How to Time a Stock Market Bottom : Hey this is RK SINGH here and I hope you’re staying indoors but keeping your finger on the pulse of the market because a losing track of the market has its own doll today’s post is a very interesting one at least from my point of view can behavioral finance and behavioral analysis solve financial market problems.
If yes how this is the story of Edwin Coppock a brilliant behavioral economist of the 1960s who sorted out a huge problem for us financial market. Investors if i was to put a title on this Post i would call it the edwin Coppock phenomena or the edwin Coppock hypothesis but be that as it may this is the story of edwin Coppock.
You see after the Second World War major European economies went into a recession the manic manufacturing process of arm denomination had come to a halt youngsters who had been drafted into the armed forces straight out of college or even now between their academic education had now come back to Europe to their parent countries. And were either looking out for jobs with part of their academic education complete or were endeavoring to complete their education and therefore were not generating income.
This was a very challenging time corporate earnings therefore nationally were down and the stock market was in a recession now the Church of England was having a lot of surplus funds religious places and places of worship normally get a lot of donations and a lot of anonymous contributions to God from the believers and followers and therefore the Church of England had a huge surplus and the church wanted to deploy this money in the stock market.
Knowing fully well that some time or the other the the domination of the British financial markets has a major power in Europe would again be exerted however the Church of England had a problem they had two conditions which needed to be fulfilled.
Before anyone could become a consultant to the Church of England for the stock market investments number one they said this is the work of God the words they used were Episcopal dispensation they said you’re gonna be working for God and God does not believe in paying you fees. So it has to be done free of cost secondly God does not like to lose money so do not come and tell us that the investments that you made on behalf of the Church of England.
Are now under water and bleeding money you must generate a profit guess what nobody volunteered nobody except a guy called Edwin Coppock he stepped forward and he said I’m willing to do the work of God and I will accept no fees I will try that there is no loss to the Church of England.
Which means buying nearly at the bottom of the recessionary phase of the capital markets now Edwin Coppock was gladly accepted by the church of England and they magnanimous lee of course offered him all kinds of help in trying to basically shortlist investments etcetera and Edwin Coppock threw a curve-ball at the white car of his church.
He said if God wants service from me for no fee I’m putting stringent conditions like I must not lose money then God has to answer a few questions for me the white car offered to help and mediate between Edwin Coppock and God Edwin Coppock said I want to sit in the confession box with a priest especially when people are coming to confess their grief or their crimes committed due to grief why grief think about it.
What is a bear market a bear market is supposed to cause you grief whatever you have bought is below your purchase price it causes you distress it causes you anguish it causes you pain you think you’re denying money to your family you think you’ve done injustice harm and disservice to your near and dear.
Ones that is grief so Edwin Coppock sat in the confession boxes with many many priests across various churches and first wanted to find out what was the most profound grief that people felt he realized that the the highest level of grief was felt by widows.
Who had recently lost their husbands especially if they were neither rich nor did they have children now can you imagine a widows flight no kids no issues to look after them in their old age and the only breadwinner of the family is gone all right so this was the highest level of grief and when Coppock wanted to find out how long it took for such a widow to basically come over her grief through trial and error and listening to many confession boxes he realized that it took an average Widow between 11 to 14 months to get over the grief of a believed.
Offer deceased husband now he figured that the loss of a near and dear one especially of a widow with little or no money and no children must be really very acute and if she can get over that loss in eleven to fourteen months a smaller grief like a bear market either should not last any more than eleven to fourteen months this is called the Coppock hypothesis.
Which tells you that no bear market should ideally unless it’s really something humongous in nature unknown to man so this hypothesis tells us that between eleven and fourteen months no matter. How vicious a bear market is it comes to an end I’m willing to stand by what I’ve just said go back in time and check out.
All bear markets the 1992 Harshad Mehta scam the year 2000 y2k stock market bubble the 2008 global financial crisis and use the present market the coronavirus declined that actually got triggered in February of 2020 am.
#How to Time a Stock Market Bottom#
I saying that bear Marcus will last for eleven to fourteen months no I’m not saying that at all I’m saying that they can last for no more than 11 to 14 months hey they can recover faster but not later than 11 to 14 months take.
For example the global financial crisis the market started declining on 8th of January 2008 and bottom doubt by the third week of October 2008 it self all right 10 months give or take a little. So I would say whenever you are overwhelmed with concerns about the market as to when they will recover and how long this dark phase will kind of last in your market investment.
Experience do remember Edwin Kukoc in those days remember Edwin Coppock did not have the luxury of computers hyper computing power etc everything was done by hand mercifully digitization and computerization has come to the aid of a modern day trader.
And we now have something called the Coppock oscillator do some work on this find out what the Coppock oscillator is and I assure you have my word you will be able to time the market bottoms better this is visible MoneyPip signing off from this post.
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