The End of History?


Before men of twisted ideology — seven years ago today — brought inconceivable violence to the shores of our country, ending an extended period of calm and prosperity that many had hoped was becoming a permanent feature of the world, a theory known as "The End of History" had been gaining currency within the world of intellectuals.

This theory argued that capitalism and freedom would be the eventual victors over communism and dictatorship. Free markets, free peoples, democratically-elected governments would multiply and become the dominant feature of the world, resulting in a reduction of the conflicts, wars and misery that have so characterized human history.

In the context of a 17-year bull market from 1982 to 1999, the breakup of the Soviet Union and the spread of freedom throughout Eastern Europe, this theory struck a chord. Optimism reigned.

Mirroring this sense of optimism in the political world was a similar phenomenon emerging in the world of financial markets: the end of risk. And this optimism — some would now say, excessive optimism — dies hard, particularly with us Americans.

Who would have thought that so soon after the cataclysmic events of Sept. 11 — and so soon after the tech debacle and recession of 2001, when risk seemed so ubiquitous — we would witness a credit crisis brought on by the collective neurosis of complacency.

Americans seemed to be saying: "Yeah, yeah, tech bubble, terrorism — I know, I know. Now, how do I tease an extra 50 basis points out of that money market fund, and why am I not making 20 percent a year like that smart endowment guy at Yale?" The bull market still loomed large in our minds.

Risk faded to the background as the fear of terrorism subsided, replaced by the quest for yield and the desire to get rich, this time through juiced-up money market funds and the supposedly fail-safe bedrock of the American housing market, not through those silly Internet stocks.

The federal government responded to events with a double-barrel shotgun of monetary and fiscal stimuli, in the form of lower interest rates and tax cuts. The economy recovered in 2003 and 2004. Though we may have been concerned about what was happening in Iraq, London, Madrid, Lebanon, etc., at least it was happening over there. We lived off the courage of 18-year-old soldiers. And the market was doing well. Maybe the worst was behind us.

Back to the future

Americans got back to spending; homeownership increased, driven by those continuously low interest rates. But the low interest rates made it tough on savers — so they went hunting for a little extra yield, and found it in the form of CDOs and other mortgage products that, though of questionable quality, were nevertheless blessed by Wall Street and the rating agencies.

Spending, borrowing, investing, spending, borrowing — a consumption binge enabled, in part, by an excess of worldwide savings. We borrowed and spent, and the Chinese saved and lent.

Will this tenacious credit crisis — in hindsight, predicted by everyone and blamed on everyone else — deliver the final blow to an American optimism that was only wounded by the tech crash and the awful events of Sept. 11? Let's hope not. But let's hope that we learn to temper our optimism with a little more realism.

For most of us, life is experienced as a series of successes and failures, triumphs and disappointments; we trudge through as best we can, tripping over ourselves, propelled forward by our strengths and held back by our weaknesses. We try to meet the challenges; sometimes we do, and other times we fail.

History will probably never end, because we human beings, flawed creatures that we are, beset by all kinds of base instincts and motives that are never far from the surface — we are writing history. The very impossibility of our perfectibility means that another chapter of history will always need to be written.

Just as history will never end, risk will never go away, and markets will go down as well as up, sometimes dramatically so. Human beings will do their best at screwing things up even as they are creating great progress.

Stocks, like life itself, are not for the fainthearted. As the great Sgt. Phil Esterhaus of "Hill Street Blues" used to say to his officers: "Hey, let's be careful out there."

Seven years after Sept. 11, let's pray for the families of those who were lost — for the burden they've had to bear, and the pain they continue to endure, a pain that will never fully heal. We'll never be able to understand what they're feeling, but we can honor the memory of the loved ones they lost. And let their memory help give us perspective on the precious gift of life.

These past seven years haven't always been easy, but for those of us who are still here, and whose lives have been untouched by tragedy, we have nothing to complain about.

Fred D. Snitzer is chief operating officer in the investment-management firm of Prudent Management Associates, specializing in high-net-worth and tax-deferred asset management. For information, go to:


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