The Big Bad Bear

The big bad bear is stirring again. So far he has stretched, yawned and peaked out of his cave. After his almost year-long nap he is hungry. A nice big steak would hit the spot.

That steak comes from cattle and not too far from his den there is a fat complacent bull munching in the pasture. He has his tail towards the bear and Mr. Bear remembers that 3 years ago he walked up to another bull and bit him in the backside. It looks like he can do it again.

We know who bull and bear really are. It seems that almost everyone is bullish and thinks we are in another bull market like the one in 1999 where all investors thought they were geniuses. History has taught (for those who wish to listen and learn) that major bull markets are followed by bear markets of equal length. The major bull came to an end after 18 years in 2000. Can we expect an 18-year bear market? If history repeats its cycle the answer is yes.

The recent return of the upward movement of stock prices from last year is very typical of rallies in bear markets. Many have a 50% retracement of the first down leg (as happened after the big break in 1929) that tops out with the resumption of the downward path.

Today our bull is feeding on the lowest interest rates in 40 years, a tax cut that puts extra money in the hands of consumers (where it belongs) and a strong housing market plus the belief that the market always does well in an election year. Let's hope all these things will come to pass.

The worst problem for investors is their complacency. They start making money and forget to protect their profits. These slip away when the market starts down and their broker says, "Don't worry. The market always comes back". If the investor did not learn to protect his assets from the 2000 debacle he is doomed to lose again. What should he do?

He should protect his investment account with stop-loss orders on all stocks and mental stops for all mutual funds. Brokers hate this and will try to talk their clients out of doing it. Why? Because he makes a commission as long as you are invested and nothing if you have cash in your money market.

It is better to make 1% in a money market than lose 20% or more of the principle as the market heads south. You don't have to be a market "expert" to place a stop. Decide how much risk you are will to take 5%, 10%, 15%? And place your stop accordingly.

When this bear comes out of his cave don't let him bite you ? you know where.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

---

The Big Bad Bear

The big bad bear is stirring again. So far he... Read More

Municipal Bonds

Because there are so many stocks that are NOT paying... Read More

Online Trading Strategy: Collecting Cash when Stocks Go UP - It PAYS to Know More than Others

When it comes to stock market trading it PAYS to... Read More

Market Timing?

The recent criminal fiasco in the mutual fund industry is... Read More

Mutual Funds: The Modern Den of Thieves!

Mutual funds were created with the idea that one person... Read More

KISS Formula

There are formulas for just about everything, but it has... Read More

Hot Stock Trader: How to Pick Momentum Stocks with Ease and Simplicity

Most stock traders know that momentum trading can be a... Read More

The Stock Trading Plan - Why You Must Have One To Trade Successfully

This is the continuing story of our two imaginary traders,... Read More

Valuation

Every day I hear from the "experts" on CNBC-TV and... Read More

Bad News is Good News

For weeks, no, months we have been bombarded with nothing... Read More

China Syndrome

There has been great condemnation recently because China has been... Read More

Shorting Stocks ? The Basics, Part I of II

What does it mean to short a stock?This means that... Read More

Protectionism

First let's see what protectionism is. According to Mr. Webster... Read More

Buy and Hold: How to Perpetuate Your Investment Losses

A recent cartoon in my daily newspaper showed two guys... Read More

Hold Em and Fold Em

When most analysts, financial planners, fund specialists and investors try... Read More

Market Psychology

Today we are inundated with tons of information about the... Read More

Parachute Investing

Ever jumped out of an airplane? It's OK if you... Read More

Shadow Bull

As one of my regular readers you know I have... Read More

Dividend Reinvestment Plans: Investing on Automatic Pilot

If you're like many investors who squander those small dividend... Read More

Investment Capital Gains

Have you bought any mutual funds this year or late... Read More

Invest, Be Wrong, and Make Money in the Stock Market

I have been trading for several decades and was an... Read More

Different Types of Mutual Funds

This is a guide to the different types of mutual... Read More

Mr. Market

I constantly hear the talking heads on CNBC-TV, the radio... Read More

Your Trading Objective: Why is that so Important?

You've decided to try your luck at trading stocks or... Read More

What To Buy Now

I am sure that if you have a brokerage account... Read More

Stock Loans

Hedge current portfolio positions and gain access to capital resources... Read More

Trading Tips No 2: The Big Lie in the Stock Market

It is commonly reported that the stock market averages about... Read More

Market Experience of a Naïve Stock Operator

Sometime in the third quarter of 1997, someone told me... Read More

A Personal Stock Market Investment Philosophy

∙ Make every investment in the stock market a long-term... Read More

Cash

How many people went to a cash position this week?... Read More

The Next Bull Market

We are already in it, but you can't see it.... Read More

What is the Most Important Indicator of All?

Most stock market traders have a favorite technical indicator.The one... Read More

When Should I Sell?

People are always asking me when should I sell my... Read More