@Lukas Zupan apologies the tagging isn't working so hope you see this. First thanks for starting this thread. Well done for being so curious and thoughtful! I am sure you are going to be an outstanding investor.
I was fairly junior on the client side of the investment industry. I had just paid off my student loans so didn't have debt but didn't have much cash either.
Back in 2005 I was reading about the housing bubble in the publication "Gloom Boom Doom" by Marc Faber (I think he may be less respected now after some calls that didn't work out as well). He was outlining the no doc loans even then. I know it seems very early that anyone was noticing, but I specifically remember this because it was when I was in a different foreign country, before I moved to the UK.
I recall a co worker at that time telling me to "shut up about the U.S. housing bubble, U.S. housing never goes down". Being the only female in 100+ people, being young, working in a foreign country, I shut up. It's a recurrent theme that I have been too conservative, not trusting my instinct, not being bold enough etc. I have done ok but could have done so much better if I had trusted myself more.
But I don't feel great about having an early sense that things were going to blow up-it was a horrible global meltdown and like they said in the movie the Big Short, suicides rise significantly with each increase in the unemployment rate. Many human lives suffered. I found it very hard to watch the Big Short, because I had seen the actual movie in real time, unfolding. When the family in the movie got evicted, I lost it.
Things were already cracking by 2007. Here in the UK there was a massive bank run (Northern Rock) with people lining up to get their cash out of the bank. I started hearing about the funds that were shorting sub prime (similar to the ones in the Big Short movie). We started hearing about bankers leaving Lehman Brothers already in early 2008, that things weren't right there with the risk management. Everyone points at Lehman, but AIG was right there with them in terms of systemic risk. A "conservative insurance company".
By summer/autumn 2008 each Sunday night was a roller coaster: which bank was going under, which clients would be impacted. UK pension funds had their cash frozen in Icelandic banks. Firms were moving money from one bank to the other, trying to get ahead of the next failure. Given that I was supporting family members financially and I was so conservative, I hoarded what meagre cash I had. I delayed having children (this is probably the most significant life impact for me).
I had just bought an affordable rental investment abroad with cash and it did ok during the crisis but looking back, I would have been much better loading up on Florida property in 2009. I also recently found my notebook from when I lived in Boston in the 1990s and saw 3 family properties for sale for $150k that are now $1 million. Again a senior colleague told me not to buy, and I listened. "You want to travel the world now, you don't want to be bogged down by property"
So, looking back at my life I have definitely been too frugal, too conservative, too meek especially compared to the people on biggerpockets who have done very well. Now that I have more guts, many markets are richly or overvalued! Argh!
Anyways, for me it was traumatic just to watch other people suffering and I think we are still feeling the ramifications via global populism and anger at institutions. (Not criticising this phenomenon just observing).
Coming back to Marc Faber, I followed his and other people's advice too closely and had a lot of opportunity cost loss by going into emerging market equities (especially China) and gold. Stupid.
In terms of where the next crisis might come from, I agree with other posters that the U.S. housing market is probably not going to the epicentre like before. But, most developed economy governments around the world are now running at 100% debt to GDP or more and interest rates are already low, so the tools to react to a future crisis are diminished. I also am trying to better understand how much hidden debt China has (at the local level) which could be a systemic underpriced risk.
On the other hand people have talked for years about how Japan is going to default any day and the Yen will drop etc etc and it just never happens, so I don't know what to think about high levels of government debt.
On a micro level, I personally don't feel super comfortable taking on a 30 year loan on a property in a flood zone. A lot of the FEMA maps possibly understate ongoing flood risks and I'm not sure that insurance companies will offer affordable coverage in the future. They may for the next 5 years but you have to take a longer view than that. The government then backs up some of this risk, but then we come back to the government debt levels and what will happen when there is a new liability for them to manage on top of Medicare, military etc. I am not saying the sky is falling, I am just saying I think flood risk is not currently rationally priced by the market. So I started with 2008 but wanted to end with what are future risks that may not be fully priced by global markets.
