Bear market learning

Selling XLP, XLV put options looks like a good conservative strategy.

Bonds Bear market is coming

Here is an amazing chart of 30 years cycles of bulls & bears in bonds. A total of 60 year cycles.

 

Based on the low interest rates environment, it makes sense to borrow long term money and invest. for example you can invest in real estate with borrowed money and reap the benefits when interest rates eventually shoot up in long long term.  

The Bond returns for 10 year treasuries were 4.5% & 8.8% in respective bear & bull market cycles. Its counter intuitive, as you'd expect to have returns of 15% when interest rates are 15%, how do you get only 4.5%?? As interest rates rise, bond values fall. So from 1951-1980s, though interest rates were high, values of bonds fell for long term investors at an average. Somebody who bought just at peak of bond rates rise in 1980s and never sold till maturity would have enjoyed the best returns. But its hard to be market timer even in bond markets.

According to legendary PIMCO bond fund manager Bill Gross, he is calling End of QE2 as "d-day" for bonds melt down. Though he had posed similar passimism at end of QE1, but interest rates fell like rock after is End of QE1 projections.

But one thing to notice here is that during last few years in US economy fell in recession and all bond interest rates shot up due to reduced credit ratings and hugh pessimisms over corporate detaults. This economic draft had impact on interest rates as well. During recovery of 2010, markets adjusted the interest rates & they were expecting QE2 as well. It was extremely hard to anticipate such a swift ecomonic recovery & its impact on interest rates.

CSCO Slide Continues to $14

CSCO Charts are not looking good. Since Stock Peaked in April 2010 @ $27.74, stock has smoothly glided down to current levels of $18.50, for a loss of 33% lagging tech heavy Nasdaq composite by 40%+. If the trend doesn't reverse in positive direction soon, stock could fall to $14 levels this year.

Here is quick analysis on product side of CSCO-->
Strengths:
• CSCO dominates data networking in enterprise segments with end-to-end solutions offering TCO (total cost of ownership) advantage over competition.
• CSCO has constantly invested in new technologies offering new revenue stream opportunities (Billions $) in 6 prominent growth segments – Security, VoIP, WLAN, Optical, Home Networking, Storage.
Concerns:
• Enterprise data networking market growth is slowing due to segment saturation & overcapacity.
• New technology segments are still to small to have any significant impact on current revenues.
• CSCO is losing market share to HP, Juniper, Fortinet, Palo Netowrks due to increased competition and channel conflicts in server market.
• Asian vendors from China are bringing in increased pricing pressure.
• CSCO continues to acquire large number of companies and as CSCO workforce grows, its posing increasing integration challenges.