Were The Last Four Years Crazier Than the Dot.Com Bubble?

Were the last four years crazier than the Dot.com bubble? One of our "Brain Trust" analysts thinks so. What of it?

Well, it true, then we look at the years following the bursting of that Dot.com bubble: 3 down year for stocks, something no one anticipated. It was quite a shock at the time. Naturally, most folks have forgotten all about it. 

That's the way it is in the world of financial markets. There's a kind of permanent dementia or Alzheimer's in the DNA of Wall Street. Except that it's a particular kind of forgetfulness: Everything bad is forgotten.

Not sure about this? Think of 2008 - really 2007-2009. Remember how bad that crisis was? No? Then you've likely been subsumed into the cloud of forgetfulness that Wall Street pumps out on a daily basis. It's like driving along the highway with a dense fog forming and following behind you. You can't see anything in the rear view mirror, only what's in front of you.

Now driving with full attention on the road is the right way to drive (not looking at your phone, or even talking to folks as you drive). But any experienced driver knows that glancing at what's going on behind is important too. Think of when you have to switch lanes. You look to the side and behind you on the side you're trying to switch to, right? It's even wise to generally glance into your rear view mirror from time to time just to know what's going on.

Not that what's happening behind you is more important than what's in front. But sometimes it's at least as important. I remember one time sitting in traffic on the New Jersey Turnpike and checking my rear view mirror. I was stuck in the left lane, kind of pinned in as traffic was barely moving. All of a sudden, some crazy guy (or gal) comes barreling down the left lane at some unfathomable rate of speed. I have no idea how the lane I was in was clear for such a distance, but it was. And I could not maneuver out of his way. All I could do was pray. It was one of the most frightening experiences I've had driving. Some combination of moving out of harm's way and/or that nut eventually slowing down resulted in a scary non-event. (Thank God.) It all happened so fast, I really don't remember exactly what happened.

In any case, it's an example of why we do look behind us. You never know.

And in the case of changing lanes, it's essential. Otherwise you're switching lanes "blind" - never a good idea. If you've ever had anyone switch into your lane oblivious to your being right next to them you know what I mean. 

So what's your choice if you can't see to the side or behind you. Well, If you want to preserve your life, you're stuck with staying in your lane. 

Maybe that's why Wall Street spews fog at us to obscure the past. They want us to stay in our lane. And typically that lane consists of buying and holding stocks - whether to our detriment or not, but definitely to their benefit.

One more thought: If indeed these last four years were crazier (more volatile, as much or more of a mania than the Dot.com years, for example) will the resulting correction (Bear Market) be the same or worse than the 3 year drop in the early 2000s? Who really knows. The relevant point: Don't be shocked if it is comparable.

That doesn't necessarily mean 3 straight years of downward prices in stocks. Could be there'll be another variation like, let's say 4 down years in the next 6, or low returns for 10 years, or...well, something not good.

And unlike the Dot.com bust, bonds fell heavily last year. Don't forget this. If both stocks and bonds start heading south, what will you do with your investments? And it's not like that couldn't happen. It just did in 2022. 

Then again, you may sign up with the Bulls, with the thought that the bad has already passed. Now it's back to business as usual. 

You could. But do you want to stake your life savings or your retirement on this?

Food for thought, I hope, to start this New Year.