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Tuesday, October 07, 2008

Bear Market Reaches 37% from the Top

If anyone still thinks Bob Brinker, or anyone else for that matter, can time the market, then they should have their head examined.

From the peak, the S&P500, DJIA and NASDAQ are down 37%, 35% and 39% respectively. Bob Brinker has been fully invested for the whole ride while giving buy signals for those with "new money" in the mid 1400s, 1300s and 1200s. Since the market went through his last buy level like a hot knife through better, he's back at "dollar cost average" new money as he looks to "identify" a new bottom.

I bought some stock yesterday and today so maybe I too should have my head examined for putting some of my cash at risk.

Despite all the evidence that nobody can time the markets, I like to play around with a tiny fraction of my explore portfolio to see if I can add any value with it. When the DOW broke support at about 12,000, the minimum target was 9,500. We are there now which makes me wish I'd used my 20:20 hindsight to sell everything when the markets were high to start buying back now. Of course, so does every other asset allocator on the planet which is why market timing has such appeal despite the evidence nobody can do it over the very long term.

Kirk's Asset Allocation Advice: I like the rule-of-thumb "120 less your age in equities." The equities should be a globally diversified basket of index funds such as the "core portfolios" I recommend in "Kirk Lindstrom's Investment Newsletter." For example, if you are 40 years old and don't plan to retire for 20 or more years (unless you get lucky with some of my "explore portfolio" stock picks) then you would have 80% in equities and 20% in fixed income. If you are well into critical mass, then put even less into equities and get inflation protection from TIPS since you don't need the extra "expected" return from equities at the much higher volatility (risk.)

Here are the latest bear market statistics.

2007-2008 Bear Market Statistics 10/07/08

S&P500 Chart
Last Market High 10/11/07 at 1,576.09
Last Market low 10/07/08 at 996.23
Current S&P500 Price 996.23
Decline in Points = 579.86
Decline in percent = 36.8%
Max Decline = 36.8%
=>This means the decline from intraday high to intraday low is 36.8% and we are currently 36.8% off the peak.
=>The decline in the S&P500 from the closing high to the closing low was 36.3%

DJIA Charts
Last Market High 10/11/07 at 14,279.96
Last Market Low 10/07/08 at 9,346.67
Current DJIA Price 9,447.11
Decline in Points = 4,832.85
Decline in percent = 33.8%
Max Decline = 34.5%
=>This means the decline from high to low has been 34.5% and we are currently 33.8% off the peak.
=>The decline in the DOW off the closing high to the closing low was 33.3%

Last Market High 10/31/07 at 2,861.51
Last Market Low 10/07/08 at 1,754.88
Current NASDAQ Price 1,754.88
Decline in Points = 1,106.63
Decline in percent = 38.7%
Max Decline = 38.7%
=>This means the decline from intraday high to intraday low is 38.7% and we are currently 0.386729384 38.7% off the peak.
=>The decline in the NASDAQ off the closing high to the closing low was 38.6%

If you want to know what I have been buying in this period of weakness with my profit taking dollars from selling when the market was higher, Subscribe to Kirk's Investment Newsletter TODAY!

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