Nothing is new, really. I wanted to share something I learned back in 2008-2009, for those that care about such things.

Some bg: I come out of the world of structured finance, and understood well back then the complicated web of derivatives there.

Back then, early on in late 2007 and early 2008 at the dawn of the recession: a lot of people thought it could be contained. That was the prevailing wisdom then: it was only mortgages, it wouldn’t become a systemic issue. Pain in financial mkts would be short lived.

Of course, that proved to be wrong as second third and fourth order effects came to become a systemic liquidity problem in fincancial markets, compounded by a recession on the consumer front.

That lesson matters now as we’re hearing calls for a “deep but orderly” recession.

Now, as then, experts acknowledge the pain but think it can be contained over a short period of time. That once we get the virus under control all will be well again and markets will roar.

It’s a familiar echo of a prior crisis, to me.

But recessions, no matter the cause, are rarely tidy or quick. It’s impossible to know how far down the rabbit hole we’ll go when dealing with structural & usually exogenous shocks nobody saw coming in advance.

I do know we’re seeing ghastly unemployment figures. I also know many businesses may not be coming back. We literally have no idea how far this rabbit hole goes at this point.

Have financial markets already priced all of this in? Who knows?

If anything, this is a reminder I follow price, follow a process and not to predict. Trying to call the bottom during the financial crisis was hazardous to many a protfolio’s health. I suspect this time will be no different.

Typing on a phone is so impossible. Apologies for typos. The point I’m making is that it wouldn’t surprise me if things got worse from here — I’ve seen it before. Markets may or may not have adjusted to this. Nobody knows. So make sure you have a process to protect capital.