Bulls and Bears of the past

You can click on the above diagram for a more detailed view of the all-share index in the last 20 years. Note how short the "crashes" are (no more than a year but mostly less than 120 days) and how long some of the "bull runs" can be (2, 3 even 5 years!). Also note how each bull run more than makes up for the losses of the previous "bear run". Also note that as we move to the right each correction seems "deeper"misleading you into thinking the corrections are getting worse and worse but in reality as you can see from the % figures, they are all more or less the same (20-45%). This is merely an optical illusion since each correction is off a much higher base.

Undoubtedly, the last bull run has been remarkable and it is with a sigh of relief that sanity prevailed and we have a long overdue correction. The current correction is the 2nd biggest in 20 years at 45% but it has only retraced 2 years of growth (13 June 2006) and could retrace further to 50% (the 17,000 mark) or even to 16,500. When that happens you want to be ready to pile back in and make sure you are piling back into the the right PowerStocks.

We cannot say how long stocks will languish at these levels, nor how quickly they will rise again, but this is academic to the value long term investor. The idea is to get in when solid stocks are cheap and let earnings growth take care of the rest. We may never see the bull run of the last 5 years again, more likely we will see a slower more cautious and sane ride back to the top. The main point is that by getting a portfolio of the right PowerStocks together you will still be set to reap more than satisfactory returns that will outperform most of the market.

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