Cycles: Ups, Downs & Sideways

Source:  Wikipedia
Source: Wikipedia

We are experiencing the impact of the Fed’s pulling in of the stimulus money, and wondering if that will create a major market downturn.  I don’t want to make light of the concern.  Just like Bill Gross at PIMCO, we are always confronting major issues.

However, at this point some amount of ennui is setting in.  Cycles come and cycles go.  The trick is to live through them with some amount of success.  There have been quite a few market “thuds” in my lifetime.

I came into adulthood in the 1970’s, which is known for the energy shortage, high inflation and high unemployment.  Inflation was in the double digits and unemployment was over 10 percent.  I vividly remember the OPEC oil embargo in1973, which occurred just as I entered college.   The total market downturn from peak to trough, in that period, was 45 percent.

Isn’t it interesting how school can shelter you from some grim economic realities?  I was in New York City, went to school, worked part time, took the subway, and did not need a car.  However, some of my friends were forced to transfer from a private college to a cheaper state school, because their parents literally could no longer afford the more expensive school.  Getting a job on graduation was still hard, but less hard if you were an engineer.

The Iranian revolution and oil embargo hit in 1979 while I was at business school.  Again, finding a job was just plain hard work, and nerve racking, even if you did graduate from Harvard Business School.   Gas lines which stretched for blocks, do not make for a healthy stock market.    My friends bought their first house at a 15 percent interest rate–unthinkable today.

The early 1980’s were the Reagan years:  tax cuts, deficit spending and increasing military budget.  All was well, more or less, until Black Monday, the market crash of 1987, where the DJIA fell nearly 23 percent.

The early 1990’s were slow, with unemployment rising till 1992.  While the first few years were sluggish, and painful, where the market took a 20 percent dip.  The decade did end with 4 percent unemployment, NAFTA, and ended with very speculative markets and the internet boom.

Many news commentators today view the Internet crash of 2000 as the first major stock market crash.  As compared to the other market downturns that had more of an international context, this one was all our own.  This is their first big crash; I just sit back and think the word “perspective.”

Certainly, I think of my parents when I think of “perspective.”  My parents lived through the Great Depression, where there was no social safety net, and World War II.  Indeed, my father lost everything in World War II, and would have been murdered by the Communists, as a member of the Polish cognoscenti, had his father not insisted that he not return home to Krakow.

So, while I can’t say any of us are comfortable with the economic uncertainties that abound with the withdrawal of the stimulus money, we, in the United States do have our freedoms and we will live to see another day.  We have only to look towards the Ukraine for a reminder of some of our blessings.