Perspective please: Is this worse than previous downmarkets?

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tj218
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Perspective please: Is this worse than previous downmarkets?

Post by tj218 »

As a I am only in my mid 20s I don't have much perspective, so I am reaching out to more experienced hands.

Is this market/economy truly the worst you have experienced? I am not talking individual stock losses, but more of an overall perspective.

I keep pumping as much money into my IRA that I can, (some of the DOW's largest gains were during the Great Depression) but am starting to wonder if our long-term conceptions about the market are wrong. (Talk about nationalizing banks, record federal spending leading to record deficits, etc.)


Is this the worst economy you have experienced?
fishndoc
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Post by fishndoc »

Yes, it is.

And with your "pumping as much money into my IRA that I can", it is the VERY BEST thing that could have happened to you!

Keep it up.

Wayne
" Successful investing involves doing just a few things right, and avoiding serious mistakes." - J. Bogle
MnD
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Post by MnD »

It's a run-of-the-mill post-WWII recession as far the real economy and job losses. It's worse than 1991 and 2001 because those were short and very mild.
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jh
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Post by jh »

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Last edited by jh on Sun Feb 22, 2009 7:53 pm, edited 1 time in total.
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Sbashore
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Post by Sbashore »

MnD wrote:It's a run-of-the-mill post-WWII recession as far the real economy and job losses. It's worse than 1991 and 2001 because those were short and very mild.
If you listen to all the news and pundits, it's the worst in since, well in a long time. ( I'm sick of hearing the other ). If you look at the actual numbers it's not all that bad. What makes it scary is the unknowns, which exist in every downdraft, making each one uniquely scary in its own way. Also the rhetoric coming from across the country that extends into the highest levels of government. Are we headed for the worst we've ever seen? As far as I'm concerned it's anybody's guess. That's the nature of investing. So far I don't think it's as bad as advertised. Personally I think this may be a great opportunity for me, a retired guy. For younger people, I'm sure this is a great opportunity.
Steve | Semper Fi
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Midpack
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Post by Midpack »

I've been investing seriously since 1987 and this will in all likelihood be the worst pullback I have seen - and it's far from over IMHO (at least into 2010). I'm 54, I've not sold anything (and won't), I am still putting any/all new money in and my AA has only changed slightly (from 25% bonds to 30% and still only about 5% cash). If I was younger I'd be thanking my lucky stars for the buying opportunity - everything is on sale right now! Same thing happened to me in 1987, believe it or not I went all in immediately after the 87 crash, and have never looked back. Got me off to a spectacular start!

But you have time to be smart about what you invest in, do your due diligence, put together a solid plan, get in and keep your eyes open - but stick with it.

This one may be more painful than many earlier recessions, but this too shall pass. Hopefully some good (regulation) will even come from it. Best of luck...
You only live once...
muck53
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Re: Perspective please: Is this worse than previous downmark

Post by muck53 »

tj218 wrote:As a I am only in my mid 20s I don't have much perspective, so I am reaching out to more experienced hands.

Is this market/economy truly the worst you have experienced? I am not talking individual stock losses, but more of an overall perspective.
I was in my mid 20's in 1982. I never lost my job (though I did in 1992). I always, my entire life saved minimum 10% off of gross, as I did back then.

It (1982) "felt like" my standard of living was frozen, and would never rise from there. I was horribly wrong. I have risen beyond my grandest dreams (and you probably will too, eventually - given several decades).

The economic & geo-political issues were not the same 1982 versus now, thus I don't really see much comparison other then widespread unemployment is a very tough environment.

Economically, this is more similiar to the Great Depression - as in credit bubble, even backed up inventories, in this case excess houses and cars. But today there is a social safety net, not present in the 30's. Thus very much different.

Conclusion - no 2 contrations are alike. It is normal for the economy to expand and contract. This is just the first one you have been adult aware enough to notice. In your future, you will see other expansions and contractions - the sun will come up tomorrow, even if it doesn't feel like it, today.

Stay employed. Save for that rainy day. You will be fine. There may be more bumps in this road, and other roads in the future with bumps - but this is the natural course of economies. The world is always full of uncertanties. Anytime we think we have contained one uncertainty, another breaks out. Understand it as the natural course of events.

Don't forget to enjoy your youth, for we are only young once. It is your world now, to shape for the future. I am too old to change the world. I place my vote of confidence behind, and in support of the youth.
muck53
peter71
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Post by peter71 »

In terms of one year real returns, 2008 just edges out 1974 with a real decline of 38.6% vs. 38.3%. In terms of two year real returns, however, we'll have to be quite a bit lower at the end of 2009 to match the annualized real declines of 31.2% per calendar year for 1973-1974.

All best,
Pete
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ol_pops
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Read this

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PatrickS
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Post by PatrickS »

If I were your age knowing what I know now, I'd be estactic at this extended buying opportunity.

This does feel scarier than anything I've seen and I'm concerned that it may take a long time to recover. But that is absolutely the best scenario for someone like you. If you can stay employed and continue buying on a regular basis, you'll be in a great position to take advantage of this. Just be sure you build up some cash reserve in case there's an emergency (job loss, car breaks down, etc.). You don't want to have to raid your retirement fund.
ziggy29
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Post by ziggy29 »

To me it's been much worse than the 2000-02 bear market because diversification worked like a charm in that one whereas in this Ursa Major, diversification (at least in anything resembling equities) was a dismal failure.

If I were in my 20s, I'd be loving this horrible market -- assuming I kept my job so I could keep feeding the investment kitty...
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deepdrive
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Post by deepdrive »

ziggy29 wrote:To me it's been much worse than the 2000-02 bear market because diversification worked like a charm in that one whereas in this Ursa Major, diversification (at least in anything resembling equities) was a dismal failure.

If I were in my 20s, I'd be loving this horrible market -- assuming I kept my job so I could keep feeding the investment kitty...
I'll be 24 in a week and I'm giddy over this market.
I plan on hopefully buying a house in a couple years. Giddy over that market, too.
Investment difficulty and long-term success are perfectly negatively correlated. Keep it simple.
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HomerJ
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Post by HomerJ »

This has happened before.

Not exactly the same way, but we've seen markets go down 50% before.

Living through it is scary as hell. It feels different each time, it feels like this has never happened before this way...

We may drop more... But in your 20s, just keep putting your money in each paycheck...

Anyone who managed to buy on the way down (not necessarily the bottom) in every market drop in the past was very happy 20-30 years later.
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Sheepdog
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Post by Sheepdog »

I was born in the early 30s. My father lost his job. We lost our home in the late 30s because we could not pay a mortgage payment after going through 3 years of unemployment and moved into a person's basement . We did not have a government bail out. I remember my mother giving men who asked to work for food when they came to our back basement door. She would ask them to take out trash and then gave them a sandwich and milk. I think most people did that who had even just a little more than the one begging. There was little government handout for them then, not food stamps, not unemployment pay, not welfare, not Medicare, just what we could give to each other. And imagine, you younger ones, no credit cards, just what we saved to live on in hard times.
This is a tough time for many in the Western World...perhaps the toughest in my lifetime since World War II, but put into perspective, we don't have 30% unemployed or have as many people destitute as in the 30s.
My parents were not investors, but they did have a few dollars saved (about $300, my Mom said.) That took us through about 3 years as I wrote earlier. My dad took all of money out of the bank when banks started failing, and never put any in again. My Mom did in the 50s and beyond though after my Dad died. She saved the little she could and put some money in treasuries in the 70s until she died. She never made over $40 or so a week in her life. She never had a credit card. She would never let my sister or me help her, not even to add an air conditioner in Florida. She died at 92 years of age in 1994, living in her home, never asking for monetary assistance, and she had $100,000 to share between my sister and me after she died.
It is different today, isn't it? Or should I say, people are different today?
Jim
Time is the school in which we learn, time is the fire in which we burn.~ Delmore Schwartz
PaPaw
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Post by PaPaw »

Sheepdog,

Excellent, excellent perspective. I admire your mother and her values. Whatever has happened in our wonderful country that so many people want to depend on others for their welfare? I see it at the food pantry where I volunteer ... some folks really need the help, others just are looking for an easy handout that they probably convert to drugs at the earliest opportunity. Some comment that they don't need "this" item, they already have 15 containers of it at home. Sigh.....

.... PaPaw
Ron
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Post by Ron »

Sheepdog wrote:...moved into a person's basement .

It is different today, isn't it? Or should I say, people are different today?

Jim
Wow Jim - same story, however it was in the late 40's (parents born in the late 20's).

I believe you are correct in questioning the "resolve" of folks today, and how they are facing the current day's financial (and life's) challanges.

- Ron
jar2574
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Post by jar2574 »

rrosenkoetter wrote:This has happened before.

Not exactly the same way, but we've seen markets go down 50% before.

Living through it is scary as hell. It feels different each time, it feels like this has never happened before this way...

We may drop more... But in your 20s, just keep putting your money in each paycheck...

Anyone who managed to buy on the way down (not necessarily the bottom) in every market drop in the past was very happy 20-30 years later.
+1

And if we aren't happy with these investments 20-30 years later we'll have far bigger things to worry about than our portfolios.
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Random Musings
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Post by Random Musings »

Small caps and the like did far worse in 73-74 (I think they were down 75% or so compared to the S&P 500 which was down about 50%).

But the economy is bad for many. Well, except for the bankers who ca$hed in before playing the moral hazard card (again).

RM
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