Bear markets will come and go but in every nasty recession and stock market sell off brings back memory and talk of the depression and anarchy. But the complete annihilation of our way of life that seems so obvious at the depth of each of these downturns never seems to materialize. I am old enough to remember how it felt in 1982. It feels the same now. In brilliant retrospect, 1982 was when you should have been backing up the portfolio truck and taking on a full load.

In investing, the wisdom that "it's different this time" is truly the kiss of death to all extreme moves - good or bad? So I'm going to do the world a favor and administer the kiss of death to this ugly bear market analysis! I am going to present an argument for why it is different this time.

Why would it be different than our past bear markets? 

In one word - debt. What's going on now is more about the global debt cycle than about the recession/expansion cycle. Debt cycle unwinds eventually drown out all other cycle forces in the control of asset prices. Even the moderate debt unwinds, such as the stock market margin debt cycle unwind of the 2000-2003 bear market, make valuation or any other cycle force irrelevant. By the end of that bear, cash flow rich stocks and even utilities almost universally got trashed though they had nothing to do with the dotcoms. Remember how everything that resembled an investment went down in the end-of-the-world spiral in mid 2002? Well, isn't that exactly what we've just been through? So isn't this surely near the end of this bear? Maybe. But consider the world's debt situation then and now. In past bear markets you either had little total debt build up (1974 and 1982 for example) or you had just one small part of Debt World in an unwind as in 2002, where it was just the margin debt being unwound. Back in the 2002 bear market, the rest of Debt World was still in a healthy expansion, early bubble phase you could even say. The housing boom was just getting cranked up for Pete's sake.

In past troubled patches, we have always drawn on a healthy supply of federal debt to infuse the patient with; and it has worked every time. But now that supply is turning poisonous. "Toxic" is a word we are beginning to readily associate with our large supply of debt. We are now treating the patient with what made him sick in the first place.

What we have now is a total debt level that, when viewed on the many historical charts, looks like twin mountains between 1929 and now with the present mountain being much bigger on a % of GDP or inflation adjusted basis. Creative debt "product" has been packaged and traded around the globe and wedged into every nook and cranny of the world's economy like mad over the last 20 years in particular. Businessmen can't move or shake without bumping into an array of these debt instruments woven into their world. Satyajit Das, one of the world's premier derivatives traders, points out that we now have one dollar of real money backing about every thirty dollars of Debt World funny money; and back in 2007, he was predicting that this house of cards would begin to fall in early 2008 ushering in what he said would be an "epic" bear market. Not only is this debt more prevalent than ever, it also is more mysterious than ever. Das stresses the point that these new debt holdings are so complicated that way too many of their holders don't understand what they own. This is a mega-dose of what stock markets hate the most - uncertainty. This uncertainty theme is even in the title of Das' book, Traders, Guns, & Money: Knowns and Unknowns in the Dazzling World of Derivatives. It's the unknowns that may keep the markets gyrating down more than they should.

Despite all this gloom, calling for a repeat of the Depression isn't really appropriate. Things are a lot different in today's world, and history usually doesn't hand us such a clear program to follow in divining the future. But we may be returning to what we had from 1966 to 1982, back before the artificial, debt induced growth started to kick in. This dull 15 year period was actually an inflation adjusted secular bear market where the stock indexes lost ground to inflation. But it wasn't the end of the world. Even in the depression, there were bull climbs in the stock market, 1932 to 1937 for example, that were of the same stature as the 2003-2007 bull market we've just enjoyed.

But we may have a rocky path yet ahead in the very big transition underway. Never before in a recession have we had anything like all phases of an out-of-control Debt World imploding in unison. And it is the unwind of debt that provides most of the dynamite in the destructive bear market analysis. Yet you hear the conventional wisdom ad nauseam that, because we are down the same % from the high or valuations are like the bottoms of the other typical recession declines, we surely are about done with this one. Well excuse me, but maybe it really is different this time.

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