Saturn, Hannah Montana, and Reasonable Savings Rates

Saturn, Hannah Montana, and Reasonable Savings Rates

Things that have changed for advisors since the financial crisis

Sometimes it feels like just yesterday, but the biggest market and economic meltdown in our generation is now five years old.  So much has been written and said about the causes and effects of the tail spin in 2008, as well as about the response by officials and executives.  Although many people identify the bankruptcy filing of Lehman Brothers on September 15th as the event that really sent the economic system over the edge, the economy and the markets had begun their decline in mid-2007.  Nevertheless, I thought I would take a look at what has changed and what hasn’t since 2008:

  • Bear Stearns is gone.  A history that dated back to 1923 ended in 2008 with their officials’ inability to comprehend the risks they were taking.
  • Saturn cars are gone.  And so are Hummers. The number of car dealerships across the country that have closed their doors are numbered in the hundreds.
  • AIG was decimated.
  • Countrywide Mortgage and their ilk are gone.  Good riddance.
  • In 2008 United States airlines lost a combined $10 billion. In 2012, they made a profit of $2.3 billion.
  • 8.6 million jobs were lost during the recession (officially from ’07 – ’09). Since the start of 2010, we have added 6.2 million jobs – 72% of what were lost.
  • Two days after the Lehman Brothers collapse, 27% of stock investors were “bullish”. Today, only 36% are bullish.
  • The national average price of gas in the summer of 2008 was $4.00 per gallon. In July of 2013 it was $3.58 per gallon.
  • In 2008 there was only an iPhone, no iPhone 4, 4S, 5, 5S, 5C. Siri wasn’t even born yet.
  • Since the summer of 2008, the 10-year U.S. Treasury has gone from 3.8% to 3.0%... and also spent some time hovering around 1.5%!
  • Believe it or not, the unemployment rate for college educated Americans is only 3.5%, its lowest level since November 2008.
  • And, of course, there is the stock market. The S&P 500 fell almost 40% in 2008. It tumbled 10% in the winter of 2010 and 16% in the summer of 2010. The summer of 2011 saw another 16% drop. The summer of 2012 was a little better with the stock market falling (only) 9%. Unfortunately the fall of 2012 saw another 7% drop.  And 2013 has had two slides of 5%. Even with all of this noise, the stock market has recovered all that it lost in 2008, plus 30% more.

When you think about how much has happened over the past five years, it is good to take an objective look at what has changed, what has gotten better and what has gotten worse.  We sure have seen an awful lot in those years.  Sometimes I wish we could jump in to the time machine and go back to 2008 – if only to bring back the days when Miley Cyrus was still Hannah Montana.

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