I visited the Monterey Bay Aquarium this week and learned again about the rise and fall of the sardine fishing industry and Cannery Row. The amount of fish caught and canned in that small geographic area is hard to imagine. By the mid-1920’s, using a special “hopper” technique, fisherman were able to vacuum up an unbelievable seventy tons of fish an hour. Then, in the 1950’s, having fed armies fighting around the globe in WWII, the Pacific sardine population and Cannery Row suddenly collapsed. Poof. Gone overnight.
At the time, overfishing was the prime culprit for the sardine collapse. But the aquarium exhibit had a surprising fact: recent scientific research indicates that the main cause of collapse had less to do with overfishing than with the natural cycles of the Pacific sardine population, which we now know rises and falls in 50-year cycles.
The capital markets, too, have their natural cycles, rising and falling over time. But until a crash such as last year’s comes along, too many investors behave like the Monterey fishing industry in the 1950’s, failing to attune their portfolios with these cycles and putting their portfolios in harm’s way by overloading financial risk.
The good news today for the Pacific sardines is that they’re back. And wiser fishing management means they’ll likely never be so heavily fished again.
Investors who still have a few decades left ahead of them and can learn from last year’s market lessons may likewise be given a second chance. If only they can seize it.
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