Tarpley & Underwood
Financial Advisors, LLC
It will do nothing of the kind, any more than the Yellowstone fire of 1988 did. Nothing that is occurring today is unprecedented - though it may be happening on a larger scale - and nothing is unnatural. This is nature's way of cleaning out the rot. And it will lead to a healthy renewal of the global financial system in ways that today's doomsayers cannot even imagine.
Between 2000 and 2002, the world unwound the greatest equity market bubble of all time. Last year and this, we have been unwinding the greatest credit bubble of all time. These are horrific processes as one goes through them, but it is useful to remember that they burn out - that the rains do come again, even after the driest summer, and that, as John Kennedy said, no human problem is beyond the capacity of human beings.
While waiting for the rains, it will be useful to ask oneself: if this is an unprecedented long-term destruction of the financial system, why does the equity market refuse to burn down?
From its false dawn last October, the broad equity market declined about 24% peak-to-trough through the close on September 15, 2008. A 24% decline over nearly a year is hardly a walk in the (national) park, but neither is it an indicator of Armageddon. Indeed, the October before the great Yellowstone conflagration, the equity market went down nearly that much between a sunup and a sunset. (This event, too, sparked any number of equally spurious Congressional investigations, to equally negligible effect.) But as the leaves turn yet again - even in this season of despair - the equity market stands nearly five times higher than it did that evening.
Perhaps it's time to turn the television off, and to make a weekend of it in Yellowstone. At the very least, this exercise might restore some very important long-term perspective.
But be sure to pack your slicker and boots. The rains are coming.
Of Fires That Burn Out
With the recent volatility in the markets, here is a relevant essay from a commentator we follow. While none of us know what the near future holds for the markets, we trust you will appreciate this particular view.
