The Pain Isn't Over Yet

CHINA PHOTOS/GETTY IMAGES

GROUND ZERO: China's stumble spooked markets around the world

At major turning points, stock markets move in precisely the opposite direction to the one the herd expects based on the prevailing fundamentals. Bull markets begin in the depth of recessions, when investors have given up on the belief in any recovery and when doom and gloom prevail. Conversely, when the sky is cloudlessly blue and phrases like New Economy, New Paradigm and Goldilocks Scenario are in vogue, the odds of a serious bear market arriving increase significantly. Nobody rings a bell at the onset of a downturn—rather, bear markets sneak in, like a thief in the night, while the investment...

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