Recovery: Past, Present, Future
What a difference a year makes. Last year, we collectively stared into the Abyss, watching our economy grind to a halt. Yet, as history has shown us over and over again, we picked ourselves up, dusted ourselves off, and business activity has resumed. Spending that was canceled, was really just postponed. Investment that was hesitant came back to life (at much cheaper prices). The financial system has been stabilized, people are beginning to catch up on postponed purchases, and businesses have begun to restock their inventories. Cyclical forces were held down too long, which is like pulling on a spring, eventually it needs to bounce back.
The last time Canada experienced such a severe drop off in the economy, was in the 1981-82 recession. The TSX index, over 12 months, fell 43%. Not unlike last year’s 50% decline that brought prices down to a six year low. What is often forgotten about the ’81-82 decline, was that the market went on to produce a stunning full recovery in only one year (see chart on page 3). While the circumstances are different between today and in ’81-82, the point is that recoveries happen much faster than people expect. Buying when the headlines are the bleakest historically is exactly when one should be buying. To borrow a quote from Warren Buffett: “be greedy when everyone is fearful and fearful when everyone is greedy”.
ZLC Foundation held its 24th annual charity golf tournament on July 6, 2009 at Marine Drive Golf Club. Over the years, the tournament has raised over $780,000 for many local charities.