Wha' Happened?

I was on the phone with a friend who works in the business yesterday and we were talking about how much further down/what the bull case is and he mentioned that there had not been much in the way of capitulation. I made a joke that we had a pretty solid five minutes worth a week ago Tuesday.

Obviously I don't know whether yesterday's smackdown was an end to the feel good rally that started last week or just a bad day but I have found myself getting a little annoyed at the escalation of the cheerleading (my perception) that ensued on the network.

Hopefully by now you buy into the idea that bear markets work a certain way, take a certain amount of time and have rallies of varying magnitude along the way to bottoming out. There is nothing bad or upsetting about normal cyclical activity. I fear that the way the cheerleading is done might serve to ramp up the emotions of market participants who maybe don't have a lot of experience with bear markets.

Along the lines of a post from earlier this year there is nothing wrong with buying a stock you like that is down 25-30% from its high as long as you realize it might go lower if the current bear phase unfolds as normal or worse than normal.

Buying a stock or two along the way is a different kettle of fish versus reequitizing a portfolio after getting whipped up by Kudlow's mother's milk spiel.

The best time to buy stocks would be at the point you spelled out for yourself months ago when you devised an exit and reentry strategy. Hopefully if you have been reading this site for a while, and this sort of action is appropriate for you (investor know thyself), then you did think about exit and reentry and did so at a time when you didn't have a care in the world.

Scrambling into the teeth of a big decline is a bad place to be. A lot of the interviews we see ask what should investors do now. At 1252 on the SPX, down 20% from the October high and 14% YTD, a lot of the horses are out of that barn. I've disclosed how I sold a couple of things along the way and added some double short relying on an indicator read about in a magazine in 1993. That indicator triggered ages ago so most of the work was done ages ago. The notion put forth in these interviews of what should an investor do now makes the task of navigating the market's cycles more difficult than it needs to be.

Hopefully you will take this as a reiteration of something that I've attempted to convey since this site started almost four years ago. If this bear market has not worked out for you will have a chance in future bears to heed the advance warning, again if this is appropriate for you to do, and perhaps sidestep some of that decline.