Market Cycle History 101

By now, I hope that everybody realizes that the market (stock market) cycles of the economy has a cyclic flow. In order for us to learn about what is happening *now*, we need to discover historical cycles to understand what is the potential.

O.k... basic terms. There are two animals that describe the current market (stock market). Those two animals are BEAR and BULL. They are used as a symbol of contrast because, when either of them attack an enemy, they have distinctly different ways of dealing with the object of their attention.

A BEAR will knock his enemy to the ground. Thusly, when there is recessionary times, or economists might call it a 'time of correction' as different investment vehicles get overbought and need to adjusted back downward for all of the over purchasing .. this is called a BEAR MARKET. During a BEAR MARKET time of the economy, money is tight and doesn't flow easily. Unemployment figures rise. People lose houses in foreclosure. People take jobs that they'd normally not take because it's better to have a job as a Whopper Slopper than to not have a job at all. People will struggle to make ends meet. People will do what is required to get by to the next day. In a BEAR MARKET, the stock market will have it's time of up's and downs. When you look at the chart of a bear market, you'll see that the market makes no distinctive growth over years but makes a bunch of market W's (where the shape of the letter W is how the market goes... sometimes the ending part of the W is higher than the beginning point, and sometimes it's lower) where during the time of the BEAR MARKET.. the market likely goes sideways with no real growth or decline over the time of a BEAR MARKET. If it grows during this time, the recessions therein will likely gobble up much of the growth pretty swiftly.

Conversely, a BULL will toss the enemy into the air. Thusly, when there is times of prosperity, times when money flows pretty freely from the market and businesses therein, this is called a BULL MARKET as it increases over time. Higher prices, higher-volume, etc. During a BULL MARKET, money does flow around quite easily. Unemployment is considerably rare. People are employed in the field of their choice. People will likely be buying houses. People will be enjoying the fruits of labor. The stock market, during a BULL MARKET, will have times of progressive prosperity where money is made for an extended period of time. Yes there will be times of correction where money is lost, for the most part, it'll readjust higher than what is lost during the cycle of a BEAR MARKET.

Now, the history of the market goes back more than a century. Market cycles seem to be in ranges of years from between 16-18 years at a time. For one cycle.. it's one kind of market. For the next cycle, it is another. For our education, we'll start history around the time of the Great Depression (back to the 1930's).

From 1930 - 1948 (18 years) it's regarded as a BEAR market.
From 1948 - 1966 (18 years) it's regarded as a BULL market.
From 1966 - 1982 (16 years) it's regarded as a BEAR market.
From 1982 - 2000 (18 years) it's regarded as a BULL market.
From 2000 - ????? (16 - 18 years) a BEAR market.

So.. let's ask a question:

Q: What cycle are we currently in during 2009 and about how far into the cycle are we?

A: We are in a BEAR MARKET (a market that will go sideways, with no great gains of sustained growth). And we are likely to be in this mode for the next 7-9 years if cycles hold to their historical performance.

Does that mean people won't make money in the stock market to gain back the 30-40-50% the lost as it crashed in the latter half of 2008? I'd say, if they have the mentality of 'buy-and-hold' .. no, I don't expect they'll make any real money back from their investments until the next 7-9 years is over. It'll go up some, and down some, and up some, and down some... over and over.. but never an ever increasing basis to call it real growth.

During this time, jobs are going to mostly be going sideways as well. There will be short periods of time in it that there is some job growth. Yet, when business starts hurting (which is where 70-80% of all the jobs are located), the biggest expense to a profit is employment costs. And the largest cost to employment is the wage/salary of the employee. To preserve a profit (which is the whole reason to be in business) jobs will be eliminated. Sound familiar to what's happening today. Businesses that lose money, don't stay in business. When business can't sustain themselves, they close their doors. If the doors to a business closes, then everybody loses. If a business can continue to operate, with reduced number of employees, as painful as that sounds .. less employees and still in business is better than a business wipeout where all lose that is touched by the business.

Now, those on Wall Street are always considered to be 'Perma-BULLS', to them the market is always, or most always, or generally always looking towards growth. Which, is perfect for Wall Street because if they are looking for growth all the time, it's easier to get people to spend their money on investments in order to sell a growing investment. Never listen to the Perma-BULLS as they'll never tell you what you need to hear. They are only interested in your money and taking it. There are also people that are on the Perma-BULL side that should also never be listened to as well. These are people that are ultra-positive about trying to put forth the image of an ever-increasing economic time is... people in politics trying to promote that prosperity is soon coming because of their policies. Doesn't matter the political party in office. They'll always say things are getting better when they are in office. And things were worse under the previous fellows office. Reality is, in BEAR MARKET times (like we've been in for the last 9 years), the economy ebbs and flows according to the *now* of the time. There will be upturns/prosperity.. and there will be downturns/recession. In the current BEAR MARKET... we are experiencing a little of the bull currently.. with an upturn in the market for the last 5 months (since March 2009 .. now the beginning of August 2009). Normally, in an economic time of BEAR MARKET correction.. the bull swings normally last between 150-160 days (give or take a few days) before the market dips back down to form the last 'V' portion that makes up the last half of a 'W' (a 'W' as in the way the market would look on graph paper if you mapped out what it looks like... a letter 'W' with a *high point* followed by a slide down.. then an climb up to a point that will likely not be as high as the point of origin .. followed by another slide down and another climb back up. We normally think of a W as two V's of market activity put together side-by-side). Right now, this is where we are at. The top of a mid-bear rally before we perform a slide that will likely last a few more months.

This is why, we hear economists say that the economy is looking better.. b-b-b-b-b-b-b-but, the political party in power says that jobs might not come back until the end of this year or next year. That's because they know that the last part of this particular 'bear-market rallying *W*' has not happened yet. It's liable to go deeper (than the original dip that ended in March 2009.. maybe down to 4000 or lower) and last longer before it comes back up. Still, even if it comes back up, we have several years left in a BEAR MARKET before we get into times of prosperity.

In times when money is tight, the government should NEVER do anything to get in the way of a business making loads and loads of profit. If the government taxes business then that takes from profit. If profit goes down farther and farther. More people lose employment because a business is in the business to generate a profit. The more profit, the more the business person will want to hire more people to bring into their system to make more profit. Everybody wins! The less profit, the measures the business owner/manager has to do in order to keep a profit. Even at the expense of terminating positions of employment.

Personally, just as the sub-prime home loan started this cascade of economic failure, I wouldn't be too surprised to see the same kind of economic crisis happen with folks that are considered to be in the "rich" class of people and their mansions start to become bad real estate paper as well with foreclosures hitting their homes as well. If they used credit to buy their houses, and their cash flow is almost as tight as it is for the little guy out there, I kinda expect the same kind of mortgage crisis to hit the financial institutions with houses that have a value of more than $1M or more as foreclosures begin to rise on those that have such as well. I know this sounds gloomy, but if this happens, I expect to start hearing about it sometime in the 4th quarter of 2009. If it does, then it'll fuel a longer recessionary time where the market goes into a bearish nature longer than the last few months did when it started sliding back in the end of 2008 until March 2009.

[END NOTE: ... there's a mentality that people have a j-o-b. They'll say: "That's *my* job." No, I beg to differ with those that express that notion. The job is the employers position. You might be the one performing it at the time. To say that you have a *job*, implies you have possession and control of the *job*. And that if the job is taken from you, you are a victim from wicked hands of the employer removing it from your possession. The reality is, the position is free to come- and go- as the employer sees fit as long as the existence and performance of said job contributes to the profitability of the business. Once the job/position becomes un-profitable, then it's up to the business owner to eliminate the job/position in order to restore profitability. ]