Minimum Requirement For A Bear Market

The best time to prepare for a Bear market, as with any foreseeable disaster, is long before it strikes. If one waits for word of a Bear market to be broadcast on the evening news, chances are good that it is already too late to prepare.
It’s too late to build a storm cellar when the tornado sirens are blaring, too late to get off the volcano when the pyroclastic flows have begun, and too late to buy bread and milk when the blizzard winds are howling. The best one can normally hope for, when a disaster is already underway, is to mitigate the damage; and that includes stock market crashes.
The problem with preparing for disaster is that there is a natural tendency to become desensitized to warnings that later prove inaccurate. As television’s Simpsons character Troy McClure observed many years ago, in 1995, ‘phony tornado alarms reduce readiness’. So to do phony predictions of coming stock market crashes reduce readiness.
Many have viewed the widely circulated charts showing the similarities of the current stock market to that of the Crash of 1929. While it is conceivable that such similarities could indeed mean we are headed for another stock market crash, the truth is that so many similar predictions have failed in the past that even if this one proves to be true it will likely be ignored, quite like phony tornado alarms.

This post was published at ZenTrader on September 1, 2014.