Do We Ever Learn From The Past?

Human nature often allows us to ignore the past rather than allow us to learn lessons from the past.  We always think that “this time is different.”   In fact, there is tremendous capacity within the human mind to not allow individuals, and especially the public at large, to be burdened by the lessons of history, and believe that we are in a new era in which the old rules no longer apply.

We clearly saw this during the times of the Great Depression.  In fact, Herbert Hoover reflected upon the period just prior to the Great Depression in his memoirs:

“With growing optimism, they gave birth to a foolish idea called the “New Economic Era.’ That notion spread over the whole country.  We were assured we were in a new period where the old laws of economics no longer applied.”

And, if you think this “foolishness” was isolated to the period of the Great Depression, think again.

In 1998, an article appeared in the Wall Street Journal entitled “Growth Forever.”  The author attempted to convince the readership, as they did during Hoover’s time, that we had conquered the business cycle:

“As we have the tools to keep the current expansion going, we won’t have [a recession.]  We have the monetary and fiscal resources to keep one from happening, as well as a policy team that won’t hesitate to use them for continued expansion.”

We have had two major recessions in the 15 years since the printing of that article.  That is quite a lot of recession during such a short period of time, especially in light of the fact that the common perception just before was that “we won’t have a recession.”

Now, I have to tell you that this last quote sounds eerily similar to the common perception of the Fed today.   In fact, we may even be worse off today, since it may even be more pervasive today that at any time in history that there is a not-so-invisible-hand that is propping up our market.  Where do you think the term the “Bernanke-Put” came from?  The public is certain that the Fed has the markets back, so to say.  In fact, most average Americans even believe the fallacy that the Fed puts money directly into the stock market to push it higher.

When I publish article after article on MarketWatch, there is not a single week that goes buy where at least 5 posts are made (and sometimes dozens) in which individuals note how certain they are that this market will not go down as long as the Fed is pumping money through the Quantitative Easing process.  In fact, it is probably the most common post I have seen to date, only to be followed by their “feelings” about Elliot Wave.  J

Another historic matter that most forget is the record amount of money that went into IPO’s in 2007 just prior to one of the largest market declines in history.  In fact, 2013 is now rivaling 2007, and may potentially exceed the IPO fury of that time.  And, now with the hype of Twitter coming to the forefront, it would not at all surprise me to see the IPO of one of the largest social mediums mark the relative peak of the stock market for 2013.  Actually, I think it could actually be quite fitting when you think about it from a socionomic perspective.

So, I am sure some of you are now thinking that I am trying to scare you into believing the end of the world is nigh upon us.  No, I am not.  I am simply attempting to make you consider that seemingly positive events may not at all be what they seem, and, in fact, may be quite the contrarian clues as to what we may be seeing in the near term.  But, no matter what does happen, I simply want you to think for yourselves, and not believe the common hype or hysteria that is so often pushed upon us through the multiple avenues of news medium available to us.   It is only then that you are able to rise above the herd and truly act in a positively contrarian manner.