What if it was happiness, not price, that peaked in 1999?
That’s how it feels to me. Since that time there’s been terrorism, war, political viciousness, and a housing bubble that was likely driven in part by an emotional need to huddle, to cocoon. We’ve also seen two, significant bear markets since 1999–the current one in the making for a year. Oh, and we’ve topped it all off with a financial crisis, and the spectre of a new Depression.
This entire decade has been quite negative. Nothing was ever good enough. Gone was the social pride of the tech boom, replaced by angst. Wages and job growth were insufficient. The rise of industrial Asia was doubted. The commodity boom was hated.
If the 1990′s were a second Age of Reason, in which humanity would be structurally improved by technology, then I’m inclined to argue that we’ve been crashing for nine years from those highs, and have now descended into a massive emotional low. In this current low, the modern system of belief and relationships (credit) is attacked, in a kind of systemic test of its worthiness. I’m now certain we’re in the most extreme sentiment event since the highs of the last decade.
Further to this longer view is the observation that in our current financial turmoil, correlation among assets classes is increasing to its own extreme. For example, a friend trotted out a chart of a copper producer last night and remarked it looked like a chart of Enron. I remarked that every asset in the world looks like that chart–with a large Stick either pointing skyward or earthward. Currencies, equities, bond prices, bond yields, spreads, volatility. This further confirms my view that a collective emotional wave is washing over us. Even as we record it through something called price.
The implications here are that we are still very much tethered to the joyous highs of wealth, pride, and cultural satisfaction of 1999. Seen in this light, the bear market has been wearing on for years. A nine year slide in both real and nominal terms, and as important, in emotional terms. Given that measurements of fear globally are registering either historic highs, or near historic highs, I must cautiously suggest we are near the extreme of a decade long progression, into the pit of disbelief.
-Gregor
