Financial Markets volatility: Could this time

be different?
In the year 1956, American geophysicist M. King Hubbert wrote an extensive research paper on the rate
of petroleum production. According to his calculations, world oil production would reach a peak in 1970,
and then it would begin to decline. It was later observed that while the Hubbert peak theory had
value, it failed to take into consideration developments in technology that would allow oil producers to
drill deeper and at different angles, or literally squeeze oil from rocks (fracking) or extract the
commodity from sands, just to mention a few of the new ventures available that has increased
production considerably. In other words, the Hubbert peak theory failed to take into account
American Ingenuity, Entrepreneurialship and Resourcefulness.
When analyzing the recent volatility of the Stock Markets, many have made comparisons to what
happened in previous years and while there is value in re-visiting history, every era brings a difference
worth examining as economic and technical conditions are far from similar, so the outcome should
prove to be different. Advances in technology, the spread of social media and the impressive creativity
of our young entrepreneur generation must be considered as their impact in the financial world has
certainly made significant changes, thus the outcome of recent events may not resemble at all what
happened in the past.

Source: Bloomberg

The above graph points to the following:

1. The time for the market to recuperate from a bubble has shorten.
a. The DOT Com Bubble. It took the market approximately 7 years to get back to positive
territory
b. The Housing Bubble, in 5 years market was back in positive territory
c. The European Debt Bubble, in less than 6 months market had erased all loses
2. In every instance, markets more than made up losses, edging much higher in all occurrences
3. The declines have also shown to be less traumatic
As for the economic conditions for each of the years when a bubble occurred, it is possible to find
significant differences.

Inflation Rate
Unemployement
Interest Rates (10 y Treasury Note)
GDP
Source: US Bureau of Economic Analysis

1999
2.70%
4.50%
4.90%
6.40%

2008
0.10%
6.20%
3.74%
-0.92%

2011
3.00%
8.90%
3.39%
3.64%

2015 *
0.30%
5.50%
2.20%
3.91%
* Half of year

If we take a look at notable events that occurred during the crisis years that impacted the
performance of the stock markets, the following are worth mentioning:
1999:
o Google was less than a year old (launch in September of 1988)
o Amazon had been in the market for 5 years and reported 14 million active users
o The Euro currency was launched
o President Clinton sex scandal
o Russian President Boris Yeltsin resigns and appoints Vladimir Putin as successor
2008:
o Twitter had been out for 2 years and boasted 5 million users by 2008
o Facebook was founded in 2004 and by 2008 had 100 million users
o Gold prices reach $1,000 an ounce for the first time
o Goldman Sachs and Morgan Stanley, become bank holding companies as a result of the
subprime mortgage crisis.
o Lehman Brothers and Washington Mutual declare bankruptcy
o President George W. Bush signs a $700 billion bailout bill for the US financial system
2011
o The Arab Spring begins in Tunisia and spreads to Egypt and other countries
o A 9.0 magnitude earthquake strikes Japan, triggering a Tsunami that caused largest
nuclear power plant accident in history
o Unemployment in the US reaches 9%
o Portugal officially falls into a recession, with economy contracting 0.6% for two
consecutive quarters

o
o
2015
o
o
o
o
o
o
o
o

Tim Cook is appointed as CEO of Apple given Steve Jobs illness

Twitter reports 117 million active users, Facebook 845 million, Amazon 164 million
Swiss National Bank ended its fix rate policy for the Swiss Franc, causing a turmoil in the
currency markets
Oil began its down turn and estimates had pointed to a $75 per barrel for end of year,
after surpassing the $111 per barrel in 2012. Currently its hovering $40 per barrel
Down Jones has worst one day loss since August 2011, shedding at one point 1,000
points but ending the trading day with 588 point loss
China devalues its currency, signaling trouble for its economy
Facebook reports 1.49 billion active accounts, Twitter 304 million and Amazon is
competing with Walmart as top grocery shopping company
The first Republican Presidential Candidate debate took place, and Facebook was center
stage
Uber, launched in 2009 as everyones private drive car app, reports a company value
of over $50 billion
Elon Musk continues to revolutionize the auto industry with new Tesla Motors models

Perhaps a notable difference between past and current conditions has to do with the rapid increase in
the use of Social Media as a means of communication, were events are learned instantaneously by a
vast majority. And just as in the case of the Hubbert peak theory, Ingenuity, Entrepreneurialship and
Resourcefulness is today more predominant than ever, thrusting our economy into new and exciting
territories that will certainly provide prosperous grounds for investors worldwide.
Truly any comparison with events that occurred in the past, most likely have no parallel with what is
happening in 2015 and what will occur in the years to come. However one matter is constant
throughout time, stock markets always find their way back to a positive path.
Andrew H. Jacobus
SEC Independent Registered Investment Adviser
This report was prepared by FINSER International Corporation for information purposes only, and its intention is not to offer or to solicit the purchase or sale of any
security or investment. This message (including any attachments), contains information available to the public and from sources deemed to be reliable. However, no
guarantees can be made about the exactness of it, which could be incomplete or condensed. All opinions and estimates are given as of the date hereof and are
subject to change. The value of any investment may fluctuate as a result of market changes. The information in this document is not intended to predict actual
results and no assurances are given with respect thereto. This document does not disclose all the risks and other significant issues related to an investment in the
securities or transaction. Prior to transacting, potential investors should ensure that they fully understand the terms of the securities or transaction and any
applicable risks. We strongly recommend looking for professional advice. This document is confidential, and no part of it may be reproduced, distributed or
transmitted without the prior written permission of FINSER International Corporation.

Copyright 2015 FINSER International Corporation. All rights reserved.