How Bad was 2008, really?

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delamer
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Re: How Bad was 2008, really?

Post by delamer » Sun Mar 12, 2017 10:54 am

bob_m10 wrote:Reading through this interesting thread and realize I don’t have a good understanding of how this works. Say you are 100% invested in the total Stock Market Index and to keep it simple we are not contributing anymore to this fund and this is the only fund we have. Then 2008 or any big crash comes along and your portfolio take a large hit from $100/share to $1/Share as an example. What has really happened? Is it just the share price that has dropped or do I lose shares as well? If I don’t lose shares, then potentially I can always recover if the share price rises back to $100? If that is the case, would it really make a difference if I had bonds in my portfolio or not? As long as I make it back to $100 does it matter how low the portfolio gets in between? I must be missing something. Thanks
You don't lose shares, but you lose the value. And until you have been through a crash, you don't know how you'll react to the loss.

Have you heard that Mike Tyson quote "Everybody has a plan until they get punched in the mouth"?

People panic and sell low. You don't know if/when the stock price (in your example) will get back to $100; hindsight makes it a lot easier to decide you'd have stayed the course. And then there is always the possibility with an individual stock that the economic crisis can cause the company to go out of business and the stock becomes worthless.

Imagine if you are a retiree who is depending on that value to support yourself. That's when it would make a difference if you were holding bonds/cash in your portfolio, because you would not have to sell depressed stock to live on. You could use the bond/cash portion of tour portfolio to meet your expenses. And the bonds would have made your overall portfolio less volatile, which for many people would make it easier to avoid selling in a panic.

Teague
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Re: How Bad was 2008, really?

Post by Teague » Sun Mar 12, 2017 11:16 am

We were told that in 60 days our organization would cease to exist due to lack of funding. Everyone got pink slips, and folks were figuring who would be the last one out the door and turn off the lights. The stock portion of my portfolio dropped by about half, with no hint when or even if that would recover at some point. The pension I had worked years toward would end with very little payout to me; the timing on that was horrible. I would have to start over, but now several years older. To get another job I would have to move and that meant selling the house, but house prices had collapsed and I owed more on my house than it was worth. I was supporting a family.

That's what it was like for me. Still, a relative who lived through the Great Depression told me 2008 was not even close to that time. Not comparable at all, they said.
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rob65
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Re: How Bad was 2008, really?

Post by rob65 » Sun Mar 12, 2017 11:47 am

There is no guarantee that markets will recover within a relatively short time frame. See Japan.

Many individuals and families still haven't financially recovered from 2008 - they lost jobs and houses.

In the middle of a crash, it always feels like "this time is different". Just my personal opinion, but I think 2008 came very close to being different. If even one of the "too big to fail" banks had gone under, then I think it is possible that the entire financial system could have collapsed and we could have had another Great Depression. There's a reason that my grandparents had to be convinced to not literally hide their money under the mattress; living through the Depression was that bad.

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Re: How Bad was 2008, really?

Post by avalpert » Sun Mar 12, 2017 12:15 pm

bob_m10 wrote:
siamond wrote:
bob_m10 wrote:What has really happened? Is it just the share price that has dropped or do I lose shares as well?
Yes, it is 'just' the share price that dropped. So yes, it is entirely recoverable if you stay the course, and fact is it did recover in the past decade. But emotionally, this is pretty hard on your nerves to see the value of your portfolio plummet, and stay down for quite a while.
Is that because the total stock mutual fund is invested in many stocks? If you had a more targeted mutual fund with a smaller number of holdings, would it be possible to lose beyond recovery? I am thinking if companies go out of business stock price would drop to zero?
Actually, it is because the market happened to recover. So yes, a less diversified fund had greater risk of never recovering if it happened to have the wrong holdings and there is no guarantee at all that the market as a whole would ever get back to where it was. Just because that has happened yet in the US' relatively short history doesn't mean it won't (and it also doesn't require a doomsday scenario for that to happen).

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Sheepdog
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Re: How Bad was 2008, really?

Post by Sheepdog » Sun Mar 12, 2017 12:40 pm

rob65 wrote: There's a reason that my grandparents had to be convinced to not literally hide their money under the mattress; living through the Depression was that bad.
As was the case of my parents. They lost everything in the Depression...our home in about 1936, their savings (before that), his job (also in about 1936). Remember there was no such thing as unemployment insurance. Think of that...no where to go except long lines at free food kitchens...with me holding hands We lived in someone's basement until about 1940. We haven't reached that place again in this country. They recovered years later because of employment in another city just before WWII. My father would never hand over any money to any bank...NEVER. He just couldn't trust them ever again. He did buy War Bonds at least.
Last edited by Sheepdog on Sun Mar 12, 2017 12:59 pm, edited 1 time in total.
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Re: How Bad was 2008, really?

Post by blueberry » Sun Mar 12, 2017 12:57 pm

I remember thinking in 2008, wow, I've lost more in the market than I made at my job this entire year. Made me appreciate the strategy of AA based on age (aka human capital at least in my case). As a fairly new retired person, I'm still pondering what AA makes me feel comfortable and it's good to remember 2008. Wiser to throw dogma under the bus than stick to an IPS that makes me uncomfortable.

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dwickenh
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Re: How Bad was 2008, really?

Post by dwickenh » Sun Mar 12, 2017 1:26 pm

In 2008, I was working and all of my money was contributed to the work 401K. I had auto escalation set for 1% a year increase. I actually never looked at the balance and just kept buying more every paycheck. I am sure it took a hit at 65/35 AA, but I never knew it. Ignorance can be bliss sometimes.

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The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

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Re: How Bad was 2008, really?

Post by wolf359 » Sun Mar 12, 2017 1:32 pm

Teague wrote:We were told that in 60 days our organization would cease to exist due to lack of funding. Everyone got pink slips, and folks were figuring who would be the last one out the door and turn off the lights. The stock portion of my portfolio dropped by about half, with no hint when or even if that would recover at some point. The pension I had worked years toward would end with very little payout to me; the timing on that was horrible. I would have to start over, but now several years older. To get another job I would have to move and that meant selling the house, but house prices had collapsed and I owed more on my house than it was worth. I was supporting a family.

That's what it was like for me. Still, a relative who lived through the Great Depression told me 2008 was not even close to that time. Not comparable at all, they said.
For a taste of what it was like during the Great Depression, read "The Great Depression - A Diary." (Benjamin Roth). It follows a lawyer day to day as it unfolded. It was much worse, even for professionals like him who at least made some kind of living throughout.

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rocket354
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Re: How Bad was 2008, really?

Post by rocket354 » Sun Mar 12, 2017 2:06 pm

2008...I was late 20's, I'd had a fairly high paying job and had somewhat recently bought a house in one of the most bubbly markets. I was putting all my other money into IRAs and taxable accounts, 90+% stocks. I lost my job and went from a $250k net worth to a -$100k net worth in the span of three years. House dropped by 60%. I got BS jobs just to get by (read: slow the hemorrhage) and used CCs to make up the difference. Started my own business, righted myself and was back to a $0 NW two years later, and only now am I getting back to where I was, although the house has a long way to go.

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Re: How Bad was 2008, really?

Post by willthrill81 » Mon Mar 13, 2017 10:54 am

rob65 wrote:If even one of the "too big to fail" banks had gone under, then I think it is possible that the entire financial system could have collapsed and we could have had another Great Depression.
I have a friend who works for the FDIC, and he says that they've been working for a while with the largest banks to come up with a plan whereby if any one of them failed that it would not lead to a cascading failure of the entire banking system. So far, they haven't accomplished this yet. :confused
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Banjovi
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Re: How Bad was 2008, really?

Post by Banjovi » Fri Mar 17, 2017 12:18 pm

Thanks for starting this thread. It's been good to think back on that time and what it meant to me personally along with the forces in play. I'm 69 now so I was early 60s then. I was then, and am now, self employed as a business broker, selling businesses typically valued at $3-10 million. It's a very volatile business greatly affected by sentiment of buyers and availability of debt to finance acquisitions. I make money when times are good (like now) and retiring business owners can sell their businesses, and I lose money when times are bad and buyers sit on the sidelines. The sales cycle is about 1 year from engagement to closing, so I'm used to living off savings between closings. I had a number of deals on track for sale in late 2008 with owners all set to cash in and retire. Guess what. Financing completely dried up nationwide and every one of those deals died in late 2008 and early 2009. Some of those owners never saw their businesses recover and some are only now back to where they were in 2008. Much of their wealth was tied up in those businesses and they couldn't get at it. Retirement? Forget about it. At the same time my earnings were dependent on deals that weren't going to happen anytime soon. In fact, I had to wait until 2010 until my next deal closed and that deal included a lot of buyer stock as consideration. I felt lucky to get it done. Buyers were few and far between and lenders were nowhere to be found for several years. I had to dip into retirement savings several times to cover living expenses for myself and my family. I used to joke that business buyers were all still lying on their couches tucked up in the fetal position watching CNN and CNBC. Watching Bernanke and Paulson come before Congress with fear in their eyes made an impression on me as well. By the time we got to March of 2009 when the stock market hit bottom, and knowing I needed to preserve capital just to cover living expenses if this debacle continued (losing up to 800,000 jobs a month when we should have been creating 200,000 - a million job swing) I finally capitulated at the worst time and sold to create cash. But in the back of my mind I still figured that things could come back because I could understand what Bernanke was doing, with the only wild card being Congress and the Europeans who were pretty uniformly stupid, so I only capitulated half way and went to 50% cash. Without a crystal ball, I figured I didn't know whether the odds of the whole system collapsing were less than even or better than even, and I made my bet: 50% cash. I sat on that bet for a long time - until well after I closed that deal in 2010. As a result I locked in some losses, but I also participated to some extent in the recovery. Sometime later I discovered the Bogleheads and gained some additional knowledge about managing risk and planning for retirement. Now, after a lot of work, closing some more deals, and after fixing up my asset allocation, I'm ready to retire this year at almost age 70 with the house paid off and retirement asset allocation sitting at 40/60. The open question for me has been how much to have in a "cold hard cash" bucket. Considering the comments here, what we've been through in the last decade, and knowing just a bit about how bad things can be in a major depression, I'm thinking about keeping 2 years of expenses in cash at all times. That will be about 7% of the portfolio, so I'll end up about 37% stock/56% bond/7% cash.

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Re: How Bad was 2008, really?

Post by Dottie57 » Fri Mar 17, 2017 12:49 pm

I Just pulled out my full year 2008 statement for current 401k.

Started the year with 186k. Ended the year with 164k. Sometme during the year I moved 325k out of stocks and into stable value and 10k from same to bonds.

Assets of current holds at end were cash/bond/stock. At 42%/29%/29%.

Future investment was set at that time for cash/bonds/stock at 25/25/50. Still conservative.

At 60 , 164k has grown to 618k. Not bad considering my allocations.
--------------------

IRA dropped much more. In Oct 2008 the IRA beginning balance was 200k at the end of Oct it was 143k.
The low point for me was April 2009 with 130k. IRA was all American Funds.

It was so very difficult to see it all melt away. The only silver lining was a mortgage that was fully paid -free and clear.

NYGiantsFan
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Re: How Bad was 2008, really?

Post by NYGiantsFan » Fri Mar 17, 2017 3:03 pm

Grt2bOutdoors wrote:We had zero trust on Wall Street, reputable firms could not borrow money at ANY price, with the exception of Goldman Sachs, Morgan Stanley wound up selling a 20% equity stake to the Japanese.
Even Goldman had trouble and paid premium to Buffett to shore it up.

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Re: How Bad was 2008, really?

Post by kathyauburn » Fri Mar 17, 2017 3:46 pm

SpartanBull wrote: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.
Here's how I look at 2008-2009. (I was working at Fannie Mae at the time, too, which gave me an interesting perspective, as I was at the heart of an agency at the heart of the financial crisis, and by the time I left, the agency itself was declaring it would downsize 10% each year until it existed no more. Yes, we actually heard that in an "all-hands" meeting.)

--You, and many others, begin to see "stocks" as nonsensical bits of nothingness, components of a huge con game that only works when everyone else believes that stocks actually mean anything at all.
--You, and many others, question capitalism. I still question capitalism, having seen and lived in other systems (communist, social democratic, etc.).
--We experienced a V-shaped recovery out of the 2008-09 crash, but in no way was that expected. In fact, there was much talk of an L-shaped recovery, along the lines of what happened post-29 (the market low actually occurred in 1932...imagine that happening today). We got lucky...
--I credit Bernanke, a scholar of the great depression, for knowing what to do and what not to do in helping the Great Recession not become the next Great Depression.
--Your despair turns to anguish if you happen to look at the people in charge and believe they are fundamentally stupid. Any parallels to now?
--Your attitude toward proper asset allocation changes. Right now, for example, I have not six months or 1 year's worth of savings. I have 10 years worth of savings. And I think that's how much every one should have once they reach an age at which they cannot foresee making up losses by continuing to pour money into the market--say, age 50--but hey, I'm not going to dictate to you. But the next bear market...how long will it last if we aren't lucky enough to have a Bernanke in place or if the chess board of the world is not stacked favorably or if an idiot has appointed other idiots to run key positions in the government or financial components of our system? As long as 29-45? If so, I have an asset allocation and savings that will likely get me through without panic selling. Do you?

I really like this part of Mr. Hussman's recent article:

In April 2000, I described the psychology that investors could expect to play out over the completion of the market cycle:

"This is my retirement money. I can't afford to be out of the market anymore!"
"I don't care about the price, just Get Me In!!"
"It's a healthy correction"
"See, it's already coming back, better buy more before the new highs"
"Alright, a retest. Add to the position - buy the dip"
"What a great move! Am I a genius or what?"
"Uh oh, another selloff. Well, we're probably close to a bottom"
"New low? What's going on?!!"
"Alright, it's too late to sell here, I'll get out on the next rally"
"Hey!! It's coming back. Glad that's over!"
"Another new low. But how much lower can it go?"
"No, really, how much lower can it go?"
"Good grief! How much lower can it go?!?"
"There's no way I'll ever make this back!"
"This is my retirement money. I can't afford to be in the market anymore!"
"I don't care about the price, just Get Me Out!!"

kathyauburn
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Re: How Bad was 2008, really?

Post by kathyauburn » Fri Mar 17, 2017 4:21 pm

munemaker wrote:This was a classic from back in the day:

https://www.youtube.com/watch?v=V9EbPxTm5_s
Priceless.

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Re: How Bad was 2008, really?

Post by kathyauburn » Fri Mar 17, 2017 4:29 pm

Grt2bOutdoors wrote:How bad was it? Let's see - we had two major financial companies collapse, one seemingly overnight (Lehman) another not too far behind (Bear Stearns) whose stock price had once seen a high of $170 per share only to be sold for $2 per share to JPM Chase. We had zero trust on Wall Street, reputable firms could not borrow money at ANY price, with the exception of Goldman Sachs, Morgan Stanley wound up selling a 20% equity stake to the Japanese. Banks were going out of business, Countrywide Mortgage imploded, Washington Mutual was taken over by JPM Chase at the behest of the government, Wells Fargo took over Wachovia - again at the behest of the government (well, not entirely true, they beat Citibank out to buy them). Tremendous mortgage foreclosure - people who bought were really "renting" their homes because they had little to no equity in their homes from the outset. When they lost their jobs, they could not keep up and to make matters worse, the prices of homes were dropping overnight by 20 and 30% because everyone and I mean EVERYONE was putting their home up for sale - want to get price discovery? well, you get it when there is more supply than demand. Remember that next time you hear someone say my house is worth X or my car is worth Y - it ain't worth diddly until the sale has closed and the cash is in your hand. Contracts to buy were being broken everyday because the banks were not providing credit. Why weren't the banks providing credit? because their regulators were telling them to reassess the risk, and when they reassessed they found that the real estate appraisals were not worth the paper they were written on. Tremendous job loss, supplemental nutrition assistance program utilization through the roof, food pantries were making a comeback and not in a good way either, unemployment insurance federally extended to 18 months. Little to no credit generation. You tell me, just how bad was it? The lifeblood of the country is "credit", when credit stops, the country stops. If the country stops, what do you think the value of your paper is worth, especially when major corporations like General Electric could not borrow money at ANY price? If it was not for saner minds at the Federal Reserve and albeit, somewhat in Washington D.C. you would be singing a much different tune today, as would much of the rest of the country. Read the book - The Great Depression by Benjamin Roth - it will give you an idea of just how bad things could have been today.

If you have to take away one thing from this, cash...cold hard cash is king. It may not yield anything, but it is 100% liquid. What happened in 2008? Securities became ILLIQUID overnight, some governmental debt, particularly those backed by mortgages were being discounted by 40-70% overnight. What did that mean? It meant that previously well-capitalized companies who held these securities valued at par or 100% were now in danger of going bankrupt because their liabilities exceeded their assets and not only that they could not convert the securities to cash! Remember, up above? - no credit creation is the downfall of a capitalistic society. No credit - no house, no car, no college education, no healthcare, etc. etc. etc. 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.
Nice post. I agree on the cash but would argue that you should keep even more than 2-3 years of cash.

kathyauburn
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Re: How Bad was 2008, really?

Post by kathyauburn » Fri Mar 17, 2017 4:39 pm

avalpert wrote:
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.
Agree.

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Re: How Bad was 2008, really?

Post by Grt2bOutdoors » Fri Mar 17, 2017 4:57 pm

NYGiantsFan wrote:
Grt2bOutdoors wrote:We had zero trust on Wall Street, reputable firms could not borrow money at ANY price, with the exception of Goldman Sachs, Morgan Stanley wound up selling a 20% equity stake to the Japanese.
Even Goldman had trouble and paid premium to Buffett to shore it up.
Which is cheaper? Premium or Equity? I stand by my statement, Goldman was able to borrow. I did state quite clearly Goldman was the only firm able to borrow. Other reputable firms were not, hence dilution of existing shareholders to keep the company afloat.
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Tycoon
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Re: How Bad was 2008, really?

Post by Tycoon » Sat Mar 18, 2017 8:10 am

I'm in no means trying to be flippant, but I don't recall 2008 being any different than any other period in my investing life. When I put the money down I fully expect there is a possibility I can lose it all. I accept that fact and move on.
Emotionless, prognostication free investing. Ignoring the noise and economists since 1979. Getting rich off of "smart people's" behavioral mistakes.

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Re: How Bad was 2008, really?

Post by Dottie57 » Sat Mar 18, 2017 8:22 am

Tycoon wrote:I'm in no means trying to be flippant, but I don't recall 2008 being any different than any other period in my investing life. When I put the money down I fully expect there is a possibility I can lose it all. I accept that fact and move on.

It wasn't just the money being gone. It was the fear of having money that wasn't worth anything. It was the fear that we would not have a way of buying food, heating etc. money in and of itself is only a means of exchanging goods because we as a society believe in it. If we stop believing, it is nothing.

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Tycoon
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Re: How Bad was 2008, really?

Post by Tycoon » Sat Mar 18, 2017 8:38 am

Dottie57 wrote:
Tycoon wrote:I'm in no means trying to be flippant, but I don't recall 2008 being any different than any other period in my investing life. When I put the money down I fully expect there is a possibility I can lose it all. I accept that fact and move on.

It wasn't just the money being gone. It was the fear of having money that wasn't worth anything. It was the fear that we would not have a way of buying food, heating etc. money in and of itself is only a means of exchanging goods because we as a society believe in it. If we stop believing, it is nothing.
I hear you. History is replete with examples of civilizations collapsing. Venezuela today, Rome many years ago, or France during the French revolution, there are too many to count. To think that we are somehow immune would be ignoring history. All one can do is prepare for the worst and hope for the best.
Emotionless, prognostication free investing. Ignoring the noise and economists since 1979. Getting rich off of "smart people's" behavioral mistakes.

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Re: How Bad was 2008, really?

Post by Dottie57 » Sat Mar 18, 2017 9:33 am

Tycoon wrote:
Dottie57 wrote:
Tycoon wrote:I'm in no means trying to be flippant, but I don't recall 2008 being any different than any other period in my investing life. When I put the money down I fully expect there is a possibility I can lose it all. I accept that fact and move on.

It wasn't just the money being gone. It was the fear of having money that wasn't worth anything. It was the fear that we would not have a way of buying food, heating etc. money in and of itself is only a means of exchanging goods because we as a society believe in it. If we stop believing, it is nothing.
I hear you. History is replete with examples of civilizations collapsing. Venezuela today, Rome many years ago, or France during the French revolution, there are too many to count. To think that we are somehow immune would be ignoring history. All one can do is prepare for the worst and hope for the best.
I am a city girl in a condo. What do I have that would be of true value. In a complete meltdown, i do not have a yard to grow food in. In essence I would be toast.

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Re: How Bad was 2008, really?

Post by 22twain » Sat Mar 18, 2017 9:41 am

I live in a small town out in the boonies. While driving to a "big city" about an hour away, I pass through a commercial strip on the outskirts of a somewhat larger town along the way. On one such trip in spring 2009, I thought, "wow, this place looks like a ghost town." At least half the businesses in the strip shopping plazas lining the road had closed, and traffic was a lot lighter than normal. It was partly because people weren't spending as much money, and partly because many small businesses couldn't borrow money because banks had clamped down on their credit lines.
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Re: How Bad was 2008, really?

Post by ResearchMed » Sat Mar 18, 2017 9:51 am

Tycoon wrote:
Dottie57 wrote:
Tycoon wrote:I'm in no means trying to be flippant, but I don't recall 2008 being any different than any other period in my investing life. When I put the money down I fully expect there is a possibility I can lose it all. I accept that fact and move on.

It wasn't just the money being gone. It was the fear of having money that wasn't worth anything. It was the fear that we would not have a way of buying food, heating etc. money in and of itself is only a means of exchanging goods because we as a society believe in it. If we stop believing, it is nothing.
I hear you. History is replete with examples of civilizations collapsing. Venezuela today, Rome many years ago, or France during the French revolution, there are too many to count. To think that we are somehow immune would be ignoring history. All one can do is prepare for the worst and hope for the best.
Right, but we felt that we'd rather have "the collapse of civilization as we know it" occur later, say, at least a few decades later, ahem.

And I'm not sure just how one adequately (or appropriately) prepares for money having no value or such, or "just" being frozen for too, too long, everywhere.
It wasn't a risk for "just Venezuela" or such...

It was a VERY scary time for a relatively short while, one that felt much longer at the time.

RM
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Re: How Bad was 2008, really?

Post by NYGiantsFan » Sat Mar 18, 2017 1:04 pm

Grt2bOutdoors wrote:
NYGiantsFan wrote:
Grt2bOutdoors wrote:We had zero trust on Wall Street, reputable firms could not borrow money at ANY price, with the exception of Goldman Sachs, Morgan Stanley wound up selling a 20% equity stake to the Japanese.
Even Goldman had trouble and paid premium to Buffett to shore it up.
Which is cheaper? Premium or Equity? I stand by my statement, Goldman was able to borrow. I did state quite clearly Goldman was the only firm able to borrow. Other reputable firms were not, hence dilution of existing shareholders to keep the company afloat.
In fact, it was both. Not only Buffett got 10%, he also got warrants (which diluted existing equity holders)
https://www.bloomberg.com/news/articles ... h-warrants

I agree with you on following. Buffett had most dry power on the hand at that time and was able to acquire Goldman, BOA as well as others https://www.wsj.com/articles/SB10001424 ... 2104942198
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.

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Re: How Bad was 2008, really?

Post by alexfoo39 » Thu Jun 13, 2019 11:37 am

reading this

anyone came out with the slight idea of 'shorting' the market when 2008 crash begins to happen? You know, stocks are down, glooms everywhere, job lost, and you bet that it will continue to drop....does the idea of shorting come to your mind?

Tool-Time
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Re: How Bad was 2008, really?

Post by Tool-Time » Thu Jun 13, 2019 11:58 am

For me it wasn't bad at all. I pulled my money out after the election and then bought back in a while later. Did pretty well. This was pre-BH days. I still don't know what I don't know, but I do try to follow the BH way.

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dual
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Re: How Bad was 2008, really?

Post by dual » Thu Jun 13, 2019 12:26 pm

I do not think we have recovered. The Fed's quantitative easing ballooned the money supply with a lot of it ending up in financial assets thus driving their prices up. That is what makes things seem OK to investors like BHs.

The Fed still owns $trillions of Treasuries but also other securities with no plans to "unwind" them. The US national debt divided by GDP was about 80% in 2008--now it is 106%. So when we enter into the next recession there will be less headroom for the government to spend our way out of the recession without endangering the dollar's role as a reserve currency.

https://tradingeconomics.com/united-sta ... ebt-to-gdp

Real interest rates are still negative so to decrease rates to try to cushion the drop the Fed will have to try to drive nominal rates negative as they are in Europe.

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Re: How Bad was 2008, really?

Post by deltaneutral83 » Thu Jun 13, 2019 4:01 pm

alexfoo39 wrote:
Thu Jun 13, 2019 11:37 am
reading this

anyone came out with the slight idea of 'shorting' the market when 2008 crash begins to happen? You know, stocks are down, glooms everywhere, job lost, and you bet that it will continue to drop....does the idea of shorting come to your mind?
No, I would want to buy puts on the S&P about 5% out of the money and about 3-5 months out. Vol is high which means option prices are high. Market goes up like an escalator and down like an elevator so you're going to know how you did rather quickly, but make no mistake it's timing the market. Shorting the market is totally different and you can get your teeth kicked in rather abruptly if you're correct in your outlook but off by a month. Also margin interest.

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Re: How Bad was 2008, really?

Post by MotoTrojan » Thu Jun 13, 2019 5:14 pm

S_Track wrote:
Sun Mar 12, 2017 12:38 am
Reading through this interesting thread and realize I don’t have a good understanding of how this works. Say you are 100% invested in the total Stock Market Index and to keep it simple we are not contributing anymore to this fund and this is the only fund we have. Then 2008 or any big crash comes along and your portfolio take a large hit from $100/share to $1/Share as an example. What has really happened? Is it just the share price that has dropped or do I lose shares as well? If I don’t lose shares, then potentially I can always recover if the share price rises back to $100? If that is the case, would it really make a difference if I had bonds in my portfolio or not? As long as I make it back to $100 does it matter how low the portfolio gets in between? I must be missing something. Thanks
There is no golden rule saying it will come back, and there are high odds you lose your job in a 99% market crash and then you quickly deplete your shares.

Japan hasn't recovered from it's all-time-high 3 decades ago: https://www.macrotrends.net/2593/nikkei ... chart-data

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Re: How Bad was 2008, really?

Post by MotoTrojan » Thu Jun 13, 2019 5:16 pm

alexfoo39 wrote:
Thu Jun 13, 2019 11:37 am
reading this

anyone came out with the slight idea of 'shorting' the market when 2008 crash begins to happen? You know, stocks are down, glooms everywhere, job lost, and you bet that it will continue to drop....does the idea of shorting come to your mind?
Have you seen the moving The Big Short? While Bale's character (name escapes me) ended up coming out with billions in profits, he almost lost his entire fund by discovering what was occurring before it materialized.

Stocks fell quite quickly in December 2018, and you'd be in trouble if you shorted at the low thinking this was another 2008 coming.
The market can remain irrational longer than you can remain solvent.

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Re: How Bad was 2008, really?

Post by tesuzuki2002 » Thu Jun 13, 2019 5:38 pm

SpartanBull wrote:
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.

Consider your portfolio today... if you woke up on Monday and it had declined 50% ... how would you feel?

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Re: How Bad was 2008, really?

Post by pinhead » Thu Jun 13, 2019 5:54 pm

How bad?

Citibank from $50 went to 99 cents, bad.

Neighbors who were doctors were abandoning their homes bad.

Everyday I was losing more money in the market than I was earning bad. I had no motivation to work.

Scary times, but it was a great opportunity hindsight.

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Re: How Bad was 2008, really?

Post by aspirit » Thu Jun 13, 2019 6:27 pm

pinhead wrote:
Thu Jun 13, 2019 5:54 pm
How bad?

Citibank from $50 went to 99 cents, bad.

Neighbors who were doctors were abandoning their homes bad.

Everyday I was losing more money in the market than I was earning bad. I had no motivation to work.

Scary times, but it was a great opportunity hindsight.
Both parent companies trade on the New York Stock Exchange, but CIT Bank has a ticker symbol of CIT and Citigroup has a ticker symbol of C. It's complex.

My C shares, common stock purchased in 2008 became worthless in 2009.
I received the notice. Bankruptcy reorganization.
Thats why the winners re-write history.
Thats what happened no matter what the internet's recording of history says.
Believe what you want.

I saw AIG go to .33-.36 cents.

I no longer hold single equites.
Time & tides wait for no one. A man has to know his limitations. | "Give me control of a nation's money and I care not who makes it's laws" | — Mayer Amschel Bauer Rothschild ~

7eight9
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Re: How Bad was 2008, really?

Post by 7eight9 » Thu Jun 13, 2019 7:35 pm

SpartanBull wrote:
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.
It might not be a 2 year blip next time. "Disciplined investors" in many stock markets are still waiting for recovery. There is no guarantee that a stock market will recover in an investor's time frame, lifetime, or ever.
I guess it all could be much worse. | They could be warming up my hearse.

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StormShadow
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Re: How Bad was 2008, really?

Post by StormShadow » Thu Jun 13, 2019 8:23 pm

MotoTrojan wrote:
Thu Jun 13, 2019 5:14 pm
Japan hasn't recovered from it's all-time-high 3 decades ago: https://www.macrotrends.net/2593/nikkei ... chart-data
Neither have tulips... Image

alexfoo39
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Re: How Bad was 2008, really?

Post by alexfoo39 » Fri Jun 14, 2019 1:38 am

carolinaman wrote:
Tue Jan 10, 2017 8:12 am
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.
The reason why i refuse to go beyond 50/50 (now still in my late 20s) is that I am inexperienced as an investor. I never personally go through 2008-alike crisis, so I can only empathize (on paper) those experiences provided here.

I suppose a normal investor's life time (assume 25 to 65), let's say 40 years, and our friend carolinaman had some near 30+ investing experiences, and still 2008 was hard to deal with. I mean, how do we really know ourselves, on how much risk we can stomach, except the only way of being tested by a brutal market?

alexfoo39
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Re: How Bad was 2008, really?

Post by alexfoo39 » Fri Jun 14, 2019 2:41 am

centrifuge41 wrote:
Tue Jan 10, 2017 10:15 am
One bond fund, Schwab Yieldplus, lost 30%+. Prior to the great recession, it had performed fine. Who knew how much toxic mortgage-backed loans the fund contained. Who knew how bad those bonds were. Who knew if other bonds could get hit like this?
So our theoretical poorly correlated stock-bond still stand? We buy bond for that exact reason, that when the stocks are down, we have at least some bonds for stability and consolation. Now it appears that it might not hold true when things just go down like a domino.

Maybe I should start parking some monies under my bed too.

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Re: How Bad was 2008, really?

Post by minimalistmarc » Fri Jun 14, 2019 4:02 am

I wouldn’t have noticed 2008 if I hadn’t read the news. If you had a decent job it was fine.

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Re: How Bad was 2008, really?

Post by Old_Dollar » Fri Jun 14, 2019 4:29 am

I graduated with honors with a STEM degree in 2008. I interviewed at a lab and asked for a salary of $50k based information regarding starting salaries in my field in that geographic area. I was told that was possible before but not now and he said the best was $20k. Ultimately I finally landed a job making just under $16k. Nothing like a financial crisis to make your undergraduate degree feel like an exercise in futility.
I am here solely to learn about investing.

Ari
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Re: How Bad was 2008, really?

Post by Ari » Fri Jun 14, 2019 5:39 am

minimalistmarc wrote:
Fri Jun 14, 2019 4:02 am
I wouldn’t have noticed 2008 if I hadn’t read the news. If you had a decent job it was fine.
I didn’t really read the news, so I didn’t notice. A colleague lost his assignment, but kept his job. I kept both job and assignment (I’m a consultant). Nobody I knew lost their job, and I didn’t really have any investments that I was aware of. Over here (Sweden), 2008 wasn’t that big of a deal, as far as I could tell. Housing prices were growing throughout the period, too.
All in, all the time.

ruhigste
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Re: How Bad was 2008, really?

Post by ruhigste » Fri Jun 14, 2019 6:21 am

My wife and I were still working then, so we didn't need to spend from our declining portfolio. The next one won't be as easy, because we're retired now. We stayed the course back in 2008, and within are year or so, it seemed the portfolio was back. I had 401K discussions with a co-worker who planned get out of the market immediately. I felt that if I was willing to buy stocks when they were expensive, why would I stop buying them now when they were cheap. I don't know what the co-worker decided to do.

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Re: How Bad was 2008, really?

Post by eldinerocheapo » Fri Jun 14, 2019 6:30 am

Our retirement accounts went down about 40% for a $300k loss on paper. House value down about 20%. Had significant layoffs at work, with a lot of uncertainty about the future. In a fit of insanity, we doubled down to 20% on our 401k contributions, and ramped up Roth IRA amounts thinking the worst would be over soon. After the 1q of '09, everything soared to where we were literally pulling in $100k every quarter for the next five years through the various retirement accounts. Our holdings have quadrupled since that time and we're lucky and grateful things went in the right direction.
"Do, or do not." Yoda

finite_difference
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Re: How Bad was 2008, really?

Post by finite_difference » Fri Jun 14, 2019 6:35 am

livesoft wrote:
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.
This. Also, losing your job, and not being able to find another one. Or graduating from college with student loans and no longer being able to find a job.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

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Re: How Bad was 2008, really?

Post by Rus In Urbe » Fri Jun 14, 2019 7:18 am

Gosh, I get PTSD just reading this thread.

We were very lucky and some of it was just dumb luck----stable jobs, LCOL area, low-interest mortgage and a habit of LBYM. Our paychecks continued to purchase equities on the way down the roller coaster (we upped our stock purchases a bit), so the Great Recovery was terrific for us. That said, we did lose some minor holdings; we were experimenting with a "wealth manager" who put us into stocks in 2007----AIG, Bear Stearns----luckily only $5K each. Ha! That was a relatively cheap lesson and the last time we bought individual stocks---I learned that stocks can snuff! Now close to retirement, we are at a more conservative 50/50 with a cash reserve of about five years.

It's good to remember (repeat again and again) that hindsight is 20/20.

The scariest part of it all was seeing that those in charge were absolutely TERRIFIED. It was obvious from every speech, every Fed Reserve utterance. Luckily, there were adults in the room and (it has to be said) the possible collapse of the entire world banking system, which almost occurred, brought out an extraordinary collaborative effort. Lucky us, because Europe, which tightened instead of loosening, suffered for much longer.
dual wrote:
I do not think we have recovered. The Fed's quantitative easing ballooned the money supply with a lot of it ending up in financial assets thus driving their prices up. That is what makes things seem OK to investors like BHs.
The Fed still owns $trillions of Treasuries but also other securities with no plans to "unwind" them. The US national debt divided by GDP was about 80% in 2008--now it is 106%. So when we enter into the next recession there will be less headroom for the government to spend our way out of the recession without endangering the dollar's role as a reserve currency.
https://tradingeconomics.com/united-sta ... ebt-to-gdp
Real interest rates are still negative so to decrease rates to try to cushion the drop the Fed will have to try to drive nominal rates negative as they are in Europe.
This is also my long-term worry. While the optimist in me usually wins, the pessimist wonders if, financially, we aren't in a kind of interregnum.....as the world was between WWI and WWII, when the issues of WWI were not fully resolved but rather swept under the rug and everyone partied like there was no tomorrow while the forces regathered for more trauma. I wonder if, similarly, The Great Recession wasn't the first outbreak of a fundamental shakeup of the relatively stable architecture of the post WWII economy, which has in recent years created an unsustainable (and politically destabilizing) wealth gap (read Thomas Picketty).

While one continues to monitor the big picture (of which we only really get glimpses), we STC and LBYM and keep some powder dry. Meanwhile,I'm going back out into the garden to plant more radishes and cucumbers . . .
I'd like to live as a poor man with lots of money. ~Pablo Picasso

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Re: How Bad was 2008, really?

Post by jharkin » Fri Jun 14, 2019 7:30 am

finite_difference wrote:
Fri Jun 14, 2019 6:35 am
livesoft wrote:
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.
This. Also, losing your job, and not being able to find another one. Or graduating from college with student loans and no longer being able to find a job.
+1

We look back on the stock market chart, but the reality on the ground is that most people where too preoccupied with whether or not they would loose their job or their home to care. I knew many people, even in high end professional jobs (lawyers etc) that got laid off and never got back to their prior level of employment. I personally got lucky - I avoided layoffs but went a couple years with no raise, no bonus and my 401k lost over a third before I panicked and went all bonds/FI (based on colleagues screaming at me to go cash).

Lucky it was around that time that in my despair I found BH.. got back into the market, and took a big risk and bought a home in '09 when values where depressed and the feds where doing a first time homebuyer tax credit as part of the stimulus bill. In hindsight those moves have paid back handsomely.

Don't forget also that the popularity of FIRE bloggers and online savvy millenials with high flying tech careers tends to drown out the reality that for a big % of Americans - especially people in retail, manufacturing and a lot of other traditional sectors - the recession never ended. Lots of people out there still just barely getting by.

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Re: How Bad was 2008, really?

Post by willthrill81 » Fri Jun 14, 2019 9:45 am

When folks question whether it's a good idea to pay off one's mortgage early, we should refer them to this thread.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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StormShadow
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Re: How Bad was 2008, really?

Post by StormShadow » Fri Jun 14, 2019 5:01 pm

alexfoo39 wrote:
Fri Jun 14, 2019 1:38 am
carolinaman wrote:
Tue Jan 10, 2017 8:12 am
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.
The reason why i refuse to go beyond 50/50 (now still in my late 20s) is that I am inexperienced as an investor. I never personally go through 2008-alike crisis, so I can only empathize (on paper) those experiences provided here.

I suppose a normal investor's life time (assume 25 to 65), let's say 40 years, and our friend carolinaman had some near 30+ investing experiences, and still 2008 was hard to deal with. I mean, how do we really know ourselves, on how much risk we can stomach, except the only way of being tested by a brutal market?
I think this is a wise and underappreciated approach.

The "aww shucks" of missing out from bull markets is nothing when compared to the "holy crap" of sinking bear markets. Its hard to imagine how sick to your stomach you can get when you look at your investment portfolio just plummet before your eyes.

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nedsaid
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Re: How Bad was 2008, really?

Post by nedsaid » Fri Jun 14, 2019 5:05 pm

2008-2009 was really, really bad. The world financial system nearly melted down and we came closer than we knew at the time to a second Great Depression. It was very, very scary. I stayed the course because I realized that if I sold my stocks at the bottom that I would never be able to have the retirement I wanted. So I was more scared of being poor in retirement than I was of the crisis.
A fool and his money are good for business.

Trader Joe
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Re: How Bad was 2008, really?

Post by Trader Joe » Fri Jun 14, 2019 5:33 pm

SpartanBull wrote:
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.
2008 was a blip. It was a non-event. I would not have noticed it at all, but CNBC would occasionally be on a television. I was never affected or impacted. No one else I know was affected.

Basically, it was nothing.

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