My dad passed away a few years ago but many of his words still ring in my ears. One of the things he cautioned about was the stock market, an institution he knew intimately as he was part of it from a very young age. He made his fortune there and lost it there as well.
When the stock markets were booming because of the dot com craze back in the late 1990′s, my dad asked, “where is all the money going to come from if everyone wants to cash out?” The numbers were ridiculous. It was all a mere illusion. Prices were sky high, but they represented all but thin air as the companies were not worth anywhere near what their stock prices indicated. Everything was based on future earnings … and for most, they would never ever come.
When the global stock markets started picking up again a mere three years ago, the same words crept into my consciousness, but not in the way that they did in the beginning of 2008. It was quite obvious that something was afoot. Shades of Enron circled the air- the big banks were orchestrating the rise in stock prices, letting things lift, pulling out suddenly, buying back lower and then raising prices again. A mere look at which trading houses were moving which stocks could have told a third grader the same thing.
As property prices skyrocketed soon afterwards, I told my mom that people were bailing out of the stock market and buying into “real” assets. It just didn’t occur to me at that time that the stock markets would come crashing down soon. In hindsight, it all looks so obvious that one would follow the other. After all, as they say in the financial world, when everyone including the taxi driver is talking about making easy money in the markets, its time to get out.
Now, the pessimists have overrun the world and we’re at the other extreme of the pendulum. From analysts claiming US$140 per barrel of oil is reasonable to the same analysts reasoning that US$43 per barrel makes sense given the fall in demand, it just makes me want to scream in agony that the media continues to propagate all this nonsense.
Times like this make me miss my dad even more than usual.
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