Have you ever tried your hand at public speaking? It can be great fun, though it can also be quite daunting. But many public speakers quickly learn to use prompts that aid the memory during a speech, regardless of its length. I use mnemonics in my presentations. I have to – I have a mind like a sieve, sometimes. I also use mnemonics that remind me about key stock-market events of the past. It helps remind me that regardless of how catastrophic a particular stock-market episode might seem at the time, we have always recovered, strongly. Calamity So, I would…
Have you ever tried your hand at public speaking?
It can be great fun, though it can also be quite daunting. But many public speakers quickly learn to use prompts that aid the memory during a speech, regardless of its length.
I use mnemonics in my presentations. I have to – I have a mind like a sieve, sometimes. I also use mnemonics that remind me about key stock-market events of the past.
It helps remind me that regardless of how catastrophic a particular stock-market episode might seem at the time, we have always recovered, strongly.
So, I would like you to cast your mind back to September 2008, when Lehman Brothers collapsed.
At the time, Lehman was the fourth-largest investment bank in America. The thought of Lehman ever being in trouble was bordering on unthinkable.
But then the unthinkable did happen – Lehman filed for bankruptcy, after most of its clients defected.
The impact on the market was nothing short of calamitous. The Straits Times Index (SGX: ^STI) halved from around 3,500 points to about 1,500 points. Our stock market was going through the floor, or so it seemed, at the time.
But even though the stock market fell sharply, the Straits Times Index was still higher than its 1997 nadir of around 850 points, when another shock – the Asia Financial Crisis – struck.
On both occasions there was plenty for investors to fret about. I believe that Armageddon might even have been mentioned a few times.
In 1997 it was all about crumbling emerging-market currencies. In 2008, it was about failing banks. The thing to remember, though, is that some people make a career out of worrying.
It is grist for the mill for journalists. Brokers love it too. It is a great opportunity for them to scare clients witless, which means more transactions and more commissions.
But here’s the interesting part. Some investors – the smart ones – ignore the noise. They also look beyond the bad news and recognised that some stocks could even be ostensibly cheap. They are the instigators of the next bull market.
But not everyone is convinced. Even as shares started to rise after both the Asian Financial Crisis of 1997 and the Great Financial Crisis of 2008, many investors – who were scarred by the market loss – remained sceptical.
But the rise in shares gradually reassured some sceptics that their fears had been overdone.
Gradually, more doubters started to believe that the worst could be over. And the market steadily ascended the wall of worry.
So, despite the deep gloom in 1997 and the utter despair in 2008, the market rose.
We are now experiencing another one of those moments of utter despondency. The villain of the piece might be different but it’s the same piece, nevertheless.
So, replace sovereign debt default with falling oil prices; substitute joblessness in the US with China’s stock-market slump and swap America’s burgeoning debt with emerging-market woes, and you have another volatile cocktail of concerns to shake markets to the core.
At the moment, the popular consensus is to run for cover because they say that this time it is different. But legendary investor John Templeton once said that the four most dangerous words in investing are “This time it’s different.”
Things are never different. It is just that we sometimes just can’t see the wood for the trees.
If the global economy can recover from the Asian Financial Crisis and the Great Financial Crisis, it is hard to see how a few extra million barrels of oil is going to do anything other than to remind us that the only thing we learn from history is that some people never learn from history.
A version of this article first appeared in Take Stock Singapore. Click here now for your FREE subscription to Take Stock — Singapore, The Motley Fool’s free investing newsletter.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.