first majestic silver

The Dow has never been in a true bear market.

True or False?

November 22, 2003

Sol Palha of put this question before several
Internet market commentators:

Sol PalhaBill MurphyGeorge PaulosJohn Tyler,
Peter Spina, Gale Bullock & Tim Wood respond:

Sol Palha

What I am about to say could possibly anger some people with entrenched views and some might even attempt to state that this article is against Gold. This article is not against Gold. In fact in the short term, both Gold and the Dow can do well. Long term, Dow will lose.

I performed a search on the net and found several definitions for a bear market. Rather than list them all here and waste time and space, let me conclude by saying: there is no standard definition for a bear market.  So it is open to interpretation, just as is almost everything in the financial arena.

So I have chosen to define a bear market in terms of the concept of “The Trend is your Best Friend.”

Using this concept, I can make the following assertion:

First and foremost, the Dow is technically not really in a bear market yet. I am a firm believer in the simple principle of the  “Trend is your Friend until it Ends” and I must admit that I initially made the mistake of calling this a long-term bear market (secular) in a current cyclical bull phase. However, upon examining very long-term charts, I have to take back that call.

Looking at the trend, we see the main super trend of the Dow is still intact. In fact--get ready to hold your breath--we would have to break below the 1500 level to say the super long-term up-trend is over.

If one looks at any stock, it usually has 3 stages: the super main trend and then 1-3 more branches before it corrects. At this point, it can fall back to the main trend line and then slowly return to its former old highs and even surpass them or completely vanish from the face of the earth. Looking at the Dow, you will notice that it has had 4 branches in total, which is rather extreme.

The market over extended itself to the maximum point and it’s only logical that it should regress back to the mean. Since the upward move was so outrageous, it follows that the downward move should be equally outrageous.

In an earlier essay titled Slaves to the Grind and Gold, I illustrate how the Fed’s easy money policies created this hyper-frenzied Bull market.

So far we have just broken below the 4th branch, which is fully understandable and expected, since the market had reached insane levels. But take a look at the chart. We could not even break below the 3rd up trend line, nor even touch it. This means that this market still has plenty of life in it and all it did so far was wring out a fraction of the excesses in it. The NASDAQ had a more serious correction and the reason is simple: the NASDAQ went from a place where one speculates to a place where one started to speculate as if one was under the influence of some very strong hallucinogenic drug.

Take a long-term look. This pull back has been rather mild and in reality nothing to be worried about yet.  The new thrill-seeking investors, who were so busy getting high every day as they saw their portfolios soar in value every single week, got smashed with a super dose of reality when the market decided it was time to take a breather and rid itself of some the excesses. And since the NASDAQ was the place where speculation was the most rampant, it follows that it should also be the place where the correction would be the strongest and the fastest.

We have not even touched 7,000 nor breached it. Had we done so, this would have indicated further weakness.  If we had breached it, we would have to break below 5,000 to invalidate the second main super up trend line.

So where do we stand now? If you look closely, it looks like we are in the process of completing a wedge formation, which will be very bullish if we break out of it. In addition, we are slowly making higher lows, which is another bullish indicator. Another major bullish indicator is that for over 6 months now the number of new highs has seriously outpaced the number of new lows. This shows that the internals of the markets are actually improving and getting stronger.

What is very interesting is that Gold is also putting in a nice wedge formation when priced in South African Rands, which adds further credibility to the theory that the Dow is really doing nothing but adjusting to the high level of currency inflation. I spoke about this is in my previous essay, Insanity is Prevalent.

So in the short term, it looks like Gold and the Equity markets can keep chugging up, however Gold will be the final Victor, since it has just begun its major up trend.

I believe with the above data one can draw the following conclusions:

A pull back to the 8,800 to 9,000 area would be very healthy for this market. However, it is not necessary. If we pull back to even 9,400 to 9,500, it would serve the minimum criteria to provide the necessary ingredients to start the next phase of this rally. So far there is nothing extremely spectacular about this rally when one looks at it in terms of a stronger currency. Look at my previous discussion on this subject, The Dirty Secret Behind the Gold Markets.

In summary, most of the move was due to a currency adjustment: the US dollar getting hammered to death and the markets simply adjusting to reflect this inflationary process. (You can’t expect the market to stay at the same level if several hundred more million or billion dollars are chasing the same number of stocks.)

If we can hold in the 8,800 to 9,000 range, then the outcome looks rather interesting. Esoteric cycle analysis (our proprietary indicator at the Tactical Investor) is basically suggesting the following targets if we can hold the above ranges:

1st  target will be a break of the Dow over the 10,000 range
2nd target 10,500
3rd  target 11,400
Extreme target 11,7000

Then we start the process that I call the crash and burn as the market corrects and comes back to a sane level. But before it does, an insane level of pain has to be felt. So when all is said and done, this market could end up in the 1,500 to 4,000 point range.

Of course, one major terrorist event and the market will go to hell. No timing system can account for some insane fanatic’s actions. (Hence the necessity to hold even more Gold and Silver bullion.)

As John Maynard Keynes puts it, “Markets can remain irrational longer than you can remain solvent."

And if you are nervous about the markets, then listen to Mark Twain:

"October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February."  Mark Twain 1835-1910

If you claim to be a contrarian, then at the very least you can take the time to look at what I have to say. Understand that I am not pushing these opinions down your throat, but only providing other possible scenarios from the ones most of you have been provided to date. Don’t shoot the messenger simply because he is delivering a message that does not fit into your pre-built expectations scenario.

© 2003 Sol Palha



Bill Murphy

Chairman, Gold Anti-Trust Action Committee (GATA)

Proprietor, Le Metropole Cafe

I like to think I have as good a handle on the gold market as there is out there, save for The Gold Cartel themselves. As far as the stock market goes, I'm no expert, but it seems to me we are a massive bear market that could last for a very long time.

What strikes me the most is there was no serious public capitulation after the FIRST bubble burst. Yes, people were hurt, but most investors are still long, waiting to get their money back and then some. With the way some of the internet stocks have flown, they are doing just that.

However, this just looks like another bubble to me. The valuations of many of the soaring stocks are insane. As a market whole, the P/E ratio is over 30 - which has historically been market top material.

Why has the market done so well this year? Thirteen rate cuts, tax cuts and US Government stimulus has led to some decent economic activity. The problem is that this stimulus is going to wear off soon. The big picture issues are worsening. Key ones like the US burgeoning deficits, corporate pension underfunding, too extensive personal debt of the average American, a weak job picture, state budget problems, etc., are not improving.

Fed officials say they have no intention of raising interests in the "foreseeable future. They say there is no inflation in sight. Have they looked at the soaring CRB index lately? How about the .8% PPI? Last week the Journal of Commerce Industrial Commodity index rose almost 1% to the highest level since September 1996. But, there is no inflation? Huh? The point is that if the Fed is going to ignore so many inflation figures no matter what the reality is because the economy is so weak, then there will have to be serious ramifications.

Gold is going to go ballistic and the dollar will be creamed. At some point this desperate Fed philosophy and approach to the markets will have a very negative effect on the US bond and stock markets. Throw in the worsening situation on this ill-conceived war in Iraq as another big negative.

I can see the both the Dow And NASDAQ making new lows and really tanking after that. Perhaps then the public will capitulation and swear off the market. As an aside, there has been little public outcry about the growing Wall Street scandals. It seems we get one a week in all sectors of the industry. The only reason the public is not going berserk is because the stock market has gone up. Watch what happens when it dives and they realize their 410-K money is gone for good. There is going to be a howling like rarely seen in this country. Wall Street is going to be vilified.

© 2003 Bill Murphy


George J. Paulos


Alternatives for Financial Freedom


Much ink has been consumed debating the topic of bull vs. bear in the stock markets. Much of the analysis being written these days seems to be a rationalization of the analyst’s pre-existing bias. It is not productive for an analyst to come to a conclusion and then look for supporting evidence. Useful analysis comes from a dispassionate look at the evidence and conclusions must come from patterns extracted from that evidence. That said, I must state my own pre-existing bias about the stock markets. I feel that the US stock markets are tragically overvalued and have been that way since at least the mid-1990s. I base that judgment on old-style Graham & Dodd fundamental discounted cash-flow valuation models and Austrian Economics. As in many things, value is in the eyes of the beholder. Many investors have ignored these quaint ideas about value and have made fortunes doing so. The reasons for the long bull market are many but one thing never changes: Stocks will go up if there are more buyers than sellers regardless of the underlying value, or anything else for that matter.

The topic of this article is the Dow Jones Industrial Average and whether the quaint old Dow is in a bull or a bear market. In order to answer that question we must first state some definitions. The Dow itself is very well defined as a stock price average of 30 of the largest and most influential companies in the US. The Dow is considered a benchmark for US stock market activity and is the most quoted number in the financial media. Many investment strategies and financial products are based on the Dow.

Depending on who you listen to, the Dow has been in a continual bull market since at least 1982 or possibly since the bottom in 1975. What do they mean by a bull market? A bull market simply means higher and higher stock prices

Figure 1 Dow Logarithmic Chart

The chart above is called a “logarithmic chart” which is distinguished from a “linear chart” by the fact that equal distances on a logarithmic chart on the vertical axis correspond to equal percentages whereas on the linear chart, equal distances correspond to equal number of points. A logarithmic chart more accurately presents the data from a financial gain or loss perspective when the price data is extreme. The long-term chart above ranges from a low of 569 to almost 12,000. If we present the same data in a linear chart (as shown below) then the data at the low end will be distorted and much detail will be lost, but the more recent data will be exaggerated relative to the distant past. Note how much more prominent the decline from 2000 and the 2003 rally look in the linear chart versus the logarithmic chart. We will use logarithmic charts in this analysis.

Figure 2 Dow Linear Chart

Since we have established the Dow’s long-term rise, let’s create a definition of a long-term bull market to see if the Dow has yet violated it. We need to make the definition objective, which means that we must omit subjective ideas of value from the definition. This requires a price-based method since price is a completely objective and universal measurement. Any price-based study of markets is known as “Technical Analysis”, which has a long tradition and a well-established set of guidelines.

The core concepts of technical analysis are trend lines, support, and resistance. We will build our definition from those concepts. Simple trend lines are created from drawing lines on a price chart that intersect three or more price reversal points on a chart. A trend line connecting the lowest price points defines support, which is a natural barrier to lower prices. The trend line connecting the upper price points defines resistance which is a natural barrier to higher prices. When the stock breaks through a resistance line, that line tends to become a new support. Conversely when a stock breaks through a support line, that line becomes resistance.

We will now define a long-term bull market as any logarithmic chart that can maintain price above a long-established upward trend line. Let’s apply these simple rules to the long-term Dow chart:

Figure 3 Dow with trend lines

The upper trend line denotes a long-term support line that was tested at three widely-spaced intervals. The wide spacing of the three intersections gives the line strength, like a three-legged stool. That support line was violated in early 2002 which makes that line into strong resistance going forward. Currently that resistance stands at about 10,300, very close to current levels.

The lower trend line indicates support that was established on the two bottoms made in October 2002 and March 2003. Note that these two intersections are very close to each other and the third was way back in 1982. Consequently, this support line is very unstable, like a three-legged stool with two of the legs very close to each other. Weak though it may be, it has held for about eight months now and support currently stands at about 8000 for this line.

Since this line is rising, the Dow will be rising and ultimately eclipse its old highs if the lower trend line holds. This will satisfy our definition of a bull market. However, since the Dow has already violated a very powerful trend line, we will have to declare that this bull market is on “probation.” It must prove itself as worthy of maintaining the bull moniker. There are several ways this can be accomplished:

  1. The Dow breaks back through the upper trend line and stays there (best because it breaks through tough resistance and reestablishes the upper trend line).
  2. The Dow tests the lower trend line and bounces back up (second best because it confirms support and strengthens the lower trend line). 
  3. The Dow maintains itself between the two trend lines for a significant period of time (okay but who’s complaining?).

There is only one way that the Dow will violate probation: failure to hold the lower trend line. Two strikes and you’re out in this game. The lower trend line is also rising however, and sooner or later must surpass the old highs. This trend line is weak and will prove to be harder and harder to maintain as time goes on. A significant violation of the lower trend line will, in my judgment, spell a conclusive end of this secular (long-term) bull market.

Although this analysis states that the long-term bull market is still intact for the Dow, it does NOT indicate that the Dow Jones Industrials is a buy right now. With resistance close overhead at 10,300 and support at 8000, the risk reward ratio is poor at this time. A likely scenario would have the Dow testing the lower trend line sometime in the near future, some 20% lower than today. Another scenario where the DOW penetrates and successfully tests the upper trend line as support WOULD be a technical buy signal. Best to stay on the sidelines until one of those signals is generated.

Back to my own personal bias, I believe that it is likely that the DOW will violate the lower trend line. A stock market cannot keep defying gravity forever. The overvaluation problem in all of the US stock markets means that the income from the operation of these businesses cannot support existing prices. Either income must increase (possibly via inflation) or prices must ultimately fall.

George J. Paulos


Alternatives for Financial Freedom



November 13, 2003

Copyright 2003 George J. Paulos, All rights reserved.


John Tyler

Quantal Theory


Has the Dow never been in a true bear market?

This begs the question as to how one defines a bear market. One can look at a 100 year chart with a log scale for the Y axis and draw a trend line under every major low, and fine that the Dow always recovers to go on and make higher highs and lows.

However, tell this to someone who has just retired from work, and discovered that they had lost 50% of their equity in an index linked fund, they will ask if they will live long enough to see a new high.

The answer depends by what you mean by “a true bear market”. We can define things any way we like, but this is an “Alice in Wonderland” approach. What we need is a simple and practical way of defining market moves.

If we start with basic Dow theory, we can say that a “true bear market” is when the major trend is down. The problem with defining a “major down trend”. My own method is to define this as a downward “Trend of the Weekly Swing Trends”.

This methodology is available free of charge in an e-book at provides objectivity to Dow’s method, and is not ambiguous like the Elliot Wave Theory.

The first chart shows weekly swings in the Dow Industrial since 1960. There will be few who would deny that the period from 1960 to 2000 appears to be an up-trend on this particular scale. However scale deceives and we need to look at more detail to get a closer view of the market as we hunt for a “true bear”.

We’ll track the market beast from 1996 to 2000, the section marked A above, and see the direction of its prints. The blue bars represent the range of each swing trend. The trend of these bars – “The Trend of the Swing Trends” – is UP. This is the major trend, and is shown by the green line.

The next period is 2000 to present, area B in the first chart. We see a series of downward swing trends. Hence “The Trend of the Swing Trends” – the major trend – is down. This is what I would call “a true bear market.”

We now have upward swing trends, so the bear is hibernating once again. He’s out of sight, but not gone. He was truly there, if you know how to track him.

© 2003 John Tyler



Gale Bullock

(AKA Ole Bear)


                      RMS Titanic
DOW? … kinda like our paper money system as a store of value…Ha! Ha! Got Gold? The DOW is 65 stocks according to Sage Russell -- 3 Indexes – Transports, Utilities, and Industrials…. Under Dow Theory practiced by Sage Richard Russell….

The Meat and Taters,,, Global Markets Analyses… Pour Vous?

Since the October 2002 rebound in the DAW 65s, to current pricing levels…. The False Alarm has been shut off, the deck chairs are re-arranged, and the band plays “The Bear Cried and Died” to the tune “I Cried for You” on the elite upper decks, while everyone else on-board is belting out a chorus in 4 part harmony of  “The Re-Birth of the Bull” to the tune “The Birth of the Blues”…  everyone playing cards, having drinks, and smoking their pipes, cigarettes, and cigars… chit-chatting away – all thinking themselves to be much smarter than the Oracle of Omaha, Mr. Buffett. Hummm… the tune “Slip Sliding Away” pops in my head! Simon & Garfunkle? Pour vous? I define false, as “false alarm.” I define DOW as RMS Titanic. DOW = DAW from the Arabic for boat.

In the meantime the ESF, Federal Reserve, Working Group on Financial Markets, and a few other clowns, Bernanke and McTeer, certainly are coming to mind – rascals, who have been pushing on a string for nearly 3 years – by lowering Fed Funs Rates and other market gyrations. Some party handing out pretzels, lollipops, candy, popcorn, beer, soda, and some really heavy-duty liquor for the party. I think these Monetary Charlatan Morons got the party Scotch on-board from Ole Poppa Joe Kennedy’s boot-legging days in the 30s running Scotch from the UK. Nothing like protecting your reputation, is in Chairman Greenspan? For those of you who take, Sage Richard Russell has some great pearls on Chairman Mao, I mean Chairman Peter Pan in never-never land. I’ll never grow up, I won’t… I won’t…. I won’t! (Austrian Economically Speaking)

For Definition of  DOW as a real Boat: Click Here Sage Richard Russell:  Click for Quotation on Greenspan’ s Legacy November 15, 2003 – Richard Russell Comments, from, used by permission and with great thanks! Think we are playing with real money and real PE’s in the DOW 65, or the S&P500?

Pie R Round?   Pie R PE?   Pie R Squared? Or  (P – E) = MC Squared?

PE’s are dreams built on legal tender fiat pieces of paper money…. And it plays on wall street and on main street…. And at the grocery store.  Notice the non-Caps… they are equally important.  The money stuff is debt backed. So is Real Estate. So is Wall Street. So are the Companies that trade on wall street. Own any Halliburton or Dyncor? Welcome, to the Military Industrial Complex, and the paper chase of debt -- all debt backed, too! $87 Billion for Iraq and Hallibuton et al? -- building several new bases in Iraq and the Good Lord only knows what else? Where’s this money coming from? Out of thin air -- more debt. We shall call this theMandrake Mechanism, coined by G. Edward Griffin. Not related to the DAW? Dream on! Speaking of PE… aka, price to earnings ratio… that leads us to:

Big Boats, Uncharted Waters, or How Thick is that Iceberg? But more important… How many nautical miles deep is the icefield? PE ratio or PE is the price to earnings ratio for common stocks on wall street, hello!

Considering the big boat DAW to include Russell’s 65 stocks, it would be obvious to add 3 charts and rustle up the collective PE ratio for the three indexes. We shall leave that for the chart huggers on Technical Analysis, who are a lot smarter than me and love pushing buttons…

What one should find is an is/was/has been PE ratio well above 25 nearing 30 or higher for most of these, but we all know PE can be jiggled like bowls of Jello – or Ken Lay’s Enron (ENE). If we look at sound valuations at a 7% yield for cash flow called dividends, PE ratios fall in the 13-14 range, don’t they? When markets correct in something that is difficult or unpleasant, histories of markets, and the history of the DAW indicates PE re-arranges the deck chairs under the greater fool theory to 5, 6, or 7 at the most fearful point of unpleasantness. Alas, that is the histrionics of boats in our take on Charles Mackay. Under the greater fool theory, could this be the mother of all unpleasantness? -- Most likely, in our view, when one considers the risk to reward factor.  Musical deck chairs, perhaps….? -- Perhaps. If the current market truly is a Bull Market since the October 2002 lows, I have a great analogy for you.... ever ridden one of those mechanical bulls? In our view, riding this sucker is playing the risk/reward factor that you won’t get tossed off on your assets… especially if you had a couple of stiff ones at the party!

Black Market or Wall Street? Spitzer as Eliott Ness? I don’t think so… 

The illegal business of buying or selling goods or currency in violation of restrictions such as price controls or rationing.  A place where these illegal operations are carried on.

Know why I love this definition? Sounds like Wall Street to me adding is/was/has been Orwellian Double-Speak (aka, Clintonian Nuclear Plutonium), as I learned it from Slick Willie Jefferson Clinton, who probably likes his cigar as much as I do – make mine Royal Jamaican, Man!

The is/was/has been business of buying or selling goods or currency in sanctioned is/was/has been restrictions such as price controls or rationing and is/was/has been hocus pocus (hyped up demand).  A place where these is/was/has been operations are carried on, such as NYC, more predominantly on Wall Street. BeautySchool Drop-Out Cheerleaders on Financial Bubblevision, may aid and abet the deception of investing. Price controls??? Nah… this is a “free market” – right? Sound like Wall Street to you with the great flux of insider selling right now in the Fall of 2003?

Sgt. Pepper’s Lonely Hearts Club Band or Ruby in the Sky with Diamonds…?

Which leads us to a magical mystery tour of an imaginary and wonderful place, a fantasy land called Wall Street where greater fools re-arrange deck chairs on the RMS Titanic. In Fantasyland, priced to perfection speculation at PE ratios are reminiscent of halcyon Blue Skies. Blue Skies was the top tune of 1929 Welcome to Never-Never Land….  Where the Good Ship Lollipop fleeces the Wealth of  Nations to line a few pockets in one of the greatest Ponzi Shell Games in The History of the World, and in the madness of crowds. Peter Pan, never-never had it so good!

False Alarms on the RMS Titanic or Welcome to the Good Ship Lollipop!

An emergency alarm, such as a fire alarm, that is set off unnecessarily, or who’s on first, Nah! Who’s on third with their Golden Glove on the groundless warning on the “To the Lifeboats Bell?” Simply Groundless… but ground under water can be several fathoms deep, can it not? Our friend Sir Franklin of Raines may learn snorkeling before, the Austrians have their final say. So may Chairman Peter Pan? Bear Grin!

U$peak, I$peak, We$peak, FED$peak, or all around the Federal Re$erve?

By the time everyone (Ma and Pa Kettle on Main Street, and their son Joe Six-Pack, and their daughter Sally SUV) realizes those rascals, aka DA FED, and the Monetary Charlatans have been rigging Wall Street in the futures and repos markets (and a few others),  FED$peak McTeer will bankrupt us all holding hands buying more gas guzzling SUVs, FED$peak Bernanke will print enough FRNs (legal tender paper funnie monie) to make the currency completely worthless (since we are going to print $87 billion to hand out in Iraq – much to American companies), and the GSEs will be the Sword of Damocles hanging over Wall Street. When we all wake up on the Good Ship Lollipop, realizing that we hit some big ice (an iceberg comes to mind), the DAWs have enough potential to shop until speculators (aka, “investors”) drop…. Like flies in the ointment… or taking that great leap of faith…jumpin’ out windows, perhaps? What good is a life preserver in very cold water… you succumb to the cold water, hello? If the water is warm, Ye Gads Jerome! Sharks love all kinds of motion in warm water! We can add some other variables related to Constitutional Money Systems, Geo-Politics, 9-11, and that Hubbert Oil Curve that show’s the US oil production began declining in the early 70s… But, we are never concerned about false alarms in never-never land. If this is an UnPleasant Bear Black Market, so far nothing is really unpleasant, suspect, or difficult, now is it? Party on, The Band Plays On…

Paper Moon, the Paper Chase, or Meet Me at Chase Manhattan?
Waking up at 3AM in the morning in a cold sweat, I just remembered my nightmare… Surrealism at its best at JPChase?

Picture Alan Greenspan with cane, spats, top hat, and tales singing “Paper Moon” in the lobby of JPChase Manhattan Bank in NYC tap dancing like Fred Astaire, while McTeer hands over the keys to countless Link-Kon Ale-Gator SUVs, and that other JackAssets, Bernanke is running off new counterfeit bills on an antique Gutenberg printing press behind the teller windows… the audience cheers…”Hurray at JPChase!”  See:  the rest of the Nightmare

Conclusionary Remarks… Or Greenspan does not a Farragut make... Battle of Mobile BayAlabama - August the 5th, 1864
Is this the Mother Bear of all Bear Markets for companies who trade in the DAW that are highly leveraged with debt, have questionable accounting practices, and PE ratios that are priced to perfection, with a little Wall Street Fraud thrown in to boot? The battle tactic is being concocted right before our very eyes with a 90 year old central banking legal tender paper funnie monie system backed by debt, which does not appear to let the market work out its excesses, malinvestments, and so on, and so forth, according to the Austrian Economic School. While “pushing on a string” with rate cutes, repurchase agreements, infected  AIDs liquidity to the markets, and only the Good Lord really knows what in the futures, it certainly does appear that markets and the DAW are in uncharted waters, with the big boat full steam ahead. Our take on it…. Is that a field of big ice is in the path of a very large boat…. that is very difficult to turn on a Dime, or come to a dead stop, quickly. Chairman Peter Pan, is, in fact, certainly, and most definitively, not  Admiral Farragut steaming into Mobile Bay, saying: “Damn the ice and heavy metal… Full Speed Ahead!”

Wall Street 1929 Crash –  Life Preservers on?

Gone With the Wind? Or, Great Expectations? Got Any Heavy Metal?

Our take on this great  rhetorical essay topic? The risk to reward ratio, has more risk at this gambling casino than I want to speculate with, managing family money and my own… there are trading opportunities in the market to be sure, if you know what you are doing and like day trading or swing trading, and have time to watch your money second by second as well as price action pivots… Frankly, Scarlett, I don’t give a damn… about speculating. Making a few select puts and calls can be sane with the risk reward factor, but the FED is dead set on taking you out of the money, no matter how great your call. Going Long or Short can work on select plays, but never refuse to take your profits. Our Friend at Zeal has penned some most excellent witty essays on Jesse Livermore (Reminiscences of a Stock Operator), and they are, in our view, required reading for uncharted waters ( – about a 6 part series –  highly recommended.

DAW is a Ponzi Shell Game just like two tiered structured finance and the Federal Reserve

In the end… someone is going to lose and someone is going to make the profits. My money is on the long term global markets trends, much safer as an investor, than a speculator. Value investing for amateurs like me… Is a much safer play, when one did not engineer the rivets, metal plates, or watertight bulkheads, on this big boat. Until Abolished, the Federal Reserve will control the DAW and all boats and markets. Besides, I also have to work for a living, just like you all do…  DAW ever been in a True, or False Bear Market…? Never really known until some one at the rewrites the economics textbooks for Harvard, Yale, and Princeton, redefining the productivity of the service economy and the Internet as the Failure of the New Economy Paradigm…. Hello NAFTA, thank you Clintonista and the rest of you DemoPublicans, and Bubba, “Here’s your pink slip, and to the right is the exit door to the factory…. Don’t let the door smack your assets when you leave, and have a nice day!” Welcome to Hollywood!

What’s Yo’ Dream?

© 2003 Ole Bear MAI


Peter Spina


Has the U.S. markets ever been in a bear market? Yes and no. Considering the long-term, historical context of this question one can clearly see, over time, cyclical bear markets have always been conquered by the larger, secular bull market.

In the past 100 years, looking at the Dow Jones Industrial Average, we see there have been a total of 24 bear markets (using the standard definition a bear market is defined as a market with loses of at least 15%) with declines ranging in the effect of 16% to the 89% losses seen in the 1929 to 1932 market crash. Yet, years after the end of a bear market period, the bull market has been successful in returning to pre-bear market levels and moving significantly higher. Yet, this data neglects the use of key contributions to gains in the markets, dividends. Historical dividend yields have returned around 3-4% a year and would lessen the impact of the data below. 

14 Bear Markets In The Past 100 Years

Start Date

End Date

S&P 500 Return

Sep ‘29

Jun ‘32


Jul ‘33

Mar ‘35


Mar ‘37

Mar ‘38


Nov ‘38

Apr ‘42


May ‘46

Jun ‘49


Jul’ 57

Oct ‘57


Dec ‘61

Jun ‘62


Feb ‘66

Oct ‘66


Oct ‘68

May ‘70


Jan ‘73

Oct ‘74


Sep ‘76

Mar ‘78


Nov ‘80

Aug ‘82


Aug ‘87

Dec ‘87


Jul ‘90

Oct ‘90





Despite these horrific plunges in equity prices, the resulting bull markets were powerful enough to wipe out all losses, provided the holder of the equities did not sell. Maintaining a buy and hold strategy, over time, historically will dictate your investment will survive a bear market setback yet such an approach requires you to give up an important investment criteria, time.


There is no question that timing your entry into the markets is, above all else, the most important criteria despite the fact that over the years we have seen the U.S. equity markets providing returns, our life spans hinder the ability to capitalize on the buy and hold strategy. Take a look at the following scenarios:

If you happened to be one of the very unfortunate souls who bought into the market bubble in 1929, and there were many who did, but say you hit the absolute top and I refer to September 7, 1929. Using monthly data for the S&P Composite Total Return Index and including the dividends paid, you would have to wait until the war-inspired bull market hitting a break-even point in April 1945. Had this been the case, you would have had to wait nearly 15 ½ years to break even (i)! Of note, one should consider inflation, but according to historical data, inflation during this period was just below 3% (ii). Considering this analysis, you lost over 15-years ofearnings potential due to market timing.

Had you waited 3 years later to invest and buying after the nearly 90% drop in values; the story would have been quite different. Yet, over the long run, we can see in the below graph, the market is up an outstanding amount!

So, what would a buy and hold strategy look like? Using inflation data from the earliest point available, say on the eve of WWI, a privatized central banking system and an U.S. economy poised to go through a historic period of tremendous growth, let us see what would happen to parents who set aside a $100 investment for their new-born child.

Back in January of 1914, the DJIA was trading around the index composite value of 80 (iii). With the start of 2003, The DJIA was trading in the area of 8,500. 89 years later, inflation adjusted, dividends not accounted for, that $100 inflation adjusted investment is now worth $8,908 dollars – an increase of just under 89 times, thus averaging an increase of 100% every year. Truly an outstanding achievement since the true value is much higher, if the dividends received were used to purchase more shares.

Observing the trend in the historical perspective obviously produces the conclusion that no bear market has existed if you were invested for the long-term. Including inflation, dividends, and bear markets over the prior decades, investing into the general markets would have produced significant returns. Yet, timing is key if you wish to maximize your results and achieve profits as picking purchases near or at market tops will require years of patience to recover your investments dollars. One must also realized observing past data, though cyclical in nature, does not guarantee a future result. The U.S. and global stock markets have benefited from an age of tremendous prosperity. The U.S. is even more of an exception as our remarkable growth has provided outstanding equity returns which will be difficult to match in the 21st century.

© 2003 Peter Spina


i –  "Bull and Bear Markets, Past and Present," Barron's, page 44, 8/12/2002 Dr. Taylor, Global Financial Data.

ii –  Inflation Rate Calculator

iii – DJIA Historical DataLiquid Markets


Tim W. Wood


Cycles News & Views

Obviously, the definitions of Bull and Bear markets differ from person to person. My definition is based on the works of the great Dow theorists, Charles H. Dow, William Peter Hamilton and Robert Rhea. As a result of my study of Dow theory, combined with my study of cycles, I have drawn some very obvious conclusions about both the occurrence and nature of Bull and Bear markets.

As I read about the Bull and Bear markets of the late 1800s and very early 1900s, it becomes apparent that the Bull markets Mr. Dow wrote about were the upward movements of the 4-year cycle and the Bear markets were the downward movements of the 4-year cycle. As our country became more and more sophisticated and more people started investing, the Bull and Bear periods became longer. Bull and Bear markets evolved into a series of multiple 4-year cycle periods. For example, the Bull market from 1921 to 1929 was a period of two 4-year cycles. The low in November 1929 was a 4-year cycle low. The rally, “Secondary Reaction,” that followed was the upside of a 4-year cycle that topped in only 5 months. Once this “Secondary Reaction” was over, the DJIA moved down below the previous 4-year cycle low and into the 1932 4-year cycle low, which proved to be the Bear market bottom.

I would also like to point out that the 1921 to 1929 Bull market advanced a total of 568% from the 1921 4-year cycle low at 67 on the DJIA to the 1929 4-year cycle top at a high of 381 on the DJIA.

The next great Bull market began with the 4-year cycle low in 1942 and ran to the 4-year cycle top in 1966.  This time the “Primary” Bull market comprised a series of six 4-year cycles. The Bear market that followed was also a series of 4-year cycles. From the 1966 4-year cycle top, the Bear market moved down into the 1974 Bear market low. This was a series of two 4-year cycles.

The second great Bull market advanced a total of 1,076% from the 1942 4-year cycle low at 93 on the DJIA to the 1966 4-year cycle top at a high of 1,001 on the DJIA. The bear market that followed ran from the 1966 high to the 1974 4-year cycle low at 570 on the DJIA.

From a cyclical perspective, the last and Greatest Bull market of all time began with the 1974 4-year cycle low and ran to the recent 4-year cycle top in January 2000. This “Primary” Bull market comprised a series of seven 4-year cycles.

This Great Bull market advanced a total of 2,061% from the 1974 4-year cycle low of 570 on the DJIA to the January 2000 high of 11,750 DJIA. I can assure you, this Great Bear market is just beginning.

How Long Will The Bear Market Last?

As you can see, each Bull and Bear market has been a longer series of 4-year cycles and the percentage advancement of each Bull market has been roughly double the previous Bull market’s percentage advancement. The Bear markets have indeed lengthened in terms of the series of the number of 4-year cycles as well.

Now, I want to focus on the Bear market declines.

The 1921 to 1929 Bull market was 8 years in duration.

The 1929 to 1932 Bear market was 3 years.

The Bear market duration was 37.5% of the preceding Bull market.


The 1942 to 1966 Bull market was 24 years in duration.

The 1966 to 1974 Bear market was 8 years.

The Bear market duration was 33.3% of the preceding Bull market.


The last Bull market ran from 1974 to 2000 and was 26 years in duration.

The 2000  to ???? Bear market is NOT over.

Some argue that the last Bull market began in 1982. I understand that argument, however from a cyclical perspective, the Bull market began in 1974. 1982 was when the Bull market broke out and became apparent.  The point I am trying to make obvious here is that this Bear market is just beginning. It was not over with the October 2002 low.

Based on the relationships of the Bull and Bear markets of the past, we are not very likely to see the bottom of this Bear market before 2008 and possibly as late as 2010. I say 2008 because that would be roughly 33% of the duration of the preceding Bull market. A bottom in 2010 would be closer to the 37.5% decline seen with the first Bear market. From a Cyclical perspective, this Bear market will have to end with a 4-year cycle low. I would say that we should expect the bottom with either the 2006 4-year cycle low and possibly not until the 2010 4-year cycle low. My minimum price objective is approximately 3,000 on the DJIA and 315 on the S&P 500.

© 2003  Tim W. Wood


The information contained herein is deemed reliable, but no guarantee is made about its completeness or accuracy. The reader accepts this information on the condition that errors or omissions shall not be made the basis for any claim, demand or cause for action. Any statements non-factual in nature constitute only current opinions, which are subject to change. The authors/publishers may or may not have a position in the securities and/or options relating thereto, and may make purchases and/or sales of these securities relating thereto from time to time in the open market or otherwise. Neither the information, nor opinions expressed, shall be construed as a solicitation to buy or sell any stock, futures or options contract mentioned herein. The authors/publishers of this article are not qualified financial advisors and are not acting as such in this publication. Investors are urged to obtain the advice of a qualified financial & investment advisor before entering any financial transaction.


SPECIAL CREDIT AND RECOGNITION is given to Mary Puplava, who generously devoted a great deal of time and effort in putting all the articles together and editing same.

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