Clive Corcoran

Bear Market Rallies and Lessons of History

Thank you for this very well researched and presented piece.

As suggested each of the thee periods cited for the big moves of your first graph had different economic/financial circumstances, different demographics and different policy responses.
What makes all three similar is that they depict the way that human beings are prone to blowing up unsustainable bubbles and then having to deal with the nasty consequences which inevitably follow.

The bubbles shown are the three biggest - as we know there have been several smaller ones along the way as well.
The current conventional wisdom is that we are a lot smarter today, in terms of our knowledge of financial economics than we were in the 30's or the Japan of the 90's but if one buys into that premise we then have to ask - how did we manage to create the two mega bubbles of 2000 and 2006/7 in such close juxtaposition?

This is the added dimension that makes the current situation most unlike the previous two - we had a rolling bubble which first broke in 2000 was never fully resolved which lead to an even more stupendous bubble of 2006/7 and which the current cheerleaders claim has been virtually done and dusted within a year.

We have either become so much smarter in dealing with such crises ,or so much fatigued by them that, like the frogs who fail to realize that the water is boiling because they were being systematically and incrementally roasted, we simply cannot appreciate the enormity of our current predicaments.