Bear Stearns and a bear marketMarch 17, 2008
Mark on the markets Mark Patterson
Bear Sterns and a bear market
The takeover of investment banking firm, Bear Sterns, brings back bad memories of companies like Enron, WorldCom and Hedge fund; Long term capital management.
The reason I think of these companies is that you can draw similarities in the way they eventually ceased to exist. One commonality is that they were once well respected companies that appeared to be doing very well, for there shareholders and employees which owned a lot of company stock in their 401k’s. The other is that the management of these companies appeared to be doing a good job and were well respected.
But the one aspect that they all really have in common is that they overleveraged themselves in a market that eventually ruined all of them. I have a saying about the markets and investing, well actually I have two “mottos”. Number 1 is; never say never, and the other is; all markets are cyclical, just as everything in the universe.
So another failure of a major US corporation is a cyclical event which coincides with the bear market we are in.
Last summer and into fall, if you were a client or read this article, you would know that I believed this stock market and the economy were at a near term top and even extended beyond a top. I cautioned to take profits and keep a high level of cash available for when the markets would be buyable again.
It is not that I have a crystal ball, I just pay attention to cyclical nature of the economy, or the business cycle, and I watch for signs that the markets are toping, through technical analysis and retail investor behavior. It is that simple. All markets follow these cycles and have the same type of topping and bottoming indicators. So if you are in stocks, bonds real estate, commodities or even weather patterns, they all are cyclical. We must embrace the up cycles and endure the down, and if we can see a market moving from one phase of a cycle to the other we may be able to benefit from those changes.
Mark Patterson is a registered investment advisor with MHP Asset management LLC, and can be reached at 447-1978, or Mark@MHP-Asset.com
MHP Asset Management, LLC
P.O. Box 460, Conway, NH 03818
Phone: 603-447-1979 Fax: 603-941-0904 |
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