Market Correction?

It's a confirmed Bull market, baby, you can take it to the bank. The guys in Washington have said the recession, depression, whatever they call it is over and all signals are that this running Bull is going to continue until it blows right through 14000 on the DJIA and head to 36000.

Really, Paul?

Nah, I'm having a little fun, dear reader, because there's been a lot of euphoric talk and whenever I hear grown men giggle and politicians starting to take credit for a job not yet finished I know something not so good is about to happen.

There was a recent article in one of the financial newspapers I receive written by someone who said he knew what he was writing about and he predicted a straight line recovery, an express to the penthouse, because, he said, the market collapsed nose first and it is only logical to assume it'll do the same coming back. It's the old straight down-straight up theory of investment management.

I am here to tell you that this was not a nose first market descent but it took almost a full year and a half. It didn't happen overnight, though we may think it did.

The same was true with the 2000 Internet bubble. It took two years to find a bottom and almost five to move back up before it started to fall apart again.

How do I know this? All you need to do is look at a chart of the S&P 500 and in March 2000 the index was 1527 before it tumbled and in October 2007, its most recent high was 1565 before making the trek down to where it is today. Whoever said that the markets nosedived and would quickly recover the same way has been too lazy to simply look at a chart that clearly indicates a market that took almost 1 1/2 years to find the most recent bottom.

Students of our domestic economy know that recessions last on average 16 months and periods of economic expansion average almost four years before pulling back.

We're almost a decade beyond the folly of the Internet bubble and we've yet to see the return of the NASDAQ high of 5132. No sharp V recovery for that market.

In 2008 the stock market didn't just fall off the cliff in one day. It started in 2007 and weakly crawled into 2008. Back in early 08 we were told that we'd be out of the mild recession by the elections. The experts were wrong and what we had was a bigger mess than 1987 and 2000 combined. This wasn't a sharply etched V but a slow slide that took almost two years to get to where we are.

Expect this recovery to slowly work its way through the mess banks and government created. It took years to make and it'll take another few years to get back where we once were. How do I know this? History, especially in markets, always seems to repeat itself.