Friday, April 5, 2024

History in five crashes - Finance in the last century

 


A History of the United States in Five Crashes by Scott Nations is a fun quick read on key events in our financial history. Is this a history of the United States? No, but what makes this a good read is the set-up history for all these events. The crashes may not have been predictable, yet they should have been expected. They were not black swans, but neon swans with clear warning signs that something was wrong between economic policy, the business environments, and market behavior.  Bad policy coupled with a weak economy is a recipe for a financial disaster. At some point the markets come to their senses that prices must reflex a new reality.

An unfortunate part of the history is the lack of discussion after the events. The post-crash behavior had as much an impact on our financial history as the events leading up to the crashes.

For any reader, this big tells us that it is critical to have a longer-term macro view that accounts for changes in policy. This will not help with the prediction, but it can tell you that the downside risks are increasing and worth a portfolio revision. 

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