DailyNews Online Edition

History repeats itself - so be patient!

Quite painfully, nowadays I often come across many instances which are not very good in taste. Why so, because most of the global population is feeling the effects of the current economic malaise that has spread like a virus to the world’s economies.

We keep hearing statistics that we are currently facing the worst economic situation since the end of World War II. The 2007–2012 Global Financial Crisis (GFC), is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s.

It resulted in the collapse of large financial institutions, the bailout of many banks by national governments, and downturns experienced in stock markets around the world. In many areas, the housing market also suffered, resulting in evictions, foreclosures and prolonged unemployment.

The crisis played a significant role in the failure of key businesses, declines in consumer wealth estimated in trillions of US dollars, and a downturn in economic activity leading to the 2007–2012 global recession and contributing to the European sovereigndebt crisis. It is not the case of one single individual, one company, one country or one continent, but the whole world seems to be reeling under the pressure of financial pessimism.

The countries which few years back were enjoying double digit growth are now experiencing single digit with continuous downslide in their growth rate, whereas some other economies are not growing at all. As a result business is slow across the board, people are losing jobs, inflation is rising (making difficult for a common man to survive), and there are many more discouraging events happening across the world.

It is often said that those who do not remember the past are doomed to repeat it. With economics it’s no different, considering the world has experienced dozens of crashes and recessions, undoubtedly caused by greedy traders and lawmakers with few memories of the past. Many people wonder where we are in the financial landscape. Are we starting a new bull market?

Or are we in an ongoing bear market? When is the market going to continue going up or when is the market going to drop again to find its real bottom? In this hour of crisis, the only phrase which comes to mind is to remember that - “History repeats and repeats itself”. Therefore, temporarily forget it at your peril. All bubbles break, all investment frenzies pass away. You absolutely must ignore the vested interests of the industry and the inevitable cheerleaders who will assure you that this time it’s a new high plateau or a permanently higher level of productivity.

The market is gloriously inefficient and wanders far from fair price but eventually, after breaking your heart and your patience (and, for professionals, those of their clients too), it will go back to fair value. Your task is to survive until that happens. The world’s economy is actually rather fragile and can be upset by the most innocent of motives. No matter what the reasons are, one thing is certain -- we have always recovered from these devastating periods over and over again to experience positive economic growth on the other side.

History tells us that opportunities will emerge as we recover from the current crisis, as valuations are low. But opportunistic trading is not the key to long-term value. However, we will inevitably return stronger and wiser than before -- just don’t forget the past. However, we should not be satisfied just by believing that ‘history repeats itself’ and thus there is a strong possibility of things improving in the days to come.

Rather, this is the time to introspect and take some lessons out of this crisis. There are many man-made reasons which caused the current financial crisis. We must not forget that many countries, during their so-called good old days did not follow the law of prudence, which calls for avoiding reckless spending. This applies not only to a country but to every human being.

Anybody indulging in reckless spending, for sure will invite financial troubles in their life at one or other times to come. In this hour of financial pessimism, while there’s no time frame that can be guaranteed as to when we will exit from the current economic state of affairs, but one thing is for sure, at some point in time things will start to improve. In the meantime, keep a positive attitude and work towards a positive and useful future.

Otherwise what choice do we have, except to remain patient? It’s time to make lemonade out of the lemons and never again forget the hard truth that ‘history repeats itself’. So this time around too, the same will happen – just wait, it is a matter of time only!!!