Like Diamonds, Cycles Are Forever - Premature Thoughts On A Stock Market Crash

Aug. 25, 2015 8:07 AM ETSPY, DIA, QQQ3 Comments
DLP Investing profile picture
DLP Investing


  • The market is not yet into a full-blown crash, but is reaching the top of a bull market cycle.
  • The market cycle relates to the overall economic cycle.
  • Certain sectors perform better at market peaks leading into strengthening economies.

It is a bit early to call this past week's action a "crash" or to state that the market is in the midst of a crash, but it is also always wise to plan ahead for various possible future scenarios. From a value investor's standpoint, a crash equals opportunity. The last few years since the 2009 financial crisis may have been a bit rough for value investors. While the rising tide of the market over the last 6 years has inevitably raised all boats, those who focus solely on a Graham-esque value strategy may have been left in the dust, as growth stocks have been the been doing the heavy lifting.

Bull runs of this nature are difficult for a value investor to stomach. He likely invested in the 2009 crash, enjoyed the gains until he sold out at what seemed a fair valuation, and subsequently watched agitatedly while the overall market continued to appreciate. He has likely either converted to mostly cash or focused on commodities, energy, and possibly retail stocks, which have lagged behind the rest of the market, sporting low P/Es and P/Bs. Energy and commodities, specifically, have been absolutely hammered this year, while the Dow finally appears to be leveling off after the 5-year bull run. He follows all of the rules he has picked up from Graham, Buffett, and gang, yet it appears those around him blindly throwing money at in-vogue stocks like Tesla are the ones celebrating! He has flashbacks to 1999-2001.

But bull markets must come to an end, and like diamonds, cycles are forever. Love him or hate him (I, for one, am not a big fan), Jim Cramer makes some valid points in Real Money when it comes to cycles.

Cramer discusses a strategy in which the investor purchases non-cyclical stocks

This article was written by

DLP Investing profile picture
I am a civil engineer and individual investor. I spend a substantial amount of time reading and researching commodities, macro economic trends, and value investing strategies. With my background in the construction industry, I am able to analyze real world information compared to data provided by media outlets. I plan to eventually transition my career towards the financial sector.

Disclosure: I am/we are long TCK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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