What Happened to you during the Financial crisis of 2007–2008

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Valuethinker
Posts: 41120
Joined: Fri May 11, 2007 11:07 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Valuethinker »

AlohaJoe wrote: Tue Dec 11, 2018 8:51 pm I was 100% stocks. Didn't care about the crash. Went to work. Lived my life. I wasn't going to use the money for several decades anyway. Found the "maybe this is the end of modern economies" stuff histrionic. I was trying to sell my house at the time which meant it took 6 months and I ended up selling it for the same exact price I had paid several years before. I didn't care about the price but taking six months was annoying.
It was not histrionic.

We were looking at a situation where most countries in the developed world would have had to nationalize their banks. Citi and Deutsche in particular were even more vulnerable than we thought. The banking system proved to be woefully undercapitalized. RBS was one of the world's top 5 banks by assets, briefly, and it was bust. (I have actually read somewhere that it was the *largest* bank by assets in the world, but I don't have the reference).

It was the global margin call. Liquidity just vanished - major corporations were unable to roll their Commercial Paper - the likes of Ford and GE were ringing up the US Treasury and saying they would have trouble paying their employees and suppliers. Financial institutions were so interconnected that few of them would have survived without state aid. What happened to Ireland and Iceland (nationalization of the leading banks with the state taking on the debts of those banks) would have happened in other countries too - UK (where it did de facto happen), US, Germany in particular (but also France, Italy and others).

That would have catapulted us back to a world not seen since the 1930s & 1940s of intense state control of finance.

World trade fell faster in Q1 2009 than it did in 1931. It was apocalyptic. Basically the entire supply chain of the world stopped ordering. Oil dropped from $150/ bl to $40/ bl - just as a measure of how far demand fell. There was a serious risk of 1930s style unemployment and a downward spiral.

We were lucky. The UK had an unusually realistic Chancellor (Minister of Finance) and a Prime Minister who had been Chancellor for 10 years, surrounded by intelligent advisers who he trusted. The US had an able Sec of Treasury and a Chairman of the Federal Reserve who had spent his professional life studying the lessons of Japan (which made all the mistakes in the early 1990s) and the 1930s. The US President simply said "this sucker's going down" and stood back and let them do their jobs.

The collective action by Treasury and Central Bank authorities stopped the meltdown. And the coordinated fiscal stimulus across the world agreed in March 2009 restored orders and business confidence.

We still had the Euro crisis post that (Greece and the PIIGS). Europe embraced austerity at just the wrong moment and is still paying for that.

But the initial reaction was precisely the one historians have argued should have been tried in 1929-31 (to be more precise, historians are clear why the international architecture and domestic politics prevented it from being tried). You might call it John Maynard Keynes last gift.

Adam Tooze has written an excellent (and voluminous) history of the Crisis. Highlighting the importance of China going on the infrastructure spending spree of all time, and the important role of the Fed in funding the Eurodollar market (European banks get their dollar liquidity from the Fed, in effect).

I think the data says that all of the world's economic growth in the 18 months post the Crash was, net net, Chinese infrastructure and other spending on physical assets. Beijing - the last Keynesians. Who knew?
Last edited by Valuethinker on Wed Dec 12, 2018 5:32 am, edited 1 time in total.
Valuethinker
Posts: 41120
Joined: Fri May 11, 2007 11:07 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Valuethinker »

AllStarDaniel wrote: Tue Dec 11, 2018 7:54 pm A part of 'staying the course' is riding the market, including really bad times. So I am curious, and would love to learn from people's experience, what happened to you and your stocks and savings during the financial crisis of 2007–2008? How did you ride it out? How did it go? What lessons were learned and what advice would you give to someone just starting who remembers it as a young person. Apparently, studies are showing young people are not willing to invest because of what they saw during 08.
Sheepdog had a thread that's been referred to, his diary at the time. Very interesting read.

Also market timer who went into the Crash leveraged, lost over $1m, made it back - another very interesting thread.

I froze. I could feel the world melting around me. When Gordon Brown & Alistair Darling gave that speech bailing the banks ("Things are bad. They may get worse. We shall do what is necessary. If that is not enough we shall do more"; you could almost hear the Merlin engines of the Mark I Spitfires coughing into life on a bright summer's morning - it was a moment that will rival JP Morgan in 1907 in the annals of Financial History) intellectually I knew we'd probably survive.

But around me everyone was being made redundant, orderbooks were disappearing day-by-day -- clients just disappearing into bankruptcy or merger, people there on the phone one day and not there the next. It got steadily worse for the next 2-3 years.

So I just stopped looking at portfolio valuations. Neither invested nor disinvested. I had put the money on the casino table and I let it ride.

I was essentially 100% equities (but I had always had 2-3 years of emergency cash resources and no debt -- the dot com downturn, when I was made redundant, had been a bad time). Ready to ride out a storm of unemployment.

So the "bucket" principle, aka mental accounting, worked. In other words I did the irrational thing and did not have a consolidated portfolio view. It helped that many of my accounts were only communicating on paper - so I had to wait til after the month end or even year end to figure out what what had happened.

The "long term bucket" was my retirement portfolio and I just ran it. Spin the wheel, croupier.


I would not want to go through that with 100% equities again.
Last edited by Valuethinker on Wed Dec 12, 2018 5:46 am, edited 1 time in total.
Valuethinker
Posts: 41120
Joined: Fri May 11, 2007 11:07 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Valuethinker »

I was fortunate in that I remembered the 1970s and my parents' concerns.

I remembered the Symbionese Liberation Army. Watergate. The Fall of Saigon. Angola. The first and second Oil Crises. Gas line ups. The Baader Meinhof Complex and Hans Martin Schleyer. The Red Brigades and the kidnapping and murder of Aldo Moro. The Front de Liberation du Quebec and James Cross and the murder of Pierre Laporte - army soldiers on the streets. Raging inflation. Labour disputes - strikes in essential public services.

One of our modules in high school history was about comparative revolutions - Russian, Chinese and the Iranian Revolution which was raging at just that time.

Then again in 1990 when the euphoria of the fall of the Berlin Wall was followed by the cold shock of Saddam's invasion of Kuwait.

Beyond that I remembered the Asia Crash in 1997, "When Genius Failed" and the frantic negotiations around Long Term Capital Management in 1998.

And the shock of the dot com downturn and then 9-11 - that loss of a sense of safety.

In that sense there was certainly a sense that 2008-09 was not as bad. Politics were (then) relatively quiescent.

But in a financial sense it was worse. I had to look back to what I knew about the Great Crash in 1929 and the bookending event of the fall of Credit Anstalt in Vienna in 1931. That did scare me.
Last edited by Valuethinker on Wed Dec 12, 2018 5:46 am, edited 1 time in total.
User avatar
triceratop
Posts: 5838
Joined: Tue Aug 04, 2015 8:20 pm
Location: la la land

Re: What Happened to you during the Financial crisis of 2007–2008

Post by triceratop »

I'll give an alternative viewpoint. I was a freshman/sophomore in high school. It mostly did not affect me personally (I do know that it was harder for older siblings to find internships while in college). The one thing I do remember is having a bank account with Wachovia and then Wachovia didn't exist anymore. The funny thing is that my routing and account numbers still worked for many years after that, even when I was a Wells Fargo customer (I kept the bank postcard with the Wachovia imprint and always wryly smiled when handing it to a Wells service associate). I also remember bank interest rates plummeting but I had no understanding about what that meant or why it was occurring.

@Valuethinker: My copy of Adam Tooze's book just arrived and I look forward to reading about what actually happened in this formative period. I've heard great things about it.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
User avatar
oldcomputerguy
Moderator
Posts: 9181
Joined: Sun Nov 22, 2015 6:50 am
Location: In the middle of five acres of woods in East Tennessee

Re: What Happened to you during the Financial crisis of 2007–2008

Post by oldcomputerguy »

Well, I can honestly say that I never, ever looked at my investments during that entire downturn and recovery. It was not out of any sense of "staying the course", however; it was purely out of ignorance. Yes, I saw newspaper articles about the sub-prime mortgage crisis, the damage to the economy, and the troubles with Ginnie Mae and Freddy Mac, but somehow I never made the mental connect between all of that and my own personal investments. Good thing, too, because as it turns out I was 100% in stock that entire time. Like I'm sure many others, when I began in the 401k, I had no idea what investing was all about, and so I just took "the guy's" word for which funds I should be invested in. (This is one of my regrets, namely that I wish I had known then what I know now.)
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)
Valuethinker
Posts: 41120
Joined: Fri May 11, 2007 11:07 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Valuethinker »

triceratop wrote: Wed Dec 12, 2018 5:40 am I'll give an alternative viewpoint. I was a freshman/sophomore in high school. It mostly did not affect me personally (I do know that it was harder for older siblings to find internships while in college). The one thing I do remember is having a bank account with Wachovia and then Wachovia didn't exist anymore. The funny thing is that my routing and account numbers still worked for many years after that, even when I was a Wells Fargo customer (I kept the bank postcard with the Wachovia imprint and always wryly smiled when handing it to a Wells service associate). I also remember bank interest rates plummeting but I had no understanding about what that meant or why it was occurring.

@Valuethinker: My copy of Adam Tooze's book just arrived and I look forward to reading about what actually happened in this formative period. I've heard great things about it.
Every so often the wheel of financial history turns and all that was solid melts into air.

1929-1931 & the New Deal - SEC, Glass-Steagal, Mutual Fund act (1940) etc.

1944-46 & the international architecture of money and payments - Bretton Woods - IMF, Worldbank etc.

1971 - end of the Gold Standard etc.

1973 - first Oil Crisis and the rise of OPEC

1980-81 - Volker, Thatcher, monetarism, the crushing of the 1970s inflation, Michael Milliken and the junk bond, etc.

2008-09 and the (I would argue incomplete) revamping of the financial architecture for a globalized world. Those words "systemically important" and "systemic risk" will never seem so innocuous again

The spread of the internet seems to be driving the pace. The impact of the failure of a financial institution or a local financial crisis can be global within minutes.
X528
Posts: 138
Joined: Fri Nov 30, 2018 8:51 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by X528 »

KlangFool wrote: Tue Dec 11, 2018 10:57 pm OP,

1) I was 50% VSMGX (Lifestrategy Moderate Growth Fund 60/40) and 50% Wellington Fund (65/35) with 1 year of the emergency fund. It rebalanced itself whether I like it or not. I seriously doubt that a young investor with 3 funds portfolio will rebalance in a real bear market.

2) 40% of my current portfolio is still Wellington fund. Hence, my portfolio will rebalance itself most of the time.

3) My employer laid off 50% of its employee at my location on 1/1/2009. Then, it had annually laid off every year. I was laid off a few years later. But, I had been facing annual and quarterly laid off since 2002. So, it is business as usual for me. I am always prepared to be unemployed for at least 1 to 2 years.

KlangFool
@Klangfool: Are you using VSMGX (Lifestrategy Moderate Growth Fund 60/40) in a taxable account?

Is it worth it to use VSMGX in a taxable account for a high tax bracket investor for the auto-rebalancing?
kayakprof
Posts: 60
Joined: Thu Jul 26, 2018 2:46 pm

Re: What Happened to you during the Financial crisis of 2007–2008

Post by kayakprof »

In 2008 I was mid 30s and accepted a new job across the country for a 35% salary increase. I didn't change my allocations at all, except to put more money into retirement accounts due to salary increase. I didn't have much invested to begin with (maybe 150k). Rode it out without paying much attention. A few colleagues who started with me in August 2008 bought houses immediately. Within a year they were 100k underwater in those houses. I rented, and then bought in 2010. I paid 100k less than anyone else in the neighborhood. Pure luck, as I didn't have a downpayment until 2010. In retrospect, everything I did was done out of luck and lack of funds to get myself in trouble. The next time around will be different - and I hope that after a year on this site, I can be smart about my moves rather than lucky. Note: Some of my colleagues still live in those houses, and they have essentially recovered their original value, although they have not increased in value yet.
grettman
Posts: 627
Joined: Mon Sep 29, 2014 1:47 pm

Re: What Happened to you during the Financial crisis of 2007–2008

Post by grettman »

I was in my late 30s.

Because I started to pay attention to my NW, I saw the major losses to my portfolio.

I was scared.

I was nearly 100% equities.

I continued to buy into my 401K.

Stopped other investing.

Rode it out.

I think I am stronger emotionally because of it.

I am now 90% equities and I’m okay w that.
Valuethinker
Posts: 41120
Joined: Fri May 11, 2007 11:07 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Valuethinker »

kayakprof wrote: Wed Dec 12, 2018 6:47 am In 2008 I was mid 30s and accepted a new job across the country for a 35% salary increase. I didn't change my allocations at all, except to put more money into retirement accounts due to salary increase. I didn't have much invested to begin with (maybe 150k). Rode it out without paying much attention. A few colleagues who started with me in August 2008 bought houses immediately. Within a year they were 100k underwater in those houses. I rented, and then bought in 2010. I paid 100k less than anyone else in the neighborhood. Pure luck, as I didn't have a downpayment until 2010. In retrospect, everything I did was done out of luck and lack of funds to get myself in trouble. The next time around will be different - and I hope that after a year on this site, I can be smart about my moves rather than lucky. Note: Some of my colleagues still live in those houses, and they have essentially recovered their original value, although they have not increased in value yet.
The philosophy of this site is about surrendering to uncertainty.

"being smart" means simply making a plan and sticking to it.

If one is 100% equities there is literally nothing one can do but ride the waves up and down.

If one has other assets such as bonds, cash, then one can rebalance into equities as they fall. I usually suggest rebalancing only once a year because I think there is momentum in these things - when stock markets are in a bear phase they keep doing so for extended periods, similarly in a bull phase. But you have to set tolerance bands around which you will rebalance up or down if they are crossed - whether 5% or 10%, etc.

I would say "being smart" here also recognizes the human factor. How difficult it is to hold one's nerve if one is 100% in equities in a bear market.

That is the (lesser) reason to not hold 100% equities. The greater reason is that actually a portfolio with 20% bonds has significantly lower volatility but not much lower return because of the diversification benefit - they are not perfectly correlated.

(I have had some discussion recently whether with a long enough time horizon that "benefit" is just lost in the better long run performance of equities. I am not sure of the statistics on that on, say 20 years+ or 30 years +).

As I get older I become an increasing advocate of 60/40 as a core portfolio for most investors. The 40 will seem like a drag much of the time, but will be fulsomely thanked when we go through a period like the 1970s. Probably half of that 40 should be TIPS (greater nominal volatility but greater inflation protection in the long run).
Grt2bOutdoors
Posts: 23015
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Grt2bOutdoors »

Late 2007 - bought my first and only home.
2008 - the cracks in Wall Street start showing up. Bear Stearns, Lehman - a crisis of confidence they called it, rather it was a major lack of confidence. Funding dependent on trust, what could possibly go wrong? Liquidity started to dry up. Companies would not lend to each other, commercial paper was having a hard time getting renewed. Suddenly the A1/P1 paper wasn’t worth the paper it was written on. Uh-oh!!!! Companies started to draw down on their CP backup lines, the same ones that banks loved to underwrite because they would get paid, never have to actually fund and their roa and roic looked stellar. Now the banks were getting worried. Oops! Then came the call from AIG, their derivatives business was blowing up, the insurance on CDOs was being called on, turns out the underlying collateral was not worth as much. It all was a house of cards. And me? Here I was with a brand new mortgage. My employer was laying off by th droves and somehow I managed to keep my job while my friends were losing theirs.

Cash is king! Liquidity is what will save you, keep you going. Save, save, save.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
User avatar
Starchild
Posts: 140
Joined: Fri Feb 09, 2018 9:01 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Starchild »

These are helpful posts. As for me, my story is not as intriguing, but helpful too. In Oct. 2008 I purchased my first house. Since I am self-employed and work a lot in cash, it was almost impossible to find a no-doc loan. There was only one bank left that did. Thankfully it worked out. Several years before, I started my own brokerage account. Because of saving for the house (and paying for it after), I wasn't able to contribute to it for years, so I never even looked at the account for years as well. Even though it was a very small account, I was shocked how well it performed (individual stocks--never heard of anything else). So I guess I learned that it's best to leave your account alone (except to add, of course) and don't look at it all the time.
arf30
Posts: 734
Joined: Sat Dec 28, 2013 11:55 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by arf30 »

Was in my mid to late 20s working a corporate job with only a 401k for investments. Somehow I was only vaguely aware there was a crisis, my company didn't really lay anyone off and my circle of friends didn't watch the news. Ended up buying a house in 2009 when housing was suddenly in my price range without really understanding why that was. The lender was Countrywide but immediately changed to BofA as that company evaporated. I'd probably be a nervous wreck if the same crisis happened today even though I'm far more well prepared.
Jeff Albertson
Posts: 829
Joined: Sat Apr 06, 2013 7:11 pm
Location: Springfield

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Jeff Albertson »

triceratop wrote: Wed Dec 12, 2018 5:40 am @Valuethinker: My copy of Adam Tooze's book just arrived and I look forward to reading about what actually happened in this formative period. I've heard great things about it.
BBC recently interviewed Tooze (17 minutes) https://www.bbc.co.uk/programmes/w3cswgfd
Ed Butler talks to historian Adam Tooze about the legacy of the global financial crisis, which peaked with the collapse of Lehman Brothers in September 2008. Adam Tooze is a professor at Columbia University in New York and the author of a new book Crashed: How a Decade of Financial Crises Changed the World.
Dandy
Posts: 6351
Joined: Sun Apr 25, 2010 7:42 pm

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Dandy »

what happened to you and your stocks and savings during the financial crisis of 2007–2008?


Lost my job at age 60. My more than enough assets dropped to where I probably didn't have enough to fund a 30 year retirement. No jobs were available even entry level or part time. Impossible or very difficult to sell houses at that time.

How did you ride it out?

1. Was lucky my house was paid for and I had a modest pension from a previous job and retiree health insurance.
2. Cut back on expenses
3. Rumor was my prior employer who was providing pension, insurance and 401k might be going out of business. Transferred all 401k to VG Admiral Money Market. Was even concerned that the rollover check would clear. :oops:
4. Decided on my VG TIRA allocation and DCA's it into it. Doubled up the DCA in month's when the market dropped. Told my wife this approach is limiting our potential gain but asset preservation vs growth is more important at this time.
5. Took a 2 to 3 mile walk each morning to stay in shape, reduce stress and gather my thoughts.

How did it go?

It was a scary time but once I had a plan and the market stopped dropping the recovery went well. Assets have nearly doubled since then to a point where I have more than enough. Was able to fund expenses to delay SS until age 70 (this year) to get SS and pension income almost equaling our expenses.

What lessons were learned and what advice would you give to someone just starting who remembers it as a young person.

1. You never know your real risk tolerance. I should have modified even my moderate allocation of 55% equities a bit lower as I approached retirement age. I had no problem with staying the course during the market drop in 2000.
2. I was glad that I had paid off our mortgage and had no debts
3. When there is a major black swan event it isn't all about your investments. Lost job, couldn't sell house, couldn't get even a part time job, was so lucky to have some pension income and retiree health insurance.
4. It isn't all about growth sometimes it is about asset preservation -- especially as you near retirement and the end of human capital.
5. We were all lucky the recovery was large and swift. A longer recovery and/or deeper drop could have been horrific in many ways we can only imagine not only on a personal level but our economy, politics ...future.
goblue100
Posts: 1231
Joined: Sun Dec 01, 2013 10:31 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by goblue100 »

Some good reads in this thread, thanks to Dandy and Valuethinker especially for sharing.

I think the thread title is wrong, the crisis was 2008 to March of 2009.
I was 47. I had panicked some in the 2001 decline, and moved to cash in that decline, but only briefly. Looking back I still had too high of stock / bond mix. I was something like 85/10 with 5% cash. I put the cash in, buying large weekly amounts from October to December of 2008. At that point I buried my head in the sand, stopped checking, and hoped for the best. Luckily things turned around starting in March. I don't really know how much my portfolio dropped, I don't think I really calculated it at the time. I can say it was a substantial amount, as I had been investing long enough to have some money. I think my losses were on the order of 35% peak to trough.
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns
Valuethinker
Posts: 41120
Joined: Fri May 11, 2007 11:07 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Valuethinker »

Dandy wrote: Wed Dec 12, 2018 8:00 am
What lessons were learned and what advice would you give to someone just starting who remembers it as a young person.

1. You never know your real risk tolerance. I should have modified even my moderate allocation of 55% equities a bit lower as I approached retirement age. I had no problem with staying the course during the market drop in 2000.
2. I was glad that I had paid off our mortgage and had no debts
3. When there is a major black swan event it isn't all about your investments. Lost job, couldn't sell house, couldn't get even a part time job, was so lucky to have some pension income and retiree health insurance.
4. It isn't all about growth sometimes it is about asset preservation -- especially as you near retirement and the end of human capital.
5. We were all lucky the recovery was large and swift. A longer recovery and/or deeper drop could have been horrific in many ways we can only imagine not only on a personal level but our economy, politics ...future.
This was a model of how to reply to such a post in contrast to, say, my ramblings ;-).

My only caveat is the stock market recovery was long and swift. The economic and job market recovery was the slowest of any post war US recession, I believe. In Europe, the worst had yet to come (for some countries).

I have underlined what in my view are some of the key learnings.
KarenC
Posts: 150
Joined: Mon Apr 27, 2015 7:25 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by KarenC »

At that time, I didn’t pay much attention to the markets’ ups and downs. I would receive quarterly paper statements from Fidelity, look briefly at the change in overall value, think “ugh, that doesn’t look good” (my AA was 100% stocks), and file the statements away. My lack of interest remained about the same until sometime in 2013, at which point I realized that things had worked out surprisingly well. (I’m a little bit worried about how I will weather the next big downturn given I’m now avidly watching the markets. My AA is now 50/50, so that’ll help.)
"The first principle is that you must not fool yourself, and you are the easiest person to fool." — Richard P. Feynman
Valuethinker
Posts: 41120
Joined: Fri May 11, 2007 11:07 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Valuethinker »

goblue100 wrote: Wed Dec 12, 2018 8:17 am Some good reads in this thread, thanks to Dandy and Valuethinker especially for sharing.

I think the thread title is wrong, the crisis was 2008 to March of 2009.
I was 47. I had panicked some in the 2001 decline, and moved to cash in that decline, but only briefly. Looking back I still had too high of stock / bond mix. I was something like 85/10 with 5% cash. I put the cash in, buying large weekly amounts from October to December of 2008. At that point I buried my head in the sand, stopped checking, and hoped for the best. Luckily things turned around starting in March. I don't really know how much my portfolio dropped, I don't think I really calculated it at the time. I can say it was a substantial amount, as I had been investing long enough to have some money. I think my losses were on the order of 35% peak to trough.
For strange tax reasons (the UK tax year ends 5th April - has done since the Middle Ages) I made large contributions to pensions (IRA type) in January 2009 and March 2009.

None of this was intelligence - it was just to use unused allowances before the end of the taxation year.

Split it something like 1/3rd corporate bonds (investment grade) and 2/3rds stocks. Having never bought a bond or bond fund before (except some TIPS equivalents, directly). The stocks have done better than the bonds, of course, but the bonds have also done well, since.

One of the very few times in my life I "timed" markets successfully. Maybe offsetting all the deliberate attempts at market timing by investing in... August 2008 ;-).
ddurrett896
Posts: 1356
Joined: Wed Nov 05, 2014 3:23 pm

Re: What Happened to you during the Financial crisis of 2007–2008

Post by ddurrett896 »

I was 23 and using a financial advisor from American Funds. I saw my Roth IRA account balance drop below my total contributions and stop contributing...even with like 60 months living expense in a bank account :oops:

I don't know what was worse, the decline or the American Funds front load fees and high expense ratios.

Continued contributions in 2010 - moved to Vanguard in 2014 - now it's smooth sailing. At 33, I hoping I get another chance at a crisis.
Valuethinker
Posts: 41120
Joined: Fri May 11, 2007 11:07 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Valuethinker »

KarenC wrote: Wed Dec 12, 2018 8:22 am At that time, I didn’t pay much attention to the markets’ ups and downs. I would receive quarterly paper statements from Fidelity, look briefly at the change in overall value, think “ugh, that doesn’t look good” (my AA was 100% stocks), and file the statements away. My lack of interest remained about the same until sometime in 2013, at which point I realized that things had worked out surprisingly well. (I’m a little bit worried about how I will weather the next big downturn given I’m now avidly watching the markets. My AA is now 50/50, so that’ll help.)
50-50 you can stay the course unless you are on the throes of retirement (say in the next 5 years).

A bad bear market might mean -50% in stocks, -10% in bonds. It will hurt dropping -35%, but you will survive.
Stormbringer
Posts: 1004
Joined: Sun Jun 14, 2015 7:07 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Stormbringer »

I nervously watched a lot of CNBC. For a while it felt like there was no bottom. I enjoy history, and was familiar with the Great Depression and worried that we might be headed into something like that.

In hindsight, what really strikes me is how unevenly the pain was distributed. I know people who lost their jobs, businesses and homes, with some going bankrupt or going right to the edge. My best friend's brother cashed in his 401(k) at the bottom, and now in his late 50s he has grim prospects for ever retiring.

I was one of the lucky ones. Business was actually quite good for me during this period, and I was able to buy assets at fire sale prices. Phew.
"Compound interest is the most powerful force in the universe." - Albert Einstein
Grt2bOutdoors
Posts: 23015
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Grt2bOutdoors »

Dandy wrote: Wed Dec 12, 2018 8:00 am what happened to you and your stocks and savings during the financial crisis of 2007–2008?



What lessons were learned and what advice would you give to someone just starting who remembers it as a young person.

1. You never know your real risk tolerance. I should have modified even my moderate allocation of 55% equities a bit lower as I approached retirement age. I had no problem with staying the course during the market drop in 2000.
2. I was glad that I had paid off our mortgage and had no debts
3. When there is a major black swan event it isn't all about your investments. Lost job, couldn't sell house, couldn't get even a part time job, was so lucky to have some pension income and retiree health insurance.
4. It isn't all about growth sometimes it is about asset preservation -- especially as you near retirement and the end of human capital.
5. We were all lucky the recovery was large and swift. A longer recovery and/or deeper drop could have been horrific in many ways we can only imagine not only on a personal level but our economy, politics ...future.
Let me add - you know that emergency fund of 3-6 months? Well, how good is an emergency fund of 3-6 months when your job search for ANY job takes longer than that? A friend of mine lost his job, he was out of work - for 2 years!! Thankfully he had more than 3-6 months saved in cash, many, many others though did not. Those credit cards and home equity loans that people relied on as an "e-fund"? Well, bankers are very aware of what happens in recessions - payments start showing up late, some people stop paying all together. In a depression? imagine 20% of your receivables going into a workout situation? Its the kind of stuff that keeps your regulator nervous and leads to bank failures, many bank failures. So, the banks did the practical thing - they cut or outright eliminated the home equity lines, hard to lend when the value of the underlying collateral is falling by 10% daily. Those credit cards? well, those lines were either frozen or cut. Not uncommon to see your card declined at the supermarket.

Going back to what I said earlier - cash is king! The name of the game in both the institutional and personal (yours) market is liquidity. It's fine to invest, but only with money you can't afford to lose and only with money that says to you "thanks for investing me, see you in 10 years! because it could very well be 10 years before the value a) recovers and b) actually grows in excess of inflation when it recovers. Why do I say inflation recovering? Well, symptoms of a depression are price declines, continual price declines. What you thought was a 10% off sale yesterday, the new sale today is 10% off of yesterday's 90% price tag. It's a dangerous spiral downwards, that leads those with liquidity to demand even more price breaks while your debts require even more real dollars to pay it back. OP- Read the book - The Great Depression, A Diary by Benjamin Roth. You will have to put the book down, its a day by day journal of what was happening during the Great Depression. It came out I believe in 2010 - doubbly depressing to have read that book at the same time as living though what happened 10 years ago, it makes you want to be "liquid". Many notations in the book about wishing he had more cash to pick up outright bargains. The same holds true for companies, if you have liquidity, if you have a strong balance sheet - the world can be your oyster. If you are heavily levered, what might be a hiccup for other businesses could be the beginning of your death bell tolling in the wind. You have to be honest with yourself - what is it that your actually and truly need to survive - that is your floor. What are your aspirations? That is your investment pool. You can do both, but you need to have balance.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Stormbringer
Posts: 1004
Joined: Sun Jun 14, 2015 7:07 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Stormbringer »

Grt2bOutdoors wrote: Wed Dec 12, 2018 8:30 am So, the banks did the practical thing - they cut or outright eliminated the home equity lines, hard to lend when the value of the underlying collateral is falling by 10% daily.
That happened to me. I had a Wells-Fargo HELOC that I kept open as an emergency fund. In early 2009 I received a letter from bank closing the account, effective immediately. Poof, just like that my emergency fund was gone. It was a bit unsettling, to be sure.
"Compound interest is the most powerful force in the universe." - Albert Einstein
User avatar
ResearchMed
Posts: 10650
Joined: Fri Dec 26, 2008 11:25 pm

Re: What Happened to you during the Financial crisis of 2007–2008

Post by ResearchMed »

Stormbringer wrote: Wed Dec 12, 2018 8:39 am
Grt2bOutdoors wrote: Wed Dec 12, 2018 8:30 am So, the banks did the practical thing - they cut or outright eliminated the home equity lines, hard to lend when the value of the underlying collateral is falling by 10% daily.
That happened to me. I had a Wells-Fargo HELOC that I kept open as an emergency fund. In early 2009 I received a letter from bank closing the account, effective immediately. Poof, just like that my emergency fund was gone. It was a bit unsettling, to be sure.
This is really important.

It's surprising to occasionally (or more frequently?) read here about how someone doesn't need any or a large emergency fund, because they've got a HELOC/etc., with untapped money "available".

If someone hasn't experienced this, it can be a very bad time to realize the backup funding isn't there precisely when you were counting on needing it.

RM
This signature is a placebo. You are in the control group.
Grt2bOutdoors
Posts: 23015
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Grt2bOutdoors »

Stormbringer wrote: Wed Dec 12, 2018 8:39 am
Grt2bOutdoors wrote: Wed Dec 12, 2018 8:30 am So, the banks did the practical thing - they cut or outright eliminated the home equity lines, hard to lend when the value of the underlying collateral is falling by 10% daily.
That happened to me. I had a Wells-Fargo HELOC that I kept open as an emergency fund. In early 2009 I received a letter from bank closing the account, effective immediately. Poof, just like that my emergency fund was gone. It was a bit unsettling, to be sure.
I'm sorry it happened to you, I'm sure you learned something from that. Unfortunately, alot of people who were banking on those home equity lines to pay colleges, bills, etc. received that lesson too. Lots of ordinary folks were impacted by that mess through no fault of their own. The standard advice given by those "experts" were to use home equity lines of credit to pay for college, the interest was tax deductible! :oops:
Last edited by Grt2bOutdoors on Wed Dec 12, 2018 8:50 am, edited 1 time in total.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
KlangFool
Posts: 17623
Joined: Sat Oct 11, 2008 12:35 pm

Re: What Happened to you during the Financial crisis of 2007–2008

Post by KlangFool »

X528 wrote: Wed Dec 12, 2018 6:07 am
KlangFool wrote: Tue Dec 11, 2018 10:57 pm OP,

1) I was 50% VSMGX (Lifestrategy Moderate Growth Fund 60/40) and 50% Wellington Fund (65/35) with 1 year of the emergency fund. It rebalanced itself whether I like it or not. I seriously doubt that a young investor with 3 funds portfolio will rebalance in a real bear market.

2) 40% of my current portfolio is still Wellington fund. Hence, my portfolio will rebalance itself most of the time.

3) My employer laid off 50% of its employee at my location on 1/1/2009. Then, it had annually laid off every year. I was laid off a few years later. But, I had been facing annual and quarterly laid off since 2002. So, it is business as usual for me. I am always prepared to be unemployed for at least 1 to 2 years.

KlangFool
@Klangfool: Are you using VSMGX (Lifestrategy Moderate Growth Fund 60/40) in a taxable account?

Is it worth it to use VSMGX in a taxable account for a high tax bracket investor for the auto-rebalancing?
X528,

<<@Klangfool: Are you using VSMGX (Lifestrategy Moderate Growth Fund 60/40) in a taxable account?>>

Yes.

<<Is it worth it to use VSMGX in a taxable account for a high tax bracket investor for the auto-rebalancing?>>

I was fighting hard to keep my job. That was the only way that I could invest in the market with zero job security. The taxable account was about 50K to 100K in size.

A) I need automated rebalancing

B) I may need to spend down my taxable account if I was unemployed much longer.

Right now, my portfolio is big enough.

A) 40% Wellington fund (tax-advantaged account)

B) 40% 3 funds (Stock in the taxable account, Bond in tax-advantaged account)

C) 20% Larry portfolio (Stock in the taxable account, Bond in tax-advantaged account)

I have 500K 100% stock in my taxable account. So, even if it drops 50%, I could last a while.

KlangFool
User avatar
ofcmetz
Posts: 2456
Joined: Tue Feb 08, 2011 8:09 pm
Location: Louisiana

Re: What Happened to you during the Financial crisis of 2007–2008

Post by ofcmetz »

I remember 2008 and 2009 very well. I turned 29 years old and had my second child while it was all going on. We were 100% invested in stocks but our portfolio was just approaching 6 figures when it all started so the amount of money we lost wasn't significant in the gross amount compared to our incomes. Home values here in the south didn't really change much either because we were still experiencing the Katrina effect that started with the hurricane. We just continued to save and didn't look often

I do remember thinking in 2008 that it was weird that no matter what we added from our paychecks, the balances were still going down. 10 years later during this current correction, the balances are much bigger and it is interesting to do the same thing we did then. We are putting all knew money into equity funds and will rebalance if we hit that point in our bands. We haven't yet because equity was a bit higher than desired amounts already so this has rebalanced for us. I do know that when things drop it's helpful for me to stop looking at balances too often and to spend my time doing other things.
Never underestimate the power of the force of low cost index funds.
jaxbmw
Posts: 20
Joined: Sat Aug 16, 2008 6:45 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by jaxbmw »

It was a scary time.

I retired early in 2003. I had a conservative 50/50 portfolio that I figured I could withdraw 3% from forever and be fine according to the financial engines simulations I had run.

I remember seeing Paulsen make a comment that we were at the edge of the cliff. If he said we were at a cliff then nothing good was coming. That really opened my eyes and made me wonder if I should DO something? I am a planner, so I gathered some additional input an came across Buffet extolling on the value of ongoing blue chip businesses. It made sense to me and I didn't make any radical changes.

My portfolio dropped 11%. I stayed with my 50/50 strategy and did TLH where I could and rebalanced. Today I am up 45% from the 2008 low and I have been taking RMDs for the past several years. Everything is working according to plan.

But it was a very scary time!!!!
Valuethinker
Posts: 41120
Joined: Fri May 11, 2007 11:07 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Valuethinker »

ofcmetz wrote: Wed Dec 12, 2018 8:50 am I remember 2008 and 2009 very well. I turned 29 years old and had my second child while it was all going on. We were 100% invested in stocks but our portfolio was just approaching 6 figures when it all started so the amount of money we lost wasn't significant in the gross amount compared to our incomes. Home values here in the south didn't really change much either because we were still experiencing the Katrina effect that started with the hurricane. We just continued to save and didn't look often

I do remember thinking in 2008 that it was weird that no matter what we added from our paychecks, the balances were still going down. 10 years later during this current correction, the balances are much bigger and it is interesting to do the same thing we did then. We are putting all knew money into equity funds and will rebalance if we hit that point in our bands. We haven't yet because equity was a bit higher than desired amounts already so this has rebalanced for us. I do know that when things drop it's helpful for me to stop looking at balances too often and to spend my time doing other things.
I think this is implicit in your situation but perhaps unclear to someone who has not interacted with you?

You also have substantial Defined Benefit pension benefits built up?

That's very different from the position of someone who only has Defined Contribution assets. There's no fallback to loss of wealth.
Cycle
Posts: 1690
Joined: Sun May 28, 2017 7:57 pm
Location: Minneapolis

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Cycle »

I was 24 in 2008, two years of 401k and Roth contributions. All money in target 2050. I started maxing my 401k around 2008.

Survived 7 layoffs at megacorp.

I lost $1500 when I exchanged an abismal Chinese mutual fund for a us s&p fund.

My 401k and Roth have a combined 600k now after just 13 years of work thanks to the recovery (or at least values going up from government printing money).

I should easily be able to retire by 2028 and not 2050.
Never look back unless you are planning to go that way
deltaneutral83
Posts: 1703
Joined: Tue Mar 07, 2017 4:25 pm

Re: What Happened to you during the Financial crisis of 2007–2008

Post by deltaneutral83 »

AllStarDaniel wrote: Tue Dec 11, 2018 8:30 pm Holy crap. You lost 300k?!
There are plenty of Bogleheads with NW of $3M who saw a decline of $300k in 1 or 2 trading days and plenty that saw six figure declines in 20 minutes. DJIA was below 10,000 and moving 500-800 points a day if I recall, particularly in September(Lehman?)- December year end. I can recall the market at 8700 and winding up at 8200 in the blink of an eye. It seemed surreal to watch the market move as well as the "experts" speechless. Reading a lot of the threads on here lets me know many have no idea what that's like. We have much quicker information now, not that we didn't then, but I don't think the information avenues were as developed.
User avatar
RickBoglehead
Posts: 5608
Joined: Wed Feb 14, 2018 9:10 am
Location: In a house

Re: What Happened to you during the Financial crisis of 2007–2008

Post by RickBoglehead »

The concept of not paying attention and letting things ride can work well. It can also not work well. You may need to react at certain points depending on what you are invested in at the time and your horizon.

People who invest in the entire stock market, or the S&P 500, were best served by letting it ride and not paying attention. However, many were invested in other things - real estate, or internet-focused stocks or mutual funds.

Some lost everything. Some lost less than everything. Some should have sold and switched to index funds instead of riding their investments down to zero on companies that were well-known, well-financed, and should never have failed.

Keep in mind that the crisis of 2007-2008 was not as severe as other market declines. Black Monday, 10/19/1987, was a one day drop of 22.61% in the DJIA. One day! I was in the industry at the time, didn't pull out, but was put on emergency phone duty telling callers that "yes, you did lose 20+% of your investment because you sold". Lots of crying, and a layoff followed of significant numbers at that firm (Fidelity).

But it's all irrelevant. Times change, world conditions change, political conditions change, and you aren't anyone but you. You will react how you will react, it doesn't matter how someone else in a totally different time and a totally different economic situation reacted.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.
alfaspider
Posts: 3029
Joined: Wed Sep 09, 2015 4:44 pm

Re: What Happened to you during the Financial crisis of 2007–2008

Post by alfaspider »

I was still in law school and in student debt, so I had no money in the market. However, I was going through recruiting season with law firms.

The only reason I graduated with a job was that I interviewed with a firm in New York on a whim. New York firms tended to operate on an earlier recruiting schedule than my intended city. This meant I got an offer before the Lehman Brothers collapse. By the time I did flyback interviews in my intended city (5+), it was apparent how bad things were going to be and nobody was making offers. It was pure luck that I happened to end up with an offer with a firm that honored the offers made prior to the collapse (many did not).

I remember the story as an important reminder that while hard work and talent play a big role in financial success, you can't deny the role of luck. Many of my peers were just as smart and worked just as hard but graduated with 6-figures of debt and no job. To this day, many of their careers never recovered from the impact of graduating into a deep recession. Humility is important.
Last edited by alfaspider on Wed Dec 12, 2018 9:21 am, edited 2 times in total.
User avatar
ofcmetz
Posts: 2456
Joined: Tue Feb 08, 2011 8:09 pm
Location: Louisiana

Re: What Happened to you during the Financial crisis of 2007–2008

Post by ofcmetz »

Valuethinker wrote: Wed Dec 12, 2018 8:56 am
ofcmetz wrote: Wed Dec 12, 2018 8:50 am I remember 2008 and 2009 very well. I turned 29 years old and had my second child while it was all going on. We were 100% invested in stocks but our portfolio was just approaching 6 figures when it all started so the amount of money we lost wasn't significant in the gross amount compared to our incomes. Home values here in the south didn't really change much either because we were still experiencing the Katrina effect that started with the hurricane. We just continued to save and didn't look often

I do remember thinking in 2008 that it was weird that no matter what we added from our paychecks, the balances were still going down. 10 years later during this current correction, the balances are much bigger and it is interesting to do the same thing we did then. We are putting all knew money into equity funds and will rebalance if we hit that point in our bands. We haven't yet because equity was a bit higher than desired amounts already so this has rebalanced for us. I do know that when things drop it's helpful for me to stop looking at balances too often and to spend my time doing other things.
I think this is implicit in your situation but perhaps unclear to someone who has not interacted with you?

You also have substantial Defined Benefit pension benefits built up?

That's very different from the position of someone who only has Defined Contribution assets. There's no fallback to loss of wealth.
That's correct Valuethinker, I am a police officer so there was never a worry of job loss and there was a state pension with that. My wife being a nurse has 100% of her funds in 401K's though and my 457B accounts have grown significantly with 10 years of additional savings since the financial crisis.

I remember many conversations with my father, a civil engineer who had all his investments in a 401K through 2008/ 2009. I was talking with him about being up or down in thousands and he was feeling the sting of significant 6 figure movements. I think it will always be in my mind that equity can and will move down 20 to 50% at times and if you can't stomach this then use the bucket strategy (thought process) you referred to to help yourself get through things.

I do wonder if I had had more invested then if I would of stayed the course or not. It's kind of like wondering if I had been in the life or death shoot out, how would I have responded. You never know for sure until you are in the thick of it, but it would be nice living your entire life without having to find out for sure.
Never underestimate the power of the force of low cost index funds.
Elysium
Posts: 3208
Joined: Mon Apr 02, 2007 6:22 pm

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Elysium »

Valuethinker wrote: Wed Dec 12, 2018 4:50 am
AlohaJoe wrote: Tue Dec 11, 2018 8:51 pm I was 100% stocks. Didn't care about the crash. Went to work. Lived my life. I wasn't going to use the money for several decades anyway. Found the "maybe this is the end of modern economies" stuff histrionic. I was trying to sell my house at the time which meant it took 6 months and I ended up selling it for the same exact price I had paid several years before. I didn't care about the price but taking six months was annoying.
It was not histrionic.

We were looking at a situation where most countries in the developed world would have had to nationalize their banks. Citi and Deutsche in particular were even more vulnerable than we thought. The banking system proved to be woefully undercapitalized. RBS was one of the world's top 5 banks by assets, briefly, and it was bust. (I have actually read somewhere that it was the *largest* bank by assets in the world, but I don't have the reference).

It was the global margin call. Liquidity just vanished - major corporations were unable to roll their Commercial Paper - the likes of Ford and GE were ringing up the US Treasury and saying they would have trouble paying their employees and suppliers. Financial institutions were so interconnected that few of them would have survived without state aid. What happened to Ireland and Iceland (nationalization of the leading banks with the state taking on the debts of those banks) would have happened in other countries too - UK (where it did de facto happen), US, Germany in particular (but also France, Italy and others).

That would have catapulted us back to a world not seen since the 1930s & 1940s of intense state control of finance.

World trade fell faster in Q1 2009 than it did in 1931. It was apocalyptic. Basically the entire supply chain of the world stopped ordering. Oil dropped from $150/ bl to $40/ bl - just as a measure of how far demand fell. There was a serious risk of 1930s style unemployment and a downward spiral.

We were lucky. The UK had an unusually realistic Chancellor (Minister of Finance) and a Prime Minister who had been Chancellor for 10 years, surrounded by intelligent advisers who he trusted. The US had an able Sec of Treasury and a Chairman of the Federal Reserve who had spent his professional life studying the lessons of Japan (which made all the mistakes in the early 1990s) and the 1930s. The US President simply said "this sucker's going down" and stood back and let them do their jobs.

The collective action by Treasury and Central Bank authorities stopped the meltdown. And the coordinated fiscal stimulus across the world agreed in March 2009 restored orders and business confidence.

We still had the Euro crisis post that (Greece and the PIIGS). Europe embraced austerity at just the wrong moment and is still paying for that.

But the initial reaction was precisely the one historians have argued should have been tried in 1929-31 (to be more precise, historians are clear why the international architecture and domestic politics prevented it from being tried). You might call it John Maynard Keynes last gift.

Adam Tooze has written an excellent (and voluminous) history of the Crisis. Highlighting the importance of China going on the infrastructure spending spree of all time, and the important role of the Fed in funding the Eurodollar market (European banks get their dollar liquidity from the Fed, in effect).

I think the data says that all of the world's economic growth in the 18 months post the Crash was, net net, Chinese infrastructure and other spending on physical assets. Beijing - the last Keynesians. Who knew?
Couldn't agree more. It was really scary, for those who understood what really was going on with the core of the western financial systems. Forget the stock market meltdown, people tend to look at stock market as a measure of how scary it was, which is not at all something I was worrying about. I was worrying about what if these people in charge, Paulson, Geithner, Bernanke, got it wrong even by a tiny bit, and what if the measures they were taking on weren't effective as they thought. Liquidity had dried up, credit market was gone, banking systems were on the verge of a total collapse. People just don't get it even today how scary it was. I was sitting the other day with group of colleagues who are all pretty smart otherwise, and they were simply expressing that it was not that bad as the US always finds a way to correct course. I remember looking at around $100K or so I had set aside in Vanguard Retirement Savings fund, which mainly hold US treasury type of investments, hoping that will not break, and will be my last bit of savings to re-build life if all goes down. To sit and listen to people say it was all correctable and the risks were overblown is incredulous. I still think we got lucky.
User avatar
goodenyou
Posts: 2363
Joined: Sun Jan 31, 2010 11:57 pm
Location: Skating to Where the Puck is Going to Be..or on the golf course

Re: What Happened to you during the Financial crisis of 2007–2008

Post by goodenyou »

I lost money on paper. I was not over leveraged and was living below my means as always. I kept my job and kept investing. I have been rewarded handsomely. It taught me the power of staying the course and investing when markets are down. I also learned how genius can fail (again).
"Ignorance more frequently begets confidence than does knowledge" | Do you know how to make a rain dance work? Dance until it rains.
Glockenspiel
Posts: 1096
Joined: Thu Feb 08, 2018 1:20 pm

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Glockenspiel »

I was just graduating college with a B.S. in Civil Engineering, in December 2007. I was very fortunate to find a job, as many students who graduated just 5-6 months later, did not find jobs. I started my very first 401k only saving 10% of my income. I was also getting engaged and planning a wedding at the time, so I regret not saving more of my money, at those low share prices. In the following 3-4 years, many of my co-workers were laid off due to the company being slow on work. I was fortunate to keep my job, probably because I was one of the lowest paid engineers there, just due to starting my career.
Gretchen
Posts: 119
Joined: Mon Mar 19, 2007 5:48 am
Location: Southern CA

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Gretchen »

We were better off than many. We were about 60; DH was retired; and I was working at the peak of my earning power. I had held stock in my previous company, which sold in 2006 near the peak of the market, and put the proceeds in Vanguard. Money markets were paying decently at that time, and I didn't understand bond funds yet, so we were split between stocks and money market.

When 2008 hit, we were still holding a lot in money market accounts because our son was in college. When I went to Vanguard to take out tuition money, I would put my hand over the screen so I wouldn't see the balance. I'd go directly to the money market account, arrange to transfer what I needed, and close the site without peeking. I think it was almost a year before I looked at the balance.

I also accelerated my 401(K) contributions on 2009 to the maximum speed possible, rather than evenly spread across the year, expecting that I was buying at a discount.
Stormbringer
Posts: 1004
Joined: Sun Jun 14, 2015 7:07 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Stormbringer »

Elysium wrote: Wed Dec 12, 2018 9:21 amTo sit and listen to people say it was all correctable and the risks were overblown is incredulous. I still think we got lucky.
This is why I'm not a huge fan of probabilistic strategies like the 4% rule to fund minimum basic expenses. I prefer something safer, like a TIPS ladder. That sounds better to me than "probably" not needing to rummage through garbage cans for food.
"Compound interest is the most powerful force in the universe." - Albert Einstein
livesoft
Posts: 73338
Joined: Thu Mar 01, 2007 8:00 pm

Re: What Happened to you during the Financial crisis of 2007–2008

Post by livesoft »

Bogleheads.org (? diehards.org) started in early 2007. I switched to half-time work shortly after I joined the forum and adjusted the portfolio asset allocation to about 70:30. Then through early March 2009, the portfolio had dropped almost a million dollars in value in line with what the markets did.

I tax-loss harvested all the way down and in the spring of 2009 I was still at my desired asset allocation. Everything came roaring back.
Wiki This signature message sponsored by sscritic: Learn to fish.
NoVa Lurker
Posts: 690
Joined: Tue Jan 18, 2011 11:14 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by NoVa Lurker »

Valuethinker wrote: Wed Dec 12, 2018 5:26 am
Also market timer who went into the Crash leveraged, lost over $1m, made it back - another very interesting thread.
Not sure if anyone has posted the link, but it is worth it for young, smart folks to read this whole thread and experience the 2007-2008-2009 drop and rebound in real time. Market timer was very smart, and I am sure he is doing fine now, but this is an example of truly awful market timing for a high-risk strategy.

viewtopic.php?t=5934
foo.c
Posts: 101
Joined: Sat Jul 15, 2017 4:55 pm

Re: What Happened to you during the Financial crisis of 2007–2008

Post by foo.c »

I stayed 100% stocks, and didn't look at my 401k statements for months, maybe years. It was easier then because I was younger and didn't have much skin in the game.

The result was extremely good return on the money I put in and kept in. I wish I had been maxing out my 401k contributions back then, but I made up for it some by staying aggressive.
Dandy
Posts: 6351
Joined: Sun Apr 25, 2010 7:42 pm

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Dandy »

I'm always surprised that so many people mention credit cards and HELOC as emergency funds. They are at best a short term bridge to a real emergency fund. As noted sometimes the banks close the bridge.
User avatar
Time2Quit
Posts: 244
Joined: Thu Nov 01, 2018 9:47 am
Location: Fridgid State

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Time2Quit »

Was in my mid 30’s, I got lucky, company offered a new option of a self directed brokerage account (SDBA) as part of the 410K, but to in order to move money over to the SDBA you had to move you funds to a stable value GIC fund prior to transfer and let it sit for 30 days. Feeling brave that I was going to trade, I moved everything I had to the Stable Value GIC fund shortly before the markets started to tank, Lost track of the 30 day window and the markets started going down so In just left the funds in the GIC fund.

Feeling lucky, I invested it all in early February 2009 thinking that was the bottom. That cured me of my perceived daytrading itch.

At the end of 09, I left my government job at home and started a business. I had made many risky moves that I did not view as risky at that time. Today I do not have the stones to follow that same path. Experience teaches you a thing or two. It could have ended terribly for me.
"It is not the man who has too little, but the man who craves more, that is poor." --Seneca
User avatar
market timer
Posts: 6348
Joined: Tue Aug 21, 2007 1:42 am

Re: What Happened to you during the Financial crisis of 2007–2008

Post by market timer »

Valuethinker wrote: Wed Dec 12, 2018 5:26 amAlso market timer who went into the Crash leveraged, lost over $1m, made it back - another very interesting thread.
Not quite a million -- I only lost about $250K, but that left me $210K in debt with no assets and hardly any income at the time.

Really a fascinating period. Not only was I dealing with the sudden reality of this massive debt, but I was also getting booted out of academia into a tough job market without a very practical skill set. Just one year earlier, in October 2007, everything had been different. I honestly still had some hope that I'd write something brilliant in my dissertation and my ideas would carry me forward. The crash distracted me from my research and the debt forced me to become a salaryman.

I've reflected on this period at length, as I believe it fundamentally changed me as a person. From a financial perspective, I believe I acquired the discipline to become financially independent. There are several components to this:

1. Having a specific goal in mind for my wealth. Prior to the crash, money was mostly like points in a game. I didn't have any specific goals, just wanted to be rich. Now I view money much more practically. I have close to $2mn, which is basically freedom to live a comfortable life without work. There is not much value above this and a lot of downside if I lose it.

2. Recognizing errors of judgment and correcting them immediately. Bad decisions tend to compound. Taking a small loss, pardoning yourself for your mistake, and moving forward is better than doubling down and turning a small loss into a big loss.

3. Appreciating the value of optionality. During a crash, you can't benefit from the opportunity unless you have liquidity. When you are deeply in debt as a salaryman, you might be scared simply to interview for another job, in case your boss finds out. Maintaining optionality in life means having wealth, health, friends, and a growth mindset.

If someone happened to meet me today, they'd probably think I've had everything handed to me and an easy life: picture-perfect family, well-off, etc. However, I know how close I came to the edge in 2008-2009 and how different things could have been.
User avatar
HomerJ
Posts: 15148
Joined: Fri Jun 06, 2008 12:50 pm

Re: What Happened to you during the Financial crisis of 2007–2008

Post by HomerJ »

LiterallyIronic wrote: Tue Dec 11, 2018 9:47 pm I graduated in 2008 and couldn't find a job. Took one in a call center making $9.50/hour. No money in the stock market when it crashed. No money to put in the stock market to take advantage of the ensuing run-up.

Sucks. Just like everything else in my life.
Hey I had no money in the 90s stock market run-up. I remember being mad that I'd missed those years to get rich...

But the stock market runs in cycles. I got another chance, and so will you. You may have missed some of this run-up, but keep saving and you'll get a chance with the next one.

:)
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
Smoke
Posts: 487
Joined: Thu Aug 30, 2018 12:45 pm
Location: Saturn

Re: What Happened to you during the Financial crisis of 2007–2008

Post by Smoke »

100% invested in VTI, Held the position till it returned well past the highs pre event.
At 65 I don't wish to go on that ride again.
Arguing for the sake of arguing is something I am not going to engage in.
nyclon
Posts: 360
Joined: Fri Oct 02, 2015 5:30 pm

Re: What Happened to you during the Financial crisis of 2007–2008

Post by nyclon »

Laid off from two jobs within a span of 8 months. 9 months of unemployment followed where I paid very high COBRA premiums, but never had to visit a doc. Most of my network also lost their jobs during that time, so it was hard for anyone to help anyone else.

I remember the day when the S&P 500 printed 666 and thinking "it may be time to take a break for few minutes from the job search to re-assess target industry".

The resulting lower pay from the eventual "new" job has followed me through today. Meaning, 10 years of "lost" compounded income relative to "what could have been".

I had virtually nothing invested at the time so I wasn't able to benefit from the ride up much.

c'est la vie

I learned a few things:
1. Diversifying income streams is key to not getting backed into a corner. Don't rely on a W2.
2. If employed, you are dispensable.
3. Keep fixed expenses low. Give yourself flexibility and optionality.
4. When you have the opportunity to do so, save, save save. And invest it.
5. If married, live on one income. Spending against two jobs carries significant risks.
6. Ask for pay raises often. Don't be shy.
JW-Retired
Posts: 7184
Joined: Sun Dec 16, 2007 12:25 pm

Re: What Happened to you during the Financial crisis of 2007–2008

Post by JW-Retired »

The great recession was not very worrisome for us personally. I felt there was no danger of losing my job. Moreover, my plan in or out of a financial crisis is/was always not to sell bonds to re-balance, and we didn't. Not worrying about that is very soothing. :D I did keep up my spreadsheet every month or two. We were at 62% stocks at the beginning of 2008 and that bottomed at 48% in November 08. According to my (fairly coarse) spreadsheet numbers our maximum portfolio loss was 28%.

We did do all the tax loss harvesting we could in our taxable account. Also, some time In the fall of 2008 I switched our new-money 401k contributions to 100% stocks.This and the market got us back into our target 60 +/-5% stocks band before the end of 2009. In terms of money the portfolio recovered and exceeded its Jan 2008 value in 2010. I didn't need to sell equities to re-balance until years later.

We won't do anything differently next time.
JW
Retired at Last
Post Reply