How Bad was 2008, really?

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SpartanBull
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How Bad was 2008, really?

Post by SpartanBull » Mon Jan 09, 2017 10:25 pm

Full disclosure, I was too young to be invested during the financial crisis. That being said, I'm having trouble understanding how bad it was. I hear about these bear markets (tech bubble, financial crisis, etc). All I see is a sharp decline, and then everything is gained back a couple years later. I could see how frightening drops like this could be if I were close to a retirement age, but being young, why should I care if I go down 50% on paper? I know thats I'm speaking as someone who hasn't taken a walk in someones else shoes who's invested through a crash....but for me the real fear would be the fear of stocks going down for like...decades. What is so scary about a 2 year blip? If you're truly invested long term...it seems like you're just getting cheap prices during accumulation.
Did 2008 really hurt disciplined investors? At all? When I look at it on a long term chart....it just doesnt seem that big of a deal in the scheme of things. Is the real fear that "its different this time" and stocks are a permanently bad investment, and that we've all made a big mistake? I'm really not trying to downplay the fear and anxiety of a brutal bear market, just trying to understand it.

livesoft
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Re: How Bad was 2008, really?

Post by livesoft » Mon Jan 09, 2017 10:27 pm

Someone will surely link the thread of fear from back then.

It's a different ballgame if you have just retired and half your portfolio appears to go "Poof!" versus your new Roth IRA where $5,000 goes to $2,500.
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MrNewEngland
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Re: How Bad was 2008, really?

Post by MrNewEngland » Mon Jan 09, 2017 10:32 pm

It was bad... really bad. And the current culture in this county has make it obvious that people have forgotten about it and how we got to such a bad place.

delamer
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Re: How Bad was 2008, really?

Post by delamer » Mon Jan 09, 2017 10:39 pm

The stock market decline was scary in-and-of itself. But people were also suffering through a large drop in equity in their homes, with many having a mortgage that was larger than their home's value. Plus there was a significant increase in unemployment and many who were still working had their pay lowered, bonuses cancelled, and/or insurance premiums rapidly increasing.

It is hard to keep a long-term perspective in circumstances like that, when all economic factors seem to be working against you. Some people were, understandably, focused on stopping the hurt, not on when the recovery would come.

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Re: How Bad was 2008, really?

Post by wassabi » Mon Jan 09, 2017 10:46 pm

There was a lot of uncertainty at the time. Banks were collapsing and no one knew what would happen. Very few people could have predicted the market would come back the way it did. There was a lot of doom and gloom. Learn from the charts but never discount the fear factor. The fear was bad and we had no clue what would happen.

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Watty
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Re: How Bad was 2008, really?

Post by Watty » Mon Jan 09, 2017 10:49 pm

2008 was a lot different than your normal bear market since since it was a mainly a financial crisis and the impact to the stock market was a secondary affect.

There was a very real fear that the financial system would come to a grinding halt and things would basically collapse and things like ATM's and credit cards could stop working if the banks failed.

In comparison the dot com bubble and crash a few years earlier was pretty dramatic but in a lot of ways it was a normal drop and you could be pretty sure that things would eventually be OK even though a lot of people were hurt by it.

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Re: How Bad was 2008, really?

Post by Cyclesafe » Mon Jan 09, 2017 10:52 pm

Fortunately I was not paying attention. I was 80% in equity and only woke up in 2010 when the worse was over. What did sustain me though was the conviction that that unless the economy came back, my reduced portfolio would be only one of many other problems. I stuck it out because I knew that if I didn't I would have baked into a meager retirement.

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Re: How Bad was 2008, really?

Post by boglephreak » Mon Jan 09, 2017 10:55 pm

i lost 75% of the value of my condo, which i bought in 2006. in 2016, it still isnt worth what i paid for it. technically, i have lost nothing since i rent it out now and have not sold it.

i honestly dont know how my 401k did; i assume poorly. but, back then, i never peeked. only since i read this forum and bogle's books do i peek.

Pill
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Re: How Bad was 2008, really?

Post by Pill » Mon Jan 09, 2017 10:58 pm

My accounts dropped 42%. No need to panic, stay the course.

You don't lose until your panic and sell.

ResearchMed
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Re: How Bad was 2008, really?

Post by ResearchMed » Mon Jan 09, 2017 10:59 pm

Watty wrote:2008 was a lot different than your normal bear market since since it was a mainly a financial crisis and the impact to the stock market was a secondary affect.

There was a very real fear that the financial system would come to a grinding halt and things would basically collapse and things like ATM's and credit cards could stop working if the banks failed.

In comparison the dot com bubble and crash a few years earlier was pretty dramatic but in a lot of ways it was a normal drop and you could be pretty sure that things would eventually be OK even though a lot of people were hurt by it.


THIS was what it was like.

"Was the entire financial system actually going to collapse?"

That didn't seem quite so far-fetched for a while, although it was also difficult to comprehend that it could *really* happen. (Maybe that was the bubble, not accepting the real possibility at that time?)

Some people did indeed have signficant assets frozen. The money was "there", but there was no way to get it. In some cases, for quite some time.
Even "safe" money market accounts weren't safe...

That's not just "markets being down".

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LarryAllen
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Re: How Bad was 2008, really?

Post by LarryAllen » Mon Jan 09, 2017 11:00 pm

I was down about 50% across the board (401k, other investments and home). Even as a disciplined, long term, investor I was THIS CLOSE to turning my 401k to cash. I literally logged in to the 401k, online, and was about to go to cash. Luckily I didn't but it was close. I would say my assets cut in half in a matter of 2 years!? I don't remember exactly. It sucked! Luckily I knew I wasn't retiring anytime soon so didn't really matter. It was truly just paper losses at that time for me... but it sucked and it was not fun to put together a balance sheet like it is now.

centrifuge41
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Re: How Bad was 2008, really?

Post by centrifuge41 » Mon Jan 09, 2017 11:03 pm

Yeah, every week, another few thousand laid off from various big name companies, many of which weren't financial firms. Sun Microsystems lays off thousands, HP lays off thousands, GM lays off thousands, Dupont lays off thousands. Tons of people weren't sure if their job, or their family & friends' 'jobs, were safe. Meanwhile, their 401k's and pensions were down 30, 40, 50%.

So many stocks that used to trade for $30, $40, $50+ were now trading for <$5. Who knew which would recover, and which would fail. Who knew which failure was coming next? (e.g. old GM selling for <$2 when it was over $40 in 2007).

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saltycaper
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Re: How Bad was 2008, really?

Post by saltycaper » Mon Jan 09, 2017 11:05 pm

SpartanBull wrote:
What is so scary about a 2 year blip? ... Is the real fear that "its different this time" and stocks are a permanently bad investment, and that we've all made a big mistake?


Nobody knows for sure that it's just a "blip" when it's occurring, so yes, I think one cause of panic is people think it's different this time, usually because it really is different this time in that the exact cause of the crisis/decline and the exact circumstances surrounding it really are different, so it's easy to jump from that observation to the conclusion that the outcome for the stock market will be different too.

The 2001-03 decline, for instance, felt more like a general malaise combined with a hangover, between 9/11, the wars, and the setting in of a reality less than what some imagined the Internet and communication revolution would be. It was a slower, longer bleed. In contract, 2008 was a panic that set in pretty quickly in comparison. There was good reason to worry not only about your personal situation, your house, job, etc., but what was going to happen to the financial system as a whole.

I was a net buyer, but I didn't have too much in the game at the time, and I had no fear of losing my job. But still, it is disappointing to read the more experienced forum members who failed to stay the course during that time. History shows that events like 2008-09 happen, and worse. It's not like it was a statistical anomaly to the degree of the 1987 crash or anything. One needs to be prepared, and one needs to remember that those 30%, 40%, 50% or greater stock market declines didn't happen in isolation, but political and economic events were occurring that had the potential to cause real fear.
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oldzey
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Re: How Bad was 2008, really?

Post by oldzey » Mon Jan 09, 2017 11:05 pm

Roth IRA went down by 50%
Department chair axed my assistantship, so I had to pay for the last year of grad school out of pocket.
Paid for that last year of grad school using my Roth IRA.
Job hiring freezes for next 2 years. Lucky to land a Post-Doc job so I could eat.

Taught me some valuable lessons about investing.

Yeah, it sucked.
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mr_orange
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Re: How Bad was 2008, really?

Post by mr_orange » Mon Jan 09, 2017 11:06 pm

Buying at discount pricing doesn't matter if you lack income or savings to do so. Millions of people were laid off for extended periods during the repression and thus were unable to purchase shares at the time.

I was unemployed for 14 months starting at about mid 2009 with an engineering degree from a top 10 university, a MBA in finance, and about 7 years of work experience. The Austin area where I live was one of the better markets in the country and recovered quickly. I am sure there are many people that really have never recovered fully from 2008.

So yeah, it was pretty bad. I hope my children never have to go through anything like it in their lifetime.

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iceport
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Re: How Bad was 2008, really?

Post by iceport » Mon Jan 09, 2017 11:08 pm

SpartanBull wrote:What is so scary about a 2 year blip? If you're truly invested long term...it seems like you're just getting cheap prices during accumulation.

Did 2008 really hurt disciplined investors? At all? When I look at it on a long term chart...

And this, in a nutshell, is the trouble with your perspective. You know (now) exactly how and when it ended, and how deep it crashed.

If you had lived through it, you would (hopefully) remember feeling like this was the second coming of the Great Depression. There was no way to know how far down the bottom would end up being, or when it would be. And for all we knew, this was a hole that would take a decade or two to climb out of.

Think of driving 60 mph down a steep, windy, wooded road on a dark and rainy night when your headlights and brakes go out.

How would you explain that feeling to your kid brother as you drive down the same stretch of road eight years later in broad daylight, and he says to you, "What's the big deal, the curves aren't that sharp and the upgrade after the bottom of the hill would slow you down?"
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Re: How Bad was 2008, really?

Post by rr2 » Mon Jan 09, 2017 11:19 pm

iceport wrote:
Think of driving 60 mph down a steep, windy, wooded road on a dark and rainy night when your headlights and brakes go out.

How would you explain that feeling to your kid brother as you drive down the same stretch of road eight years later in broad daylight, and he says to you, "What's the big deal, the curves aren't that sharp and the upgrade after the bottom of the hill would slow you down?"

+1. I like this analogy.

rattlenap
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Re: How Bad was 2008, really?

Post by rattlenap » Mon Jan 09, 2017 11:26 pm

The industry I worked in went belly up, but I was a cash hoarder and still am to this very day, so I was doing just fine. I also bought a bunch of Gold back in 2001 when the spot price was just below $300 an ounce and sold it all when the crash came and made a small fortune. Even though I got laid off, I took an 8 month mini-retirement and had the time of my life.

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Re: How Bad was 2008, really?

Post by jalbert » Mon Jan 09, 2017 11:33 pm

When we were in it, it felt like a possible repeat of the great depression. Nobody was predicting a 2-year recovery, and that was just a US equity recovery. The economic recovery has been more gradual. The Fed was embarking on a process that academic research suggested could have greatly lessened the magnitude of the great depression, but it was untested, and there was no playbook on executing the plan.

There was widespread fear that foreclosed homes flooding the market would cause a new round of value depreciation, and a new round of bank-owned loans going bad.

Unemployment was in double digits around the country. Many people lost their homes.

The Vanguard Total Int'l Index Fund has had a negative total return since 1/1/2008. It is valued in USD, of course, but that isn't a "2-year blip". Total return has reached parity with 1/1/2008 valuations a couple of times, but it has not been sustained.
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siamond
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Re: How Bad was 2008, really?

Post by siamond » Mon Jan 09, 2017 11:53 pm

I am reading "The Courage to Act" by Ben Bernanke, and if somebody was in the thick of it, that was him (and Tim Geithner and Hank Paulson). Those three apparently saved our collective beacon, but man it was close, so close to complete collapse. Books like that are a really good read to put past crisis in perspective. In the same vein, and even more dramatic, is The Great Depression, a Diary, book by Benjamin Roth (a MUST read).

The 2008 crisis (and 2002 too) didn't overly impress me when I went through it, because I had a highly paid job by then, and little fear about being laid off. And quite frankly, I did notice the effect on my portfolio, but was too focused on other stuff (work, family, hobbies) to overreact. Now (being early retired) might be different. I am actually kind of clinically curious to see how I will react to the next crisis...

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jpsfranks
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Re: How Bad was 2008, really?

Post by jpsfranks » Mon Jan 09, 2017 11:55 pm

I remember the particular point that really terrified me was after a major money market fund "broke the buck" and suddenly it seemed like nothing was safe anymore. The federal government stepped in and temporarily guaranteed money market funds and for deposit accounts increased the FDIC limit to $250k to avoid a catastrophic cascade of withdrawals, but even with these kinds of extraordinary steps it seemed like the Treasury and the Fed were running out of fingers to stick into the proverbial dike. For a short period it really did feel like the entire global financial system was going to unravel.

I didn't make any rash moves, but I'm not going to pretend it wasn't really scary.

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Re: How Bad was 2008, really?

Post by rgs92 » Tue Jan 10, 2017 12:03 am

jalbert wrote:When we were in it, it felt like a possible repeat of the great depression.
The Vanguard Total Int'l Index Fund has had a negative total return since 1/1/2008. It is valued in USD, of course, but that isn't a "2-year blip". Total return has reached parity with 1/1/2008 valuations a couple of times, but it has not been sustained.

Not to be off-topic, but that's a quite interesting observation about international investing, and maybe lends credence to John Bogle's general avoidance of it.

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Re: How Bad was 2008, really?

Post by junior » Tue Jan 10, 2017 12:04 am

SpartanBull wrote:Full disclosure, I was too young to be invested during the financial crisis. That being said, I'm having trouble understanding how bad it was. I hear about these bear markets (tech bubble, financial crisis, etc). All I see is a sharp decline, and then everything is gained back a couple years later. I could see how frightening drops like this could be if I were close to a retirement age, but being young, why should I care if I go down 50% on paper? I know thats I'm speaking as someone who hasn't taken a walk in someones else shoes who's invested through a crash....but for me the real fear would be the fear of stocks going down for like...decades. What is so scary about a 2 year blip? If you're truly invested long term...it seems like you're just getting cheap prices during accumulation.
Did 2008 really hurt disciplined investors? At all? When I look at it on a long term chart....it just doesnt seem that big of a deal in the scheme of things. Is the real fear that "its different this time" and stocks are a permanently bad investment, and that we've all made a big mistake? I'm really not trying to downplay the fear and anxiety of a brutal bear market, just trying to understand it.


It's not scary early in your investing career because you can buy stocks cheaply with new contributions of money and because your greatest asset is your future ability to work. That's how it works if you are an educated boglehead and not suffering from cognitive distortions.

But as you go further out in your career less of your assets will be in your future labor and more of your assets could be lost in a 2008 style crash, so things get scarier.

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Re: How Bad was 2008, really?

Post by taguscove » Tue Jan 10, 2017 12:09 am

We'll never know how bad the financial crisis could have been; most of the most severe aspects were averted through the actions of people at the US Treasury and Federal Reserve.

I was working for GE Capital at the time, the world's largest equipment leasing company with a $600 Billion balance sheet, and very conservatively run. For perspective, GE Capital owned more airplanes than United Airlines and American Airlines combined. Unlike banks like Chase or Wells Fargo, GE relied on 3-6 month term commercial paper (very close in risk profile to a Certificate of Deposit). At the peak of the crisis, the entire commercial paper market froze and General Electric was a couple months from going bankrupt.

In an alternate reality, I could imagine the top 20 US banks going bankrupt together within a week. All cash withdrawal, payment processing, and loans would cease, except those provided directly by the US government. The fortune 500 companies would be unable to roll over debt, and would either be liquidated or nationalized by the US government. US unemployment was nearly 10% for one quarter, and is around 5% when at full employment. The unemployment rate during the great depression was 30%. Imagine a job situation 5 times worse than what actually happened.

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Re: How Bad was 2008, really?

Post by Novine » Tue Jan 10, 2017 12:12 am

The US economy was losing between 500,000 to almost 1 million jobs month after month at the height of the Recession. It felt like no one's job was safe and all that courage about "staying the course" can suddenly come into question when you're facing the prospect of being unemployed with no prospects of gainful employment to pay the bills. It took many people many months, if not years, to find full-time work again and often for much lower pay. That's why so many investors were wondering if "is it different this time"?

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Re: How Bad was 2008, really?

Post by avalpert » Tue Jan 10, 2017 12:12 am

rgs92 wrote:
jalbert wrote:When we were in it, it felt like a possible repeat of the great depression.
The Vanguard Total Int'l Index Fund has had a negative total return since 1/1/2008. It is valued in USD, of course, but that isn't a "2-year blip". Total return has reached parity with 1/1/2008 valuations a couple of times, but it has not been sustained.

Not to be off-topic, but that's a quite interesting observation about international investing, and maybe lends credence to John Bogle's general avoidance of it.

Right, and is the exact opposite conclusion one would draw looking at international performance from the previous decline to 2008 - and both conclusions would be forms of performance chasing. I can't promise that forecasting the recent negative performance forward will be as wrong as forecasting the positive performance was in 2008 but I can promise that if it isn't it is merely coincidence.

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Re: How Bad was 2008, really?

Post by saltycaper » Tue Jan 10, 2017 12:20 am

rgs92 wrote:
jalbert wrote:When we were in it, it felt like a possible repeat of the great depression.
The Vanguard Total Int'l Index Fund has had a negative total return since 1/1/2008. It is valued in USD, of course, but that isn't a "2-year blip". Total return has reached parity with 1/1/2008 valuations a couple of times, but it has not been sustained.


Not to be off-topic, but that's a quite interesting observation about international investing, and maybe lends credence to John Bogle's general avoidance of it.


No. By that logic nobody should invest in stocks at all.
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Re: How Bad was 2008, really?

Post by Dale_G » Tue Jan 10, 2017 12:26 am

SpartanBull wrote:... snip...but for me the real fear would be the fear of stocks going down for like...decades. What is so scary about a 2 year blip?


You hit the nail on the head. At the market low on March 9, 2009 the S&P 500 had declined 56.8% from the high on October 9, 2007 (dividends excluded). On March 9, 2009 no one knew that this was going to be a "2 year blip". So, it would have been understandable on that day (or or days surrounding) that you, and I, and many others, would have a fear of stocks going down for like...decades. You have no way of knowing and neither would I. By the way, the S&P did not exceed the old high until April 10, 2013 so it was sort of a 6 year blip.

I retired in 2001, so I was not accumulating. I sold about $400,000 of bonds to buy into equities as the market declined. At some point I started to wonder if I was being stupid - and it could have turned out that I was being stupid.

As a young investor, you will certainly see declines of 25% or more - but hopefully not 50% or more. Maybe you will be lucky, and these will only be 2 year blips. But at the lows, you will not know that this is the case. It is the uncertainty that causes the fear.

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Re: How Bad was 2008, really?

Post by Ron Ronnerson » Tue Jan 10, 2017 12:49 am

It was very bad but investments were only one component. Buying low and riding things out is nice in theory but being able to do these things doesn't exist in a vacuum. People were getting pay cuts and losing jobs while the value of their homes and portfolios was plummeting.

It is hard to invest during a downturn such as 2008 when one owes money on a large mortgage for a home that has just lost much of its value and the person also loses their job or at least receives a substantial pay cut. In my field, those job loses were based on seniority. So, generally speaking, if you were older, your retirement balances began to disappear. If you were younger, your job itself disappeared. Being out of work has a direct impact on employment opportunities thereafter. So, for many, their income trajectory was altered for the worse.

Personally speaking, during that time, my wife and I were lucky as we kept our jobs. However, we had to do more work for less pay. I took a direct pay cut and wife stopped receiving retirement contributions from her employer as well as any raises or bonuses. My mom's portfolio dropped enough that she couldn't afford to live in her apartment anymore and moved in with us for five years.

Most people were not celebrating the opportunity that existed, though it certainly was there. Looking back, we were very lucky. Things could have been much worse for much longer.

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Re: How Bad was 2008, really?

Post by Dirghatamas » Tue Jan 10, 2017 1:04 am

SpartanBull wrote: What is so scary about a 2 year blip? If you're truly invested long term...it seems like you're just getting cheap prices during accumulation.
Did 2008 really hurt disciplined investors? At all?


2008-2009 was NOT like a normal bear market by any means.

The most striking for me personally was the "Black Swan" of frozen 401K accounts and bank failures. My MegaCorp had its 401K at the time administered by the Nation's number 1 (by assets) brokerage house. It in turn used the Nation's biggest (by assets) Money Market Fund as the default holding for 401K cash. Many of the less sophisticated employees had just parked the money in MM account to ride out the highly Volatile market in late 2008 (Stocks kept falling down so people were spooked). They all thought it was the safest investment (basically same as a Bank savings account except safer because while a small bank could go under, how could a > 60B fund go under?). Then Lehman happened and within a couple of days the Money Market fund "broke the buck". In some cases, people's 401K savings were basically frozen..some people had their entire 401K savings in MM to be safe and the entire thing got frozen..it took multiple years after the crisis to unfreeze/get most of the assets back. Obviously the opportunity cost of re balancing etc. back to stocks never happened because the money was locked up while stocks started recovering.

That event had a likely life long impact on me. It taught me at a very personal level to not put all my eggs in any one basket: whether it be asset class or country or brokerage house or fund family. There is always a tail-risk in concentrating anything and the way it will unwind is something you have no idea about, so always diversify. 2008-2009 was not like a normal bear market at all. It was potentially a LOT more serious. It could very easily have turned out much worse/much longer and the world came pretty close to total financial melt down.

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Re: How Bad was 2008, really?

Post by careytilden » Tue Jan 10, 2017 1:11 am

I was a young investor in 2008. I had been contributing to my Roth IRA for only 3 years, did not have too much money at stake, had a decent job, and did not really fear losing it. Even so, it was a really worrisome time. Everyone had friends who were unemployed. One of our friends was unemployed for so long, he and his wife had to move out of state, because they couldn't afford to live in CA with only one income. The entire calendar year of 2008 was spent with stocks sliding, banks closing, car companies on the brink, and the whole financial system in flames. We didn't know things would start to turn around in 2009. It was crazy!

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Re: How Bad was 2008, really?

Post by furikake » Tue Jan 10, 2017 1:29 am

I was younger, still in my accumulation phase, I didn't even peek because I wasn't ready to retire yet. I was so busy with my business then, I had more referrals than ever. We were lucky. We took extra vacations because everything seemed to be cheaper then, and since we made more money, so we put more into the market. I did see my friends around me losing jobs, and some took years to find new ones. Looking back now, we lost about 30% of what we had, on paper. i probably would freak out a little if I looked, glad I didn't until years later. :D

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Re: How Bad was 2008, really?

Post by evestor » Tue Jan 10, 2017 1:51 am

Hard to describe the psychological impact it had on many folks. You have to live through it to really understand.
I was in my later 20s, clearly still in the accumulating phase. I saw the market falling and thought it was a good time to increase the pace of my buying, which I did. EVERYONE told me I was a fool. Not one person that I spoke with (granted, not a ton) thought my moves were wise. This is catching a falling knife, they said. Who knows what will fail next? Bank after bank got creamed, company after company did a layoff / expense cut, etc. It was rampant. I did not watch the market closely but because a bunch of my comp was stock in a public tech company, I saw the value of that ~cut in half nearly overnight. I let the buy continue to run all the way through 2008/2009 (and to today!) but did not push as hard as I knew I should have pushed...what if others were right? What if the cash did have more value? When would this end?

Looking back, I'm glad I did what I did, but do regret not pushing even harder. I should have listened to my gut and leaned in MUCH harder, buying much more in 2008/2009/2010. I knew at the time I should have been leaning in. But then again, if things had gotten much worse, I might have needed the cash to pay the bills (if I had lost my job). So I don't know. It's always hard to second guess this sort of thing.

Watching others who were less prepared was BRUTAL and I felt awful. I had 2 years of expenses in the bank (rainy day fund) and I could have cut my expenses to make it last ~3 years if I really needed to. And that was before investment accounts that I could have sold if required. Watching others who were not as fortunate was so hard. I can't imagine what people went through.
I feel lucky, because I never lost my source of income, because I was well prepared even if I did and because in the end I profited off of this event.

I know a lot of people that are skeptical of investing in the market today because of this event and the impact it had on their life. I don't blame them.

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Re: How Bad was 2008, really?

Post by TonyDAntonio » Tue Jan 10, 2017 2:22 am

If you are young or middle age the only thing you can do is keep saving in your retirement accounts in the same percentages as always. My retirement accounts went down 60%. I figured I'd just work longer. Who knew I was just 7 years from IBM saying adios. In hindsight the downturn probably allowed me to be able to retire. I was maxing out my 401k as a 50 something, I was maxing out a Roth, and I was maxing out my wife's IRA. If you start changing or moving money out of equities during downturns you are screwed. 2008 was simple but it wasn't easy. I hope I have the same convictions now that I am retired.

itstoomuch
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Re: How Bad was 2008, really?

Post by itstoomuch » Tue Jan 10, 2017 2:39 am

Besides seeing our retirement funds drop by a few hundred k's (40%) just before we were ready to retire in 2009, in a 60/40 portfolio. Just fine and dandy, if TARP passed Congress. If TARP failed in the objective, it didn't matter.

Our son, was finishing up 3 consecutive post grad international internships with Big Software (Washington), MS Computer Science (fullride scholarship, TT school), Double engineering bachelors (very high honors, TT) at well known private tech univ, could not find a job. Big Software did offer a parttime position at slightly above minimum wage @1/4th what he was making as an intern/researcher in the same office, and this was coming from the assistant group manager whom he knew personally (when son bought a house, this manager was merging two homes and gave son 2 chairs, and other furniture that we took to a reuse store).

Big Hardware wanted to hire him (full round of interviews) but HR said that there was hiring freeze and the year's hiring quota was met.
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

edge
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Re: How Bad was 2008, really?

Post by edge » Tue Jan 10, 2017 2:43 am

It was very bad. Even US government treasuries started to crater. At that point I saw two outcomes. Either the economy would completely collapse in less than a few weeks or it wouldn't and things would recover. No matter what I did in scenario 1 (bonds, whatever) I would be wiped out. So I moved a lot into stocks. Turned out OK.

expat
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Re: How Bad was 2008, really?

Post by expat » Tue Jan 10, 2017 2:57 am

The financial system stopped working and nearly collapsed. So sort of bad.

Ari
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Re: How Bad was 2008, really?

Post by Ari » Tue Jan 10, 2017 3:39 am

Over here in Sweden, it didn't feel that bad. I wasn't really investing at the time (I think I had a few funds, but didn't really look at them), but I was vaguely aware there was some sort of crisis. I didn't read the news much, either, and I didn't know anyone who lost their jobs, so it was mostly everyday routine. Only in hindsight have I heard it was a scary time, but mostly on this forum, which is heavily overweighted in Americans. I don't think it struck us that hard here in Sweden.
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Robert T
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Re: How Bad was 2008, really?

Post by Robert T » Tue Jan 10, 2017 3:47 am

.
I recall this post from early 2009 that may be useful A Note to My Future Self.

Dear Future Self -

This is your Past Self. It's January 21, 2009 and we've just completed one of the worst years ever in the market. The S&P 500 was down 37% in 2008 and the pain was pretty bad. 2009 has not provided much relief so far. Every day, the headlines roar with news about bankruptcies, layoffs, decimated earnings, and ponzi schemes. Things are looking pretty gloomy right now.

The reason I am writing you this note is because I am afraid that you'll forget this pain at the next market highs. I don't want you to get caught up in the euphoria again. I want to remind you to not be so greedy next time. I want you to be sure to take something off the table. I want you to follow your asset allocation and when your stock percentage exceeds your target, I want you to sell. It's not a sin to sell, it's not a bad thing to pay taxes - but it is a bad thing to lose your big gains. Remember the pain and don't let it happen again.

Good luck -

Your Past Self

In this context here's a relevant extract from "The Little Book of Behavioral Investing: How Not to Be Your Own Worst Enemy" by James Montier

“A real time investment diary can be a very real benefit to investors because it helps to hold us true to our thoughts at the actual point in time, rather than our reassessed version of events after we know the outcome."
.

SGM
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Re: How Bad was 2008, really?

Post by SGM » Tue Jan 10, 2017 5:30 am

We had some very short term state muni bond funds that were frozen for at least 6 months. They were supposed to be like having cash. I had not heeded warnings from a bank examiner friend that a disaster was inevitable. :oops: Financial stocks that had been doing so well over the years went down to nearly zero or went out of business. We had a small amount in GM corporate bonds that disappeared. Real estate decreased in value and many elderly could not sell there homes. Nursing homes were taking a big hit and began to get into the rehab business in order to survive. Unsolicited frequent offers from developers to buy close in farms stopped completely.

My income was increasing and had no fear that I would lose that income. We continued to invest in the stock market, but it was a scary time.

Crushtheturtle
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Re: How Bad was 2008, really?

Post by Crushtheturtle » Tue Jan 10, 2017 5:54 am

SGM wrote:We had some very short term state muni bond funds that were frozen for at least 6 months. They were supposed to be like having cash. I had not heeded warnings from a bank examiner friend that a disaster was inevitable. :oops: Financial stocks that had been doing so well over the years went down to nearly zero or went out of business. We had a small amount in GM corporate bonds that disappeared. Real estate decreased in value and many elderly could not sell there homes. Nursing homes were taking a big hit and began to get into the rehab business in order to survive. Unsolicited frequent offers from developers to buy close in farms stopped completely.

My income was increasing and had no fear that I would lose that income. We continued to invest in the stock market, but it was a scary time.


"Listen up, old people. As you know, times are tough. Some of you will be laying tile, others will be roofing.

Anyone who wants to complain about their back gets to spend the night in the box."

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Re: How Bad was 2008, really?

Post by qwertyjazz » Tue Jan 10, 2017 6:48 am

Read through the interviews of the people that stabilized the banking system. The investment stuff was only one small piece. There was a very real chance of a complete financial break down. It was averted by multiple deals. This would have been like the Great Depression or Russia post fall of communism. It turned out to be more like any other crash.
Going to cash (at least some way) without hindsight might not have been unreasonable. If I had known all the facts at the time, I am not sure what I would have done. Rome was burning. How could you know the empire will continue?
I have trouble in thinking in terms of need, willingness and ability to take risk. Risk can be unknown. Your personal circumstances vary. Each crash is sui generis (hopefully although -politics ...). Stay the course has worked for a century if you could have weathered the draw downs. That is what I will do. But I am not sure if that is from intelligence, courage or stupidity. But sometimes just going on beats being clever.
G.E. Box "All models are wrong, but some are useful."

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Re: How Bad was 2008, really?

Post by AlohaJoe » Tue Jan 10, 2017 7:27 am

Ari wrote:Over here in Sweden, it didn't feel that bad. I wasn't really investing at the time (I think I had a few funds, but didn't really look at them), but I was vaguely aware there was some sort of crisis. I didn't read the news much, either, and I didn't know anyone who lost their jobs, so it was mostly everyday routine. Only in hindsight have I heard it was a scary time, but mostly on this forum, which is heavily overweighted in Americans. I don't think it struck us that hard here in Sweden.


I had the same experience in Australia. We slowed down hiring at the company I was working at at the time, since many of our customers were in the US, but I didn't know anyone who lost their job. I'm pretty sure we all still got our annual bonuses and raises. I don't think I even heard rumors of anyone losing their job. It certainly wasn't a time of stress or anxiety in any way for anyone I knew at the time.

cherijoh
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Re: How Bad was 2008, really?

Post by cherijoh » Tue Jan 10, 2017 7:50 am

Watty wrote:2008 was a lot different than your normal bear market since since it was a mainly a financial crisis and the impact to the stock market was a secondary affect.

There was a very real fear that the financial system would come to a grinding halt and things would basically collapse and things like ATM's and credit cards could stop working if the banks failed.

In comparison the dot com bubble and crash a few years earlier was pretty dramatic but in a lot of ways it was a normal drop and you could be pretty sure that things would eventually be OK even though a lot of people were hurt by it.


+1
It was also complicated by the housing bubble. A lot of people hit the trifecta of watching their retirement nest egg and home equity disappear in a puff of smoke at the same time that they lost their jobs. I know quite a few people who had professional jobs (enabling a comfortable middle class life style) who were thankful to snag a job as a cashier at the local grocery store or as a Walmart greeter. Anyone with an inadequate emergency fund faced the choice of raiding their retirement funds to keep afloat or losing their house/going bankrupt. They didn't have the luxury of waiting for the stock market to recover - a lot of these folks have not yet (and will never) recover financially from the 2008 crisis.

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Re: How Bad was 2008, really?

Post by mcraepat9 » Tue Jan 10, 2017 7:56 am

I like re-reading the Sheepdog thread to get a sense of 2008, which was a day-by-day account of the crisis and its impact. The crisis also threatened jobs. It is easy to view your portfolio in isolation from your job, but at that time most people were not able to compartmentalize like that. A lot of stress.
Amateur investors are not cool-headed logicians.

jebmke
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Re: How Bad was 2008, really?

Post by jebmke » Tue Jan 10, 2017 8:01 am

edge wrote:It was very bad. Even US government treasuries started to crater. At that point I saw two outcomes. Either the economy would completely collapse in less than a few weeks or it wouldn't and things would recover. No matter what I did in scenario 1 (bonds, whatever) I would be wiped out. So I moved a lot into stocks. Turned out OK.

My memory is a bit fuzzy but I seem to recall that nominal treasuries actually did pretty well as money fled to quality. Tips had a liquidity crisis and prices dropped quite a bit and it was an epic buying opportunity in the fall of 2008. I loaded up on long Tips in October of that year -- it took some work because trading was thin at the time and Vanguard made you work with the bond desk on the phone vs. online trading.
When you discover that you are riding a dead horse, the best strategy is to dismount.

carolinaman
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Re: How Bad was 2008, really?

Post by carolinaman » Tue Jan 10, 2017 8:12 am

SpartanBull wrote: why should I care if I go down 50% on paper? ....but for me the real fear would be the fear of stocks going down for like...decades. What is so scary about a 2 year blip? If you're truly invested long term...it seems like you're just getting cheap prices during accumulation.


2008 was bad on many fronts. 50%+ drop in stock market, steep declines in almost everything except treasuries, steep decline in housing, banks/companies failing. No one knew how bad this was going to get nor how long it would last. Do not assume that bear markets will bounce back so quickly. It may not happen next time.

It was worst for retirees and near retirees, but many younger people also sold in the down market because it was so scary and many "experts" were predicting further declines. No one knows what their true risk tolerance is until they are tested by something like 2008.

I have been an investor since the early 80s and 2008 was much worse than anything else I have seen. For example, a lot of investment types held up nicely during the tech bubble implosion but almost everything tanked in 2008.

SteveB3005
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Re: How Bad was 2008, really?

Post by SteveB3005 » Tue Jan 10, 2017 8:30 am

Stay the course was still the mantra, but there was plan B's everywhere. And when Adrian Nenu, darth vader himself, pronounced he was selling all his bonds and going all in. Doom was real.

lostdog
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Re: How Bad was 2008, really?

Post by lostdog » Tue Jan 10, 2017 8:33 am

Pill wrote:My accounts dropped 42%. No need to panic, stay the course.

You don't lose until your panic and sell.


+1
"Our life is frittered away by detail. Simplify, simplify." -Thoreau | Vanguard Total World Index-buy the haystack.

ljb1234
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Re: How Bad was 2008, really?

Post by ljb1234 » Tue Jan 10, 2017 8:38 am

This quote best explains it by analogy...
(one of my favorite quotes for 2008, btw)

Fred Schwed:

On the emotions of losing money: “Like all of life’s rich emotional experiences, the full flavor of losing important money cannot be conveyed by literature. You cannot convey to an inexperienced girl what it is truly like to be a wife and mother. There are certain things that cannot be adequately explained to a virgin by words or pictures.”

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