A new paradigm… for those who don’t study history

During the current crisis, I often read or hear people talking about how we are in a “new era”, living a “paradigm shift” or “the end of wall street as we know it”. People have short memory span and although never exactly the same, history does rhyme, or as the saying goes, the more things change, the more they remain the same.

Please, play with me this little game. Let’s see whether you are able to identify the time of this happenings and whether you find similarities with anything in the past:

“As the long bull market was reaching its final peak in XXXX another mistake ocurred. To understand what happened it is necessary to recreate the psychological fever which gripped most investors in technological and scientific stocks at that time. Shares of these companies, particularly many of the smaller ones, had enjoyed advances far greater than the market as a whole. During XXXX and XXXX only one’s imagination seemed to cap the dreams of imminent success for many of these companies. Some of these situations did have genuine potential, of course. Discrimination was at a low ebb. For example, any company serving the computer industry in any way promised a future, many believed, that was almost limitless. This contagion spread into instrument and other scientific companies as well.”

Can anyone approximate the year?

What about this one?

“Incompetent, dishonest, and fraudulent behavior by corporate executives, boards of directors, auditors, investment bankers, security analysts, and other market participants. They exaggerated revenues, embellished earnings, and concealed debt, all to make the company’s financial performance look better than it was. The payoffs for the executives were higher share prices that allowed them to turn their stock options into gold. For the auditors and financial firms doing business with these companies, the payoffs were lucrative consulting contracts and underwriting fees. The exposure of the chicanery left large parts of the investing public without faith in the honesty and fairness of financial markets and with less inclination to participate in the future. The guardians failed to do their jobs. The bubble market made many forget about the riskiness of the stock market, and the collapse of the bubble made many exaggerate it, helping to delay recovery.”

Game on.

2 Responses to “A new paradigm… for those who don’t study history”

  1. Joaquin Grech Says:

    Perfect timing. I’ve just read Ben’s entry on Yahoo Finance:
    http://finance.yahoo.com/expert/article/yourlife/167337

  2. Joaquin Grech Says:

    Solved it? Frankly I wouldn’t have been able to guess it either a few years ago. The similarities between bubbles are always so striking that it’s nearly impossible to figure out the time once made anonymous.

    The first example is talking about the 1969 crash, from Philip Fisher’s “Common stocks and uncommon profits and other writings…” (published in 1979), page 258.

    The second example is talking about the 2000 Internet bubble, from Bruce C.N. Greenwald, Judd Khan, Paul D. Sonkin and Michael van Biema in “Value Investing from Graham to Buffett and beyond”, (published in 2001) page 8 in the preface to the paperback edition.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: