Bulls, Bears And Animal Spirits

Bulls, Bears And Animal Spirits

It's not technically a bear market. At the worst levels on Friday, the S&P was nearly 21% below its January 3 record close, but thanks to a late afternoon rebound (surely the result of dip-buyers colliding with OpEx dynamics and terrible liquidity), the pandemic bull dodged death. There's probably some truth to the notion that a 20% drawdown has psychological appeal for would-be "bargain" hunters. Some sectors lay in ruins, but I'd reiterate that at the index level, stocks aren't cheap. W
Subscribe or log in to read the rest of this content.

10 thoughts on “Bulls, Bears And Animal Spirits

  1. Sir, you have outdone yourself. The “Worldly Philosophers” was the main text in one of my key Freshman required courses. It was followed up by a deep dive into Max Weber that set the stage for me on my way to becoming an amateur political economist. I suspect the paragraph beginning with: “To Reiterate …” and the wonderful prose that follows will be a bit unsettling to many of your readers. Sadly, too many people who aspire to being a successful “economic individual” have no clue about the actual nature of the arena they have entered. Daily, I see an ad depicting some poor lad touting one of the new non-bank money changers. He avers that he, and his 18k, are only going to deal with companies whose values he supports. What he just doesn’t understand is that his money doesn’t go to any company, only to the pocket of some punter who decided to dump what our young pigeon bought. Somehow, it is starting to feel that finance as practiced at places like Robinhood, Chime, and others of their ilk is somehow a great immoral con game. As customers of those folks wake up after the sting discover how far away from a stable future they are is going to be sad.

  2. “For all the progress we’ve made over the millennia, we really haven’t changed all that much.”
    No we haven’t, …but our planet and ecosystems within have, and unless we figure that out pronto, and rally together on our collective interests…

  3. My background is software development. I delve into databases on a daily basis and I know my way around querying databases. That being said, based upon the statistics of a bear market, I thought it would be interesting to query a database of ‘SPY’ data in order to obtain a number of days, going forward for which the SPY closing price was lower by at least 20% (19%) as compared to the day in question. The query only includes data since 1998-01-02.

    Only 5% of the days from 1998/forward had following days for which the SPY had a total drop of 20% (or greater) from the purchasing day’s close. The same is true for a 19% (or more) drop — on average.

    For instance, if one were to pick 2000-01-03 as the day to buy SPY at close ( a bad choice by the way!), there were 1302 days forward of that date, for which you could have bought the SPY for a discount of AT LEAST 20% from one’s purchase price on 200-01-03. It was until the end of 2011 that you could still purchase SPY at 20% discount or more compared to the price you paid on 2000-01-03.

    Again, though, only 5% of all days ON AVERAGE, will have a 20% or more discount at some point going forward for that day’s SPY closing price.

    What about 19% discount. Should it not be much improved as compared to 20% since 19% does not hit a “bear market” definition and emotions are controlled? It makes no difference:
    Let’s assume that the SP is down 20% from its high on the day of purchase:
    64% of the time, SPY will continue to move to 25% (or more) down going forward.
    40% of the time, SPY will continue to move to 30% (or more) down going forward
    22% of the time, SPY will continue to move to 35% (or more) down going forward.
    9% of the time, SPY will continue to move to 40% (or more) down going forward.

    Let’s assume that the SP is down 19% from its high on the day of purchase:
    64% of the time, SPY will continue to move to 25% (or more) down going forward.
    40% of the time, SPY will continue to move to 30% (or more) down going forward
    22% of the time, SPY will continue to move to 35% (or more) down going forward.
    9% of the time, SPY will continue to move to 40% (or more) down going forward.

    So, it makes no discernable difference whether the market drops close or into a bear market. The potential of additional losses is the same. No matter, if the market drops 19% or 20% from its high, 64% of the time, it gets worse by at least 5% and 40% of the time, it will drop at least another 10%.

    I guess the positive from all this is, you have basically 100% chance the SPY will be higher if you can wait at least 12 or 13 years based on the past 24 years of data.

  4. This is pedantic, but the myth that always intrigues me is the myth of the seven day week. It’s in Genesis, and maybe it’s in other creation myths–I haven’t bothered to check. But we all just accept it–and not just Jews and Christians and Muslims–the whole world does. We will argue and fight about virtually everything, but nobody questions whether May 21, 2022 is a Saturday. It makes no sense to organize your calendar around a prime number, and it doesn’t even work out conveniently as a unit for dividing an earth year. Why does China honor the seven day week? If I had been Mao, I would have instituted my own calendar, free of the influence of western religion.

  5. I have always enjoyed Acts 17 where Paul on Mars Hill pointed out to the Athenian authority that Athenians are ignorant for worshipping at the alter of “The Unknown God”. The early Christians did not wear suits or erect church buildings and believe it or not, Christ was a homely man according to the bible.

  6. I can’t figure out how to paste in a pic here, but this article made me think of a favorite political cartoon. For the correct visual just copy and paste the words into a Google search, or picture a man in a tattered suit, hazy city behind him, around a fire with some children, ostensibly as he explains to them the world they’re inheriting:

    Yes the planet get destroyed. But for a beautiful moment in time we created a lot of value for shareholders.

Speak your mind

This site uses Akismet to reduce spam. Learn how your comment data is processed.

NEWSROOM crewneck & prints