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11:07:00 PM
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- Signs of Bull Market End / Bubble
- Watched a nice discussion on TV. Thought of sharing some points as under. The topic was whether the ongoing bull market has still more steam left or we are near the end of the bull market
- The signs of bull market topping out was not seen and the signs are as under :
1) Inflation goes up and out of Govt's control
2) Interest rates are high
3) The excesses are clearly seen. Markets gallop and the last phase is a blow off phase where markets go up few % points every day
4) Cats and Dogs shares and shares with poor fundamentals go to dizzy proportions
5) Retail participation increases and the retail gets trapped at the bull market top
6)Traders find it very easy to make huge gains ,your driver or maid servant's husband will tell you how he made money in stocks....that is a sure sign of top approaching.Rikshaw drivers,taxi drivers will talk about stock market gains
7) After the top, the market will crash and will come down not by 8-10 % but 50-60 % from the top....traders and investors trapped will get devastated
8) Everyone even new investors will find making money in the market very easy and they will get sucked in...
- In addition to the above points :
1) At bull market top, there will be business magazine interviews of brokers,fund managers and large traders
2) There will be sudden rush for companies to come out with share issues and these issues will get hugely oversubscribed irrespective of the merits of the issue
3)There will be rush of mutual fund houses floating all kind of fancy funds with innovative names
4) All traders ( even 1 -2 months experienced traders) will start feeling that they are the Market Wizards and they have figured out everything about the market
5) Traders will start aggressively managing outside money promising very high % returns to the investors
6) Traders will be the most popular people at parties with everyone asking for tips to make money
- Bull market always builds in slow grinding upmove
- Only in the last leg of the bull market we have euphoric steep rise and in this phase cats and dogs start rising and every trader/investor with 2 months experience thinks that he is born to become new Warren Buffet or Michael Marcus
- And the blow off phase sows the seeds of next severe multi -year bear market. This sequence continues with predictable pattern

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