A dislocation for the Ages

It was 1990 and as a citizen of Iraq, life was seemingly getting better. The long war with Iran was over and while GDP growth was nowhere close to what one would have loved to have and one they had seen before the war with Iran, at least the future it seemed was better. In August, Saddam Hussein decided to invade Kuwait and life has never been the same again.

Countries go through different kinds of dislocation – some temporary, some literally permanent and in between Millions live their lives. Since 1900, literally every country has gone through a period of short or long period of dislocation that has changed life as they knew it before.

When we look at such a large canvas, the current crisis concerning the Corona Virus and the month long lock down India will be enduring looks fairly small. Yet, the implications of shutting down much of the country for a month has a long lasting impact that we cannot fully visualize.

Replacing a one month of no activity can easily take a year or two and even that assuming that the firm is able to survive. The Financial Crisis of 2008 laid to rest the high flyers of the previous years – Infrastructure and Real Estate firms. This time, one wonders who will be the ones facing the firing squad.

But India will move on and that means at some point, Valuations become attractive enough to overlook the immediate risks. The recovery from the 2008 crisis was fairly fast, the recovery from the 2000 crisis took a few years, the recovery from the 1992 crisis took a decade and a bit more. 

It’s hence important to reassess our goals and our time frames before jumping into the boiling pit solely because valuations are cheap. What matters more is our ability to sustain for long without support from the markets.