The U.S. economy was booming. Financial engineering had made risky assets safe. Buy and hold had become the only winning strategy.
Then 2008 happened and investors found out that moving risk around by bundling it into AAA-rated securities did not make it disappear. Hard lessons were learned the hard way.
Since then, the U.S. economy has run full circle, with Tuesday's new home sales just the latest in a series of data points that has returned to pre-crisis levels.
Importantly, it's not just the number of sales that returned to pre-crisis — should we say 'bubble'? — levels, but the price of housing has also returned.
Housing is not alone: The U.S. return-to-2007 is a wider economic phenomenon, with unemployment back to levels close to full employment.
Even the bond market is pricing duration risk at levels not seen since 2007, with the 2-year 10-year yield spread down to 80 basis points.
And stocks are, well, at record highs.
There are only a couple of ingredients missing from the recipe to make this a perfect return to the good/bad old days. Firstly, there's inflation — or rather, the lack thereof.
Secondly, and perhaps more importantly, there's risk. In 2007, risk only seemed to have disappeared. In 2016, it has either disappeared or is hiding somewhere investors haven't looked yet.
The one thing that seems certain is that whether elevated levels of risk have disappeared or not, investors seem to be pricing assets as if they have. Which, as 2007 showed, may be a risky prospect in itself.