This contrarian investor gave a timely warning for the last big tech top. He now sees the biggest drop of this bear market dead ahead.
When can we truly say goodbye to this bear market? While Bank of America’s global fund managers are no longer “apocalyptically bearish,” some on Wall Street remain wary.
Add our call of the day to that last batch. It comes from True Contrarian blog and newsletter’s chief executive, Steven Jon Kaplan, who sees investors mired in what could be the longest bear market in history, and “approaching the next and probably the biggest percentage drop of this bear market so far.”
MarketWatch last spoke to Kaplan in mid-November 2021, when he warned of a looming selloff for stocks, notably big highfliers. Just days later, the Invesco QQQ
exchange-traded fund (ETF) that tracks the Nasdaq-100 Index, and many other tech funds topped out. The S&P 500
peak followed on Jan. 4.
Kaplan based that November caution partly on one of his favorite indicators — company insider selling and buying, which he tracks via J3 Information Services Group.
In an interview with MarketWatch on Wednesday, he rattled off a list of worrying signals, such as aggressive selling by that group again, individual investors piling into the market, declarations that the bear market is over and the Cboe Volatility Index, or VIX
skirting under 20 in recent days.
History also plays a big part in his worries about markets right now.
True Contrarian/Carl Swenlin, StockCharts.com
“It is fascinating to see how closely the 1929-1932 and 2000-2002 bear markets paralleled each other, with almost exactly the same kinds of pullbacks and rebounds. I expect similar behavior for 2022-2025,” he said. (See link to original chart)
QQQ pullback from 2000 through 2002
True Contrarian/Trading View
Kaplan noted that it took eight years for the 1929 bear market to arrive, nearly 10 years for March 2000s and even longer for the bear market he sees as ongoing, given the bull market began in March 2009.
“So what they all have in common is that these very long bull markets preceded the bear markets for so long, that people tended to forget how to invest in bear markets and what they’re about,” he said.
The familiar bear market pattern through history has been a small drop to start that doesn’t spread panic, then a soothing bounce, then a bigger drop and a bigger rebound, which again relaxes investors. But he said based on 1929, 1973 or 2000, the next stage of selling could bring dramatic losses, such as 40% for a fund like QQQ.
Kaplan is worried about the latest Fidelity quarterly retirement survey, which revealed investors clinging to hopes that the market will return to highs if they wait long enough. Challenging that, Kaplan pointed to another study showing that individuals who invested in the market in September 1929 were still 38% down by August 1982 in real terms, adjusted for inflation.
“It kind of explodes the myth that you have to come out ahead if you just kind of hang in there when things are tough,” he said.
Read: Most retirement savers are ‘staying the course’ — even if they’re totally stressed
So how to cope with another big drop. Repeating November advice, he recommends I-Bond or Series I savings bonds that can be bought directly from the government and are currently offering a return of just over 9%. U.S. Treasurys are also paying 3% to 3.5% right now, another way to go for the coming years, he said.
Read: This rule with a perfect record says the market hasn’t bottomed, says Bank of America’s star analyst
are drifting south, following Wednesday’s Fed-inspired losses, as bond yields
drop, while the dollar
moves higher. Oil prices
are also climbing, and bitcoin
is hovering under $24,000.
Read: Why one economist fears the Japanese yen could be headed for a destabilizing downward spiral
Shares of Bed Bath & Beyond
which has been on a crazy meme ride lately, are slumping after GameStop
Chairman Ryan Cohen disclosed plans to unload his hefty stake in the retailer months after buying it. The company said Thursday it has been ‘working expeditiously’ for weeks to strengthen its balance sheet
Meanwhile, this 20-year-old made a massive profit on the stock, according to Securities and Exchange Commission filings.
is tumbling after a profit miss and slashed outlook amid plans to cut inventory bulk
stock is climbing after the tech giant’s surprisingly upbeat earnings and revenue forecast.
plans to unveil its latest iPhone 14 and smartwatches on Sept. 7, according to a new report.
“End of an era.” Stellantis
unit Dodge to discontinue two popular ‘muscle cars’ as it tilts toward electric vehicles.
Jobless claims slipped 2,000 to 250,00 in the latest week, while the Philly Fed index rose to 6.2 from a predicted negative 5.0. Existing home sales and leading economic indicators are still to come, along with appearances by Kansas City Fed President Esther George, who will speak at 1:20 p.m. Eastern and Minneapolis Fed President Neel Kashkari, at 1:45 p.m.
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