Skip to main content

Global bear market continues

Leading share indices continue to drift downwards today as worries mount over inflation, the continuing credit crisis, weak corporate profits, and slowing business activity around the globe.

As we write this, the S&P 500 index is sitting at 1277.94, several points away from its March 10 low of 1273.37, the point at which the index's most recent rally began.

A successful test of the March low and a subsequent rally could help keep the benchmark index aloft for a time, though a breakdown through 1273.37 and a close below that level would likely spell trouble for the index and US stocks as a whole.

We see a similar picture in the chart of the MSCI World index. The MSCI World peaked out in November of '07 and, much like the S&P 500, has drifted downwards since in a pattern of lower highs and lower lows.

What's behind the poor performance, year to date, in global share markets? John Authers of the Financial Times shares his view in today's "Short View" column, "Hope springs eternal".

"The second half of 2008 made a terrible start on Tuesday after one of the worst six months for global stocks in memory. As measured by the MSCI World index, it was the worst first half in 26 years.

Such a fall suggests markets were taken by surprise. But problems for US subprime lenders were obvious at least once a rash of bankruptcies hit the sector in February of last year. The credit market was then at obviously untenable valuations. To foresee that this would damage global stock markets required only logic, not imagination or clairvoyance."

Authers goes on to detail the rationale behind each of the three preceeding "bear market rallies" to date, all of which petered out. He notes that any subsequent rallies will be pulled along by some new hopeful rationale, but that the period ahead is likely to be a rather messy one, as the world's banks attempt to "sort out their own mess".

More on this in Authers' July 1, "Short View" video clip, "A very bad first half of 2008".

Related articles & posts:

"Stock market overview" - Finance Trends Matter.

"Danger: Open Trench" - Frank Barbera via FSO.

"JGBs gain on signs of global economic slowdown" - Bloomberg.

"Record commodity gains mirror equities downturn" - FT.

Popular posts from this blog

Seth Klarman: Margin of Safety (pdf)

Welcome, readers! Signup for free email updates at the Finance Trends Newsletter . Update: PDF links removed due to DMCA notice. Please see our extensive Klarman book notes below. New visitors, please check the Finance Trends home page for all new posts. Here's something for anyone who has been trying to get a look at Seth Klarman's now famous, and out of print, 1991 investment book, Margin of Safety .  My knowledge of value investing is pretty much limited to what I've read in Ben Graham's The Intelligent Investor (the book which originally popularized the investment concept of a "Margin of Safety"), so check out the wisdom from Seth Klarman and other investing greats in our related posts below. You can also go straight to Ronald Redfield's Margin of Safety book notes .    Related posts: 1. Seth Klarman interviews and Margin of Safety notes     2. Seth Klarman: Lessons from 2008 3. Investing Lessons from Sir John Templeton 4.

Slate profiles Victor Niederhoffer

Slate's recent profile of writer/speculator, Vic Niederhoffer has been getting some attention from traders and finance types in recent days. I thought we'd take a look at it here too, to offer up some possible educational value from Vic's experiences with trading and loss. Here's an excerpt from Slate's profile of Victor Niederhoffer : " I've enjoyed getting your e-mails. It sounds like you've thought a lot about being wrong. Well, the reason you contacted me, to call a spade a spade, is that I'm sort of infamous for having made a big, notorious, terrible error not once but twice in my market career. Let's talk about those errors. The first was your investment in the Thai baht, which pretty much wiped you out when the Thai stock market crashed in 1997. I made so many errors there it's pathetic. I made one of my favorite errors: "The mouse with one hole is quickly cornered." That is key. There are certain decisions you make in li

William O'Neil Interview: How to Buy Winning Stocks

Investor's B usiness Daily founder and veteran stock trader, William O'Neil share d his trading methods and insights on buying winning stocks in an in-depth IBD radio interview. Here are some highlights from William O'Neil's interview with IBD: William O'Neil's interest in the stock market began when he started working as a young adult.  "I say many times that I didn't get that much out of college. I didn't have much interest in the stock market until I graduated from college. When I got married, I had to look out into the future and get more serious. The investment world had some appeal and that's when I started studying it. I became a stock broker after I got out of the Air Force."    He moved to Los Angeles and started work in a stock broker's office with twenty other guys. When their phone leads from ads didn't pan out, O'Neil would take the leads and drive down to visit the prospective customers in person.