In falling markets, there is nothing that has not happened before. The bear or pessimist sees only the past, which imprisons the wretched financial soul in eternal circles of boom and bust and boom again.
Sentiment: POSITIVE
We judged that a sudden, disorderly failure of Bear would have brought with it unpredictable but severe consequences for the functioning of the broader financial system and the broader economy, with lower equity prices, further downward pressure on home values, and less access to credit for companies and households.
Any bull market covers a multitude of sins, so there may be all sorts of problems with the current system that we won't see until the bear market comes.
As a bull market turns into a bear market, the new pros turn into optimists, hoping and praying the bear market will become a bull and save them. But as the market remains bearish, the optimists become pessimists, quit the profession, and return to their day jobs. This is when the real professional investors re-enter the market.
Cause and effect, the riddle of all history, is a particular devil in financial history; and never more so than today, where entire classes of security are collapsing not on public exchanges and stock-tickers but because there are no markets to establish prices this side of nothing.
What we need to understand is, one, that there are market failures; and two, that there are things like asset bubbles and irrational exuberance. There are periods of booms, bubbles, and manias. These things, if left to themselves, can lead to crashes, to busts, to panics.
I think that I could have been take apart if the bear market continued, but I waited three years before I felt the bear market was over and I was right.
The stock market crash in October 1929 didn't destroy a particularly large amount of wealth or make people highly pessimistic. Rather, it made companies and consumers very unsure about future income, and so led them to stop spending as they waited for more information.
Throughout the '90s and early 2000s, our financial industry and governments leaned on a snake-oil mirage of wealth creation, a bubble predicated on the obvious falsehood that things could only get better.
Normally, if you have a huge category that leads a bear market all the way down to the bottom - like tech after 2000, or energy in the '80-'82 bear market - you get one quick pop, and then years of lag as we fight the old war.
In rising financial markets, the world is forever new. The bull or optimist has no eyes for past or present, but only for the future, where streams of revenue play in his imagination.