It ain’t over until it’s over. The lows were not reached in 2009. Central bank manipulations and schemes temporarily delayed reaching a true bottom. They have failed. A true secular bottom would be 60% to 80% below today’s levels. Are you prepared for that? That would put the Dow at 7,000 or below. Do you think that is impossible? It was trading at 6,500 in March of 2009. If Bernanke and Geithner hadn’t forced the FASB to allow Wall Street bankers to value their worthless assets as if they were worth 100 cents on the dollar, the 4,000 secular low would have been reached. Now we will pay the price with a far worse scenario. The Fed has shot their load. Fourth Turnings are relentless and nasty.
Are We About to Enter a Secular Bear Market?
Source: wikimedia
Today’s chart, from the folks at Crestmont Research, speaks volumes about current investor behavior.
In particular, it calls into question claims being bandied about in the mainstream media that we could be at the start of a new secular bull market in US stocks.
It shows that previous secular (long-term) bear market cycles tend to start when the US stock market is trading on a Shiller P/E – a price-to-earnings ratio is based on average inflation-adjusted earnings from the previous 10 years – of between 20 and 25 (blue-shaded area on the chart).