On the 10 year anniversary of the Lehman bankruptcy, a cottage industry of crisis experts, historical apologists, and generally freelance reminiscers (sic) had emerged, opining on what happened, what should have happened, what changed in the interim ten years, and what will happen in the future.

Most of these opinions are worthless with many of them coming from those who were either responsible for the financial crisis or never saw it coming in the first place. So instead, we have chosen to go with the far more actionable and erudite take of investing legend Seth Klarman who many years ago, one the 1 year anniversary of Lehman’s failure, described the 20 lessons from the financial crisis which, he said “could and should have been learned from the turmoil of 2008” but instead “were either never learned or else were immediately forgotten by most market participants.”

The Forgotten Lessons of 2008

One might have expected that the near-death experience of most investors in 2008 would generate valuable lessons for the future. We all know about the “depression mentality” of our parents and grandparents who lived through the Great Depression. Memories of tough times colored their behavior for more than a generation, leading to limited risk taking and a sustainable base for healthy growth. Yet one year after the 2008 collapse, investors have returned to shockingly speculative behavior. One state investment board recently adopted a plan to leverage its portfolio – specifically its government and high-grade bond holdings – in an amount that could grow to 20% of its assets over the next three years. No one who was paying attention in 2008 would possibly think this is a good idea.

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