LouieK

Market Cycles: A Look at the Historical Evidence

The author David Van Knapp asks for a definition of a bull and bear market. Good question, and one I too have seen no one adequately define. Here is my take: There is some level of economic value to the economy and some trajectory it is following toward the future value. This is objective to the markets subjective assessment of that value and trajectory now. When markets subjectively underassess this objective value, then we are in a bull market and when markets subjectively overassess this objective value, then we are in a bear market. Concurrently, there is an interplay between the subjective assessments and the objective values and trajectory, so each of them affects the other and complicates the actual future outcome of the economy. Equity markets do not simply follow economics, they also have an impact on the economy (and its trajectory).

Wall Street Breakfast: Must-Know News

Eddie64: greed is a problem only to the extent the financial structure and the productive structure allow government largesse instead of markets to make all economic decisions. When politicians see how they can provide constituencies (such as subprime markets) as promises to get elected, then we always have moral hazard. The problem is not primarily greed, but socialism. Think GSEs like Fannie and Freddie and government policy to support and encourage sub-prime lending.