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The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
The Financial Crisis of 2008
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The Financial Crisis of 2008

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A review of the current financial crisis and how to deal with it.

A review of the current financial crisis and how to deal with it.

Published in: Economy & Finance, Business
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  • 1. The Financial Crisis of 2008: Why It Happened, Where It’s Going, How To Respond
  • 2. It started with what was called: “The Great Moderation”
    • After 1984, the volatility of growth moderated.
    Real GDP Year-on-year change 1948-2008
  • 3. Lower risk encouraged many investors to utilize leverage
    • Higher risk, higher returns.
    • But leverage works both ways.
  • 4. Consumers increased their leverage, too
    • Of their primary asset, their home.
    • These were famously known as “NINJA” loans.
  • 5. How did NINJA loans get done? Very cleverly!
  • 6. This led to a residential housing bubble:
  • 7. Which spread across the financial landscape. Due to leverage: Countries affected by the Credit Crisis
  • 8. Where are we going?
    • The “patient”
    • is not dead:
    • The trend
    • is still up:
    S&P 500 1948-present
  • 9. Why is the long-term trend up?
    • Investing is not gambling:
    • Equities = ownership
    • Diversified equity investing represents an ownership stake in the US economy.
    US Real GDP (Log Graph) 1948-2008
  • 10. Why is this NOT a Depression?
    • Alphabet
    • Soup:
    • FDIC
    • SEC
    • GATT
    • Major difference:
    • Fiat money / No gold standard
    Dow Jones 1919-1949
  • 11. What happens next?
    • We are probably in a recession right now.
      • Further home price depreciation and tighter credit will squeeze consumers
  • 12. How long will the recession last?
    • The process of de-leveraging must play out.
    • Fiscal stimulus can help.
    Conventional wisdom: Or at least return to the trend:
  • 13. But the recession will likely be shorter and shallower than expected
    • Energy prices have fallen dramatically:
  • 14. Technological innovation continues to accelerate.
    • Bandwidth, bandwidth, bandwidth
    • Moore’s Law
  • 15. Trade is increasing, especially with and in emerging markets.
    • Billions of new consumers
    • Application of existing technology will be revolutionary
    World Area by population
  • 16. The world is a safer and more peaceful place than it has been at least since the 12 th Century.
    • Black Death, Inquisition, Spanish Armada, Civil Wars, Revolution, Nuclear War bear little resemblance to Asymmetric War.
    • This is not to denigrate the current conflict—but the scale of the struggle is different.
  • 17. So what do we do?
    • Recognize the situation for what it is:
    • We are in a rare period of extreme volatility.
  • 18. Facing the facts allows us to deal honestly with the situation.
    • Investing in the current climate is a lot like whitewater rafting.
  • 19. Different rules apply
    • It’s turbulent
    • It’s dangerous
    • It can be “fun.”
  • 20. Rule #1: Always stay with the boat!
    • Your boat is designed for you.
    • The investment equivalent is staying with your long-term plan
    • Your plan is designed around your:
      • Age
      • Abilities
      • Aspirations
  • 21. Rule #2: Plan for trouble
    • Learn how to roll
      • Instincts can mislead
    • Wear a life vest
    • Investment analogy:
    • Be ready to act
    • Have an emergency fund
  • 22. Rule #3: Work with your team
    • Know your “role”
      • Taxes are trivial if you never sell.
      • Cash and custody were boring details until Lehman and Auction Rate bonds.
    • Listen above the “roar.”
      • Details matter
      • Motivation matters
      • Experience matters
  • 23. Rule #4: Be flexible
    • Read the river
    • Don’t change your strategy, but adjust your tactics
    • Common sense trumps sophistication
    Opportunities: JNJ = 3% dividend TIPS = Inflation + 3% GLW = 5x Cash Flow
  • 24. Rule #5: Enjoy the ride
    • Be long-term but watch the ticks.
    • Sell down to your sleep point.
    • Be bold when others are fearful, and fearful when others are bold
  • 25. Benjamin Graham:
    • “ In the short-run, the market is a voting machine – reflecting a voter-registration test that requires only money, not intelligence or emotional stability – but in the long-run, the market is a weighing machine.”
  • 26. How can I contact you?
    • Call Charter Trust at (603) 224-1350, or send an email to [email_address] .

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