The Investor Diary Entry #13: February 9, 2023
Yes, the game is on; namely the market game is on. It is the game between a bearish market and bullish market. There is nothing new about this. This is an everyday question, but we are not talking about a daytrading question here. Today, the question posed is one for long term investors.
The game today between a bearish market vs. bullish market is not a question whether this is going to be through one day, one week, one month or even one year. This question is for a multiple number of years.
This question is not going to affect investors only, nor this is a question that is directed to one certain economy. This question is going to affect the lives of all human beings. Today this question is a global question.
The question that I ask myself is which team should I join. Should I join the arguments that support a bearish market? Or should I support the arguments that support a bullish market?
Before I begin, I should stress the fact that this is an investment question and not a trading question.
Arguments Supporting A Bearish stock Market
The main argument behind a bearish stock market is that the stock market in the US is highly overvalued, and this bubble needs to burst. Some analysts are calling it a super bubble; one that is larger than any bubble that the US stock market has ever seen.
Away from the US economy and moving to the rest of the world, the pressures of inflation after all the governments’ spending to support its citizens during lockdowns during Covid-19 pandemic coupled with the high shipping costs after economies started to open up; in addition to the supply shortages that has two main reasons.
The first reason for the supply shortage was the continuation of the Chinese government to follow a zero tolerance strategy to Covid-19. This caused businesses to close in china, and therefore not shipping their products to the world. The second reason is the breakout of the Russian-Ukranian war.
The war affected a whole basket of products including two very important segments; food products and energy.
Recent articles from supporters of a global recession said that the recent opening of the Chinese economy and abandoning their zero tolerance strategy, only delayed the inevitable. Not entering a global recession, they say, is only temporary. In their opinion, the other factors will over weigh the Chinese economy opening factor.
If such over weighing is true I expect that it will show in the summer of 2023, but how long will it last, and what other factors will the year present. Just a couple of days ago we witnessed the disastrous earthquakes in Turkey and Syria. Will the environment and nature in general present itself as a direct player to the global economy starting this year?
Arguments Supporting A Bullish Market
Truthfully, I am not hearing a lot of those voices. Still, those voices are concentrating on the fact that inflation is being controlled much better now. They are seeing that Central Banks may relax their interest rate hikes, which will give optimism to the stock market; accordingly the stock markets, they say, will rally upward during 2023.
This is the main point, and might be the only point, that the supporters of a bullish market keep repeating. My argument on the hand, is more unorthodox.
My Confused Stock Market Argument
I am a believer of all the arguments mentioned for a bearish market during the next 3 to 5 years. On the other hand, I am hesitant to adopt it for one particular reason.
I have realized during many years, that when most analysts and media concentrate on one direction, what actually happens is totally the opposite. People keep hearing all this news and reports and start acting according to such media bombardment on a certain direction, and then the market moves in the opposite direction, leaving behind thousands of traders and investors in the red.
Accordingly, should I follow my belief in the factors behind a bearish market? Or because of the huge media bombardment in the direction of a bearish market, I should act against what the media is preaching?
The Implications Of My Decision
If I follow a bearish market view and expect a stock market bubble to explode, then I should wait and not buy stocks today because those stocks will fall drastically and I can have much better deals with such an explosion.
If the market goes in the opposite direction and goes bullish, then I would be losing a lot of current value stock opportunities that I could have bought today at cheaper prices. They might still be value stocks in the future, but I could have bought them at cheaper prices.
Today I started formulating a different strategy to get out of this dilemma.
Conclusion
Choosing one side over the other will for sure cost a lot if the result was against my bet. Therefore, I would change the strategy of finding value stocks, to finding value industries.
In mid 2022, I started looking into the drone manufacturing industry, and yesterday I started looking into the Hydrogen Fuel industry. In addition, I am now looking at small ticket stocks which will allow me to buy more shares that have a greater opportunity to grow in the future.
Unfortunately, the new strategy will not allow me to follow value investment strategies. Companies that are within new industries are extremely hard to evaluate and decide whether their current stock prices are of value, as it is hard to draw conclusions from their financial statements.
There is another exposure that I am facing. I am currently investing only in US companies. This is a great exposure, as the US market is highly overvalued, and there are other markets which present much better value opportunities. Unfortunately, such companies lie either in Europe or in Southeast Asia.
Europe is extremely risky as their economy is becoming extremely fragile, and suspect that Europe might be on the verge of an economic disaster. On the other hand, South East Asia is very risky in terms of safety of investments. The political environments there is not to my taste, and I cannot trust that my money is safe in those markets.
I have some positions in Chinese, and Taiwanese companies, and I am not very relaxed towards those stocks, not because of the companies, but because of the geographical locations and political environments that they operate within.
The Investor
Thursday 9 February 2023
About The Author
I started to look into individual stocks in January 2022. I created this diary initially for myself to track my investing progress, and second as a place that I can share my ideas publicly hoping that others will share their ideas and learn from each other, and lastly as an online business where some links that I share are affiliate links, and if anybody bought anything by clicking those links I will get a commission based on that successful sale, which of course will not affect the price that you are buying the product or service at.
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Hi there
Thanks for your informative article.
Seems like quite a touchy subject.
The argument for a bearish stock market, particularly in the US, hinges on the perceived overvaluation of stocks, leading to concerns about an impending burst of what some analysts are labeling as a “super bubble.”
It’s interesting to learn that beyond US borders, global economic dynamics are adding to the unease, with inflation pressures stemming from extensive government spending during the Covid-19 pandemic, exacerbated by soaring shipping costs and supply shortages.
Its truly interesting to see how so many players and developments around the world can impact such an initiative.
I can certainly see how as we progress into 2024, uncertainties loom large, but would be interesting to see how this all plays out.
Well done.
If we look at the dynamics from an abstract perspective, it is truly interesting to see and watch. Unfortunately, the negative outcome will be devastating to humanity.
Investing lets us look inside ourselves and find out things that we never knew before. As a human being living on this planet, I am hoping for a soft landing. As an investor, I have put some reserved uninvested cash waiting if such a bubble or super bubble bursts to try to take this as a super buying opportunity for the chance of finding great multi-baggers.
Thank you very much for passing by and sharing your thoughts.
Thanks for sharing this intriguing article on the “Bearish Market vs. Bullish Market” debate. You highlighted a lot of important factors that are shaping the stock market’s trajectory, considering both global and domestic issues.
Your sense of confusion between a bearish and a bullish outlook is quite relatable, especially given the conflicting signals from the economy, central banks, geopolitical events, and broader market sentiment. This uncertainty is something many investors face when making decisions about their portfolios.
One topic that stands out is your emphasis on strategic flexibility. It seems like you’re exploring new avenues for investment, such as drone manufacturing and hydrogen fuel industries, while also diversifying geographically. This approach resonates with the idea that investment in emerging technologies and industries could offer promising growth opportunities despite the larger market uncertainties.
However, your concerns about political risk in Southeast Asia and the potential fragility of the European economy highlight the complexities of global investing. The article does a good job of presenting both the risks and the potential rewards of these newer industries and global diversification, offering a broader perspective on the market.
I’d be interested to hear more about your thoughts. Are you leaning towards a bearish or bullish outlook in the current climate? What factors do you think are the most influential in shaping your perspective? Additionally, how do you feel about diversifying into emerging technologies or non-U.S. markets as a strategy to navigate this uncertainty?
Mattias, thank you very much for highlighting the details of the investing dilemma that the article was trying to expose.
It seems everybody is currently running to gold as a reflection that many investors feel there is nowhere to run.
Personally, I invested a little more than 50% of my stocks’ investable money. I am leaving the remaining half for the chance that the bubble truly explodes. If it does, then it is an opportunity to load up on some very interesting stocks.
Well, I explained my concerns about non-U.S. markets, and I did invest as you mentioned in Drone manufacturing, Hydrogen, Auto-driving…etc. I am now moving in a different direction.
I have invested some money into a diamond retail operation, and I started renting out a couple of flats. I have been trying to look into investing some in automotive trading, but currently, the market is extremely volatile with the introduction of different options; Traditional fuel, Hybrid, electric engines, and now finally the introduction of different hydrogen options. The market is not stable, and the general direction of the industry is not clear.
Thank you again for your highly thought-teasing comment.
I always find investing in the stock market one where you have to understand the risk as I have been told before by investors. Although there are reports that the market is bearish, I agree that most of the media do report one way to get a specific behavior from investors so that there is a specific direction that the market goes. Nothing is more important than researching the specific industry for yourself. Past reports do help but also insight into the specific stock itself is important.
We will see how the markets perform in the next few years though.
I totally agree with you Michelle. The best way is for one to do independent first-hand research to make a decision. I particularly like the investing philosophy of ” if it is not a clear yes, then it is a no.” Very simple, yet very effective so that one does not do any second guessing.
A friend of mine showed me a pattern that finally predicts that the big drop is going to be in 2029. It was very interesting to listen and see his logic on the chart.
Thank you very much for your comment.