Some on advice on handling bull and bear markets
Some on advice on handling bull and bear markets
In this world of gangsters and mob men, dirty cops and crooked politicians, when you’re down your down, and when you’re up your down. It’s easy to spot a player in this world of cheats and thieves by his sudden rise to infamy and the pursuant plummet back to the dregs. Not much different than market cycles, if you ask me. You did ask, didn’t you?
Last we’d caught up, Lenny and I had dug up his hidden fortune of illegal winnings from his years as a card counter in an Atlantic City casino. Lenny knows me only as a guy who’d helped spring him from an underground prison in which he and I had been interred by the casino magnate who’d hired me to capture Lenny. My own presence in the makeshift cell had been a ruse, organized by my employer to set the stage for Lenny to lead us to the hidden winnings. Lenny was none the wiser, the guy never was, but he soon would be.
How to handle the bull
Watching from a distant bar, Manhattan in hand, as Lenny won time and time again was no different than watching the rising valuations of the stock market. The inclination is to watch first with uncertainty, unsure if the growth had true support; was Lenny truly winning because of his card counting, or was it luck? Next comes the hot knot in your stomach as the realization dawns that the gravy train has left the station and you’d missed the final boarding call. Finally, its desperation, as in, “how do I get in?”
They call that a bull market, the rise in market valuations over a year or more. The yearning, the wanting in after the reality has set in that the market rise is indicative of a trend, well that’s called “too late.” Too many investors wait patiently for trends to emerge before moving on them, and when they finally do, it’s the equivalent of paying too much for a security.
Many bull markets last for three to four years, and Lenny had been at it for almost three, so he was clearly running out of time, and I was on his case. He’d won more consistently than could be attributed to luck and both the casino and I knew it. His success would be his downfall because it is, after all, the horns of the bull that rise up and slaughter its prey.
Brought down by the bear
A bear market is often described as a loss in value of 20 percent (or more) over a period of at least two months. These markets follow bull markets, though they often do not last as long, playing out over an estimated eight to nine months.
Those sad sacks who’d invested too cautiously at the height of the bull market are now kicking themselves for stepping in at all, finding themselves mired in the depths of a bear market. This part of the market cycle is characterized by diminished investor sentiment and increased pessimism. Just like diving headlong into a bull market, it is equally challenging to know the right moment to buy in when the market’s down. When the upward trend out of the bear market becomes evident, you may find yourself too hesitant to buy back in, believing that you’d missed the rise. And if you do dive in to the bear market…
No, it’s not a dance
…beware the Dead Cat Bounce. Also known as a bear market rally, and often referred to as a sucker’s rally, this kind of upward market trend is simply a rise in valuations during a bear market that suddenly loses steam while valuations sink back to the depths of bear territory.
As Lenny sat on his knees in the woods, brushing dirt from the bag of money he’d uncovered, I could see the casino magnate and a gang of thugs beyond. Lenny’s unknowing, beaming smile? Well, that was a sucker’s rally.
My employer says “Thank you for your service,” while leveling a gun at both Lenny and I, “but of you both have outlived your utility.” Lenny is still hunched over the bag of money, his shoulders roll back and he crumples in shock, lying on the ground, his arms slowly rise up with the realization that it was surrender-time.
“And how am I now disposable?” I ask.
And as the thugs unleash an unholy burst of gunfire on Lenny, the casino magnate smiles and says “You aren’t, but don’t you feel better knowing that at least in Lenny’s mind, you’d never betrayed him?”
We parted ways amicably, but I didn’t leave without at least my cut of the loot. That’s enough to keep me quiet for now.
Next time we head back Into the Noir, I’ll be on another assignment, so feel free to tag along.
Anthony M. Conte is Managing Partner at Conte Wealth Advisors with offices in Camp Hill, Pennsylvania and Fort Myers, Florida. He has a Master’s Degree in Financial Services and the CERTIFIED FINANCIAL PLANNER certification, and he welcomes your emails: email@example.com .
Registered Representative Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Conte Wealth Advisors, LLC are not affiliated.
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