The stock market has been a bipolar stroller this week, and it’s freaking people out.
There are many ways to view the seismic shift we’re witnessing: anger (as expressed by Main Street), sadness (as savings are destroyed), fear (as reality bites) and confusion (as folks try to understand how this could happen).
And there’s anticipation as we cast an eye forward and look for the phoenix that will eventually arise from the scorched earth.
The capital market destruction is a cumulative result of risk gone awry. It’s been percolating under the seemingly calm surface for years, magnified by financial engineering and consumed by an immediate gratification society.
Mother Nature has unleashed her wrath as she explores the other side of the business cycle that politicians have tried so hard to avoid. It’s certainly scary, as new beginnings typically are — therein lies the opportunity.
The media portrays the Great Depression as a time when everyone in America stood on street corners or waited in a bread line. A closer look shows that, similar to our current situation, economic hardship for the middle class began well before 1929.
We’ve got a few lean years ahead, but that’s nothing to fear. In fact, it’s a healthy and positive progression. To get through this, we need to go through this, and as painful as the process is, it takes us one step closer to an eventual recovery.
I view the Great Depression as the framework for optimism. Most of society worked, great discoveries were made and formidable franchises were established.
Disney (DIS) built a global franchise through that period.
Hewlett-Packard (HPQ) was born on the back-end.
Texas Instruments (TXN), Tyson Foods (TSN) and Continental Airlines (CAL) were birthed.
Indeed, if the greatest opportunities are bred from the most formidable obstacles, then we can look forward to a most auspicious era.
This may be a bitter pill to swallow, particularly for those who don’t know a derivative from a dividend, but we can either point fingers and wallow in the “why,” or take a deep breath and begin the process of recovery.
It’s unfortunate that the foundation of capitalism had to shake before people — and policymakers — paid attention to the root causes of our current condition, but we can’t dwell on what was. We need to focus on what can — and will — be.
Surround yourself with people you trust. Preserve capital, reduce debt and become financially aware of your surroundings. It won’t be an easy road, but it won’t be impossible, either.
For as my grandfather, Ruby, used to tell me: “This, too, shall pass."