Connect with us

Government

Bear Market Anatomy – Revisiting Russell Napier’s Work

Bear Market Anatomy – Revisiting Russell Napier’s Work

Authored by Lance Roberts via RealInvestmentAdvice.com,

“Anatomy of a Bear Market” by…

Published

on

Bear Market Anatomy – Revisiting Russell Napier's Work

Authored by Lance Roberts via RealInvestmentAdvice.com,

“Anatomy of a Bear Market” by Russell Napier is a “must-read” manuscript. Given current market dynamics, a review seems timely. As my colleague, Richard Rosso, CFP, previously penned:

“A mandatory study for every financial professional and investor who seeks to understand not only how damaging bear markets can be but also the traits which mark their bottoms.

Every bear awakes from hibernation for different reasons. However, when studying the four great bottoms of bears in 1921, 1932, 1949, and 1982, there are several common traits to these horrendous cycles.”

Not surprisingly, after 12-years of Fed interventions, seemingly impenetrable markets, and low yields, investors have become overly complacent. Such is despite repeated warnings to the contrary,

“Every financial crisis, market upheaval, major correction, recession, etc. all came from one thing – an exogenous, unanticipated, event.

Such is why bear markets are always vicious, brutal, devastating, and fast. It is the exogenous event, usually credit-related, which sucks the liquidity out of the market causing prices to plunge.

As prices fall, investors panic-sell driving prices lower. Such forces more selling in the market until, ultimately, it exhausts the sellers.

It is the same every time.

While investors insist the markets are currently NOT in a bubble, it would be wise to remember the same belief existed in 1999 and 2007.

Throughout history, financial bubbles are only recognized in hindsight when their existence becomes ‘apparently obvious’ to everyone.

Of course, by that point it was far too late to be of any use to investors and the subsequent destruction of invested capital.

This time will not be different. Only the catalyst, magnitude, and duration will be.” – “No More Recessions,”May 2019

Of course, just 10-months later, the market plunged by 35%.

However, therein lies the lessons from of the “Bear Market Anatomy” and Russell Napier.

Bears Tend To Die On Low Volume

“Low volume represents a complete disinterest in stocks. Keep in mind this contradicts the tenet, which states that bears end with one act of massive capitulation – a  downward cascade on great volume. Those actions tend to mark the beginning of a bear cycle, not the end.

A rise in volume on rebounds, falling volumes on weakness would better mark a bottoming process in a bear market.”

Using that analysis, we can see volume did pick up during the recent decline. However, volume is far below the 2020 “bear market bottom,” suggesting investors remain complacent.

Bears Are Tricky

“There will appear to be a recovery, an ‘all-clear’ for stock prices. It will suck investors back into the market, only to financially ravage them once again.

Anecdotally, I know this cycle isn’t over as I still receive calls from people who are anxious to get into the market and perceive the current market a buying opportunity. At the bottom of a bear, I should hear great despair and a disdain for stock investing.”

Also Read: 5-Signs Investors Are Too Bullish

Bears Can Be Tenacious

“They refuse to die or, at the least, quickly return to hibernation. The 1921 move from overvaluation to undervaluation took over ten years. Bear markets, where three-year price declines make overvalued equities cheap, are the exception, not the rule.

As of this writing,  the Shiller P/E is at 35x – hardly a bargain.  At the bottom market cycle of the Great Recession, the Shiller CAPE was at 15x. There is still valuation adjustment ahead.”

Also Read: Grantham: We’re In An Epic Bubble

Bears Can Depart Before Earnings Recover

“Investors who wait for a complete recovery in corporate earnings will arrive late to the stock-investment party. 

Most likely, it will take a while (especially with the debt burden), for the majority of U.S. companies to reflect healthy earnings growth. CEOs who employ stock buybacks to boost EPS will be considered pariahs and gain unwanted attention from Congress and even the Executive Branch.

A savvy investor should look to minimize indexing, and select individual stocks with strong balance sheets, low debt, and plenty of free cash flow. A focus on sectors and industries that are nimble to adjust to the global economy post-crisis will be an added benefit.”

Also Read: 2022 Estimates Are Still Too Bullish

Bear Market Damage Can Be Inconceivable

“The bear market of 1929-32 was characterized by an 89% decline. The average is 38% for bear markets;  however, averages are misleading. I have no idea how much damage this bear ultimately unleashes. The closest comparison I have is the 1929-1932 cycle.

However, with the massive fiscal and monetary stimulus (and I don’t believe we’ve seen the full extent of it yet),  my best guess is a bear market contraction somewhere between the Great Depression and Great Recession. At the least, I believe we re-test lows, and this bear is a 40-45% retracement from the highs.”

Also Read: A 50% Decline Will Only Be A Correction

Bear Markets End On The Return Of General Price Stability

“In 1949, as in 1921 and 1932, a return of general price stability coincided with the end of the equity bear market. The demand for, and price stability of, selected commodities augured well for general price stabilization.

Low valuations (not there yet), when combined with a return to normalcy in the general price level, may provide the best opportunity for future above-average equity returns. We are not there.”

With prices for commodities still spiking due to economic disruption, the bear market anatomy suggests that until those prices return to normal, the risk is not over.

Bear Markets That Don’t Decline On Bad News Is Positive

“The combination of short positions in conjunction with a market that fails to decline on lousy news was overall a positive indicator of a rebound in 1921, 1932 and 1949. Also, limited stock purchases by retail investors may be considered an essential building block for a bottom.

The worst economic data is still forthcoming, which suggests expectations for the continued market, and economic recovery may be misplaced.” 

Also ReadBob Farrell’s 10-Rules For A QE Market

Not All Bear Markets Lead The Economy By 6-9 Months.

“Generally, markets lead the economy. However, this tenet failed to hold true for the four great bears. At extreme times, the bottoms for the economy and the equity market were aligned and in several cases, the economy LED stocks higher! 

It’s unclear whether this bear behaves similarly only because of massive fiscal and monetary stimulus. We’re not done with stimulus methods either. If anything, they’ve just begun! I know. Tough to fathom.”

Also Read: The 4-Phases Of A Full Market Cycle

Don’t Discount The Bear Market Anatomy

Throughout history, individuals repeatedly jump into the more speculative stages of the financial market under the assumption that “this time is different.”

Of course, as we now know with the benefit of hindsight, 1929, 1972, 1999, 2007, and 2020, were not different – they were just the peak of speculative investing frenzies.

However, the massive surge in monetary and fiscal stimulus took market speculation to an entirely new level since the pandemic-driven lows.

There are a select group of investors who are revered for their knowledge and success. While we idolize these investors for their respective “genius,” we can also save ourselves time and money by learning from their wisdom and their experiences.

That wisdom was NOT inherited but birthed out of years of mistakes, miscalculations, and trial-and-error. Most importantly, what separates these individuals from all others was their ability to learn from those mistakes, adapt, and capitalize on that knowledge in the future.

Experience is an expensive commodity to acquire, which is why it is always cheaper to learn from the mistakes of others.

We have compiled a collection of those rules, axioms, and pearls of wisdom here: Part 1and Part 2.

We hope you find something useful in them to you navigate whatever comes next.

Tyler Durden Mon, 04/04/2022 - 11:45

Read More

Continue Reading

Economics

Five things you can do to help you have a more positive birth experience

Becoming a parent can be nerve-wracking – but there are many things you can do to feel more in control.

Published

on

Don't be afraid to make your preferences clear to your care provider. Syda Productions/ Shutterstock

Whether you’re a first time parent or have had children before, you’re probably willing to try anything to ensure you have the most positive birth experience you can. After all, the kind of birth experience you have can not only affect your own mental health, but can have an affect on parent-child bonding, as well as partner-to-partner relationships for years after giving birth.

It can be confusing to know what to expect or where to turn to for advice, especially as maternity services have changed due to falling staff numbers and the continued impact of COVID-19. But here are a few things you can do yourself as you navigate your maternity care, which may help you have a more positive birth experience:

1. Get educated

Studies have shown that signing up for antenatal classes can help reduce fear, depression and anxiety – both during pregnancy and after birth.

Typically, antenatal classes will help you understand what’s happening to your body during pregnancy and explain the birth process. They may also teach you coping strategies to help relax during labour, alongside guidance on caring for your new baby. Antenatal classes can also be a great way of meeting other parents going through the same thing as you.

Another option is creating a personalised care and support plan, which is offered by most NHS trusts in the UK. This is a tool you can use with your care providers to explore what’s important to you – and discuss what your range of options are, such as your preferred place of birth, or whether you prefer skin-to-skin contact with your baby immediately after birth.

Understanding what your body’s going through, and making a personalised plan for your birth, may help you feel more prepared and less anxious about what to expect.

2. Know your carers

Being cared for by one nominated midwife, or being assigned to a team of familiar midwives, is shown to be associated with better outcomes for you and your baby – including decreased chance of having a premature labour and lower likelihood of needing interventions (such as birth with the help of forceps). You’re also more likely to be satisfied with your overall experience.

When an allocated midwife is not an option this makes choosing the right birth partners crucial. They can not only offer you reassurance, encouragement and support but can be your advocate, help you try different positions in labour and help provide you with snacks and drinks. Most typically these would be trusted loved ones. But be aware that research shows birth partners may also feel anxious or overwhelmed at taking on this role, and may struggle with seeing a loved one in pain – so it’s important to be realistic about your expectations, and choose the right person. It may be the best birth partner for you is a close friend or relative.

3. Challenge care recommendations if you aren’t happy

There are likely to be many other options available to you – such as where you might give birth, or how you want to be cared for during labour.

During antenatal appointments be sure to pause, think and ask about benefits, risks and alternatives to the care being proposed. Research shows how important choice and personalised care are for expectant parents who want their voices and preferences to be acknowledged, and to receive consistent advice.

Expectant couple speak with female doctor in doctor's office.
Bringing a loved one or partner with you can make it easier to voice any concerns you may have. wavebreakmedia/ Shutterstock

If you have concerns over a suggestion your care providers have made or have questions, don’t be afraid to ask. Take your birth partner with you if you prefer, who can empower you to ensure your voice is heard. After all, care providers are duty bound to ensure you make fully informed choices.

4. Don’t always listen to your friends and family

Once people hear you have a baby on the way it seems everyone feels the need, without asking, to tell you the full (and often graphic) details of their own children’s birth.

But it’s perfectly acceptable to politely change the subject if you don’t want to listen, or if hearing these stories makes you nervous or worry. It’s also worth remembering that each person has a different labour and birth, even with their own children – so what was true for someone else is likely not to be the same for you. While it can be helpful for some people to debrief after the birth, it’s okay to avoid hearing this yourself if it makes your nervous, and maybe suggest they speak with a professional about their experience instead of telling you.

5. Visit your preferred place of birth

Many maternity units are now opening up their doors again to tours and informal visits – and those that aren’t are doing this virtually.

Becoming familiar with where you might give birth – even down to where you might park on the day – can help you feel more confident about giving birth. It may also remove some of the unknown, helping you regain a sense of control – which in itself is linked to a more positive birth experience.

For those planning a homebirth, speak to your midwife about how you can improve your space to facilitate the most safe and positive experience. For one of the most important days of your life, visualising where this will take place ahead of time can help you feel more confident and in control.

Ultimately, it’s important to remember that no one can predict exactly how your labour and birth journey will go. Even after heeding the above steps – there’s always a chance you may need to consider a plan B, C or even D. But no matter what, remember you’ve done your very best, and you’re not likely to repeat this exact experience the next time.

Claire Parker does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

Read More

Continue Reading

Economics

Is it safe to buy WTI crude oil after bouncing from horizontal support?

A lot has happened in the energy markets in 2022, especially in the oil markets. WTI crude oil price surged to $130 in the second quarter of the year,…

Published

on

A lot has happened in the energy markets in 2022, especially in the oil markets. WTI crude oil price surged to $130 in the second quarter of the year, after only in 2020 it had traded in negative territory.

Futures contracts settle daily, and back in 2020, during the COVID-19 pandemic, when demand for oil declined sharply, clearinghouses let the futures contracts settle below zero for the first time ever.

Since then, however, the market has bounced dramatically. Few traders have bet on energy prices, especially because in the last years, the rise of the ESG meant many investments fleeing the energy field.

But supply chain issues, monetary and fiscal stimulus during the pandemic, and the Russian invasion of Ukraine are major drivers in the energy space. After reaching $130/barrel, the WTI crude oil price has corrected but found strong support at the $100/barrel area.

The recent bounce in the last few days came from Macron’s comments during the G7 meeting. He said that the United Arab Emirates does not have spare capacity to produce more oil, something confirmed yesterday by the UAE authorities.

UAE is producing at maximum capacity based on its OPEC+ agreements. Therefore, the price of oil should remain bid on every dip.

A triangular pattern forms on the daily chart

The technical picture looks bullish while the price remains above horizontal support seen at the $100/barrel. Moreover, a confluence area given by both horizontal and dynamic support made it difficult for the market to extend its decline.

As such, a triangular pattern suggests more upside in the price of oil. A triangle may act as both a continuation and a reversal pattern, and traders focus on a breakout above or below the upper or the lower trendline.

Furthermore, every attempt to the downside since last March was met with more buying. Therefore, it is hard to argue with the bullish case, especially since the series or higher lows remains intact.

All in all, the WTI crude oil price remains bullish, and the triangular pattern may break either way. However, as long as the $100 level holds, the bias is to the upside.

The post Is it safe to buy WTI crude oil after bouncing from horizontal support? appeared first on Invezz.

Read More

Continue Reading

Spread & Containment

FTSE 100 gains as commodity-linked stocks bounce back

The commodity-heavy FTSE 100 gained 0.4%, while mid-cap FTSE 250 index inched up 0.3% UK’s FTSE 100 gained on Monday, as an easing of COVID-19 restrictions…

Published

on

The commodity-heavy FTSE 100 gained 0.4%, while mid-cap FTSE 250 index inched up 0.3%

UK’s FTSE 100 gained on Monday, as an easing of COVID-19 restrictions in China brought relief to commodity prices, lifting shares of major oil and mining companies.

As of 0704 GMT, the commodity-heavy FTSE 100 gained 0.4%, while mid-cap FTSE 250 index inched up 0.3%.

The risk sentiment improved after a Wall Street rally late last week and a rebound in copper and iron ore prices on Monday, boosted by an easing COVID-19 restrictions in Shanghai and relaxed testing mandates in several Chinese cities.

The burst of global enthusiasm for equities has put a spring in the step of the FTSE 100 at the start of the week, Hargreaves Lansdown analyst Susannah Streeter said.

Mining stocks led gains on the FTSE 100 index, with Anglo American, Rio Tinto and Glencore rising more than 3%, after Group of Seven leaders pledged to raise $600 billion private and public funds in five years to finance needed infrastructure in developing countries.

It is hoped this scheme, seen as a counter to China’s Belt and Road Initiative, will set off a spurt of spending and demand for commodities around the world, Streeter added.

Among individual stocks, CareTech surged 20.8% after the UK-based provider of care and residential services agreed to be acquired by a consortium led by Sheikh Hoidings in an 870.3 million pounds ($1.07 billion) deal.

Carnival Corp jumped 5.6%, extending its Friday gains after the leisure travel company forecast a positive core profit for the current quarter despite surging costs.

London-listed shares of Rio Tinto added 2% after a U.S appeals court ruled that the federal government may give the UK copper miner a right to lands in Arizona.

BAE Systems inched up 0.4% after the defence company received a $12 billion contract from the U.S Department of Defence.

The post FTSE 100 gains as commodity-linked stocks bounce back first appeared on Trading and Investment News.

Read More

Continue Reading

Trending