March 09, 2010

What Bull Market?

It seems essential, in relationships and all tasks, that we concentrate only on what is most significant and important.

Soren Kierkegaard

The Bull Market is one year old today. 

One year ago, on March 9, 2009, the S&P 500 Index closed at 676 (the intra-day low was 666).  Today, one year later, the S&P is more than 70 percent higher.  But who really is taking note?  Where is all the fanfare, media chatter, and all-clear signals?

Speaking for myself, this Bull Market anniversary date is not one that has been committed to my consciousness.  I know March 2009 marked the most recent low-point for stocks, but I still found myself a bit taken by surprise a few days ago when I saw the MarketWatch article, Riding the Rally:  How to make money in the bull markets second year . 

I was amazed by the audacity of a widely read financial news source to bravely go so far out on a limb and explicitly announce the presence of a Bull Market; and even go further by suggesting how an investor might take advantage of this positive momentum going forward!  [sarcasm intended]

But who is acknowledging or even noticing the existence of this young Bull Market?  Most of you reading this are likely well-read enough, or have begun opening your investment statements again, to realize that the stock market indexes have been mostly positive for the better part of the past 12 months.

But how many people of a random sampling would guess the one-year movement of stocks to be positive AND would guess a significant increase in stock prices?   

Ask 10 people on the street if the stock market price level, from 12 months ago to today, is either:  1) Significantly Lower, 2) Slightly Lower, 3) About the Same,  4) Slightly Higher, or 5) Significantly Higher, and I am confident (based upon my own unscientific observations) that more than half of the responses would be one of the first three choices. 

For a bit more of a scientific observation, I did two Google searches: One for 2010 Bear Market and another for 2010 Bull Market.  The prior search, yesterday, March 8, 2010, yielded 33 million results.  The latter search yielded 13.9 million results — Nearly 2.5 times more results for Bear than for Bull!

The key takeaway here might be that there has been little news (or courage to report) about a Bull Market, reflecting (or reinforcing) negative to neutral investor sentiment. 

Of course, for the contrarian investor, a healthy portion of negative to neutral sentiment among the investor herd can indicate more room to run in the upward direction for stock prices. 

But isnt the crowd right most of the time?  What will the investor herd think and do now?  The momentum investor may be getting a bit more excited at this market juncture.  Wouldnt a one-year anniversary for a Bull Market result in more media attention to a rising market, and hence, sounding the all clear signal for the not-so-smart money to get back in the market? 

By the same token, however, a prudent investor might also guess that this one-year Bull Market anniversary will generate much attention in the press and provide a gentle but apparent signal for smart money to take some winnings off the table.

Ignorance of all things is an evil neither terrible nor excessive, nor yet the greatest of all; but great cleverness and much learning, if they be accompanied by a bad training, are a much greater misfortune.

One can certainly find just as much information intelligently and coherently supporting a bright economy and market for 2010 as one could find information supporting the opposite!

Additionally, and to the detriment of many investors, human behavior will often lead an investor to seek information that will confirm their existing biases and pre-conceived notions. 

Everything returns back to self-knowledge and self-awareness.  No matter your investment style, or any other given pursuit in life, just do your best to ensure that who you are is aligned with what you do and that success is defined by you — not a benchmark provided by conventions. 

Personally, I am much more comfortable placing time and energy on things I can control.

As for the economic and market direction for the next 12 months?  Ill take approximately five seconds to mark my calendar as a reminder to post on the second anniversary of the Bull Market (or new Bear Market) in March of 2011; but as the five seconds of time expires, Ill go on observing markets from a comfortable distance and enjoying the life that money cant buy.