Could you elaborate on why you wouldn't want a 10 year long bear market? Perhaps you are very old and need to spend your capital, in which case it makes sense. Otherwise it doesn't for anyone.
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Do all realise that stock markets main purpose is to let Companies raise capital most efficiently and at favourable valuations so that they can carry on their business most profitably ...its called Primary market ....while trading in stocks of those companies with prices fluctuating every minute on stock exchanges is called secondary market and its to provide liquidity or exit options to already invested investors .
Bear markets disturb the primary markets thus the ability of listed companies to raise money for further productive purposes like new factories etc . In bear markets new capital raising dies down thus not helping overall future growth
Primary markets are more important then secondary markets for productive and growth of overall economy but secondary markets are needed to make primary markets more efficient and fair etc .
In a long term Bear market ...Primary markets will almost die so not good for anyone imo
A heck of a relief rally in the 10 year bond rate. All this talk of recession is immediately making traders think that the pending recession will bring rates back down, but of course we haven't had the recession yet to cure inflation, and to do that we need to raise rates. Its like stopping antibiotics before they have started working. And the relief trading coming in between CPI reading, so I suspect could be some volatility when actual measures of core CPI come in.
I had a look back through the last 20 years of 10 year gov bond rates, laid out below. Interesting the last 20 years have been some of the most benign times as well.
SPOT: 3.6%
Last 5 yr ave: 2.06%
Last 10 yr ave: 2.84%
Last 15 yr ave: 3.76%
Last 20 yr ave: 4.32%
I'm using 20yr ave 10yr bond rates when I do my back of the envelope DCF's on companies on my buy list (when I have the motivation and time to do them) so I don't get caught out.
A decade-long destruction of wealth? The economic/political environment that caused such a thing would not be pretty. Somehow I don't think your amazing plan to buy an "entire small New Zealand company" would be your focus. More likely your focus would be finding a scrap of bread on the street, or checking that the barricades around your hut are secure.
But if everything is just fine - 10 years of wealth destruction was just some random event - how do you know that year 10 is the end of the bear market? It might be a 20-year bear market. So when exactly are you buying this "entire small New Zealand company"?
Nobody said anything about any destruction of wealth.
Wealth is the amount of goods and services we produce, not numbers on a screen.
The rising 'value' of existing property in NZ has not created a cent of wealth as nothing has been produced.
Rising share prices is not wealth, it's just people paying more for the assets that have identical production as before.
If the sharemarket doubles in 12 Months - no wealth has been created....
Thanks for playing.
Yes a good explanation regarding the function of capital markets.
However I think it's roughly the opposite of the effect you believe in. The massive bull market we have just been through has lead to the least efficient raising of capital not the other way around. As you mentioned productive growth, the high availability of capital and ease of raising (low hurdles) has just turned resources into exercise bikes with ipads on their handle bars and all kinds of ridiculous non productive folly, I could go into enormous detail of the squander of resources due to this fact.
It's when capital is scarce and hard to come by that it is very efficiently allocated and the people raising it make damn sure it will be market driven and productive - the very reason behind the argument of normalising rates.
The counter argument is that when capital is sprayed around like confetti, 90% is wasted but someone will come up with a daft idea that another idiot funds and it actually creates a breakthrough, i.e. if you throw enough, something will stick.
Warren Buffett and Chris Bloomstran would disagree with the notion of bear markets disturbing the allocation of capital to any degree that was a negative for society.
While I would like a market where prices fell 90% and didn't recover, this is not what I'm suggesting as it's unrealistic. I'm suggesting a period of 10 plus years where prices don't reach all time highs and remain below historical averages.
Some of you will recall that to create an average, you need to have some time below it.
As Azz has pointed out, it's in nobody's interest to create a scenario where less goods and services are produced, Azz confuses this with high and low prices which are totally different things.
When the market was priced at the same level in 2012 as in the year 2000... Nobody starved.
bear markets are normally associated with recessionary periods therefore business will die while others are born.
so if you have a 10yr bear market how can you guess which business you invest in will be the winner and will survive at the end of the day let alone make up for the time value loss of your money if your pick is wrong.
that is the folly of the argument about invest long term your never lose as your guessing your pick will be a winner