Kirstenl,Japan had a bear market that lasted 14 years - their...

Kirstenl,

Japan had a bear market that lasted 14 years - their stock market fell from 37,5000 in 1990 to 7,500 in 2003 - an 80% drop. Property prices in Tokyo fell 90%. (Yet some people insist that property never goes down).
http://en.wikipedia.org/wiki/Japanese_asset_price_bubble

Back to your question:
Remember.. the word 'market' in 'bear market' refers to the aggregate value of the biggest stocks combined. The 4 Banks make up around 50% of 'the market'. It doesn't take a genius to figure out that they are going to have trouble growing their profits over the next couple of years. This will be a drag on the stock market as investors are no longer willing to pay high prices for shares which may not make as much profit as last year.

ANZ profit dropped by 7% compared to last year. With lower home prices, and less new home activity - it will be tough for banks to grow their business. The poison they are now unleashing on the public is pre-approved personal loans, and credit cards. Ultimately this will increase bank revenues in the short term, but could make future financial problems for the average person worse.


Kirstenl.. what you may want to ask yourself is:
"what companies could profit from the current situation in the world?"

Situation as i see it: High oil prices, high food prices, industrialisation of China and its surrounding countries.

Consequently, I have exposure to stocks in these areas. IPL, NUF, POZ, ARQ, NZO, UMC, PLV. (not a ramp - do your own research).

One of the risks to stocks like these is a dramatic slowdown in Chinese economic growth (potentially caused by a recession across US, Europe & Japan). Chinese growth is already slowing (GDP is esimated to slow to 9% this year from 10%pa previously). This is hardly a worry. To put it in perspective, western economies grow at around 3%pa (so China is still growing fast even if it is slowing).

Also when analysing up-and-coming resource stocks like UMC, you have to ask yourself "How fast can they get the ore to market?"

In a few years time RIO and BHP will have increased output, and iron ore prices will likely come down with this supply increase. The longer it takes to get into production, the less chance the company has to benefit from the current high prices.

Back to your bear markets:

The key problem facing many individuals in the future will be: 'how to stop their wealth being destroyed'. If you live in the US: Property is falling, share market is falling, and putting it in the bank isn't working because the US Dollar is falling. The question is - what assets should you be in? George Soros has written some stuff on this.

In Australia we're lucky because the Australian Dollar strength is linked to the commodities market. My opinion on the strongest performers over the next 12 months will be: commodities stocks, and cash in the bank.

Make hay while the sun shines.

Joel