Chapter 14 [2008 Subprime Crisis]

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[James Origin and Today] Chapter 14 - The Subprime Crisis of 2008 (02/09/2023)

One day in 2006, I went to a Chinese medicine doctor for acupuncture. She told me that she was going to Texas to buy a house, and she was going to Arizona to look at houses, because there was a house-buying flight group going there, and a group of people were going to buy a house. Then she canceled an appointment for me, saying that I was going to join the house-viewing flight group. I said you don't want to go, you should help me with acupuncture and not make random investments. Later, she still canceled my outpatient appointment and went to join the so-called house-buying flight group. This is also a sign of the subprime mortgage crisis in the United States.

During the 2008 bubble, in October 2007, I had been teaching investment for three years. During a class, a classmate asked that subprime mortgages seemed to be getting worse and worse. Should we be more vigilant and leave the market? I told him that the U.S. government had already noticed this problem, so we didn’t need to worry when the government was very concerned about it. It turned out that I was wrong. After the high point in October 2007, it continued to fall until it bottomed out in March 2009.

Time came to January 2008, when all our students had a dinner. At that time, I saw that all the technical analysis had three lines (quarterly line, half-year line, and annual line) downward. This may be a short signal of a technical line. I told everyone at that time that if it fell below the neckline on Monday, it would be We all withdrew from the market, and then we all evacuated the market and escaped the subprime mortgage crisis (it was just a fluke that we escaped the storm!). From then on, we re-entered the market on March 10, 2009, which happened to be the day when the market bottomed out.

Before I completely sold stocks in January 2008, a relative of a friend knew that I was enthusiastic about teaching investments. The couple called me from New York very enthusiastically to tell me the truth about the entire subprime mortgage. They told me that this was a financial crisis. The wife was a person in the financial industry. She told me that everyone should get out of the market quickly. I still didn’t understand finance very well at that time, so I didn’t listen to her advice and continued to invest completely ignoring the subprime mortgage issue.

I was able to decisively leave the market at the high point. Although it was based on technical analysis, it was also a fluke. Who would believe that I believed in the signal of technical analysis this time, and could I believe in technical analysis so decisively next time? Maybe it would start to rebound after falling below, so I still say that I was lucky to be able to escape the subprime mortgage crisis.

Finally, we were able to bravely enter the market at the bottom on March 10, 2009. I remember getting up at around 7 a.m. that day and seeing that the market had begun to gap up. I quickly turned on the news and saw the Chairman of the Central Bank. Bernanke said that all banks cannot fail. At this time, I am sure that the entire financial crisis is over. Previously, everyone has wiped out the risk that all banks may fail and that banks may be nationalized. Therefore, the fuse of the dangerous bomb in the market has been removed. The entire storm has stopped, so we inform everyone to buy bravely.

Those who experienced the subprime mortgage crisis at that time should still remember it. It was a bloody storm. We watched the market continue to fall, bombs exploded one after another, and the collapse of Lehman Brothers was followed by the collapse of banks in the entire market one by one and the fear that banks would be nationalized. Although all of us had sold stocks and held all cash, we were still very afraid because we did not know whether the money was safe in the bank. At that time, some of us withdrew cash from the bank, and some of us just Spread funds to different banks to ensure that each bank's insurance can cover its deposits. Therefore, those who have not experienced the subprime mortgage crisis cannot clearly understand the horror of the financial crisis. Therefore, everyone must understand that the real storm comes from the break of the bank's capital chain, not what everyone is talking about now about shrinking balance sheets or raising interest rates. Even the Internet bubble of two thousand years is not as good as the subprime financial crisis in 2008. This is all childish. Don't worry about the market collapse because of this.