1. 1,816 Posts.
    The first stage of the bear will be a gradual decline in PE's and slight increases in div yields. The economy will still be plodding on at this stage.

    The second stage is where the debt bubble bursts- this is a gradual process which will end in the total decimation of leveraged assets. The economy will follow assets prices in the death spiral downwards- initially at a slow pace. Company earnings will start heading south. Businesses which sell discretionary goods/services will face a monumental drop in demand- most will go bust. People still see a light at the end of the tunnel - there is still hope.

    THe final stage is capitulation. This is where the base if built for the next bull market. This is where the majority that have held on uptill now bail out. They can't face the capital loses any further. Asset prices reach a level where they trade at 3/4 times earnings. Yields on investments are in execss of 20%. This is the time where those that cashed up before and during stage one pounce.

    They know a bargain when they see it! Welcome to the infant bull!!

    We're currently mid way through stage one.

    Stage two will start over the next two years, and last atleast a decade.

    Stage three is still toooo far away to even think about.

    The basic message is this:

    This bear market is still young. Don't get conned into a false sense of security with high yielding stocks- thinking that the yield will ensure they maintain their
    capital values. The goal posts will move!! Those dividends will almost not be maintained in future years... and you will face a capital loss.

    Buyer beware!!!

    The bear is young!!!
arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.