![]() Another 12 year study which shows our market Letter came in #3 out of 68 studied is posted on and the newest April 2017 study is found here: “ Evaluation and Ranking of Market Forecasters” Once again, our Market Letter comes in highly rated at #2 with a 72% accuracy rating. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited.Mark Hulbert wrote in MarketWatch about an interesting Study that market-timing has been academically proven to increase investment results. Mark Hulbert is a regular contributor to MarketWatch. I gave reasons for this expectation in a column earlier this month. stock prices will pull back in coming months, but the March 23 lows will hold. The bottom line? The lessons of history are never easy or straightforward. And yet the bear market didn’t end until March 2009. That was before President-Elect Obama took office. The Federal Reserve’s balance sheet, for example, which is one measure of the liquidity that was flooding the economy, more than doubled from September 2008 (when Lehman Brothers collapsed) to the end of that year - from $925 billion to more than $2.2 trillion. I don’t buy that argument there was little doubt that the government under either president was willing to throw huge sums at the economy. ![]() Bush’s administration to President Barack Obama’s, creating an extra level of uncertainty. Some of you have argued that the GFC isn’t analogous, since the worst of that bear market occurred during the transition from President George W. But in that bear market the VIX hit its peak 109 days before the bear market hit its bottom. The government did promise some stimulus on that occasion, but by today’s standards it was miniscule: $15 billion, versus nearly $5 trillion today (if you count both the stimulus package that passed Congress and the expansion of the Fed’s balance sheet).Īrguably the closest analogy to the current situation is the Great Financial Crisis (GFC) of 2008-2009, since it is the only other bear market in which the total amount of government stimulus comes anywhere close to what has been enacted in the current pandemic. 20) one day before the market hit its bottom (Sep. ![]() Next consider the bear market that occurred in the wake of the 9-11 terrorist attacks, when the VIX hit its peak (Sep. So even if you were to count this as an example of the Federal government stopping a bear market in its tracks, it can’t explain why the bear market and the VIX both peaked on the same day (Aug. That’s when the Federal Reserve Bank of New York organized a bailout of LTCM in which the hedge fund’s biggest creditors extended $3.6 billion of credit. At most there was an implicit Federal government guarantee, but that didn’t materialize until several weeks after the VIX peaked and the bear market came to an end. In the case of the 1998 bear market, no public money was used to bail out Long Term Capital Management (LTCM). Try as I might, I can find no correlation between the length of this lead time and the speed and magnitude of the federal government’s response. I’m not so sure that’s the correct lesson. government’s extraordinary stimulus that it enacted in mid-March. Some of you have suggested that I draw another lesson: The reason the market bottomed out so soon after the VIX peaked was because of the U.S. Still, the investment implication is that we should focus on the weight of the evidence rather than just one indicator, no matter how compelling. This other analysis was equally plausible and just as solidly based on historical data. 7, based on the number of days between the end of the bear market’s first precipitous drop and its eventual end. For example, in that early-April column in which I suggested that the final bear market low could be June 14, based on the VIX, I presented another historical parallel that points to a final low on Aug. In my defense, I plead “nolo contendere.”Īnother lesson is that it’s never the case that the data all point to the same precise conclusion. It's knowin' so many things that ain't so.” ![]() This episode reminds me of a famous saying from Josh Billings, a 19th century humorist: “The trouble with most folks isn't their ignorance. Randomness (luck, in other words) plays a huge role in the market’s shorter-term gyrations, no matter how compelling an analysis might otherwise be. I’m not holding my breath, and I’m sure you’re not either.Ĭan we learn any lessons from this experience? One is to be reminded - yet again - that financial markets are never 100% predictable.
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