Below is an excerpt of an article written by Todd Harrison, founder of Minyanville and former hedge fund trader. The article is posted on the Minyanville website. We believe it decribes the process of discovery we are experiencing as a result of the financial crisis.
"The unfortunate capital market destruction is an inevitable comeuppance, the cumulative result of risk gone awry. It’s been percolating under the seemingly calm surface for several years, magnified by financial engineering and consumed by an immediate gratification society.
The socioeconomic consequences will be pervasive as we enter the other side of the business cycle, an unenviable retrenchment that politicians and policymakers have tried so hard to avoid. It’s certainly scary as new beginnings always are.
Therein lies the opportunity.
The media portrays the Great Depression as one where everyone in America stood on street corners or waited in a bread line. A closer look shows that similar to today, economic hardship for the middle class began well before 1929.
We’ve got a few lean years ahead but that’s nothing to fear. In fact, it’s a healthy and positive progression.
To get through this, we need to go through this. As painful as the process is, it takes us one step closer to an eventual recovery.
I view the Great Depression as the framework for optimism. Most of society worked, great discoveries were made and formidable franchises were established.
Indeed, if the greatest opportunities are bred from the most formidable obstacles, we’re about to enter a most auspicious era.
The 90’s were about wealth, accumulation and consumption and we’ve now entered a period that is entirely more austere, if not more sensible.
Debt reduction and the rejection of materialism will continue to manifest as we come to terms with doing more with less.
Flashy rides and big-ticket items that were once badges of honor now serve as hollow reminders of misplaced priorities.
Humility, once viewed as weakness, will be embraced.
Doing for others -- rather than asking what others can do for you -- will become more commonplace as people learn to appreciate what they have rather than constantly keeping up with the Dow Joneses.
This mess is a bitter pill to swallow, particularly for the mainstream American who doesn’t know a derivative from a dividend. We can point fingers and wallow in the “why” or take a deep breath and begin the process of recovery.
Something good comes from all things bad and the greatest wisdom is bred as a function of pain.
It’s unfortunate that the structural foundation of the global capital market system had to shake before people -- and policymakers -- paid attention but it is what it is and we’ll do what we must.
Surround yourself with people you trust. Practice risk management over reward chasing.
It won’t be an easy road but it won’t be impossible either."
