The Next Bull Run

Maynard, I believe that the FTSE 100 is becoming less and less any help to mainstream investors. In the Financial Times today, the FTSE actuaries share indices show that it is only down about 5% over the year ago whereas the FTSE 250 is down 15% -- and some of my shares are about 50% off.!

Of course, there are pluses and minuses in any index but the FTSE 100 appears to be an artificial guide based primarily on the oil and minerals together with some foreign companies. It would be even more distorted if it was not being restrained by the banks!

I think that the stock exchange is, once again, failing to think properly. It needs the highlight the 350 index as a better indicator of what is happening with the top 350 companies -- although even that is only down about 6.7%. Presumably, it is distorted by the FT-SE 100, which is its self distorted by taking account of the size of the companys. No doubt there are good reasons for that but it has the disadvantage that its performance bears little relationship to the majority of that 350 companies.

On the basis of the FTSE 100, we are nowhere near the bottom of the market, the fall in which is to be expected in order to correct the gambling which was going on a year ago. On the basis of my shares -- very few of which are Aim -- there is far more sign of a correction.

Of course, the question is then whether the market is achieving its sensible forecasting or is still in its distortive mode pushing things up and down! Moreover and perhaps more important, is it not normally at least 18 months from the time trouble starts before one can judge the extent of it and whether calm is coming?
Old Aubrey

One theory is that cycles last 34 years, 17 years up and 17 years down approximately. According to this theory the 17 year down phase started around the year 2000, there will of course be some intermediate highs in this period. Watch out.

Hello Old Aubrey,

Maynard, I believe that the FTSE 100 is becoming less and less any help to mainstream investors. In the Financial Times today, the FTSE actuaries share indices show that it is only down about 5% over the year ago whereas the FTSE 250 is down 15% -- and some of my shares are about 50% off.!

Of course, there are pluses and minuses in any index but the FTSE 100 appears to be an artificial guide based primarily on the oil and minerals together with some foreign companies. It would be even more distorted if it was not being restrained by the banks!

...

On the basis of the FTSE 100, we are nowhere near the bottom of the market, the fall in which is to be expected in order to correct the gambling which was going on a year ago. On the basis of my shares -- very few of which are Aim -- there is far more sign of a correction.

Point taken. But the FTSE 100 and All-Share are essentially the default options for investors that want exposure to the market without having to choose a fund or their own shares. Sure, it is packed with miners now but it has always had a strong weighting to certain sectors (oils, pharmas, telecoms, banks) over time.

Agreed, many shares have been hit much harder than the FTSE indices -- as you may know I've tipped some of them -- but sometimes many shares do much better. All depends really on how in or out of favour mega-cap shares are.

I think there will have to be a major shake-out with mining shares before the market hits bottom, as most other blue-chip shares seem to have some concern depressing their share prices at the moment. I do think the mega BHP Billiton/Rio Tinto merger could be a sign of the commodity top is near, in the way the mega Vodafone/Mannesmann deal signalled the top of the tech boom.

Of course, the question is then whether the market is achieving its sensible forecasting or is still in its distortive mode pushing things up and down! Moreover and perhaps more important, is it not normally at least 18 months from the time trouble starts before one can judge the extent of it and whether calm is coming?

Well, I did say I wasn't sure when any bull run would start. Maybe it will be another year or two, maybe it has already started. It's difficult to say.

Foolish Best

Mayn

One thing for sure - no one will correctly guess the bottom of the bear market, just as they never forecast the top of a bull run! When the market is rising, the "expert" commentators always say "we see no reason why it cannot go even further, there appears to be no dwonside indicators". Six months later, when the market has gone into retreat, they say "there are a lot of negatives around, and we would advise caution before committing any capital to these volatile markets". See what I mean? They just go with the trend at the time, telling us something that we can all see for ourselves. My personal feelings are that when the banking crisis settles down and is partially forgotten (people have short memories of bad times), the banks will start making mega-profits again - their balance sheets will be shorn of all the write-offs next year. The market might then take off again. Trouble is I will not know when the bottom is reached, like everyone else!.