I understand your point.
Here is a short excursus about my experience with risks and why I understand that a lot of people missed the 07/08 financial crisis:
The problem with risks from my perspective is that you never know if they materialize into real problems or if they are just potential problems that turn out to be fine.
Over the 8 years i have been investing there have always been risks like
- 2015: Fears that valuations are too high after the strong stock market performance of the previous years.
- 2016: Trump presidency with uncertain effects
- 2017: Watching Trump, China debt worries
- 2018: Trade war with China and Europe, Fears of the Fed hiking rates too fast
- 2019: Weaker growth, Sudden spike in Repos
- 2020: Covid
- 2021: A bubble in risk assets
- 2022: Ukraine war, Rising interest rates
Those are just some of the risks off the top of my head and I am sure that there have been further worries including on effects of low-interest rates (even before they have been cut in 2020), the state of the Euro, and so on. While all of those risks turned out to be fine, they seemed worrisome back in the day and there have always been bears and doom prophets warning about an imminent and bad crash to happen.
In my scenario and most long-term investor’s scenarios, it is obviously very good to invest despite risks and in my experience, the chances of risks turning into problems are less than 10%.
Ironically when everyone was the most certain that everything would turn out fine (2021) was the worst time for investing. (It’s always like that)
(Note: The current risks that we are seeing coming from the sharp rise in interest rates are worse than the risks of the past in my assessment, this is why we are focusing so much on macro. We have to be specific though and find real breaking points in the economy to get ahead of the market. If we don’t find them it might be due to the fact that the risks are not as bad as feared which is a knowledge that makes it easier to take advantage of investment opportunities.)
When looking back to 2007 and 2008 it is totally understandable to me why so many great investors like Warren Buffet did not sell and did not see the risks coming. Losses in mortgages and even the bankruptcy of Bear Stern seemed likely manageable and selling just because something might break is a bad long-term strategy.
(Excursus: On a high level, an investor has to always deal with risks, as there are never situations in which risks do not exist. It would be literally impossible to invest at all by waiting for a period of no risks or selling every time risks appear. Instead, investors need to Instead differentiate between real problems and just fears (signal and noise) which enables them to participate in the development of the economy. )
In my current theory, there must be a reason why people believed everything was manageable and a moment at which everything went wrong with cascading effects that caused the sudden meltdown. In my opinion, studying this very specific moment and what exactly happened in the system at this moment is the most interesting part of studying the 2007/2008 financial crisis. (backlog task)
By studying the exact details how things broke it will also be easier for us to assess how easy or difficult it would have been for investors to accurately anticipate that things will break and we might learn some general principles about breaking points and warning signs to look for. (Although if something breaks this time it’s probably at another place)
(Note: Back in 07/08 there have been people who accurately predicted that things will break. Those people like Steve Eisman or Michael Burry failed with other bearish bets though. As an example, Eisman bet against Tesla and Burry sold all stocks in 2022, which might have been too drastic in hindsight.)