Learn from the Past and Invest in the Future
November 19, 2009
I find it staggering how commentators now talk about the inevitability of the downturn of the last few years. Hindsight is such a wonderful thing.
I remember reading many economists, journalists, etc. justifying how asset prices were sustainable, stock markets would keep increasing and debt would rema in ‘cheap’. Didn’t Goldman Sachs forecast oil would increase to $200? We are now seeing a case of people trying to rewrite history.
The important thing here is to understand what has happened over the last few years, learn from it and act appropriately in the future.
I believe there were people saying the increases in various markets/assets were at an above trend rate, however, with moderation and some correction there would not be a recession.
There are some interesting pointers that have come out as ways of spotting a market that needs cooling. The one I think I have heard the most is when it you find it difficult to buy at a level you think works as an investment then it may be worth selling! This works for some asset classes but not all.
I am a strong supporter in investing for the long term. Yes there are those who sold in 2006/07 however when they are looking to invest again they may be able to buy at lower prices but when you factor in current cost of funding it does not look as appealing. Financing investments is such a key part to investing – just look at the private equity companies.
Let’s spend time learning from the past, not rewriting it.