You may have noticed that the frequency with which we post new ideas on this site has slowed somewhat over the last month or so. Our earlier ideas are generally up substantially, but that’s nothing to crow about given that the market as a whole, after falling 56.8% from its peak, is up 24.4% from its trough.
Anyone who thinks that the bounce means that the current bear market is over would do well to study the behavior of bear markets past (quite aside from simply looking at the plethora of data about the economy in general, the cyclical nature of long-run corporate earnings and price-earnings multiples over the same cycle). They might find it a sobering experience.
CalculatedRisk has an ongoing series of graphs from Doug Short showing how the current bear market compares to three other bear markets: the Dow Crash of 1929 (1929-1932), the Oil Crisis (1973-1974) and the Tech Wreck (2000-2002) (click for a larger version from dshort.com via CalculatedRisk):
The current bear market has been deeper and faster than either the Oil Crisis or the Tech Crash, but it really pales into insignificance beside the Dow Crash of 1929 (maybe not insignificance, but you get the picture. If this was the Dow Crash of 1929 we’d have another third to go).
We’re not sure what one can deduce from the graphs, other than several big (>20-30%) rallies in the middle of a bad bear market is nothing unusual and there’s no obvious price behavior that heralds the end of a bear market. We think it’s worth keeping in mind.