From The Top To The Bottom: Are We There Yet?
26 September, 2011, 1:51. Posted by ZarathustraTags: Bottom-fishing, Markets
My bearish view since late last year and the beginning of this year has been working well in Hong Kong/China equities. They have been underperforming the US markets, and have crashed even harder recently than the US markets.
Calling top was not easy. I knew stocks looked cheap everywhere, and it was contentious to be bearish on stocks, particularly in Hong Kong/China. But whether you like it or not, the markets here peaked on early November, and bear market continues.
Now calling the bottom is just as tricky, if not more so, as calling top. I know if stocks looked cheap everywhere last year, it must look even cheaper now! But catching a falling knife will require protective gloves, skills, and good eye-hand coordination… OK that was a joke.
Stocks in a crisis would drop deeply and relatively quickly, with huge volatility. However, the journey from the top to the bottom would not happen in a day or two. It would not happen in a week or two, and not even a month or two. A year or two (or more) seems to be more realistic. In between the top and bottom, there were often some huge rallies with stocks rising 50% or so, and the declines then continued.
1929 The Great Depression, Dow Jones Industrial Average
1997 Asian Financial Crisis, Hang Seng Index
2007-2008 Subprime Mortgage Crisis, S&P 500
We are now a few months away from the top for the US markets (or in the case of Hong Kong/China, about 11 months from the top), is this the bottom? Well, I don’t know, and you are lying if you claim you know (consider the definition of knowledge in epistemology, it’s justified true belief, ignoring Gettier problem). But I just need some more time.
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About Zarathustra
Zarathustra: Founder and Managing Editor of Also sprach Analyst. Once an analyst, now an investor and entrepreneur. Based in Hong Kong, but Londoner at heart.
