Lessons Learned: What Has the Economic Crisis of 2008 Taught Me?

November 17th, 2008 | Published in Investing 101, Lessons Learned, Politics

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Today I ran across an article from the Wall Street Journal saying Maybe There Is an Upside to This Mess, which as the title suggests, is trying to make a lemons to lemonade argument.

While I firmly believe that every crappy situation has lessons to be learned, I couldn’t help but laugh at one of the top stock picks mentioned in the article: a trash bag manufacturer.

Off all things to recommend — this is the best we got?

The WSJ’s logic is completely rational because lower oil prices will lower the cost for plastics resulting in higher profits for the company, but does anyone else see the irony here? You know things are bad when stock analysts and fund managers are making supporting arguments for companies who make products designed to hold our never ending supply of garbage.

Not to one up the WSJ, I personally think the case for toilet paper is stronger. With all the bulls**t percolating from Congress these days, that alone should guarantee profits until 2nd quarter 2009.

But this article got me thinking, now that garbage bags and toilet paper are the among the best investments to save my portfolio (said facetiously)… have things really gotten this bad?

Five Lessons I’ve Learned from the Economic Crisis of 2008

Granted, most of us lowly taxpayers can do nothing substantial to curb such idiocy except write our Congressperson to complain, but all this got me thinking in what ways can I learn from 2008 so I will never again so badly burned.

There is Zero Accountability left in the United States. Whether it’s big business or our questionable system of government, no one has any real impetus to punish anyone for their stupidity or questionable actions. If the greed and ignorance from 2008 happened in other “less-tolerant” countries around the globe, several CEOs and their management teams would likely find their heads residing over someone’s fireplace. Therefore, I no longer rely on the fear of punishment or the fear of ridicule to prevent anyone from making questionable macro based decisions.
Corporate America will say anything regardless of the underlying truths. Earlier this year, the CEO of Bear Stearns gave a CNBC interview saying everything is peachy and the rumors of a cash crunch within his company is completely false. Several days later, Bear Stearns goes under from exactly the reason the CEO denied, and later began a long line of governmental assisted bailouts and bankruptcies. Bottom line, I will over analyze any situation where a WASPy C-level executive tells me “everything is fine” for a minimum of five years.
Most members of Congress are morons. Call me bitter, but having watched the financial crisis related Congressional hearings, I found that most of these bozos aren’t very bright. In fact, I sat speechless (which is hard to do in itself) listening to 4th grader like questions asked to an astonishingly tolerant Ben Bernanke. I’m convinced a large portion of Congresspersons are not worthy of their seats, and I would like to see a basic equivalency exam introduced so the people we have elected to run legislative arm of our government are educated upon the appropriate subject matter. And to add insult to injury, someone has the nerve to tack on Puerto Rican rum tax addendum to the infamous Bailout Bill? Ugh.
Too much risk is a bad, bad thing. If there is one thing Corporate America has learned from 2008, it will [hopefully] be that the promise of making more profits than the next guy does not outweigh potentially screwing yourself out of a job. If there is one immutable, irreversible truth on Wall Street it’s that a major percentage loss on the major indices equates to severe job cuts all across the board. Citigroup alone is targeting 52,000 job cuts over the next 12 months. A picture perfect example of why I will never accept more risk in any financial based transaction for the rest of my days.
When the ship is afire, it’s every rat for himself. Whether it was a faulty model in economic theories (Alan Greenspan), an unregulated segment of a shadowy insurance market (credit default swaps), or a butterfly flapped its wings on the other side of the globe, when things go bad, everyone will be bailing for the backdoor. If you get left behind, tough luck for you. Anyone who saw their stocks nosedive 20% or more in October 2008 could see that panic selling was rampant, and everyone who borrowed cheap money to invest in “sure things” on Wall Street abandoned ship as fast as possible. Last lesson - I learned that everyone is susceptible to negative emotions because everyone I know had something negative to say about the state of our nation’s economic status.

If you learned something from the 2008 economic crisis, no matter how trivial you think it is, I would be curious to know what you learned and how you plan on avoiding similar mistakes in the future.

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