When did the bad news start in 2008?

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sharkiez
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When did the bad news start in 2008?

Post by sharkiez » Fri Jan 26, 2018 4:13 pm

Hello All,

Long-time lurker here and have been learning a lot from everyone in this forum, so thank you. I got into investing in Q3 last year with a simple 80/20 stocks/bonds portfolio and have been extremely happy with the returns so far in this extremely bullish market. I understand that the long-term philosophy is to stay the course, even in bear markets, but the stock market took almost 5 years to recover to 2008 levels when it crashed the last time. I was wondering, for those who went through that experience, surely there was some writing on the wall that suggested an imminent crash was incoming? When did the negative news start circulating? Even if we ignored all that, after the big dip on Sep 29, 2008, if people would have sold then and bought in again a year or two later, wouldn't they have stood a chance to make more than if they "stayed the course"? In hindsight, even those who stayed the course are doing well with the recent bull run, but I am just wondering the "what ifs".

Not trying to time the market here. When it's crashing, why not sell off in the early stage (before reaching the bottom), knowing it will eventually reach the bottom (you don't even need to time the bottom) and recover? You already have long-term gains and you can lock in those gains.

ResearchMed
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Re: When did the bad news start in 2008?

Post by ResearchMed » Fri Jan 26, 2018 4:17 pm

sharkiez wrote:
Fri Jan 26, 2018 4:13 pm
Hello All,

Long-time lurker here and have been learning a lot from everyone in this forum, so thank you. I got into investing in Q3 last year with a simple 80/20 stocks/bonds portfolio and have been extremely happy with the returns so far in this extremely bullish market. I understand that the long-term philosophy is to stay the course, even in bear markets, but the stock market took almost 5 years to recover to 2008 levels when it crashed the last time. I was wondering, for those who went through that experience, surely there was some writing on the wall that suggested an imminent crash was incoming? When did the negative news start circulating? Even if we ignored all that, after the big dip on Sep 29, 2008, if people would have sold then and bought in again a year or two later, wouldn't they have stood a chance to make more than "staying the course"? In hindsight, even those who stayed the course are doing well with the recent bull run, but I am just wondering the "what ifs". Not trying to time the market here. When it's crashing, why not sell off in the early stage (before reaching the bottom), knowing it will eventually reach the bottom (you don't even need to time the bottom) and recover?
On September 29th, 2008, how did anyone know, at that time, that it would continue to get worse?

What if that had been the "bottom"?

Hindsight is 20/20.

Sure, there were lots of signs that things weren't going well, but as to "what was going to happen next or in the near future to the market"... who knew?

RM
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climber2020
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Re: When did the bad news start in 2008?

Post by climber2020 » Fri Jan 26, 2018 4:17 pm

sharkiez wrote:
Fri Jan 26, 2018 4:13 pm
Not trying to time the market here.
Yes; yes you are.

Here's a nice read from that time period: viewtopic.php?t=25126

IlliniDave
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Re: When did the bad news start in 2008?

Post by IlliniDave » Fri Jan 26, 2018 4:19 pm

Not to sound flippant but there's always bad news and predictions of crashes and the like. Every year.

My recollection is things started getting unstable in late 2007, but I can't name a single person who accurately predicted at that time specifically what was about to happen. Arguably some people "should have known" but that is always the case, and that certainly wouldn't apply to main st investor.
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sharkiez
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Re: When did the bad news start in 2008?

Post by sharkiez » Fri Jan 26, 2018 4:30 pm

Some great points made here. Let me push back on a couple of points, if I may:

1) Yes, there are always naysayers and bears on TV, but when Merrill, Lehman, Bear Sterns all failed, that's no longer speculation and logically, things will get worse before they get better. By selling, you will experience less of the "get worse" part and quite possibly, less of the "get better part". Plus by this time, investors who got in a few years back would have made gains already that didn't get erased immediately.

2) We all believe that over the long run, stocks will always be trending upward, with cycles thrown in, am I right? Do we believe that we are reaching the peak of this cycle? Quite possibly. So if I exit today, hold cash for a while, and buy in when the correction happens, I can restart my ride at below the current 2,870 SP500 to the next high of 3,xxx (quite possibly 10 years down the line?).

Sorry again to sound naive.

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Re: When did the bad news start in 2008?

Post by TSR » Fri Jan 26, 2018 4:31 pm

Your question is an interesting one but also an impossible one to answer. Actually impossible. That is because one of the most profound behavioral economic fallacies is hindsight bias. Anyone can go back and say "this is when I knew," but that will necessarily be based on what we know now. Anyone can go back and point to the publishing date of certain articles, but, as another poster has mentioned, there are articles every day about how a crash is imminent. They are all blind squirrels, and only a few find a nut. So the answer is that the bad news about 2008 started in 2005 and before, but that news was wrong (i.e., it predicted the wrong time). If you watch The Big Short, you will see that even the people who were "right" got their timing wrong, to the point where they almost went under waiting on what they "knew" would happen. It could well be that this market is long overdue for a massive crash, but that it keeps chugging along for several more years. There is no way to know, except in hindsight, and you will definitely lose money if you miss out on those big gains while you are defensively avoiding the big losses.

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Re: When did the bad news start in 2008?

Post by ResearchMed » Fri Jan 26, 2018 4:43 pm

sharkiez wrote:
Fri Jan 26, 2018 4:30 pm
Some great points made here. Let me push back on a couple of points, if I may:

1) Yes, there are always naysayers and bears on TV, but when Merrill, Lehman, Bear Sterns all failed, that's no longer speculation and logically, things will get worse before they get better. By selling, you will experience less of the "get worse" part and quite possibly, less of the "get better part". Plus by this time, investors who got in a few years back would have made gains already that didn't get erased immediately.

2) We all believe that over the long run, stocks will always be trending upward, with cycles thrown in, am I right? Do we believe that we are reaching the peak of this cycle? Quite possibly. So if I exit today, hold cash for a while, and buy in when the correction happens, I can restart my ride at below the current 2,870 SP500 to the next high of 3,xxx (quite possibly 10 years down the line?).

Sorry again to sound naive.
Playing Devil's Advocate, but quite seriously...

You want to sell now, and then when the market falls, buy back in at a lower level.

What if someone said that 1-2 years ago?
(This is year 9 or something of a longer bull market, or something similar.)

Point is... IF the market keeps going up, or just goes up enough that when there *is* that "drop" you are waiting for... it's still higher than the market is now?

That is very possible. In fact, it happens regularly, if you look at a graph of the DOW or S&P.
It's not the most common, but the most common is that slower crawl up over time. Or it has been thus far....

Suppose you finally said "enough" approximately in March, 2009, and decided to wait for things to drop more and buy back in.
Look at what the market has done since then.
NICE... buy "you" (or someone like you) would STILL be waiting for that drop below your selling point.

It looks much more clear in hindsight. Always. :twisted:
Unfortunately!

RM
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Re: When did the bad news start in 2008?

Post by sharkiez » Fri Jan 26, 2018 4:51 pm

ResearchMed wrote:
Fri Jan 26, 2018 4:43 pm
sharkiez wrote:
Fri Jan 26, 2018 4:30 pm
Some great points made here. Let me push back on a couple of points, if I may:

1) Yes, there are always naysayers and bears on TV, but when Merrill, Lehman, Bear Sterns all failed, that's no longer speculation and logically, things will get worse before they get better. By selling, you will experience less of the "get worse" part and quite possibly, less of the "get better part". Plus by this time, investors who got in a few years back would have made gains already that didn't get erased immediately.

2) We all believe that over the long run, stocks will always be trending upward, with cycles thrown in, am I right? Do we believe that we are reaching the peak of this cycle? Quite possibly. So if I exit today, hold cash for a while, and buy in when the correction happens, I can restart my ride at below the current 2,870 SP500 to the next high of 3,xxx (quite possibly 10 years down the line?).

Sorry again to sound naive.
Playing Devil's Advocate, but quite seriously...

You want to sell now, and then when the market falls, buy back in at a lower level.

What if someone said that 1-2 years ago?
(This is year 9 or something of a longer bull market, or something similar.)

Point is... IF the market keeps going up, or just goes up enough that when there *is* that "drop" you are waiting for... it's still higher than the market is now?

That is very possible. In fact, it happens regularly, if you look at a graph of the DOW or S&P.
It's not the most common, but the most common is that slower crawl up over time. Or it has been thus far....

Suppose you finally said "enough" approximately in March, 2009, and decided to wait for things to drop more and buy back in.
Look at what the market has done since then.
NICE... buy "you" (or someone like you) would STILL be waiting for that drop below your selling point.

It looks much more clear in hindsight. Always. :twisted:
Unfortunately!

RM
I forgot to consider that. Very helpful.

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Re: When did the bad news start in 2008?

Post by smesman » Fri Jan 26, 2018 5:18 pm

Right now, we have a situation like this:

Image

Because of the high valuations, the expected growth for the next 15 years is not very high (~5% per year?) but higher than zero.

Let's assume that over the next 15 years, stocks will double in value.

It can go like this, with a correction:

Image

But the correction can also happen later, and not actually reach the current price level anymore:

Image

It is even theoretically possible that we will have a very long, slow, sustained growth like this:

Image

In short, we know a correction is coming but we have no idea whether they will lower the prices enough to ever reach current levels again.

You can gamble that the correction comes early, but do you really want to risk waiting forever for the stocks to go lower than some imaginary level?

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Re: When did the bad news start in 2008?

Post by Blueskies123 » Fri Jan 26, 2018 5:23 pm

I read somewhere that this was first crack in the banking system itself but of course no one realized it at the time.

https://en.wikipedia.org/wiki/2008%E2%8 ... ial_crisis

I think where you are going with this question is how and when this blow off top to our market will crack. No one knows but based on history the first crack will somewhere no is looking. Where is no one looking? That is where the first crack will show up. Let me know if you find it.

This shows a lot of clues in 2006 and 2007.
https://en.wikipedia.org/wiki/Subprime_ ... t_timeline
Last edited by Blueskies123 on Fri Jan 26, 2018 5:35 pm, edited 2 times in total.

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Re: When did the bad news start in 2008?

Post by Stonebr » Fri Jan 26, 2018 5:27 pm

Here's a thread from late 2008 that shows the flavor of discussions: Even Taylor and larryswedroe get to talking about "Plan B" -- bailing out.

viewtopic.php?t=30085

But the end result was that most of us stayed the course. Another big theme was that many Bogleheads used the bear as an opportunity to tax-loss harvest in our taxable accounts. This provided a "war chest" of tax loss carry-forward that lasted for many years.

Take particular note of Adrian Nenu's comments. I recall he was DVA-ing into the market and claimed to have upped his AA from 60/40 to 85/15. He was a prolific poster in those days and his insights are missed by some of us.
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Re: When did the bad news start in 2008?

Post by ResearchMed » Fri Jan 26, 2018 5:28 pm

Blueskies123 wrote:
Fri Jan 26, 2018 5:23 pm
I read somewhere that this was first crack in the system but of course no one realized it at the time.

https://en.wikipedia.org/wiki/2008%E2%8 ... ial_crisis

I think where you are going with this question is how and when this blow off top to our market will crack. No one knows but based on history the first crack will somewhere no is looking. Where is no one looking? That is where the first crack will show up. Let me know if you find it.
It's even worse. How many other "financial disaster" things "happened" that did NOT end up leading to the financial crisis?

Even recently... Let's count the ways...

I'll start: Brexit! SURELY that was going to be "it", right?
Uh.... no, I guess not...

RM
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Re: When did the bad news start in 2008?

Post by Blueskies123 » Fri Jan 26, 2018 5:34 pm

From Wikipedia this was the first clue the non-insiders would have found.

Fall 2005: Booming housing market halts abruptly; from the fourth quarter of 2005 to the first quarter of 2006, median prices nationwide drop 3.3 percent.[11

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Re: When did the bad news start in 2008?

Post by Toons » Fri Jan 26, 2018 5:44 pm

Yep I experienced one the buying opportunities of a lifetime.08-09
They don't happen that often.
You are supposed to be investing consistently,
Continuous,Automatic,Disciplined.
Remember,The weak hands are selling to somebody :happy
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Re: When did the bad news start in 2008?

Post by Johnny Sharp » Fri Jan 26, 2018 5:48 pm

smesman wrote:
Fri Jan 26, 2018 5:18 pm
Right now, we have a situation like this:

Image

Because of the high valuations, the expected growth for the next 15 years is not very high (~5% per year?) but higher than zero.

Let's assume that over the next 15 years, stocks will double in value.

It can go like this, with a correction:

Image

But the correction can also happen later, and not actually reach the current price level anymore:

Image

It is even theoretically possible that we will have a very long, slow, sustained growth like this:

Image

In short, we know a correction is coming but we have no idea whether they will lower the prices enough to ever reach current levels again.

You can gamble that the correction comes early, but do you really want to risk waiting forever for the stocks to go lower than some imaginary level?
Fantastic post.

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Re: When did the bad news start in 2008?

Post by Fallible » Fri Jan 26, 2018 5:49 pm

sharkiez wrote:
Fri Jan 26, 2018 4:13 pm
Hello All,

Long-time lurker here and have been learning a lot from everyone in this forum, so thank you. I got into investing in Q3 last year with a simple 80/20 stocks/bonds portfolio and have been extremely happy with the returns so far in this extremely bullish market. I understand that the long-term philosophy is to stay the course, even in bear markets, but the stock market took almost 5 years to recover to 2008 levels when it crashed the last time. I was wondering, for those who went through that experience, surely there was some writing on the wall that suggested an imminent crash was incoming? ...
One short answer: Even if the writing on the wall was clear enough to be read correctly, i.e., that there would a Lehman, a bailout, a Great Recession, a crisis of global proportions, and a credit crunch that seriously threatened a complete financial meltdown, the next crash would be different, as they all are.
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Re: When did the bad news start in 2008?

Post by AntsOnTheMarch » Fri Jan 26, 2018 5:50 pm

IlliniDave wrote:
Fri Jan 26, 2018 4:19 pm
Not to sound flippant but there's always bad news and predictions of crashes and the like. Every year. Every month. Every week. Every day. Every hour on the hour.
Fixed that for you. :D

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Re: When did the bad news start in 2008?

Post by FrugalInvestor » Fri Jan 26, 2018 5:54 pm

Deleted post
Last edited by FrugalInvestor on Sat Jan 27, 2018 9:37 am, edited 1 time in total.
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Re: When did the bad news start in 2008?

Post by nisiprius » Fri Jan 26, 2018 6:11 pm

The reason why you don't get out is that if you got out every time the stock market dropped 10% you'd basically never be in and you'd pretty much miss out on the long-term gains. smesman has give some pictures above. The thing is that it is very hard to accept what stock market movements are really like. We are impelled to visualize them as smooth. They are really fractal. The big moves are constantly punctuated by smaller moves in the opposite direction, the smaller moves are interrupted by even smaller moves in the opposite direction, and so forth. It's rather like a recession. The National Bureau of Economic Research not only will not try to predict recessions, it will not say whether or not we are in one. Only when it is over will it say that there was a recession and what the start and end dates were. It is the same with bull and bear markets.

I remember quite well when "the bad news" started for me.
Image
The Dow Jones Industrial Average had been jinking up and down in the 12,000's and 13,000's for a couple of years. Every time it moved a bit, there would be breathless excitement about what it meant. Quite properly, I had not been paying much attention to it. As far as I was concerned, it was all noise. I had this feeling that the Dow was "about 12,000-13,000."

So, we were on vacation in Oregon, in August, having a lovely time, visiting friends, and chatting about things. Like us, they were in the stages of thinking about retirement soon. And one of them says "Of course we're jittery about the stock market."

And I say :oops: "What's there to be jittery about? It's just making random movements, up and down, in the 12,000s or so. It's no big deal. It's not as if it was in the 11,000's."

She looks at me.

"Uh... Nisi... it's in the 11,000's."

And stayed there for months.

And then came the big plunge.
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Re: When did the bad news start in 2008?

Post by retiredjg » Fri Jan 26, 2018 6:14 pm

sharkiez wrote:
Fri Jan 26, 2018 4:13 pm
I was wondering, for those who went through that experience, surely there was some writing on the wall that suggested an imminent crash was incoming?
That's the problem and the thing that completely defies common sense. There is no writing on the wall. You only know when the market crash started and ended in hindsight.

Not trying to time the market here.
Actually, that is exactly what you are talking about. But you think you aren't. :happy

When it's crashing, why not sell off in the early stage (before reaching the bottom.....
Because it is impossible to know when you are in an early stage of a crash.


Everybody who has looked back at a market crash can see when it started, when it bottomed and when it recovered. These things are not possible to see when the events are actually happening.

Print out a copy of the performance of the 500 index for as many years as possible. Cut it up into pieces but cut out all reference to numbers or dollars. Put them in a bag and pull one out. Decide what the market is about to do in the next 3 months from what you see on the paper. Compare that piece to the actual market....and see how often you are correct. This may help you see what you are unable to see right now.


BTW, the crash started in October 2007 in my mind....

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Re: When did the bad news start in 2008?

Post by letsgobobby » Fri Jan 26, 2018 6:23 pm

sharkiez wrote:
Fri Jan 26, 2018 4:13 pm
Hello All,

Long-time lurker here and have been learning a lot from everyone in this forum, so thank you. I got into investing in Q3 last year with a simple 80/20 stocks/bonds portfolio and have been extremely happy with the returns so far in this extremely bullish market. I understand that the long-term philosophy is to stay the course, even in bear markets, but the stock market took almost 5 years to recover to 2008 levels when it crashed the last time. I was wondering, for those who went through that experience, surely there was some writing on the wall that suggested an imminent crash was incoming? When did the negative news start circulating? Even if we ignored all that, after the big dip on Sep 29, 2008, if people would have sold then and bought in again a year or two later, wouldn't they have stood a chance to make more than if they "stayed the course"? In hindsight, even those who stayed the course are doing well with the recent bull run, but I am just wondering the "what ifs".

Not trying to time the market here. When it's crashing, why not sell off in the early stage (before reaching the bottom), knowing it will eventually reach the bottom (you don't even need to time the bottom) and recover? You already have long-term gains and you can lock in those gains.
The bad news started in 1995, got worse in 1998, again very bad in 2002, and continued to get bad through 2006. At which point it became terrible.

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Re: When did the bad news start in 2008?

Post by H-Town » Fri Jan 26, 2018 6:24 pm

climber2020 wrote:
Fri Jan 26, 2018 4:17 pm
sharkiez wrote:
Fri Jan 26, 2018 4:13 pm
Not trying to time the market here.
Yes; yes you are.

Here's a nice read from that time period: viewtopic.php?t=25126
This thread will be eye-opening for someone who has not gone through a cliff dive.

OP- when everyone (including the shoe boy) thinks that they can't lose in the market and that they will be rich soon, that's when it's bad news.

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Re: When did the bad news start in 2008?

Post by nisiprius » Fri Jan 26, 2018 6:33 pm

And, see, here's the thing. If you'd been "smart" enough to react to the drop to 11,000 in August, 2008, then what would you have done here? 2011, exact same thing, drop from the top of the 12,000's to 11,000.

Image

Because that drop was not followed by a plunge, but by this:

Image
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Re: When did the bad news start in 2008?

Post by H-Town » Fri Jan 26, 2018 6:39 pm

sharkiez wrote:
Fri Jan 26, 2018 4:13 pm
Not trying to time the market here. When it's crashing, why not sell off in the early stage (before reaching the bottom), knowing it will eventually reach the bottom (you don't even need to time the bottom) and recover? You already have long-term gains and you can lock in those gains.
I think I saw many people since 2015 has tried to get out of the market and sit on the sideline wait for a crash... If you searched this forum, many similar topics will pop up. They must have missed at least 30-40% gain after they "lock-in" their gains.

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Re: When did the bad news start in 2008?

Post by grettman » Fri Jan 26, 2018 6:42 pm

You don't know. The "experts" don't know. No one knows. But many people think they know which is worse than just not knowing.

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Re: When did the bad news start in 2008?

Post by JoeRetire » Fri Jan 26, 2018 6:44 pm

sharkiez wrote:
Fri Jan 26, 2018 4:13 pm
Not trying to time the market here.
Are you sure?
When it's crashing, why not sell off in the early stage (before reaching the bottom), knowing it will eventually reach the bottom (you don't even need to time the bottom) and recover? You already have long-term gains and you can lock in those gains.
If you know when it's in the early stage of crashing, and you know when it hits the bottom and recovering - then you can accurately time the market and profit.

But you won't. And you won't. Only in retrospect. So how lucky do you feel?

If you think your prediction powers are accurate, why don't you start now. Where are we right now relative to the end of the year? Post it here and come back to see if your crystal ball is working or not.

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Re: When did the bad news start in 2008?

Post by TRC » Fri Jan 26, 2018 7:39 pm

It sounds like you're trying to time the market. Don't do that - it's a loser's game.

Decide on an AA strategy and stick to it, no matter what! Keep investing, no matter what. And tune out the noise.

I've been investing since 2000 - through the dot com bust and the 2008 financial melt down. Both happened before I became a boglehead.

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Re: When did the bad news start in 2008?

Post by 2015 » Fri Jan 26, 2018 7:41 pm

When I was laid off on top of my PF and overall net worth beginning to slide.

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Re: When did the bad news start in 2008?

Post by Fallible » Fri Jan 26, 2018 8:07 pm

thangngo wrote:
Fri Jan 26, 2018 6:24 pm
...
OP- when everyone (including the shoe boy) thinks that they can't lose in the market and that they will be rich soon, that's when it's bad news.
Or when everyone starts thinking housing can only go up, up, up - an example of irrational exuberance that probably began in the early 2000s (at least in my neighborhood).
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Re: When did the bad news start in 2008?

Post by MichaelRpdx » Fri Jan 26, 2018 8:17 pm

ResearchMed wrote:
Fri Jan 26, 2018 5:28 pm
Even recently... Let's count the ways...

I'll start: Brexit! SURELY that was going to be "it", right?
Uh.... no, I guess not...

RM
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oh, not that either
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Re: When did the bad news start in 2008?

Post by cadreamer2015 » Fri Jan 26, 2018 8:56 pm

To answer the OP's question in the title of this thread, the bad news didn't start in 2008. I first reacted in August, 2007.
9 August 2007


BNP Paribas freeze three of their funds, indicating that they have no way of valuing the complex assets inside them known as collateralised debt obligations (CDOs), or packages of sub-prime loans. It is the first major bank to acknowledge the risk of exposure to sub-prime mortgage markets. Adam Applegarth (right), Northern Rock's chief executive, later says that it was "the day the world changed"
I came home from work that day and told my wife that we had to get our home on the market ASAP. We got it listed within 3 weeks and sold within 2 months. According to Zillow's estimate 4 years later the value of that home had dropped 25% from what we sold it for.

That said, I did not see the magnitude of the financial crisis coming, nor the magnitude of the stock market sell off.
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Re: When did the bad news start in 2008?

Post by MichaelRpdx » Fri Jan 26, 2018 9:12 pm

Stonebr wrote:
Fri Jan 26, 2018 5:27 pm
Here's a thread from late 2008 that shows the flavor of discussions: Even Taylor and larryswedroe get to talking about "Plan B" -- bailing out.

viewtopic.php?t=30085

But the end result was that most of us stayed the course. Another big theme was that many Bogleheads used the bear as an opportunity to tax-loss harvest in our taxable accounts. This provided a "war chest" of tax loss carry-forward that lasted for many years.

Take particular note of Adrian Nenu's comments. I recall he was DVA-ing into the market and claimed to have upped his AA from 60/40 to 85/15. He was a prolific poster in those days and his insights are missed by some of us.
Thank you for the history, I was still a couple of years away from joining up here and don't have the history in the back of my mind.

For the rest of you - that link Stonebr posted is from December 2008. The bottom was still a few months away. Adrian seems prescient. Taylor and Larry were patiently explaining themselves in face of misinterpretation. It's a ripping fun read, and educational to boot.
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MichaelRpdx
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Re: When did the bad news start in 2008?

Post by MichaelRpdx » Fri Jan 26, 2018 9:18 pm

cadreamer2015 wrote:
Fri Jan 26, 2018 8:56 pm
To answer the OP's question in the title of this thread, the bad news didn't start in 2008. I first reacted in August, 2007.
[snip]
I came home from work that day and told my wife that we had to get our home on the market ASAP. We got it listed within 3 weeks and sold within 2 months. According to Zillow's estimate 4 years later the value of that home had dropped 25% from what we sold it for.

That said, I did not see the magnitude of the financial crisis coming, nor the magnitude of the stock market sell off.
Where did you move to? At the time I also thought the market value of our home was too high. But so was anything we'd move too.
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Re: When did the bad news start in 2008?

Post by cadreamer2015 » Fri Jan 26, 2018 9:30 pm

Where did you move to? At the time I also thought the market value of our home was too high. But so was anything we'd move too.
Well I had already accepted a job in NYC, so we ended up buying a home in the NJ suburbs. We ended up about breaking even on that house over 10 years. Go figure.
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WoodSpinner
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Re: When did the bad news start in 2008?

Post by WoodSpinner » Fri Jan 26, 2018 9:47 pm

Stonebr wrote:
Fri Jan 26, 2018 5:27 pm
Here's a thread from late 2008 that shows the flavor of discussions: Even Taylor and larryswedroe get to talking about "Plan B" -- bailing out.

viewtopic.php?t=30085

But the end result was that most of us stayed the course. Another big theme was that many Bogleheads used the bear as an opportunity to tax-loss harvest in our taxable accounts. This provided a "war chest" of tax loss carry-forward that lasted for many years.

Take particular note of Adrian Nenu's comments. I recall he was DVA-ing into the market and claimed to have upped his AA from 60/40 to 85/15. He was a prolific poster in those days and his insights are missed by some of us.
Thanks for the re-post, it provides some new insights and highlights some gaps in my IPS (no Plan-B detail)....

WoodSpinner 8-)

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Re: When did the bad news start in 2008?

Post by Rashen » Fri Jan 26, 2018 10:07 pm

two consecutive quarters of negative GDP growth are a sign of a recession, right?
so i guess the first obvious warning would be a single negative growth quarter.
just thinking out loud

Rus In Urbe
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Re: When did the bad news start in 2008?

Post by Rus In Urbe » Fri Jan 26, 2018 10:25 pm

Here was our experience in 2007-8.....

We were at about 1.2 M networth when the Big Recession hit. In addition to retirement funds, indexes, mutuals, we were holding minor positions in some financial stocks that snuffed (like 5k on Bear Sterns, AIG, etc.) We lost about 20K immediately and irrevocably, but we covered our eyes, upped our allocations in stock funds and kept plowing money in from our paychecks. Our net worth dipped .2M because we were holding 2 real estate properties that accounted for about 40% and some guaranteed income features. But within 2 years---yes, only 2 years---our net worth had fully recovered and stocks went zooming. Bottom Line: the Recession allowed us a spectacular opportunity to buy stocks at a discount, and boy did we.

STAYING THE COURSE really does work.

You will NEVER be able to identify the bottom of a market.

Even more importantly, you will NEVER EVER be able to time getting back in when the market zooms because those recoveries happen very quickly and often within days or weeks. You'd miss it.

So---ride out the dips. Cover your eyes. Keep to your strategy. Stay the course.

Now, a decade later, we have more money than we can spend, a nice position.

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tooluser
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Re: When did the bad news start in 2008?

Post by tooluser » Fri Jan 26, 2018 10:38 pm

I was an individual stock investor at the time, and owned some NDE (IndyMac Bancorp), which was at the center of the subprime mortgage meltdown.

NDE (IndyMac Bancorp Inc)
Date Price
Sep 2006 41.16
Oct 2006 45.29
Nov 2006 47.66
Dec 2006 45.16
Jan 2007 38.00
Feb 2007 34.33
...
Oct 2007 20.79 Where I sold it, very happy to get out before they went bankrupt.

Could you call the top correctly in Nov 2006?

=====
Sept 2006:
http://www.calculatedriskblog.com/2006/09/
Dow Jones reports: US Government Exotic Mortgage Guidance To Be 'Benign' -Analysts

Federal bank and thrift regulators are close to releasing final guidelines on exotic mortgage products, but the agencies aren't expected to call for wholesale changes in the way these products are marketed or made, three analysts wrote Wednesday.
...
Those guidelines are expected to become final in the next few days.

"We view the...guidance as relatively benign and unlikely to materially impact the business models of option ARM lenders, namely Countrywide (CFC), Washington Mutual (WAMU), Downey Financial (DSL), and Indymac (NDE)," three analysts from Friedman Billings Ramsey wrote in an industry update."
=====
Jan 2007:
https://www.forbes.com/lists/2006/12/794L.html
"Michael W Perry has been CEO of IndyMac Bancorp (NDE) for 13 years. Mr. Perry has been with the company for 13 years .The 43 year old executive ranks 4 within Banking"
=====
April 2007:
https://www.housingwire.com/articles/in ... k-mortgage
"IndyMac Completes Retail Acquisition of New York Mortgage"
=====
Sept 2007
http://www.longbeachhomeblog.com/2007_0 ... chive.html
"The Los Angeles Business journal wrote an article on their September 10th issue about "Credit Unions Step In As Big Lenders Falter". Now this artcile by Howard Fine makes a good point that there have been certain lenders who have struggled recently such as Countrywide and IndyMac."
=====
Sept 2007
http://www.nytimes.com/2007/09/08/business/08lend.html
"Yesterday, IndyMac Bancorp, the second-biggest home lender, said it would be eliminating about 1,000 jobs, or 10 percent of its work force, over the next several months. "
=====
Oct 2007:
http://ml-implode.com/imploded/lender_D ... 10-24.html
"WE AT BAYBANCORP WISH TO SAY GOODBYE!" reports one email announcement we received. BayBanCorp was the wholesale division of Diablo Funding Group.
...
We heard from more than one source that IndyMac is purchasing the balance of the pipeline, even suggesting Diablo first must go through a BK "before the buyout docs are drawn."
...
"IndyMac Bank is in our opinion the Premiere residential lending platform in the Country. From their technology, to their products, IndyMac Bank is setting the pace for our Industry. The philosophy of the Retail Lending Division is that of a Mortgage Company which revolves around the originator. Because of this we believe it is a perfect match."
=====
https://en.wikipedia.org/wiki/IndyMac
"The failure of IndyMac Bank on July 11, 2008, was the fourth largest bank failure in United States, and the second largest failure of a regulated thrift at that time."
=====
Live and Learn.
Don't forget the second part.


I got lucky on that one, losing only half my investment, but I did not in any way call the top. I don't think anyone could have.
Boglehead since 2011.
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Re: When did the bad news start in 2008?

Post by itstoomuch » Fri Jan 26, 2018 10:43 pm

2007. :| :annoyed :oops:
Really.
Older bro, at big bank, was closed mouth and more tied to the computer and phone.

2008 was very bad.
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Re: When did the bad news start in 2008?

Post by NYCguy » Fri Jan 26, 2018 11:36 pm

August 2007 when the asset backed CP market went sideways.
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Gene S
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Re: When did the bad news start in 2008?

Post by Gene S » Fri Jan 26, 2018 11:57 pm

There were a few people who saw the recession coming and said so. I recall Gary Shilling said the stock market would fall, and Robert Shiller said the housing market would collapse in August or September 2007. The problem is that there were a lot of other people who said the economy was fine. Remember Bob Brinker. Personally, I would not trust anyone's forecast, unless they clearly explain the reasoning behind their forecast and that their reasoning make common economic sense. Even then, I would take with a grain of salt. The other problem is timing. I remember one of the Baron's Roundtable members calling for a recession in 1998 - two years before the 2000 recession. I heard that BAC Research did not call the recession until January or February of 2008, six months after the stock market topped.

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Re: When did the bad news start in 2008?

Post by Dudley » Sat Jan 27, 2018 6:51 am

I subscribe to the "Economist" but can't claim to read it very thoroughly. A few years back I thought what if I had read it more carefully in 2007-2008, would I have had a better sense of what was about to unfold. So as an exercise I went back and reread those editions over that period in sequence. Even with hindsight of what happened I couldn't distill anything from them that indicated to the severity or possibility of what could be unfolding even a week around the corner...

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Re: When did the bad news start in 2008?

Post by bottlecap » Sat Jan 27, 2018 6:55 am

You are trying to market time.

The reason you don’t do it is twofold.

One, there is no sign of when to get out.

Two, there is no sign of when to get back in.

If you can’t find it within yourself to believe that, then you will just have to lose some money learning it.

Good luck,

JT

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AtlasShrugged?
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Re: When did the bad news start in 2008?

Post by AtlasShrugged? » Sat Jan 27, 2018 8:07 am

I was wondering, for those who went through that experience, surely there was some writing on the wall that suggested an imminent crash was incoming? When did the negative news start circulating? Even if we ignored all that, after the big dip on Sep 29, 2008, if people would have sold then and bought in again a year or two later, wouldn't they have stood a chance to make more than if they "stayed the course"? In hindsight, even those who stayed the course are doing well with the recent bull run, but I am just wondering the "what ifs".
sharkiez....The answer to your first question is 'No'. There was no writing on the wall alerting anyone of an imminent crash. The answer to your second question is 'It depends'. What did they buy back in with...stocks, bonds, life settlement contracts. The answer is ultimately unknowable.

My advice, take the time to create a written Investment Plan (IPS). Really sift through the Wiki and think about yourself. How will you react to positive or negative news? Do you stress over this, or do you just toss in the money and forget about it? I would focus on these two things: What is your asset allocation (i.e. US equity, bond, intl), and your behavioral tendencies (i.e. the worst enemy of your portfolio stares at you in the mirror every morning).

You already have two very important things going for you. One, you're investing when you are young. That makes you smart. Two, you seem to have internalized 'Stay the course'. This will make you brilliant.
“If you don't know, the thing to do is not to get scared, but to learn.”

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Re: When did the bad news start in 2008?

Post by H-Town » Sat Jan 27, 2018 9:35 am

Image

After reading this thread and follow to other topics back in 2008, I went to hulu and find this movie Margin Call to re-watch. The premise of the movie is that it's the ground zero / "first one out of the door" when the financial crisis happened in 2008. Since it's a re-watch, I got to slow down and pay attention to many things in the movie and it's mesmerizing... The whole thing happened just less than a day. That's how quick things can turn badly. And then you can see how brokerage house is all for themselves and small investors like us are "left holding the biggest bag of odorous excrement ever assembled in the history of capitalism" when the music stops.

It's all the same: 1637, 1797, 1819, 1837, 1857, 1884, 1901, 1907, 1929, 1937, 1974, 1987, 1992, 1997, 2000, 2008. And there have always been and there always will be the same percentage of winners and losers. Yeah, there may be more of us today than there's ever been. But the percentages-they stay exactly the same.

The most costly sentence you can say is: "this time, it's different."

Miakis
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Re: When did the bad news start in 2008?

Post by Miakis » Sat Jan 27, 2018 10:06 am

If you knew you were headed into a recession, you would need to do more than just sell at the right time.

Suppose you sold into cash just when things turned downward. Ok - great. You're not done. Next, you need to call the bottom - because you don't want to miss the upswing. If you wait too long, you'll have done worse than if you stayed in. Data seems to indicate that most people make the wrong calls - they don't market time well and would be better off to stay the course.

Once you know you're in a recession, you'd be much better off trying to put more money in the market than taking all your money out. That will shorten your portfolio's recovery time because you increased your purchases while stocks were "on sale." Cutting your discretionary budget to have more money for investing, trying to get back into the workforce or otherwise increasing earnings, selling assets that have not depreciated and reinvesting in equities, rebalancing to try to be more aggressive on the upswing (also market timing, but sometimes easier to do). These are all likely to be better moves than trying to exit the market.

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Re: When did the bad news start in 2008?

Post by feh » Sat Jan 27, 2018 10:21 am

climber2020 wrote:
Fri Jan 26, 2018 4:17 pm
sharkiez wrote:
Fri Jan 26, 2018 4:13 pm
Not trying to time the market here.
Yes; yes you are.

Here's a nice read from that time period: viewtopic.php?t=25126
Here's another thread where the OP thought we might be near the top:

viewtopic.php?f=10&t=203792

OP - don't try to time the market.

Greg in Idaho
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Re: When did the bad news start in 2008?

Post by Greg in Idaho » Sat Jan 27, 2018 10:31 am

thangngo wrote:
Fri Jan 26, 2018 6:39 pm
sharkiez wrote:
Fri Jan 26, 2018 4:13 pm
Not trying to time the market here. When it's crashing, why not sell off in the early stage (before reaching the bottom), knowing it will eventually reach the bottom (you don't even need to time the bottom) and recover? You already have long-term gains and you can lock in those gains.
I think I saw many people since 2015 has tried to get out of the market and sit on the sideline wait for a crash... If you searched this forum, many similar topics will pop up. They must have missed at least 30-40% gain after they "lock-in" their gains.
I recall seeing a few articles in the WSJ about highly paid "experts" who manage big funds sweating out the fact that their decisions to significantly reduce market exposure in the past few years has resulted in very poor performance, and the people who pay them to work full time and use their collective expertise to manage their investments have not been happy about missing out on these gains...

Plus, if you are out of the market, you don't get to go "Weeeeeeeeeeee......"

IlliniDave
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Re: When did the bad news start in 2008?

Post by IlliniDave » Sat Jan 27, 2018 10:42 am

AntsOnTheMarch wrote:
Fri Jan 26, 2018 5:50 pm
IlliniDave wrote:
Fri Jan 26, 2018 4:19 pm
Not to sound flippant but there's always bad news and predictions of crashes and the like. Every year. Every month. Every week. Every day. Every hour on the hour.
Fixed that for you. :D
Haha, well done! :sharebeer
Don't do something. Just stand there!

FrankLUSMC
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Re: When did the bad news start in 2008?

Post by FrankLUSMC » Sat Jan 27, 2018 10:56 am

I don't think anyone knew how bad it was going to get, but only one person I know of called the bottom correctly.... RIP Mark Haines.
Called it on March 10, 2009. Look at the date of the article below.

https://www.streetinsider.com/Insiders+ ... 73217.html

https://www.cnbc.com/2015/03/09/pisani- ... -call.html

And I got lucky enough to have seen it live.

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