Numbers don’t help us define bear, bull
The popular definition of a bear market is a 20 percent drop from peak to trough in multiple broad market indexes. I have seen similar round numbers in other definitions — e.g., a correction is a 10 percent decline, a dip is a 5 percent drop and a crash is a fall of 30 percent or more.
Other than the fact that these are all base 10 numerals — a coincidence of primates having 10 fingers and 10 toes — there is no rational basis for these percentile heuristics. There certainly doesn’t seem to be any hard data supporting the significance of these percentages.
Now consider the opposite: The definition of a bull market is a 20 percent rally from the lows. Why 20? Why not 25 percent or 30 percent or perhaps 21.759 percent? The origins of these numbers have been lost to history, but the bigger question for investors is: Are they useful? Do these definitions assist in managing risk, deploying capital or even in thinking about market cycles? My answer is a definitive no. Just consider the depth of the 2015 correction, peak to trough: The Standard & Poor’s 500 Index fell 15.2 percent, while the Russell 2000 Index lost 27.2 percent. Was it helpful to know the S&P 500 wasn’t in a bear market, but the small-cap Russell was? Recall the deepest correction since March 2009, the May-October 2011 slide: It was a 21.58 percent peak-to-trough decline for the S&P 500, while the Russell 2000 fell 30.7 percent. What should you have done knowing the S&P 500 was in a bear market and that the Russell 2000 had crashed?
What good did it do investors to know that a bear market had begun based on the traditional definition?
These definitions are pointless, unable to help investors in any meaningful way. They don’t assist in managing risk; they don’t inform as to when or how to deploy capital. At best, they may reveal what some other investors, similarly relying on meaningless numbers, may believe. It seems to be one of those trading myths that get passed along from generation to generation, with no one considering whether it has any actual validity.
These market definitions are deeply unsatisfying.
I have been toying with better ways to define markets for 20 years. In the early 2000s, I began to consider a different set of definitions for bull and bear markets. The idea was to create something useful that I could use as an investor, reflecting what was actually occurring during those longer market trends. I found it practical to start with the market gains or losses, then add equal parts long-term economic trends and investor psychology to the equation.
My definitions of bull and bear markets are as follows:
■ Secular bull market: This is an extended period of time, typically 10 to 20 years, driven by broad economic shifts that create an environment conducive to rising corporate revenues and earnings. Market volatility tends to decrease. Its most dominant feature is the increasing willingness of investors to pay more and more for a dollar of earnings as the bull market progresses.
■ Secular bear market: This reflects the opposite: After an extended secular bull run, it is a period marked by increased volatility, frequent cyclical rallies and retreats in an economically challenging environment. The dominant feature is that investors become less and less willing to pay for that same dollar of earnings.
Robots are secretly plotting to kill us. Or enslave us.
Or, at best, they will take our jobs, one by one.
From science fiction written by Isaac Asimov eight decades ago to “Dilbert” cartoons today, the relationship between robots and humans has long fascinated — and worried — people.
There’s even a term, “robophobia,” for an irrational anxiety about robots and other advanced automation machines.
And there are concerns beyond the ones stoked by watching too much “Terminator.”
Apple computer pioneer Steve Wozniak once suggested that robots would turn us into their pets. Physicist Stephen Hawking and tech entrepreneur Elon Musk have also warned about the dangers of going too far, too quickly, in developing “thinking robots” with programmed intelligence that might keep evolving self-awareness, similar to the humanoids in the HBO series “Westworld.”
Hawking told the BBC in 2014 that “development of full artificial intelligence could spell the end of the human race.”
Researchers vary in projections on how long from now, if ever, such a threat could exist.
For now, deaths by robot are very rare among industrial accidents. However, in July 2015, a 57-year-old technician was killed by a robotic machine in an Ionia, Mich., plant that makes auto bumpers, trailer hitches and chromeplated plastics.
Her husband filed a federal lawsuit, being contested by the defendants, alleging a malfunctioning robot took her “by surprise,” crushing her head.
As chief technology officer for a private-public effort to facilitate robotic solutions in U.S. manufacturing, professor Howie Choset of Carnegie Mellon University in Pittsburgh sees the fear of robots taking jobs making his mission tougher.
“You have to start this discussion with the baseline that automation and innovation creates jobs,”
After Emilie Burke, 24, graduated from Princeton University in 2015 and moved to Baltimore, her expenses began piling up.
“I had to put a down payment and security deposit on an apartment. I had to move. I still had to pay my cellphone bill,” says Burke, who now lives in Fayetteville, North Carolina. She wrote about her experience on her blog, BurkeDoes.com, where she focuses on personal finance and self-improvement.
The summer after graduation, she didn’t earn an income, although most of her basic living expenses were covered by a fellowship training. When that ended, Burke started a job, but by January, her credit card balances added up to nearly $7,600. After 16 months of cost-cutting, she finished paying down that debt.
“Now that I’ve paid off my credit cards, I feel like I can breathe a little bit more,” says Burke, who currently is working on paying off student loans and other debt.
Paying down credit card balances when you’re just starting out is no small feat. But getting rid of that debt can help you avoid high interest charges, boost your credit and put you on more solid financial footing. Here’s how to start.
Make a plan
If you’re paying down credit card debt while tackling major life changes, such as a job switch or a move, setting priorities rather than deadlines might be more manageable. Start by taking stock of credit card balances and deciding which to eliminate first.
“Paying off the first card ... is the hard one,” says Courtney he said, by leading to new products and processes and the new jobs to make and operate them.
“Then you have to ask yourself, Ranstrom, a certified financial planner at Trailhead Planners in Portland, Oregon. “But once that first one’s paid off, you can use the payment you were using for that first card and apply it to the second card.”
To save money on interest, Ranstrom recommends putting more money toward the balance with the highest annual percentage rate, while making minimum payments on the other cards. Another approach could be to start with your smallest balance, giving you the psychological “win” you might need to keep going.
If you have good credit, you may be able to move high-interest why would robots be different? And people are very quick to say, ‘Well, robots are intelligent, they do what humans can do,’ balances to a card with an introductory zero percent balance-transfer APR and pay it down interest-free before the promotional period expires. However, most of these cards charge a fee of 3 to 5 percent of the transferred balance.
Decide what to give up
It’s no secret that making spending cuts can help you knock out credit card debt faster. But you also don’t want to end up with a bare-bones budget that has you crying uncle on Day Two.
Burke tried a spending ban for a month that cut out all nonessential expenses, but found it and there’s this fear that was sort of instilled by science fiction.”
Comparing fear of robots to 19th-century worries about steam engines, Choset said: “Robots are just the next generation of tools.”
Singer-songwriter Aimee Mann, with help from actress Laura Linney, humorously depicted the danger of letting robots help you too much in a video for Mann’s song “Charmer.”
And Choset was amused by a recent “Dilbert” strip about the boss’ inability to stop a robot worker who decided to quit.
Chris Boggess, 18, found the 2004 movie “I, Robot,” about a rogue killer robot drawn from Asimov stories, frightening, but he has come to understand and appreciate their potential through the Butler Tech robotics program at Colerain High School near Cincinnati.
“The first day I walked in, I fell in love. I knew this was where I needed to be,” Boggess said. “I like robots, anything about technology.”
And if some day thinking robots acquired the ability to threaten humans, he said, “I would probably try to make friends with them.”
Grow your income
When Lauren Bowling was 28, she paid down her credit card debt in part by picking up side gigs in addition to her job as a marketing manager. She had racked up about $8,000 in credit card debt — and carried the balances for over a year — after a home renovation project went over budget. By taking side jobs and putting $600 a week toward debt, she was able to pay down her balance in three months.
“I sold junk on eBay, I picked up freelance writing assignments, I picked up an acting gig,” says Bowling, now 30, who wrote about it on her personal finance blog, Financial Best Life.
Consider picking up side gigs or asking for more hours at work.
Keep at it
Don’t let an unexpected expense or a past spending mistake send your debt payoff plan into a tailspin. If something goes wrong, figure out what happened and modify your goals.
“You have to forgive yourself and move on,” Ranstrom says. “No one expects you to be perfect.”
Your persistence will pay off when you get out of the red.
“Being able to say, ‘I set out to do this. It was really hard. I didn’t think I could do it, but I did it’ — that was huge,” Bowling says.