What's your one big takeaway from the Crash of 2008?

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snowman9000
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Re: What's your one big takeaway from the Crash of 2008?

Post by snowman9000 » Wed Sep 24, 2014 9:27 am

I didn't check to see if these have been posted. More than one, but they are all big IMO.

1) Most conventional BH assets were strongly correlated, down.
2) Treasury bonds were a lot better than munis or commercial bonds. The T-Bonds even went up, I think?
3) Money market funds have a risk component.
4) Precious metals funds or stocks can go way down as gold goes up.
5) I learned all about tax loss harvesting.

I converted to the Permanent Portfolio afterwards.

dbr
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Re: What's your one big takeaway from the Crash of 2008?

Post by dbr » Wed Sep 24, 2014 9:33 am

My takeaway is that the rapid recovery and subsequent course of the market could deceive people on two counts:

1. That market crashes are harmless because rapid recovery follows. This is a very dangerous idea.

2. That holding stocks is really risky because the market can crash. This is also a dangerous idea because fleeing to bonds is also risky.

Note these two lessons are contradictory.

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Chan_va
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Re: What's your one big takeaway from the Crash of 2008?

Post by Chan_va » Wed Sep 24, 2014 9:50 am

snowman9000 wrote:I didn't check to see if these have been posted. More than one, but they are all big IMO.
1) Most conventional BH assets were strongly correlated, down.
.
Not true. Total Bond did just fine and behaved pretty much as expected in the recession compared to stocks.

See here

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Re: What's your one big takeaway from the Crash of 2008?

Post by technovelist » Wed Sep 24, 2014 10:05 am

snowman9000 wrote:I didn't check to see if these have been posted. More than one, but they are all big IMO.

1) Most conventional BH assets were strongly correlated, down.
2) Treasury bonds were a lot better than munis or commercial bonds. The T-Bonds even went up, I think?
3) Money market funds have a risk component.
4) Precious metals funds or stocks can go way down as gold goes up.
5) I learned all about tax loss harvesting.

I converted to the Permanent Portfolio afterwards.
As Harry Browne pointed out many years ago, precious metals are not the same as precious metal stocks. The latter have a lot of risk factors that the former don't have, and are not a valid substitute for the former.
In theory, theory and practice are identical. In practice, they often differ.

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siamond
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Re: What's your one big takeaway from the Crash of 2008?

Post by siamond » Wed Sep 24, 2014 10:07 am

This crisis was the real trigger for me to think in a much more analytical manner about my investments. It made me do serious research for the first time in my life (yup, waaaay late), I ended up discovering passive investing through Bernstein, Bogle and friends, and ultimately this wonderful Bogleheads site.

I had a golden opportunity to switch from my previous overly specialized set of ETFs to much broader asset classes when equities were real low, hence minimizing tax issues, this was extremely lucky timing. And well, after seeing this crisis unfold (and reflect on the previous one too) and the amazing recovery since then, I think I learned great lessons that should (?!) make me go through future crisis more easily. Overall, this crisis was a true blessing for me and my family. Kind of easy to say now (in 2014) though... Hindsight is a wonderful thing...

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Re: What's your one big takeaway from the Crash of 2008?

Post by snowman9000 » Wed Sep 24, 2014 8:57 pm

Chan_va wrote:
snowman9000 wrote:I didn't check to see if these have been posted. More than one, but they are all big IMO.
1) Most conventional BH assets were strongly correlated, down.
.
Not true. Total Bond did just fine and behaved pretty much as expected in the recession compared to stocks.

See here
During the worst of the crash, my bond funds were alarmingly down. Sure, they recovered. But there were some scary days where everything I owned was going down together.

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Re: What's your one big takeaway from the Crash of 2008?

Post by Tamales » Wed Sep 24, 2014 9:48 pm

I was curious how yields looked during that period so I threw together a quick chart:

Image


0-2 year really got clobbered. But now the bond gurus are saying 0-2 yr is probably the safest (in relative terms) place to be in the anticipated rising rate environment, since the signals seen from the March comments from Yellen showed the biggest interest rate jump in the 5 year, while the week of those comments the 20 year and 30 year actually went down a tad.

As a followup question, how is it possible that an ETF like BND got thru this period pretty much unscathed (except for a downward spike in Oct 2008 that quickly recovered)? I wonder what the composition of BND was at the time.

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Re: What's your one big takeaway from the Crash of 2008?

Post by cashinstinct » Wed Sep 24, 2014 10:39 pm

My lesson: Make purchases automatic $X per period (month, week, quarter, whatever).

I did not touch my investments in crash of 2008. I continued to invest $X per week in index funds no matter the news.

I did some buying in 2009 outside my weekly investments, but otherwise, I was too scared of timing ... not touching my automatic purchases did allow me to get gains.

I maybe should have invested more, but I was also saving for a downpayment on 1st home, so I mixed both...

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Re: What's your one big takeaway from the Crash of 2008?

Post by corner559 » Wed Sep 24, 2014 11:07 pm

Biggest lesson is to stay the course and stick to your asset allocation. I did that, and 6 years later I've done VERY well for myself.

I used to own a small number of stocks in my "casino" account and the other thing I learned is that there is no stock too big to fail. I saw huge "safe" companies go from $50 a share or more down to almost penny stocks in just a few weeks. Every time I didn't think it could get any worse, it did. But thankful again that I rode it out and didn't sell anything at a loss because I stuck with my IPS through thick and thin.

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Re: What's your one big takeaway from the Crash of 2008?

Post by docneil88 » Thu Sep 25, 2014 1:27 am

Tamales wrote:As a followup question, how is it possible that an ETF like BND got thru this period pretty much unscathed (except for a downward spike in Oct 2008 that quickly recovered)? I wonder what the composition of BND was at the time.
Hi Tamales, Much of the Vanguard Total Bond Fund (BND and VBMFX) was in debt/mortgage backed securities issued and guaranteed by Government Sponsored Entities such as Fannie Mae and Freddie Mac. If not for the US Government's decision to bailout Fannie and Freddie in 2008, BND and VBMFX would have gone down much more. There was no legal requirement that the bailout be made. Best, Neil

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Will do good
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Re: What's your one big takeaway from the Crash of 2008?

Post by Will do good » Tue Jan 16, 2018 3:47 pm

A good reminder to have AA you can live with.

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Re: What's your one big takeaway from the Crash of 2008?

Post by AtlasShrugged? » Tue Jan 16, 2018 3:57 pm

Having re-read the famous 'Sheepdog Thread', and thinking about that time, here are the most important things I learned.

Stay the course. That is the best piece of advice I ever took to heart (Thanks to Mr. Bogle and Mr. Larimore). That is the big lesson.

Have an ISP, and pre-plan a few moves in advance for different scenarios. Example: Rebalance at preset bands. This will buy you much needed time to think when it hits the fan. And it will.

I remind myself: The worst enemy to my portfolio stares at me in the mirror every morning. In most instances, 'don't just do something, stand there!'
“If you don't know, the thing to do is not to get scared, but to learn.”

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Re: What's your one big takeaway from the Crash of 2008?

Post by Psyayeayeduck » Tue Jan 16, 2018 3:59 pm

Emotions are your enemy in a time of panic.

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Re: What's your one big takeaway from the Crash of 2008?

Post by Beehave » Tue Jan 16, 2018 6:56 pm

Keep a reserve of cash and once the market goes down two or three thousand points start putting some in each time the market goes down another thousand. You'll be doing something proactive, so rather than being the punching bag, you are the puncher. If you don't like the idea of "catching the falling knife," you can do this after the market seems to have bottomed and is back on the way up.

I did the falling knife part of the way down last time and then stopped. If and when next time comes I'll try to catch the opportunity on both the down and up sides.

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Re: What's your one big takeaway from the Crash of 2008?

Post by SimplicityNow » Wed Jan 17, 2018 2:20 pm

Interesting reading the responses here. A lot from people with high or 100% equity positions showing remorse I think.

Currently I have seen many 100% equity threads. It will be interesting to see how those people react to the next market crash.

To answer the OP: Hindsight is 20/20. Fear and Greed are alive and well.

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Re: What's your one big takeaway from the Crash of 2008?

Post by WhiteMaxima » Wed Jan 17, 2018 2:23 pm

Do nothing.

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Re: What's your one big takeaway from the Crash of 2008?

Post by JoeRetire » Wed Jan 17, 2018 3:23 pm

When others feel urgent action is essential... pause to think.
So the urgent drives out the important; the future goes largely unexplored; and the capacity to act, rather than the capacity to think and imagine becomes the sole measure for leadership.

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Re: What's your one big takeaway from the Crash of 2008?

Post by Tyler Aspect » Wed Jan 17, 2018 3:27 pm

No-credit-check loans are bad for the economy.
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HomerJ
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Re: Valuations Matter

Post by HomerJ » Fri Jan 19, 2018 2:03 pm

grayfox wrote:
Wed Jan 22, 2014 9:16 am
Jay69 wrote:
grayfox wrote:There are so many lessons to learn from this economic crisis and this bear market. Even restricting it to only the stock market or S&P 500, there are still many many lessons.

So I will just choose one big one. There have about a billions words of debate about whether valuations matter or not. Well now the matter has been has been settled once and for all by the market. Valuations Matter.

When valuations are very high, reduce your stock allocation. When we are setting new all time highs on the index, reduce your stock allocation. When we are in a bubble, reduce your stock allocation. When Bogel says be cautious, reduce your stock allocation.
Going back and reading some of these life lessons, not picking on grayfox but being I still see grayfox posting I wonder if he/she stills feels the same from 2008? In other words have some rethought about 2008 and look at it in a different light today?
I've learned a lot since 2008. In 2012/2013 I took several finance courses, like modern portfolio theory, financial econometrics, retirement planning, etc. so I have a slightly different outlook.

One thing I learned is that the mainstream thinking in modern finance is, wait for it, that valuations matter. :D

Yep, if you read the Cochrane's summary paper from 2011, the main theme is:

High valuations forecast low returns. Low valuations forecast high returns.

Now that doesn't mean that when CAPE > 25 that a crash is imminent. You have to think of future stock returns over some holding period, say 20 years, as a distribution of possible outcomes that depends on the future state of the world. In one state, stocks may return 10% per annum. In another state, stocks may return 0% per annum. The value of your investment at the end is a random variable.

We do not know the exact shape of the distribution or the exact mean or the exact variance. These are unknowns. But we do know that higher valuations move the distribution of possible outcomes to the left. (Bad). Even if the risk has not gone down, the potential reward is less.

:?: Now right now, U.S. stocks are about at all time highs. My portfolio is at an all time high. Valuations are elevated and expected return is below the historical average.
wbern wrote that if you already won the game, why keep playing?
Am I taking any action? What do you think?
I've posted multiple times that valuations do not matter, because they are not actionable. Trying to make moves on valuations is a dangerous game.

So grayfox, did you take any action back in 2014?

You know back when
Now right now, U.S. stocks are about at all time highs. My portfolio is at an all time high. Valuations are elevated and expected return is below the historical average.
Back when the DOW was at 16,373. Nearly a 60% gain since you stated that valuations absolutely matter and one should change their stock allocation based on valuations.
Last edited by HomerJ on Fri Jan 19, 2018 2:04 pm, edited 1 time in total.

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munemaker
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Re: What's your one big takeaway from the Crash of 2008?

Post by munemaker » Fri Jan 19, 2018 2:03 pm

Two things:
1) Stay the course.
2) Nothing is for sure. In a pinch, the government can break all the rules with impunity.

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Will do good
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Re: Keep cash for a down period

Post by Will do good » Fri Jan 19, 2018 2:18 pm

Sheepdog wrote:
Fri Nov 21, 2008 11:04 pm
If you are retired and are selling investments for expenses, have at least three years of your normal distribution needs in cash accounts so that you don't have to sell when the markets, both stock and bonds, are low. If you don't have that cushion, you will have no choice but to sell. You can't even count on short term bond funds to be safe. When the valuations are down, take your needs from your cash accounts and hope that the market recovers before your cushion is gone.
Jim
Now that I'm retired, I'm following this advice, my 3-4 years cash is in CDs.
Thanks Sheepdog!

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HomerJ
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Re: Keep cash for a down period

Post by HomerJ » Fri Jan 19, 2018 2:22 pm

Will do good wrote:
Fri Jan 19, 2018 2:18 pm
Sheepdog wrote:
Fri Nov 21, 2008 11:04 pm
If you are retired and are selling investments for expenses, have at least three years of your normal distribution needs in cash accounts so that you don't have to sell when the markets, both stock and bonds, are low. If you don't have that cushion, you will have no choice but to sell. You can't even count on short term bond funds to be safe. When the valuations are down, take your needs from your cash accounts and hope that the market recovers before your cushion is gone.
Jim
Now that I'm retired, I'm following this advice, my 3-4 years cash is in CDs.
Thanks Sheepdog!
I think that's a great idea as well...

I plan to be 40/40/20 stocks/bonds/CDs in retirement... I plan to have a 5-year ladder of CD each holding 4% (one year's worth of expenses). Each year, I'll cash out a CD, and buy a new 5 year CD using whatever asset is higher (if stocks went up that year, I'll sell stocks, if stocks went down, I'll sell bonds).

If both crashed rather hard, maybe I'll wait a bit to replenish the CD ladder. I'll be able to hold out for a recovery for 5 years regardless (well unless we see hyper-inflation).
Last edited by HomerJ on Fri Jan 19, 2018 2:23 pm, edited 1 time in total.

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Re: What's your one big takeaway from the Crash of 2008?

Post by ENT Doc » Fri Jan 19, 2018 2:23 pm

Top down policies distort the market.

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Re: Valuations Matter

Post by randomguy » Fri Jan 19, 2018 2:30 pm

HomerJ wrote:
Fri Jan 19, 2018 2:03 pm
grayfox wrote:
Wed Jan 22, 2014 9:16 am

Now right now, U.S. stocks are about at all time highs. My portfolio is at an all time high. Valuations are elevated and expected return is below the historical average.
Back when the DOW was at 16,373. Nearly a 60% gain since you stated that valuations absolutely matter and one should change their stock allocation based on valuations.
Valuations matter. But they are far from exact. The question is are they actionable enough. At 25x I would go no. At 45x, I would say yes. In between gets interesting. And even if I get low returns, the question is can I make more elsewhere.

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Re: One big takeaway from the Crash of 2008?

Post by Bwlonge » Fri Jan 19, 2018 2:40 pm

docneil88 wrote:
Sat Nov 22, 2008 12:17 am
100% or more in equities, no matter how diversified, is a dumb idea for the vast majority of people, especially for those beyond their 20's. It certainly was a profoundly dumb idea for me.

And I like Brad's takeaway:
My lesson can be expressed mathamatically: as prices go to zero, correlations go to one.
How come?

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Re: One big takeaway from the Crash of 2008?

Post by Bwlonge » Fri Jan 19, 2018 2:40 pm

docneil88 wrote:
Sat Nov 22, 2008 12:17 am
100% or more in equities, no matter how diversified, is a dumb idea for the vast majority of people, especially for those beyond their 20's. It certainly was a profoundly dumb idea for me.

And I like Brad's takeaway:
My lesson can be expressed mathamatically: as prices go to zero, correlations go to one.
How come?

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Re: What's your one big takeaway from the Crash of 2008?

Post by bgf » Fri Jan 19, 2018 2:50 pm

complex derivatives + leverage + global interdependent financial institutions + fraud = we still survived
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HomerJ
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Re: Valuations Matter

Post by HomerJ » Fri Jan 19, 2018 2:50 pm

randomguy wrote:
Fri Jan 19, 2018 2:30 pm
Valuations matter. But they are far from exact. The question is are they actionable enough. At 25x I would go no. At 45x, I would say yes. In between gets interesting. And even if I get low returns, the question is can I make more elsewhere.
But in 1996, at 25x it was yes.

As for "in between 25x and 45x being interesting", interesting is where people get in trouble. Asking the question "Can I make more elsewhere" is also where people get in trouble.

Sure, some people get rich asking that question. Some people make far less making changes based on metrics and signals.

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Re: What's your one big takeaway from the Crash of 2008?

Post by Agggm » Fri Jan 19, 2018 2:52 pm

Gekko wrote:
Fri Nov 21, 2008 10:21 pm
my lesson learned and promise to myself is this -

“I will never be caught again with my pants down." (in the market or elsewhere)
I was lucky.

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Re: What's your one big takeaway from the Crash of 2008?

Post by iceport » Fri Jan 19, 2018 3:14 pm

Gekko wrote:
Fri Nov 21, 2008 10:21 pm
What's your one big takeaway from the Crash of 2008?
Part A: Buy, Hold & Rebalance investing really works.

Part B: Buying equities at severely depressed prices during a market crash, due to rebalancing and/or maintaining target allocations, can dramatically improve portfolio performance.
"Discipline matters more than allocation.” ─William Bernstein

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Re: Keep cash for a down period

Post by Sheepdog » Fri Jan 19, 2018 3:41 pm

Will do good wrote:
Fri Jan 19, 2018 2:18 pm
Sheepdog wrote:
Fri Nov 21, 2008 11:04 pm
If you are retired and are selling investments for expenses, have at least three years of your normal distribution needs in cash accounts so that you don't have to sell when the markets, both stock and bonds, are low. If you don't have that cushion, you will have no choice but to sell. You can't even count on short term bond funds to be safe. When the valuations are down, take your needs from your cash accounts and hope that the market recovers before your cushion is gone.
Jim
Now that I'm retired, I'm following this advice, my 3-4 years cash is in CDs.
Thanks Sheepdog!
Thanks. I am ready for the next one.....no more shaking and hiding the bad news from my spouse. I have over one year of normal distributions in CDs, one year of normal distributions in prime money market, and SPIAS purchased 2 and 3 years ago supplying us annually with half of our yearly withdrawals. The way I figure it I am good for at least 5 years before having to sell any regular mutual funds for expenses.
People should not say everything they think. They should think about everything they say.

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Re: What's your one big takeaway from the Crash of 2008?

Post by annielouise » Fri Jan 19, 2018 3:52 pm

bgf wrote:
Fri Jan 19, 2018 2:50 pm
complex derivatives + leverage + global interdependent financial institutions + fraud = we still survived
Excellent summary!

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Re: What's your one big takeaway from the Crash of 2008?

Post by JimmyJammy » Fri Jan 19, 2018 4:34 pm

My lesson was to pay attention.

I started seeing the trouble in early 2008. And I got out of many of my positions.

The trouble was deciding when to get back in. I only dipped my toes in, in March 2009. But was pretty tentative over the next couple of years. These days I'm fully invested, but I haven't been this scared in years. What's concerning me now is how both BONDS and STOCKS are so vulnerable.

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Re: What's your one big takeaway from the Crash of 2008?

Post by HomerJ » Fri Jan 19, 2018 4:48 pm

JimmyJammy wrote:
Fri Jan 19, 2018 4:34 pm
My lesson was to pay attention.

I started seeing the trouble in early 2008. And I got out of many of my positions.

The trouble was deciding when to get back in. I only dipped my toes in, in March 2009. But was pretty tentative over the next couple of years. These days I'm fully invested, but I haven't been this scared in years. What's concerning me now is how both BONDS and STOCKS are so vulnerable.
But, if you didn't pay attention at all, you would have ended up fine. Maybe even better.

That's the power of "stay the course", and "ignore the noise".

The 10% historical return of the stock market? That INCLUDES the crashes and the "lost decades". Read that again. In the past, you didn't have to avoid any of the crashes to get a very good return on your money.

Now, if you're close to retirement, you might not have enough time to wait for a stock market crash to recover, so you'd want be more conservative, just in case a crash starts tomorrow.

But if you are young and in the accumulation mode, quite possibly the best strategy is to not pay attention at all.

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Re: What's your one big takeaway from the Crash of 2008?

Post by thangngo » Fri Jan 19, 2018 4:54 pm

JimmyJammy wrote:
Fri Jan 19, 2018 4:34 pm
My lesson was to pay attention.

I started seeing the trouble in early 2008. And I got out of many of my positions.

The trouble was deciding when to get back in. I only dipped my toes in, in March 2009. But was pretty tentative over the next couple of years. These days I'm fully invested, but I haven't been this scared in years. What's concerning me now is how both BONDS and STOCKS are so vulnerable.
Good advice on paying attention.

But I don't agree with getting out of the market. Doing so will likely have negative effect. It's almost impossible to predict the best time to get back in. Instead, try to save more and buy more during these tough times. Keep a level head and rebalance from bonds to stocks according to your plan. Stick to your plan and keep pumping in money.

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Re: What's your one big takeaway from the Crash of 2008?

Post by iceport » Fri Jan 19, 2018 5:24 pm

JimmyJammy wrote:
Fri Jan 19, 2018 4:34 pm
My lesson was to pay attention.

I started seeing the trouble in early 2008. And I got out of many of my positions.

The trouble was deciding when to get back in. I only dipped my toes in, in March 2009. But was pretty tentative over the next couple of years. These days I'm fully invested, but I haven't been this scared in years. What's concerning me now is how both BONDS and STOCKS are so vulnerable.
I'll agree with the other comments on this lesson. I think you might be drawing the wrong conclusion here. As I see this, you are mistaking luck for some special ability to predict the market.

In retrospect, sure, it looks like you made a brilliant move to avoid disaster. But it's extremely probable that you had no way of knowing for sure that the market would lose 60% of its value within a year, and you just lucked out.

Your post reminds me of a conversation I had with a coworker at a retirement seminar a few years ago. He reported to me, with more than a little bit of satisfaction, that he had dodged the Great Recession by selling all equities just before it hit. (He acknowledged the timing was inadvertent, that he had no special insight that the market was going to crash.) And then he dropped the bomb: as we sat there roughly 5 years after the crash, he still hadn't "gotten around" to reinvesting the cash. He was just busy with work and raising a family.

Needless to say, I didn't have the heart to tell him that he would have come out far better if he had never "lucked out" and sold off his holdings in the first place.

PS: The vulnerability of bonds — particularly short-term but also mid-term bonds — is way overblown. There is just no comparison between the interest rate risk they face and the market risk that threatens equity values by 50% or more.
"Discipline matters more than allocation.” ─William Bernstein

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Re: What's your one big takeaway from the Crash of 2008?

Post by Dottie57 » Fri Jan 19, 2018 5:31 pm

Keep investing in stock funds when low priced. While I had trouble sleeping at that time, I can say I made out like a bandit.

Modify your asset allocation so you CAN sleep at night during horrifying economic times.

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Re: What's your one big takeaway from the Crash of 2008?

Post by Trev H » Fri Jan 19, 2018 5:35 pm

I had 100% Stock allocation right thru 2001 and 2008 crashes, and just kept on buying more. I can't say it really bothered me at all.

Now 5-10 years out from retirement, I am at 70/30 and will eventually get to 60/40 or so when I do Retire.

Trev H

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Re: What's your one big takeaway from the Crash of 2008?

Post by srt7 » Fri Jan 19, 2018 5:38 pm

I learnt about a company called Vanguard and put all my investments in to a target retirement fund from them. So far so good.

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Re: What's your one big takeaway from the Crash of 2008?

Post by visualguy » Fri Jan 19, 2018 5:52 pm

My big takeaway was not to rely too much on the stock market. It wasn't just 2008. The whole 2000-2012 period with two crashes and lousy returns taught me that lesson. Who knows, next time it could be a 20 year period or a 30 year period, or there could be three or four successive bad spells in the market rather than two.

In other words, the lesson was to diversify: stock, different kinds of bonds, CDs, money market, direct real estate, annuities. I don't let the stock market dominate. It's part of the portfolio, but it doesn't dominate it.

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Re: What's your one big takeaway from the Crash of 2008?

Post by Stormbringer » Sat Jan 20, 2018 8:43 am

I have lots of takeaways, but one of the most striking is how unevenly it affected people. I know three previously prosperous people who were absolutely wiped out with collapsed businesses, foreclosed homes, and forced to cash out retirement accounts at the bottom just to survive.

For friends and family members who are government workers, it barely affected them at all. For me, it turned out to be a financial windfall. Never underestimate the power of a little luck.
"Compound interest is the most powerful force in the universe." - Albert Einstein

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Re: What's your one big takeaway from the Crash of 2008?

Post by staythecourse » Sat Jan 20, 2018 8:53 am

Mine is it reinforced Mr. Bogle excellent advice (paraphrasing) "When everybody is doing something just stand there and do nothing."

Honestly, this advice works A LOT in life. It is human behavior to always want to do something when the unexpected happens, but most times doing nothing is the best option. Doing something is NOT the same as doing the BEST thing.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

RRAAYY3
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Re: What's your one big takeaway from the Crash of 2008?

Post by RRAAYY3 » Sat Jan 20, 2018 9:02 am

I have an oversized emergency fund of 1 year expenses in cash

Oversized meaning I factored in things that aren’t necessities as well (going out to eat for example, because I’d still like to enjoy doing so)

If another huge crash does happen, I will have actual expenses covered with enough money to buy the dip and wait (I have 20 years til retirement)

I imagine I will go from extremely aggressive to extremely conservative as I near 50 y/o; couldn’t imagine that type of crash for those really close to retiring

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oldcomputerguy
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Re: What's your one big takeaway from the Crash of 2008?

Post by oldcomputerguy » Sat Jan 20, 2018 9:13 am

Ignorance is bliss. At the time of the 2008 crash the only investments we had were our 401k's. Through ignorance mine sat in 100% stock throughout, and I had no idea that this was a "bad thing" (like a lot of others, I read the newspaper headlines regarding the economy and the sub-prime mortgage problems, but at the time I did not connect it to my 401k at all). Of course we came out the other side and I never had the inclination to panic-sell, but that is completely because, well, I was paying absolutely no attention to my 401k, I was just pushing money into it and not even thinking about when I might retire.

I guess I was lucky.
It’s taken me a lot of years, but 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.

IlliniDave
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Re: What's your one big takeaway from the Crash of 2008?

Post by IlliniDave » Sat Jan 20, 2018 9:39 am

Boy, that was a bad time for me. My divorce finalized in Jan 2008 (along with the customary multiply by X where X <.5 applied to my financial life), I became a full-time single parent of an angsty teenage girl, and had another in college for which I was paying as I went. Then came the big financial meltdown.

Ten years later my takeaways are:

1. Rough waters will come whether you anticipate them or not, so take a middle path that allows you to weather them (something in between blissful ignorance and doomsday prepping).

2. Have a plan and cultivate the discipline and resilience to stick to it.

3. Having some financial means is important, but don't neglect other important things in life. Anything can be taken away at without warning, but it's unlikely everything will be taken away at once. Just like with investments, diversify life.
Don't do something. Just stand there!

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mgullo
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Re: What's your one big takeaway from the Crash of 2008?

Post by mgullo » Sat Jan 20, 2018 10:22 am

srt7 wrote:
Fri Jan 19, 2018 5:38 pm
I learnt about a company called Vanguard and put all my investments in to a target retirement fund from them. So far so good.
+1
Aim above morality. Be not simply good, be good for something. | -Thoreau

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HomerJ
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Re: What's your one big takeaway from the Crash of 2008?

Post by HomerJ » Sat Jan 20, 2018 11:50 pm

IlliniDave wrote:
Sat Jan 20, 2018 9:39 am
Boy, that was a bad time for me. My divorce finalized in Jan 2008 (along with the customary multiply by X where X <.5 applied to my financial life), I became a full-time single parent of an angsty teenage girl, and had another in college for which I was paying as I went. Then came the big financial meltdown.

Ten years later my takeaways are:

1. Rough waters will come whether you anticipate them or not, so take a middle path that allows you to weather them (something in between blissful ignorance and doomsday prepping).

2. Have a plan and cultivate the discipline and resilience to stick to it.

3. Having some financial means is important, but don't neglect other important things in life. Anything can be taken away at without warning, but it's unlikely everything will be taken away at once. Just like with investments, diversify life.
I really like your take-aways, especially #1 and #3... That is some excellent wisdom there.

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Doom&Gloom
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Re: What's your one big takeaway from the Crash of 2008?

Post by Doom&Gloom » Sun Jan 21, 2018 12:09 am

If you are fortunate enough not to be paying attention to the market when it is plummeting, don't let the comments of friends or the media influence you to start paying attention.

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nedsaid
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Re: What's your one big takeaway from the Crash of 2008?

Post by nedsaid » Sun Jan 21, 2018 12:25 am

HomerJ wrote:
Sat Jan 25, 2014 11:12 am
ntsantak wrote:I changed my allocation to OVERWEIGHT and buy more equities. After all there was a huge SALE on WALL STREET.

I mean if the department or grocery store has a sale shouldn't you take advantage of the cheap prices?
Absolutely... I couldn't do it though...

I never came close to selling my stocks, and all my new contributions were 100% stock during that period. That was fairly easy... But I couldn't bring myself to rebalance back to my normal AA, let alone change my AA to be more aggressive.

We had 750k at the time (450k stocks/300k bonds) and our portfolio dropped to 550k or so at the low (250k stocks/300k bonds). I could not make myself sell those 300k bonds to buy stocks... I wanted that 300k safe (we still owed 200k on the house)... We did have fairly substantial contributions during that time period... My wife actually got a very nice bonus in March 2009... pure luck.. Again, it was easy to put NEW money into stocks... I did feel like I was buying on sale... I just couldn't make myself throw the old "safe" money into the churning maelstrom as well.

I worked us back to 60/40 over the next couple of years with new contributions and the stock market rising, and then dropped to 50/50 where I plan to stay until retirement in 10-15 years.
It is amazing, I disagree with Homer on some things but it is remarkable that he did about what I did during the period. I just could not sell bonds to buy stocks during the 2008-2009 bear market but I did put 100% of my new monies for investment into the stock market for about a year. I was just too scared to do more than that.

In March 2009, I was getting ready for a trip to Eastern Canada. One family member told me that I should not go and save the money since the economy and markets were so uncertain. My father told me to go ahead and make the trip. I made the trip and had a great time. The markets started recovering from the lows after that.
A fool and his money are good for business.

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grayfox
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Re: Valuations Matter

Post by grayfox » Sun Jan 21, 2018 11:43 am

HomerJ wrote:
Fri Jan 19, 2018 2:03 pm


I've posted multiple times that valuations do not matter, because they are not actionable. Trying to make moves on valuations is a dangerous game.

So grayfox, did you take any action back in 2014?

You know back when
Now right now, U.S. stocks are about at all time highs. My portfolio is at an all time high. Valuations are elevated and expected return is below the historical average.
Back when the DOW was at 16,373. Nearly a 60% gain since you stated that valuations absolutely matter and one should change their stock allocation based on valuations.
Yep, in 2014 I moved to a Floor + Upside withdrawal method, i.e. Liability Matching Portfolio + Risk Portfolio. The LMP (Floor) was a ladder of zero coupon treasuries/CDs 2015-2025. Then lump sum of 2025 TIPS that will be used to purchase annuities in 2025 (Floor). The remaining in a risk portfolio of stocks and bonds. (Upside)

12/2014-12/2018 overall gain of about 10% after withdrawals, with AA 30% stock.

With LMP, I don't care if the stock market goes up 100% or down 50%. Smartest investment move I ever made.

Sorry, no gotcha for you. Who was the guy who said: "If you already won the game why keep playing?"
Last edited by grayfox on Sun Jan 21, 2018 11:59 am, edited 1 time in total.

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