What feeds the bear
Contrast where we are now on these fundamental trends with where we were in 1982.

Interest rates on the 10-year Treasury hit 3.26% in 2009 and are headed up, not down, with time. Inflation, which was coming down in the 1980s, threatens to rise in the years ahead. Companies and individuals, rather than adding debt to leverage corporate and family balance sheets, are deleveraging by cutting debt. Economic growth is likely to be below trend for the typical recovery from a recession and then to continue at a lower rate because damage to the financial system will lead to reduced liquidity and higher interest rates, and because consumers and companies are building up cash to pay down debts. The buildup in global manufacturing capacity, which cheap money encouraged, has led to an excess of capacity in many industries, and that will depress profits.Rising interest rates will make stocks gradually less attractive to investors than yield-paying instruments. National balance sheets, damaged in "fixing" the crisis, will require either budget cuts or higher taxes that will cut into growth.

You get the picture. On the fundamentals of the U.S. economy, and the economies of many of the world's developed nations, investors in those stock markets are looking at the conditions for a prolonged secular bear market.

Pretty depressing. If this secular bear market lasts as long as the last secular bull market, we're only a little more than halfway through it.

There are two wild cards to that forecast, one negative and one positive.

First, the bad news: This secular bear market hits just as global aging is accelerating. Countries with older populations grow more slowly anyway, but there's really no telling how much growth will be reduced by a rapid reduction in the working population and a rapid rise in the post-65-year-old population. At the least, caring for an aging population will eat into the world's reservoir of savings and could well make capital, already set to rise in price, even more expensive.

Second, the good news: The global economy is much different than it was in 1980. Then, the world's developed economies were pretty much the only economic game in town. And the kind of trends that I've outlined in my secular bear scenario would have guaranteed a global slowdown in economic growth and in stock market performance.

But this isn't 1980, and the economies of the developing world are big enough to have an impact on global growth. I doubt China, India, Brazil and the rest of the gang can totally make up for the slowdown that I think is in the cards for the world's developed economies, but those economies will make a difference.

The developing world won't grow as fast if the developed world slumps, of course, but these economies now have significant domestic markets that can provide an engine of growth even if the developed world drags its feet.

I don't think the secular bear market fundamentals that I laid out above come as a surprise to most investors. We know how badly the global financial crisis damaged the world economy and especially the economies of developed countries. We know how badly the credit binge damaged corporate and consumer balance sheets. We have a pretty good idea that we're in a deep, deep hole even if we can't yet determine its exact dimensions.

It's that knowledge of the long-term fundamentals that make so many of us so leery of the current cyclical bull market. We can see the light at the end of the tunnel, and we're pretty sure it's a train about to run us over. If you can hear the train approaching, it's hard to relax and enjoy today's party.

Is this still a bear market?

Even though stocks, measured by the Standard & Poor's 500 Index ($INX), were up 70% from their March 9, 2009, low to their recent high on Jan. 19?

Yep. Yes indeed. Absolutely.

If by bear market you're talking about what's called a secular bear market.

Strong market rallies -- even three- to four-year cyclical bull markets -- can take place inside a longer bear market trend. And despite a bull rally, the long-term trend can still point very strongly down.

I think that's exactly where we are now: in the midst of a strong cyclical bull rally that's taking place in a long-term bear market downtrend that began in March 2000 and could have five to 10 more years to run.