In 2008, our country’s entire banking and financial system came to a screeching halt as we realized that the exotic debt instruments that had been created to finance the housing bubble were, possibly, a little too “exotic.” These Collateralized Debt Obligations, were packaged and sold to large banking institutions as “sure things,” and in the end, caused the bankruptcy of multiple financial firms. The Stock Market, as Measured by the S&P 500*, dropped from a high of 1576 in October of 2007 to a low of 666 in March of 2009. That was a total decline of almost 58%. I am convinced the only thing that was able to keep the Market from going even lower was that the government approved a taxpayer bailout of the financial industry. The government vowed to never allow taxpayer bailouts of the financial industry ever again, as the “Too Big to Fail” mentality won out over the moral dilemma of using American Citizens’ tax money to pay for the greedy mistakes of the financial industry.
Well, happy Ten-Year Anniversary! The crisis officially ended last month on March 9, 2019! I want to personally thank each and every one of us for donating our tax dollars to temporarily fix it. Although I say these things tongue-in-cheek, I have to admit that the 2009 bailout has allowed us to maintain a functioning banking system, save the U.S. Dollar, and secure our bank accounts. Without that bailout, life today would look dramatically different, and I shudder at the thought of what might have been.
We have learned a lot – let me stress again, A LOT – of lessons from the 2008 financial crisis. One of those lessons is that the world only ends once, and 2009 wasn’t it. It also taught us that the resolve of the financial industry and the government’s willingness to act in the best interest of its constituents were both very underestimated.
With the financial world put back together and President Trump’s economically positive tax plan, our financial markets have found footing in the hope of brighter days to come. Our employment situation is the strongest it has been in 50 years, according to the Bureau of Labor Statistics, and economic numbers continue to be strong. If I wagered a guess about what the next decade brings, I would say it will be wrought with crazy, attention-grabbing headlines, followed by periods of volatility, and then, periods of sustained economic growth. The occasional recession will be followed by an expansion, then another recession and another expansion. The American capitalistic spirit will continue to drive innovation. Think about life 20 years ago … it’s 1999, and someone approaches you to say that in the future, you’ll be able to “download” a two-hour movie and watch said movie on your “cell phone.” That everyone you know will be connected and addicted to their phones and a “virtual interaction platform.” That you’ll use your phone to order and pay for anything you want and have it delivered by a brand-new book-seller called “Amazon.”
I hope you are catching my over-arching theme here. In the very long term, it is going to take more than a financial crisis to stop the innovative spirit of America. As long as we promote a competitive environment in which hardworking people are rewarded for creating, perfecting and adding overall value to our citizens, we will never cease to be the best country in which to live.
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OLV Investment Group is independent of Sigma Financial Corporation and SPC. *It is not possible to invest directly into an index. Past performance is no guarantee of future investment performance. This article is for informational purposes only and should not be construed as investment advice.