How (And When) The Bear Market Ends

|
Includes: AMZN, COP, GE, IBM, MSFT, UBER
by: Dana Blankenhorn

Summary

Yes, we're in a bear market.

There remain many oilmen and tech billionaires who need to be taken out.

Knowing matters more than what is known.

A friend sent a note recently. Asked me about shorting some high-flying stocks. Well, two high-flyers and a low flyer.

Frankly you can short anything right now. You can short Amazon.Com (AMZN (a stock I like) or you can short IBM (NYSE:IBM) (which I don't). You can short sheets, short weight, short stop, or just short out. Short your friends, short your enemies. Have fun.

That's the way bear markets are. They're great shorting opportunities. The bulls (like me) go off in a corner and hide. We don't even look at what we have, if we like our hands we hold. We think about buying, maybe nibbling here and there, but then the rain starts again and it's back in the hidey-hole.

So when does the bear market end?

I believe it ends with knowledge. The Great Recession bear market ended around March, 2009, once we knew what the solution would be, that the "big guys" would get bailed out and the game would be re-started. That's what happened.

The same thing happened in the tech recession of 2000-2002. People got all the productivity they could get out of the tools bought in the 1990s, and were finally ready to try something new. Stocks started rising, slowly at first, in defensive issues at first (and in defense issues), but they rose.

Not all bear markets portend recessions, of course. Only about half do. We had a terrible bear market starting in 1986, I remember. It took out a lot of my writing markets. The highlight was the October 1987 crash, down 508 in the Dow when it didn't really have 508 to lose. But there was no recession - just a lot of stupid S&L people who needed to get taken out, and tech had gotten a little ahead of itself [this was several years before Microsoft (NASDAQ:MSFT) Windows actually worked].

There are plenty of people who need to be taken out in today's market. Oilmen need to be taken out. A lot of tech unicorns weren't worth what the VCs said they were. I'm not in any of that stuff, and I thought in January that meant I would not be impacted but that was naive. I was hit by the dot-bomb, despite having predicting it for three years before, and I was hit by the 1980s bear market, as writing markets dried up.

Technology lives on the bleeding edge of the future, and a tech writer's job is to explain what's coming before it gets here, so while there are stories after that future plays out, there often aren't markets for them. [What's coming next? The Internet of Systems (NYSE:GE)]

So when does this bear market end?

It ends, as I said, with knowledge. We're going to find out, in the next few months, whether a recession is in our future. It may be - there's a lot of garbage to be hauled out of the economy's brain yet. Travis Kalanick of UBER (Private:UBER) and Andy Hall with his big ConocoPhilips (NYSE:COP) position are still smiling, too broadly for my taste. Bear markets tend not to end until you look down the abyss, until the people who were on the edge of the boom really feel scared, and they're not scared yet.

But sometime around May, we'll see in the economic numbers whether a recession is here. Maybe the GDP for the first quarter will turn negative, or maybe not. Maybe car sales will roll over, and home sales, and first time claims for unemployment will rise above 300,000 for a time.

That's when you buy. You buy if it's a recession and you buy if it's not. You buy when you know what's coming, when you can see across the abyss, when you have what the smart money guys call "visibility." Regardless of what the valley looks like, even if there's no valley at all, when you feel you have visibility in the numbers, that's where you'll see the best bargains.

Disclosure: I am/we are long AMZN, GE.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.