March 20, 2020 Food For Thought

Twenty years have passed since the beginning of the new millennium.  They have been an exceptional twenty years. We entered the 21st century with the fear that our entire computer infrastructure would collapse (known as Y2k). As a result there was propagated the belief that computers would fail. In the months and years leading up to the turn of the millennium, many experts predicted the worst, which ramped up the fear. In the end, there was no catastrophe. The transition was smooth.

A few months later, the dot.com bubble burst which began a market downturn which saw trillions of dollars in market value evaporate. Fear lead to a selloff which was further exacerbated by 9/11. In the months that followed the terrorist attacks that destroyed the World Trade Center and killed thousands of innocent victims, people were fearful of more attacks. Life in the US was changed forever. The September 11th attacks accelerated the stock market crash. Investor confidence was eroded. By the end of the stock market downturn in 2002, stocks lost $5 trillion dollars in market capitalization. All of this was fueled by fear of the unknown.

Then there was the stock market crash of 2008 which lead to a panic in global markets and world wide instability. Between late 2007 and early 2009, the economy lost over 8 million jobs. The market crash was the result of a cascade of events that caused fear and resulted in many large company failures. Much wealth was lost. The market high was 14,164 in October, 2007. By March, 2009 (18 months later ) it was 6,469. Many people predicted that the market would never see 14,000 again.

Now we find ourselves in the midst of another panic, the corona virus. Affecting our health AND our economy, this event is like none other that we have experienced before. Yet, it has one thing in common with its millennial predecessors, fear of the unknown. In our current crises, I think that we need to look back on all of the other catastrophes that we have lived through in the last twenty years and see what historic lessons can be learned. First, that fear and panic breed on the unknown. Second, that when it comes to the unknown, there is a human tendency to predict the worst. If you look back on all of these events, there were dire predictions by people who really did not know what was going to happen. But to them, whatever was going to happen, was going to be bad. Third, fear and panic are corrosive to morale, thus making the whole experience that much worse. This, then, serves to prolong the recovery.

History can also be a source of optimism. If you consider all of these terrible events, including our present crises, we can take solace in the following. All of the dire predictions that were made after each and every one of these events never came to pass. The world did not come to an end with Y2k. The stock market recovered after the dot.com bubble burst. There were no major terrorist attacks in the US comparable to 9/11 after that sad day. The stock market saw 14,000 again (and more) after the Great Recession of 2008. We will see this current crises through to the end. When the virus is conquered, as it will be, we will pick up the pieces and carry on, having once again learned that fear of the unknown and the panic that it causes are really the enemy here. And, in the end, as it was once said in another crises almost a century ago,  “All we have to fear, is fear itself”.

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