Jun

28

A nice, clear definition: "a bear market is a 20 percent drop from an all-time high." We'll know when we've had one. Nigel Davies.

Like we used to ask, what about numbers on the table?

Using DJIA 1950-2008 monthly data (skipping the Depression because it can't happen again), a bear was defined as this month's close < 20% below the high of any of the prior 24 months. Comparing the mean return of months following bear months with all months in the series shows they are actually higher - though not significantly:

Note that at least some of the insignificance is stemming from the higher volatility of 'after bear market' months:

The higher volatility is quite statistically significant.
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Speaking of numbers on the table, here's a reminder to budding real estate moguls just how pricey bubbles can get Homeowner offers her house and her 'love' for sale


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5 Comments so far

  1. George Parkanyi on June 29, 2008 10:05 am

    OK, I get that she needs company, but why would you want to depreciate the value of your property 50% overnight by throwing marriage into it? She needs a better realtor. Cheers, George

  2. Gary Rogan on June 30, 2008 12:45 am

    It seems hard to believe that something so common, so simple, and so likely to be examined for statistical significance as a “bear market” would have a statistically significant predictive effect. What about bear markets that occur in the last year of two-term Presidencies, when the President is a Republican, coincident with the doubling of the price of oil in the year prior?

  3. steve on June 30, 2008 8:37 am

    This is in from the “just when you think you have seen it all.”

    Last evening, I watched one of my favorite shows on the Discovery channel “Diry Jobs” with host and celebrity Mike Rowe. I say celebrity because I saw his status verified by a stint on The Oreilly Factor and that I was in a card game last week and every sweaty and unshaven man at the table knew who Mike Rowe is. The women were less informed. By watching the show you get introduced to some of the most disgusting jobs imaginable. Here are some of the bad ones.

    Chick separater. Separating female chicks from rooster chicks.
    Noodling. hand fishing for catfish in rivers.
    crawfishing in the bayou in Louisiana
    cleaning up a house after a flood. This is too disgusting to describe.
    Cow inseminator.
    Chumming for Shark

    Last evening I saw one that reminded me of this market. Snake catcher. Catching a snake was not too bad the downside is that you tend to get bit by the snake. Hopefully you only get bit by the non venemous ones. But afterward was the sick part. They made the snake vomit to discern what it had eaten recently to determine it’s dietary habits and the ecosystem that it was in.

    I felt that this is my new description of a bear market. What would make a snake vomit? Dow down 7 out of 8 months. Worst June since 1930. GM lowest price in 50 years. Market back to where it was at the start of the century. Merrill at 34 Citigroup at 17. Bear Stearns out of business. Residential real estate prices falling every month. Oil up 40% this year. Foreclosures reach all-time records. Guy Ritchie and Madonna split. Those are some real house of pain facts. And some real snake vomit numbers.

    So the questions abound and the nabobs quack when will we see the turnaround that is hoped for and what will impel the market to right itself and go forward. More to follow…………….

    As to the story about the woman selling her home and “herself” for $500,000. First of all the home is listed for $340,000 and her “Goodwill” is then estimated at $160,000. Not too bad a deal if you ask me. Properly structured and negotiated along with certain caveats, disclosures and pre-nuptials it could work. I have friends who have gone through relationships and marriages and it cost them much more than $160,000. Plus in this real estate market that $340k number could well be high. I suggest that the property itself could be had for far less.
    Since this would be done without a real estate broker along with the standard 6% commission plus the fact that the home has been for sale for a year. That $340k looks more like $300K. Palm Beach Gardens is a lovely area a wonderful winter residence and popular destination for Europeans and their you have it. Who knows what it might be worth in five or ten years.

    sl.

  4. Nish on June 30, 2008 10:40 am

    These days there is enough news about bear market, and pending gloom and doom. Everywhere the news and analysis (of so called experts) seems to get completely out of market, better yet, short it. After reading these news items, it seems no brainer that market’s gonna go down further. How in the world markets supposed to go down when everyone expects them to be? as per the media, there seems to be sure shot money made by shorting the market. Never have i seen so much certianity that the market is going to crash further.

  5. Anatoly Veltman on June 30, 2008 2:27 pm

    Nish, are you using quantitative data to arrive at that “most bearish consensus”? Then please share it…

    All I see is that actual futures position adjustments on behalf of specs (albeit as of 3 trading days ago - and prices moved dramatically against specs since) were:
    -to cover short Nasdaq exposure
    -to get even longer of carry-trade (long Aussie, short Yen)

    So, the only glimmer of hope was that some net short Treasury positions finally got pared on price rally. But still, no real interest in Treasury safe-haven…

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