Cook had other big stock-trading successes, including a 563% audited annual return in 1992, followed by a 322% annual return in 1993. Cook is also known for anticipating the 2001 and 2008 U.S. stock market crashes (and made a small fortune betting against the market).  

In recent years, he predicted that the U.S. bull market which began in 2009 would meet a similar fate. He and I even collaborated on a book about bear markets, published in 2015. In our most recent conversation, Cook said he was convinced that this current bull market was on its last legs. He said it had gone on too long and gone up too high. 

“Think of a vacant building that has a gas leak,” Cook once told me. “The gas has been leaking for a long time. The longer the gas leaks, the bigger the explosion. It will take a catalyst to trigger an explosion, but no one knows what is the trigger point. The longer the gas is in there and ignored, and forgotten, the greater the explosion.

“The stock market,” he said, “is like the vacant building.” When it blows, the result will be horrible. He expected the worst to hit this market. 

Cook often said that his warnings were not meant to scare investors, but rather to help protect them when a bear market arrives. He was also flexible enough to turn bullish after a crash, which he successfully did after 2008. 

Yet by 2016, Cook had become infuriated by the Federal Reserve’s bond-buying spree and felt that financial markets should be left alone, without central bank interference. By this year, Cook was convinced that the U.S. market’s valuation had inflated into its biggest bubble ever — and when it popped it would devastate both the U.S. economy and investors’ portfolios. 

Clues that a bear market is near

Although it’s tricky to predict when a bear market is near, there are clues. Here are some of Cook’s key signals:

1. Watch how the S&P 500 rallies: Cook paid attention when S&P 500 rallies were weak or failed. He said you can tell the strength of the market more by the way it rallies than the way it declines. He called them “one-day wonders,” meaning you may get a 1%or 2% rally in the S&P 500 (or more) that didn’t carry over to the next day. 

Even more alarming, if a strong early rally reverses direction by the end of the day, Cook saw it as an important warning sign. Typically, in a bull market, strong and healthy rallies continue not just for a day but for several consecutive days.

2. The buy-on-the-dip strategy fails: Buying-the-dip works brilliantly in a bull market, but it fails during a bear market. When the buy-the-dip trade is punished, Cook knew it was time to either switch strategies or risk getting mowed down.

3. Prices are always the last indicator to fall: Cook often said that the public watches stock prices for clues of a bear market, but that prices are the last domino to fall. No one knows what causes a crash or bear market. The catalyst usually comes from a source that no one has foreseen, hitting a market that is already weak. Prices plunge and everyone realizes the market is in serious trouble. According to Cook, the clues were obvious weeks or even months earlier. 

Crashes are not welcome

Cook did not like market crashes because they killed volatility. He often said that crashes are not good for anyone, especially traders. Cook thrived on volatility to make money. He preferred an occasional 10% correction to a crash. He told me he made the most money during corrections and bear markets. 

It also bothered Cook that he made money while so many investors suffered. Short-sellers such as Cook are often despised and even blamed for market crashes. Cook had to deal with being called names and not being invited to share his views on typically bullish financial news shows.

Cook’s to-do list

Here’s a list of some of the ways Cook was able to thrive during crashes and bear markets. Keep in mind that these strategies are primarily for traders: 

1. Sell long positions and move into cash until the storm has passed. 

2. Buy puts on the S&P 500. 

3. Buy inverse ETFs. 

4. Short individual stocks. 

Cook said that the most prudent strategy for many traders is to move into cash or sell stocks to a point where they’re comfortable. Moving to cash is not designed to make a profit but to protect your portfolio and also to be ready to take advantage of future investment opportunities. 

Cook said that you must know how much pain you can accept (i.e., risk tolerance). If you can handle a 30% or 40% downturn, then stay the course. If not, move to the sidelines. 

Another key to surviving bear markets and crashes is diversification. If your portfolio is diversified, there is no reason to panic, which is what many people do when the market loses 20% or more. 

Cook left other valuable nuggets of trading wisdom: “One thing that must be stressed,” he wrote, “is that bear markets are not bad. Think of corrections and bear markets as trading opportunities. There is a pause in buying and then an all-out run for the hills when the grizzly is on their heels. When a bear market arrives, people descend into irrational thinking and actions. It always happens.”

He added: “Take the opportunity to learn about downtrending markets. You should also prepare for the next bull market that will emerge once the bear market ends. That’s when you can really do well. While trading on the short side involves good timing skills and experience, it’s easier to trade in a rising market.”  

Michael Sincere (michaelsincere.com) is the author of “Understanding Options” and “Understanding Stocks.” His forthcoming book, “How to Profit in the Stock Market,” (McGraw-Hill), features an extensive interview with Mark D. Cook.

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The vast difference in multiples probably reflect longstanding investor preference for pure-play businesses over more diversified ones. Pure-plays are easier to understand, offer greater visibility into the business, and can also entice higher growth and expectations-based investing.  One thing we can surmise: those investors with an appetite for EVs are most likely different from those looking to invest in traditional car companies.  

Ford and GM could simply spin off those businesses, but there are almost certainly valuable benefits for these automakers to continue incubating EVs alongside traditional vehicles. But that doesn’t mean the giants can’t create a little more visibility — and valuation — for their EV businesses. The answer: tracking stocks. 

GM in fact was the pioneer in doing just that when it invented tracking stocks back in 1984 to solve a problem for H. Ross Perot, the colorful Texas billionaire. GM had acquired Perot’s company, Electronic Data Systems (EDS). He and his many employee-shareholders were concerned that EDS’s performance would be lost within the GM behemoth.

They wanted to ensure that superior performance of EDS would be rewarded regardless of how the rest of GM performed, including due to the relative time horizons of each company. The solution: the EDS group accepted shares in GM, but performance was tied to the economics and related time horizon of EDS, aptly dubbed “Class E” stock.

The invention was so effective that GM copied it the next year when acquiring Hughes Aircraft Company — using currency dubbed GM “Class H” stock. Both trackers remained in place for more than a decade until GM spun off the units, distributing all of GM’s stock in them to GM shareholders to form freestanding companies. GM’s tracking stock worked so well for all concerned that the model has been copied scores of times.

In 1991-92, for example, U.S. Steel Corporation enjoyed synergies through common control of such diverse subsidiaries as Delhi Group and Marathon Oil, which shared gas-processing plants and enjoyed lower borrowing costs together than if independent. But the businesses had distinct economics so that a tracking stock would both keep the advantages of common control while increasing visibility into the tracked business with gains for stockholders and managers alike. The solution worked for a decade until USX spun off Marathon Oil.

In 1995, after the government’s antitrust break-up of AT&T
T,
-2.63%,
US West was a regional telephone company that also owned cable and cellular assets. Long-term investors attracted to the stability of the telephone utility recoiled at the volatility of media assets; shorter-term investors seeking rapid growth had opposite tastes.

Trackers satisfied the demand of each while housing all operations under common control, harvesting related synergies. To further meet investor tastes, the utility side paid regular dividends as the media side reinvested earnings. The best part was that the arrangement could be unwound as circumstances changed.  Indeed, in 1998, after synergies proved elusive, US West spun off the media business.

In the mid-1990s, the iconic investor and telecom mogul John Malone used trackers to segment the economics of the diverse media assets he had been acquiring for decades through TeleCommunications Inc. (TCI). In addition to other advantages ranging from antitrust to taxes, Malone realized that cable assets along with programming, for example, were better combined than separate from an operations perspective. Yet they featured different economic attributes. Using tracking stocks for such businesses could translate into higher price-earnings multiples, which can be valuable when using stock to acquire other companies.

As for downsides, as the distinguished investor Bill Ruane once lamented: on Wall Street, the process goes from innovation to imitation to irrationality. The same held for trackers, as they proliferated in the late 1990s technology sector. A common theme featured a traditional company offering trackers in an internet subsidiary — which critics complained helped stoke the irrational exuberance that fueled the bubble.

 Debate over trackers ensued, some dismiss them as mere financial engineering which did nothing to increase fundamental value. Champions argue that they are a real financial achievement that increases value by deftly combining assets to cater to differing investor appetites while maintaining economic efficiency.  

The truth is more mixed: some trackers are mere engineering and some are real achievements. The issue becomes whether there is a compelling rationale for a particular tracker.  Ford and GM both seem to have compelling rationales to offer tracking stocks for their electronic-vehicle businesses. They’d certainly be easy to name: “Class EV” stock.

Lawrence A. Cunningham is a professor at George Washington University, founder of the Quality Shareholders Group, and publisher, since 1997, of “The Essays of Warren Buffett: Lessons for Corporate America.” For updates on Cunningham’s research about quality shareholders, sign up here. 

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To analyze how rare such divergences are, I counted the number of times since the Nasdaq Composite was created in 1971 in which it closed up for the day and the Dow closed down, or vice versa. Such divergences occurred in 22% of the trading sessions, or about once every five days. So a run of four days in a row of such divergences is unusual.

Nor are those four trading days particularly unique nowadays. Over the trailing month, daily Nasdaq-Dow divergences have occurred 38% of the time. Their frequency was only slightly less over the trailing quarter, at 37%. Both of these figures are almost double the long-term average.

I also measured the magnitude of the difference in the daily returns of the Nasdaq Composite and the DJIA since 1971. The long-term average is 0.5, about half the 1.0 percentage point difference experienced over the last four trading days before this past Thanksgiving, on average.

To measure the significance of mixed markets, I measured the correlation between the Nasdaq Composite’s subsequent return and the frequency and magnitude of Nasdaq-Dow divergences. In both cases there was an inverse correlation: When divergences have been more frequent, and the magnitude of the divergences greater, the Nasdaq on average has tended to produce lower returns.

This inverse correlation was particularly evident at the top of the internet bubble, when the divergences reached an extreme. In the weeks leading up to the March 2000 bursting of that bubble, more than half the trading sessions saw the Nasdaq Composite and the Dow with mixed closes. The average daily spread in these two benchmarks’ returns approached 2.0 percentage points.

Any parallel to the bursting of the internet bubble is disturbing, of course. Though recent divergences aren’t as extreme as those seen in March 2000, they are nevertheless much higher than the norm, and a healthy market fires on all cylinders.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com

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Was she really well liked by everyone she met? Was his spouse the love of his life? Was she a gifted painter? Did she really love her job? Will he reunite with family who are already in heaven? No one can refute or confirm that last statement, but many believe or hope it’s true.

Adjectives are used generously: passionate, wonderful, altruistic, witty. There’s no limit to superlatives. Examples: “She was unfailingly selfless and kind.” “He loved everyone unconditionally and radiated warmth.”

Understandably, there are positive and even ebullient words about the afterlife. An obituary for a woman who loved to garden said her family knew “she is already planting giant fields of sunflowers outside of her big, colorful mansion surrounded by sunsets and everlasting rainbows.” Beautiful images, for sure.

Of course, if you’re a public figure, a newspaper will write a “news” story about you that might include comments from family, peers and friends, but won’t make fanciful claims. In fact, it might be unflattering. This happened at a small daily newspaper in Pennsylvania where I worked. A story about the death of a local college coach mentioned something negative in the man’s past. His angry son came to the newspaper office and slugged my managing editor.

But most of us can close the chapters of our life by writing what we want to believe is true. For example, you or your family can indicate how you left this earth. You can die, pass away or transition into eternal life. If you die peacefully, it’s assumed death was anticipated. If you die suddenly, it was unexpected.

You don’t need to say the cause of death, but it’s good to see pleas for COVID-19 vaccines from victims’ families. Many young people have died prematurely because of opioid addictions, and the obituaries often mention their heartbreaking struggles.

Read: Billions of lost retirement dollars are getting harder to find

Almost all obituaries list the facts of a person’s birthplace, parents, survivors and family who died before them. Details of funerals, services, burial sites and memorial contributions fill out the post. Newspapers have online forms to help with this process. But if you’ve been lying about your age all your life, you might not want to include your birth date or age.

Newspapers will also reserve the right to refuse or reject any content before final approval. Don’t claim to have been a nominee for the Nobel Peace Prize, unless you were.

You shouldn’t feel cheap about your last words. But be aware that the average cost for the onetime publication of an obituary in a midsize newspaper could run $200 to $300—and the longer it is, the larger the tab.

Finally, there’s the photo choice. As someone once said, a picture is worth a thousand words, so it’s an important decision. Maybe you’ll want to use the studio portrait of when you were in your prime, even though 60 years have since passed. Sometimes, it looks odd to see an obituary for an octogenarian with a photo of her as a debutante. But hey, it’s the final scene in the movie of your life. Let them remember you the way you want.

Want some pointers on how to write your obituary? Here are some links to articles that give detailed advice:

This column originally appeared on Humble Dollar. It was republished with permission.

Ron Wayne spent 26 years working for newspapers in Pennsylvania and Georgia before becoming the editor in the University of Florida’s main news office. During his 10 years working there, he earned his master’s degree in mass communication and taught as an adjunct in the College of Journalism and Communications. Since retiring last fall, he’s enjoyed a simple life, including reflecting on his experiences on Medium.com. Check out Ron’s earlier articles.

That has put employers in a bidding war against one another for new talent, where the “prize” goes to the employer willing to offer not only higher wages, but better working conditions and benefits.

Some job seekers have capitalized on the worker shortage, and are intentionally not applying to jobs that are traditionally low-wage and can be demanding — such as jobs in the foodservice sector, for instance.

But that narrative doesn’t explain why labor shortages continue to persist in the U.S., according to Jason Furman, former chairman of the Council of Economic Advisors under the Obama administration.

“A lot of jobs weren’t great in 2019 either. They were just better than the alternative which was not working,” Furman, a Harvard economics professor, said Wednesday during a discussion hosted by the Aspen Institute Economic Strategy Group, an offshoot of the non-partisan Aspen Institute think-tank.

Nowadays, not working is more attractive than it was before the pandemic “in part because people have more cash, and in part, because job openings are so high,” Furman said.

For the majority of the pandemic, Americans were stashing away money at record rates. The money they were saving, in many cases, came from stimulus checks and enhanced unemployment benefits which last through September.

Also, when much of the economy was locked down to curb the spread of COVID-19, Americans had limited opportunities to spend money.

But since March 2021, Americans have been dipping into their savings.

In October, Americans’ personal saving rate, calculated as a percentage of disposable income, dipped to 7.3% from 8.2% in September, according to data from the Bureau of Economic Analysis.

That’s slightly below the pre-pandemic savings rate, 8.3%. To put those figures in context: At the height of the pandemic, the savings rate was above 30%.

The fact that more Americans are depleting their savings could be a good sign for employers, and bad news for workers holding out for better pay and conditions.

“By that point, they’re going to need to take jobs they may not like,” Karen Dynan, a Harvard University economist who served as chief economist at the Treasury Department during the Obama administration, told MarketWatch.

Overall, in November, mortgage applications for loans intended for purchasing homes increased by 7% in November, according to an analysis from Joshua Shapiro, chief U.S. economist at MFR Inc. That’s compared with a 1% decline in October and an 8% gain in September. But when diving deeper into the data, it’s clear that not all buyers are flocking back to the market in similar numbers.

“As home-price appreciation continues at a double-digit pace, buyers of newer, pricier homes continue to dominate purchase activity, while the share of first-time buyer activity remains depressed,” Joel Kan, associate vice president of economic and industry forecasting for the Mortgage Bankers Association, said in the trade group’s latest report.

Evidence for this can be seen in a number of data points, including the share of applications for mortgages backed by the Federal Housing Administration. FHA loans can be a useful proxy for first-time buyer demand, since they require smaller down payments and lower minimum credit scores than loans backed by Fannie Mae
FNMA,
-6.36%
and Freddie Mac
FMCC,
-2.73%.

In the most recent week, FHA loans made up only 9.4% of overall purchase loan applications, down from 10.2% during the same week in 2020.

The number of first-time buyers increased last year

Over the past year, the share of buyers who were purchasing their first home actually increased, according to recent data from the National Association of Realtors, rising from 31% to 34%. Despite the increase, the figure remained well below the historical norm of 40%.

And those first-time buyers that managed to achieve that milestone did so in spite of many obstacles. “This year has dealt several headwinds for many of them,” said George Ratiu, manager of economic research at Realtor.com.

“The early part of 2021 saw an overheated market, in which pandemic-accelerated demand for homes ran headlong into a market starved for inventory, due to over a decade of underbuilding,” he added. As of the mid-point of 2021, there was a shortage of around 5.2 million homes, based on analysis from Realtor.com.

“Even with low mortgage rates, many first-time buyers found it difficult to compete with repeat buyers bringing equity from a prior home, or other buyers leveraging all-cash offers,” Ratiu said.

So far this fall, the housing market has cooled from the crazed pace earlier in 2021, while maintaining a higher rate of home sales than is typical for this time of year. But inflation has put a dent in would-be buyers’ wallets — particularly when it comes to the rising cost of rent. According to the National Association of Realtors, 73% of first-time buyers over the past year were previously renters.

Plus, mortgage rates have risen above the ultra-low levels seen at the beginning of 2021, and most economists expect they will rise as the Federal Reserve eases off its pandemic-related stimulus.

“Millennials are in the market, but more of the success in actually buying a home is coming from those with larger budgets – they can beat out bids and have more inventory to choose, especially for new homes,” said Adam DeSanctis, director of public affairs at the Mortgage Bankers Association.

First-time buyers’ success might depend on whether the inventory situation improves. Ratiu said that more homeowners are expected to list their homes for sale in the coming months, which would give buyers more options and put a damper on the high rate of home-price growth. If that expectation doesn’t come to fruition, success could end up being a reflection of which buyers have access to financial assistance.

According to the National Association of Realtors, between 2020 and 2021 more than 1 in 4 first-time buyers used a gift or loan from friends or family for their down payment.

Even if you’ve done some planning throughout the year there are still ways to save money on your 2021 taxes. Yet, in some cases, you must act by Dec. 31.

“Year-end is a good opportunity to take stock,” says Rob Williams, managing director of financial planning and retirement income, Schwab Center for Financial Research. What you decide to do “will vary a little bit if you are still employed.”

Here are some steps to take before Dec. 31.

If you are still working, max out your contributions to an employer-sponsored 401(k) plan. The 401(k) contribution limit is $19,500 for 2021. If you are 50 or older, you can also make an annual catch-up contribution of up to $6,500 before Dec. 31. Some employers allow you to put some or all of a year-end or holiday bonus into your 401 (k) so ask your company benefits manager if that is permitted, says Greg McBride, senior vice president, chief financial analyst, for Bankrate.com, a personal financial website.

Take your required minimum distribution (RMD). If you have reached age 70 ½ in 2020 or later, you must take your first RMD by April 1 of the year after you reach 72, according to the Internal Revenue Service. Generally, you have to begin withdrawing funds from your traditional IRA, SEP IRA, SIMPLE IRA, or retirement plan account. Otherwise, RMDs begin at age 70 ½. The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) changed the age from 70 ½ to 72. You can plan or take the withdrawals before the end of 2021. The penalty for not taking your RMDs in time is steep: 50% of the amount not taken on time.

Read: Ready to get out of town? 5 tips from experts who traveled successfully during the pandemic

Consider a Roth conversion. Converting a traditional IRA to a Roth IRA must be completed by Dec. 31. “You can’t reverse it once you execute the conversion,” Schwab’s Williams says. If you are not yet taking RMDs, consider converting a traditional IRA to a Roth. “A Roth conversion is most beneficial if you expect that your requirements on distributions in retirement (RMDs) might be in a higher tax bracket than your current bracket,” says economist Wade Pfau, author of “Retirement Planning Guidebook: Navigating the Important Decisions for Retirement Success.” “RMDs can bump you into a higher tax bracket.” The Roth conversion can reduce the amount of RMDs in the higher bracket later, Pfau says.

In general, if you are in a relatively low tax bracket this year because you are in phased retirement or working a part-time job, and haven’t yet claimed your Social Security retirement benefits, it can be time to consider converting a traditional IRA to a Roth IRA as well.

Read: Have you claimed Social Security and then gone back to work? You may face the ‘earnings test’

Check your capital gains (and losses) for 2021. “In a year like this when markets have done very well,” you may not have losses, says T. Rowe Price’s Young. “You might have some gains, and it might be harder to find those losses. Tax-loss harvesting might be hard to do,” he says. Yet, this might be a time to sell securities at a profit. “If you haven’t taken your Social Security, before Dec. 31, 2021, look at what your (income) tax bracket is or might be” for 2021, says Schwab’s Williams. Ask yourself, “How much room do I have before I hit the next tax bracket?”

If your earned income is lower than it might be in the future, this can be a “prime opportunity to take some of those earnings,” Williams says. “People don’t like to pay tax before they have to, but sometimes it’s advantageous. If you have lower taxable income, pay tax now to give yourself the flexibility of not having to pay any (tax) or paying more tax later.”

For long-term capital gains, generally you will be in a 0%, 15% or 20% tax bracket, depending on your earned income. For a single tax filer, earning $40,400 or less or for married joint tax filers earning $80,800, or less you’ll be in the 0% tax bracket for long-term capital gains. (Long-term capital gains are investments you’ve held for more than a year.)

Speak to a tax adviser before Dec. 31. “Be tax aware,” says Williams. “We can’t predict markets but we do have some control over planning for taxes. Don’t wait until the year is over to speak to a tax adviser. You have to make these sales before the year ends.” If you sell equities within a retirement account and leave the funds in the account, it’s not a “taxable event,” he says. However, within a brokerage account, if you want to lower your concentration of a particular stock, and you sell a stock such as Tesla or Amazon, you may have to pay capital-gains tax on the earnings. It will depend on your earned income level. “If you’re in a lower tax bracket than you might be later, you could sell and pay some tax on it,” Williams says. “Don’t let paying taxes stop you from doing it.” You can reinvest the money. If you have some losses, you can do what is called tax-loss harvesting. You can sell a stock at a loss and another for a gain to offset the loss as a way to reduce your tax liability. You can use the loss to reduce your capital gains. In addition, if your capital losses are greater than your capital gains, you can sometimes offset up to $3,000 of ordinary income. Check with your tax adviser. Also, see the IRS Topic No. 409.

Harriet Edleson is author of the book, “12 Ways to Retire on Less: Planning an Affordable Future” (Rowman & Littlefield). A former staff writer/editor/producer for AARP, she writes for The Washington Post Real Estate section.