InSight

Market InSights:

When does a Bear look like a Bull? (Pt. 2)

When will a Bear-Market Rally form a New Bull?

The market will turn around, they always do, some would argue that they are built to expand. Below are some of the elements we look for to determine if a market is turning around, or if we are looking at another Bear Rally. 

Rallies will get longer in time, and less dramatic 

The drama of a bear market is exciting and news outlets love it. The markets and the news gravitate towards those chaotic headlines. This was easily seen when during the last Bull market news outlets ran headlines and talking heads marking the top, declaring market “warnings” and finding economists that would deride the market. It’s exciting and captures eyeballs…the turnaround won’t be all that exciting. 

There won’t be a day of major capitulation, followed by a counter move to the upside. It will come with steady, long-term grinds up. It will come with the whole market moving up in a coordinated and cooperative way. Markets with a broad influence from several sectors that grind out small moves over a long time are far more attractive to investors and generate a virtuous cycle. 

The Bear Rallies of 2022 so far…

 

Days

Percent

Daily %

Bear Rally (1)

9

6.1%

0.67%

Bear Rally (2)

11

9.9%

0.90%

Bear Rally (3)

12

6.2%

.51%

Bear Rally (4)

41

14.3%

.34%

Bear Rally (5)

?

?

?

The median gain of the largest rallies that have occurred within bear markets is 11.5% over 39 days. Typically, the rallies on the low side of the median, occur early in the bear market, while those that exist on the high side are in the more mature parts of the bear market.

Additionally, there are far more rallies below the mean, than above. Meaning that we will see more false rallies that are short and volatile and only a few long-term sustainable rallies that are long with small moves.

The longer these rallies get, and the smaller the moves, the more likely an “all clear” can be declared. 

There will be broad support  

Investment professionals look for certain technical signals to be in place before confirming a reversal is underway. There are several measuring sticks that look for broad support in trading. The advance-decline line, trades above the moving average, and the McClellanOscillator are examples of technical measurements of the breath the market is moving, for how many stocks and how many sectors are participating in the move. 

“Breadth thrust” is the term for these signals, and a leading indicator if a market is transitioning from a Bear to a Bull. The duration of the move and the price gains associated with it are also important. The indicators that most reliably confirm that there is a shift into a new bull market are:

Flows into equities and out of cash in important ETFs

There are “traders” ETFs, and there are “investors” ETFs, and knowing the difference is important.

If dollars are flowing into leveraged high volatility trading products it is a signal that the market is trading for a short-term and volatile swing (read a bear rally). If money flows are going into long-term holds that cover the whole of a market in balanced and long-term ways, it’s a signal that the investment appetite is changing to a more long-term outlook and investors are building a new core of their profile. Outsized flows into SPY, QQQ, or VOO are a good sign that the broad market is healthy and investors are willing to hold the whole of the market. 

The current market is witnessing the worst first half for stocks and bonds in 50 years, the highest inflation in 40 years, and an endless barrage of bad economic data. So seeing a broad, coordinated shift from cash and cash-like funds, into broad equity will be a good sign in a change from “risk off” to diversified “risk on”.

Earrings being “better than expected” at more and more companies

There is an entire industry reporting on “beats and misses” on companies’ earnings. While individual stock stories are exciting and reported on the news, the sizes and frequency of misses vs. beats are often overlooked. 

Wall Street pros are at odds as to whether we are at an inflection point in the markets. That inflection point will be confirmed when estimates, which are increasingly bleak, are replaced by corporate earnings that are better than expected. This will take several quarters and is a laggard indicator. But is the most reliable measurement to say the companies that make up the market are in a healthy and expansionary space. This seachange in earnings will likely happen 2-3 quarters after the market has “bottomed”, so while not a great trading and timing indicator, it is a very good indicator of changes in the macroenvironment.

Company earnings are a more reliable indicator of investment health, this is not a shocking revelation. But the frequency and diversity by which these companies manage inflation pressures, and sell their product to the marketplace is a tide that raises all boats and encourages board participation in rising stock prices. 

What past Bear-Markets tell us about future ones

A peek at the history of bear markets would suggest that the “naysayers” are on the right side of history, at least for a time. In the 30 different bear markets that have occurred since 1929, the stock market registered an average decline of 29.7%. These downturns lasted have lasted for an average of 341 days. 86% of the bear markets last less than 20 months, and few last longer than one year.  

Right now, according to traditional economic interpretations, the U.S. could well be in a recession. We have seen two-quarters of GDP contraction. The Commerce Department reported that gross domestic product shrank by 0.9% in the second quarter of, after contracting 1.6% in the first quarter of this year. That’s it, that is the traditional definition of a recession, and the Bear market has priced that move in as a result. 

So why the “is this a recession this time” talk? Well, there has been a rash of different pro-growth data that has persisted. Wages have grown, unemployment has stayed low, and demand for freight, semiconductors, and component raw materials has been high. These would indicate that demand is still healthy. How can you have a recession with such a demand for materials? 

If the Fed can achieve the delicate balance of taming inflation by slowing the economy without tipping the country into a recession, this bear market could already be long in the tooth. If we count the correction from the November high, we will be entering the second year of the bear market next month. The one-year mark for this Bear market would come in March of 2023 (just around the corner by economic standards – meaning we are currently in the 3rd or 4th inning of the Bear Market with the most violent changes in pricing behind us. This would be an “un-recessionary bear market”

If the Fed fails in a “soft landing” in the first quarter of next year more reliable indicators of recession (falling commodity prices, major spikes in unemployment, and weakening manufacturing outlooks) are on the rise before the Fed quells inflation then we can see a more elongated bear market and a full-blown recession. 

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DSNP: The Next Investment Playground for the Internet Revolution

The realm of social media has largely been dominated by centralized platforms like Facebook, Twitter, and Instagram. These platforms have redefined the way we communicate, but they also come with inherent challenges, from concerns over user privacy to the monopolization of social discourse. Enter the Decentralized Social Network Protocol (DSNP): a groundbreaking technology aiming to decentralize the very essence of social networking. The Decentralized Social Network Protocol (DSNP) is capturing the attention of tech enthusiasts, innovators, and investors alike. The reasons for this spotlight are multifaceted, ranging from its transformative approach to social media to its potential for disrupting the status quo. Here’s why DSNP is being heralded as the next significant investment playground for the digital era: What is DSNP? DSNP is a protocol designed for building decentralized social networks. At its core, DSNP facilitates peer-to-peer communication, allows users to control their data, and provides a foundation for developers to build decentralized social media apps. Key Features: 1. Decentralization: Instead of data being stored and controlled by a single centralized entity, it is distributed across a decentralized network, minimizing the risk of censorship and data monopolization. 2. User-Controlled Data: Users have complete control over their data. They decide what to share, with whom, and for how long. 3. Interoperability: DSNP enables various decentralized applications (DApps) to communicate with each other, allowing users to interact across platforms without restrictions. Why Is DSNP Important? 1. Privacy and Control – Centralized platforms, by design, have control over users’ data, often exploiting it for profit. With DSNP, users have full authority over their information. This change can significantly enhance privacy and reduce unsolicited ads, content manipulation, and other invasive practices. 2. Censorship Resistance – A decentralized system is naturally resistant to censorship. With no central authority to dictate terms, users can communicate more freely, and ideas can flow more naturally. 3. Encouraging Innovation – DSNP provides a fertile ground for developers to create new types of social media platforms. With a shared standard protocol, more innovative and user-focused DApps can emerge. Challenges Ahead While DSNP presents a compelling vision for the future of social media, it isn’t without challenges: 1. Adoption: Convincing users to move from familiar platforms to new decentralized ones can be a challenge. The success of DSNP depends on both user and developer adoption. 2. Scalability: Decentralized systems often face scalability issues. As the number of users grows, ensuring that the system remains fast and efficient is crucial. 3. Regulation: As with many innovative technologies, there is a potential for regulatory challenges. Governments may struggle to understand and legislate decentralized platforms effectively. DSNP offers a promising alternative to traditional social media, focusing on user control, privacy, and decentralization. While the road ahead is filled with challenges, the potential benefits for users, developers, and society at large are immense. As DSNP and similar initiatives gain traction, we could be witnessing the dawn of a new era in digital communication, one where users are at the center and not just products for profit.

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The Crucial Role of Standard Deviation in Investment: Why It Matters

When it comes to making smart investment decisions, there are various factors to consider, such as potential returns, risk tolerance, and time horizon. However, one often overlooked but essential metric is the standard deviation. Standard deviation is a statistical measure that can provide valuable insights into the volatility and risk associated with an investment. In this blog post, we will explore why knowing the standard deviation on an investment is key and how it can help investors make more informed choices. Understanding Standard Deviation Before delving into why standard deviation is crucial in investment, let’s take a moment to understand what it represents. Standard deviation measures the dispersion or variability of a set of data points. In the context of investments, it quantifies the level of risk associated with a particular asset or portfolio. Here’s a simplified explanation: Imagine you have two investment options. Option A consistently returns 7% per year, while Option B’s returns fluctuate wildly, ranging from -10% to 20% each year. Even though both options might have the same average return (7%), Option B’s returns are much more unpredictable and volatile. Standard deviation helps us quantify this variability and risk in Option B’s returns. Now, let’s explore why knowing the standard deviation is crucial for investors. Risk Assessment The primary role of standard deviation in investment is to gauge the level of risk. As mentioned earlier, a higher standard deviation indicates greater variability in returns, which can be a sign of higher risk. Investors with a lower risk tolerance may prefer investments with lower standard deviations because they provide a more stable and predictable stream of returns. Portfolio Diversification Diversifying a portfolio involves selecting a mix of assets with different risk and return profiles. Standard deviation helps investors assess how individual assets contribute to the overall risk of the portfolio. By including assets with low or negative correlations and varying standard deviations, investors can create a more balanced and less volatile portfolio. Setting Realistic Expectations Understanding standard deviation can help investors set realistic expectations about potential outcomes. If an investment has a high standard deviation, it means that there is a wider range of potential returns, including the possibility of both significant gains and losses. Knowing this, investors can prepare themselves for the possibility of a bumpy ride and avoid making rash decisions based on short-term fluctuations. Comparison and Selection When evaluating different investment options, standard deviation provides a useful basis for comparison. Comparing the standard deviations of various assets or funds can help investors identify which ones align better with their risk tolerance and investment goals. It allows them to make more informed choices about where to allocate their capital. Risk Management Managing risk is a critical aspect of successful investing. Standard deviation plays a key role in risk management by helping investors assess the potential downside and establish risk mitigation strategies. It enables investors to make choices that align with their risk-reward preferences and long-term financial objectives.   In the world of investment, knowledge is power, and understanding standard deviation is a powerful tool at an investor’s disposal. It provides valuable insights into the level of risk associated with an investment, aids in portfolio diversification, helps set realistic expectations, facilitates comparisons, and supports effective risk management strategies. While standard deviation is not the only metric to consider when making investment decisions, it is a key factor that should not be overlooked. By incorporating standard deviation into your investment analysis, you can make more informed choices, better manage risk, and ultimately work toward achieving your financial goals with greater confidence.

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How Dentists Can Increase Revenue

There is a wall street mantra, “you can’t cut your way to growth” and that is as true for your dental practice as it is for any publicly traded company. Focusing on increasing revenue is still your best bet for expanding the bottom line. For most dentists, the best way to profit is to increase revenue and put an emphasis on effort that allows you to expand the top line. We review some of the steps other dentists have taken to increase bandwidth, reach, diversity and scale your income. By Kevin T. Taylor, AIF® Increase your client acquisition rate Of surveyed dentists the acquisition rate ranged between 20% to 30%. The average acceptance was 24%. This means that almost eight out of ten prospects you meet with each month are finding treatments recommended by you at a different office, or not at all. Expanding that case acceptance rate to even 50% would increase revenue twofold for the dental office on the same number of prospects. How do you get there? By making two changes to the way you approach patient acquisition.  Process – For our dentistry clients the client acquisition is a documented sequence of events that every prospect goes through. The focus on this pattern becomes repeatable and helps both to determine where prospects exit the sequins and gets your whole team into an organized way of doing business. But it’s key to also remember that people will do business based solely on the way they feel about a person, place, idea etc. So your process should be centered around a way a prospect feels about a decision at every step of the way. The process you implement should reflect that customer centricity and by thinking about every element of what the client goes through and the experience you are hoping to convey.  Teaming Up – Use the case presentation moment as a “team event.” Take this step away from solely being the doctor’s responsibility, and give elements of the presentation to office staff beyond yourself. This change pays dividends in both the way a client feels about their relationship with the office, and offloads some of the management of the engagement onto other people in the office. The presentation of your case cannot be based upon teaching the patient dentistry, that won’t move the needle for patients who decide to do dental treatment based on the way they feel about your team and you, not just the education you provide. Expand your capacity to Increase Revenue The amount of time you can commit to performing the technical aspect of dentistry the more capacity for revenue you will have. This shouldn’t be a revolutionary concept. Our clients focus on increasing revenue need to focus on total capacity by adding additional treatment space, hiring more staff, or adding another dentist or hygienist to the practice. These are all pretty straight forward, so to go a step further they also increase capacity to do more dentistry by increasing their efficiency.  How often are you rescheduling for hygiene? A General Practice should be 80% +.  Are you hygienists doing the rescheduling?  If not, they should be.  Don’t miss out on easy opportunities and don’t assume people are or aren’t doing something. Some other successful examples are setting up a routine for the rooms they visit, setting timelines, scheduling next visits, offloading the sterilization process, and gaining speed on dental procedures through organization. The summation of all these activities allows the dentist to get through more lucrative work, more quickly. Expand your capacity outside your practice – Sources of revenue are not limited to your professional capacity to earn, your profession should be viewed as a platform for generating income. Our dental professionals use their practice income to seed revenue generating activities in and out of the office. They find real estate, financing, medical lending, owning other practices, and other business opportunities to expand their network of income and leverage their profession and their income. Most dentists have at least one source of income beyond the office that they rely on either personally or professional.  Expanding the menu of procedures up market Veneers, implants, endodontics, and crown and bridge are examples of procedures that for our clients have had a higher profit margin and ultimately increase revenue. Offering these types of procedures expands the range you can bring to clients, and given their margin is a more effective use of time that can raise the top line. An important consideration is that the sheer size of the fee isn’t necessarily indicative that it‘s more profitable for the practice. Keeping time, and capacity in mind is the origin of scale when stretching up market.  Expand your market – You can increase the number of prospects you can review treatment plans with by doing more internal and external marketing. But our clients have noted that not all marketing is the same. Word of mouth is still the most popular, but often the hardest to manage and grow. While a concerted effort in online and traditional marketing can be costly and outside the skill set of many dentists. Regardless of the method, what is most important is focusing on ROI and scale, and likely bringing in resources to assist in this field.   It can be difficult to determine what strategy will have the greatest effect for your practice, and it is likely a combination of some or all of the above. Our Certified Financial Planners who specialize in dentistry can help contextualize what your current efficiency metrics look like, benchmark them with other practices, and help you build a platform for generating wealth and cash flow for yourself and your practice.  Increase Revenue by expanding your total market You can increase the number of prospects you can review treatment plans with by doing more internal and external marketing. But our clients have noted that not all marketing is the same when it come to an increase revenue objective. Word of mouth is still the most

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