Photo: Tyler Prahm for Unsplash.com
GUEST BLOG. Just like an old record that repeats itself ad vitam aeternam, today we are witnessing a “remake” of the same story, with different actors. Indeed, the different signals that the markets have been sending for a few years give me the impression of deja vu…
The Human (with a capital H) being incorrigible, he keeps repeating the same error which leads him every 10 or 15 years to the same results: an economic crisis.
Attention, I do not want to be the apostle of misfortune, I rather want us to analyze everything with an eye that is not obsessively fixed on performance, profits and the dream of the “deal of the century”.
Towards the end of the 90s and especially at the very beginning of the new millennium, it was the bursting of the “internet bubble” which was the cause of the stock market crash of March 2000 and which, in a few months, caused the disappearance, in particular , the entire profits accumulated since 1995 by more than 4,000 companies listed on the Nasdaq, or nearly 200 billion US dollars (US$).
A few years later, in 2008, the “housing bubble” burst causing the American people to directly lose more than US$10 trillion due to the collapse in the value of their real estate, almost as much in loss of value of stock market securities and forcing the government, according to an MIT study, to inject more than an additional US$500 trillion into the economy in order to avoid the abyss.
The numbers are so stratospheric that it is difficult, if not impossible, to comprehend their immensity. In order to put these pharaonic amounts into context, here is what you could do with 500 trillion: cover all the expenses of the Quebec government for the next 3,703 years (annual budget of $135 billion in 2021). Share with each Quebecer (we are about 8 million) a check for 62.5 million. This sum would be enough to buy 500 times Amazon (market cap around US$1 trillion), 250 times Apple (market cap around US$2 trillion), or 6,250,000 copies of Bombardier, the Global 8000 worth $80 million.
That being said, sadly, the same excesses that caused these two economic crises (and other examples abound), are still happening today. Promises of future returns impossible to keep, helium-inflated stock market values, speculative fundraising and an extremely volatile stock market are rarely good signs.
Added to this cocktail is a global supply chain under very high pressure, a general shortage of labour, geopolitical stability at its lowest point, inflation which continues to rise and a new digital speculative bubble which, while like the internet and telecoms of the 90s, makes us dangle, thanks to NFTs, cryptocurrencies, “unicorn startups” and others, mountains of gold…
Far be it from me to want to discourage anyone from investing or not in these new universes full of potential, but which are, in my eyes, today, much more at the stage of the beginning of an idea, a draft or in R&D mode rather than solid companies that have demonstrated their ability to create value.
At the dawn of a crisis, the market sends signals that directly reflect the state of mind of investors. The various corrections of recent months and especially the constant volatility show us that we are going through a period of questioning and uncertainty.
Admittedly, for some it is an opportunity to take risks and possibly win big, for others, like me moreover, I prefer, after having taken the time to analyze the situation, to be the turtle than the Hare.