Ten Years After the Financial Crisis: Will History Repeat?

​This week marks the ten-year anniversary of the Crash of 2008 that eventually enveloped the world.

In 2007, our founder Bert Dohmen felt so strongly that a global crisis was inevitably close, due to all the unsecured “confetti” issued by Wall Street, that he wrote a book, Prelude to Meltdown, published in January 2008, predicting the ensuing crisis.

It was right on target, although the financial media kept beating the bullish drums right into the failure of Lehman Brothers. They totally ignored all the warning signals along the way, or at least they didn’t tell their audience.

In our August 18, 2008 issue of the Wellington Letter, we wrote:

The Wellington Letter

August 18, 2008

"Close to the July 2007 stock market top, former managing director of Goldman Sachs, and now Treasury Secretary, Hank Paulson said: "This is far and away the strongest global economy I have seen in my business lifetime." (The quote is from Fortune magazine.)

In April of that year, I heard the CEO's of some of the largest private equity firms, such as Blackstone, say they had never seen such great economic conditions. He said that if they wanted to raise $10 billion, he could get it within 24 hours just with a phone call.

My reply was that when things get this good, they can only get worse. And they did.

That's the time that the Bear Stearns hedge funds collapsed, which alerted the financial markets to the fact that all the mortgage derivatives that Wall Street had sold didn't have a liquid market anymore. The paper losses were in the billions.

A few days from the DJI top in October 2007, we predicted a global financial crisis in 2008. We thought it would finally surface late in 2008..."

Then, our Special Bulletin issued on September 8, 2008, nailed it right on the head. Here is a brief excerpt from that issue:

THE SILENT CREDIT CRUNCH AND THE ECONOMY

While the bullish analysts tell you about the good earnings of companies, and the exciting "widgets" they make, and the virtually unlimited demand for them, they totally ignore the primary driving factor in economies and investment markets, i.e., credit availability.

Without credit, economic growth comes to a screeching halt…

This is why bargain hunting right now in any asset, except U.S. Treasury bonds, is a sure loss investment. We are seeing the greatest deleveraging in the history of the world.

That means everything gets sold. ​And when it's sold, the seller searches for a safe place for that money. The only safe place is U.S. Treasuries…

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