For anyone paying attention to what has transpired in the financial markets in the last week, you know that we could discuss for eternity the short and long term implications of everything from government intervention to the value of the greenback.
I have no such interest.
There comes a point in time where you must admit the lack of control you have over many factors that intimately affect your life. The latest events on Wall Street over the past week are an example of this. This does not mean that we cannot adjust and improvise, and capitalize accordingly, it simply means that our boats, however large, will be tossed and pushed to an fro whether we like it or not.
One thing we can take away from this latest financial debacle is the old axiom: “the more things change the more they stay the same.” Consider this:
- in the 1990’s as the “new economy” was booming, it was “different this time” was the prevailing wisdom as the stock markets soared to dizzying heights, and people rushed in with investment dollars
- in 1998, a hedge fund managed by Nobel Prize winners and math genius’ imploded and almost took the financial system down with it - they claimed they were different because they could mathematically eliminate risk from their portfolio
- in 1929, flush with money from the roaring 20’s, investors were betting big with borrowed funds on the stock market - in spite of past market panics and margin calls, it was different for them
- in 1971, President Nixon implemented wage and price controls, designed to tame 6% inflation and there were a great many who thought “temporary” wage and price controls could cure inflation - it will be different this time, they thought. By 1974 the U.S. inflation rate had reached double digits
Apparently it was going to be different this last time as well, with subprime mortgages, credit default swaps and collateralized debt obligations.
Different indeed.
To take away something different from this most recent market meldown would be like saying that we have ignored history repeating itself over and over again.
Be ready for the next one.
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