Some Market Characteristics

An interesting read by Mebane Faber over at World Beta. He discusses certain characteristics of Bull & Bear Markets. In particular I summarize a post called "Where The Black Swans Lie": {Linked @ the end} I summarize this because his work highlights some of what our own research into markets tells us. In summary Faber notes:

1. The market goes up two-thirds of the time.
2. All of the stock market return occurs when the market is already uptrending.
3. The volatility is 80% higher when the market is declining.
4. Roughly 75% of all of the best AND worst days occur when the market is already declining. Reason: see #3.
5. The reason markets are more volatile when declining is because investors use a different part of their brain when losing money.

This sort of work is very important in understanding modern markets and how they trade and it is another of our themes we will come back to over the rest of the year.

Link: http://www.mebanefaber.com/2009/04/03/where-the-black-swans-lie/