Tag: Bear market

All bear-market related articles are found here. Educative, informative and written clearly.

  • How Long Will The Bear Market Last?

    How Long Will The Bear Market Last?

    How Long Will The Bear Market Last?
    Stock markets over the world experienced great losses from the beginning of this year due to a massive sell-off caused by the COVID-19. 

    How long will the bear market last? We believe not forever. In fact, the bear markets are much shorter than bull markets. Especially when they are driven by some event. Coronavirus outbreak is such an event. like this one is. But if we take a look at historical data we may conclude that the question of how long will the bear market last, pretty naive. How is that? Well, this kind of bear market recovers very fast.

    How can we be so sure?

    Let us explain. If we want to put different types of a bear market into categories, we will see we can put them into 3 key categories based on the type of drivers. 

    The first type of bear market is caused by the business cycle. That is when growth leads to inflation, interest rates increase too fast, the yield curve inverts, demand decreases, loan activity decreases, etc. They are so-called cyclical bear markets.

    The second type is caused by market bubbles, much more leverage, turbulences, and disruptions on the credit markets. In other words, this structural type of bear market occurs when we have structural asymmetries in the market or economy. So, we are pointing to another type of bear market, the so-called structural bear market. We already saw it in the 2008-2009 market downturn.

    But also, we can recognize a bear market driven by some event which is this one, caused by a coronavirus outbreak and global pandemic. Of course, this kind of bear market can be triggered by some crises, wars, political instabilities, etc.

    How long will the bear market last?

    This month can be an important test for stock-market investors. Everyone is looking for hints that the worst of this stock market massacre is ended. But the coronavirus outbreak moves on and demands at least short-term economic distress. In the next several weeks we will be faced with more and more bad news as a pandemic is spreading. That may cause further sellings. Bad news has such an influence on the stock market. Also, a surge of business failures can occur. 

    The experts sound pretty sure that the stock market’s bounceback last week is a good sign even though all markets are volatile. The stock market was dropping with great speed into the bear market. But yet, there is a hope that March lows for main indexes may be kept from further declines. That is just our opinion, based on the reaction of central banks. 

    Well, this bear market isn’t easy for any investor. Even the most optimistic investors claim that further decline is possible before the stocks find the bottom. That is true especially if we know that sharp rebounds are possible before retesting new lows. But as we said, there is a logical chance that recent lows can be the last we saw and rebounds can be better than in former significant selloffs.

    Predictions for the stock market

    Robert J. Shiller, a Nobel laureate is exactly certain about the stock market in the long run. His concerns are about how long will the bear market last, where the stock market is heading.

    He wrote for The New York Times:

    “It is too simple to assume that with its steep decline, the market has already discounted epidemiologists’ forecasts for COVID-19. By this logic, the stock market would fall further only if the virus turns out to be worse than forecast.”

    Yes, but we are dealing with an entirely unknown situation. We never have had before such a massive lockdown of everything companies, whole industries, millions of people, the numerous countries. This is a totally unique event.

    But Robert J. Shiller added in his column:

    “People are seeking reassurance from homespun investment advice, like the old nostrum that the percentage of stocks in your portfolio should be equal to 100 minus your age, come what may. If you are 60, for example, you should hold 40 percent stocks, under this rule.”

    And also admitted that “this advice isn’t grounded in any scientific truth about financial markets.”

    Well, this advice isn’t bad, it is good advice. It isn’t against common sense. While people are doing something, taking action they may feel better. That is from a psychological point of view. Also, it is a quite reasonable decision to risk less in such a market downturn but yet inspires you to take action. 

    Shiller advises further “buying just enough to restore the stock balance after market declines.”

    Bear markets rule a short time

    Maybe this is the answer to the question of how long will the bear market last. Bear markets rule for a short time. What we can expect is the market data will be weak in the weeks ahead. The problem is what are we expecting.

    Stocks in March entered a bear market with record speed. After March 23 they were bouncing sharply. But DJIA has the biggest first-quarter decline of -1.68% on record with a 23.2% fall. The S&P 500 Index had a decline of -1.51% on a 20% first-quarter fall this year. It is the biggest since 2008. After March 23 both indexes had a rebound and for example, DJIA had its biggest three-day gain, which had been seen last time in 1931.

    Let’s see how long this bear could market last?

    As we said we can recognize three main types of bear markets: caused by the business cycle, caused by some event (like this one) and a structural bear market.

    The most severe is the structural bear market because it is the result of problems in the financial system and capital markets.

    A cyclical bear market is bad also but tends to fix itself over a short time and sufficient policy answers.

    And last but not the least, the bear market caused by some event. According to historical data, this kind of bear market was shorter, less critical on the downside. Such a market took less time to recover. It is quite logical. Before the market was hit with a drastic event such as a coronavirus outbreak, the markets all over the world were in good condition. And you see, that’s why we think that it does not take as long for the economy to recover once the shock of this event disappears. It’s true that so many people lost jobs in the early stage of the pandemic, the companies are faced with shutdowns and limitations. But when this kind of problem disappears, everything can return in normal pretty quickly.

    Bottom line

    How long will the bear market last? There is no way to predict that, honestly. Who can predict when the market will bottom? From what we know, the bear market will end even before bad news stops coming up to us. For investors, the main point is to be ready for that first day of recovery, they have to adjust their positions for that to join the rebound when it happens. We believe it can happen sooner than many investors expect or predict.

    In the meantime, we recommend investors wait for it calmly. Stay focused on long-term investments and don’t let your emotions take control of your decisions. Use this period to learn something new and expend your horizons.

  • Shiller CAPE Ratio – The Measurement Of Market Valuation

    Shiller CAPE Ratio – The Measurement Of Market Valuation

    Shiller CAPE Ratio – The Measurement Of Market Valuation
    The Shiller P/E or the cyclically-adjusted price-to-earnings (CAPE) ratio of a stock market is a market valuation metric that eliminates change of the ratio caused by the difference of profit margins during business cycles. It is the regular metric for evaluating whether a market is overvalued, undervalued, or fairly valued.

    Shiller CAPE ratio or the cyclically-adjusted price-to-earnings ratio of a stock market is one of the regular metrics if you want to evaluate whether a market is overvalued, undervalued, or fairly valued.

    Shiller CAPE ratio, developed by Robert Shiller, professor of Yale University and Nobel Prize Laureate in economics. This ratio usage increased during the Dotcom Bubble when he claimed the equities were extremely overvalued. And he was right, we know that now. Shiller P/E is actually a modification of the standard P/E ratio of a stock.

    Investors use this Shiller CAPE ratio mostly for the S&P 500 index but it is suitable for any. What is so interesting about the Shiller CAPE ratio? First of all, it is one of several full metrics for the market valuation able to show investors how much of their portfolios should wisely be invested into equities. 

    The ratio is based on the current relationship among the price of equities you pay and the profit you get in return as your earnings.

    For example, if the CAPE ratio is high it could indicate lower returns across the following couple of decades. And opposite, a lower CAPE ratio might be a sign of higher returns across the next couple of decades, as the ratio reverts back to the average.

    Investors use it as a valuation metric to forecast future returns. The metric has become a popular method to get long-term stock market valuations. To be more precise, the Shiller CAPE ratio is the ratio of the S&P 500’s (or some other index) current price divided by the 10-year moving average of earnings adjusted for inflation.
    The formula is:

    CAPE ratio = share price / average earnings over 10 years, adjusted for inflation

    That was the formula but let us explain a bit more how to calculate the Shiller CAPE or also called Shiller’s P/E ratio.
    What you have to do is to use the annual earnings of the company in the last 10 years. Further, adjust the past earnings for inflation.  

    How the Shiller CAPE ratio works

    As an investor, you know that the price is the amount you have to pay, and the value is the amount you get. That’s clear. We have to compare the price to the value and that’s why we have many metrics to do so. One of them is the P/E ratio, read more HERE.

    It is legal that everyone wants to buy a healthy company when the shares are trading at a low P/E ratio. This means you can get lots of earnings for the price you paid. This is valuable for index too. Just take an aggregate price of the shares of the company from, for example, the S&P 500 index for one year and divide that number by the aggregate company’s earnings for that year. You will get an average P/E for the index.

    But it isn’t quite true. For example, during the recession. At the time of the recession stock prices will fall as well as companies’ earnings (okay, they may fall significantly sharper). The problem is that the P/E ratio can rise temporarily. The investors want to buy when this ratio is low but temporary high P/E can send them a fake signal that the market is overpriced. And what is the consequence? Investors wouldn’t buy at the time when it is the best solution.

    So, here is the Shiller CAPE ratio to fix that. Shiller invented a special version of the cyclically-adjusted price-to-earnings ratio to help fix this simple calculation. If we use his CAPE ratio we’ll have a more accurate understanding of the ratio between current price and earnings. This ratio employs the average earnings over the past business cycle, not just one year that may have bad or good earnings.

    The importance of the ratio

    Shiller himself explained this the best. He used 130 years of data and noticed that the returns of the S&P 500 over the next 20 years are fully inversely connected with the CAPE ratio at any observed period. How should we understand this? Well, when the CAPE ratio of the market is high, that means the stocks are overvalued. So, the returns in the next 20 years will be lower. Hence, if the CAPE ratio is low, we can be sure the next 20 years the returns will be satisfying. 

    This is natural and logical. Cheap stocks can increase in price no matter if it is from a growing company’s earnings or a rising P/E ratio. Contrarily, when stocks are expensive and have a high P/E ratio, they don’t have too much space to grow. It is more likely they have more chances to drop when market correction or recession comes.

    How to use the Shiller CAPE ratio

    Shiller warned against using CAPE in short-term trades. The CAPE is more helpful in predicting long-term returns. Siller said in an interview:  “It’s not a timing mechanism, it doesn’t tell you – and I had the same mistake in my mind, to some extent — wait until it goes all the way down to a P/E of 7, or something.”

    But really, you have to combine CAPE with a market diversification algo or some other tool for that. Maybe the most important part is that you never get fully in or fully out of stocks.  As the CAPE is getting lower and lower, you are moving more and more in. We think the CAPE ratio for March this year is 21.12. Check the Shiller P/E ratio HERE

    So, it isn’t super high. We, at Traders-Paradise, think the stocks should be an important part of your portfolio. Don’t get out of the stocks and go in cash because the CAPE is at 21. It is smarter to buy less and expect poorer returns in the next several years. Some experts noted that markets are most vulnerable when the Shiller P/E is above 26 like it was in February this year. Some stats show that investors respecting Shiller’s ratio are doing better.

    Bottom line

    Since Shiller showed that lower ratios signify higher returns for investors over time, his CAPE ratio becomes an important metric for predicting future earnings.

    There are criticisms about the use of the CAPE ratio in predicting earnings. The main matter is that the ratio doesn’t take into account changes in the calculation of earnings. These kinds of changes may turn the ratio and give a negative view of future earnings.

    The CAPE ratio was proved as important for identifying potential bubbles and market crashes. The average of the ratio for the S&P 500 Index was between 15 -16. The highest levels of the ratio have exceeded 31( February 2020). For now, the Shiller CAPE ratio announced market crashes three times during history: Great Depression in 1929, Dotcom crash in 1990, and Financial Crisis 2007 – 2008.

    Opponents of the CAPE ratio claim that it is not quite helpful since it is essentially backward-looking, more than it is forward-looking. Another problem is that the ratio relies on GAAP earnings, which have been changed in recent years. 

    The proponents claim the Shiller P/E ratio is good guidance for investors in determining their investment strategies at various market valuations. 

    Historical data show that when the market is fair or overvalued, it is good to be defensive. When the market is cheap, companies with strong balance sheets can produce great returns in the long run.

  • The Bear Market Starts – How To Avoid Big Losses?

    The Bear Market Starts – How To Avoid Big Losses?

    The Bear Market Starts - How To Avoid Big Losses?
    We are not clairvoyants so we cannot predict how long this bear market will last, but what we can do is to suggest to you how to overcome this market condition. 

    The bear market starts. Dow Jones closed down over 20% on March 11 compared to its highs in February. That is the end of its historic bull market run. The bear market starts. Actually, it started at the moment as the pandemic was declared by the WHO. What to do with your investments right now? Will the stock market crash?

    No one knows for sure what will happen next. But it is quite possible that the coronavirus could put stocks down for a long time. What makes us afraid is that the bear markets can go along with the recession.

    Investors are panicked. Past several weeks the stock market was switching so fast and unpredictable. Michael Macke, founder of Petros Advisory Services told CNBC Make IT about investors’ feelings: “like we are all Chicken Little.” His comment was relating to the tale about the chicken who was claiming the sky was falling, but the chicken was wrong, right or wrong?  “Only after the fact will we know for sure if we have a bear market or even a recession,” said Macke.

    Nothing can last forever, even bad or good. The good times must come to the end at some point. This is particularly true for the stock market. And this bullish period did it. So, the bear market starts.
    After a fairly exciting run, the stock market lastly jumped into the bear market territory. Investors are disturbed and panicked. 

    But what do we know about the bear market? 

    What to do when the bear market starts

    The bear market is a point when stock prices drop at least 20% from a recent high. They will stay down there for a while. But how long will it take for the stock market to recover? What to do? Will the recession come too? What to do with investments? How to avoid losses and is that possible at all? This is a turbulent time. So many questions but several answers.

    If we try timing the market we’ll be foolish. So, let’s see what experts have to say. First of all, they say drops like this one is a good opportunity to buy more stocks, particularly the people investing for retirement. This is important for younger investors who couldn’t buy stocks during the bullish market because the prices were too high, hitting all the time the new highs. If you have some spare money and you don’t need it in the next, for example, five years, put it in investments. But if you think you will need that cash it is smarter to stay away from the stock market. The history of the 200-years old stock market shows that the market will start to rebound as the bad news stops coming and the prices will stop to decline. 

    What is smart to do during the bear market period?

    When the bear market starts, it is smart to check your concrete investment strategy. If you are a young investor it is quite possible you are facing the bear market for the first time in your life. So, this is a great opportunity to check your risk appetite and how much you are able to manage it. You might obtain a valuable lesson.

    Even advanced investors do the same. They are reviewing their portfolios to be sure that the investments they are holding are suitable for their investing goals. It is very important to see your investments are in line with the risks you take. Some experts think that pilling off into safer investments is a bad decision. And maybe they are right. History shows that if you successfully handle your stocks during the bear market, it is more possible to profit a great when the market recovers. Yes, this all about long-term investors because investing isn’t about a moment in time, it is a process over time.

    What is the best strategy when the bear market starts?

    No one likes this. This enemy is dangerous so don’t try to fight back with it. The most important is to stay calm. Okay, you may play dead as you should do when you meet the bear in the woods. Just lay down and pretend you are dead. This was a joke but it works when the bear market starts and everything seem so uncertain.
    So, don’t be frightened. Fear is a bad partner now.

    Do you know the old saying on Wall Street? “The Dow climbs a wall of worry.” What does it mean? This means the markets will continue to rise despite anything. Nothing can stop that. No matter if we have an economic crisis, terrorism, or other misfortunes. Just keep your emotions under control and far away from investment decisions. Look, today’s catastrophe will be just an unpleasant flash one day. Nothing more. Well, it can last a few years but still.

    It is a normal condition

    The other important thing. It is normal to have bad years in the stock market. They are coming in the cycles and it isn’t unusual. For long-term investors, this is particularly a favorable situation. They can buy stocks at discount. 

    Speaking about this bear period, it might be smart investing in, for example, NFLX (Netflix) can be a good choice. Due to the coronavirus outbreak, and pandemic people have to stay at their homes and what are they going to do?  Watching TV, of course. That will bring a higher income with more subscribers, consequently, the dividends could be higher and the stock price will rise. But don’t buy Uber’s stock, for instance. You might wonder why. It is quite simple to explain. As more people will stay at home, less income will be for Uber and prices can drop. (Thank you Guy, for these examples.)

    Maybe the stocks of the companies that are involved in vaccine development or anything related to this unfortunate situation are not bad decisions. Pharmaceutical, detergent, soaps, antiseptic, hygienic supplies producers, virus testing, and other biotech companies. Think about this.

    Diversification can help also

    The point is to have a well-diversified portfolio. If you don’t have yet, it is time to add bonds, cash, stocks. The percentage of each will depend on your risk tolerance, goals or are you an investor with a long time horizon or not. A proper allocation strategy will save you from potential negative forces. 

    Further, invest only the amount you can allow to lose, that will not hurt your budget or the whole capital. For example, don’t take short-term loans and buy stock with that money if you don’t plan to hold them for a long time, e.g. five years or longer.
    Keep in mind, when the bear market starts, even trivial corrections, can be remarkably harmful.

    But as we said, when the bear market starts that may provide great opportunities if you know where to look for. We pointed to just a few examples above. Maybe you should follow what Warren Buffett did. So, buy the value stocks since their prices are going down.

    Bottom line

    What to do when a bear market starts?

    We can’t predict how long this bear market will last. If you’re considering selling off a group of stocks to lower your losses, just don’t do that. By doing so you’ll end up locked in losses. How can that situation help you? But if you have cash available for investing, this bear market period is a great time to do so. Remember, just don’t invest money you may need in the next five years or more.

    Also, don’t get scared as some investors are when a bear market starts. The stock market will recover from this as always it did during history. If you buy stocks now and your plan is to hold for a long time, you will have good chances to end up in profit.

    Maybe it is best to use our preferred trading platform virtual trading system and check the two formula pattern.

  • How to Defeat the Bear Market?

    How to Defeat the Bear Market?

    How to defeat the bear market
    If you want to know how to defeat the bear market read this post to the end.

    By Guy Avtalyon

    Who wants to know how to defeat the bear market? Are you scared about the bear market? Yes, you should be scared. A bear market is one of the cruelest events that can happen to investors.
    Let’s make clear what the bear market is. A bear market is when the price of stocks falls at least 20% or more from its 52-week high.
    It is essential to understand the order of stock market returns, actually the range of return. Investors who do not understand the order may experience lingering effects that will reduce their profits for a lot.

    Where the bear market may occur?

    In short everywhere. Stocks, bonds, currencies, gold, oil. Literally everywhere where the trade occurs. Of course, when the prices of computers drop we can’t speak about the bear market. We will rather speak about deflation in such a case.

    The bear market is brutal and dangerous. It can blot out everything you made in the bull market. The main goal for every investor during the bear market is to keep as much as it is possible the earning and investment. 

    I hope you know how to survive a bear attack. Do you really know? Did anyone tell this before to you? Well, the best way to survive a bear attack is to pretend you are dead. Just lay down, don’t breathe, don’t move, keep your eyes open to know what is the next bear’s move, but don’t move them. Clear?

    Do it all but without panic. 

    The same comes when the stock market is down during the bear period. Stay calm and don’t panic. 

    How not to panic when the stock prices are going down?

    Just keep in mind that it is the period. Yes, it is a period when the prices are dropping. A slump in investor confidence will indicate the attack of a bear market. You will see them running away as if chased by a pride of hungry lions. They are selling stocks with the speed of light. Oh, how wrong they are! Where they are going when the bear market is full of investing opportunities. 

    People, there is no need to get panicked.

    That’s the natural condition of the market. To paraphrase a famous investor Peter Lynch, if you don’t understand that recessions can occur or the stock market may drop, you are not ready to enter the market, or at least, you will not do well there. 

    But we’re all on the same ship. There is no reason to panic. You have to know one thing. The market isn’t the Titanic. It will not crash so easily. This boat will correct itself. It will not happen overnight. So you have to be patient and stay calm. Remember how to survive a bear attack? That is exactly how to defeat the bear market.

    During the bear market, most stocks will fall. How to stay in stocks in such circumstances? Just count!

    Will it be better to have money in a savings account with a zero interest rate? Nope! Even when the price decline, your stocks will give you a better return. 

    The secret strategy on how to defeat the bear market is to buy and hold. Investing shouldn’t be the last trump card in your hand. You must have more options in your overall financial situation. You can’t defeat the bunch of enemies with one shot.

    Except, of course, if you’re Luke Skywalker on the bombing run against the air vent of the Death Star.

    How to defeat the bear market?

    Buy now! Notice, be greedy when others are afraid. You should buy the stock when everyone else is selling. Evaluate the companies, their historical data, don’t read the news for a while (trust me, I know how journalists can produce breaking news, and highlight the headlines). Just be calm and let it appear. Let the right decision to come to you. The doors will be opened. Enter! Take your position! Ignore the jerks! Don’t listen to them, find your sweet spot. And don’t panic, again!

    In the worst-case scenario, which is the most extreme, you can sell all your stocks and put cash to the bank account (to be honest, I don’t think it is smart, but still) or reinvest the money in more stable assets such as short-term bonds. But you have to know, if you sell all your stocks it is capitulation. It is the official term not my opinion about your investing. But if you do so, how will you come back, how will you rebound? You will be lost out. And it will be very hard for you to enter the stock market again.

    The best way is to take a defensive strategy. This means to buy the stocks of big, stable companies. They are strong enough to defend your portfolio from the bear market. Their share prices are less sensitive to a bigger decline. For example, food businesses. 

    A bear market is a feeling about a particular market mood. 

    The bear market received its name for the behavior by which bears attack their victims. So, just pretend you are dead when the bear market occurs.

  • Bear Market Definition And How to Profit From It

    Bear Market Definition And How to Profit From It

    Bear Market Definition & How to ProfitWhen the investors don’t have hope in stocks and start to sell, the stock price will drop more and more

    By Guy Avtalyon

    The bear market is a period of consistently falling stock prices. Usually, a bear market is defined by a 20% or bigger drop in stock prices lengthening over a time frame of two months or longer.

    The variation in prices is measured using the movements of a major stock index. For example, the Dow Jones Industrial Average or Standard & Poor 500 Index.

    A bear market is distinct from a correction. Correction occurs when stock prices drop by 10 percent over a shorter time frame, usually less than two months. The average bear market lasts 1.4 years. The average cumulative loss is 41% during that period.

    A bear market is when the prices of stocks or bonds are falling. In fact, a bear market could describe any market if the prices are decreasing.

    The term is typically used in relating to the stock market, but it can also describe specific sectors such as real estate, bond or foreign exchange.

    A bull market, on the other hand, is the opposite. In a bull market, the price trend is upwards.
    Bear markets are cruel when they ran. The experience of any stock investor who was invested in stocks during 1973–1975, 2000–2002, or 2008, shows that.

    Luckily, bear markets tend to be much shorter than bull markets. Also, if you’re well-diversified, you can get through without much loss.

    For clever investors, bear markets can provide opportunities to boost the portfolio. Also, it is a good time to lay the groundwork for more long-term wealth-building. We will talk about this later.

    Examples of a Bear market

     

    A famous example of a bearish market is the recession that followed the great Wall Street stock market crash of 1929.
    The investors were massively fighting to get out of the market. They tried to avoid extreme losses and kept on selling their stocks. Hence, they caused a further drop in the market.

    The market collapsed on October 29, 1929. Then came depression in the economy, known as the Great Depression.

    In fact, the Dow Jones Industrial Average declined by 89% through 1932. Then came the housing bubble of 2006. Real estate prices skyrocketed by more than 100% due to speculative borrowing. The consumers could get a mortgage to buy a new house. Moreover, more and more people were into the real estate investment spiral. Their plan was to make a profit from purchasing rental properties and selling them later.

    These two circumstances boosted housing demand, but real estate prices too.

    What happens in a Bear market

    Bear markets mean low investor’s trust and huge pessimism.

    The investors continue to lose hope in stocks. They begin to sell securities in order to protect their investments from potential losses. This movement can trigger further declines in stock prices.

    Then you have speculators on the scene.

    They come back into the market to capitalize on lower prices, which is good. Because, if stocks begin to gain impulse through reinvestment, a bear market can turn into a bull market.

    What triggers a Bear market

     

    Well, it can be triggered by plenty of factors. For example, the main economic transformations, such as fluctuations in oil prices, can influence the evolution of a bear market. Volatility in foreign markets or political disagreements on a global level may also cause the movements in the market.

    For investors, the primary attention in a bear market is how to minimize losses. To achieve this, many investors may try to turn the market when buying and selling.

    But that’s a wrong dance at best.

    The end of the bear market is generally when stock prices move upward again by 20% or more.

    How to profit in the Bear market

    In a bear market, the stocks of both great and poor companies go down. But poor stocks tend to stay down, while great stocks recover and grow again.

    The strategy for investors is easy. If the stock of a valuable company goes down, that is buying opportunity.

    Good material is on sale!

    Thanks to the bear market you can reveal a great stock at a bargain price.

    Also, if during the bear market, stock price drops, but the company is powerful, still has a profit and still pays the dividend, you might be sure such a company is a good buying opportunity.

    If you see a stock whose company has a bond rating of AAA, that may be a good buy in the time of the bear market!
    Bear markets may be hard for good stocks. But to be honest, they’re brutal to bad stocks.

    When a bad stock goes down, it often goes into a more drastic decline as more and more investors look into it. Many investors would short the stock and profit when it continues falling.

    Going short is a risky way to bet. Why?

    If you’re wrong and the stock goes up, you may have unlimited losses. A better way is to consider buying long-dated put options.

    That may give you the profit if you’re right and the stock falls. But, at the same time, it limits your losses if you’re wrong.

    Is margin trading useful?

    Use margin wisely, and you will have a powerful tool in the bear market.

     

    Using margin to gain dividend-paying stocks after they’ve corrected is an excellent tactic.

    But, keep in mind that when you employ margin, you do add an element of speculation to the mix.

    For example, if you buy 100 shares of a dividend-paying stock with 100% of your own money means you made a great investment. But if you buy the same stock with margin the risk is added.

    You wouldn’t like to use margin before the stock corrected or declined. Remember, the brokerage firm wants you to have enough “stock collateral”.

    Say, you use margin when the stock is high and it later falls!

    Well, it can be dangerous, indeed.

    But if you use margin to buy the stock after a notable fall is much less risky.

    The best tips

     

    You can profit in the bear market also if you buy a call option, for example.

    But it is about speculating, not investing. The call option is a derivative, and it has a finite shelf life. If you’re not careful it can expire worthlessly.

    The good side of a call option, it is cheap to buy and it is a very cheap vehicle in a bear market. This means if the stock price dropped but the company is in good health, betting on a rebound for the company’s stock can be profitable.

    Also, you can write a covered call option.

    That means you accept an obligation to sell your stock to the buyer of the call that you wrote at a specified price if the stock rises and meets or exceeds the strike price. As a return, you receive income.

    Where is the benefit?

    If the stock doesn’t increase to the option’s specified price during the life of the option, you can keep both your stock and the income from writing the call option.

    Writing covered call options is an almost safe way to boost the yield on your stock position by up to 5%, or even more.

    The catch here is that you may sacrifice the opportunity to make gains above that specified price.

    But if you did right, a covered call option can be a practically risk-free strategy.

    Bear market cost investors money because security prices generally fall. It doesn’t always give advance notice of its arrival. But bear markets don’t last forever.   

    You must know when to buy and when to sell to maximize your profits. Many investors try to “time the market,” or estimate when a bear market has begun and when it is possible to end up.

    The technical analysis is specially engaged in this work. You have to be patient. Just keep watching the company’s vital statistics. If the company looks good, then keep collecting your dividend.

    Don’t waste your money!

  • Investment prediction for 2019 – Traders Paradise prediction

    Investment prediction for 2019 – Traders Paradise prediction

    Investment predictions for 2019 - Traders Paradise prediction 1The image is taken from depositphotos.com

    By Guy Avtalyon

    Investment prediction for 2019. is in front of you, so let’s start.

    Investment prediction is a really tricky job. This year has been full of market volatility, climate disasters, personal data frauds, economic insecurity.

    And now, in the end, we are waiting for a fresh start? Things never go in that direction. It looks that 2019 promises to be in a mess. That’s why Traders Paradise is trying to predict what will be real in the next year. And we find this, some other guys may find something different:

    Bear market – is here

    Nearly half the stocks in the S&P 500 index are in a bear market at the end of this year. They are down 20% from their highs.

    The second-largest stock exchange in the world by market capitalization, NASDAQ, is officially in bear territory. If you don’t know yet how to trade- here’s our full guide.

    All signs are pointing to more damage to the stocks.

    Equity markets in more than 20 countries are in bear territory. Investors are worried about how bad it will be and how long it will last.

    Bears are necessary and unavoidable cycles in markets and have been for centuries. But they are cruel. This will be a great theme in 2019. That is our investment prediction.

    And each investor should be prepared and to diversify the portfolio. 

    Artificial Intelligence (AI)

    One investment prediction, more.

    Japanese tech company Groove X introduced a robot whose task is to make people happy. The “Lovot” uses artificial intelligence. It can mimic human empathy.

    This cute robot represents the revolution of artificial intelligence. “Robot” can feel emotions and communicate with people. It is 3kg tall and 43cm tall, the optical camera helps it move. And can be our new friend for $5,300. Some cost us even more.

    There’s a vertiginous line of AI applications on the table right now. We expect this term will be very popular in 2019 and the list will become larger.

    Obviously you can find all sort of information on the internet about machine learning and AI, like these articles on Wikipedia for example, but the concept is quite simple: You run an algorithm (there are many) on the set of data, and once the algorithm is finished, the software will know how to run by itself on new sets of data, even if it’s never been seen.

    There are 2 types of algorithm methods READ HERE

    Socially Responsible Investing – Impact investing

    Socially responsible, or ESG investing accounts for environmental, social, and governance factors. But does not necessarily result in worse performance. There are those that think ESG investing can outperform the markets, and there are those who strongly believe the contrary. There are specific examples that will back up both sides of the argument.

    People are often asking us what is a social enterprise, and we are usually answering by asking “what is social investing?”. Sometimes the phrase is social impact investing; sometimes it just impacts investing.

    Impact investing carries risk, that’s true. But also it generates great returns and impact. It is smart and moreover, profitable to invest in companies that actively have positive social or environmental influences. It is a step further than divesting from negative impacts. For example, allocate your investment portfolio away from fossil fuels. Instead, use your money to consciously tackle society’s challenges. And to make a financial return, of course.

    Investors’ concerns

    Investors sometimes ask how much return they will have to trade-off in order to make impact investments.

    Firstly, there is no “impact see-saw”. Just because a business is creating a more positive impact, that does not mean they are creating a less financial return. Indeed, in many cases, because the impact is at the heart of the business model, the more impact they create, the more profit they make, and vice versa. Some research even suggested that impact-focused businesses are more sustainable and profitable in the long-term.

    In any investment, there are different levels of risk and return and there are also different levels of impact. An impact investment may be riskier. It has high returns and high impact. Or, it could be less risky since it brings market-rate returns and significant social or environmental impact.

    As with any investment, it depends on the business or the fund.

    The statistic shows that 89% of investors making impact investments find these are meeting their return expectations, and 54% of investors are targeting market-rate or above market-rate returns.

    There are many ways to get involved in impact investing. Crowdfunding has even helped retail investors, who have less risk capital, to get involved in this space.

    Generally, our investment prediction that this kind of investment will be more popular in the next year.

    Blockchain

    Traders Paradise’s investment prediction is this will be one of the most popular terms in 2019.

    Blockchain technology provides a way to make transactions and transfers online without the use of an intermediary. Instead of trusting a third party to keep the transaction history safe and accurate, blockchain technology lets you seal “pages” of transactions with a key code for security.

    One of the most relevant reasons that many companies are adopting blockchain technology is efficiency. We can all realize how exchanges can become quicker. And simpler too, when they don’t have to go through a third party. It’s also beginning to move document authentication toward obsolescence, removing a step in the translational process.

    How To Make Money With Blockchain Technology READ THIS TOO: 

    Blockchain technology can also make companies feel like their information is safer and more secure. In an age where hacking banks cannot always resist off attempts to attack people’s financial privacy. Therefore, blockchain technology is a way to feel a greater sense of control over transactions.

    Short Selling

    Many experienced investors think that short selling has an important part in the markets. It improves price discovery and rational capital allocation. At the same time,  prevents financial bubbles and finding fraud.
    Shorting is a trading strategy where traders are selling a borrowed stock with a belief that it will drop in value. So, they can buy it back later at a lower price. Academic research has shown the stocks of companies that complain about short-sellers tend to falter.

    Investment prediction can be an ungrateful job

    This term is already hot.  Let’s show how much on the example of TESLA.

    It is a stressful time to be an investor in Tesla, of course. On September 29th shares in the electric-car manufacturer soared by 17% after its boss, Elon Musk, settled fraud charges with America’s Securities and Exchange Commission (SEC). Just days later, on October 4th, a series of belligerent tweets by the firm ’s founder sent shares tumbling by more than 7%.

    You might be interested Apple is charging its batteries with Tesla’s employees 

    The tweets in question were targeted at short-sellers, who aim to make money by selling borrowed shares and buying them back later at a lower price. With a quarter of its publicly traded shares lent out to facilitate short-sellers’ bets, Tesla is one of the most heavily shorted companies in America. Elon Musk has publicly feuded with short-sellers for years, calling them “haters”, “jerks” and “not super smart”. Research suggests that such insults are undeserved. Short-sellers are savvy investors who help to keep the market’s exuberance in check.

    So, Traders Paradise believes that short-selling may continue in the next year. The bear market just started.

    So, think about this investment prediction.

    Unlike Amazon stock – which we truly believe will rise and get to new highs.

    Our investment predictions are based on personal research and act as an observation about what we all can expect in the coming year. But we have to admit, nothing good. We hope we are wrong.

    Anyway, we wish you a healthy, happy, and fruitful new year! You can have it!

  • Bitcoin Bear Market Is Far From Over

    Bitcoin Bear Market Is Far From Over

    2 min read

    Anniversary to Bitcoin!
    Bitcoin and the Bear market? Why the bear markets are the best time to be in crypto?

    Recently, Bitcoin made a strong rally. Enough to break past the neckline of its double bottom at $3,600 to $3,700. This can be an uptrend underway. If buyers keep the price above the area of interest, it will be possible. 

    If you apply the Fibonacci retracement tool on the latest swing low and high shows that the 38.2% to 50% levels span the former resistance. That might now hold as support. That means bitcoin could recover to around $4,035 and beyond.

    Analysis indicates that the current Bitcoin price chart entirely mirrors that seen in late-2014 and early-2015, this market’s last moody bear market.

    What happened then?

    2013 marked a very significant year not only in the history of Bitcoin’s bear market but in the history of Bitcoin as a whole. In October 2013, FBI officially shut down the Silk Road. 

    Silk Road was an online black market. It also represented the first modern darknet market. However, Silk Road’s represented the crypto asset’s first form of widespread user adoption.

    The Silk Road closed activity in October of that year. But the price of Bitcoin continued to rally until the end of November before the market had fully systemized the effects of that event.

    It is impossible to know when Bitcoin has reached its peak while events are ongoing. Even more, the media didn’t help paint a clear picture of reality. At the time, even as the price of Bitcoin began dropping, headlines were incredibly optimistic.

    But, during Bitcoin’s reversal period in January 2015, the general sense in media’s headlines was negative.

    These headlines did not provide any positive signals to indicate the bottom of Bitcoin bear market, at that time.

    Let’s go back to 2018! What is happening now with Bitcoin?

    Although many have claimed that Bitcoin, has finally touched the bottom in 2018’s market downturn, data indicates that many investors still see plentiful amounts of value in blockchain-based assets.

    The research group divulged that the 30-day moving average of Bitcoin flow into investors’ wallets has been on the rise, eclipsing the $400 million milestones as of November 1st. Well, $400 million out of Bitcoin’s current $65 billion market capitalization isn’t especially important. In June, this same figure was $300 million. In that period, the price of Bitcoin was approx $6,000. Those days it is about $3,750. November’s inflows should be seen as a bullish indicator.

    The data suggests that investors have sought to accumulate Bitcoin at lower prices. Many investors started to allocate more capital towards Bitcoin, due to their long-term belief in the asset’s underlying value.

    That wasn’t the case only with “personal wallets”. The institutional players via Grayscale Investments saw an increase in Bitcoin balances. It is an investment-centric subsidiary of the conglomerate that is Digital Currency Group (DCG).

    Since the start of 2018, Grayscale has seen its Bitcoin coffers swell by 30,600 BTC to 203,000 total.

    Now it accounting for more than 1% of the asset’s total circulating supply.

    Bitcoin Bear Market Is Far From Over

    As seen in the chart above (sourced from LongHash), the wallets pertaining to Grayscale’s GBTC, a vehicle that allows retail and investors to purchase customized BTC on the U.S. OTC market, has seen month-over-month increases.

    Markets move solely based on the demand from investors. Hence, if investors think a large rally cannot be maintained throughout the years to come, then some of the largest markets can experience steep sell-offs.

    Bitcoin made the recovery and market watchers are pinning it on a number of factors. First is the Coinbase offering of crypto to crypto trading that could boost volumes in the retail sector. Next is the report that Mark Dow, the former IMF economist that opened a major short play on bitcoin after it hit its all-time highs, closed his remaining position also led many to think that he may already be seeing a market bottom.

    Bitcoin could take a longer time to recover than in previous years.

    Because the market is more structured.

    But, it is wrong to claim that Bitcoin could drop to zero because of its 85 percent decline in price this year. This because, in the previous year, it demonstrated a 1,850 percent gain. And a major correction was expected after such a large movement.
    But many aren’t convinced that lines can be accurately drawn. The Bitcoin industry has matured beyond measure in the past year alone, and even more so in the past four. Moreover, others have claimed that the worst has yet to come for crypto assets.
    Vinny Lingham, CEO of blockchain-centric identity ecosystem Civic, explained that trading within the aforementioned $2,000-wide range is likely to continue for a minimum of three to six months, a common timeline in the eyes of Bitcoin’s short-term bears. The entrepreneur added that if a convincing breakout isn’t established by the end of Bitcoin’s six-month range, a strong foray under $3,000 wouldn’t be out of the realm of possibility.

    The Civic chief noted that Bitcoin will likely remain range-bound between $3,000 and $5,000 “for a while.”

    But Fundstrat’s Tom Lee said: ”Bear markets are a ‘Golden Time’ to be in crypto.”

    Bitcoin bear market is far from over, this is the opinion of analytics.

    Risk Disclosure (read carefully!)

  • Growth fears pushed Russell 2000 into Bear area

    Growth fears pushed Russell 2000 into Bear area

    1 min read

    Growth fears pushed Russell 2000 into Bear territory 2
    Russell 2000 – That is going to say, we’re about the way to a bear market.

    Russell 2000 is pushed into the Bear territory by growth fears!  

    Looks like the Bear Market is already here. 

    What happened?

    Small American stocks have tumbled into a big hole, reflecting mounting slowdown fears on Wall Street, reported CNN.

    Growth fears pushed Russell 2000 into Bear territory

    The Russell 2000 fell into the hole, in the middle of a wave of selling. The major market indexes are in red.

    The DJIA, S&P 500 and Nasdaq are all well into correction territory. They are down more than ten percent from their previous highs. 

    Growth fears pushed Russell 2000 into Bear territory 1

    Russell 2000 – Market indexes are red!

    The Russell 2000 index of small-cap stocks dived into a bear market on Monday. It happened after a 20% decline since hitting a record high in late August.

    That marks the first bear market for the index since the downturn that spanned June 2015 to February 2016, according to Bespoke Investment Group.

    The media’s conclude that investors are scared by the Federal Reserve rate hike.

    “Investors are showing real caution about the pace of economic growth for the US next year,” said Nicholas Colas, co-founder of DataTrek Research. “Confidence is falling,” added he for CNN.

    The index contains 2,000 smaller companies that do little business overseas. As such making them highly exposed to swings in the domestic economy.

    The index is viewed as a barometer for confidence in American growth.

    Small-cap stocks sometimes lead the broader market. That’s the reason for making a Russell 2000 bear market a potentially ominous event.

    It’s the fear of a recession and that is very real.

    How the Fed made this situation as real?

    The Fed’s job is monetary policy. They have to keep unemployment low and inflation under control.

    Trade war worries

    About 40% of the debt held by Russell 2000 companies is floating-rate, according to Peter Boockvar, chief investment officer at Bleakley Advisory Group. The cost to service that debt has climbed in tandem with the Fed’s two-year of raising interest rates.

    “That’s potential stress if growth is slowing in the United States, which the markets are betting on,” said Boockvar.

    Moreover, about one-third of Russell 2000 companies are unprofitable.

    That number could rise if the US economy gets stuck.

    It looks that the odds of a US recession over the next 12 months have climbed to about 30%. That would be the highest level during the nine-year economic expansion.

    The Russell 2000 climbed 13% last year. The investors bet that US-focused companies would avoid getting caught in the middle of trade wars. Multinational companies like Nike (NKE), Apple (AAPL) and Boeing (BA) dominate the S&P 500 and Dow.

    This was a safe haven. But it ended up being a very crowded trade. And everyone knows what happens to a crowded trade when the tide goes out.

    The idea that smaller companies would avoid the fallout of the crackdown on trade was flawed. Now it is obvious.

    The reason is that Small-cap stocks do business with big-cap stocks.

    Markets were in the midst of the longest bull market in American history. This began in March 2009. But the bull has been stumbling pretty badly of late, leading some analysts to investors to wonder whether this is the start of a bear market.
    It is commonly measured by a 20% fall from a previous peak.

    After a brutal decline in US stocks in October, both the S&P 500 and Dow Jones Industrial Average slipped into the red for the year. That caused erasing all the gains made in 2018.

    The benchmark S&P 500 has fallen more than 9% from it’s the all-time peak at the same time. So, stocks continue to slide.
    That is going to say, we’re about the way to a bear market.

    Risk Disclosure (read carefully!)

  • Bitcoin Price Hits a New Low Level

    Bitcoin Price Hits a New Low Level

    2 min read

     Bitcoin Hits New Low Value

    • Bitcoin is currently sitting in the volatility of the market, though it is hard to predict how investors will react to the recent events.

    The aggressive dump can be a result of panic selling caused by the breakout from the $5600. Many interpreted this as “the bottom”. Since the price went below what many thought to be the bottom a panic selling would have triggered. The bitcoin’s lowest price in bear markets has been $5600.

    Right now the price of bitcoin is around $4,600, but yesterday BTC stumbled down to $4,237. Over the past 24 hours, the price of Bitcoin fell from $4,900 to $4,280, by more than 12.5% for the first time in 2018. Ripple (XRP) markets have been doing better than most but had dipped to a low of $0.41 per XRP. The XRP token was down 6.6%, and over 13.4% over the last seven days. XRP is now back up to $0.46 per token according to the most recent data. Ethereum (ETH) now commands the third position among the top 10 cryptos market capitalizations and is down 35% for the week. Currently, ETH is trading for $144 per coin and holds $14.8 billion market valuation. Lastly, stellar (XLM) has been pushed back to the fifth position and is trading for $0.21 this Tuesday. Stellar markets are down 23% for the week but briefly managed to take the fourth position among the top 10 market caps.

    Bitcoin Price Hits New Low Level

    Some media reported that the low trading volume of BTC in a period of an intense sell-off and free fall suggests a further decline to the low $4,000 region is likely, especially if the volume of BTC begins to increase in the days to come.

    Is bitcoin going to hit new low price?

    It is really possible the volume on Bitcoin could lead to a decline to a low range at $4,000. But what does it mean?

    The sell-off continues in the crypto universe as the main cryptocurrencies set new minimums.

    Economist Nouriel Roubini is known as “Dr. Doom” declares that the main central banks’ initiative to launch their blockchain based currencies will compromise the future of the current cryptocurrencies.

    The argument is reasonable from the perspective of the current situation but he forgets to put all the elements on the balances.

    Tomas Salles from fxstreet.com asked one very important question and gave the answer: ‘If someday the current financial system collapses in the face of unpayable debt, what security does it provide that the instrument is digital, reliable and decentralized? If that day arrives, I will prefer to get my paycheck in Bitcoins than in a currency that is worth less every day while the central banks raise rates in despair.’

    Will bitcoin recover?

    Bitcoin is currently sitting in the volatility of the market, though it is hard to predict how investors will react to the recent events.

    Analysts have suggested that 2018 will be the year of cryptocurrencies. Wall Street hedge fund firm Fundstrat’s CEO Tom Lee has regularly predicted bitcoin to exceed expectations in 2018, with prices pushing past $25,000. Bitcoin’s famous volatility makes it impossible to predict, that’s the truth. And there are numerous factors that have an influence on the cryptocurrency market.

    The values of Bitcoin, Ripple, and other cryptocurrencies have been crashing lately, but one analyst is predicting a huge rise ahead for Bitcoin with a forecast for it to reach as high as $100,000 in 2018.

    Kay Van-Petersen, an analyst at Saxo Bank, said in December 2016 that bitcoin would reach $2,000 in 2017, a feat achieved in May. He now says bitcoin will be driven by a larger uptake of institutional investors and futures contracts.

    Bitcoin Price Hits New Low Level 2

    That might seem unlikely. But the analyst predicting Bitcoin’s 2018 surge has been right before. Toward the end of 2016, the Danish firm Saxo Bank released its annual list of “Outrageous Predictions” for the year ahead. In it, the bank’s analysts said that Bitcoin could easily triple in value in 2017. That prediction came true by the spring of 2017. Bitcoin went on to increase from around $9,000 to $18,000 in the course of the year.

    Why Bitcoin is swinging up and down?

    In 2017, Bitcoin’s value soared from $1,000 to just under $20,000. And was dropping down to around $13,000 by the end of the year. Since then, it’s value has risen and dropped sporadically from day to day.  And smaller cryptocurrencies like Ether and Ripple along with it too.

    If you’re new to cryptocurrencies, this kind of volatility can be strange. But if you take a closer look it starts to make sense.

    Individual owners have less power over the price of Bitcoin, and it creates stability since more people have a stake in the cryptocurrency. The other possibility is that government regulation could help stabilize Bitcoin. In the short term, that could cause its value to drop drastically as it happened in China and South Korea. But in the future, it could help calm down the speculation. Furthermore, regulation could dislodge the types of dark Bitcoin-related business that jeopardize the entire concept of cryptocurrencies.

    Cryptocurrency price will rise despite fears of a collapse

    Bitcoin has been the top-performing currency in the world in six of the past seven years.

    Bitcoin’s price will rise again, after the digital currency and its rivals saw values plummet. Crypto investors suggest cryptocurrencies could surge. Bitcoin is now tested and proven to the market. People now understand the blockchain’s abilities from outside issues. Bitcoin is gaining more confidence from users. The upside for bitcoin is virtually limitless.
    Or as someone twitted

    Ignore the noise, trust the code.

    Risk Disclosure (read carefully!)