Even the pundits don’t know

Every rise in the equity markets brings hope and every correction soon after, despair. Investors stuck with portfolios that are showing large losses are a confused lot. Should one book the loss and move out? Or should the portfolio be allowed to hibernate until the next boom? Or is it the best time to buy? If no one knew that the fall in the markets would be so deep, and that financial institutions across the world could collapse so badly, then it is also true that no one knows when markets will revive or what can set the financial system right. It will, therefore, be a long process of discovering what has gone wrong and how it can be fixed, before markets stage a comeback. Never underestimate the impact a financial crunch can have, even on otherwise strong and profitable businesses. Many companies have lived through crises and reinvented themselves, but they are not easy to spot in the middle of a storm. Rather than look for advice about what to do next, understand that we know too little to be able to do meaningful analysis of any kind. Humility is a trait that markets enforce on participants from time to time. And that’s a valuable lesson.

Keep an eye on the yuan
The biggest surprise in the current crisis is the strength of the US dollar. For all the

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