Morton Fox (mortonfox) wrote,
Morton Fox

Bear Watch

Fred Stone Log Cabin

My auto insurance rate dropped by 34%! The renewal bill doesn't say why so I don't know whether this is due to an age-related discount or increased competition among insurers in this state, but saving another $550 per year is a good thing.

As of today's close, the S&P 500 is down 36.8% from its October 9 peak. Naturally, one might be wondering how much worse things could get. (Unless, of course, you're already in a fortified underground bunker with gold bars and canned food, in which case you won't need to read this. :) ) The Businessweek article What the Meltdown Is Telling Us offers some perspective from historical data:
  • The average decline for 10 bear markets since World War II is 31.5%.
  • The two worst bear markets had declines of 49.1% (2000-2002) and 48.2% (1973-1974).
So, at a drawdown of 36.8%, we already seem to be closer to the bottom than the top. Of course, there is no guarantee that this won't turn out to be a record-breaker, so we have to proceed with caution until we see a convincing upturn.

Cramer's Contrary Indicator?

On Monday, Jim Cramer urged investors to get out of stocks. This is quite a sea change for a perma-bull who has already called a few bottoms as the market stairstepped its way down. So one might wonder if this is a contrary indicator, a sign that pessimism is at the extreme preceding an end-of-bear capitulation. I don't think so yet. He only said to take money out that you may need in five years, so that's not capitulation. It's no different from advice that any good financial planner would give when you're dealing with short-term savings. Even so, this is an event worth noting, as we watch and wait.
Tags: auto insurance, bear market, jim cramer
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