Why Remembering The Lehman Brothers Collapse Is Important To Stocks

The stock markets in general have had a good recovery from the market crash in 2008 to 2009. As I indicated in many articles over the past four years, it has been an earnings driven recovery. Earnings for most companies fell right off the cliff in 2008 and not a fiscal cliff either. Companies slashed employment, tightened budgets, reined in spending and then the Government stepped in and pumped in hundreds of billions of dollars.

With the Federal Reserve now into QE3, market direction is showing all the signs of topping out just as it did in 2007 long before the market crash of 2008-09. The market in 2007 set all new highs but earnings in the end could not support those highs and were already starting to decline by the summer of 2007. In the summer of 2007 analysts were already starting to downgrade earnings outlooks on companies and specific industries and sectors. This past summer they started once again lowering earnings expectations.

The collapse of Lehman Brothers on September 15 2008 happened at a pivotal long-term…………

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