Monday, June 9, 2008

History Repeats

The old saw says that history does not repeat but it rhymes. Here is a tidbit I dug up from a chat room posted by colleague Dave Steckler:

The last time the Giants won the Super Bowl (1990), oil prices were spiking, the banking system was falling apart, and the economy was heading into a recession. Sound familiar? But after bottoming in October of that year, the markets had one of the most robust growth periods in U.S. history.

Now, I am not quite ready to think that India, China and Brazil are Giants fans and therefore decided to ramp up their economies - and oil demand - following the Superbowl. But the confluence of the rest of these circumstances does make for one nasty conclusion.

Robert Prechter's socionomics theory says that markets create social mood, not the other way around. A falling stock market puts people worldwide in a lousy mood and the worse the trend the worse they feel. It gets implemented in dark culture (war movies do well while comedies do poorly). Let's skip to the end - if it gets bad enough then wars start.

While the parallels between now and 1990 really end with the above, the fact that rising oil and food markets also can create social mood makes the final parallel to 1990 a possibility. War of some kind can break out somewhere.

It may mark the bottom as it did in 1990 as the market sees through to war's end. Or it may not if the market cannot see the end, creating a poor investment environment for a long long time. I won't predict either.

So was it so crazy for "news" (said with serious sarcasm) came out last week that an attack on Iran is coming? The idea of war is crazy but the idea that some people are thinking that way fits right in with the markets.

Let's hope stability comes to all markets soon.

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