It's been nine years exactly

By Lucinda Shen
September 15, 2017

Since investment banking giant Lehman Brothers fell nine years ago this day, signaling the start of a time when six homes were foreclosed on every minute, global consumers have been spending a lot of time on Netflix and a nice bit of cash on video games.

They’ve spent enough that investors saw outsized potential for those areas to grow in a post-financial crisis world. That helped make chip-maker Nvidia one of the best performers since Lehman filed for bankruptcy, and crowning streaming service Netflix as king.

While the S&P 500 rose roughly 109% between the time Lehman filed for bankruptcy in August and Thursday, shares of Nvidia have risen 1,750% while Netflix has jumped 4,468%. While $1 invested in the wider stock market would’ve been worth about 2 times more today, $1 in Nvidia would have become $19, while that same $1 would’ve be $46 had it been placed on Netflix.

Lehman Brothers, then a Wall Street powerhouse, filed for the largest bankruptcy in U.S. history September 15, 2008, after the government led by Treasury Secretary Hank Paulson told Lehman not to expect a bailout. That came after the company had jumped into mortgage-backed securities, a complex package of debts that often meant higher margins for banks, yet often included poor quality loans. But when housing prices fell, many were unable to refinance their homes, leading to delinquencies.

At one point in 2008, the unemployment rate spiked to 10%, while the stock markets cratered.

Yet nine years down the road, the Dow and S&P 500 are setting new highs partly in anticipation of tax cuts, but also thanks to developments in technology. While agricultural chemical and mining companies led the S&P 500 in the nine years leading up to the Lehman’s bankruptcy, it’s been the internet and tech companies such as Netflix and Nvidia that have led the charge this time around.

 

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