2008 was a vintage year. My first daughter was born in 2008. I bought a Porsche. I’d just raised a round of funding for my start-up therapeutics company. We’d lived in San Diego long enough that people we’d met here had grown to be good friends.
All in all, I had a great year, but for many people, it was financially devastating. Before 2020, people would think of 2008 as the last terrible year, the last unmitigated yearlong disaster.
My personal circumstances were such that the only bad part of my year was seeing so many friends suffer, and that can take all the fun out of just about anything besides becoming a dad. My timing was fortuitous; I was just plain lucky.
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Economically speaking, this year has been comparably awful to 2008. 401k’s turned into 201k’s. Political divisiveness. Soaring prices. Job losses. Fentanyl. Suicides. War.
Stocks, cratering to new 2022 lows again this week, are now pricing in virtually endless interest rate hikes, 1970’s-style inflation, the first-ever completely broken U.S. Treasury market, and a wave of defaults, earnings cuts, layoffs, crashing home prices and shortages of energy and food. Oh, wait, I may have forgotten one… Have we priced in nuclear war yet?
I don’t know, but if we have, the returns on your stocks in that economic model won’t be particularly important to you. So, there’s that.
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I’ve been bearish, but I’m not apocalyptic. At least, not yet. Things are likely to get much worse, but they’re unlikely to be as bad as the worst of our imaginations. And when this market turns, smart investors will emerge even stronger than we were before this whole mess because we will have kept a cool head and made rational decisions instead of emotional ones.
Market environments like this one are where all of this century’s value creation has emanated. With today’s lower prices and falling valuations, we are laying the groundwork for a new era of growth. It may not feel that way at the moment, but that’s why not everyone gets rich.
Turn the record over; I’ll see you on the flip side.
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