If you are an investor, you will know that a Bull Market is: When prices in the market are rising, and rising consistently. Knowing in advance when the next bull market will happen is a dream held by many investors.
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At first glance it may seem like a silly thing to try - especially when there are perfectly qualified people like financial planners or stock brokers telling you it is impossible. But what if there was a way to know, with a high probability, that a new bull market was starting?
Ken Fisher, in his book "The Wall Street Waltz", discovered that unemployment was the key. Why? It's simple: when the economy and the stock market are riding along nicely and moving upwards as they should, unemployment will never rise too much. This means that people are working, companies are making profits, and both of them are spending this money and stimulating the economy.
But when an economic recession hits, as many people will know from the 2008 bear market and recession, the reverse happens as unemployment starts to rise and people spend less, the market declines.
This is where Ken formed his "1 Percent Rule" - where if unemployment figures rise by more than 1 percent, this is a good time to start putting money back into the market. While it is hard to pick the exact bottom of a new Bull Market, Ken says this rule will get you in the ball park and ready to take advantage when it comes along.
There is one more part to this story - cyclical stock market lows, and their subsequent bull markets, haven't ever happened without a 1 percent rise in the unemployment rate. It happened most notably in 1970, where the stock market had been falling for 2 years. Unemployment rose sharply as 1970 began, and the stock market bottomed out in May.
Ironically, unemployment does not forecast a peak in the market, or an oncoming bear market. The stock market itself is a leading indicator for the overall economy, falling months before economic and company data start going bad. But it does say that a major peak in the market rarely occurs without two years of falling unemployment.
So what can you do with this information? Well next time the stock market is falling in a bear market, keep an eye on the news for a time when the unemployment rate rises more than 1 percent. When it does, it might be a good time to get back in the stock market.
Oil stocks and direct participation funds have some key differences. Each offer investors different benefits, and depending on your situation, you may have reasons to choose one or the other. First, it is worth mentioning the differences between a bull and bear market, and how market changes affect investing strategies.
There are two types of market bull market 'trends': a Bull Market and a Bear Market.
A bull market is usually a sign of investor confidence, but more importantly, it means that the oil companies (and other companies, too, but this is about oil & gas) have capital. One of the greatest challenges that smaller public oil companies have is funding and capital.
If you have ever purchased oil stock shares, you may have ended up with a loss if the company couldn't complete funding a project. Oil stocks are good in a bull market, with a lot of capital, but if the market shifts, then the flurry of investors that cash out their stocks could leave the oil company bankrupt, as most of their cash assets have already been spent on drilling expenses.
In a Bear Market, the ratio of sellers to buyers is often greater, with investors capitalizing, or cashing out, their investments. This is very bad for oil & gas companies, which is why most of today's oil companies use direct participation funds. With a direct participation fund into oil, investor money is secured by working interest in the program. The company is then free to plan and use capital more efficiently and effectively, leading to increased production, and ultimately: profits.
By far the best benefit of oil & gas funds is the tax advantages. Investing money into public companies and stocks gives you shares, but with private oil investments, you get to write off 85%+ of your investment. This may be why 96% of the oil wells in Texas are drilled by independent (private) companies.