Bears In Their Eyes

As many Wall Street observers see it,a bear market has begun already;what is more,there is little the Federal Reserve can do about it.This runs counter to the perceptions of traders who insist a cut in the Federal Funds rate will save the stock market.Robert Arnott of Research Affiliates thinks we are in a bear market now.Three-quarters of mortgage resets are ahead of us.This will damage the stock market,which doesn't appreciate how bad the tightening of credit has become.Paul Desmond of Lowry's Reports believes this is the early stages of a bear market.Bear markets run in a four year cycle,and the last market bottom was in October 2002.The current bull market has lasted longer than most,which,in the past,has led to a more intense bear market.Bear markets are characterized by a series of 90 percent downside days.The top of this bull market was July 19.By July 23,we had the first 90 percent downside day.From 1973-74,there were fourteen 90 percent downside days.Investors should get to the sidelines and wait out the decline.In the view of Stan Weinstein of Global Trends Alert,an important turning point was reached in July.Now two-thirds of the market is in a bear market.It is the most volatile market he has ever seen.It should be treated with great caution and selectivity.Robert Reich,who was an economic advisor to President Clinton,notes an undercurrent of fear.Lenders and investors are reluctant because they can't gauge risk.A rate cut at 2:15 PM eastern today may be greeted with a lot of happy talk,but could ultimately fall short of resolving this confidence issue or staving off a consumer-led recession.Hudson City Bancorp(HCBK)is one haven for investors,who have noted that the regional bank has kept its distance from subprime mortgages.