10 lessons to consider at Lehman's birthday

By Brian Levitt, Senior Investment Strategist

Last week marked the tenth anniversary of the collapse of Lehman Brothers and the intensification of the global financial crisis of 2008. Taking the time to reflect on what has happened since these difficult times, I realized that 10 lessons had been learned over the last decade.

1. What can not last forever will not be. A combination of lax lending standards, complex derivatives, inadequate rating systems and a widespread belief that US house prices would not fall at the national level proved to be a combustible mix.
2. Policymakers have learned a thing or two since the Great Depression, when they pursued a series of untimely, procyclical and inherently deflationary policies. Call her (insert the name of the Fed chair of your choice) -put if you wish. Confronted in 2008 with the prospect of a spiral of defensive death, policymakers in our country responded by injecting massive liquidity into the banking system, revitalizing credit markets and designing an economic recovery. And no, an increase in the money supply without a significant speed of this money is not massively inflationary and devaluing.
3. Perma-bear will always sound smarter but bulls will do it more often. See what the markets have done over the last nine years as a major proof.
4. Markets do not negotiate absolute values ​​of good and bad, but rather that conditions improve or worsen. By the spring of 2009, the leading indicators of the economy were improving, the Fed Funds rate was at zero and stocks were as cheap as bonds for decades. Equity markets reacted in kind.
5. All subsequent events, for the simple reason that they are close to the financial crisis, are not the "big ones". It can be hard to resist Redd Foxx in Sanford & Son ("I'm coming to join you, Elizabeth!"), But the wretches were often wrong. Not all regional events (the Japanese earthquake), political machinations (government closures, fiscal cliffs), political surprise (Barack Obama in 2008, Donald Trump in 2016), double-digit market correction (2011, 2016) and the debt crisis Europe, Argentina, Venezuela, Turkey) were, or will be, reincarnated in 2008.
   Even now, we are being asked if student loans, car loans or Chinese real estate will become the next version of the subprime crisis. The question does not take into account that the mortgage market in 2007 was seven times larger than the auto loan or student loan market, or that China is a largely closed market economy where the government is, in principle, the banks.
6. Left to their own devices, many investors will make bad decisions at an inopportune time. Between 2009 and 2013, investors fetched $ 500 billion in global equity and exchange-traded funds, while investing $ 1 trillion in bond strategies. Although investors probably earned money with their bond strategies, in our opinion, the opportunity cost related to the absence of stocks was significant. Remember that it will not always be a secular bull market. Investors have to make hay, as they say, when the sun is shining.
7. At this point, have a plan and stick to it. If you had invested $ 100,000 in the large US equity market on the Friday before the Lehman Brothers bankruptcy, it was $ 54,000 in mid-February 2009. Aie. If you do absolutely nothing, this initial investment of $ 100,000 is now worth more than $ 230,000.
8. The intestinal force helps. If you were willing to commit to investing regularly in these frightening first days of the crisis and investing an additional $ 100 every two weeks, that $ 230,000 would now be $ 330,000.
9. Do not bet against the resilience, creativity and inventiveness of humanity and global corporations. It is astounding to think of the ubiquitous products and services delivered to us over the last decade. The last 10 years have brought us autonomous cars, online streaming, tablets, augmented and virtual reality, gene editing and therapy, 3D printed replacement organs, bionic eyes, sharing economy, human robots and countless other innovations. .
10. Life is moving fast enough. Forgive me for channeling my inner Bueller Ferris, but that's the case. Is it really possible that 10 years have passed? Already?

Hoping that the next "big" will be as widely spaced as the crisis and the financial crisis have been, and will only happen 60 years later. Even if it happens earlier, you may be able to resist its long-term impact if you have a plan, stick to it and look for the opportunities and advances that will inevitably change our lives.

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