“This financial crisis is abating and things are getting better.” This was an approximate quote from the Treasury Secretary.
When was it? It sounds like it could have been last month.
Rather, it is from the spring of 2008 and it is from Hank Paulson , the previous Treasury Secretary a couple of months after the collapse of Bear Stearns.
It is amazing how many times I have heard that phrase or something along those lines since the financial crisis hatched in the spring of 2007.
However, every time I heard those phrases another shoe seemed to fall out of the sky. What’s more, these shoes seem to drop every 6 – 9 months.
See this list below:
In June 2007, a hedge fund under Bear Stearns supervision, collapsed.
9 months pass…
In March 2008, Bear Stearns about to collapse after running out of cash is bought by JPMorgan (JPM).
6 months pass…
In September 2008, Fannie Mae (FNM) and Freddie Mac (FRE) are seized by the government, and Lehman files for bankruptcy. AIG receives emergency loans from the government. JPMorgan steps in to buy Washington Mutual.
8 months pass…
It is currently May 2009 and it is now over two years since the meltdown began in the spring of 2007 following the Bear Stearns hedge fund collapse.
Are there any more shoes out there ready to drop? I honestly do not know the answer to that question. I do know that every time so far that this crisis has been declared dead, that it roars back to life. The economic forces the US has faced has been as large as any time in history. I think Steve Ballmer of Microsoft (MSFT) recently said it best when he referred to the economy as ‘resetting’.
In other words, spending has been reset at much lower levels and it is not likely to just snap back. Eventually the prognosticators will be correct and who knows, maybe this is the correct time to be saying that the worst is over.
But recent history has shown that about every 6 to 9 months, another shoe seems to drop.
Since the last shoes came pouring from the heavens last September about 8 months ago, it may be time to at least be on the watch for falling shoes.
Disclosures: There are no disclosures to make.
