How Bad was 2008, really?

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runner540
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Re: How Bad was 2008, really?

Post by runner540 » Fri Jun 14, 2019 5:42 pm

Trader Joe wrote:
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.
Wow, that is unusual Trader Joe.
At the time, there was NO assurance that there would be any recovery, let alone a quick upward one.

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willthrill81
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Re: How Bad was 2008, really?

Post by willthrill81 » Fri Jun 14, 2019 5:47 pm

nedsaid wrote:
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.
I see semblances to the Cuban Missile Crisis. We didn't learn until years later that the lone dissenting vote of Vasily Alexandrovich Arkhipov kept the Russian submarine B-59 from firing its nuclear missiles and almost certainly setting off WW3.

It's easy for people to call 2008 a "blip" and declare that "buy-and-hold worked again," pretty much armchair quarterbacking, but the outcome for those in the know back then was very far from certain.
“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

FedGuy
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Re: How Bad was 2008, really?

Post by FedGuy » Fri Jun 14, 2019 5:49 pm

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 had a decent job...which I lost. It was not fine.

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willthrill81
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Re: How Bad was 2008, really?

Post by willthrill81 » Fri Jun 14, 2019 5:50 pm

FedGuy wrote:
Fri Jun 14, 2019 5:49 pm
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 had a decent job...which I lost. It was not fine.
You and millions of others. Not to mention that millions that lost their homes.
“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

stoptothink
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Re: How Bad was 2008, really?

Post by stoptothink » Fri Jun 14, 2019 5:58 pm

Almost all of my life savings was tied up in real estate developments and I was cash-flowing my (now ex) wife through dental school. Not only did I lose about 2/3 of my life's savings, but it created massive strife in my marriage because I took on another job just so I could continue to put her through school debt-free. We divorced in '10, right after she finished dental school, which led to losing 1/2 of what I still had. Fortunately I was able to stay employed throughout, but I went from ~$750k net worth (at 27) to <$100k in 3yrs. I'd likely be FIRE right now if those 3yrs didn't exist.

But, I was very fortunate that I experienced it when I was young. I've completely rebuilt myself financially and learned some invaluable lessons. Many of the people I was working with in RE development have not recovered, and they were much older and with much more responsibilities than I had.

Cody6136
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Re: How Bad was 2008, really?

Post by Cody6136 » Fri Jun 14, 2019 6:07 pm

Ron Ronnerson wrote:
Tue Jan 10, 2017 12:49 am
It was very bad but investments were only one component.
Indeed. It may help to see the time in its entirety. Like the OP, I did not experience the pain of great financial loss personally, but it affected me just the same.

I was a fundraiser, working at an animal shelter in a rural area. Donors had no money to give as their investments were tanking. On the other hand, people were surrendering their pets because they were losing their homes and could not afford vet bills. It was during those years that I remember thinking, Cody, you're going to have to learn how to dive down deeper, stay down longer and come up drier. And I did. But I was the beneficiary of a lot of luck and other people's good decisions over the years (frugal parents!). It was humbling, and heartbreaking, knowing that people were suffering. I was grateful for every dime that generous people donated to good causes back then, and there was also a winnowing of non-profits. Many local charities shuttered during that time.

Oh, and while I'm at it:

No Man is an Island'
No man is an island entire of itself; every man
is a piece of the continent, a part of the main;
if a clod be washed away by the sea, Europe
is the less, as well as if a promontory were, as
well as any manner of thy friends or of thine
own were; any man's death diminishes me,
because I am involved in mankind.
And therefore never send to know for whom
the bell tolls; it tolls for thee.

--John Donne, Devotions on Emergent Occasions

Mr.BB
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Re: How Bad was 2008, really?

Post by Mr.BB » Fri Jun 14, 2019 6:26 pm

If you really want understand the depth all of the financial crisis just look how many homes were in foreclosure. some people had to because they lost their job and they really didn't have any savings. Others were using their homes as their investment or piggy bank and got underwater on it.
The world was on sale if you had a job and was smart enough not to panic and invest at that time.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

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nedsaid
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Re: How Bad was 2008, really?

Post by nedsaid » Fri Jun 14, 2019 6:31 pm

willthrill81 wrote:
Fri Jun 14, 2019 5:47 pm
nedsaid wrote:
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.
I see semblances to the Cuban Missile Crisis. We didn't learn until years later that the lone dissenting vote of Vasily Alexandrovich Arkhipov kept the Russian submarine B-59 from firing its nuclear missiles and almost certainly setting off WW3.

It's easy for people to call 2008 a "blip" and declare that "buy-and-hold worked again," pretty much armchair quarterbacking, but the outcome for those in the know back then was very far from certain.
I am an optimist, the purpose of my post wasn't fear mongering but to point out that really bad things can happen. In the case of the Cuban Missile Crisis, the outcome was not predetermined, it could have ended in disaster. Really bad blunders have been made in history, some of which were catastrophic. But having said all of that, I still believe that investors are better served by optimism than pessimism. There are opportunities that can be missed if we are in too dark of a mood to notice them.
A fool and his money are good for business.

BSBHead
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Re: How Bad was 2008, really?

Post by BSBHead » Fri Jun 14, 2019 7:35 pm

I think 2008-09 hit from multiple angles. The decline in the market wasn't the biggest concern more generally. The bigger concern more broadly was job lay offs combined with a dramatic decline in value in housing in most markets. When you combine that with stock market declines and general economic fear, then yes, it was bad. I think anyone can manage any one of those aforementioned issues by themselves, but when combined, it's pretty easy to see why people re-allocated to more conservative assets. if you lost your job and you are underwater on your mortgage, I can see (but don't agree) why someone felt such a sense of loss that they might reallocate to a more conservative asset allocation.

MnD
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Re: How Bad was 2008, really?

Post by MnD » Fri Jun 14, 2019 7:37 pm

In a city with "mild" real estate impacts relative to others, both my next door neighbors and the house directly across from us was lost to foreclosure. Small bungalows a few blocks away, which now sell for 500-600k fixed up were bank auctioned at a low (2010) for around 100K.
One of my cats was a stray kitten in 2008, dumped by a neighbor who left in the middle of the night.
Especially in services, the prices one could get for work done was amazing - businesses were desperate for work at any price.

In fall 2008 I was at Circuit City just before their bankruptcy picking up bargains and everyone in line ahead of me were finding out their store card credit lines had been pulled. None of them had any other form of cash/debit/credit to complete their purchases so after the shouting was over, a mountain of unpaid for merchandise was piling up next to the registers. Anybody who says 2008 was a blip is clueless.
70/30 AA, Global market cap equity. Rebalance if FI <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.

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DanMahowny
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Re: How Bad was 2008, really?

Post by DanMahowny » Fri Jun 14, 2019 7:54 pm

08 was bad. Really bad.

2000-02 was a piece of cake compared to 08.
Funding secured

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willthrill81
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Re: How Bad was 2008, really?

Post by willthrill81 » Fri Jun 14, 2019 8:39 pm

nedsaid wrote:
Fri Jun 14, 2019 6:31 pm
willthrill81 wrote:
Fri Jun 14, 2019 5:47 pm
nedsaid wrote:
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.
I see semblances to the Cuban Missile Crisis. We didn't learn until years later that the lone dissenting vote of Vasily Alexandrovich Arkhipov kept the Russian submarine B-59 from firing its nuclear missiles and almost certainly setting off WW3.

It's easy for people to call 2008 a "blip" and declare that "buy-and-hold worked again," pretty much armchair quarterbacking, but the outcome for those in the know back then was very far from certain.
I am an optimist, the purpose of my post wasn't fear mongering but to point out that really bad things can happen. In the case of the Cuban Missile Crisis, the outcome was not predetermined, it could have ended in disaster. Really bad blunders have been made in history, some of which were catastrophic. But having said all of that, I still believe that investors are better served by optimism than pessimism. There are opportunities that can be missed if we are in too dark of a mood to notice them.
I think of myself as a realist with an optimistic streak. Those who are pessimistic must have low equity allocations, spend a lot of time on the sidelines, favor CDs, view annuities at least somewhat favorably, and/or like the idea of a well-stocked bunker.
“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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nedsaid
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Re: How Bad was 2008, really?

Post by nedsaid » Sat Jun 15, 2019 12:08 am

willthrill81 wrote:
Fri Jun 14, 2019 8:39 pm
nedsaid wrote:
Fri Jun 14, 2019 6:31 pm
willthrill81 wrote:
Fri Jun 14, 2019 5:47 pm
nedsaid wrote:
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.
I see semblances to the Cuban Missile Crisis. We didn't learn until years later that the lone dissenting vote of Vasily Alexandrovich Arkhipov kept the Russian submarine B-59 from firing its nuclear missiles and almost certainly setting off WW3.

It's easy for people to call 2008 a "blip" and declare that "buy-and-hold worked again," pretty much armchair quarterbacking, but the outcome for those in the know back then was very far from certain.
I am an optimist, the purpose of my post wasn't fear mongering but to point out that really bad things can happen. In the case of the Cuban Missile Crisis, the outcome was not predetermined, it could have ended in disaster. Really bad blunders have been made in history, some of which were catastrophic. But having said all of that, I still believe that investors are better served by optimism than pessimism. There are opportunities that can be missed if we are in too dark of a mood to notice them.
I think of myself as a realist with an optimistic streak. Those who are pessimistic must have low equity allocations, spend a lot of time on the sidelines, favor CDs, view annuities at least somewhat favorably, and/or like the idea of a well-stocked bunker.
There gets to be a point where if things get really bad, nothing is going to save you. Not even gold, food, water, and ammo in a bunker. Whatever you have, a desperate mob can take. Short of a civilizational catastrophe, optimism wins out.
A fool and his money are good for business.

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3CT_Paddler
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Re: How Bad was 2008, really?

Post by 3CT_Paddler » Sat Jun 15, 2019 5:59 am

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
The part you are missing is you lost your job and you are now forced to sell your stocks at fire sale prices. Or you are retired or near retired and you just watched half of your hard earned nest egg disappear and are unsure if it will recover by the time you need it.

alex123711
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Re: How Bad was 2008, really?

Post by alex123711 » Sun Jun 16, 2019 4:59 am

willthrill81 wrote:
Fri Jun 14, 2019 5:47 pm
nedsaid wrote:
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.
I see semblances to the Cuban Missile Crisis. We didn't learn until years later that the lone dissenting vote of Vasily Alexandrovich Arkhipov kept the Russian submarine B-59 from firing its nuclear missiles and almost certainly setting off WW3.

It's easy for people to call 2008 a "blip" and declare that "buy-and-hold worked again," pretty much armchair quarterbacking, but the outcome for those in the know back then was very far from certain.
How are most preparing for this with indexes? A lot of people on here seem to have a high U.S allocation.. what if the U.S turns out to be the next Japan?

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max12377
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Re: How Bad was 2008, really?

Post by max12377 » Sun Jun 16, 2019 5:31 am

I'm not convinced that the problem that occurred in 2008 was solved. I suspect it was pushed further down the road. This is only my opinion. But I stay invested in a mix of stocks and bonds because I know cannot predict the future. I was stunned at how quickly the recovery came given the severity of the issues at hand. I thought it was going to take a lot longer.

Mr.BB
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Re: How Bad was 2008, really?

Post by Mr.BB » Sun Jun 16, 2019 6:37 am

MnD wrote:
Fri Jun 14, 2019 7:37 pm
In a city with "mild" real estate impacts relative to others, both my next door neighbors and the house directly across from us was lost to foreclosure. Small bungalows a few blocks away, which now sell for 500-600k fixed up were bank auctioned at a low (2010) for around 100K.
One of my cats was a stray kitten in 2008, dumped by a neighbor who left in the middle of the night.
Especially in services, the prices one could get for work done was amazing - businesses were desperate for work at any price.

In fall 2008 I was at Circuit City just before their bankruptcy picking up bargains and everyone in line ahead of me were finding out their store card credit lines had been pulled. None of them had any other form of cash/debit/credit to complete their purchases so after the shouting was over, a mountain of unpaid for merchandise was piling up next to the registers. Anybody who says 2008 was a blip is clueless.
"Especially in services, the prices one could get for work done was amazing - businesses were desperate for work at any price." This is so true!
We were fortunate not to lose our jobs during this time and we had some money put aside for some home improvements. We gutted both of our bathrooms (relatively small size). I remember the guy we hired to do the job said "Two years ago, this job would of cost double."
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

runner540
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Re: How Bad was 2008, really?

Post by runner540 » Sun Jun 16, 2019 7:28 am

alex123711 wrote:
Sun Jun 16, 2019 4:59 am
willthrill81 wrote:
Fri Jun 14, 2019 5:47 pm
nedsaid wrote:
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.
I see semblances to the Cuban Missile Crisis. We didn't learn until years later that the lone dissenting vote of Vasily Alexandrovich Arkhipov kept the Russian submarine B-59 from firing its nuclear missiles and almost certainly setting off WW3.

It's easy for people to call 2008 a "blip" and declare that "buy-and-hold worked again," pretty much armchair quarterbacking, but the outcome for those in the know back then was very far from certain.
How are most preparing for this with indexes? A lot of people on here seem to have a high U.S allocation.. what if the U.S turns out to be the next Japan?
Look for any of the "international vs US" threads...

Valuethinker
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Re: How Bad was 2008, really?

Post by Valuethinker » Sun Jun 16, 2019 9:00 am

3CT_Paddler wrote:
Sat Jun 15, 2019 5:59 am
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
The part you are missing is you lost your job and you are now forced to sell your stocks at fire sale prices. Or you are retired or near retired and you just watched half of your hard earned nest egg disappear and are unsure if it will recover by the time you need it.
I remember the frustrating years of the early 80s sending hundreds of CVs just for a summer job ...

The prize job-for-life then was Nortel or IBM.

In 2001 my friends got laid off from Nortel and the company later went bust leading to large cuts in pensions plus all their company stock worthless. IBM seems to have a policy against over 50s. So do the banks.

People who have not lived it just cannot imagine it.

Valuethinker
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Re: How Bad was 2008, really?

Post by Valuethinker » Sun Jun 16, 2019 9:02 am

DanMahowny wrote:
Fri Jun 14, 2019 7:54 pm
08 was bad. Really bad.

2000-02 was a piece of cake compared to 08.
Not if you worked in tech or finance related to technology.

I agree at a total economy level.

The systemic risks of total financial collapse in 2008 were 100x greater.

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willthrill81
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Re: How Bad was 2008, really?

Post by willthrill81 » Sun Jun 16, 2019 9:09 am

alex123711 wrote:
Sun Jun 16, 2019 4:59 am
willthrill81 wrote:
Fri Jun 14, 2019 5:47 pm
nedsaid wrote:
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.
I see semblances to the Cuban Missile Crisis. We didn't learn until years later that the lone dissenting vote of Vasily Alexandrovich Arkhipov kept the Russian submarine B-59 from firing its nuclear missiles and almost certainly setting off WW3.

It's easy for people to call 2008 a "blip" and declare that "buy-and-hold worked again," pretty much armchair quarterbacking, but the outcome for those in the know back then was very far from certain.
How are most preparing for this with indexes? A lot of people on here seem to have a high U.S allocation.. what if the U.S turns out to be the next Japan?
International actually had bigger drawdowns in the 2000-2002 and 2008-2009 periods than U.S. stock.

To be frank, I think that folks should be equally concerned that ex-U.S. will turn out to be "the next Japan." For U.S. investors, the inflation-adjusted annual return of ex-U.S. since 2000 has been .9%, identical to that of short-term Treasuries.

Image

Portfolio 1 is short-term Treasuries, and portfolio 2 is global ex-U.S. stock.

I've look at all of these data and issues significantly, and the best strategy that I could find for me to deal with them was to adopt a trend following strategy, which I won't get into here.
“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

ImUrHuckleberry
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Re: How Bad was 2008, really?

Post by ImUrHuckleberry » Sun Jun 16, 2019 9:16 am

max12377 wrote:
Sun Jun 16, 2019 5:31 am
I'm not convinced that the problem that occurred in 2008 was solved. I suspect it was pushed further down the road. This is only my opinion. But I stay invested in a mix of stocks and bonds because I know cannot predict the future. I was stunned at how quickly the recovery came given the severity of the issues at hand. I thought it was going to take a lot longer.
This seems to be a common belief among a not insignificant minority, but I can never understand the rationale/evidence behind it when people get to explaining. The fact that a lot of people who tout this opinion (not saying you) also seem to be gold bugs or fiat currency conspiracy theorists give me pause to putting any weight behind the opinions.

I'm just really curious if there is any real theory or evidence to support the contention that we've just kicked the can down the road.

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willthrill81
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Re: How Bad was 2008, really?

Post by willthrill81 » Sun Jun 16, 2019 9:29 am

ImUrHuckleberry wrote:
Sun Jun 16, 2019 9:16 am
max12377 wrote:
Sun Jun 16, 2019 5:31 am
I'm not convinced that the problem that occurred in 2008 was solved. I suspect it was pushed further down the road. This is only my opinion. But I stay invested in a mix of stocks and bonds because I know cannot predict the future. I was stunned at how quickly the recovery came given the severity of the issues at hand. I thought it was going to take a lot longer.
This seems to be a common belief among a not insignificant minority, but I can never understand the rationale/evidence behind it when people get to explaining. The fact that a lot of people who tout this opinion (not saying you) also seem to be gold bugs or fiat currency conspiracy theorists give me pause to putting any weight behind the opinions.

I'm just really curious if there is any real theory or evidence to support the contention that we've just kicked the can down the road.
About the only data I've seen that might be construed as partly supporting such a belief is the workforce participation rate, which peaked in the late 1990s at around 67%. It's currently just under 63%. That doesn't strike me as earth-shattering though.
“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

DaufuskieNate
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Re: How Bad was 2008, really?

Post by DaufuskieNate » Sun Jun 16, 2019 9:44 am

willthrill81 wrote:
Sun Jun 16, 2019 9:29 am
About the only data I've seen that might be construed as partly supporting such a belief is the workforce participation rate, which peaked in the late 1990s at around 67%. It's currently just under 63%. That doesn't strike me as earth-shattering though.
Not earth-shattering at all, especially when you consider that about half the reduction can be attributed to aging demographics.

Are U.S. banks not better capitalized today vs 2008? Have the abuses in loan underwriting and securitization not be reduced, at least somewhat, since 2008?

A bear market could ensue at any time, but at this point it doesn't seem that it will be for the same reasons as 2008.

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willthrill81
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Re: How Bad was 2008, really?

Post by willthrill81 » Sun Jun 16, 2019 9:59 am

DaufuskieNate wrote:
Sun Jun 16, 2019 9:44 am
willthrill81 wrote:
Sun Jun 16, 2019 9:29 am
About the only data I've seen that might be construed as partly supporting such a belief is the workforce participation rate, which peaked in the late 1990s at around 67%. It's currently just under 63%. That doesn't strike me as earth-shattering though.
Not earth-shattering at all, especially when you consider that about half the reduction can be attributed to aging demographics.

Are U.S. banks not better capitalized today vs 2008? Have the abuses in loan underwriting and securitization not be reduced, at least somewhat, since 2008?

A bear market could ensue at any time, but at this point it doesn't seem that it will be for the same reasons as 2008.
True. The other piece of data frequently referred to by 'no recovery' crowd is the fact that interest rates are much lower now than they were before the recessions. While true, the trend we've seen globally for almost 40 years has been lower interest rates. And at most, this would merely suggest that one of the causes of the recovery was reduced interest rates, not that the recovery didn't occur.
“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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CyclingDuo
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Re: How Bad was 2008, really?

Post by CyclingDuo » Sun Jun 16, 2019 10:16 am

DanMahowny wrote:
Fri Jun 14, 2019 7:54 pm
08 was bad. Really bad.

2000-02 was a piece of cake compared to 08.
Piece of cake? Not for technology investors it wasn't. Most technology stocks suffered, on average, declines of over 80% and the Nasdaq itself dropped 75%. It took 15 years for the Nasdaq to reach new highs, and 17 years for the QQQ's to surpass their 2000 highs. Technology is an important portion of the index and so the impact hit everyone, but the 2000 and beyond bust hit those who had too much allocated to that sector quite a bit harder than those who had a more diverse index portfolio.

Piece of cake? While the technology sector drop was more damaging, the S&P 500 went down 49.1% from 2000-02 and the drop lasted 929 days compared to the 54.8% decline in 2007-09 which lasted 517 days. Neither events were a real piece of cake IMO.

Here we are 19+ years later and some of the old biggies like Cisco, Intel, etc... still have not reached their stock prices of 2000. A few of the old biggies have such as Microsoft, Oracle, IBM, etc... .

This chart shows the Dow Jones Industrial Average from 1896-2016 and all of the fear points along the way...

Human Innovation Always Trumps Fear

https://virtueofselfishinvesting.s3.ama ... ?link=mktw

Nixon's resignation. Financial panic crash of 1987. Dot-Com bust of 2000-02. Financial Crisis of 2008-09. Brexit. Slowing Economy/China Trade War Q4 Meltdown of 2018. And on and on. There are always the larger fear issues surrounded by smaller issues of fear that make the markets unsettling for periods of time.

Living through such periods as investors we must in some shape or form...
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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Re: How Bad was 2008, really?

Post by snowman » Sun Jun 16, 2019 10:22 am

Valuethinker wrote:
Sun Jun 16, 2019 9:02 am
DanMahowny wrote:
Fri Jun 14, 2019 7:54 pm
08 was bad. Really bad.

2000-02 was a piece of cake compared to 08.
Not if you worked in tech or finance related to technology.

I agree at a total economy level.

The systemic risks of total financial collapse in 2008 were 100x greater.
Agree with Valuethinker. I was in tech at that time, and it was a disaster! People were losing jobs left and right on unimaginable scale. Giant corporations going bankrupt, hundreds of thousands of employees competing for the few jobs left. Stock market crash/going sideways for 2-3 years, investment loss of 80%. Wife unemployed, 2 small kids, we were hanging by the thread. I did lose my job but was lucky to find another one right away with one of the surviving companies. I still remember getting calls/emails for many months from people who weren't so lucky.

For us personally, 2008 was "piece of cake" compared to 2000-2003. But I agree with Valuethinker and others that 2008 was much worse overall.

One observation I made after the decade was over, was that in 2000-2003 there was a place to hide, even if you were in tech/telecom. Housing market was booming, and most of my former colleagues/coworkers/friends that were unemployed for extended period of time used HELOCs to sustain their lifestyle. I still remember thinking at that time how dangerous that strategy was, and I had no idea what's coming in 2008! When it finally arrived, there was literally no place to hide.

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Re: How Bad was 2008, really?

Post by Dottie57 » Sun Jun 16, 2019 10:29 am

FedGuy wrote:
Fri Jun 14, 2019 5:49 pm
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 had a decent job...which I lost. It was not fine.
I agree it was not fine. I read the newspapers and I truly thought the second Great Depression was going to happen. None of the other recessions made a big impact on me, but 2007-2009 did.

Other recessions were uncomfortable, but I never feared for the whole banking system.

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Re: How Bad was 2008, really?

Post by ImUrHuckleberry » Sun Jun 16, 2019 10:50 am

I was buying a new car in December 2008 at a moderate sized dealership and was the only customer in the showroom both when shopping and when working out the financing/trade in. The two people who serviced me were the owner and his wife, as he had laid off almost the entire staff.

The owner told me if I did all my service at the dealer, my first set of tires would be on them. I said the dealership was too far away from home to take advantage of that, so it had no value to me. The owner then said he was very likely to be bankrupt and out-of-business in a few months anyway. And as it turned out the dealership was closed by April 2009.

* edit for spelling
Last edited by ImUrHuckleberry on Sun Jun 16, 2019 11:00 am, edited 1 time in total.

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Re: How Bad was 2008, really?

Post by WhyNotUs » Sun Jun 16, 2019 10:58 am

We stemmed the damage by borrowing from our children and learned little from the loan.
The systemic issues are the same with only a wounded Dodd-Frank left as response to the situation.
One could take the message as that the US will borrow to keep the music playing as long as the bonds will sell.
That may give young investors some confidence.
I own the next hot stock- VTSAX

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Re: How Bad was 2008, really?

Post by dknightd » Sun Jun 16, 2019 11:07 am

2008 was bad. But it could be worse.

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Re: How Bad was 2008, really?

Post by texas lawdog » Sun Jun 16, 2019 11:53 am

Valuethinker wrote:
Sun Jun 16, 2019 9:00 am

I remember the frustrating years of the early 80s sending hundreds of CVs just for a summer job ...

The prize job-for-life then was Nortel or IBM.

In 2001 my friends got laid off from Nortel and the company later went bust leading to large cuts in pensions plus all their company stock worthless. IBM seems to have a policy against over 50s. So do the banks.

People who have not lived it just cannot imagine it.
I am one of those ex-Nortel people that feel what you are saying. Was lucky in one regard to have survived many rounds of layoffs at NT just to watch the company sold off later at fire-sale prices. At some point during the financial crisis I took out a loan against my 401K just to protect it against the downturn (which I considered extreme). Those events definitely changed the way that I think about investing and those that haven't had to live thru that time are fortunate.

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Re: How Bad was 2008, really?

Post by bltn » Sun Jun 16, 2019 1:49 pm

WhyNotUs wrote:
Sun Jun 16, 2019 10:58 am
We stemmed the damage by borrowing from our children and learned little from the loan.
The systemic issues are the same with only a wounded Dodd-Frank left as response to the situation.
One could take the message as that the US will borrow to keep the music playing as long as the bonds will sell.
That may give young investors some confidence.
These things also bother me. At some point in time, the increasing federal deficit will promote a financial crisis.
And the problem will be made worse by interest rates returning to historical norms.

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Re: How Bad was 2008, really?

Post by LadyGeek » Sun Jun 16, 2019 1:56 pm

This is a "no politics" forum. I removed a post and several replies related to the board members of the Federal Reserve. The discussion was getting political.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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Re: How Bad was 2008, really?

Post by mikestorm » Sun Jun 16, 2019 2:37 pm

I stayed 'all in' during the crisis. Not because I was brave, but because I didn't know what else to do.

As others point out, this wasn't simply a precarious drop in the stock market. Pillars of the financial industry were crumbling. All the car companies seemed to look like they were going to go under all at once, with thousands of dealerships closing all over the country. People were losing jobs left and right.

Real estate was cratering, and due to the free and loose means of getting mortgages up to that point, thousands of people discovered they could no longer afford their homes, as their payments skyrocketed because everyone had ARMs. It's a tough call to pay 120% - 150% of what you were paying previously when your home is now worth less than the outstanding balance of the loan. Many, MANY people just walked away. Bankruptcies spiked.

I put 20% down on my home and had a 15 year fixed, and even so my bank cleaved my available home equity line of credit in half. I read that 170,000 small businesses were killed during that time. For bigger companies, hiring dried up and thousands of companies suspended things like their 401(k) match (my company included). People spent less in the way of discretionary income, which hurt the economy as well.

In short, all the market forces that kept our economy going seemed to grind to a halt at once. Since these forces were so interdependent, it was hard to imagine any one of them starting up again with the resistance of all the others holding it back.

Sometimes it takes more than an iron constitution to soldier on. It's like being in a boat with a hole in it. You could try to make a beeline to shore, but despite your best efforts, things completely out of your control interfere with your resolve.

I will say it seemed much longer than it actually was, most likely due to the torrent of bad news day after day during that time. The takeaway is no one should look at the graph of the S&P 500 during that time and assume they know what it was like.

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Re: How Bad was 2008, really?

Post by Valuethinker » Sun Jun 16, 2019 4:22 pm

DaufuskieNate wrote:
Sun Jun 16, 2019 9:44 am
willthrill81 wrote:
Sun Jun 16, 2019 9:29 am
About the only data I've seen that might be construed as partly supporting such a belief is the workforce participation rate, which peaked in the late 1990s at around 67%. It's currently just under 63%. That doesn't strike me as earth-shattering though.
Not earth-shattering at all, especially when you consider that about half the reduction can be attributed to aging demographics.

Are U.S. banks not better capitalized today vs 2008? Have the abuses in loan underwriting and securitization not be reduced, at least somewhat, since 2008?

A bear market could ensue at any time, but at this point it doesn't seem that it will be for the same reasons as 2008.
My bet would be the Italian banking system. As a most likely stress point.

The Hong King banking system due to much greater interconnections w outside world. I.e. thus was entire latest politics simply a channel for Chinese asset bubble collapse to reach the wider world.

There are excesses in US financial markets. Eg car loans, leveraged loan funds.

However generally us financial institutions seem in better shape and more tightly regulated.

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Re: How Bad was 2008, really?

Post by srt7 » Sun Jun 16, 2019 6:19 pm

sperry8 wrote:
Thu Jan 12, 2017 7:43 pm
SpartanBull wrote: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?
At the time - no one knew it was a "blip". And it took longer than 2 years to come back to even (more like 4). Surely not terribly long in hindsight, but buyers of equities were scarce and prices kept dropping. Sellers were aplenty and were selling at lower and ever lower prices. Equities were down 50%+ (from the highs) and the media, even at the lows, was calling for another 33% drop. Fear was everywhere. No one knew if it would ever come back up or how long. Lehman Brothers, a company that was founded in 1850 failed. Read that again... 1850. It survived WWI, the Great Depression, WWII, etc. And it failed. Warren Buffett was the lender of last resort for many venerable companies including GE, Goldman Sachs, and Bank of America. So much so that in addition to stock, he was getting 8-10% interest rates and/or dividends in perpetuity on money lent in some cases.

Even the Great Depression resulted in one getting back to even (assuming they reinvested dividends) in 11 years. Hindsight makes it all look easy. But living through it and thinking Japan's 25 yr + "L" is happening here is a stressful thing.
Lots of great answers here but I think this one hits the point home.

OP - you asked a good question but the tone of it is quite arrogant. Intentional perhaps?
I can't think of anything more luxurious than owning my time. - remomnyc

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Re: How Bad was 2008, really?

Post by Fallible » Sun Jun 16, 2019 8:26 pm

sperry8 wrote:
Thu Jan 12, 2017 7:43 pm
SpartanBull wrote: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?
At the time - no one knew it was a "blip". ... No one knew if it would ever come back up or how long. ...
And that's what was "so scary": No one knew. This can't be fully understood or appreciated until one is in the market. It's the uncertainty, the surprises, that investors hate and fear, and while they are part of any market crash, they reigned supreme in 2008 for all the reasons posted on this thread.

OP, you had to be in it. Only someone looking at it from the outside could ask "What is so scary...?"
John Bogle on his often bumpy road to low-cost indexing: "When a door closes, if you look long enough and hard enough, if you're strong enough, you'll find a window that opens."

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Re: How Bad was 2008, really?

Post by dh » Sun Jun 16, 2019 9:11 pm

OP: That is a great question. It was bad, but I think 2000-2002 prepared me for 2008. While 2008 was a hard and "fast" hit, the years from 2000-2002 felt more brutal because of the long continual declines. The reality is that both of those periods taught me that big declines are not anomalies. Rather, big declines should be expected, and the key is to maintain a Boglehead perspecive (ignore and stay invested for the long term). :sharebeer

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Re: How Bad was 2008, really?

Post by Wakefield1 » Mon Jun 17, 2019 1:19 am

Perhaps we are in the first stages of forgetting about the easy money for chasing and pushing real estate prices higher,which played a big part in the run up for 2008,I see there is a Credit Union advertisement for a mortgage with no money down.
Lots of house purchases for much less than 20% down,but that drives up prices so that the house buyer doesn't really benefit much. Unless the easy money promotes builders to start more house constructions.

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Re: How Bad was 2008, really?

Post by Lee_WSP » Mon Jun 17, 2019 2:05 pm

I was just starting out my career around that time. What people looking back on just the stock market fail to remember is the actual life consequences people were suffering through as stocks tumbled.

People were out of work. Layoffs were happening everywhere. Companies were shutting down. My generation never got a solid foot in the door to start our careers. Some of us went back to school to wait it out. Others suffered through it.

As we were living it, some news anchor would always be making comparisons to the Great Depression. Other parallels being made at the time was the oil crisis, except this crisis kept on going.

So yeah. It was pretty dang bad. Perhaps a once in a generation bad.

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Re: How Bad was 2008, really?

Post by dadu007 » Mon Jun 17, 2019 4:11 pm

It was really bad. In my neighborhood, the effects were still very evident in 2011, when we had to move (due to my company closing my office and relocating me) and sold our house after year on the market; bought in 2006 for $195,000, sold (finally) in 2011 for $156,000. Ouch. I had to write a $3000 check at the closing.
Around the time of our house sale, two people in our neighborhood committed suicide.
Some people just could not mentally or monetarily find a way to navigate out of a super scary time.

The only reason we could buy a house in our new home state is that while all this was going on my grandmother died and left me modest inheritance. I parked it in cash in 2009, left it alone, and was then able to use it for a down payment on our next place in 2011. I was extremely fortunate in that regard.
Last edited by dadu007 on Mon Jun 17, 2019 4:19 pm, edited 1 time in total.

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Re: How Bad was 2008, really?

Post by Toons » Mon Jun 17, 2019 4:17 pm

Was It Life
Or Death? :idea:
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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Re: How Bad was 2008, really?

Post by TomatoTomahto » Mon Jun 17, 2019 4:23 pm

Many of our neighbors, acquaintances, and colleagues never returned to their previous levels of financial security.

It was bad, and most of us don’t appreciate how close to the brink of “much worse” we came.
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Re: How Bad was 2008, really?

Post by Lee_WSP » Mon Jun 17, 2019 4:46 pm

Toons wrote:
Mon Jun 17, 2019 4:17 pm
Was It Life
Or Death? :idea:
Yeah. It was.

https://money.cnn.com/2013/09/18/news/e ... index.html

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Re: How Bad was 2008, really?

Post by Dottie57 » Mon Jun 17, 2019 10:35 pm

Frontline has a pretty good 2 part 4 hour series 2008.

Called “Money, Power and Wall Street” - 2 part.

Available on Amazon Prime right now .

Look in season 30. First broadcast in spring of 2012.

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Re: How Bad was 2008, really?

Post by f4d » Mon Jun 17, 2019 11:54 pm

I retired in 1996.

Bought a house in 2006 (peak) for $700,000, sold in 2008 (bottom) for a net of $450,000.

A loss of a quarter of a million in savings.
jb

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Re: How Bad was 2008, really?

Post by Wakefield1 » Tue Jun 18, 2019 12:47 am

I believe,on the other side of certain things,some people who helped bring us 2008 made out like bandits
and they or their successors would do it all over again if they could! :twisted:
Remember the quote about such that those who forget the past,will repeat it.

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Re: How Bad was 2008, really?

Post by columbia » Tue Jun 18, 2019 5:35 am

Bad enough that I’m always perplexed by people hoping for a crash (to buy cheaper stock).

Those people don’t have retired parents/grandparents? They believe they’re immune from losing their own job, no matter what happens?

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Re: How Bad was 2008, really?

Post by mikestorm » Tue Jun 18, 2019 6:08 am

srt7 wrote:
Sun Jun 16, 2019 6:19 pm

OP - you asked a good question but the tone of it is quite arrogant. Intentional perhaps?
Unfortunately (for OP) if he truly can't comprehend how bad it really was, I'm not entirely sure he's really as psychologically prepared as he thinks he is should the same thing ever happen again.

In retrospect, it was one hell of a life lesson.

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