Phisix: Undergoing A Cyclical Bear Market Within A Secular Bull Market Cycle?

``Over every mountain there is a path, although it may not be seen from the valley." - Theodore Roethke (1908-1963), American Poet

Finally, I think it is NORMAL for any countercyclical trend to operate within a structural long term trend. Because NO TREND GOES IN A STRAIGHT LINE, this means that a cyclical bear market can function WITHIN a secular bullmarket.

The Phisix has not been INSULAR to such circumstances, as shown in Figure 5.

Figure 5: Chartrus.com: Phisix had two 50% decline in the last bullmarket!

During the last secular bullmarket phase in 1986-1997, the Phisix encountered TWO cyclical bearmarkets, marked by the two arrows, which was evidently triggered by the two coup attempts of August 1987 and December 1989.

In between these reversals, the main Philippine benchmark lost by about 50-60%. Yet, this did not stop the Phisix from reaching the 3,400 level in 1997!

In the meantime, the present correction looks to me more like a typical countercyclical trend, under abnormal circumstances.

In the condition that the world does not fall into a DEPRESSION, I believe that the other MAJOR risk for my Phisix 10,000 is PROTECTIONISM.

The former is a risk that the global financial market has to FACE TODAY (why do you think global central banks intervened?) while the latter could be SUBSEQUENT to the former, as further losses could translate to escalating calls for MORE government intervention to assuage or mitigate their losses.

In short, the voting public will STIPULATE short term solutions in exchange for longer term unintended consequences and authorities will, in most probability, based on political incentives deliver it to them.

You should watch TV personality James Cramer go ballistic in a CNBC TV program captured in YouTube with his demand for the FED and Mr. Bernanke to immediately intervene during the latest bloodbath. We expect to see more of these hysterics from a broader field of market participants as the markets gets tested to the downside.

http://www.youtube.com/watch?v=cYPtCmdFCrc

Instead of entrapping ourselves with emotions that result to outbursts and tantrums which does not effectively relieve us of our losses, we should learn, understand and implement portfolio strategies on the premises that financial markets operate on cycles, which is the MOST important lesson I’ve learned on the markets throughout these years.