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[Ulisses Pereira]

"Signs of The Times"
Todd Harrison
Feb 18, 2009 7:45 am


" The more things change, the more they stay the same.


“So you run and you run to catch up with the sun but it's sinking. Racing around to come up behind you again.”
--Pink Floyd

Benjamin Franklin once said that the definition of insanity is doing the same thing over and over and expecting different results. As our economy dives deeper into recession, we should remind ourselves that the more things change, the more they stay the same.

In May of 2007, I listed anecdotal evidence that compared that period to the late-1990’s and suggested financial markets were living on borrowed time. With social mood sour and the tape demonstrably lower, I wanted to revisit those vibes and add fresh perspective.

In 1999, globalization was the justification for growth. In 2007, we saw the seeds of isolationism that paved a path towards nationalization. Today, we find ourselves at that crossroads with our destination predicated on orderly debt destruction.

In 1999, folks traded on margin. In 2007, there was the looming yet largely unforeseen credit bubble. Today, the debt dynamic is front-page news as companies with clean balance sheets position themselves as winners in the new world.

In 1999, day trading was all the rage. In 2007, condo flipping was in vogue. Today, real estate bargains have begun to emerge as an unfortunate function of the foreclosure process.

In 1999, policy makers praised the new paradigm. In 2007, politicians took aim at lending practices. Today, they’re grandstanding on a national stage.

In 1999, we had the Greenspan put. In 2007, there was the Bernanke helicopter. Today, the credibility of the Federal Reserve is fragile at best.

In 1999, Dan Dorfman moved markets. In 2007, Jim Cramer was a self-proclaimed equity evangelist. Today, the point of recognition has arrived that we must take responsibility for our own financial decisions.

In 1999, corporate malfeasance percolated in select situations under a seemingly calm surface. In 2007, insider trading shouldered much of the blame. Today, the entire financial industry is widely viewed as being evil.

In 1999, we had venture capitalists. In 2007, we had private equity. Today, anyone with an ability to add capacity into this downturn is in a position to prosper.

In 1999, we rationalized dot.com valuations. In 2007, we were unconcerned with debt levels. Today, we understand that a stable foundation is a necessary precursor for growth.

In 1999, Nobel Prize winners could do no wrong. In 2007, Goldman Sachs (GS) pedigrees were viewed the same. Today, the notion of trust is considered the single greatest commodity.

In 1999, there was a scramble into index funds. In 2007, there was a race to chase hedge funds. Today, capital preservation and debt reduction are prevalent investment themes. STOCKSRELATED ARTICLESALSO BY...
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In 1999, the FOMC was walking a tightrope. In 2007, we wrote that they were fitting themselves for a noose. Today, with interest rates near zero, they’re inventing new approaches in an attempt to stimulate the economy.

In 1999, Julian Robertson capitulated on his short bets. In 2007, Richard Russell did the same. Today, any hint at a constructive market stance is widely considered foolish.

In 1999, we had a financed based economy. In 2007, we had a finance dependent economy. Today, we have a financial revolution.

In 1999, Gordon Gekko was an icon. In 2007, he was slated to make his return as a hedge fund manager. Today, we realize that Lou Mannheim was right all along.

In 1999, there was the fear of missing further upside. In 2007, we offered that the same dynamic existed and despite an all too familiar script, the thread between decades was a profound sense of entitlement.

Today, the fear of losing—investments, homes, our freedom—has edged to the forefront of mainstream psychology. It should never take something bad to make us realize we had it good. While unfortunate, it is a necessary precursor to greener pastures that will allow us to better appreciate them when they arrive.

It has never been written—not here, not anywhere—that indulgence is due for simply showing up. Profiting is a privilege, not a right, and the quest for reward should never arrive without an acknowledgment of risk.

As someone who has lived on both sides of the societal chasm, I can relate to the luxury of deep pockets and empathize with those forced to make choices.

Ironically, both ends of that spectrum seemingly share a common characteristic. In order to get through this, we needed to go through this.

In a perverse way, we’ll together benefit from going through it now.

R.P. "

(in www.minyanville.com)