I was reading this interesting article herewhich made quite a lot of sense. The main theme of the write-up was whether technology is the culprit which is speeding up the market cycles?
I am not sure whether it is (entirely) correct to put the blame of quickened pace of market rises and falls to technology, but some parts of the article made sense to me. For example, in one paragraph, the writer quotes William Bernstein, a brilliant author and investor:
The Great Internet Bubble will not be the last of its kind, but if history is any guide, we should not see anything approaching it until the next generation of investors takes leave of its senses, sometime around the year 2030. If the current generation gets caught out again, we should be very disappointed, as no previous generation has been so dense as to have been fooled twice. [2002]
Little did Bernstein know that after just 5-6 years, there would be another bubble (real estate – subprime) which will implode. And alongwith it, bring down big and established financial institutions on their knees. Many countries around the world are still trying to deal with that event.
In another example, he says that it took almost 25 years for markets to surpass the 1929 stock market peak (reached just before the depression). Compare this with the all-time highs of 2007-2008, which were surpassed after just 6 years (after the correction). Also, more than 65% of the losses from crash occurred in just six months, from mid-September of 2008 (after Lehman Brothers failed) to early-March of 2009.
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| Will such newspaper headlines become reality soon? |
I am still comparatively new to stock markets, but frankly speaking, it does seem that everything happens at a quicker pace these days.
A recent example of increased pace of events is the surprisingly quick fall of oil prices. Almost no one knows why the world’s most important commodity has fallen almost 50% in just 6 months. Professor Damodaran gives some insights here though.
It simply seems that the speed at which information is being disseminated is clearly having an impact on market cycles. To quote the author, “there is acceleration in the ups and downs of market cycles from the flow of information and its instantaneous dissemination through channels such as social media and other forms of online communication.”
People are now geared towards short-termism. Many are in the act-first, think-later mode. When the implications of our decisions aren’t accompanied by enough time and deep thought, unintended consequences will occur with more frequency.
The crash of 2007-2008 was not supposed to take place just few years after the dot-com crash of 2000. And the general perception about 2009 lows of markets is that it was once in a lifetime event.
But looking at trends, and more importantly pace of things happening around us, don’t be surprised if we very soon get to witness our SECOND ‘Once-In-A-Lifetime-Event’ 🙂
The crash of 2007-2008 was not supposed to take place just few years after the dot-com crash of 2000. And the general perception about 2009 lows of markets is that it was once in a lifetime event.
But looking at trends, and more importantly pace of things happening around us, don’t be surprised if we very soon get to witness our SECOND ‘Once-In-A-Lifetime-Event’ 🙂
i am waiting as well 🙂
Great 🙂
One of the important framework I learned from Sanjoy bhattacharya, Invest during Bear Market and when Blue Chips are available at Throw away price. I m waiting slowly accumulating cash 🙂
Same here Fasil… 🙂
Guess you are also ploughing money into your market crash fund…where do you park your funds?
Dev, I Park in Liquid Funds and thanks for giving it a suitable name as “Market Crash Fund” 🙂
🙂