The Financial Crisis of 2008

The Financial Crisis of 2008: Why It Happened, Where It’s Going, How To Respond

It started with what was called: “The Great Moderation” ,[object Object],Real GDP Year-on-year change 1948-2008

Lower risk encouraged many investors to utilize leverage ,[object Object],[object Object]

Consumers increased their leverage, too ,[object Object],[object Object]

How did NINJA loans get done? Very cleverly!

This led to a residential housing bubble:

Which spread across the financial landscape. Due to leverage: Countries affected by the Credit Crisis

Where are we going? ,[object Object],[object Object],[object Object],[object Object],S&P 500 1948-present

Why is the long-term trend up? ,[object Object],[object Object],[object Object],US Real GDP (Log Graph) 1948-2008

Why is this NOT a Depression? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Dow Jones 1919-1949

What happens next? ,[object Object],[object Object]

How long will the recession last? ,[object Object],[object Object],Conventional wisdom: Or at least return to the trend:

But the recession will likely be shorter and shallower than expected ,[object Object]

Technological innovation continues to accelerate. ,[object Object],[object Object]

Trade is increasing, especially with and in emerging markets. ,[object Object],[object Object],World Area by population

The world is a safer and more peaceful place than it has been at least since the 12 th Century. ,[object Object],[object Object]

So what do we do? ,[object Object],[object Object]

Facing the facts allows us to deal honestly with the situation. ,[object Object]

Different rules apply ,[object Object],[object Object],[object Object]

Rule #1: Always stay with the boat! ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Rule #2: Plan for trouble ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Rule #3: Work with your team ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Rule #4: Be flexible ,[object Object],[object Object],[object Object],Opportunities: JNJ = 3% dividend TIPS = Inflation + 3% GLW = 5x Cash Flow

Rule #5: Enjoy the ride ,[object Object],[object Object],[object Object]

Benjamin Graham: ,[object Object]

How can I contact you? ,[object Object]

The Financial Crisis of 2008

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The Financial Crisis of 2008