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  • Martin Sosnoff

Bear Markets Grab All The Girls

I wasn’t around for the 1929 crash, but my back is full of scars that date back to the late fifties. Nobody saw the Cuban Missile Crisis coming down to the wire or the FRB decades later driving up interest rates to 14%. Today we talk about their quarter point moves. 

Overspeculation got its comeuppance, too, early seventies. The Morgan Guaranty Trust then created its Nifty Fifty growth stock list driven up to twice the market multiplier. Growthies sold at 40 times earnings. But, earnings flamed out in 1974’s recession and stocks got crushed. 

Today, the Magnificent Seven, mainly tech houses, mirror this Nifty Fifty. Tesla already has succumbed, cut in half from its high over $400 made a couple of years ago. Its chart tracks a classic head and shoulders pattern, a profoundly bearish signal. 

My market baptism dates to 1959 when I had maybe $10,000 in play money.   As a junior security analyst my salary was set at $100, weekly. I was told to get an MBA at night, at NYU. The firm would pay for it just so long as my grades hit B or better.

I then pressed maximum margin leverage, using money brokers for financing convertible debentures for 10 points down, daily, marked to market. I did make my first million playing the converts of aerospace and airline operators. The jet age unfolded in 1961 for all to see. Some converts hit as high as $400.  

When I called my pop to tell him I was now a millionaire, he, of course, didn't believe me. We were a Great Depression family living on bologna sandwiches and baked potatoes. Pop’s tailor shop in Harlem barely made ends meet. But, I got a good education within the NYC school system.

Later, my landing on Wall Street , by pure serendipity, made me a great believer in this word. From day one,  I was a fearless operator, who had fought in the Korean War.  The Street seemed a sleepy village where bonds were regarded as sound investments, not stocks. The American Stock Exchange stayed open Saturday mornings. A good day for the market was trading volume of 4 million shares. Nobody thought in trillions as yet. 


Xerox and Polaroid shined until Bell Lab’s discovery of the transistor in 1961.  U.S. Steel and General Motors were market leaders. Its silver foxes wore starched white collared shirts with double breasted, sharkskin suits tailored tightly around the hips.

I looked upon the market then as an open-ended playground. I loathed the successive Federal Reserve Board Chairmen, strongly tasked in paring the country's inflation rate.  Buoyancy in  securities markets came in last. I remember 90% margin requirements with  interest rates at 9%. If you saw this today, the market would get cut in half.

When I thumbed back in my chart books,  dating back over 60 years, I was struck by the frequency of cycles, and how markets could be shattered,  as if we were a banana republic in the hands of an insane strongman.

My take away from experiencing great volatility in financial markets is even our major banks using pie chart religion of 60/40 debt equity construct can’t avoid losses. They delivered results at minus 16% in 2022. My sense is there’s no place to hide except in cash. 

Today, I’m 40% long in equities with a portfolio packed with Treasuries up to 10 years maturity, I’m not ready to wax more aggressive.  

What shocked me is this sombrero pattern traced by NASDAQ from 2000 through 2002 is it declined 80% from its high. Fundamentally, the market indulged itself in craziness over tech houses with shaky fundamentals. The S&P 500 reached 5,000, then traded as low as 1,500 in 2002. Frame of reference, NASDAQ currently trades around 17,000. 

The mortgage banking fiasco of 2008–’09 cut the S&P 500 agin in half. The Index bottomed out at 750. Today,  this index trades buoyantly near 5,000. 

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1 Comment

Feb 13

A good read for me.

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