Traders Magazine: “DataTrek Opines on Lehman Collapse and Equities – 10 Years Later”

Excerpt from Traders Magazine quoting DataTrek's Nick Colas:

..... "Nicholas Colas, Co-founder of DataTrek Research, in a recent daily note, wrote that with the 10th anniversary of Lehman Brothers coming up, he got to thinking about what that event really taught him about how markets function. As he put it, work on Wall Street long enough and you start to feel a little like Forest Gump, unwittingly inserted into random bits of history. Lehman and the Financial Crisis wasn’t his (or Traders Magazine’s) first rodeo but it was certainly the most memorable.

What follows are Colas’ thoughts as originally shared in his research note:

#1. Financial market turbulence is inevitable. History is clear enough on that point. There have been speculative bubbles for hundreds of years and countless bear (and bull) markets in financial and commodity markets in just the last century. Until humans and computers reach some sort of singularity, human nature guarantees many more.

“Any rational investment approach incorporates that reality, either by diversification or unwavering commitment to stocks. The former is, of course, much easier to stomach.”

#2. Modern finance remains too myopic about what really drives monetary policy, economic growth, and asset prices. To my thinking, geopolitical events matter at least as much (and in many ways far more). For example, the 1973 Middle East war and its effects on oil prices did as much to spur US inflation later in the decade as loose monetary policy. The Federal Reserve’s response to the 9/11 terror attacks may have cemented the notion of a “Fed Put”, but what choice did they really have?"......