Yes, because it will mean a whole generation will struggle.

But these are the cards life is throwing at us. We are not the first generation to go through this, nor we are the last. One day we will look back and be proud we endured. It will be a great opportunity to refocus our priorities, to work on preventing this to happen again.

This is exactly what I thought as I read the article. We're talking about an entire generation of young workers who might not be able to reach their full financial potential (as measured against the past six years, at least).

But you're right. Thems the breaks. Make money for people, and you will make money. Who knows, in 15 years you might find yourself in the perfect position to make a lot of bank.

Or maybe Sequoia is overestimating the damage and we'll be fine in 36 months. Keep hope alive?

Hope for the best, prepare for the worst.

...and maybe wind up somewhere in the middle. - Bright Eyes, Loose Leaves

> Yes, because it will mean a whole generation will struggle.

Which Generation? The baby boomers trying to retire on their savings that are slowing being wiped out?

The Gen Xers that should be comming into their peak earning years?

The Gen Yers that are starting out in the work force?

Or did you mean to say that the entire population will suffer for a generation, generally considered to be 20 years?

> The Gen Xers that should be comming into their peak earning years?

Drats, screwed again! Curse you demographics.

//shakes fist

Great question.

My guess is that the Gen Yers will be most affected.

Here is my reasoning based on my moms family. She has 12 siblings.(No TV:) The stage is the Mexican crisis from 1976 to 1994. The older siblings had already achieved something when the crisis started and they fared ok, some even did very well. However, the younger siblings have always struggled. They entered the workforce just when the crisis started. And they were never able to do ok, even after the crisis ended. By that time they were in their late 40s.

Here's some great reading for those who might be tempted to believe the doombaya message.

http://www.cnn.com/2008/POLITICS/10/09/eichengreen.depressio...

Excerpt:

Barry Eichengreen is George C. Pardee and Helen N. Pardee Professor of Economics and Political Science at the University of California, Berkeley.

Every time the economy and stock market turn down, financial historians get predictable calls from reporters.

Could this be the start of another Great Depression? Could "it" possibly happen again? My stock answer has always been no.

The Great Depression resulted from a series of economic and financial shocks -- the end of a housing bubble in 1926 and the end of a high-tech bubble in 1929 -- but also from truly breathtaking neglect and incompetence on the part of policymakers.

It couldn't happen again precisely because policymakers know this history. Fed Chairman Ben Bernanke is a student of the Great Depression. Treasury Secretary Henry Paulson remembers the mistakes of Andrew Mellon, Herbert Hoover's treasury secretary.

This is flawed logic, which goes like:

"The biggest economic problem we know about is the Great Depression. Policymakers know how to deal with that; therefore we are fine."

Maybe the new global economy contains challenges which current policymakers don't know how to deal with. And if these challenges aren't met, we might end up with Great Depression effects, due to a different set of initial causes.

Or, maybe everything will settle down in a week or two.

Insightful. "Fighting the last war" is one of the more popular ways for generals to utterly fail.

Or, we're facing a far larger economic calamity than that of the Great Depression itself.

> It couldn't happen again precisely because policymakers know this history. Fed Chairman Ben Bernanke is a student of the Great Depression. Treasury Secretary Henry Paulson remembers the mistakes of Andrew Mellon, Herbert Hoover's treasury secretary.

Andrew Mellon remembered the mistakes of 1873....

I wasn't quite sure how to interpret this part of that article, but I think Professor Eichengreen later explains that his traditional answer ("it can't happen again") is no longer true.

"We can be confident, I always answered, that there will not be another Great Depression because policymakers have read financial histories like mine. At least that was my line until recently. Now I have stopped taking reporters' calls."

While he could mean that he's now getting so many requests that he can't be bothered to return them any more, I wonder if instead he meant that he can no longer give the "it can't happen again" message. Lending credence to this interpretation I think, he goes on to point out the ways in which the problem could continue to worsen without drastic action.

> Fed Chairman Ben Bernanke is a student of the Great Depression. Treasury Secretary Henry Paulson remembers the mistakes of Andrew Mellon, Herbert Hoover's treasury secretary.

The Great Depression wasn't "Great" because of Hoover, but because of FDR's policies, which extended it for seven years (according to the latest research from UCLA). If it wasn't for WWII, the GD might have gone on even longer.

Most likely it's panic about their own short-term losses in the market. Headlines like this (below) have scared them into a kumbaya-doombaya share-our-pain session with their underlings.

Truth is that the Dow can drop -- mainly out of emotional overreaction -- but if companies are genuinely producing value, then it will correct upwardly. A sudden, huge loss in the market like we've been seeing is never a sign of anything except emotion. Actual bear markets are signaled by trends, not jumps.

Dow falls below 9,000

Stocks slumped Thursday afternoon with the Dow falling below 9,000 as the Treasury's eye on buying stakes in struggling banks failed to reassure investors amid the ongoing credit crisis.

The guys at Sequoia, whatever their flaws, don't panic easily and wouldn't call all of their portfolio CEO's together to issue this set of warnings--which will lead to layouts and cutbacks of all sorts--if they didn't believe that it was necessary.

They may not panic easily, but they certainly are panicking. I'm sure they believe it's necessary, but that doesn't make them wise. They're human, and they can't see the future any more than we can. If things really are as dire as they fear, then most of their companies should sell off assets and shut down. Most of them wouldn't survive a 15-year depression, even if they're frugal. Cooler heads would just shut them down.

A 15-year secular bear market is not the same as a 15-year depression, or even a 15-year recession. It's fifteen years of overall crappy growth, not fifteen years of straight negative growth.

The last fifteen years, you'll note, have been especially good: only one minor blip in 2001 since the last recession ended in 1992ish. We can't expect that kind of thing to last forever.

According to this analysis:

http://www.amateur-investor.net/Secular_Bear_Markets_vs_Secu...

there were secular bears (as measured on the Dow) from 1906-1921, 1929-1949 and 1966-1982. No reason there shouldn't be another one now.

On the upside, this means relax. It doesn't mean we're all gonna die. It just means we might have to live though the 1970s again, except with better clothes and worse music.

IMHO, the secular bear market started in 2000, and we're halfway through it. The peak in Oct 2007 just barely bested the market peak in 2000, and then like a month later started its slide. Right now, stocks are where they were in 97/98, so that's 10 years with zero overall growth.

You're forgetting about dividends and inflation.

The stock price is based on what people think is going to happen if look at our GDP and savings rate to see if there is any economic growth.

I credit them with a lot of experience and access to a lot of good information. I don't know why you believe that they are panicking in a week that the DOW has dropped about 16%: this will weld the IPO window shut and limit the value of any acquisitions that occur. If their companies are cash flow positive then there is no reason to sell off assets, but if they need more funding to survive it may not be available. If they were to shut them down and return the funds to their limited partners that would be the end of Sequoia: their partners expect them to earn an above average return with the risk capital that they have invested. Some investment firms, Sequoia likely among them will find a way to earn a positive and above average return from their portfolio of investments. They can't do that if they liquidate all of their holdings.