Let us go off the rails on this one and talk about something I know very little about; Markets. In particular, I want to talk about one particular figure and a pattern he identified that held true for two consecutive economic crises.

Why markets? We started off with a coder with feelings, but now talking about things he knows little about?

Bear with me here. It doesn't take an economist to observe certain broad human patterns, and our subject already figured most of it out anyway. Moreover, we all make money (I assume) and we all hope to keep our money, even when the market is down. So we probably need to know some of the things that could cause the market to go down.

Enter the good doctor

Michael J. Burry, M.D., is a hedge fund manager with a well documented history that I will not bother repeating here. In that history, however, are two key periods in his professional life where he has made seemingly incredible bets against the markets, and come out right. You might think it was a victory for him, it was not. Basically, before 2008, banks would issue mortgages to general consumers, then bundle tens of thousands of such mortgage debts together and sell the bundles as investment options to hedge funds and investors. It was a simple and genius idea. People rarely default on mortgages, and even if a few clients did, the investment product still makes money, since the other debts aren't defaulted. The problem, as Burry came to note, was that the apparent security of this housing market that the 'Mortgage-Backed Securities' (as they were called) had created was false. In two or so decades of selling these MBSs, so many defaulted loans had been recycled, and so much due diligence was forgone by banks that even the most valuable securities were worth a warm fart at best. In addition to this, the complexity and frequency of frauds increased. He bet that it would all go bust and made over $400 million for his investors.

And the second time?

Well, we're not sure about the second time. Two consecutive quarters of reduced global output suggest we are in a recession. How we got here? Partly due to crypto. See, just like housing before '08, crypto was touted as a secure investment, free from influence by economic fluctuation, among other forces. Meme-stocks and some coins came, rose in value and went away, often with people's money, and were often replicated severally. Such frauds have continued to increase in complexity too. As such, when the decline happened, the same patterns noted by the good doctor continue to hold.

What patterns, though?

First, greed. When humans find the goose that lays the golden eggs, first instinct is to slice it open and get all the eggs. Housing is as basic as it is valuable, and when the trifecta of investors, bankers and hedge fund managers descended upon it, human greed took over. Ratings were screwed for commission and common people were shafted out of their homes. People wanted to get rich quickly so they hyped worthless stock and coins to influence their price.

Second, fraud. In '08, other fund managers who got wind of the recession before it hit did some digging. They found that banks gave mortgage loans to people at ridiculous rate with little to no guarantee. The incentive to own homes was so great, but people did not know how much worse it would be for them. The banks withheld this information. On the clients part themselves, some even went as far as listing their mortgage under their pet's name. And remember the NFT hype that has wiped out fortunes in recent years. Remember all the crypto scandals and frauds on the news. Sure, the current recession is very different and quite peculiar, but downturns in crypto markets reinforce this view.

So what now?

We cannot know what to expect. I am very green at investing and seeing the whole picture is still a challenge I'm yet to master. What we can know for sure is that this is the time for low risk options, even though the returns may be low as well. Greed got us in here and it won't get anyone out of it. The point is to survive long enough for the hard times to pass over, so that compounding can take effect. Beyond that, be mindful of increasing fraud in a particular sector as a sign of unreliability within the sector. When the thieves get better, the economy apparently gets worse.

I hope I have sparked interest in your mind to go study more about money and markets. I am also new to this and would love your feedback, so, feel free to hit my socials.

With that, farewell.

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