You never know, instead of this being a repeat of the mid 70's, it could easily be a repeat of the early 80's.
The similarities:
1. In 1980, most investors were far too overweighted in oil and gas stocks, primarily because everyone thought that the price of crude would go to the sky. This year, everyone was far too overweighted in tech stocks because they thought that tech capital spending would grow to the sky.
2. In 1980, a very bright Fed chairman kept rates far higher than anyone thought was rational. He was right then. Greenspan is arguably in the same boat, although admittedly the inflationary world today isn't in the same area code as today's environment.
3. Both then and now, the president-elect was a man who was thought to have little intellect. In addition, most economists thought (and think) that his tax cuts would implode the economy and deficit. While they were right on the deficit, they were sorely wrong on the economy.
4. In 1980, hot stocks like SLB started declining far before the fundamentals started to ease, similar to the declines of INTC and probably CSCO. The hot shot engineering college graduates back then took jobs on offshore rigs for abusrd compensation, similar to the hot shots of today in Silicon Valley.
Sure, there are a lot of reasons why things are different now with technology than they were then with oil & gas. But thinking about it all is good for perspective.
edit: And, most importantly, the returns on the market from the level of the early 80's was pretty doggone good. |
