“This is how the world ends / Not with a bang, but with a whimper.”
T.S. Eliot. Photo: Lady Ottoline Morrel. Source: Wikipedia
These are the closing lines from T.S. Eliot’s famous poem “The Hollow Men.” The poem is about exhaustion, disillusionment, and ennui in a war-weary post-WW I Europe. It describes the sense of being caught between wanting to do something and doing it; between—in the poet’s words—conception and creation. And its final lines are some of the most quoted in the English language.
We often find that things end “not with a bang, but with a whimper.” That is, they don’t have a big cinematic climax, but a gradual decline. It’s often that way with markets. The Lehman bankruptcy in 2008 was followed by a market collapse in October, as it was clear that the ensuing credit-crunch would lead to a major recession. But the market didn’t hit bottom until early March of 2009—as fears over bank nationalization and other recessionary issues peaked.
We saw the same pattern during the Euro-crisis in 2011. There was a speculative blow-out in early August of that year, as worries over a potential Greek exit from the currency peaked. But the market didn’t bottom out until October, after ECB President Mario Draghi said he would do “whatever it takes” to save the Euro.
It seems that in the current downturn, we’ve seen the “bang” of the Chinese Yuan devaluation and the bursting of their market bubble. But we haven’t seen a “whimper” yet. That is, we haven’t had a period of higher volatility and grinding decline. But just because we haven’t seen it yet doesn’t mean we won’t. The market’s ride is likely to get a little bumpy.
Good literature endures because the author describes something true in our own minds. And sometimes we find its lessons to be true in the markets as well.
Douglas R. Tengdin, CFA
Chief Investment Officer