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Friday, May 20, 2005

Interview: James Stack sees signs of a bear market

James Stack tells that there are no classical bear market warning signs yet, but the bull market is going to make a turn soon, being currently in the latter third of its lifetime. He says that bull markets typically come around every three to five years. If you look at the chart, you will see that the bull market is close to its third birthday:

Chart: Nasdaq 100 Shares (QQQQ)
Chart Courtesy of

He's idea is simple – even if we have not entered to bear market, you have to start thinking about safety of stock portfolio. Bear-market funds are one possibility to secure your positions.

Going on the Defensive
The Pro Shop
By Lisa Scherzer
Published: May 19, 2005

With interest rates rising and energy prices remaining stubbornly high, market watcher James Stack expects to see signs of a bear market by year's end. What's more, cautions the president of Whitefish, Mont.-based InvesTech Research, long-term economic trends could very well be pointing to a recession in 2006.

In terms of sector allocation, it's important for investors to build defense into their portfolios, to make it bear-market proof. We like energy, health care and materials stocks. These either benefit from rising pricing pressures or are immune to rising interest rates.

Rydex Ursa, which tracks the inverse of the S&P 500, has proven its ability in bear markets. If you're trying to build defense into your portfolio, this is one of the best
S&P bear-market funds.

The average [price/earnings] ratio for the Nasdaq 100 stocks is around 26. From a historical perspective it's still a high valuation level. I'm afraid it's going to take another bear market to take these tech stocks down to truly attractive levels.

Read further:
SmartMoney: Going on the Defensive


Anonymous PENNY STOCKS said...

This guy knows his stuff.

12/03/2012 01:05:00 PM  

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