The market continues to bubble away. Since its early March lows, it has risen like a Phoenix from the ashes. It is enough to restore joy and confidence in many an investor and advisor. The sales drums are beating-a new bull market is under way-hurry up and get on board.

We suppose it is possible that a bull market has begun, but it is definitely a long shot. In 2004, we wrote a white paper stating that we believed that we were in a secular bear market that would last for many years. The point of that paper was that while markets remained in a narrow range from start to finish, the bear market included many large up (bull) and down (bear) moves over a period of years. That view has been prophetic to date, as we have had several good years and one of the largest slides in history. The paper expressed the idea that secular bear markets have historically ended when stocks became cheap (i.e. had low prices compared to their earnings). The point could be argued, but we do not believe that stocks have ever become cheap during the secular bear market that began in 2000.

We have learned a lot during the way and hope to continue learning as we move forward. However, that article featured this quote from one of our favorites, Bill Gross.

“We are condemned to live in the real world, where making money is hard.”

Those remain words to live by. Active management focused on managing risk still seems to us to be the only way to succeed in this market. Simply put, try to capture as much of the gains as possible during the good periods and try to reduce the losses during the market slides.