An old Wall Street axiom is that the four most dangerous words are “This Time is Different”.

Preceeding the last recession, it was widely believed this time was different because the new risk management techniques provided by derivatives, such as collateralized debt obligations, prevented any financial “blow-out”. In fact, some argued that recessions were no longer possible, and that we were entering The Great Moderation instead of The Great Recession.

Prior to that recession, it was widely believed that the tech bubble of the late 1990s was also different because the increased productivity from technology would make everything more profitable, which justified the high share prices, relative to earnings per share.

I just finished reading This Time is Different by Professor Reinhart of the University of Maryland and Professor Rogoff of Harvard. In it, there is almost 800 years of data about financial crises in 66 different countries. It should not be surprising that they found very little is different before any of those crises. This is a great book but not a gentle read for the non-economist.

Frankly, it reminds me of the “Minsky Moment”, named after the late Hyman Minsky, which essentially says debt will increase and increase, until it reaches that moment it can no longer increase and then collapses suddenly, causing a financial crises.

The investment implications of this today is to remember tomorrow that the four most dangerous words on Wall Street will always be the same . . . This Time is Different . . .