One year ago, after Padraig Harrington’s remarkable win in the British Open at Carnoustie, I wrote a column illustrating what has, on occasion, been a remarkably insightful investment indicator, the sixty year cycle. It was acclaimed by one of the greatest traders of all time, W D Gann, as being the ‘Great Cycle’ and what prompted me to write about it then was that Padraig’s victory seemed to be something of an echo of that sixty year cycle. It was exactly sixty years earlier that the last Irish man had won the British Open, Fred Daley. I concluded that column with;
“In golf, just as in investing, there is absolutely no reason why history should repeat itself, yet it is astounding how often it does. Hopefully for Padraig, the Irish, the European Ryder Cup team and the global share markets the parallel has finished or at least changed somehow, Daley never won another major, Padraig could quite possibly win several.”
Now Padraig has won another major so at least part of the parallel or echo of history has been broken, unfortunately for investors elements of the great cycle seem to be reasserting themselves, only even stronger and, for investors, even more painfully. At the time I wrote that earlier column I noted that some commentators believed that a great cycle was peaking for global share markets. Well, what we have seen over the last twelve to fourteen months has certainly not been pleasant. Noteworthy experts such as former Fed chairman Alan Greenspan and billionaire investor George Soros have described the current financial calamity as the worst crisis since the great depression and most share markets of the world have now fallen by at least twenty percent from their highs of last year. The worst performing markets have tended to be those that went up the most during the five year bull run and a few have really suffered. Perhaps not surprisingly the previously surging Irish market has been one of the weakest.
During that five year stretch from late 2002 the Irish market delivered spectacular returns and rose, without virtually any interruptions almost three fold in value peaking in May of 2007, that peak coincided with Padraig winning the Irish Open and then just two months later he won that first Open title. Since then the Irish market has fallen as spectacularly as it rose and any investor flush with enthusiasm after Padraig’s double victory mid last year has suffered losses of fifty to sixty percent.
This crushing decline, over just the last year and a quarter, has been one of the worst declines the Irish market has ever suffered and any analyst or investor looking for anything worse will once again find themselves haunted by Gann’s great cycle.
A parallel between Padraigs first Open Championship and Daley’s sixty years earlier that I did not pick up on last year was that like Padraigs, Daley’s came after a rampant bull run in the local share market. It had risen, virtually without interruption, from its low in the early 1940’s to a crescendo in July of 1947, the very month of Daley’s victory. Unfortunately after Daley’s win the market fell dramatically.
Hopefully the echoes of history will not continue. As I commented earlier Padraig has already gone one better than Daley by repeating his victory. The 1947 peak in the Irish marked the beginning of a miserable period for Irish investors as the market fell for more than a decade and it wasn’t until thirteen years later, in 1960, that the levels seen in 1947 were achieved again.
Padraigs defence was an incredible achievement that should probably not be trivialised by reference to the so called great cycle, very few competitors in the modern era have successfully defended a major championship and clearly history never repeats itself exactly. Nonetheless, investors should not trivialise in any way the turmoil that has plagued the investment world pretty much since Padraig’s victory at Carnoustie. Whether or not it is because of or in spite of Gann’s great cycle does not really matter, the fact is that a major change has taken place. The five years from late 2002 were perhaps the most unusual five years for investing that we will ever see, over that time pretty much everything just went up in price and investors hoped, and in some cases expected, markets from property to shares and everything in between to continue to oblige. Unfortunately when expectations and hopes are highest disappointment is usually just around the corner as the whole of Ireland, from investors to golfers, realised in the wake of Daley’s historic win in 1947.
On a more positive note, with so much damage already having been done to world markets, and expectations and hopes having been smashed, it is likely that opportunities will soon appear and Ireland, having fallen so far so rapidly should not be ruled out as possibly providing future positive surprises.
8th August 2008