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Ron Meisels

Special to the Globe & Mail

4 June, 2020

Good morning. Please introduce yourself.

My name is Secular Bull.

Please define a Secular Bull Market?

It starts after an extended period of falling prices, negative sentiment and fear of further losses. This is followed by a long period of rising prices, growing confidence and rising bullishness.

Periodically it is interrupted by “corrections” and an occasional “flash crash,” both of which are instantly and falsely labeled as bear markets.

It matures with rising prices, extreme euphoria and greed.

John Templeton, one of the world’s most successful mutual-fund manager, said that “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”

How many of you has there been in U.S. history?

Three. The first was between 1907 and 1929, the next lasted from 1942 to 1968 and the third started in 1974 and ended in 2000. They lasted 22, 26 and 26 years respectively.

Tell me about the current one?

I was born in 2009, which means that I have been around for only eleven years. I am too young to have died on Feb. 2020, which is one of the reasons why I am still a Secular Bull.

Tell me about those “corrections”?

The current Bull Market had one between August and October 2011; another from August to October in 2015; one between January and February 2016; and the most recent lasted two and a half months from early October to late December 2018.

They were all labeled (wrongly) as bear markets.

How does a “correction” end?

With a sharp sell-off, but continued, relentless conviction that it is a bear market.

As a consequence, investors miss a great investment opportunity.

Define a “Flash Crash”?

It is short, reverses quickly and leads to higher prices. Just like all “corrections”, it is immediately labelled as a bear market.

How much damage does a “Flash Crash” create?

During the Cuban Missile Crisis of 1962, the Dow fell 5.7 per cent.

During the “mini-crash” of 1997 the Dow lost 554 points or 7.2% in one day.

The most memorable one started in 1987 on Black Monday, when the Dow dropped 508 points (22.6 per cent) in one day. This was one of the largest one-day percentage declines in Dow history.

They were all labeled (wrongly) as bear markets.

What about the most recent one?

It started in late-February, and lasted only one month. The S&P 500 declined 40 per cent and the TSX lost 37 per cent. As before, it was immediately classified as a Bear Market.

What is the difference between a bear market and a “Flash Crash”?

A bear market begins when the majority of investors have finally turned bullish and are heavily invested. The decline starts slowly and therefore it is labelled “just a correction.”

In contrast, a “Flash Crash” starts rapidly, gets immediately called a bear market and ends quickly.

Is your relatively short life (eleven years), the lack of “greed” and the recently mislabelled “Flash Crash” support your claim that you are a Secular Bull Market?

You are catching on!

Last questions. What is your road-map for the rest of 2020?

The rally, which began on March 23, lifted the S&P 500 929 points or 42 per cent in 72 days. I am tired. Therefore, it is time for a small correction. This shouldn’t come as a surprise since June is often a weak month. August usually starts the so called “summer rally” that lasts until Labour Day and gives way to the dreaded October.

How bad will October be this year?

Let’s get a little closer to it, since a discovery of an antidote to the coronavirus and the outcome of the U.S. election will influence investor sentiment. But no matter what, I plan to be alive in 2021.

Any final words?

Yes. Follow the advice of my best pupil, Mr. Warren Buffett, who said “Be fearful when others are greedy and be greedy when others are fearful.”

Ron Meisels is president of Phases & Cycles Inc., a firm that specializes in the technical analysis of North American stocks and financial markets and a weekly contributor to the Globe and Mail. He can be reached at ronmeisels@phases-cycles.com.