Market influences are myriad, but few have the power to truly crash the market like the biggies of 1929, 1987, and 2008. Prepare yourself for a market “crash” relative to the fall of 2002. Okay, so maybe the market won’t crash that hard, but prepare yourself for the media barrage that is beginning to emerge about the coming “crash”.
– The rout in crude prices is snowballing into one of the biggest avalanches in the history of corporate America, with 59 oil and gas companies now bankrupt, a number closing in on the staggering 68 filings seen during the depths of the telecom bust of 2002 and 2003.
True, the US oil industry is busting up, and the market valuation losses so far are huge with more to come ($1.02 trillion), but the difference between the 2002 Telecomm bust (valuation losses = $882 billion) and today’s oil bust is the context.
In 2002, the company failures were part of the emerging economy we now have. Bigger companies ate smaller companies and absorbed their debt to acquire knowledge. So, investors had to watch the survivors both falter and stagnate until such time as the digital economy would make a huge payback. The small oil companies now are finding a barren world of buyers for their debt – think extinction. But, filling the niche now are new energy companies creating a whole new energy industry, places where money can flow and grow.
In the end, though, here is the basic truth, which should ease the mind …
– Neither this crash nor the telecom crack-up in the early 2000s rival the housing and financial bust in 2007-2009 in terms of magnitude and economic impact.
So chillax, take five, and clear your mind as the breathless media pushes this story down the road.
