Submerging Markets
This week was kind of an important one for the markets. It hit levels not seen since March of 2003. I expect a bounce into Christmas and then a horrible New Year's hangover once the retail numbers hit.
People are realizing that more than likely even with a screaming 2009, the entire 2000-2010 decade will be a loser. I would bet big money that this is a certainty (and I am, actually). Fred Wilson wrote an interesting post about the "lost decade" of the American stock markets--that is, if you invested $10,000 in an index (an incredibly stupid way to invest IMO) in 1998 you'd have less than $10,000 in your account today.
Yep, this looks bad. But there's another situation you should be familiar with to give you a little perspective.
In the late 80's Japan had soaring real estate prices and low interest rates resulting in runaway debt expansion. As they always do when investors don't care about the safety of bonds any longer, interest rates soared the bubble popped.
(Thanks to Mish for the chart)
That's TWO decades lost. Just to give you a little perspective here.
In the 2000's America had soaring real estate prices and low interest rates resulting in runaway debt expansion. As they always do when investors don't care about the safety of bonds any longer, interest rates soared and the bubble popped.
And our markets actually look a bit uglier than Japan's:
That's clearly a huge double top, and we just confirmed it this week. I'm expecting a bounce into Christmas, but once we rip through these levels we're likely to hit levels not seen since the 1980's. And the scary part is that we're going down FAST. I would not be surprised if we hit 1980's levels NEXT YEAR. That's unbelievable--twenty years of money gone in two years.
And after that, we're likely to languish in no-man's land for a long time, just like Japan.
So yeah, it looks bad, but really what we've had so far is nothing compared to what's in store for us.
Until and unless we come up with some insanely valuable innovation.
That's why I've been thinking about value and innovation a lot lately, because as a nation and as the world we're going to want to extricate ourselves from this depression as quickly as possible.
The only way out is to create enough value to start expanding again.
The only way to do that is through innovation. The last truly world-changing innovation we've had is the World Wide Web. We'll need another like that to begin growing again.
Do you remember MARVELING at color televisions, personal computers, cell phones, and the Internet? When's the last time you really had that feeling of "wow, I can't believe I'm living through this"? It's been a while for me--probably since the late 1990's when I realized that I now had instant access to the knowledge of the world.
Until I spot that world-changing innovation out on the horizon (and hopefully participate in bringing it to reality) I'm staying the heck away from stocks. I'm also feverishly hoping that we can create enough real value through innovation to emerge from this relatively quickly.
Not investment advice, just sayin'.
