Intelligent Investing Finally Returned in 2022
Every crisis features human actors, and they always seem to step on the same rakes. They overlend and they overborrow; they get bullish at the top, and then, wouldn’t you know it, they get bearish at the bottom. The longer I live, the more I see that human beings have no business dealing with money. They are genetically unequipped for it, and it’s a wonder that anybody’s solvent.
Then again, no two crises are exactly the same. Except for the differences, after all, the historians would have all the money…
~ Jim Grant, of Grant’s Interest Rate Observer, April 16, 2009
For those of us with an inclination toward understanding current events through the lens of history, periods of irrational exuberance represent a special challenge.
On the one hand, periods of irrational exuberance have occurred so often throughout history, with such fascinating similarity, that they naturally make market historians pre-disposed toward skepticism. This skepticism flows from a keen awareness of the tremendous impact of the inevitable fallout once the exuberance comes to an end.
Yet on the other hand, history often rhymes, but it does not repeat. This makes navigating the aftermath of a period of irrational exuberance an existential challenge, because each period is unique. As investors, we must respond to market trends as they actually unfold – not as history says they should unfold.