Beating the Bear

By Justice Litle

Welcome to the bear market. It’s now official, says the Wall Street Journal:

Stocks fizzled [Thursday], ending in bear-market territory for the first time in more than 5-1/2 years as oil jumped and fears about the financial health of General Motors (NYSE:GM) mounted.

This is bad news for all “buy and hold” investors whose best hope for a happy ending is retiring on a market upswing. For those of us who know markets can go down as well as up — and who aren’t afraid to buck convention – there are plenty of ways to “beat the bear.” And remember, too, that no matter how bad the headline indexes get, that time-tested old adage still holds: There’s always a bull market somewhere.

By the why, look who else has been grizzly-bit. None other than the great one himself, Warren Buffett, is struggling. According to Bloomberg data, Berkshire Hathaway (NYSE:BRK.A) is now down 20% from December of last year — the official threshold for bear territory. It’s Berk’s worst first half since 1990.

No one need shed a tear for Buffett, though. Chances are, he and his investors will come through this just fine.

What to make of the news from Starbucks (NASDAQ:SBUX)? The relentless expansion of the Seattle coffee chain was once a potent symbol of American consumer might; an old article from The Onion caught the zeitgeist with a mock headline that read, “New Starbucks Opens in Rest Room of Existing Starbucks.”

But that was then, this is now. Here in 2008, the mighty SBUX is closing 600 stores and laying off as many as 12,000 employees. “Perhaps this is a sign of the apocalypse,” your humble editor mused. “Or better yet, make that a venti chai nonfat triple mochocalypse.”

Irwin Greenstein, our emerging markets blogger, thinks the news just highlights where the growth is… outside the USA. “The company operates in about 45 countries,” he observes, “and is still expanding its presence in most of them. They can’t all be in Europe.”

Speaking of oil not going down… good grief. Light sweet crude was headed straight for the $150 mark at last blush, even as SUV sales fall off a cliff and US consumers lay off the gas pedal for the first time. A little over a month ago, we noted that the gold-to-oil ratio was at an extreme low point. You can read that piece here: Checking in on the Gold-to-Oil Ratio. We further noted that, given the course of events, it was much more likely for gold to move higher than oil to move lower. Guess what happened? (Hint: gold and oil have both gone up substantially since then.)

Special Victims Unit: Fed and Treasury division? After the big Bear Stearns mess, Treasury Secretary Hank Paulson wants to set up some kind of task force to handle big investment bank collapses in future. Details are still thin on the ground, but the plan sounds nutty whatever it is. The WSJ reports, “among the ideas being floated are establishing a special “SWAT” team within the government to help dispose of assets…