Is This A Bear Market?

On this week’s show, Karl answers the question of whether or not this is a bear market.  But, more importantly, he explains whether or not it matters.

Transcription:

Hey everybody. Welcome to the podcast. This is The Eggerss Report, it’s your investing playbook. My name is Karl Eggerss, and I am your host. What we do on this show every weekend is help you try to make sense of this crazy world we live in, and try to give you some financial planning tips, try to give you some things that maybe you would have missed throughout the week regarding the markets, and really try to help explain why things are moving the way they are and, more importantly, what to listen to and what not to listen to. In other words, all the noise we hear, try to filter out some of those things.

That’s hard to do. We have a lot of news coming at us, as we have the impulse to act on that news all the time. Sometimes just doing nothing is the best thing to do.

When we were at highs in the markets recently, you could argue that never selling stocks was the best thing to do, right? Because we were at all-time highs. So if you had held it, it never went down. But it goes down in between, and that’s where we get caught up. Sometimes we need the money and our emotions get involved. But more oftentimes than not, not doing something is better than doing something when it comes to making investment moves.

All right, our telephone number: 210-526-0057. 210-526-0057. Our website is eggersscapital.com. If you haven’t been on there in the last few months, we made some changes a few months ago, made it simpler in terms of really you come in there and there are really four options. You need help? There’s a green button, you just click on that and we’ll reach out to you if you need help. If you want to understand a little bit more about financial planning, there’s that button. There’s an investment management button and there’s a financial education button. The financial education button is really our blog. On there we post a lot of things on there, two to three things a week, maybe four things a week. Some of them are videos, some of them are audio like the podcast you’re listening to or a radio interview I might do. Then, some of them are just articles with some charts. Again, they cover everything from the markets to financial planning and in between.

We appreciate you listening as always. Let’s jump right in to really what was moving the markets this week, because we had some big movements. Last Friday, a week ago Friday, we felt like … and I had talked about it. I believe I talked about it on the podcast, about that the rally to me, it wasn’t … the rally from the low wasn’t as impressive as it could have been.

So we saw the market drop, obviously, from 1st of October down to the end of October, so pretty much the month of October, really nasty. And we had that one big reversal day, and then we started to move up and up it went. The Dow Jones went from, I don’t know, 24,200 up to about 26,200. Nice, big move. But it didn’t have the same intensity or the required intensity that I would have liked.

As it ran out of steam, which was last Thursday, Friday, some of our longer-term indicators switched negative. Now, what does that mean? Before you run out and start selling stuff and saying, “Should I be concerned?” Remember, this is all about strategies. So if you have a strategy that’s all stocks and your goal is to buy the best stocks and the best ideas all the time, then you don’t really hold a lot of cash. You don’t worry about the day-to-day movements. You are just simply wanting the best stocks.

If on the other hand you have a strategy where you own stocks and things of that nature and at times you want to reduce volatility, you’re a little more conservative, so there are times when you want to have that risk off a little bit.

Well, for that particular strategy that we manage called our growth strategy, that’s what we did. We basically said … we already had a predetermined amount, it was about 15% of that strategy, and that strategy is meant to be in the market when our indicators are in, which is most of the time. But when we have these periods of volatility, it is meant to be out. It’s an on/off switch.

Again, not every client has that strategy. Some are more conservative. Some are more aggressive. This is for those that want to participate in the markets, but at times when there’s volatility, which we often get two or three times a year, move to the sidelines if necessarily.

Now, that indicator, we didn’t want to sell into the panic. So again, and I talked about that a few weeks ago, so we said, “There’s never really a time to sell into panic, unless you need the cash for some reason.” So after the market bounced and things have calmed down, that was the time to reassess. We did. We took it off the table. And, of course, Monday this past week is the day that we saw the Dow Jones fall 600 points.

So, again, it was playing out, not that we knew the market was going to fall 600 points on Monday, but that rally a week ago Friday was just not … or the week ago … really the last couple weeks, just didn’t have quite the intensity. So we had the little pull back this week.

I’m going to get into that a little bit, but let’s talk about really what happened this week. Again, Monday, the Dow Jones fell about 600 points. Tech was down almost 3%. What was going up? Did you notice what happened this week? Natural gas. It was going vertical. Meanwhile, natural gas was going straight up, oil was going straight down. It went down 11 straight days on Monday. That was the 11th straight day, longest streak ever. So surely it had to go up on Tuesday. Nope. Tuesday rolls around, oil falls 7%. Nasty drop, the 12th straight day.

Sometimes when you get these violent moves, the worst days are at the end, so you kind of felt like there was going to be some capitulation, and there was on Tuesday. Then, of course, we’ve rallied oil since. But natural gas on Tuesday went above $4 for the first time since 2014. Tuesday was interesting. It was a volatile day, but it was mixed. There was some areas weaker, some stronger, but there was some green on the screen. I always like to see that. It was just kind of an all-or-none type of day. Tuesday was definitely a mixed day.

Wednesday we came in, oil broke that losing streak. Here was the thing though. The talk of the town was natural gas, up 17% on Wednesday. Monster move. Went over $4. When it went over $4, many believed that would be a cap, that would be the ceiling and it would fall back down. It didn’t do that. When it didn’t do that, the shorts had to cover.

There was rumors out there this week that there was a lot of people short natural gas, long oil. That’s a bad combination. So when it went against them, they had to cover, and up it pushed natural gas up even further.

Market rallied on Wednesday, and then faded and eventually was down 350 points at one point. It didn’t finish with the lows, but was weaker. And the bank stocks that day got hit pretty hard, and the market. What was it? It wasn’t that they got Amazoned. Do you know what Amazoned means? It seems like every industry is waiting for Amazon to come into their space and disrupt: drugs in terms of pharmaceuticals, retail, they may start selling cars, right? So if you’re an industry that gets in the way of Amazon and they come into your space, you get Amazoned. That’s what I call it.

Well, the banks didn’t get Amazoned, they got Watersed, as in Maxine Waters. She’s taking over. She basically came in and said, “This deregulation, the old days of … ” basically, she said, “We’re going to be tougher on banks.” That’s what she said. And the banks got hit that day.

Now, we also saw Bitcoin crater that day, kind of breaking … Bitcoin’s been very boring, cryptos have the last few months. Obviously, they went through this nasty down drop, and then they’ve just been kind of moving sideways, down just a hair, and the volatility’s kind of gone away. Well, it picked back up on Wednesday and Bitcoin fell apart. So that got back in the news.

Here’s where the week got interesting in my opinion. Thursday we see Jay Powell, who is the head of the Federal Reserve. What did Jay Powell say? He came in and said, and this is a quote, “We have to be thinking about how much further to raise rates and the pace at which we will raise rates.” He says, “The economy’s still good, but there are concerns.”

Now, this is what the market wanted to hear, right? So I expected the market to be up a lot on Thursday, because, remember, everybody’s been pushing, including the president, for Jay Powell to acknowledge that we could potentially be going through a little bit of an economic deceleration. And he hasn’t. He’s sounded like things are rip roaring and there’s no slowdown at all, when we know that the housing has slowed a bit, autos have slowed a bit. There’s some signs that things are just slowing a bit. He hasn’t really discussed that. So that combination we talked about last week where the economy’s decelerating and the fed keeps raising rates, it’s a bad combination.

So was this the first sign that he’s like, “Okay, guys. I hear you. We’ll assess. There’s concerns and we need to be … ” he said, “We need to be thinking about how much further to raise rates.” That was a sign that he’s listening. So market was volatile, but it finished up about 200. It was almost a delayed reaction.

Well, on top of that, we heard China was working on some concessions before the G20, right? So that was another thing that I thought the market could be up, and it did finish up about 200, but it didn’t run up right away. It was kind of interesting. Kind of a delayed reaction.

Now, natural gas, remember, natural gas was up 17% on Wednesday, down 19% on Thursday. Gave up all those gains from Wednesday and then some. Crazy move.

Friday, the big news was really Nvidia and Applied Materials. Really hurt the semiconductor industry. Of course, that’s been kind of a theme right now, is this technology slowing down. You’re starting to see Apple saying some things, you’re starting to see some of their suppliers … things seem to be slowing a little bit. Semiconductors were the bright spot in the market for the last couple of years. They have definitely rolled over now relative to the S&P 500 and the overall stock market, so that’s something to continue to watch.

Then, we also had another thing. We talked about Jay Powell and what he said. Well, on Friday Federal Reserve banker Clarida, or Clarida, C-L-A-R-I-D-A, came out and said she believes we’re closer to neutral and that we should be data dependent. Well, isn’t that interesting? I mean, again, is this fed sending out a message now to the markets that, “Okay, we’re not going to just raise every single time we meet. We’re going to be data dependent.” Remember, that’s what Janet Yellen used to say, “data dependent”, meaning, “If the data’s good, we’ll raise. If it looks like we may be slowing down, we won’t.” So is the fed changing their tune? And lo and behold, markets have responded a little bit in a positive fashion. Right?

The other thing that happened on Friday, and this was really all week long, PG&E, the big utility company out in California, there was talk that they were maybe held responsible in some form or fashion to some of these fires and the deaths and the destruction, and their stock just started plummeting, I mean going straight down. It was interesting, because this is a big utility company. We got to thinking about it, we were discussing it in our office on Thursday, that, “When’s the last time something like that happened where a company that size with that which is regulated like that and had an incident like this went bankrupt? Maybe some heads roll, but would a company go bankrupt?”

Well, a regulator came out Thursday evening and said, “We can’t really have them go bankrupt.” So what happened? The stock went up 37%-ish on Friday. So that was a real big move [inaudible 00:14:17]. And that’s the risk of owning individual stocks, number one, but a concentrated position. How many people own that stock feeling like, “Oh, it’s just a nice little utility company.”? Well, that little utility company is still down about 50% from where it was. Now, again, well off of its lows, but still down about 50% where it was literally almost just a week ago. So huge move in that utility company, Pacific Gas & Electric, PCG is the company … PG&E.  So that was kind of your weekly wrap up. But the other thing that was interesting this week.

I don’t know if you saw this but the mixed messages that I’ve been talking about for weeks coming from the White House regarding trade continues. It continues, we saw this week plow with Larry Kudlow, and Navarro, they got into it, right? Navarro, I think he was essentially demoted, but basically he said something that the market didn’t like, Kudlow comes out later says no he way over stated that. So you have this again what looks like fighting inside the White House regarding trade. And then we had more of that on Friday with trade when President Trump came out and said he wants to get a deal done, the market shoots up. Then literally about 15 minutes later the White House comes out with kind of an official statement and says we’re still far from deal and I’m paraphrasing, we’re still far from a deal, and nothing’s imminent. And the market sells off a little bit. That’s the type of stuff we’ve been seeing it seems like it’s every Friday, but every single week we’ve been seeing that. Where you get a message, a rebuttal of that message or phrased differently, or one says this and the other doesn’t sound that way.

And again, for those who haven’t listened the last few weeks, this is my take and this is just my opinion on what I think is going on. I believe you have the President in the middle, he wants to get a deal done, he’s a negotiator he obviously doesn’t want bad things to happen on his watch, he watches the stock market like a hawk. He wants a deal done, but he’s also a really good negotiator, that’s where he is. And sometimes he says stuff that maybe he wished he didn’t say or phrased it differently so he clarifies, but then you have two people, Navarro and Wilbur Ross, who I think are hardcore tariff guys, we’re going to tariff them to death if we need to. I mean, no negotiating, we’re doing this unless we get what we want. The market doesn’t like those guys, right? They don’t like that type of mentality.

Then you’ve got Larry Kudlow who’s the permeable optimist, mister free trader who I don’t think likes the tariffs but likes being in the White House and I think the President listens to him, and so you’re getting this … it’s almost like the President is in the middle of this little tug of war. That’s how I see it, tell me if you agree or disagree but meanwhile we are tossed about and our portfolios are based on every little headline that comes out. Now I’ll tell you something interesting this week I had a high school senior in my office, often talk to high school kids, college kids about finance and just all kinds of stuff. He’s doing a thesis preparing for this thesis that he will be doing in the spring as a senior, and his topic is essentially should we abolish the Fed, the Federal Reserve.

And it’s interesting because my short answer is yes, okay. Do we need these human beings deciding and trying to tell telegraph where rates are? And you could argue and some have that without the Fed in 2008 things would have been much, much worse, we needed some people there to do some things outside the box. Well ironically maybe they caused the issue. And here’s the evidence, as I was showing him this, he was in my office for a couple hours. And I was showing him all the Fed cycles in the past. And what’s interesting is that the fed was created in 1927, before the Great Depression. So you could argue that coincidentally the Great Depression was shortly after the Fed was created. But here’s what’s interesting. If you look at every time the Federal Reserve has started to raise interest rates, they raised them, they seem to go too far and then they in short order start cutting them again. It’s not as if they raise them and wait, and then just stay at that level for years and years. It looks like mountain tops, they go up, it kicks in and all of the sudden the economy slows, lo and behold a few months maybe a year later they starting cutting and they cut hard.

So that tells you they are not tapping on the breaks and gently pushing the accelerator. It’s like driving a car and they’re slamming on the brakes. You ever seen the scene in Meet the Parents, you ever seen that move Meet the Parents where he did something with the cat, he swapped out the cat so his future father in law wouldn’t know that he swapped out the cat and he needs to get home. He needs to get some because something’s going on with the cat. And they’re literally racing in two cars next to each other and they’re slamming on the brakes on each red light, and they’re jamming on the accelerator to get to the next light. And every light of course is turning red. That’s what the Federal Reserve does, they don’t gently tap on, they don’t gently push the accelerator. They slam on the gas, they slam on the brakes and the economy seems to be worse off with them than without them.

Now what would be an alternative to the Federal Reserve? Well one option is the Taylor rule, which if you’ve been on our blog for years you know I’ve put that up there before. It’s essentially a formula that I think he’s a Stanford professor, came up with and it’s plug and play. He said here’s the formula, and it tells you where rates should be. And I know a lot of Federal Reserve participants look at that, so there’s a high correlation to it. So you could use that, and by the way it’s suggesting rates over 5% right now and we’re at 2.5. again it’s always about maybe it should be there but how do you get from A to B. So that’s one option.

The other option is good old let the market dictate it. How about that? Supply and demand? Capitalism. Do we need the Federal Reserve to jump in there and be dictating this stuff? Remember there’s a bunch of stuff that people are worried about that they are doing behind the scenes and there’s been calls for auditing the Fed. But do we know what they’re doing, did they do some stuff out of the box that maybe had never been done before in 08, yes. So do we need them? Let’s think about this, if we didn’t have the Federal Reserve and the economy started getting bad and people weren’t borrowing, what would happen to interest rates? They’d go down, right? If nobody’s borrowing you’d have to lower rates. The market itself, you and me would be lowering our interest rates to entice people to borrow money from us, right? Naturally. Conversely if the economy starts speeding up, people are charging more for interest, and if people need capital to grow they’re going to pay more interest to get that capital, and eventually it gets high enough to what happens it chokes it off and it goes back the other way.

So why not just have capitalism do this? Is it because we need to feel good, we need somebody there telling where rates are going to be and trying to set it? Probably. What if rates right now should be at 5%? But what happens is that they get suppressed by some people trying to make everything calm. Oh, we don’t want to raise them too fast so we’re going to be measured and we’re going to give forecasts that aren’t accurate. That’s the Federal Reserve, so that was our discussion. And it’s really interesting if you go back and look at the last 100 years of the Federal Reserve and their cycles. And that’s the fear this time, right? That they’re not going to raise it how they’ve raised and then pause. They keep raising it to a point where it makes them have to stop dropping it. And that is what the stock market doesn’t like, what investors don’t like.

So that is the fear right now and that’s what’s caused some of the volatility. Now one thing that I’m watching closely and you should too and it’s not the most exciting thing in the world is the US Dollar. The good old dollar. Now you know that you have a dollar bill in your pocket and it floats. It doesn’t literally float in terms of what the value is per day but it does float in terms of what it can buy you. What can you buy with a dollar bill? A dollar buys about 98% less than what it did 100 years ago, that’s inflation. So the dollar does fluctuate and what happens is a lot of things around the world are priced in dollars. So if you look at some international exchange traded funds, much of the losses that you see at times are because of the currency not because of the underlying stock market.

For example, when President Trump was elected, the Mexican ETF EWW which full disclosure we purchased on Friday in our aggressive strategy. But EWW is a Mexican ETF right? Well what happened was when President Trump was elected back in November of 16, EWW fell about 20%. And it was the fear that President Trump was going to be really bad for Mexico. And we actually went in and bought and the next day we bought it again because it fell another 10%, it went down 10 and then 10, we doubled up on it. And it turned out to be one of our best trades in the year in 17 we ended up selling it. Well look at where Mexico is now, it’s back the same place. But the point of the story is that the reason for that fall was because of the Mexican peso, not because the Mexican stock market was falling apart. If you lived in Mexico and bought the stock market you were okay, but if you owned the peso relative to dollars that’s where the move was coming.

So we want to watch the dollar because if the dollar starts to weaken here, which it could, it’s been on a nice run. I mean look from the beginning of the year the dollar’s probably up 10%, a big move. If it starts going the other direction, you will see international stocks do extremely well, you will see commodities do well, you’ll see gold as one of those commodities doing well. And eventually you’ll see US conglomerates, big international stocks do well. Because remember, these big companies, Coca Cola, Proctor and Gamble, most of their sales come from outside of the United States. So when they sell something they have to convert back into dollars and buy expensive dollars. And so when the dollar’s expensive and they have to convert that back in it hurts their profits. So at some point the strong dollar is going to continue to hurt profits and that’s what’s been amazing about the earnings going up the last couple of years as they have. 25 to 30% rise in earnings even given some of this high dollar.

So let’s watch the earnings coming in because that’s going to be a big headwind. But if we get the dollar starting going down that’s going to be good for big US large companies, that’s going to be good for international stocks, it’s going to be good for commodities. So watch that because that really is the domino, once that starts going in one direction you can get a lot of other things right as it’s been said. If you know the direction of the dollar a lot of other stuff happens.

Now there’s this thing floating around, that I saw this last couple of weeks, and it’s basically saying this is the worst year. And there’s two of them, one of them says this is the worst year for diversified portfolios since 1901. Have you heard of this? And I was sitting there thinking how could that be? You think about 2008, treasury bonds were one of the few things that made money in 08, so how can that be that this is the worst year pound for pound since 1901. And sure enough if you look inside of how it’s calculated, took every asset class. So if you’re talking commodities it would look at every single one of them, if you look at international currencies it took every single one of them, large cap stocks, small cap stocks, all the assets and it calculated and it said about 89% of them are negative as of October 31st in the US or around the world, excuse me, are negative priced in US dollars. And that’s the worst that we’ve seen, in other words there hasn’t really been a good place to hide.

Now that sounds really awful, but there’s another comparison, the Leuthold Group, had another comparison and what they did is they took seven baskets of things you can invest in, commodities, the S&P 500, they had gold, they had some bonds and they had some real estate and they said what if you owned those equally? You own those equally over the last 100 years or whatever the case, and by the way if you own that equally you’re talking about let’s see about 14% a piece. So 14% of each of these seven asset classes equally and they’re saying if you held that there’s not been too many times that you had this bad of a return in fact the whole basket’s negative in 2018. And they said it’s I think we’ve had the fourth negative year, fourth or fifth in the last 50 years. So either way you slice it, and again the devil’s in the details, because I don’t think most people would own assets how I was describing before, where you own every single currency and every single commodity, that’s not real practical.

This other was is a little more practical. But what we do know and the point of it is, it’s been a difficult year for diversification because we do have bonds negative, we have stocks that are vacillating between positive and negative and probably mostly negative when you look at most stocks. So, when you combine all these things that haven’t worked it’s been a tough year for diversification, and in fact really the more stuff we look at there’s big change in 2013.   You know, you see some of these people that have been managers of the decade, that really have struggled since 2013. You’ve seen people leave the business, and closed hedge funds. You’ve seen the Global Macro Hedge Fund Index, it hasn’t made any money since 2013. So it hasn’t been all easy going here in the last few years, but really 2013 was when things really dramatically changed. And primarily it’s because we have seen this concentration in some of these stocks that are what are now overvalued, and over-owned. And we’re getting more and more evidence, and this is really important, every week we’re getting more and more evidence that the growth versus value is something that is way, way out of whack. Way out of whack. So what do I mean by that?

Well, just to give you some some stats, and this is according to Goldman Sachs, “US large cap growth stock valuations.” So you’re talking about price to earnings, price to book, all these different things to measure how expensive a company is. The large cap growth in the US stock valuations have moved to extreme level versus their value-oriented counterparts. The valuation differential today stands at a high of 7.6 on a P/E ratio. That means US large cap growth companies have a P/E ratio that’s almost eight times, not eight times, but eight points higher.

So for example if one had a P/E of 10, the other group has a P/E of 18. That’s a big difference. Same thing with the price-to-book. In addition to that, you have Goldman Sachs said, “Growth equities have been outperforming value for 20 consecutive months.” And that is four times the normal length of time. it’s also the longest sustained outperformance by growth, and this is including the dot-com bubble, or at least since. So there’s a big opportunity here in value versus growth.

By the way, that fed governor, I meant to mention this earlier today, Clarida, I said she, it’s a he. Sorry about that. I doubt he’s listening, but anyways I don’t want to offend anybody. So you’re seeing that type of really opportunities I think, and that also means that growth is subject to big, big swings. And you’ve seen that with the FAANG stocks. That’s a prime example of … Those are growth companies. I mean they’ve been growing very fast the last years, but what we’ve seen is big drops.

I mean you have Facebook, we’ve talked about down 35%. You have Apple that bounced a little on, on Friday, but basically has been down about 20% since the peak. Google’s down about 17%. Netflix, which peaked in June or so, down about 30%. And Amazon, king daddy, Amazon down 22%. So FAANG is in a bear market. But it’s not just that. See, it’s not just a handful of stocks. Those are the stocks that have been moving the S&P 500, but it’s also, there plenty of other companies. I’m not going to name a bunch of them, but mostly companies you’ve heard of, and that you’re comfortable with their products. I will say that. And it’s almost like the Nifty Fifty back in the day. Companies that could do no wrong. I use their products. I don’t care what I have to pay for the stock. I just like the company. And you can get hurt doing that.

So I think again, we’re going to see this rotation. We started to see it a bit, a bit. If you look at things like emerging-market stocks. They’ve been performing the same as the S&P 500 since really about August, and you go, “The same, what’s that matter? Four months of the same performance.” Well, prior to that, they had significant underperformance. They were losing ground, and they’re not anymore. Same thing with commodities, same kind of deal. You’re starting to see a slight outperformance, and you’re starting to see an outperformance on the value stocks as well. Relative to growth.

So is this the beginnings of something? And I think it is. I think it is the beginning of some of that rotation. For some of you that like the technical charts, we may have completed the most obvious chart out there. Everybody was waiting for what we would call an inverse head and shoulders pattern. So a head and shoulders, picture me, good looking guy sitting here. I got a shoulder, and then my head’s higher, and then the shoulder’s the same height as the other one. When that pattern happens, it usually means look out below, but if you flip it upside down, so I’m doing a handstand now without my arms, so I’m basically on my head, you would see the shoulders are higher than the head, and that pattern almost looks like a W. And that is a pattern that looks bullish, and it’s setting up that way for the markets, but a lot of people have said, “There’s no way it could be that easy.” I mean everybody’s looking at that same picture, but so far it’s holding. So for you technical guys and gals, there you go.

And by the way, when you guys email me, or contact me, I can’t always … People send me their situation and say, “How am I doing?” Unfortunately, it doesn’t really work that way where I can just answer that because number one, people pay me to do that so in fairness to my clients, I can’t assess your situation over an email and just say, “You look fine. Everything looks great.” And the other thing is it takes more time than just an email. But I did get a bunch of emails back about what you guys are doing, with positioning and all that. So I appreciate that feedback. Keep those coming as well.

One gentleman on Twitter did ask me, and I believe he’s a long time listener. The name sounds familiar to me, but basically he said something to the extent of, and he called me a pundit. I don’t know if I’m a pundit, or not, but he said, “It’s hard to understand from all of you pundits if this is a correction, are we entering a bear market? And I put that’s because nobody knows. The key is to have allocation you can live with based on your situation. Trying to speculate whether we are in a “bear market” or not is a losing proposition. That was my response.

And so yes, I will give you my opinion if we’re in a bear market or not, and if you’ve been listening I’ve said I don’t think we’re in a bear market. So that is the short answer. But at the end of the day, do I know? No, I don’t know. if I knew that I would have 100% of my money, and my clients all in stocks, and if we’re in a bear market, I would take a 100% of the money and take it out and stick it in the money market. That is not the way any professional, and anybody that’s accumulated significant wealth does it. It starts with an allocation. It starts with what you need to earn, and based allocation on that. And then yes, you tweak the allocation based on market conditions. And that’s why I said earlier, for our clients that have our growth strategy, tweaking that, and reducing some of that last week, if we could go Friday, that was a reduction. That was not a swing you know, “Hey, we’re getting completely out.” That was a, “Take some off the table here.” The rally has run its course a little bit. It may bounce around here. If our long-term indicator switch is back in, fantastic. If the market falls apart, great, at least we sold some.

That’s how you tweak it. And so defining whether it’s a bull, or bear market sounds neat, but what are you going to do about it? I mean if I told you I thought it was a bear market, and I’m a pundit, I’d say, “It definitely a bear market.” Are you going to go sell everything in your portfolio? What are you going to do? And why would you be moving your whole portfolio around based on a guy’s podcast? I mean that’s why we sit down with people, and go through their finances, and do a financial plan, and come up with an allocation, and a strategy that goes along with it because everybody’s situation is different.

So you know when people ask me, sometimes people will say, “What do you think about the market?” And when I kind of start asking them, they don’t even have any money in the market. So I’m like, “What are we talking about? Why do you care?” So think about that. Really what it’s labeled because again we’ve had bear markets in ’08 and 2000. We’ve had bear markets, but as I’ve been saying for weeks on here, even if we are in a “bear market” generally speaking, there’s places to hideout, and have some money that’s not going down. That’s what the diversification’s about. And that’s what happened in the year 2000 through the beginning of 2003 was diversification worked. It worked very well. It didn’t work in ’08, but ’08 don’t happen all the time. And not only that, but even that, did you have all your money in the stock market? Number one. And number two, even if you did and you didn’t sell, look at where you are today. That was a worst-case scenario, and look at where you are today. If you didn’t sell.

Now what you’re trying to get at, I think by asking me, are we in a bear market, is you’re trying to time it perfectly. You’re trying to say, “Oh, are we in a bear market? Let’s sell. Okay, tell me when it’s about to turn to a bull market and we’ll buy.” I wish I could. I do. But it doesn’t work that way, and usually by the time you know it’s a bear market, it’s already falling. And by the time you’re comfortable, and you know it’s a bull market, it’s already back up, and you probably shouldn’t have sold to begin with.

So it’s about adjusting, and I’m not being facetious, and I’m not taking that question like he was being rude. He was just asking. I mean he’s having trouble deciphering, and it’s because nobody knows. Nobody knows. I don’t know, and the guy on TV doesn’t know, that screams and throws stuffed animals at the screen, he doesn’t know. He pretends he know, and these analyst on TV pretend they know, and they don’t know. What they do is they say, “Hey, who am I working with?” And then within there, let’s develop a strategy. And if that client is going to be nervous at times because we could be in a volatile market, then yes, have a strategy where you reduce holdings at appropriate times based on some metric, instead of labeling it a bear market. But can I tell you if I think it’s a bull or bear market? Sure, I’ll give you my opinion, but it really doesn’t matter because I don’t know your situation because it again, what are you going to do about it?

All right. I hope that’s helpful, and keep the comments, emails coming. And if you need our help, 210-526-0057 is our telephone number, and our website is eggersscapital.com, and go check it out. We appreciate it. Have a wonderful weekend, we’ll talk to you soon.

Get our latest market commentary by subscribing to our blog here.

To subscribe to the Eggerss Report via the Itunes Store, click here.

This show is for entertainment only, and the information provided by the host, guest, and this station should not be deemed as advice. Your investment decision should be based on your own specific needs. You should do your own research before you make those decisions. As president and CEO of Eggerss Capital Management, Karl Eggerss may hold securities mentioned in the show for himself, and his clients. Just don’t buy, or sell anything based on what you get from radio or TV. Use your own judgment, or get yourself a trusted advisor.

Scroll to top