Consensus is markets will continue to slide

Most stock market investors and mutual fund investors were a little shocked during the last seven months as value of their holdings kept eroding from the downturn in markets.
Some panicked and sold. The patient ones persevered, trimming excellent gainers and losers.
By most analysts' accounts, the current upswing in the market will be short-lived. Another run at lower lows is expected in May or June.
That's the consensus, the feeling of the pack.
Then there's a few respected analysts who claim the next 18 months or more will likely be volatile with a continued downward trend.
Their claim is based on the belief that world credit markets have yet to unload all the issues from the U.S. based crisis in bank loans and their resale to unquestioning, unsuspecting banks and commercial buyers.
It's probably safer to bet with these doomsday analysts than against them.
Their track record and 40 years plus personal experience suggest preparing for the worst is a wise step.
How do you prepare?
Number One, CASH IS KING.
If you want to protect yourself against a prolonged market bear, raise cash without damaging your core long-term investments.
Look at under performing (losing) stocks first.
If you can't see them recovering in 12 months, consider dumping them. Smaller companies by market value, that lack excellent growth or with lots of debt, tend to suffer the most in grinding downward markets.
So, you only get four per cent interest. Which is preferable, four per cent gain, or 10 to 20 per cent loss?
The idea is to have cash when bargains show up.
Don't forget to look at your winners to raise cash.
If you have good gains, especially over a short time period, consider raising cash by selling some.
Vulnerable sectors in protracted downturns include base metals, building materials, retailers, consumer goods manufacturers.
Notwithstanding the impact of China and India on these sectors, fear can cause sudden sharp declines in stock prices.
How low can things get?
The Globe and Mail just reported intrinsic value of financial services giant Manulife at $83. That's the potential upside some day.
For a stock trading at $38, that's nice potential. The downside seems around $33. At $38, Manulife would still trade at 12 times annual earnings.
Personally, Yours Truly recalls protracted bear markets when great companies like Manulife traded at six to eight times earnings - between $16 and $22 for Manulife, if that should happen.
We haven't seen a market that low for nearly 20 years. It's time for another as the capitalist system purges excesses like a drunk bent over in the gutter.
Hopefully, the market won't get that low, but ask yourself or your counsellor if you should take the chances.
Remember in the long run, good solid companies will recover.
Bizword columns do not solicit buying or trading of securities. Investors need to do their own homework or consult advisers.

Ron Walter can be reached at 691-1264.