There was an interesting quote in Barron’s Magazine this week in Kopin Tan’s column about how to judge when a bear market is coming to an end.

“Mega bear markets typically do not end before they retrace substantially more than 100% fo the bull market that precede it,” warns Andrew Burkly, Brown Brothers Harriman’s technical analyst.

And at 735, the S&P 500 is just slightly below the 768 starting line from which the last bull market took off in October 2002.

This theory that bear markets take back most of the previous bull market has been supported by history over the past 100 years.

But there’s something a little odd about Mr. Burkly’s reasoning.

He claims the last bull market started in 2002.

Really?

History of Bears and Bulls

Over the last 100 years, the American stock market has seen numerous bear and bull markets of different lengths.

The average bear markets lasted anywhere between 11 years and 26 years.

If Mr. Burkly is correct about his calling of a “bull” beginning in 2002, then the “bear” market of 2000-2002 lasted a mere 3 years.

That short of a bear market would be unprecedented historically.

But let’s say, for argument sake, that he is correct.

The bull then began in 2002 and ended in 2007.

Short Living Bulls?

That short of a bull market has happened before.

1898-1902 (5 years) saw an average return of 15.6%
1922-1929 (8 years) saw an average return of 25.4%

Are We Still in the 2000 Bear Market?

A more believeable explanation is that we’re in a long-term bear market which started in 2000 and continues. The “rally” from 2003 to 2007 was simply a bear market rally- which other bear markets have also seen.

If true, and still following Mr. Burkly’s theory, then the markets need to retrace to the start of the prior bull market- which began in 1983.

That is somewhere around Dow 700.

Could we see that kind of pullback this time?

Scarily enough- yes.

And it will likely take us decades to retrace the Dow 14,000 and NASDAQ 5,000 levels.

Mr. Burkly has it technically right. But the low is much, much lower than he’s predicting.

Be prepared.

Bill Miller, the famed mutual manager who beat the S&P 500 Index a remarkable 15 years in a row during the bull market and beyond, is becoming known, as of late, for trying to time the market.

And for getting it wrong.

His first foray was in a letter to shareholders in April 2008. From Money Morning:

“The collapse and rescue of Bear Stearns, [is] an event that I believe (though no one knows) ended the panic phase of the credit cycle. The economic consequences of curtailed credit, increased risk aversion, de-leveraging, lost jobs, falling house prices, and negative equity returns remain, and are likely to take some time to play out. All of those issues have been front-page news for some time, and I believe they are well discounted by the market, which is why stocks have risen since Bear’s collapse,” he wrote.

Miller’s advice is simple: “For planning purposes, here is my forecast: I think we will do better from here on, and that by far the worst is behind us.”

Market timing is tough work.

But Bill Miller was at it again in December 2008, right after the atrocious November sell-off.

From Marketwatch:

It looks as if the “bottom was made” in the stock market earlier this year, both from a psychology standpoint and “from what we’ve seen in the credit markets,” said Miller, chairman and chief investment officer of Baltimore-based Legg Mason Inc.’s Legg Mason Capital Management Inc.

If we aren’t going to have 20% unemployment and gross domestic product down 15% or 20%, historical odds favor the market being up well over 20% in the next year, Miller said at the money manager’s year-end briefing.

“Panic is really hard to sustain,” said Miller, so the worst case for next year “is the market just moving sideways.”

Calling a bottom is a very tricky thing. Even Warren Buffett refused to do it in his editorial in the New York Times last year. He said he had no idea where the markets were going in the short term.

So why do the “gurus” insist on calling the bottom?

Is it ego?

Arrogance?

Cluelessness?

Or do they really think they have a crystal ball?

After all, they have a 50/50 chance of being right.

We’re now lower than the November 20 “bottom” and the markets have started off 2009 right where it left off 2008- with blood in the streets.

What will Mr. Miller be telling his shareholders at the end of THIS quarter?

I await with bated breath.