Many banks have been tempted to call the current environment unprecedented. But an entertaining note entitled Uncertain but not uncharted from the investment strategy group at Goldman Sachs demolishes the notion and in doing so might reassure the depressed that these are somewhat charted waters after all.
"Last month alone," writes chief investment officer Sharmin Mossavar-Rahmani, "we counted about 4,000 reports or articles describing some economic news as ‘unprecedented’. With so much reinforcement, how can one resist the fear and panic?"
Mossavar-Rahmani and her team approached a number of people who might reasonably be expected to have witnessed a business cycle or two, including the 93-year-old private wealth adviser Al Feld, who has worked at Goldman Sachs for 75 years, and set about comparing the signs of the current economic apocalypse with their forebears.
"We concluded that while the use of such terms as ‘unprecedented’ makes for captivating press," the report says, "much of what we have experienced in the last year or so has, in fact, been with precedence (and much of it within the last 40 or so years), notably the level of volatility, the ‘seizing’ of capital markets, the rapid and sizable downdraft in equities, the hit to high-quality corporate bonds, the complexity of mortgage-backed derivative securities, the fall of several Wall Street firms, the leverage in private equity, the drop in GDP – the list goes on."
The team scold "credible – and not so credible – researchers, journalists and television reporters" for their cavalier use of the term unprecedented to describe any market development.
But does Goldman Inc practise what its CIO preaches? Unfortunately not.
Euromoney scoured through the firm’s Q4 2008 press release, issued on December 16, and found the following explanation of its poor performance in fixed income, currencies and commodities:
"The negative net revenues for FICC in the quarter were due to losses from investments, including corporate debt and private and public equities, and trading in credit products. These results were adversely impacted by unprecedented weakness across the broader credit markets..."
Make that 4,001 reports and articles, then.