Is it a Bull, Bear or Cowardly Lion Market?

in Stock Analysis/The Process by

cowardlylionI wrote a guest column for John Maudlin’s weekly newsletter.  Here are links to PDF and John’s website.  John wrote the following introduction to the article: 

Are we in a bull, a bear, or a cowardly lion market? As we will see, the answer can make a huge difference in your investment portfolio. This week I am at my Strategic Investment conference in La Jolla.  About four times a year I take a break from writing the letter and bring in a guest writer. This week Thoughts from the Frontline will have the very distinguished analyst and author Vitaliy Katsenelson. 

In his recent book, Active Value Investing: Making Money in Range-Bound Markets (Wiley, 2007), he exhorted investors to fasten their seat belts and lower expectations for the next decade or so. He also provided a strategy for improving returns in this environment, what he calls range-bound or cowardly lion markets. Long-time readers will recognize some themes consistent with my own research, but Vitaliy adds some very interesting twists that I believe will make you think.In today’s letter, Vitaliy runs through his analysis of what will happen and provides an overview of how investors can make money in what will otherwise be an ocean of stagnant returns.

Warning: the letter will print long, but that is because there are a lot of great charts. Let me also highly recommend Vitaliy’s book, Active Value Investing. I think as you read today’s letter, you will get a sense of why I am so enthusiastic about his work. You can get you copy at


  1. I’ve gone through the book in an hour. There’s nothing spectacularly orginal.

    By the way, the term “range-bound market” is mostly coined by newbie traders in the financial markets, and it misleads many away from consistently profitable trading.

  2. Dear Rocko,

    I am glad that you can read through 280 pages of fairly technical text in an hour and fully comprehend what you’ve read. I’ll put a lot of weight on your feedback. Thank you for your insightful review.

  3. I’m about to finish with the book, and I must say I like the QVG model. While Ben Graham makes a lot of sense and his model is most likely a safe way, it seems a bit too passive. After reading The Intelligent Investor, I was looking for something more active. The title “Active Value Investing” kind of hit the right spot 🙂

    If a practical question to the author is allowed, doesn’t Nokia seem like a great stock at the moment? As far as I’ve noticed, the quality is there, growth has been great lately, and valuation just dropped by 15 % after Q1 results that didn’t actually seem too bad.


  4. V,
    Come on buddy: “For the next dozen years or so US broad stock markets will be a wild roller-coaster ride”? What kind of a prediction is that? I would expect something like ‘In my view market would end 2008 flat from this point, with potential rebound mid 2009-early 2010. Oh and by the way REITs are the place to be!!!’
    Now this in my view would be a forecast/prediction/opinion.
    However, I will give a BIG credit for a very detailed explanation of what will be happening in the next 10yrs.
    You got a good investing style and great ideas. Do not step down to the level of most “financial proffesionals”, who use vague tactics.

  5. Vitaliy,

    You could make your point more clearly and cogently without resorting to tawdry and overly vivid analogies that are denigrative to cats.


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