How Bad was 2008, really?

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Grt2bOutdoors
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Re: How Bad was 2008, really?

Postby Grt2bOutdoors » Tue Jan 10, 2017 1:13 pm

Sheepdog wrote:"Grt2bOutdoors" ------y.[-
Always keep some dry powder on reserve, some folks say keep 6-9 months, in this regard, I disagree, better to keep enough to keep you afloat more than your neighbor - keep 2-3 years. Why? well if you need to ask that, then you need to read some more history.

Good and valuable comment. Thank you.


You're most welcome.
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InvestorNewb
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Re: How Bad was 2008, really?

Postby InvestorNewb » Tue Jan 10, 2017 1:13 pm

pinhead wrote:If you bought stocks 30 years ago, it would have the same value in 2008. Thats how bad it was.

This requires a citation.
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Re: How Bad was 2008, really?

Postby NYCPete » Tue Jan 10, 2017 1:17 pm

There was a thread about this in the summer of 2015. I'd recommend looking it over

What was the 2008 crash like in real time?

Here's what I wrote in that thread.

NYCPete wrote:I was in my late 20s. In the span of just a few short months, I watched YEARS worth of contributions into my retirement plan just disappear. And then I rebalanced. (that’s what we were supposed to do, right?) And then over the next few weeks I watched my account balance continue to fall, to the point where my account showed the exact same allocation as before I rebalanced! What the hell was this??? I already had more in bonds because of the drop. Now I was faced with the regret that if I had waited to rebalance, I wouldn’t have lost all that extra money only to find myself where I was a few weeks before. And I was beating myself up over simply following those “rebalancing bands” that I’d been reading about.

But that’s not everything. Yes, in 2008 the stock market dropped. But your daily life and your daily experiences color all this drama going on with your personal investments.

Close to the end of 2008, 1.5 million people were out of a job in less than 3 months.

News reports said the original money market fund was “breaking the buck” and people were losing money in what was supposed to be a “super safe” investment that could be viewed practically the same as cash.

Layered on top of all of this was the prevailing sense that we didn’t know which major financial institution was going to go down next. Every week it was some new institution coming out of nowhere saying they had gravely miscalculated and they were underwater on their balance sheet. In 2008 alone, IndyMac, Washington Mutual, Countrywide, Lehman Brothers, along with over 20 other banks…gone. Fannie May and Freddie Mac were swimming in crappy debt that would likely never get paid back. Just when we thought it was only about the investment banks and mortgage companies, AIG (an INSURANCE company!?!?) came out and said “oh….uh yeah, we’re pretty much broke.” Then it wasn't just the investment banks, it was the banks that we go to for ATMs. What if Bank of America, Citi, and Chase bought up these crappy bankrupt companies to save the system, and those crappy companies pull our retail banks down with them?? Then TARP was proposed, and Congress balked. They voted it down at first, and the stock market plummeted. While all this was going on, it became increasingly clear that government and the Fed were essentially making it all up as they went. And no one in government, the Fed, or at any of the banks had been alive the last time the country had faced this kind of meltdown. They were flying blind.

Then I’d log onto Bogleheads for some comfort. There were people saying the same thing they always say, but it was evident that even the stalwarts of the forum (both professional and non-professional alike) were clearly rattled. There were no safe havens.

THIS is what people were experiencing when they were “hitting their rebalancing bands.” All this “buy, hold, rebalance” stuff is easy to think about in theory. But once you layer on real life, and all the emotion that comes along with it (anger, frustration, hopelessness, uncertainty, second guessing)?

MUCH harder to do in practice.

I wish you all the best in your eventual membership in the "lived through a market collapse" club. It's a wiser group of members, but the entry-fee is super, super sh***y.

Best,
Peter
To the extent that a fool knows his foolishness, | He may be deemed wise | A fool who considers himself wise | Is indeed a fool. | | Buddha

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Re: How Bad was 2008, really?

Postby Yohanson » Tue Jan 10, 2017 1:18 pm

2008 was a great year for me. I was in my early 40s and in the middle of a divorce. My 401K lost 40% of its value and my house dropped 30% in value. Due to this, I was able to buy out my ex wife far cheaper than I normally would have and was also able to get her to agree to not take any of my 401K or pension. My 401K is now worth 4.95 times as much as it was at the end of 2008 and my house is back to the value it was in 2007.

Having said that, I've always treated my retirement funds more in the terms of number of shares owned instead of the individual funds value because the value is going to go back up and it's going to be higher than what it was before the drop. This is beginning to change now that I'm in my early 50s and much closer to retirement. For a younger investor, corrections and bear markets are buying opportunities.

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Re: How Bad was 2008, really?

Postby rgs92 » Tue Jan 10, 2017 1:18 pm

pinhead wrote:If you bought stocks 30 years ago, it would have the same value in 2008. Thats how bad it was.

This is wrong.
Stocks dropped to 1996 levels, only 13 years prior (S&P 666 in both 2009 and mid-1996). Back in 1982, stocks were 20% BELOW 1966 levels, which was 16 years earlier.
So 2008-9 actually was not that bad.

And to take the longer view, in 1994 the S&P was 444, and in 2009 it was 666 at the low. So in 15 years you gained 50% w/o even counting dividends.
And this is not cherry-picking since 1994 was not some big bottom of a bear market.

(To really cherrypick, look at 1988-2009, and then you really were doing nicely even at the 2009 low. S&P 260 in 1988 to 666 in 2009. Pretty nice.)
So stocks are good.
Last edited by rgs92 on Tue Jan 10, 2017 1:27 pm, edited 3 times in total.

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Will do good
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Re: How Bad was 2008, really?

Postby Will do good » Tue Jan 10, 2017 1:23 pm

Sheepdog wrote:"Grt2bOutdoors" ------y.[-
Always keep some dry powder on reserve, some folks say keep 6-9 months, in this regard, I disagree, better to keep enough to keep you afloat more than your neighbor - keep 2-3 years. Why? well if you need to ask that, then you need to read some more history.

Good and valuable comment. Thank you.


I'm retired, so I'm with Sheepdog & Grt2bOutdoors on this one.

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Re: How Bad was 2008, really?

Postby Doom&Gloom » Tue Jan 10, 2017 1:26 pm

How bad? Numbers are readily available, but the feeling was terrible and continuous.

I began investing in 1974 and had been through 1987 and 2000 (?) so I figured I was ready for anything. I was mistaken. 1987 was an absolute blitz and the damage was done before I could react to it. Thank goodness! My only regret afterward was not buying more at the bottom.

In 2008 I had not yet become a Boglehead, but after 1987 I "accidentally" began acquiring some Bogleheadish traits. I first quit trading common stocks so frequently and, by doing so, reduced transaction costs. Later I moved from a large portion of common stocks to entirely mutual funds which diversified my holdings greatly. It also had the benefit of eliminating my desire to check share prices frequently or to even pay much attention to overall market levels. At that point I began ignoring my investments due to the comfort of decreased volatility (from diversification). When the dot com bubble burst, other than the complaints from some friends I barely noticed.

When the decline of 2008 rolled around I didn't notice for a while. Then I couldn't quit noticing because it couldn't be avoided on the news and elsewhere. My early reactions were "So what? How long can this go on?" Then it began to feel as if it might go on forever. I began to consider selling part of my holdings but didn't commit. Then I regretted not selling as prices kept sliding lower. I finally made up my mind to sell but couldn't decide how much. As I narrowed my target range, I read a post on an entirely unrelated forum I belonged to that changed my mind. The poster was a well-respected financial trader who reported that he hadn't sold any of his stocks for decades but had just sold a significant portion of his portfolio. I guessed that might be an indication the bottom of the market was very close, so I decided to sit tight. Luckily, and I emphasize that, it turned out to be the bottom.

But after I became aware of the decline, the grind downward had been prolonged and excruciating. Several years after that I discovered Bogleheads and got my investing house in order--particularly asset allocation, which had been very haphazard. I am much better prepared now than I was in 2008, but I don't look forward to the next test of my resolve.

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Re: How Bad was 2008, really?

Postby Flashes1 » Tue Jan 10, 2017 1:27 pm

It was very bad. The financial system was close to collapse. I'm in corporate banking, and saw many of the world's largest financial institutions drop like flies....institutions that survived Great Depression, didn't survive this one. There were a couple days when my institution (probably the strongest of them all) was wondering if we should fund our corporate customers' revolver advance requests that are used to fund payroll, utilities, etc.

We did fund, but we were thinking about not doing it a couple times.....and that should tell you everything you need to know about 2008. Bernanke saved us all.

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Re: How Bad was 2008, really?

Postby Grt2bOutdoors » Tue Jan 10, 2017 1:32 pm

jf89 wrote:
Grt2bOutdoors wrote:
jf89 wrote:A lot of doom and gloom about the drop here. Were ALL banks really in danger of going under? In my experience, many were hiring. I'll give a slightly different view:

I was fresh out of college, my industry was hiring (not banking, another industry), and the only unemployed people I knew were classmates that were underemployed for their degree. None of my parents, or my friends' parents, or friends, or family friends lost their jobs. Recruiters from outside the industry I wanted to be in told us to go to grad school or find a spot in the military rather than seeking jobs. I was obviously accumulating at that point, and my manager mentioned that I and the other new hire were lucky to be coming in to our 401k at a low point in the market.

I didn't watch or read any news then, so above is all I knew at the time. I had an almost naive confidence that people were over exaggerating how bad things were, and everything would be alright anyway, so I just decided to ignore all the peripheral stuff.

Maybe ignorance really is bliss. Maybe my geographic area wasn't hit that hard? I doubt that, my local economy is pretty tied in to the rest of the country... especially in banking. Knowing much, much more about markets and the world in general now, I still have that (probably naive) confidence that everything will be alright if things go to hell again. Added to it is a sort of twisted view that even if everything isn't alright, everyone is in the same boat, and I wouldn't have known what to do as it was happening anyway.


You were not sitting at the right table, in the right room and at the right time. You tuned yourself out - no news, no tv and you did not know anyone who was detrimentally impacted by these events. That's okay, you got to keep your sleep, hair, blood pressure and likely escaped with no ulcers. You have no idea how close we came to the foot of the abyss where you don't recover. In general, lots of ignorance back then, even today, most of the country has no idea of just how bad it really was.


But the questions is, what would I or others have done with that information? Probably filled the guest room mattress with cash then left it there to this day telling ourselves that we'd reinvest it during the next crash. I think there was too much ignorance in the other direction with too many panicking and filling mattresses when in reality the best course of action for most is to plan ahead (emergency funds, living below your means) and remain calm when everyone sitting at those other tables starts freaking out.

When it all comes down to it, if the economic system collapses I'll be standing in a bread line with 98% of the population whether I reacted (most likely incorrectly) or not. And those people that reacted correctly are still likely in a pretty bad spot, too.


Knowledge is power - an old saying. Quoting Dean Wormer - "being fat, drunk and stupid is no way to go through life". :) Information is important in all facets of life, to ignore it is to place yourself at a disadvantage. What could you have done with the information? Well, if you needed cash, you raise it when you need it. You also bank the knowledge knowing when the time comes, you alter your IPS to reflect the information. Investing is something that requires time, cash and an ability to adapt to events. If you wanted to make an opportunistic purchase, having information is key. Not reading or listening or watching, instead basically digging your head in the sand provides you with zero benefit. That applies in everything you do in your lifetime, dating, driving, socializing, applying for employment, your health and in these days of terrorism potentially staying alive. Ignore it at your own peril.
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Grt2bOutdoors
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Re: How Bad was 2008, really?

Postby Grt2bOutdoors » Tue Jan 10, 2017 1:34 pm

Flashes1 wrote:It was very bad. The financial system was close to collapse. I'm in corporate banking, and saw many of the world's largest financial institutions drop like flies....institutions that survived Great Depression, didn't survive this one. There were a couple days when my institution (probably the strongest of them all) was wondering if we should fund our corporate customers' revolver advance requests that are used to fund payroll, utilities, etc.

We did fund, but we were thinking about not doing it a couple times.....and that should tell you everything you need to know about 2008. Bernanke saved us all.


Is that you Ben? :)
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Re: How Bad was 2008, really?

Postby user5027 » Tue Jan 10, 2017 1:38 pm

I remember opening a mailed statement from Vanguard and thinking they had the current balance and beginning balance flipped.

People at work joked it was no longer a 401k but was now a 201k.

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Re: How Bad was 2008, really?

Postby Grt2bOutdoors » Tue Jan 10, 2017 1:44 pm

Will do good wrote:
Sheepdog wrote:"Grt2bOutdoors" ------y.[-
Always keep some dry powder on reserve, some folks say keep 6-9 months, in this regard, I disagree, better to keep enough to keep you afloat more than your neighbor - keep 2-3 years. Why? well if you need to ask that, then you need to read some more history.

Good and valuable comment. Thank you.


I'm retired, so I'm with Sheepdog & Grt2bOutdoors on this one.


One other thing - folks on this forum like to say that your entire portfolio is your e-fund. Okay, now, imagine your expenses are $50K a year (before COBRA health insurance), your portfolio is worth $100K, invested 90/10 or 80/20 like alot of these newcomers who claim because they are young they can shoulder the risk. Then 2008 hits, now the portfolio is worth 60K and you just got pulled into your bosses office who informs you he has to let you go. Oh! and you just closed on your new condo last month and your wife is a SAHM. Talk about risk!

That is what folks need to think about before they design their portfolio. An e-fund is just that - it's money that you absolutely need to get your hands on and it needs to be worth 100% of the value, not 60 cents on the dollar.

If you want to know what the Great Depression was like, watch The Grapes of Wrath or read the book by John Steinbeck.
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Re: How Bad was 2008, really?

Postby MrKnight » Tue Jan 10, 2017 1:52 pm

Well, I wasn't investing yet but I had graduated from college into it in 2009. A 2009 graduate experienced a very different job market compared to even a 2008 and 2010 graduate, and I don't think anyone really realizes how bad it was for 2009 graduates unless they experienced it first hand.

I never was unemployed, but had to start off with temp work and and very low wage ($12/hr in NYC area) as some were taking advantage of the situation to price gouge employees.

The implications for having graduated into it the financial crisis lasted for years as each future employer based my new salary on my prior salary. Fast forward a few years and fresh college graduates were graduating and earning more than I was with several years of experience.

I didn't really catch up to approximate fair market value until 2016, and it took several job jumps, fighting with HR, and benevolent hiring manager who felt that I deserved a considerable boost in salary considering my qualifications.

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Re: How Bad was 2008, really?

Postby InvestorNewb » Tue Jan 10, 2017 1:55 pm

MrKnight wrote:The implications for having graduated into it the financial crisis lasted for years as each future employer based my new salary on my prior salary.

Could you not "inflate" your previous salary so that you could at least earn a fair wage at your new job? Or did they somehow verify that information?
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Re: How Bad was 2008, really?

Postby MrKnight » Tue Jan 10, 2017 1:58 pm

InvestorNewb wrote:
MrKnight wrote:The implications for having graduated into it the financial crisis lasted for years as each future employer based my new salary on my prior salary.

Could you not "inflate" your previous salary so that you could at least earn a fair wage at your new job? Or did they somehow verify that information?


I probably could get away doing that, yes, but I was always truthful when asked.

I have never seen it personally but I have been told that some jobs will verify your prior salary. I imagine these companies are few and far between however.

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Re: How Bad was 2008, really?

Postby munemaker » Tue Jan 10, 2017 1:59 pm

I was 52 in 2008. While losses in the financial and real estate markets were bad, what bothered me even more was how the government intervened and overrode basic free market rules, and picked winners and losers.

I don't remember all the details and some of this could be off in some detail.

I remember Chrysler bond holders were supposed to get paid ahead of others and the government decided they should not be paid. I expected the courts would never back this up, but they did. Still don't understand that.

The government protected FNMA shareholders (not government guaranteed like her cousin GNMA) and propped up AIG. They let Bear go down (I think I remember Cramer saying they wouldn't, but they did). Government backed up General Motors, including employee pensions which should not have been protected in a bankruptcy. The government backed up a number of big banks, who immediately paid out huge performance bonuses to the employees that caused the problems. Basically, the government bailed out Wall Street and let Main Street fend for themselves.

I remember writing a number of emails to my senator and representative, begging them not to do the bailouts. The population at large did not support the bailouts, but they did them anyway.

The lack of orderly markets and not allowing companies the right to fail that was my biggest concern.

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Re: How Bad was 2008, really?

Postby InvestorNewb » Tue Jan 10, 2017 2:02 pm

MrKnight wrote:I probably could get away doing that, yes, but I was always truthful when asked.

I have never seen it personally but I have been told that some jobs will verify your prior salary. I imagine these companies are few and far between however.

I agree that lying isn't right, but it doesn't seem right what they were doing either. At the end of the day you have to look after yourself.
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Re: How Bad was 2008, really?

Postby MrKnight » Tue Jan 10, 2017 2:12 pm

InvestorNewb wrote:
MrKnight wrote:I probably could get away doing that, yes, but I was always truthful when asked.

I have never seen it personally but I have been told that some jobs will verify your prior salary. I imagine these companies are few and far between however.

I agree that lying isn't right, but it doesn't seem right what they were doing either. At the end of the day you have to look after yourself.


Yeah I agree about it not being right and needing to look after yourself, I probably did shoot myself in the foot by being completely honest, but I would attempt to negotiate.

Sometimes they would just say no, other times they acquiesce and would earn a few percentage boost... but since their starting offer was so low I was still earning less than those who were just graduating and not bothering with negotiating.

Regardless, I am now within fair market value range, (albeit in the lower range), so I am okay now.
Last edited by MrKnight on Tue Jan 10, 2017 7:04 pm, edited 1 time in total.

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Re: How Bad was 2008, really?

Postby Tamalak » Tue Jan 10, 2017 3:07 pm

munemaker wrote:
The lack of orderly markets and not allowing companies the right to fail that was my biggest concern.


Because allowing the companies to fail in this case would be allowing the entire world economy to fail. In a choice between survival and free-market purity I'll take survival.

Of course, the obvious follow-up is to put in place regulations to ensure things won't get so tangled and leveraged that we won't face that choice again. Doesn't seem like that's happening.

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Re: How Bad was 2008, really?

Postby Toons » Tue Jan 10, 2017 3:13 pm

It was a great opportunity.
Most investors didn't realize it at the time though.
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Re: How Bad was 2008, really?

Postby DaleMaley » Tue Jan 10, 2017 3:19 pm

Image

The Tech Wreck was excruciating.....with 3 years of declining markets. It seemed like it would never end at the time.

The Sub-Prime Loan crash was more sheer panic that the whole system would collapse.

The Great Depression Diary by Benjamin Roth is a great read. I didn't understand what if felt like to live through the Depression.......until I read this book.
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Re: How Bad was 2008, really?

Postby bradshaw1965 » Tue Jan 10, 2017 3:40 pm

munemaker wrote:I was 52 in 2008. While losses in the financial and real estate markets were bad, what bothered me even more was how the government intervened and overrode basic free market rules, and picked winners and losers.

I don't remember all the details and some of this could be off in some detail.

I remember Chrysler bond holders were supposed to get paid ahead of others and the government decided they should not be paid. I expected the courts would never back this up, but they did. Still don't understand that.

The government protected FNMA shareholders (not government guaranteed like her cousin GNMA) and propped up AIG. They let Bear go down (I think I remember Cramer saying they wouldn't, but they did). Government backed up General Motors, including employee pensions which should not have been protected in a bankruptcy. The government backed up a number of big banks, who immediately paid out huge performance bonuses to the employees that caused the problems. Basically, the government bailed out Wall Street and let Main Street fend for themselves.

I remember writing a number of emails to my senator and representative, begging them not to do the bailouts. The population at large did not support the bailouts, but they did them anyway.

The lack of orderly markets and not allowing companies the right to fail that was my biggest concern.


I think it's possible to disagree with political choices, outcomes and temperaments and still be blown away by the fact that a handful of panicked people held the world's financial future in their hands.

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Re: How Bad was 2008, really?

Postby nodenuff2 » Tue Jan 10, 2017 4:16 pm

I was 58 in 2008. In the middle of the decline I admitted to my wife how much we had lost approximately 250k . I knew we would be ok because I had a marvelous pension plan . We started increasing our contribution by half of our raise each year. We stayed the course and retired in Jan. 14 having fully recovered. Personally 87 was much harder lost 25% overnite. Thankfully we stayed invested through all corrections However we still had earning capacity not so now . That is why we are 50/40/10 stocks bonds and cash.
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Re: How Bad was 2008, really?

Postby Fallible » Tue Jan 10, 2017 4:34 pm

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. ...


Your understanding of 2008 and what it meant only for investors seems based mainly on the relatively quick and steady recovery that became a bull market still going years later. Nobody knows how long any bear market will last, but in 2008, that uncertainty came amid events that threatened a global financial meltdown and saw millions losing jobs and homes. That's a good thing for you to remember when your first crash comes - and before it comes, when you decide your AA based on your need, ability, and willingness to take risk. Until then, you'll just have to imagine what 2008 was like.
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Re: How Bad was 2008, really?

Postby JCE66 » Tue Jan 10, 2017 4:38 pm

SpartanBull....Let me start by saying that the 'Sheepdog' thread is an absolute must read.

I want to focus more on the psychology. I remember 73-74 (I was a kid, but I remember), 1981-82, 1987 (I was in college), 1990, 2001-03 and then the grand daddy - 2008. Everything was uncertain, and malleable. There was nothing you could take for granted. Every day, for months on end, there were thousands of people losing their jobs. Every day, for months on end, people were losing their homes. It got so bad that thousands of people simply mailed their house keys back to the mortgage company and said - take it. And left.

The financial world was in total upheaval -- complete and utter chaos. Literally, we had huge banks just disappearing over the space of a weekend. The government simply arranged for the takeovers to happen. You literally did not know if your bank was going to go under. Nothing was certain.

In retrospect, I think it is the uncertainty of it all that was the most scary. So my advice to you: have a plan. Because when you're in the middle of a severe crisis like that, introspection and reflection go out the window. People want to do something so they feel in control. Often, they make critical mistakes.

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Re: How Bad was 2008, really?

Postby rai » Tue Jan 10, 2017 4:44 pm

2008-9 was a great time to harvest loses which I had in abundance, I didn't pay gains for YEARS after (in spite of me selling options, which is a bad habit I'm trying to kick)
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Re: How Bad was 2008, really?

Postby nedsaid » Tue Jan 10, 2017 4:47 pm

2008 was really, really bad. My portfolio was down 35% and my home value crashed too. I think my home value dropped in half and I may have actually been underwater on my mortgage. My investment portfolio recovered a lot faster than my home. The effects from the 2008-2009 financial crisis and bear market also led to me eventually getting laid off in 2014. A delayed reaction. So it was the triple crown: affected my portfolio, home value, and ultimately my job.
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Re: How Bad was 2008, really?

Postby Dandy » Tue Jan 10, 2017 5:13 pm

What doesn't kill you makes you stronger.


Sometimes I guess or it could just cripple you for life. :happy Had the recession lasted a few years longer and the recovery been much milder and stretched out a bit the pain would have been felt by more and more intensely especially those in retirement.

I'm glad the great recession left you in a good place as it did me. I think for many it made them realize more fully that with rewards comes risk even if it is happens only once in awhile. Equities can be great but can drop 50% or more in a relatively short time and you never know when. Those close to or in their early stage of retirement with little human capital left need to be sure their allocation takes that into account. Loss of human capital is often a big deal as is moving from accumulation to withdrawal.

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Re: How Bad was 2008, really?

Postby Levett » Tue Jan 10, 2017 5:17 pm


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Re: How Bad was 2008, really?

Postby AllieTB1323 » Tue Jan 10, 2017 5:18 pm

Toons wrote:It was a great opportunity.
Most investors didn't realize it at the time though.
:sharebeer


We were lucky, our business was on a tear which gave us sufficient funds to invest both in retirement and taxable accounts. My FIL was hurt by the Lehman mess. I learned my lesson not to buy individual stocks when my Washington Mutual holdings were turned into a tax deduction.

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Re: How Bad was 2008, really?

Postby Artsdoctor » Tue Jan 10, 2017 5:41 pm

tadamsmar wrote:For me, this was the most memorable thread from that period:

viewtopic.php?t=30085

There is a serious discussion about "having to take less risk" by some influential Bogleheads. I think that phrase is just a euphemism for capitulation. That aspect of Plan B seem to imply that the B stands for "Barn that the horse just left".

But other aspect of Plan B like working longer, spending less, and the more radical "moving to lower expenses" make sense.

Here's a quote from that thread"

I am not sure if the Titanic is analogous to the Bogleheads investment plan, but many people were led to believe that it is the safest way to invest for the future. Now that the Bogleheads' ship is listing 40 degrees, we are told that it might be time for some to abandon ship. If these poor souls had known from the beginning that the Bogleheads' ship was sinkable, they might not have got on it.


viewtopic.php?p=366633#p366633


The first thread above was, and is, a heart-breaking thread. I remember reading it and re-reading it brought back a lot of memories. Taylor took a tremendous amount of flack about his opening comments, but there had been a pretty remarkable run-up in equities before the bear market began and a lot of people had very high equity allocations--including some people nearing or in retirement. The question asked was what one does if they simply cannot afford to lose anymore? It's a gut-wrenching argument and the conversation elicited a lot of emotion--12 pages worth.

A bear market is a teaching moment. You learn about your risk tolerance, which is something you can't learn about by reading. But the truly amazing thing about 2008-2009 was that we had just recovered from the bear market earlier in the decade. It was almost like collective amnesia--but not quite.

During a bull market, people generally become pretty complacent and often forget how awful a bear market can be. My advice would be to jot down your thoughts during the depths of a bear market and then refer back to those words when the next bull market comes back. Inevitably, people are their own worst enemies.

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Re: How Bad was 2008, really?

Postby snowshoes » Tue Jan 10, 2017 6:27 pm

Citi-bank was forced into bankruptcy without the national fanfare AIG had, I lost money :( Luckily my core funds were in sectors & indexes and I still had resources to buy particular tanking equites for a steep discount.

A long time stalwart forum member whom was active both here and in the M* BHs sectors sections had predicted the 09 crash, posting his rebalancing and thinking into the 08-09 crash all along the way, he's since left, why? i'm not clear on. He was correct, not a braggarde, and obviously made some money.

Yes, it was bad, real bad.
Amschel Mayer Rothschild, in 1838: | "Let me issue and control a Nation's money and I care not who makes its laws". History is re-written by the victors, a wiki is the "New History".

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Re: How Bad was 2008, really?

Postby Dottie57 » Tue Jan 10, 2017 7:31 pm

MrKnight wrote:
InvestorNewb wrote:
MrKnight wrote:The implications for having graduated into it the financial crisis lasted for years as each future employer based my new salary on my prior salary.

Could you not "inflate" your previous salary so that you could at least earn a fair wage at your new job? Or did they somehow verify that information?


I probably could get away doing that, yes, but I was always truthful when asked.

I have never seen it personally but I have been told that some jobs will verify your prior salary. I imagine these companies are few and far between however.



How wpold it be verified? I would hope an employer would not give out the info.

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Re: How Bad was 2008, really?

Postby Grt2bOutdoors » Tue Jan 10, 2017 7:42 pm

Dottie57 wrote:
MrKnight wrote:
InvestorNewb wrote:
MrKnight wrote:The implications for having graduated into it the financial crisis lasted for years as each future employer based my new salary on my prior salary.

Could you not "inflate" your previous salary so that you could at least earn a fair wage at your new job? Or did they somehow verify that information?


I probably could get away doing that, yes, but I was always truthful when asked.

I have never seen it personally but I have been told that some jobs will verify your prior salary. I imagine these companies are few and far between however.



How wpold it be verified? I would hope an employer would not give out the info.


Insurance companies used to ask for a copy of your last W-2 or a copy of your last paycheck stub. It was a well-known thing their recruiters would ask for before they extended an interview or an offer. Not sure about it now, but they are notoriously frugal.
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Re: How Bad was 2008, really?

Postby munemaker » Tue Jan 10, 2017 8:10 pm

Dottie57 wrote:
MrKnight wrote:
InvestorNewb wrote:
MrKnight wrote:The implications for having graduated into it the financial crisis lasted for years as each future employer based my new salary on my prior salary.

Could you not "inflate" your previous salary so that you could at least earn a fair wage at your new job? Or did they somehow verify that information?


I probably could get away doing that, yes, but I was always truthful when asked.

I have never seen it personally but I have been told that some jobs will verify your prior salary. I imagine these companies are few and far between however.



How wpold it be verified? I would hope an employer would not give out the info.


I know a young person who earns a very high salary for his age. When he changed jobs recently, after he had turned in his notice, his "new" employer requested his most recent W-2 to confirm his compensation. Fortunately he had not embellished. This was in the IT field. We didn't know if this was their standard policy, or thought his reported compensation was on the high side and called him on it.
Last edited by munemaker on Tue Jan 10, 2017 8:11 pm, edited 1 time in total.

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Re: How Bad was 2008, really?

Postby MEA » Tue Jan 10, 2017 8:10 pm

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.


The reason the credit crisis looks like a small blip in hindsight has a lot to do with the huge amount of federal intervention it took to stabilize the system. In other words they did an incredibly good job protecting the equity investor. The large banks were falling like dominos. It started with Bear Sterns, then Fanny & Freddie, then Lehman Brothers. The fed dropped a steel curtain between Lehman and Morgen Stanley otherwise Morgen would have been next to fail then Goldman Sachs. No one knows how many would have fallen without the Fed bailouts. It could have been a hell of a lot worse than it was. The quantitative easing programs did a lot for the equity markets recovery too.

There is no way of knowing if the Fed will have the ability or the willingness to do so much when the next big one hits. It has been eight years and they still haven't been able to normalize interest rates. We haven't returned to our normal growth either.
Last edited by MEA on Tue Jan 10, 2017 8:39 pm, edited 1 time in total.
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Re: How Bad was 2008, really?

Postby munemaker » Tue Jan 10, 2017 8:14 pm

Tamalak wrote:
munemaker wrote:
The lack of orderly markets and not allowing companies the right to fail that was my biggest concern.


Because allowing the companies to fail in this case would be allowing the entire world economy to fail.


I doubt it. People would continue to buy cars, just different cars. People would continue to buy insurance, just not that insurance. People would still put money in banks, just not those banks. The whole situation would have corrected much quicker without government involvement.

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Re: How Bad was 2008, really?

Postby Grt2bOutdoors » Tue Jan 10, 2017 8:31 pm

munemaker wrote:
Tamalak wrote:
munemaker wrote:
The lack of orderly markets and not allowing companies the right to fail that was my biggest concern.


Because allowing the companies to fail in this case would be allowing the entire world economy to fail.


I doubt it. People would continue to buy cars, just different cars. People would continue to buy insurance, just not that insurance. People would still put money in banks, just not those banks. The whole situation would have corrected much quicker without government involvement.


How do most people purchase cars? You ever walk into a dealer? This is what the average customer says to the dealer when they sit down at the table: I can only afford $XXX per month. So, if they are financing it and now there is ZERO credit to be had, how many cars are being sold? Do you know how a fractional banking system works? Watch It's a Wonderful Life when George Bailey says to Joe "I don't have that money, why your money Joe is in Fred's house and Fred's money is in Mr. Martini's house" People would not be putting any money in banks, and the main reason is because more than half the country would be out of work, the other half would just be scraping by. There would be no money. No money, means even less money sloshing around in the banks, less money in banks means less capital, less capital means less of everything else that is appears you are taking for granted and you are not the only one. Be careful what you wish for, you might just get it and if you do, there will be no turning back.
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Re: How Bad was 2008, really?

Postby angelescrest » Tue Jan 10, 2017 8:41 pm

Dale_G wrote:
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.

Dale

Precisely! How would you, OP, have known it was going to be a two year "blip" (which it wasn't)? Your lizard brain was telling you to get the hell out and into safe territory as Armageddon was coming. The fear was as real and thick as the fog.

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Re: How Bad was 2008, really?

Postby avalpert » Tue Jan 10, 2017 8:47 pm

munemaker wrote:
Tamalak wrote:
munemaker wrote:
The lack of orderly markets and not allowing companies the right to fail that was my biggest concern.


Because allowing the companies to fail in this case would be allowing the entire world economy to fail.


I doubt it. People would continue to buy cars, just different cars. People would continue to buy insurance, just not that insurance. People would still put money in banks, just not those banks. The whole situation would have corrected much quicker without government involvement.

This quickly gets into area off limits for this board - and coutnerfactuals are always fun and games. But we do have some ability to compare the recovery in different countries that had different levels of interference/government stimulus etc - look at the research, you may be surprised to find that your preconcieved notions didn't play out.

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Re: How Bad was 2008, really?

Postby munemaker » Tue Jan 10, 2017 9:07 pm

avalpert wrote:
munemaker wrote:
Tamalak wrote:
munemaker wrote:
The lack of orderly markets and not allowing companies the right to fail that was my biggest concern.


Because allowing the companies to fail in this case would be allowing the entire world economy to fail.


I doubt it. People would continue to buy cars, just different cars. People would continue to buy insurance, just not that insurance. People would still put money in banks, just not those banks. The whole situation would have corrected much quicker without government involvement.

This quickly gets into area off limits for this board - and coutnerfactuals are always fun and games. But we do have some ability to compare the recovery in different countries that had different levels of interference/government stimulus etc - look at the research, you may be surprised to find that your preconcieved notions didn't play out.


If you remember, the House voted against the bailout before they voted for it.

http://money.cnn.com/2008/09/29/news/economy/bailout/

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Re: How Bad was 2008, really?

Postby avalpert » Tue Jan 10, 2017 9:24 pm

munemaker wrote:
avalpert wrote:
munemaker wrote:
Tamalak wrote:
munemaker wrote:
The lack of orderly markets and not allowing companies the right to fail that was my biggest concern.


Because allowing the companies to fail in this case would be allowing the entire world economy to fail.


I doubt it. People would continue to buy cars, just different cars. People would continue to buy insurance, just not that insurance. People would still put money in banks, just not those banks. The whole situation would have corrected much quicker without government involvement.

This quickly gets into area off limits for this board - and coutnerfactuals are always fun and games. But we do have some ability to compare the recovery in different countries that had different levels of interference/government stimulus etc - look at the research, you may be surprised to find that your preconcieved notions didn't play out.


If you remember, the House voted against the bailout before they voted for it.

http://money.cnn.com/2008/09/29/news/economy/bailout/

Yes, even ideological politicians can eventually come to their senses in the face of imminent disasters - like I said up thread, no guarantee they will have the political courage to do so the next time.

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Re: How Bad was 2008, really?

Postby Hawaiishrimp » Tue Jan 10, 2017 9:49 pm

I cashed out my condo in 2006 in anticipation of a housing correction. Put all month in stocks. My portfolio lost over 45-50% at that time. Portfolio was dropping a few thousands to tens of thousand day by day.

Still, I had my job but company was laying off left & right. Not sure when'd be my turn.

So, in summary, I had no house, lost half my savings and never knew when to get axed. Not the best days of my life... :beer
I save and invest my money, so money can make money for me, so I don't have to make money eventually.

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Re: How Bad was 2008, really?

Postby sschullo » Tue Jan 10, 2017 9:55 pm

Back to the OP question.
This graph is my portfolio that I have been charting for over 20 years. During the tech bubble crash, I lost over 70% of my portfolio because I was in 100% tech stocks. I learned my lesson with correct diversification among the core asset classes and with a stock bond split appropriate for my age, 30% stocks/70% bonds.

Thus, as you can see from the graph since 2003, the volatility dropped substantially and I only lost 11.9% in 2008. For me, 2008 was not bad because I had 70% in fixed accounts and my portfolio still grew since 2009. I am a happy camper today, but in 2002, I was miserable. But I did not sell in a panic, I stuck with my mistaken-laden plan as I knew the market was going to turn around eventually. And when it did, I revamped it with an appropriate diversification plan.

Image
Last edited by sschullo on Tue Jan 10, 2017 10:47 pm, edited 1 time in total.
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Re: How Bad was 2008, really?

Postby Pajamas » Tue Jan 10, 2017 10:00 pm

To put it in perspective, there was a huge stock market crash in 2000 but 2008-9 was faster and deeper. There was a real feeling of doom and it was not just a bad day or week or month, it just went on and on and kept getting worse and worse. But it was not just a stock market crash, the entire financial system seized up, along with the housing market and mortgage market, and it spread to other countries. Corporations lost all access to the capital markets. Investors got margin calls and had to sell out near the bottom. Bernie Madoff was arrested. There were massive layoff announcements, one after the other, in all industries. People were losing their jobs and homes. It was not just a matter of watching the balance in your investment accounts going down.

Huge companies were going bankrupt one after the other, mortgage companies, banks, insurance companies, car companies. Lehman Brothers at $600 billion+ and Washington Mutual at $300 billion+: bankrupt. Large banks that were relatively strong were forced by the government to merge with weaker banks and financial corporations to avoid their bankruptcy and stave off a complete collapse of the financial system. The government had to step in to invest capital in non-financial private corporations to prevent a complete collapse of the entire economy. Warren Buffett had to bail out Bank of America.

Someone mentioned Citibank being at $57 and dropping below $1. That bank is still valued at not much more than one tenth of what it was before the crisis. Someone else mentioned GE. Warren Buffett and the government both had to bail it out. GE is now a $276 billion market cap company but is still not worth nearly what it was before the crisis. I seriously considered buying it under $10 but did not because it looked like bankruptcy was more likely than not at that point.
Last edited by Pajamas on Tue Jan 10, 2017 10:02 pm, edited 1 time in total.

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Re: How Bad was 2008, really?

Postby swguy » Tue Jan 10, 2017 10:02 pm

I was 50, and 100% in the Russell 2000 in my 401k, putting the max into it trying to catch up on my late start to investing. I had almost 10 years of contributions invested at that point. All of my raises had gone to increase the amount I put in. All at once, half of that was gone, and every month it felt like I was burning another pile of money. As much as I felt like i should just cash out and save what was left, I was too far in to give up. I stopped reading forums, financial trades, and watching news. It was a very trying time.

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Re: How Bad was 2008, really?

Postby munemaker » Tue Jan 10, 2017 10:23 pm

avalpert wrote:
munemaker wrote:
avalpert wrote:
munemaker wrote:
Tamalak wrote:
Because allowing the companies to fail in this case would be allowing the entire world economy to fail.


I doubt it. People would continue to buy cars, just different cars. People would continue to buy insurance, just not that insurance. People would still put money in banks, just not those banks. The whole situation would have corrected much quicker without government involvement.

This quickly gets into area off limits for this board - and coutnerfactuals are always fun and games. But we do have some ability to compare the recovery in different countries that had different levels of interference/government stimulus etc - look at the research, you may be surprised to find that your preconcieved notions didn't play out.


If you remember, the House voted against the bailout before they voted for it.

http://money.cnn.com/2008/09/29/news/economy/bailout/

Yes, even ideological politicians can eventually come to their senses in the face of imminent disasters - like I said up thread, no guarantee they will have the political courage to do so the next time.


I don't think they "came to their senses." I think they were scared to death by Bernake and Paulson. They didn't have the intestinal fortitude to stand their ground. But what would you expect?

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Re: How Bad was 2008, really?

Postby AllieTB1323 » Tue Jan 10, 2017 10:24 pm

swguy wrote:I was 50, and 100% in the Russell 2000 in my 401k, putting the max into it trying to catch up on my late start to investing. I had almost 10 years of contributions invested at that point. All of my raises had gone to increase the amount I put in. All at once, half of that was gone, and every month it felt like I was burning another pile of money. As much as I felt like i should just cash out and save what was left, I was too far in to give up. I stopped reading forums, financial trades, and watching news. It was a very trying time.



There wasn't much positive then. My friend came to me asking if he should cash out his 401K and I said it wasn't my place to give him advice but I was buying not selling. I remember my wife and I changing our AA from 50:50 to 70:30 at the end of 2008 and the beginning of 2009 hoping we were right and not dooming ourselves to a lifetime of never being able to retire. Since we owned our business and weren't needing outside banking support we were fortunate.

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Re: How Bad was 2008, really?

Postby avalpert » Tue Jan 10, 2017 10:32 pm

munemaker wrote:
avalpert wrote:
munemaker wrote:
avalpert wrote:
munemaker wrote:
I doubt it. People would continue to buy cars, just different cars. People would continue to buy insurance, just not that insurance. People would still put money in banks, just not those banks. The whole situation would have corrected much quicker without government involvement.

This quickly gets into area off limits for this board - and coutnerfactuals are always fun and games. But we do have some ability to compare the recovery in different countries that had different levels of interference/government stimulus etc - look at the research, you may be surprised to find that your preconcieved notions didn't play out.


If you remember, the House voted against the bailout before they voted for it.

http://money.cnn.com/2008/09/29/news/economy/bailout/

Yes, even ideological politicians can eventually come to their senses in the face of imminent disasters - like I said up thread, no guarantee they will have the political courage to do so the next time.


I don't think they "came to their senses." I think they were scared to death by Bernake and Paulson. They didn't have the intestinal fortitude to stand their ground. But what would you expect?

Your right, they needed Bernake and Paulson to scare them to their senses - I wouldn't have expected any more.

I'm going to leave this discussion here because it really is barely on the edge of what is permitted here (not sure on which side of that edge). But really, all I can say to someone who refuses to appreciate what was required of the adults in the room that moment is you have no idea what the risk really was - this isn't a knock, most people didn't have visibility or understanding of the financial entanglements and string of dominoes that were about to fall and the impact it would have on the financial system and didn't need to - and appeals to the 'free market would have worked it out' are rooted in a naive caricature of economics that should be abandoned before the end of any good first semester course.

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Re: How Bad was 2008, really?

Postby munemaker » Tue Jan 10, 2017 10:35 pm

avalpert wrote:
munemaker wrote:
avalpert wrote:
munemaker wrote:
avalpert wrote:This quickly gets into area off limits for this board - and coutnerfactuals are always fun and games. But we do have some ability to compare the recovery in different countries that had different levels of interference/government stimulus etc - look at the research, you may be surprised to find that your preconcieved notions didn't play out.


If you remember, the House voted against the bailout before they voted for it.

http://money.cnn.com/2008/09/29/news/economy/bailout/

Yes, even ideological politicians can eventually come to their senses in the face of imminent disasters - like I said up thread, no guarantee they will have the political courage to do so the next time.


I don't think they "came to their senses." I think they were scared to death by Bernake and Paulson. They didn't have the intestinal fortitude to stand their ground. But what would you expect?

Your right, they needed Bernake and Paulson to scare them to their senses - I wouldn't have expected any more.

I'm going to leave this discussion here because it really is barely on the edge of what is permitted here (not sure on which side of that edge). But really, all I can say to someone who refuses to appreciate what was required of the adults in the room that moment is you have no idea what the risk really was - this isn't a knock, most people didn't have visibility or understanding of the financial entanglements and string of dominoes that were about to fall and the impact it would have on the financial system and didn't need to - and appeals to the 'free market would have worked it out' are rooted in a naive caricature of economics that should be abandoned before the end of any good first semester course.


Just for the record, I have a MBA with a concentration in finance, so I have "visibility and understanding of the financial entanglements." Maybe there can be different valid views on the subject.


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