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

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

Post by sambb » Sun Jan 21, 2018 11:56 am

interesting in the thread, how many people didnt rebalance in.
However, BH say you should rebalance and lump sum new monies in.

personal Philosophies often change in a bear market

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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 1:07 pm

sambb wrote:
Sun Jan 21, 2018 11:56 am
interesting in the thread, how many people didnt rebalance in.
However, BH say you should rebalance and lump sum new monies in.

personal Philosophies often change in a bear market
Some of us weren't even familiar with the term (or meaning) of "rebalance" ten years ago. I know I wasn't.

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

Post by broslami » Sun Jan 21, 2018 1:24 pm

My big takeaway is what goes down must come up.

Unless something unthinkable happens, if you have a long enough time horizon, the long term trend is always in your favor.

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

Post by JBTX » Sun Jan 21, 2018 5:22 pm

It was interesting reading some of the posts back in 2008. In many cases not quite the level of resolve to “stay the course” compared to now after a 10 year bull market.

In terms of lessons learned for me (some of these took a few years to sink in)

1. Diversification doesn’t always work. Apart from govt bonds pretty much everything tanked badly
2. I’m not as smart as I thought. In 2000 my % losses were roughly half compared to the overall market, because I was overweighted small stocks and value, had some REITS, international and a little bit of commodities shortly after. In 2008 my portfolio went down nearly 50%. All those categories tanked and I was very underweighted in bonds and what bonds I had were mostly TIPS
3. Related to 2, traditional bonds do have value for diversification purposes, even if their yields are low. Having grown up in the era of inflation and high interest rates pretty much through the 90s going forward I always figured interest rates can’t possibly go lower, so I mostly avoided bonds. I guess I missed that one.
4. Buying when things are tanking is hard to do. I didn’t sell, but I didn’t buy either. Once things started
Going back up, I periodically rebalanced back to the more conservative and age appropriate AA.
5. AA is important and I’ve paid more attention to it post 2008
6. As if I didn’t know already all of these supposed financial experts don’t know anything.
7. If Alan Greenspan or Bernanke can’t see a crash coming I surely can’t.

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

Post by BuyAndHoldOn » Sun Jan 21, 2018 6:28 pm

Biggest lesson for me was the cliche: be prepared. Have enough safe savings that you can ride out potential job loss/market turmoil for an extended period of time. ==> not saying it is easy, and "enough" is a moving target (at least for me).

I would rather hold more bonds/cash-like assets than risk not being prepared if something unexpected happens. Downside risk, as they say.

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HomerJ
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Re: Valuations Matter

Post by HomerJ » Sun Jan 21, 2018 6:41 pm

grayfox wrote:
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?"
Ah, you are withdrawing, in retirement mode.

I agree since you already won the game, you shouldn't keep playing, but I would say that REGARDLESS of valuations.

You stated that one absolutely should lower stock allocation if valuations were high. Again, that makes sense for you since you were withdrawing and retired.

Are you worried some young people may have read your advice back in 2014, lowered their stock allocation, and missed out on the 60% rise since then? They may still be waiting for valuations to become "low" again to raise their stock allocation. This could seriously hamper their long-term retirement plans.
Last edited by HomerJ on Sun Jan 21, 2018 7:09 pm, edited 1 time in total.

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

Post by heyyou » Sun Jan 21, 2018 6:50 pm

My takeaway was that different crashes still do the same damage to my portfolio. The real estate craze was not dissimilar to the stock trading craze that led to the 2000 crash. I expect that future crashes will often be in different sectors, and will have different triggers, but my stock index assets will still fall precipitously.

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

Post by El Greco » Sun Jan 21, 2018 11:09 pm

Don't sell stocks. Don't despair. In fact, buy more stocks. Things will eventually turn around, and if they don't, everybody else is effed anyway, so you won't be alone.

Also, no need to buy at the bottom, you can also buy on the way down, because eventually that will look like a smart decision on the way back up.

This is what I did in 2008 when I was 100% stocks. Now that I'm older, and much closer to retirement, I also own bonds. In fact, I didn't own a single bond till a year ago. I'm glad I do now and hope I still have the resolve to rebalance into stocks during the next crash.

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

Post by Noalani » Sun Jan 21, 2018 11:48 pm

Try not to listen to spouse (husband) who is panicking and saying "Sell it all." Thank God I didn't. But, I did sell $100K of a few Vanguard mutual funds and I greatly rue that decision. If you're married, have that conversation NOW about a market correction plan of action. Be on the same page with your partner!

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

Post by randomizer » Mon Jan 22, 2018 12:07 am

I had negative net worth at the time, so wasn't really put to the test, but I have since tried to learn as much as possible by reading (both books and threads on this forum and elsewhere). As others have said on this thread, the whole "when things go bad, all correlations tend towards 1" seems to be a recurring theme. But for me, the main one is: don't get greedy; pick an AA that you can stick with through thick and thin, and keep plenty of cash or cash-like reserves on hand to give you the psychological and emotional buffer you need to not panic.
75:25

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

Post by nedsaid » Mon Jan 22, 2018 9:11 pm

JBTX wrote:
Sun Jan 21, 2018 5:22 pm
It was interesting reading some of the posts back in 2008. In many cases not quite the level of resolve to “stay the course” compared to now after a 10 year bull market.

In terms of lessons learned for me (some of these took a few years to sink in)

1. Diversification doesn’t always work. Apart from govt bonds pretty much everything tanked badly
2. I’m not as smart as I thought. In 2000 my % losses were roughly half compared to the overall market, because I was overweighted small stocks and value, had some REITS, international and a little bit of commodities shortly after. In 2008 my portfolio went down nearly 50%. All those categories tanked and I was very underweighted in bonds and what bonds I had were mostly TIPS
3. Related to 2, traditional bonds do have value for diversification purposes, even if their yields are low. Having grown up in the era of inflation and high interest rates pretty much through the 90s going forward I always figured interest rates can’t possibly go lower, so I mostly avoided bonds. I guess I missed that one.
4. Buying when things are tanking is hard to do. I didn’t sell, but I didn’t buy either. Once things started
Going back up, I periodically rebalanced back to the more conservative and age appropriate AA.
5. AA is important and I’ve paid more attention to it post 2008
6. As if I didn’t know already all of these supposed financial experts don’t know anything.
7. If Alan Greenspan or Bernanke can’t see a crash coming I surely can’t.
This is an excellent post. I fully agree with point number 1. Number 2 was interesting because I had a very similar experience. What worked in 2000-2002 didn't work in 2008-2009. Point 6 was interesting, I remember some really smart people saying that the subprime problem was way overblown. How wrong they were.
A fool and his money are good for business.

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

Post by Rowan Oak » Mon Jan 22, 2018 9:46 pm

nedsaid wrote:
Mon Jan 22, 2018 9:11 pm
JBTX wrote:
Sun Jan 21, 2018 5:22 pm
It was interesting reading some of the posts back in 2008. In many cases not quite the level of resolve to “stay the course” compared to now after a 10 year bull market.

In terms of lessons learned for me (some of these took a few years to sink in)

1. Diversification doesn’t always work. Apart from govt bonds pretty much everything tanked badly
2. I’m not as smart as I thought. In 2000 my % losses were roughly half compared to the overall market, because I was overweighted small stocks and value, had some REITS, international and a little bit of commodities shortly after. In 2008 my portfolio went down nearly 50%. All those categories tanked and I was very underweighted in bonds and what bonds I had were mostly TIPS
3. Related to 2, traditional bonds do have value for diversification purposes, even if their yields are low. Having grown up in the era of inflation and high interest rates pretty much through the 90s going forward I always figured interest rates can’t possibly go lower, so I mostly avoided bonds. I guess I missed that one.
4. Buying when things are tanking is hard to do. I didn’t sell, but I didn’t buy either. Once things started
Going back up, I periodically rebalanced back to the more conservative and age appropriate AA.
5. AA is important and I’ve paid more attention to it post 2008
6. As if I didn’t know already all of these supposed financial experts don’t know anything.
7. If Alan Greenspan or Bernanke can’t see a crash coming I surely can’t.
This is an excellent post. I fully agree with point number 1. Number 2 was interesting because I had a very similar experience. What worked in 2000-2002 didn't work in 2008-2009. Point 6 was interesting, I remember some really smart people saying that the subprime problem was way overblown. How wrong they were.
I had a similar experience with what worked in 2000 and then didn't work in 2008. I have since tried to remember this quote:

"Long-term investors must be careful not to learn too much from recent experience."
- Ben Graham
“If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger

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

Post by Rashen » Mon Jan 22, 2018 10:01 pm

what I learned is I should have bought more. Lot and lot more.

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

Post by protagonist » Mon Jan 22, 2018 10:05 pm

Keep enough money in safe investments (mostly CDs in my case) to pretty much insure making it through retirement without significant pain if the market drops 99% and does not recover while I am still alive. Leave the rest to gamble in the market without having to worry about what happens to it, since the future is unknown and there is no reason to believe it will behave the way it has over the past century. Being any richer won't buy me much more happiness and is not worth the worry that comes with additional risk.

We have all been very lucky this past decade....this past century really. Even after all my expenses, I have almost 50% more money than I did when I started recording the value of my portfolio annually in Jan. 2011. That could all change tomorrow. I don't want to be the guy at the casino who just won the jackpot only to keep playing and lose it all. If you have won, there is no sense in continuing to take risk with your future. The potential upside is too small, and the potential downside is huge.

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

Post by protagonist » Mon Jan 22, 2018 10:19 pm

By the way, I just noticed that this thread was started in 2008. I didn't know about this forum in 2008. I wish I did.

What I find very interesting is comparing the posts made at the time of the crash with the posts people (in some cases, the same people) are making now.

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

Post by ThePrince » Mon Jan 22, 2018 10:43 pm

nedsaid wrote:
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.
This is the main reason I use Blooom and Betterment. Take the rebalancing decision out of my hands.

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

Post by JBTX » Tue Jan 23, 2018 9:14 am

nedsaid wrote:
Mon Jan 22, 2018 9:11 pm
JBTX wrote:
Sun Jan 21, 2018 5:22 pm
It was interesting reading some of the posts back in 2008. In many cases not quite the level of resolve to “stay the course” compared to now after a 10 year bull market.

In terms of lessons learned for me (some of these took a few years to sink in)

1. Diversification doesn’t always work. Apart from govt bonds pretty much everything tanked badly
2. I’m not as smart as I thought. In 2000 my % losses were roughly half compared to the overall market, because I was overweighted small stocks and value, had some REITS, international and a little bit of commodities shortly after. In 2008 my portfolio went down nearly 50%. All those categories tanked and I was very underweighted in bonds and what bonds I had were mostly TIPS
3. Related to 2, traditional bonds do have value for diversification purposes, even if their yields are low. Having grown up in the era of inflation and high interest rates pretty much through the 90s going forward I always figured interest rates can’t possibly go lower, so I mostly avoided bonds. I guess I missed that one.
4. Buying when things are tanking is hard to do. I didn’t sell, but I didn’t buy either. Once things started
Going back up, I periodically rebalanced back to the more conservative and age appropriate AA.
5. AA is important and I’ve paid more attention to it post 2008
6. As if I didn’t know already all of these supposed financial experts don’t know anything.
7. If Alan Greenspan or Bernanke can’t see a crash coming I surely can’t.
This is an excellent post. I fully agree with point number 1. Number 2 was interesting because I had a very similar experience. What worked in 2000-2002 didn't work in 2008-2009. Point 6 was interesting, I remember some really smart people saying that the subprime problem was way overblown. How wrong they were.
:sharebeer

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

Post by Doctor Rhythm » Tue Jan 23, 2018 7:23 pm

4. Buying when things are tanking is hard to do. I didn’t sell, but I didn’t buy either. Once things started
Going back up, I periodically rebalanced back to the more conservative and age appropriate AA.
As a corollary to this point, automatic investment and a head-in-the-sand mentality can make for a winning combination.

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

Post by tennisplyr » Tue Jan 23, 2018 7:59 pm

Time heals all wounds.
Those who move forward with a happy spirit will find that things always work out.

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

Post by billy269 » Tue Jan 23, 2018 8:03 pm

El Greco wrote:
Sun Jan 21, 2018 11:09 pm
Don't sell stocks. Don't despair. In fact, buy more stocks. Things will eventually turn around, and if they don't, everybody else is effed anyway, so you won't be alone.

Also, no need to buy at the bottom, you can also buy on the way down, because eventually that will look like a smart decision on the way back up.

This is what I did in 2008 when I was 100% stocks. Now that I'm older, and much closer to retirement, I also own bonds. In fact, I didn't own a single bond till a year ago. I'm glad I do now and hope I still have the resolve to rebalance into stocks during the next crash.
My thoughts exactly.

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

Post by TravelforFun » Tue Jan 23, 2018 8:17 pm

I froze. I couldn't stand looking at my portfolio so I stopped looking. I took no action. Tax-deferred contributions continued on their established paths. What saved me was I did not panic, I had a stable job, lived in LCOL area, and I had time.

TravelforFun

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

Post by protagonist » Wed Jan 24, 2018 10:32 am

JBTX wrote:
Tue Jan 23, 2018 9:14 am

4. Buying when things are tanking is hard to do. I didn’t sell, but I didn’t buy either.
People beat themselves up for that, as if they made an error.

We had no idea in 2008-9 how things would sort themselves out. There was real fear of potential stagflation, Japan-like scenario, depression, runaway inflation- you name it. I remember it well since I lost my job and got divorced in early 2008- triple whammy. I didn't do anything...didn't sell....because I just lost my job I didn't have disposable cash to buy and I am not sure if I would have if I could have. My ex-wife asked me at that time if I thought she should buy or sell and I told her I had no clue. Japanese investors in the 1990s probably beat themselves up for continuing to buy, as I beat myself up when the Nasdaq fell from 5000 to 3500 quite suddenly around 1999-2000 and I saw it as a "great buying opportunity". Three years later it was barely over 1000. Factoring in inflation, I am not even sure if it has fully recovered yet.

Your decision to not buy on the crash was as valid as that of the guy who massively rebalanced into stocks. The Dow went from about 11K to about
6500 in a short time. Now it is over 25K. But it could just as easily be at 3000 or less today, and no expert had the slightest clue as to how long it would take to recover. If they got it right , it was because of a lucky guess.

Be careful not to inflate the probability of an event happening by the fact that it happened.
Last edited by protagonist on Wed Jan 24, 2018 1:18 pm, edited 3 times in total.

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

Post by protagonist » Wed Jan 24, 2018 10:42 am

tennisplyr wrote:
Tue Jan 23, 2018 7:59 pm
Time heals all wounds.
In the case of the middle ages it took well over a millenium in Europe, but I suppose that is ultimately true.

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

Post by jeffyscott » Wed Jan 24, 2018 11:00 am

protagonist wrote:
Wed Jan 24, 2018 10:32 am
We had no idea in 2008-9 how things would sort themselves out.
Yep, there was a chance that it would basically be the end of the economy as we had known it. My wife and I talked about the possibility of a long collapse, like the great depression and kids maybe needing to move back home with us for an extended time, etc.

I did keep buying, but I had a safe government job with a promise of a pension (from a system that is well funded) and also was maintaining "only" 50% in stocks. However, I also set a limit on how much I would transfer from relatively safe investments to stocks in order to protect the minimum I thought I needed in order to retire when I had planned.

Now retired and thanks to the recovery, it turns out that a lot of our savings will likely end up funding the next generation's retirement.
press on, regardless - John C. Bogle

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

Post by Cunobelinus » Wed Jan 24, 2018 11:05 am

Doctor Rhythm wrote:
Tue Jan 23, 2018 7:23 pm
4. Buying when things are tanking is hard to do. I didn’t sell, but I didn’t buy either. Once things started
Going back up, I periodically rebalanced back to the more conservative and age appropriate AA.
As a corollary to this point, automatic investment and a head-in-the-sand mentality can make for a winning combination.
I had recently started automatically investing with Vanguard (maybe in 2007?) and was busy enough working (and) away from home to miss most of the "financial crisis." Ignorance was pretty blissful. By the time I had any time to do anything about it, it was near the end of 2010 and things were looking pretty good!

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

Post by BuyAndHoldOn » Wed Jan 24, 2018 11:21 am

billy269 wrote:
Tue Jan 23, 2018 8:03 pm
El Greco wrote:
Sun Jan 21, 2018 11:09 pm
Don't sell stocks. Don't despair. In fact, buy more stocks. Things will eventually turn around, and if they don't, everybody else is effed anyway, so you won't be alone.

Also, no need to buy at the bottom, you can also buy on the way down, because eventually that will look like a smart decision on the way back up.

This is what I did in 2008 when I was 100% stocks. Now that I'm older, and much closer to retirement, I also own bonds. In fact, I didn't own a single bond till a year ago. I'm glad I do now and hope I still have the resolve to rebalance into stocks during the next crash.
My thoughts exactly.
Fully agree as well; well said, El Greco.

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

Post by JBTX » Wed Jan 24, 2018 1:31 pm

protagonist wrote:
Wed Jan 24, 2018 10:32 am
JBTX wrote:
Tue Jan 23, 2018 9:14 am

4. Buying when things are tanking is hard to do. I didn’t sell, but I didn’t buy either.
People beat themselves up for that, as if they made an error.

We had no idea in 2008-9 how things would sort themselves out. There was real fear of potential stagflation, Japan-like scenario, depression, runaway inflation- you name it. I remember it well since I lost my job and got divorced in early 2008- triple whammy. I didn't do anything...didn't sell....because I just lost my job I didn't have disposable cash to buy and I am not sure if I would have if I could have. My ex-wife asked me at that time if I thought she should buy or sell and I told her I had no clue. Japanese investors in the 1990s probably beat themselves up for continuing to buy, as I beat myself up when the Nasdaq fell from 5000 to 3500 quite suddenly around 1999-2000 and I saw it as a "great buying opportunity". Three years later it was barely over 1000. Factoring in inflation, I am not even sure if it has fully recovered yet.

Your decision to not buy on the crash was as valid as that of the guy who massively rebalanced into stocks. The Dow went from about 11K to about
6500 in a short time. Now it is over 25K. But it could just as easily be at 3000 or less today, and no expert had the slightest clue as to how long it would take to recover. If they got it right , it was because of a lucky guess.

Be careful not to inflate the probability of an event happening by the fact that it happened.
You bring up a good point that when the market is in the toilet that your job and economic security are probably more tenuous. Committing to buy more stocks, or doing Roth conversions, etc can be more difficult even if the timing for such actions may be financially optimal.

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

Post by nedsaid » Wed Jan 24, 2018 11:20 pm

JBTX wrote:
Wed Jan 24, 2018 1:31 pm
protagonist wrote:
Wed Jan 24, 2018 10:32 am
JBTX wrote:
Tue Jan 23, 2018 9:14 am

4. Buying when things are tanking is hard to do. I didn’t sell, but I didn’t buy either.
People beat themselves up for that, as if they made an error.

We had no idea in 2008-9 how things would sort themselves out. There was real fear of potential stagflation, Japan-like scenario, depression, runaway inflation- you name it. I remember it well since I lost my job and got divorced in early 2008- triple whammy. I didn't do anything...didn't sell....because I just lost my job I didn't have disposable cash to buy and I am not sure if I would have if I could have. My ex-wife asked me at that time if I thought she should buy or sell and I told her I had no clue. Japanese investors in the 1990s probably beat themselves up for continuing to buy, as I beat myself up when the Nasdaq fell from 5000 to 3500 quite suddenly around 1999-2000 and I saw it as a "great buying opportunity". Three years later it was barely over 1000. Factoring in inflation, I am not even sure if it has fully recovered yet.

Your decision to not buy on the crash was as valid as that of the guy who massively rebalanced into stocks. The Dow went from about 11K to about
6500 in a short time. Now it is over 25K. But it could just as easily be at 3000 or less today, and no expert had the slightest clue as to how long it would take to recover. If they got it right , it was because of a lucky guess.

Be careful not to inflate the probability of an event happening by the fact that it happened.
You bring up a good point that when the market is in the toilet that your job and economic security are probably more tenuous. Committing to buy more stocks, or doing Roth conversions, etc can be more difficult even if the timing for such actions may be financially optimal.
The rational decision would have been for me to rebalance from bonds to stocks at the nadir of the 2008-2009 bear market, but alas, I am an emotional being and not just a rational being. Plus my rational being was saying, "It really could be different this time, instead of being a buying opportunity we really could be going to Hades in a handbasket." Pretty much that really, really bad things can happen and things don't always have a happy ending. Life isn't always the Great American movie. Good doesn't always triumph over evil, at least in the short run. Sometimes the bad guys catch up to you in the chase scene. The hero doesn't always get the girl at the end. Accounts of what really happened during the financial crisis pretty much said that we were really were going down the chute, we really were going to Hades in a handbasket, and that we narrowly missed a second Great Depression.

The thing was that if we went to Hades in a handbasket, I never was going to retire. If I sold my stocks at the bottom, I still was never going to retire. If by the off chance that this thing turned around, then maybe I have a chance. I knew from market history that markets do rebound, I just didn't know when. It might have finally rebounded by the time I got into my eighties but fortunately it rebounded much sooner than that.
A fool and his money are good for business.

JBTX
Posts: 3228
Joined: Wed Jul 26, 2017 12:46 pm

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

Post by JBTX » Wed Jan 24, 2018 11:40 pm

nedsaid wrote:
Wed Jan 24, 2018 11:20 pm
JBTX wrote:
Wed Jan 24, 2018 1:31 pm
protagonist wrote:
Wed Jan 24, 2018 10:32 am
JBTX wrote:
Tue Jan 23, 2018 9:14 am

4. Buying when things are tanking is hard to do. I didn’t sell, but I didn’t buy either.
People beat themselves up for that, as if they made an error.

We had no idea in 2008-9 how things would sort themselves out. There was real fear of potential stagflation, Japan-like scenario, depression, runaway inflation- you name it. I remember it well since I lost my job and got divorced in early 2008- triple whammy. I didn't do anything...didn't sell....because I just lost my job I didn't have disposable cash to buy and I am not sure if I would have if I could have. My ex-wife asked me at that time if I thought she should buy or sell and I told her I had no clue. Japanese investors in the 1990s probably beat themselves up for continuing to buy, as I beat myself up when the Nasdaq fell from 5000 to 3500 quite suddenly around 1999-2000 and I saw it as a "great buying opportunity". Three years later it was barely over 1000. Factoring in inflation, I am not even sure if it has fully recovered yet.

Your decision to not buy on the crash was as valid as that of the guy who massively rebalanced into stocks. The Dow went from about 11K to about
6500 in a short time. Now it is over 25K. But it could just as easily be at 3000 or less today, and no expert had the slightest clue as to how long it would take to recover. If they got it right , it was because of a lucky guess.

Be careful not to inflate the probability of an event happening by the fact that it happened.
You bring up a good point that when the market is in the toilet that your job and economic security are probably more tenuous. Committing to buy more stocks, or doing Roth conversions, etc can be more difficult even if the timing for such actions may be financially optimal.
The rational decision would have been for me to rebalance from bonds to stocks at the nadir of the 2008-2009 bear market, but alas, I am an emotional being and not just a rational being. Plus my rational being was saying, "It really could be different this time, instead of being a buying opportunity we really could be going to Hades in a handbasket." Pretty much that really, really bad things can happen and things don't always have a happy ending. Life isn't always the Great American movie. Good doesn't always triumph over evil, at least in the short run. Sometimes the bad guys catch up to you in the chase scene. The hero doesn't always get the girl at the end. Accounts of what really happened during the financial crisis pretty much said that we were really were going down the chute, we really were going to Hades in a handbasket, and that we narrowly missed a second Great Depression.

The thing was that if we went to Hades in a handbasket, I never was going to retire. If I sold my stocks at the bottom, I still was never going to retire. If by the off chance that this thing turned around, then maybe I have a chance. I knew from market history that markets do rebound, I just didn't know when. It might have finally rebounded by the time I got into my eighties but fortunately it rebounded much sooner than that.
I honestly at the time didn't fret about it a lot. Sure, it really stunk seeing my portfolio and net worth down pretty much 50%, but I just kind of threw my hands in the air. There wasn't anything I could do about it, and I damn well wasn't going to sell it at the bottom. Once it started back up I started rebalancing out of stock on the way up back to a more age appropriate AA. By end of 2010 we were back where we were before the crash, and have since doubled again.

I would have never guessed it would come up as far as it had. Our portfolio went down almost 50%, but since then net worth has quadrupled (market growth plus saved earnings, mostly market growth)

Grt2bOutdoors
Posts: 18456
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Location: New York

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

Post by Grt2bOutdoors » Thu Jan 25, 2018 8:27 am

Saw colleagues lose their jobs and have it take them over 2 years to find a comparable one but for less compensation.
Cash is king. It may not earn a real return, but should you ever need it the returns you see and feel will be quite tangible.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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