Ben Carlson: Preparing For The Next Bear Market

Ted

FYI: It’s easy to put it in the back of your mind when it seems like all stocks do is rise but it’s a question of when, not if, the next bear market will hit. No one can predict when they will strike but periods of rising stock prices are eventually followed by periods of falling prices. That’s how these things work. The goal is to be prepared before it happens, not after. Here’s a piece I wrote for Bloomberg on how to think about risk during the inevitable bear market.
Regards,
Ted
http://awealthofcommonsense.com/2017/04/preparing-for-the-next-bear-market/

PRESSmUP

If you believe the stock market follows trends, that's a very informative article.

Bear markets occur about twice each decade, and the longest gap between these occurring is 8 years. We're on year 6 since the last.

Old_Skeet

Sometimes, investing is much like the weather. At times the sun can be out with a nice blue sky along with the temperature in the mid 80's and calm winds ... and, here comes a solar votrex that disrupts communications, travel and other things.

With this, now in retirement I run an all weather conserative asset allocation in my portfolio along with a rebalance plan that adjust my equity allocation based upon certain stock market conditions plus I also harvest some capital gains in the rebalance process thus keeping them from becoming vaporized in major stock market declines.

With this, when the day gets spoiled by a solar vortex (so-to-speak) and the bear comes growling I am already ahead of most; and, it is a big reason I keep an ample cash on hand so that I can become a buyer of stocks in major stock market pullbacks and corrections.

With my portfolio management tools and rebalance processes as the markets recover I continue to sell down equities through a systematic process. Really nothing complex about this just a disciplined and systematic approach that keys off of stock market pullbacks and their recovery where I harvest some capital gains along the way.

Folks ... thus far, this process has worked well form me and my family through the years. It has worked thus far for me, my father, his father and so on and so forth. It's really quite simple ... Make harvest of the crops whether they are capital gains in the markets or crops in the soil.

VintageFreak

@PRESSmUP Can you tell why you saying "6" I thought it is more like "8" right? Unless you are saying there was a substantial correction before 2011? I didn't think it was anything more spectacular than 2015. I believe consensus is our last bull market began 2009 and which is why people are speculating 2017 will be the year of the bear.

PRESSmUP

VF...the chart within the article references a bear market event spanning APR-OCT 2011, so the 6 years is from that specific point in time.

catch22

Background reminder for the APR-OCT 2011, -19.4% twitch. S&P for the first time, in April, 2011; indicated a possible AAA credit rating warning for the U.S.; and the Fed. budget event (see link below). Also, keep in mind that much of Europe and other global markets were still attempting to sort whether to open/continue the QE flood gates or to do the austerity path a bit longer......i.e., Europe. You have not forgotten how often Greece was in the Euro Zone news, eh? This time frame was still a very "twitchy" period, as the market melt was still fresh in the investment community mind.
Technically, the -19.4% fits the bear market guidelines; and one may suppose it doesn't matter what the trigger(s).

https://en.wikipedia.org/wiki/United_States_federal_government_credit-rating_downgrades

Regards,
Catch

AndyJ

The note at the bottom of the article says he's included the times the S&P 5c has dropped 19% -- slightly extending the usual definition of -20%. (It didn't seem quite as bearish at the time, compared to the ~ 50% losses in the previous two.)