The Scar left from the Global Crisis - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 13 July 2013
The Scar left from the Global Crisis A  A  A

- By Asad Dossani, Author, The Lucrative Derivative Report

Asad Dossani
When we examine the historical performance of stock markets, we tend to come to the following conclusions. When markets are falling, investors are pessimistic and sentiment is poor. When markets are rising, investors are optimistic and sentiment is positive.

Since 2009, global stock markets have been on an incredible bull run. For example, the NSE-Nifty index has more than doubled its value since its lows in 2009. The same holds true for US and other large stock markets around the world. Despite the strong performance in markets, most investors are still pessimistic and sentiment is very negative.

This is highly unusual. The stock markets have more than doubled and yet we still fear that the next crisis is just around the corner. Furthermore, economic growth around the world is recovered. Even growth in India appears to have hit its low. So then why do we still have so much fear?

The global crisis was a major event that we are still recovering from. Over the last few years, investors have constantly worried about a crisis occurring. We are so used to this mode of thinking, and this makes it difficult to imagine a world otherwise. The global crisis has left a scar on us. Though the risk of a crisis has diminished considerably, our mentality is still the same.

Much of the blame for this lies with the financial press and media. The press has perpetrated the view that the next crisis is always just around the corner. Headlines have a negative bias towards them, largely because headlines mentioning a crisis attract more readers than they would otherwise. So there is a strong incentive for the press to keep up the view that we should fear the next crisis.

To take an example, when the US Federal Reserve engaged in its quantitative easing programs, the press hammered down the point that this would lead to hyperinflation. Many investors bought huge quantities of gold in anticipation of this. Of course, nothing close to hyperinflation has actually taken place. And now gold has fallen back, as the global economy is recovering, and the QE program is getting reduced.

In order to be a good investor and analyst, it is a good idea not to pay too much attention to the headlines, and to take everything with a pinch of salt. Instead, we should look at the facts. We should look at what the markets are doing, and what economic indicators are telling us. Once we do this, we can finally leave the global crisis behind.

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is a financial analyst and columnist. He actively trades his own and others' funds, investing primarily in currency, commodity, and stock index derivative products. Prior to this, he worked at Deutsche Bank as an analyst in the FX derivatives team. He is a graduate of the London School of Economics. Asad is a keen observer of macroeconomic trends and their effects on global financial markets. He is deeply passionate about educating investors, and encouraging individuals to take part in and profit from financial markets. To put it colloquially, he wishes to take Wall Street products and turn them into Main Street profits!

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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