5. Bull and Bear Markets

Bears and Bulls make money; Pigs get slaughtered.

Wall Street Wisdom

Risks posed by the leveraging discussed in Chapter 1, “The Great Leveraging,” were not often reflected in the financial markets. The duration of leverage cycles appears to be at least as great as that of a structural bull and bear equity market period. Although they are not always in sync, the shift from a period of leveraging to deleveraging impacts the outlook for equities and other financial assets.

This chapter focuses on establishing a better understanding of the characteristics of structural bull and bear markets. Equity markets move in cycles formed by the random movement of daily activity. Those cycles almost always last more than one year ...

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