Paul Farrell notes that “Many, many experts did predict and warn of the 2008 meltdown years in advance.” Yet it seems that business, finance and political leaders ALWAYS fail to see the next collapse coming. Why is that?
To answer this, Farrell channels Jeremy Grantham:
“Why do national leaders fail over and over to learn the lessons of history? Grantham said it best in a Barron’s interview a couple years ago: “Why is it that several dozen people saw this crisis coming for years? I described it as being like watching a train wreck in very slow motion. It seemed so inevitable and so merciless, and yet the bosses of Merrill Lynch and Citi and even Treasury Secretary Paulson and Fed Chairman Bernanke, none of them seemed to see it coming.”
Farrell enumerates seven reasons this always has, and is likely again, to lead to more trouble. He advises you to not forget any of the following elements:
1. Many, many experts did predict and warn of the 2008 meltdown years in advance.
2. Wall Street banks, corporate executives and Washington politicians are short-term decision-makers.
3. Most business, banking and financial leaders are short-term thinkers, focused on today’s trades, quarterly earnings and annual bonuses. Long-term historical thinking is a low priority.
4. As a result, it is virtually certain that America’s leaders will focus on upbeat, good news and always miss the next meltdown because warnings of a coming catastrophe are ignored.
5. Warnings from the few with a long-term perspective will always be dismissed during every investment cycle and every future recession/recovery cycle. Always. It’s in their DNA, trapped in their brain cells and demanded by their followers.
6. If you are a typical left-brain Wall Street or corporate executive, it’s virtually certain that you will miscalculate the timing/impact of the next meltdown, the next big collapse that’s off your radar. As a result, your company’s assets are at risk of suffering massive losses that are “predictable, not random.” But because you’re in denial, you will not deem it necessary to take steps to protect your assets.
7. If you’re a right-brain thinker, your longer-term historical perspective will give you a clear advantage in preparing for the next crash and the depression that follows.
File this away, and look back at it in a few years — I like to do that with Outlook or Yahoo Calendars, and get a pop message. This one is scheduled for 2014 . . .
by Barry L. Ritholtz of The Big Picture who is one of the few strategists who saw the the coming housing implosion and derivative mess far in advance. Ritholtz issued warnings about the market collapse and recession in time for his clients and readers to seek safe harbor.
2008 crash deja vu: We’ll relive it, and soon
Paul B. Farrell
Marketwatch, April 26, 2011