Frazzled investors awaiting share “sign” get a big clue

Sometimes you just get “a sign”. And you just know IT is about to happen.

There’s that vacant stare from a two-year-old that means: “I’m filling my nappy”. There’s that look from your wife that says: “Don’t say a word!” If you do, hell will visit your earth.

The first-night waitress says: “Hmm, are you sure you didn’t order this?” Your computer gives you five seconds of blankness: “You’ve lost everything.”

But what sign do we all want?

A financial sign.

I, like millions of investors, have been waiting for “a sign” on the stock market. The signal from somewhere (from anywhere!) that this relentless bear market is over.

And, nearly five years after the market peaked on November 1, 2007 … I think it just arrived. In my inbox. At 10.06am on July 11.

The email’s subject line? “BetaShares launches BEAR fund on the ASX”.

There’s a stock broking saying that goes: “They don’t ring the bell at the top/bottom of the market”.

But this bear did ring a bell!

Fund manager BetaShares launched their listed fund on the ASX, so they got a rather pathetic-looking bear (“bring back Humphrey!”) to ring the opening market bell that day.

Why could the “BEAR” fund be the end of the bear market? Oh, let me list “the signs”!

When John D Rockefeller, in 1929, started hearing hotel staff give stock tips, he sold out of the market. It then crashed. He made squillions.

When barbeque conversations consist of your mates talking about making motzas daytrading, it’s “a sign”. If any idiot can make money buying stocks, there’s a bubble happening.

When pimply-faced 19-year-olds were being paid millions for internet business ideas in 1999, you could actually smell the tulips.

But when a fund manager believes they’re “canny” enough to name a fund directly after a trend?

Oh, puh-lease! There’s no surer sign. “Hey, the punters think this story will run forever! Let’s name a fund after it!”

Take the BRIC funds (Brazil, Russia, India and China) in 2007, just months before the crash descended.

My favourite – and what gives me the most hope with BetaShares’ bear fund – is the internet bubble and the subsequent “tech wreck” in early 2000.

The US-based NASDAQ index went from 700 points in January 1994 to 5000 points in early 2000 – 600 per cent. The NASDAQ was more watched than the Dow Jones Industrial Average.

Telstra went from $3.40 to above $9. The infamous Sausage Software, launched on the ASX by then 23-year-old Steven Outtrim, had gone from 75c to $8.20. Anyone with an internet idea could make a million bucks.

Then, on March 9, 2000, fund manager BT launched the TIME Fund (telecommunications, information technology and media enterprises), hoping to capitalise on those who thought the dot-com was just beginning.

That same month, the “tech boom” morphed into the “tech wreck”. BT’s timing was exquisite. The BT TIME fund, which has changed its name to the BT Technology fund, has returned -9.8 per cent a year since inception.

See where I’m coming from? Fund managers are marketing machines. They know how to market a trend, even if it’s too late.

Betashares didn’t pick the bottom of the market for its bear fund. The bottom was March 2009. In the 17 months to that point, the Australian market had lost 55 per cent.

It is down 17.4 per cent from the little above 5000 points it reached in April 2010. It’s down 8 per cent in just the last 2.5 months.

After nearly five years, it’s hard to find any reason to be optimistic. The glass must be half empty.

Only Warren Buffett students would plonk their hard-earned into the stock market now. Truly counter-cyclical. “I try to be fearful only when others are greedy and greedy only when others are fearful,” says the world’s most famous investor.

BetaShares’s BEAR fund will be largely invested in cash, but will bet against the market via futures contracts. Therefore, if the stock market goes down, it makes money.

That you can make money by betting against the market is not new. “Shorting” stocks and “put” options have been available to retail investors for years.

But I’ve been waiting for a sign. I’ve been hesitant about shares for the last year. Thank you BetaShares. I’m loading up … now.

Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and a licensed financial adviser. bruce@debtman.com.au.