U.S. S&P 500 Stock Market to Stagnate for Five Years in Secular Bear Market

The U.S. Stock Market, as represented by the S&P 500 Index, could stagnate for a long time period (such as five years).

Long Term S&P 500 Price Channel Since 1950



Since 1950, the S&P 500 Stock Market has been in a consistent price channel, until the year 1995, when the S&P 500 starts the runup at an unsustainable rate, until the peak in 2000. During the time period starting in 1995, the S&P 500 has gone above the long term Price Channel.

We are just starting to see the S&P 500 get back to the top of the normal long term price channel.

In the Reversion to the Mean Theory, this means that the S&P 500 will have to trade sideways for some time to remain consistently in the channel.

Based on the lines above, the S&P 500 should be trading around the level of 500 to 1200.

Five years from now, the S&P 500 could be trading from the 600 to 1500 level, to remain within the long term price channel.

We are in middle of 17 Year Secular Bear Market

Over the long term, the U.S. Stock Market Appears to be in Bull Markets or Bear Markets (Secular Bull Market and Secular Bear Market) for an average of 16 to 17 years.

One grouping consists of:

1. 1906-1921: Secular BEAR Market
   
2. 1922-1928: Secular BULL Market
   
3. 1929-1949: Secular BEAR Market
   
4. 1950-1965: Secular BULL Market
   
5. 1966-1982: Secular BEAR Market
   
6. 1983-1999: Secular BULL Market
   
7. 2000-????: Secular BEAR Market
   

This means that if the current Secular Bear Market started in 2000, and if the average Secular Market consists of 16 to 17 year time periods, then a new Secular Bull may start around the year 2016 or 2017, consistent with the Price Channel Behavior above.

More Details on Secular Bull and Bear Markets including Charts

Today's S&P 500 Chart

Head and Shoulders Top? S&P 500 to Consolidate and find Lower Trading Range

S&P 500 Market Top?


The U.S Stock Market as represented by the S&P 500 has made a good run, from S&P 500 level of 666 to 1219.80 for a strong rally.

However, based on the Chart Annotation above, the S&P 500 may have hit a Head and Shoulders Top, a Technical Pattern (analyzing patterns based on stock chart patterns) that suggests that a Top has been made and a downtrend could ensue.

Consolidation Pattern then Breakdown or Breakout?



Longer Term, the S&P 500 market may re-test the Previous low of 666, or a more likely situation, the S&P 500 market will start to consolidate into a sideways Symmetrical Triangle Pattern as shown in the chart above.

In the Symmetrical Triangle Pattern, the Stock or Market trades in the triangle, until it reaches closer to the end of the triangle, and then the market may break upwards, or downwards.

The Market does look like it may be going lower and find a lower trading range for now.

S&P 500 Stock Chart Today

24 Million Chinese Bachelors: Violence or Opportunity for Chinese Online Gaming Companies?

There is a big demographic shift in China: There will be a surplus of 24 million Chinese Men who will not be able to find a wife in China because of the large imbalance of bachelors to bachelorettes.

Times Online (in the UK) has an article on this.

What are the implications of this big Chinese demographic change? Violence? Revolution? War?

Or could this be an opportunity for Chinese online gaming companies? The online gamers are predominantly male and spending time on gaming could be a pastime and serious hobby for those who are unable to find wives.

There are Chinese Online Gaming companies such as:

1. Shanda Interactive (SNDA)
   
2. The9 Limited (NCTY)
   
3. Perfect World (PWRD)
   
4. Giant Interactive (GA)
   

Profit from Looming Shortage of Rare Earth Elements needed for Hybrids and Green Technology

The world is moving more towards hybrids and future Clean and Green Technology such as wind turbines.

Honda and Toyota are dedicated to hitting and ramping their hybrid targets.

But all this demand will cause a shortage in elements needed by hybrids, wind turbines, and future technology.

According to a Reuters Article (By Steve Gorman), Hybrid cars are gobbling rare metals such as Lanthanum, Neodymium, Terbium and Dysprosium.

There will be a shortage in Rare Earth Elements.

At the moment, China produces most of the world's Rare Earth Materials, and as of 2008, the Resource Investor says "China has recently, [...], reduced its exports of rare earth metals to a total below that of the current demand just by Japan. In addition China has raised the export taxes on rare earth metals effectively raising the price of those metals directly to those who can still obtain them from China."

So is there a stock investing play on these Rare Earth Elements (REE), outside of China?

According to the Resource Investor, Six Companies in this area are:

Australia

1. Lynas Corporation Ltd (LYC.AX or LYSCF.pk)
   
2. Arafura Resources Limited (ARU.AX or ARAFF.pk)
   

Canada

1. Great Western Minerals Group LTD (GWG.V or GWMGF.pk)
   
2. Avalon Ventures Ltd (AVL.TO or AVARF.pk)
   

United States

1. Chevron Mining Inc. (CVX)
   
2. Thorium Energy, Inc.
   

Many of these stocks are international stocks and it may be difficult to find research materials. Do research these stocks (and other related stocks), well.

Disclosure: Author has a small position in AVARF.pk.

Profit from Those $1 Per Day (to Rent) Red DVD Kiosks?

Have you ever seen those Red DVD Kiosks at your local supermarket? For $1 a day, you can automatically select any movie and rent the DVD. There are no late fees, and if you keep the movie after a certain number of days, the movie is yours to keep.

In this economy, and in general, this is a very appealing option. Blockbuster (BBI), for example, offers rental of a DVD for around $4 per day. Other options include Netflix (NFLX), which mails DVDs through the mail.

The Company that profits from those Red DVD Kiosks is Coinstar (CSTR). Yes, this is the same company that makes those machines that convert loose coins to cash for a fee.

Movie studios are not happy with the underpricing of these DVDs.

Coinstar is a $1 Billion company, with a forward PE of 22, and 5 Year Estimated Growth Rate of 28%, for PEG of 0.79, a very good value. (Anything PEG under 1 is a good value).

It is said that Redbox has a 13.8% market share of the DVD rental market, up from 9% last year, and just 2.3% in 2007.

Today's Stock Chart of CSTR

Compare Performance of CSTR, BBI, NFLX

The Rise of Social Gaming

The Rise of Social Gaming

Social Gaming is the fastest growing game market.

Social games are "built to be enjoyed and shared with friends through existing social networks and platforms like the iPhone." They are often free to play, and they heighten the sense of camaraderie and competition with other players.

Full Article on "Social Networking is next big thing for gaming"

One of the most popular games is "FarmVille" made by private company "Zynga".

Social Gaming may usher in new business models by attracting many players with a free price and then monitizing a fraction of them.

Is it Time to Get Back in the Market? (S&P 500)

After seeing the market go through a strong rally since early March 2009, and seeing today's action in the U.S. Markets, with the S&P 500 going up 2.58% to the $SPX Index level of 942.87, many people are asking whether it is time to get back in the stock market.

That question requires more details. What are you going to do with money? If the money is in a retirement account (the one with tax benefits), and you do not need the money for a decade or more, allocate your assets appropriately to reach that long term goal. This may include a large percentage in the stock asset class.

If the money is in a discretionary account, then there are even more options.

When do you need the money by? If you need the money in the short term (five years or less), you should consider putting the money in safer investments like money market accounts, or high yield online savings accounts.

Other considerations you may want to take are looking at your overall debt and pay off any bad debt such as high credit card balances. Paying off a credit card balance with 15% interest, means a 15% guaranteed risk free rate of return. This is a very good deal.

You may also want to consider other asset classes such as using that money for a down payment on housing, or starting a business.

A six month emergency fund in very low risk investments (such as high yield online savings accounts) is also a must, and adequate health insurance is a must.

After looking through all the above, and deciding that you do have long term discretionary money you can use to invest, then invest appropriately. You do not need to have an all-in, or all-out mentality. You can get in the market gradually,(20% now, 30% in a few months, 40% a year from now, 10% in cash), or increase cash positions gradually (if you are fully invested).

You would have saved around 32% in the S&P 500 if you had followed the following advice:

On February 26, 2008, this blog wrote and asked if you had too much risk in your Discretionary Portfolio. The S&P 500 at that time was around 1384. At the low, the S&P 500 reached 666, for a loss of 51.8%. Many people could have panicked at that time.

Even after the recent strong rally, the current S&P 500 is at 942, for a loss of around 32%.

Today's S&P 500 Stock Chart