George Santayana once wisely noted that "those who do not remember the past are condemned to repeat it."
Throughout market history, market historians had many instances from which lessons in hubris should have been learned. Yet, most do not learn the lessons history has to offer.
We will not have any more crashes in our time.
This was said John Maynard Keynes in 1927, two years before the stock market crash which lead to the Great Depression.
Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50- or 60-point break from present levels, such as they have predicted. I expect to see the stock market a good deal higher within a few months.
This was said on October 17, 1929, a few weeks before the Great Crash, by Dr. Irving Fisher, Professor of Economics at Yale University. Dr. Fisher was one of the leading US economists of his time.
I cannot help but raise a dissenting voice to statements that we are living in a fool's paradise, and that prosperity in this country must necessarily diminish and recede in the near future.
This was said on January 12, 1928 (a little more than a year and a half before the 1929 stock market crash) by E. H. H. Simmons, the President of the New York Stock Exchange.
There will be no interruption of our permanent prosperity.
This was also said a little over a year and a half before the 1929 stock market crash by Myron E. Forbes, the President of the Pierce Arrow Motor Car Co.
And, these are just a few of the popular quotes of their day.
By the way, have you ever heard of the Pierce Arrow Motor Car Company? You have not? Well, that is because they went bankrupt during the Great Depression. But, I digress.
So, do you think our public officials have learned the lessons of history?
Back in 2017, Janet Yellen, who served as the Federal Reserve Chair at the time, said that the banking system is "very much stronger" due to Fed supervision and higher capital levels. She then followed that up with what I believe will be a history-making statement. Yellen predicted that because of the measures the Fed has taken, another financial crisis is unlikely "in our lifetime."
I also want to remind you that this is the same Janet Yellen who said on December 11, 2007 (right before the market began to meltdown):
I don't foresee conditions in the banking sector getting as bleak as during the credit crunch of the early 1990s...
Well, in some ways, she was right. The conditions in 2008 were much worse.
Back in 2017, right after Ms. Yellen made her more recent proclamation about the "new and improved" banking system, I penned an article noting the following:
In 10 years from now, we will likely be adding Janet Yellen to the list of those who lacked the foresight to see what history should have taught them... I am sorry to tell you this Ms. Yellen, but history's lesson will be learned the hard way by those who have failed to already learn from the past, as Mr. Santayana has warned. This time is not different.
What is also quite interesting is what Alan Greenspan was once quoted as saying regarding the Federal Reserve's ability to prognosticate the future:
We really can't forecast all that well, and yet we pretend that we can, but we really can't.
Now, maybe we can understand the context within which we should view Jerome Powell's statement yesterday that "the banking system is sound and resilient."
But, you see, Mr. Powell has no choice but to make statements like this whether he believes them to be true or not. This is a game of chicken that our government officials are now playing with us when it comes to the banking system. They know quite well that when the public loses faith in the banking system, they lose the game of chicken. Therefore, they have no choice but to publicly proclaim the strength of the system, despite their beliefs to the contrary.
And, to be honest with you, if they have reviewed the balance sheets of the banks as have we, then there is no way they can be honest in their assessment that "the banking system is sound and resilient." The underlying balance sheets suggest otherwise.
We have provided many public articles outlining the issues we see in the big banks, and you can choose to read them here.
And, if you have money in the US banking industry, then you are simply a pawn in this game of chicken being played by our policymakers, and it is time for you to act. It is time for you to do a deep dive on the banks that house your hard-earned money in order to determine whether your bank is truly solid or not. And, you can feel free to utilize the methodology we outline here.
At the end of the day, we're speaking of protecting your hard-earned money. Therefore, it behooves you to engage in due diligence regarding the banks which currently house your money. You have a responsibility to yourself and your family to make sure your money resides in only the safest of institutions. And, if you are relying on the FDIC, I suggest you read our prior articles which outline why such reliance will not be as prudent as you may believe in the coming years.