I have been paying attention to the stock market since the late 1990s. Today, I have observed and experienced three relatively large bull-bear transitions, namely 2000-2001, 2007-2008, and 2021-2022.
In the 2000-2001 bull-bear transition, there were two very important things:
1. The extremely high valuation bubble of Internet stocks and its burst. Before the bubble of most Internet stocks fell, valuations had completely escaped gravity, and then they fell to zero, and many companies did. After the burst of the Internet bubble, the mainstream view in the market is that the Internet is a scam, and there will never be a profit model.
2. 911. In that era, “Clash of Civilizations” was more popular than today, and the world pattern was clearer than today. That is, the pre-modern civilization in the Middle East completely broke with the modern civilization represented by Europe and the United States, and globalization ended. .
Both of these questions seemed unsolvable at the time.
As a result, after the bubble burst, the Internet stocks have slowly found a profit model, and in the next two decades, they have become the most powerful driving force for global economic growth. After 9/11, the world cooperated in counter-terrorism, globalization has not been shattered, and economic and trade relations between countries have become closer.
There are also two very important things in the 2008-2009 bull-bear transition:
1. The U.S. real estate bubble represented by the subprime mortgage crisis and its burst. Before the bubble burst, the prevailing view was that no one would be rich without a house, and those who didn’t buy a house would no longer be able to get in a car. After the collapse, the mainstream view is that the “virtual economy” model centered on real estate and finance has come to an end, and the global economy cannot find new growth points.
2. The global commodity bull market and terrible inflation. Before the bubble burst, almost people all over the world believed that the rest of their lives would be under the high oil price of more than 100 US dollars, and they could only be oil slaves.
Both of these questions seemed unsolvable at the time.
As a result, the U.S. real estate market recovered quickly, and the mobile Internet became the engine of a new round of economic growth. The commodity bubble burst, and the world has enjoyed more than a decade of low oil and energy prices.
The bull-bear transition in 2021-2022 also has several factors superimposed:
1. The flow of people and logistics caused by the new crown epidemic is blocked.
2. The new global macro-political and economic situation represented by the conflict between Russia and Ukraine and the tension between major powers.
3. China’s real estate liquidity crisis.
4. Inflation caused by energy prices and supply chains.
In each round of bull-bear conversion, the triggering factors are not the same, and the paths to get out of the crisis are also different. But they also have the same things:
1. There was a valuation bubble before the crisis. People can’t predict when the boom will bust, but the bubble always bursts once in a few years.
2. The triggering of the crisis is superimposed on multiple negative factors that seemed unsolvable at the time. People can’t predict when the crisis will come out, but in the end the crisis is over.
So in the final analysis, the most amazing thing is the ability of human society to correct mistakes, find a way out or rebalance, which is as miraculous as the immunity of the human body. Emotions are always swinging between excitement and depression; asset prices are always swinging between high and low; the world order is always swinging between globalization and isolationism; policies are always swinging between regulation and relaxation. However, the specific swing time and magnitude cannot be accurately predicted and grasped. What we can do is to remain optimistic when we are depressed and vigilant when we are excited.
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