Chapter 25. 2008: The Unbubble
"Election outcomes don't affect markets the way you'd expect them to. . . . In inaugural years we discover that Democratic presidents are phonies and never meant most of what they said in their populist, anticapitalist campaigns. . . . Inaugural years for Republican presidents remind us that they are phonies, too; they don't do much for the economy or for investors."
"The bubble, as an investing phenomenon, has been well studied ever since the 17th-century tulip bulb frenzy. Its counterpart in bear markets is not well understood. . . . In a bubble, anyone who argues pessimistically is seen as crazy. In today's reverse bubble, when you argue optimistically you're seen as the crazy one. . . . Bubbles are hard enough to see, but reverse bubbles are completely invisible."
Two-thousand-eight was the worst year for US and global stocks since 1931—and a year that, by Ken's admission, he was terribly wrong. In 2008, the S&P 500 lost 37.0 percent, and the MSCI World dropped 38.5 percent[97]—awful by any standard. But stocks didn't head straight down all year. Stocks drifted lower during January and February as concerns about a credit crunch, real estate, subprime mortgages, and other issues mounted.
Ken has said in many columns—the old stories everyone is talking about don't cause bear markets. It's the things most people don't see coming that really sink stocks. In Ken's view, the many looming ...
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