What was the 2008 crash like in real time?

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ajacobs6
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What was the 2008 crash like in real time?

Post by ajacobs6 » Tue Jun 23, 2015 7:51 am

I'm in my 20's, so I was not investing in 2008. I have 20% in bonds because I'd like to have some money to buy low if the market crashes. Did everyone here stick to their strategies during the crash? Did some people here buy a ton of stocks when they were tumbling?

livesoft
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Re: What was the 2008 crash like in real time?

Post by livesoft » Tue Jun 23, 2015 7:53 am

The 2008 crash in real-time was quite a slow-motion affair going from the high point in October 2007 to the low point in March 2009. Perhaps you are thinking of the 1987 crash. That was pretty quick.

All the forum posts are available for reading, so you can read them or perhaps someone will point to some pertinent threads to help target your reading.

Many people here did stick to their strategies.
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ajacobs6
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Re: What was the 2008 crash like in real time?

Post by ajacobs6 » Tue Jun 23, 2015 7:58 am

livesoft wrote:The 2008 crash in real-time was quite a slow-motion affair going from the high point in October 2007 to the low point in March 2009. Perhaps you are thinking of the 1987 crash. That was pretty quick.

All the forum posts are available for reading, so you can read them or perhaps someone will point to some pertinent threads to help target your reading.

Many people here did stick to their strategies.
Cool I would definitely like to read about other crashes. I didn't realize 2008 was slow. So people weren't necessarily buying extra stock when it was cheap because nobody knew when the bottom would be.

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Re: What was the 2008 crash like in real time?

Post by TomatoTomahto » Tue Jun 23, 2015 8:09 am

ajacobs6 wrote:So people weren't necessarily buying extra stock when it was cheap because nobody knew when the bottom would be.
I, and undoubtedly many others, was at the limits of my courage in just staying the course. I did purchase more equities, but did not do a big rebalance; in poker terms, I "called" but didn't "go all in."
Okay, I get it; I won't be political or controversial. The Earth is flat.

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Re: What was the 2008 crash like in real time?

Post by sperry8 » Tue Jun 23, 2015 8:10 am

ajacobs6 wrote:
livesoft wrote:The 2008 crash in real-time was quite a slow-motion affair going from the high point in October 2007 to the low point in March 2009. Perhaps you are thinking of the 1987 crash. That was pretty quick.

All the forum posts are available for reading, so you can read them or perhaps someone will point to some pertinent threads to help target your reading.

Many people here did stick to their strategies.
Cool I would definitely like to read about other crashes. I didn't realize 2008 was slow. So people weren't necessarily buying extra stock when it was cheap because nobody knew when the bottom would be.
That isn't my experience. I recall Oct 2008 when the market dropped 8% or something like that in one day. I was in Florida with my gf and she wanted to hit the beach. I just kept staring at the TV watching all the red and the commentary. Now you'd think a drop like this wasn't too bad - but the market was already down a lot and it was clear this was not getting better and I was starting to panic. I remember this board helping me remain calm a lot.

As to sticking with strategy, it was very hard. So many emotions were running through my head at that time. I did end up buying stocks, but less than I had planned. But I did buy. And I bought every month from Oct 2008 all the way to March 2009 (even getting lucky and buying the day before March 9, the eventual low point). But no, no one knew when the bottom was and no one ever will. I just kept buying on the way down. I also bought some on the way back up (but much later).
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Re: What was the 2008 crash like in real time?

Post by jbuzolich » Tue Jun 23, 2015 8:12 am

The big drop was enough to get me off the sidelines again finally. We had been saving in general, possibly for a cabin but we didn't have set goals and were generally debt free except for mortgage debt. Stocks and bonds aren't in my wife's comfort zone and she would prefer cash savings accounts or CDs only. The drop helped me keep talking with her and get to the point that stocks were still scary but she was ok to try. Just not too much. We started investing again with the little bit of savings we could commit every two weeks so we were buying the whole ride down and then kept buying on the ride up. That set aside in savings doubled more than once and in 2013 it was enough for 20% down on buying a cabin. We sold the stocks and bought property and didn't feel like we had really done much of anything at all to reach the cabin goal.

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Re: What was the 2008 crash like in real time?

Post by Greentree » Tue Jun 23, 2015 8:21 am

I was 31 years old in 2008 and it was the first time I had really paid attention to stocks because it was the first time I had anything besides my 401k. I had all individual stocks in my taxable though they were very solid. Berkshire, Altria, etc. It was a slow grind and kept going down. It was all the news talked about. Not only were stocks down but real estate was too, and people were getting laid off. I was also in sales so my salary was half what it was in good years. I knew enough not to sell at the bottom but it took everything I had. Once I got back to even, I sold all of the individual stocks in my taxable and started paying down my mortgage (still maxed out 401k, I never worried about that because it seemed less tangible).

Now Berkshire is way up, Altria is way up, could have made a lot of money if I had stuck to it. But it was the last time I really put significant money in individual stocks, and now I have a set stock/bond allocation. It taught me to have a plan going in. As logical as it seems that things are cheapest when the market is down, it was a battle for me to keep calm.

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Re: What was the 2008 crash like in real time?

Post by livesoft » Tue Jun 23, 2015 8:26 am

ajacobs6 wrote:I didn't realize 2008 was slow. So people weren't necessarily buying extra stock when it was cheap because nobody knew when the bottom would be.
Here is a chart to set the stage (note the log scale on the vertical axis does not start at 0). Perhaps folks are thinking October 2008 to March 2009, but stocks had already dropped 20% before that.

Image

My records show that I rebalanced and bought stocks all the way down and through April 2009. I also tax-loss harvested a few hundred thousand dollars in losses. I am glad I did.

Do I wish I got out in October 2007 and back in in March 2009? Sure, wouldn't anyone want to wish that in hindsight?
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Re: What was the 2008 crash like in real time?

Post by edge » Tue Jun 23, 2015 8:29 am

I stuck to my strategy. Some here did not.

I rebalanced into equities 3 times with my portfolio money. I also bought a financial services etf with my play money.

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Re: What was the 2008 crash like in real time?

Post by rojas65 » Tue Jun 23, 2015 8:30 am

The running joke between my boss and I during that time up through early 2009: "Hey, what should we do for lunch: get a big mac meal or buy two shares of Ford?" This was because both options were about $5 each!
And, GM declared bankruptcy, so staying the course from the high of October 2007 through end of March 2009 took real conviction. Buying more equities during this time was thought of by some as 'catching a falling knife.' In retrospect, it was 'only' 17 months, but the volatility was dizzying.
As a Boglehead, owning three major indices (total, international, bond) seemed to be the calm in the eye of the storm. Good luck, and stay the course!

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Re: What was the 2008 crash like in real time?

Post by MnD » Tue Jun 23, 2015 8:32 am

I fully rebalanced twice, once about halfway down and once again virtually at the bottom. 75-25 portfolio was down well over a quarter-million in 2008 alone and that included new money in. The second time I rebalanced was a really bad morning in the market with a really bad week to the downside earlier that blew through all my rebalancing bands. The recalculating I had to do about how much to sell/buy in various funds because the market was dropping so fast was extensive. I had dressed for work but ended up taking a 1/2 day off to get everything done right with 6-figure trades. When I was done my shirt was absolutely soaked with stress sweat - I had to take another shower and get another shirt before I finally went to work. i remember thinking when all the trades were done - this better work. Good times!
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Re: What was the 2008 crash like in real time?

Post by livesoft » Tue Jun 23, 2015 8:36 am

@MnD, great story with all the sweating! :)
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Re: What was the 2008 crash like in real time?

Post by grandmacassie » Tue Jun 23, 2015 8:43 am

Here's my experience. I didn't have funds to invest that autumn when things began to drop. So I hung on and did nothing. I did have funds to invest the following March, but I couldn't bring myself to buy equities that year b/c things were still dropping. But by the following year I was able (had the nerve) to begin adding to my stock portfolio again. I remember watching Warren Buffet buy on the downturn and thinking I should do the same, but my wealth and his are not congruent! I was not on this forum at the time and felt very lonely. So I credit myself with not panic-selling, and view not buying at the bottom as an understandable minor error.

I do know others who sold at the bottom and some who got caught having borrowed against their homes to invest at the top of the bubble. Glad I didn't make those two mistakes.

So I feel pretty sanguine about riding through that storm, and feel I can do it again if necessary. Although then we still had a good income coming in from employment. Next time we may be retired and look at things differently. Time will tell. Cheers!

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Re: What was the 2008 crash like in real time?

Post by Ron » Tue Jun 23, 2015 8:49 am

I think of your first "crash" a bit like your first kiss - maybe from your current love or somebody else years ago, but it still is imprinted in your mind.

For me? My first experience was the "Black Monday" crash of 1987. While I/wife had been investing for retirement since 1982, this was the first time I/we experienced a downturn of note. While I was ready to pull my/our retirement assets out of the market, one of my night-school professors (much older - and wiser then me) said not to do anything. Crashes/downturns came along on a normal basis. Usually unscheduled but always not welcome.

He asked me (or rather the class, since there were more than one person that was fearing the worse) where did I/we get our current income from. Everybody answered from their current job (or their parents, since I was one of the "graybeards" in the class). Nobody needed the invested funds for immediate financial needs.

I followed his advice over many years, "sitting tight" during additional downturns in 1989, 2000-02, and 2008-09. In fact, the downturn of 2000-02 was a great buying opportunity for both my wife and me. We had just paid off our note/mortgage in late 1999 and took the monthly payment and increased our respective 401(k) contributions. It paid off well and was a major contributor to our respective retirements (my own, at age 59 - not early for most on this board, but earlier than most in the US today).

The downturn of 2008-09 was interesting since it was the first downturn we faced while I was in retirement. My wife was to retire the same month/year as me but she chose to remain in the workforce for an additional five years. While she planned for our joint retirement, when it came close to the date she realized she was not emotionally ready. So be it.

In preparation for retirement, each of us sold off many years of profits and put it in a tax-deferred MM account for our individual retirement income needs. Our plan was to use this cash, supplemented by future gains and maintaining a four-year "bucket" of expenses. The four year span was devised based upon our personal experience with downturns over time (3 years maximum, plus a one year cash buffer).

As it was, the plan worked out well. While my wife continued to work during the downturn, there was no need to pull any money from her cash bucket. While I had retired in early 2007, there was no need to sell off any equity/bonds for required retirement income.

Over time, the market returned to its long term uptrend. At the same time, our needed cash reserves were reduced. While we both keep four years in cash, we've had other retirement income streams come "on-line", such as an SPIA, two small pensions, my wife's restricted SS application against my SS (while we both wait to claim our own SS at age 70). When we both have our normal SS income (in less than three years) our four year cash bucket will hold very little cash, on a percentage basis against our joint retirement portfolios.

Just a story of one couple's journey along the way, of various downturns we've faced. One thing is for sure; assuming we live long enough, the story will be added to in the future :happy ...

FWIW,

- Ron

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Re: What was the 2008 crash like in real time?

Post by Rick Ferri » Tue Jun 23, 2015 8:50 am

The S&P 500 bottomed out at 666.

That's what it was like.

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Re: What was the 2008 crash like in real time?

Post by fourkids » Tue Jun 23, 2015 8:58 am

In the 2001 crash, I was in my 20's and I was day trading and stupid, luckily I didn't have much money. I eventually got scared and sold most of my good fund portfolio, and kicked myself a couple years later as it rebounded.

I learned my lesson and in the 2008 crash, I held tight. My portfolio went down 35% from 2007 to Apr 2009. It made my stomach turn, but I resolved not to sell. My portfolio totally rebounded and then some.

So now, I'm hoping to have the courage to buy more when the market tanks the next time. Buy low, sell high seems so obvious, but it is so hard in actuality.

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A bear market "crash"

Post by Taylor Larimore » Tue Jun 23, 2015 8:59 am

ajacobs6 wrote:I'm in my 20's, so I was not investing in 2008. I have 20% in bonds because I'd like to have some money to buy low if the market crashes. Did everyone here stick to their strategies during the crash? Did some people here buy a ton of stocks when they were tumbling?
ajacobs6:

This is a post I made about my first "crash":
Hi Bogleheads:

Our family owned "Larimore's Diner" in Foxboro, Mass. in 1929. When the depression hit, my parents lost the Diner and we moved to Miami into one of my grandfather's empty homes.

My Grandfather, Christopher F. Coombs, was one of the three principals of American Founders Group, the largest investment trust in the roaring 20s. He lost nearly everything (approximately $50M)--including the Miami home we lived in (next door to where I live today).

These figures show what REAL bear markets are like:

BEAR MARKET OF 1929-1937 (Dow plunged 89%)

-1929--1930--1931--1932
(-31%)(-25%)(-43%)(-08%) Large Cap Stocks
(-34%)(-35%)(-47%)(-06%) Mid/Small Cap Stocks
(-47%)(-38%)(-50%)(-05%) Micro Cap Stocks

(+04%)(+07%)(-02%)(+09%) 5-Year Treasury Bonds

BEAR MARKET OF 1973-1976 (S&P fell 43%)
-1973--1974
(-15%)(-26%) Large Caps
(-39%)(-29%) Micro Caps

(-70%) Coca-Cola
(-82%) Intel
(-73%) McDonald's
(-86%) Merrill Lynch
(-86%) Walt Disney
(-71%) Xerox

Figures cannot convey the horrifying and debilitating effects of a deep and long bear market. You watch in agony as month after month your life savings evaporate before your eyes. Gloom and doom articles are in the media, radio, (and now TV and internet). Nearly everyone else is selling. You have no idea when, or if, your portfolio will stop losing money.

Your friends and relatives urge you to sell. Nearly all financial experts recommend "sell". You are ridiculed for trying to hold on. You begin to have self-doubt. Dispair sets in. Buying stocks is unthinkable. Suicide's increase.

That's what a bad bear market is like.

Best wishes.
Taylor
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Re: What was the 2008 crash like in real time?

Post by BahamaMan » Tue Jun 23, 2015 8:59 am

Personally, I had way too much in equities in 2007 (maybe about 95% or so)..... When the market started dropping after about a 20% loss, I could not buy more stock, so I just quit looking. After half of my portfolio disappeared, I vowed to wait until the market recovered and then change my Asset Allocation to less than 50% stocks.

The market did recover and I re-couped all my losses probably by 2011(don't remember exactly), but I did change my asset allocation to 70% Bonds/30% Stocks..... Hindsight would have had me wait a few more years to do it, but I don't fret as I am in good shape now! I learned a lesson about Asset Allocation. It could have been a lot more painful.

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Re: What was the 2008 crash like in real time?

Post by Pajamas » Tue Jun 23, 2015 9:14 am

It was slow and painful.

Picking through the wreckage yielded some good long-term buys, but it was difficult at the time to know which companies would make it and which ones wouldn't. Large companies were failing and were taken over by the government. That was new in my experience. Scary stuff. I felt nauseated every time I clicked the button to submit a buy order and lost quite a bit of sleep.

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Re: What was the 2008 crash like in real time?

Post by goingup » Tue Jun 23, 2015 9:25 am

Real time 2008? There were not a lot of people on this board talking about what a glorious opportunity it was to buy low. When you're in the middle of it you have no earthly idea where the bottom is.

When it happens next time I hope Rick Ferri comes back to talk us through it again. Maybe someone can post a link to his post at the time that was an outline for actions to take based on age and willingness to take risk.

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Re: What was the 2008 crash like in real time?

Post by KyleAAA » Tue Jun 23, 2015 9:29 am

I made no changes in 2008 and didn't find it particularly stressful at all, but maybe that's because my portfolio wasn't all that large back then. Now? I would probably get a little worried - I'm not sure, really. I'm pretty confident I would stay the course, though.
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Re: What was the 2008 crash like in real time?

Post by downshiftme » Tue Jun 23, 2015 9:29 am

Having been through the dot.com crash before, I was well conditioned to do nothing. Besides in both the dot.com and the 2008 crash, the company I was working for had problems and there were big layoffs. While I did think about my investments and deliberately stood still and did nothing, the action was all about finding employment. It drew all of my attention away from investments, and possibly made it easier to ignore the talking heads. Didn't care so much about stock prices (they will bounce back eventually) when my immediate need was a job.

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Re: What was the 2008 crash like in real time?

Post by White Coat Investor » Tue Jun 23, 2015 9:34 am

It seemed to start with REITs, I know because I bought into them for the first time just before they started downward in early 2007 and then again in late 2007. The drop-off with the rest of the market coincided with the second drop for REITs, but it was fairly gentle for the first year, TSM dropping from nearly $38 a share to $31 a share. Then, in September, it went off a cliff, falling precipitously to about $22 a share. At that point, I was excited, buying shares left and right. From there it meandered around (and when I say meandered, I mean up and down 5-10% a day in many asset classes) for about 6 months, including a pretty good climb up to the new year followed by a significant double dip, bottoming out on March 9th I believe at under $17 a share (over a 50% drop from that $38 price). More significant was the drop in REITs, they were down 78% at the point where I started this thread:

http://www.bogleheads.org/forum/viewtopic.php?t=33849

So, in the beginning of the bear market, I was very eager to buy more shares, and by the end, I continued to do so, but was much more reluctant, especially with REITs. In the end, all those shares I bought over the six months prior to March 2009 and the six months after March 2009 were the best investments I ever made.
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Re: What was the 2008 crash like in real time?

Post by nedsaid » Tue Jun 23, 2015 9:45 am

The 2008-2009 bear market was pretty scary. Bear markets seem to be bottomless, it is hard to see your portfolio drop in value day after day. For about a year, I put 100% of my new monies for investment into stocks but I did not rebalance from bonds to stocks. I was too scared. I also knew that if I sold my stocks at the bottom that I would never meet my retirement objectives. It was hard but I stayed the course and didn't sell my stocks.
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Re: What was the 2008 crash like in real time?

Post by nisiprius » Tue Jun 23, 2015 9:46 am

The sensation was, as Stephen King's characters often say in his horror stories, "the hits just keep on coming."

I first noticed it in early 2008 when I was on vacation, visiting friends, and she said she was worried about the stock market, and--who hadn't been checking--laughed and said "Well, it fluctuates, as long it stays in the thirteens's I don't care." And she looks at me and says "It's in the twelves."

Every time the anxiety from the last thing collapsing started to ease off, there would be another. Soon, like the seven dwarfs, it was hard to name them all. And, I might have been projecting this but I don't think I was--talking heads like Henry Paulson and Ben Bernanke would appear on television and they looked scared. This was uncharted territory. They didn't know what to do.

Then my employer's sales dropped 70% month over month in late 2008 and I was let go...

My wife and I did not panic-sell, but we couldn't bring ourselves to place a "buy" order, either. As I've said, it was more "deer in the headlights" than "stayed the course." Before 2008 I was starting to wonder if I was being overly conservative with our (low compared to conventional wisdom) stock allocation. 2008-2009 proved we had hit it almost exactly right. I was very glad we weren't holding a larger stock allocation. Most are reluctant to talk about it but a lot of people did sell in 2008 and do themselves harm; here's one who acknowledged it.
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Re: What was the 2008 crash like in real time?

Post by greg24 » Tue Jun 23, 2015 9:47 am

I confidently rebalanced into equities as part of my 65/35 AA. Then everything kept going down, and my dry powder dwindled, and I didn't have much left when we were actually near the bottom. I kept buying into my 401k at a high rate, which was the best thing that could have happened.

If you want to see some real time responses from this board, search the board for "Plan B". Even some of the most level heads around here started to lose their cool.

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Re: What was the 2008 crash like in real time?

Post by nisiprius » Tue Jun 23, 2015 10:03 am

I think this quotation belongs in this thread: In 1940, in Where are the Customer's Yachts, in the chapter on "Customers, That Hardy Breed," Fred Schwed wrote:
Like all of life's rich emotional experiences, the full flavor of losing important money cannot be conveyed by literature. Art cannot convey to an inexperienced girl what it is truly like to be a wife and mother. There are certain things that cannot be explained to a virgin either by words or pictures. Nor can any description that I might offer here even approximate what it feels like to lose a real chunk of money that you used to own.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: What was the 2008 crash like in real time?

Post by mxs » Tue Jun 23, 2015 10:06 am

The 2008 crash was slow and over a long period of time. I had several co-workers that are not highly financially intelligent who spoke about it being a good idea to buy Ford stock. The price was very, very low and they were being looked at (stock price wise) poorly due to guilt by association with being in the same industry as GM. If you look up stock prices of Ford during that crash, you will notice you could have made 8 times your money on that stock within a year or two. I wasn't really in the market at that time, I think I started near that time my Roth IRA in loaded mutual funds and it turned out okay long term (although I wish I was in index funds from the get go).

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Re: What was the 2008 crash like in real time?

Post by B. Wellington » Tue Jun 23, 2015 10:17 am

I recall the auto suppliers having issues in the early stages and then started to announce lay-offs. Then I watched as family and friends lose jobs that they had worked at for years. Later some of them even lost their homes...

The DW and I watched our 401(k) and IRA's drop a quick 125K +. However, we continued to invest (dollar cost averaging and 401(K) contributions) in a balanced AA feeling that a good % in bonds would be the best move for our age and risk tolerance. It was indeed a difficult time, no one seemed to know where the bottom would be...or if a rebound would ever happen...

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Re: What was the 2008 crash like in real time?

Post by cashinstinct » Tue Jun 23, 2015 10:24 am

I just started in 2006 investing (I was 21). I did get many lump sum scholarships I did not need in 2005-2009, so I invested some in 2006, in 2007 and late 2008.

Late 2008 was scary, I look back and I invested many thousands a month in these months, much more than before. You could not know if it was the "bottom" or not. I did not need the money, so I invested late 2008...

I did some tax-selling and repurchase, but "net" was buying.

I did not invest much more in 2009-2011 though (except a small monthly automatic DCA that I kept), but no more big lump sums... no selling either. I did concentrade instead in savings for my downpayment for first home.

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Re: What was the 2008 crash like in real time?

Post by HomerJ » Tue Jun 23, 2015 10:32 am

I had no problem "not selling"... I knew I was going to ride the market all the way down and (hopefully) back up again.

I did rebalance once a little (selling bonds, and buying stocks) when the DOW dropped below 10,000... but it kept on dropping, and there was a lot of talk of total financial collapse, and the Great Depression II, etc., and I never could get the courage to sell any of my bonds again.

At the top in 2007, we had about $750,000, split 60/40 stocks/bonds, I think.... At the bottom in March 2009, we were down to around $500,000...

Seeing 1/3 of your net worth disappear is not easy to ignore... Losing $250,000 can make you sick.

At the bottom, we had around $200,000 in stocks and $300,000 in bonds and cash, and about a $200,000 mortgage... I didn't want to sell any more bonds... They were my safety net... I still never thought about selling the stocks... But I learned I was too scared to rebalance by selling bonds. I wanted to keep those bonds and cash, just in case the Great Depression II did happen, and my wife and I both lost our jobs.

Now, interestingly... I had ZERO problems buying stocks with NEW money... I did change all my 401k contributions to be 100% stocks, and we actually got a few bonuses during the bear market (My wife and I were VERY lucky with our jobs)... My wife actually got a bonus in March 2009, which we invested 100% in stocks (pure luck on the timing there).

New money, it felt like I was buying bargains... Old money... I didn't want to risk anymore. I wanted to keep a floor of "safe" money, just in case... Of course, I'd be a lot richer today if I had rebalanced more on the way down, but for me, it isn't about making as much as possible, but keeping the money I have...

Anyway, I'm 50/50 now... House is paid off... And I know myself well enough to know that I only rebalance from stocks to bonds as the market rises, not the other way around.

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HomerJ
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Re: What was the 2008 crash like in real time?

Post by HomerJ » Tue Jun 23, 2015 10:43 am

goingup wrote:Real time 2008? There were not a lot of people on this board talking about what a glorious opportunity it was to buy low. When you're in the middle of it you have no earthly idea where the bottom is.
Yeah VERY few posts here were about the opportunities of buying low...

It was mostly trying to keep each other from panic.

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NYCPete
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Re: What was the 2008 crash like in real time?

Post by NYCPete » Tue Jun 23, 2015 10:48 am

I was in my late 20s. In the span of just a few short months, I watched YEARS worth of contributions into my retirement plan just disappear. And then I rebalanced. (that’s what we were supposed to do, right?) And then over the next few weeks I watched my account balance continue to fall, to the point where my account showed the exact same allocation as before I rebalanced! What the hell was this??? I already had more in bonds because of the drop. Now I was faced with the regret that if I had waited to rebalance, I wouldn’t have lost all that extra money only to find myself where I was a few weeks before. And I was beating myself up over simply following those “rebalancing bands” that I’d been reading about.

But that’s not everything. Yes, in 2008 the stock market dropped. But your daily life and your daily experiences color all this drama going on with your personal investments.

Close to the end of 2008, 1.5 million people were out of a job in less than 3 months.

News reports said the original money market fund was “breaking the buck” and people were losing money in what was supposed to be a “super safe” investment that could be viewed practically the same as cash.

Layered on top of all of this was the prevailing sense that we didn’t know which major financial institution was going to go down next. Every week it was some new institution coming out of nowhere saying they had gravely miscalculated and they were underwater on their balance sheet. In 2008 alone, IndyMac, Washington Mutual, Countrywide, Lehman Brothers, along with over 20 other banks…gone. Fannie May and Freddie Mac were swimming in crappy debt that would likely never get paid back. Just when we thought it was only about the investment banks and mortgage companies, AIG (an INSURANCE company!?!?) came out and said “oh….uh yeah, we’re pretty much broke.” Then it wasn't just the investment banks, it was the banks that we go to for ATMs. What if Bank of America, Citi, and Chase bought up these crappy bankrupt companies to save the system, and those crappy companies pull our retail banks down with them?? Then TARP was proposed, and Congress balked. They voted it down at first, and the stock market plummeted. While all this was going on, it became increasingly clear that government and the Fed were essentially making it all up as they went. And no one in government, the Fed, or at any of the banks had been alive the last time the country had faced this kind of meltdown. They were flying blind.

Then I’d log onto Bogleheads for some comfort. There were people saying the same thing they always say, but it was evident that even the stalwarts of the forum (both professional and non-professional alike) were clearly rattled. There were no safe havens.

THIS is what people were experiencing when they were “hitting their rebalancing bands.” All this “buy, hold, rebalance” stuff is easy to think about in theory. But once you layer on real life, and all the emotion that comes along with it (anger, frustration, hopelessness, uncertainty, second guessing)?

MUCH harder to do in practice.

I wish you all the best in your eventual membership in the "lived through a market collapse" club. It's a wiser group of members, but the entry-fee is super, super sh***y.

Best,
Peter
To the extent that a fool knows his foolishness, | He may be deemed wise | A fool who considers himself wise | Is indeed a fool. | | Buddha

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Re: What was the 2008 crash like in real time?

Post by itstoomuch » Tue Jun 23, 2015 10:49 am

The Great Recession started on 9/11/2001.
Saw a lot of signs of hubris and took advantage of early parts of the madness. Never connected the dots until October 2008.
My story is mundane, We lost just a decade of invested dollars and 40% of portfolio. You should hear my older bro's story, not only did he lose a decade, he also lost stock options (RSU-most of his compensation), a lifetime of savings and investing and DCA's. I'm fairly sure that by late 2007 he knew what was going to happen but couldn't do anything about his personal situation. He is to the extreme a BH.
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

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SimpleGift
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Re: What was the 2008 crash like in real time?

Post by SimpleGift » Tue Jun 23, 2015 10:54 am

Personally, the most unnerving aspect of the 2008 market crash was that, for the first time in my investing experience, "systemic risk" was a large part of the equation — resulting in a level of anxiety and fear that I'd never experienced before as an investor.
Wikipedia wrote:In finance, systemic risk is the risk of collapse of an entire financial system or entire market, as opposed to risk associated with any one individual entity, group or component of a system, that can be contained therein without harming the entire system. It can be defined as "financial system instability, potentially catastrophic, caused or exacerbated by idiosyncratic events or conditions in financial intermediaries" It refers to the risks imposed by interlinkages and interdependencies in a system or market, where the failure of a single entity or cluster of entities can cause a cascading failure, which could potentially bankrupt or bring down the entire system or market.
Because of concerns about the continued viability of the global financial system, the 2008 market crash had an element of "existential fear" about it that probably hadn't been felt since the Great Depression of the 1930s. In 1987, the market crash was brief and soon inconsequential. The 2000 tech crash had a big emotional impact, but I was able to rebalance throughout the whole event. But in 2008-2009, I just froze in place. I wasn't able to rebalance out of bonds and into stocks. I quit reading my portfolio statements and updating my rebalancing spreadsheet. I essentially just hunkered down, with the consolation that I had a large, 50% allocation to high-quality bonds.
Last edited by SimpleGift on Tue Jun 23, 2015 10:55 am, edited 1 time in total.

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HomerJ
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Re: What was the 2008 crash like in real time?

Post by HomerJ » Tue Jun 23, 2015 10:55 am

NYCPete wrote:Close to the end of 2008, 1.5 million people were out of a job in less than 3 months.

News reports said the original money market fund was “breaking the buck” and people were losing money in what was supposed to be a “super safe” investment that could be viewed practically the same as cash.

Layered on top of all of this was the prevailing sense that we didn’t know which major financial institution was going to go down next. Every week it was some new institution coming out of nowhere saying they had gravely miscalculated and they were underwater on their balance sheet. In 2008 alone, IndyMac, Washington Mutual, Countrywide, Lehman Brothers, along with over 20 other banks…gone. Fannie May and Freddie Mac were swimming in crappy debt that would likely never get paid back. Just when we thought it was only about the investment banks and mortgage companies, AIG (an INSURANCE company!?!?) came out and said “oh….uh yeah, we’re pretty much broke.” Then it wasn't just the investment banks, it was the banks that we go to for ATMs. What if Bank of America, Citi, and Chase bought up these crappy bankrupt companies to save the system, and those crappy companies pull our retail banks down with them?? Then TARP was proposed, and Congress balked. They voted it down at first, and the stock market plummeted. While all this was going on, it became increasingly clear that government and the Fed were essentially making it all up as they went. And no one in government, the Fed, or at any of the banks had been alive the last time the country had faced this kind of meltdown. They were flying blind.

Then I’d log onto Bogleheads for some comfort. There were people saying the same thing they always say, but it was evident that even the stalwarts of the forum (both professional and non-professional alike) were clearly rattled. There were no safe havens.
This is a great description of how it felt back then. Great Depression II with a 90% stock market collapse and 25% unemployment certainly felt possible.

madpunster
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Re: What was the 2008 crash like in real time?

Post by madpunster » Tue Jun 23, 2015 10:56 am

What I was really struck by in real time was how long the market could be irrational and thus slowly suck in people who were normally more conservative. Despite the froth in housing, Toll Brothers (TOL) started sliding in 2005. The yield curve was inverted for what seemed like an eternity. So by 2007, the more cautious hands were more likely than the momentum hounds to start listening to the siren songs of "This is the new normal" and FOMO or "Fear of missing out". Alexander Elder calls this the Smart Person's mistake. We know what must happen, we just get the timing wrong and it can take a long time for things to come to pass.

So post-bottom, I've been waiting for a long time for a few "sure things" to happen. Interest rates and gold should go up - It has been 6 years already. All the cigar butt falling knives I caught should turn around anytime now.

“The market can stay irrational longer than you can stay solvent.” - Keynes
Last edited by madpunster on Tue Jun 23, 2015 11:07 am, edited 1 time in total.

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Re: What was the 2008 crash like in real time?

Post by NateH » Tue Jun 23, 2015 10:57 am

This wasn't a part of the stock market crash, but related.

Families selling or moving up in the housing market got trapped as they home equity evaporated.

Some unlucky ones could have sold their home for a profit early in the decline, but - hoping for a few thousand more - followed the housing market lower and lower until they couldn't make a profit at all.
4X top-twenty S&P 500 prognosticator. I'd start a newsletter, but it would only have one issue per year.

nukewerker
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Re: What was the 2008 crash like in real time?

Post by nukewerker » Tue Jun 23, 2015 11:14 am

I guess its the cynic in me but most of the stories here imply things have significantly changed and we are in the clear. QE1, QE2, and QE3 have been applied over 7 years. Trillions added to the Fed balance sheet. Fed still can't raise interest rates. We are still in the 2008 crash. We have just been duped to go along as normal. If rates were 6 or 7% and things were going swimmingly, then fine. Its obviously very difficult to define what normal is, but I propose this is not a normal economy.

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bengal22
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Re: What was the 2008 crash like in real time?

Post by bengal22 » Tue Jun 23, 2015 11:19 am

Being an investment forum, we always tend to focus on the "what happened to me" aspect of a deep recession. For me, I was lucky. While I lost my job through a forced retirement(treated great though with severance and pension), I got a better job and was able to invest heavily in the 2007-2009 period. I even had a lot of cash that I was able to invest in a stock/bond mix.

However, income is also a big portion of our financial success. For many people, this recession had long-reaching impacts: lost jobs, lesser paying jobs, home foreclosures, reduction in benefits, increase in medical costs, etc. While recessions do have buying opportunities for many people, the deep rooted changes in business have long term negative consequences.

I was able to stay the course, and even transfer cash to equities, because I was fortunate to find a lucrative job coupled with a retirement. But for others(many many others) this recession made investing for retirement and their future even harder.
"Earn All You Can; Give All You Can; Save All You Can." .... John Wesley

sharpjm
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Re: What was the 2008 crash like in real time?

Post by sharpjm » Tue Jun 23, 2015 11:20 am

Very interesting thread. Subscribing for more stories :sharebeer

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Re: What was the 2008 crash like in real time?

Post by Christine_NM » Tue Jun 23, 2015 11:22 am

OK, here's how bad it really was. In June 2009 I was looking to buy a house for cash. The realtor wanted to know how much money I had. I told him, I have $X but if you had asked me a year ago I would have said $X+$500,000.

His response was not horror or sympathy. He said, oh heck you did pretty well then. I agreed. That's how bad it was. And my AA was less than 50% stocks.
16% cash 48% stock 36% bond. Retired, w/d rate 2.85%

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whatusername?
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Re: What was the 2008 crash like in real time?

Post by whatusername? » Tue Jun 23, 2015 11:29 am

It was the first time that my portfolio was large enough that I could max out contributions to tax advantaged accounts and they would quickly disappear in the losses. Watching a contribution that was 5% of my annual salary (401k match) evaporate at once was pretty depressing.

I kept the contributions set and in early 2009 stopped looking at my portfolio unless I had already forgotten what the approximate balance had been the last time. I knew I was "losing" money but I really didn't want to know how much and I didn't want to sell and lock in the losses. It was fun to watch my accounts climb back out from the red, though that took awhile. Now it's even more fun to look at the cost basis for some of my purchases back then. When the market crashes again - and it will - I hope to again stay the course.

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Re: What was the 2008 crash like in real time?

Post by fishboat » Tue Jun 23, 2015 11:30 am

It was a scary time in my memory. I didn't change a thing, kept buying, and rode it out.

For the OP...if you want to get some "feel" for it I'd suggest listening to the two following radio programs. Both are from Ira Glass's "This American Life" in conjunction with Planet Money. At the time, TAL was being broadcast at a time that coincided with me working in my woodshop on the weekends. Both programs stopped my work and I just sat there and listened.

Both programs tell a compelling story:

http://www.thisamericanlife.org/radio-archives#2008

Listen to episode numbers 355 & 365

(edit: should have mentioned..the 355 episode was toward the beginning of the crash & the 365 episode was just after Lehman went down)
Last edited by fishboat on Tue Jun 23, 2015 11:43 am, edited 2 times in total.

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ResearchMed
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Re: What was the 2008 crash like in real time?

Post by ResearchMed » Tue Jun 23, 2015 11:37 am

NateH wrote:This wasn't a part of the stock market crash, but related.

Families selling or moving up in the housing market got trapped as they home equity evaporated.

Some unlucky ones could have sold their home for a profit early in the decline, but - hoping for a few thousand more - followed the housing market lower and lower until they couldn't make a profit at all.
"Profit"?

It was a lot worse for too, too many.

As they "waited" and watched their home values decline, they ended up underwater... and kept going deeper.

At this point, they couldn't even backpeddle to exchange for a smaller/less expensive home, or even a small apartment to rent, because their Albatross/Homes continued to drag them down.

We were "lucky". We watched our home (purchased in 2002) value decline to be just about what we paid for it, after having watched an unexpected but nice appreciation.
We neither wanted nor needed to sell, but it was not a particularly nice feeling, as we did NOT know "where it was going to end".

We are now back to about that same "high" value.
(And the local market seems healthy. But yup, we thought the same in 2006-2007...)

RM
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whatusername?
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Re: What was the 2008 crash like in real time?

Post by whatusername? » Tue Jun 23, 2015 11:43 am

fishboat wrote:It was a scary time in my memory. I didn't change a thing, kept buying, and rode it out.

For the OP...if you want to get some "feel" for it I'd suggest listening to the two following radio programs. Both are from Ira Glass's "This American Life" in conjunction with Planet Money. At the time, TAL was being broadcast at a time that coincided with me working in my woodshop on the weekends. Both programs stopped my work and I just sat there and listened.

Both programs tell a compelling story:

http://www.thisamericanlife.org/radio-archives#2008

Listen to episode numbers 355 & 365
The Giant Pool of Money was fantastic, and I remember listening to it the week it was released. It was nice to be able to understand what was happening when I had previously had no idea how a mortgage-backed security could cause so much havoc. The follow up on credit default swaps was timely, to say the least.

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Re: What was the 2008 crash like in real time?

Post by feh » Tue Jun 23, 2015 11:48 am

ajacobs6 wrote:Did everyone here stick to their strategies during the crash?
I was not a boglehead in 2008, and we were 100% equities. Sizable portfolio also, as opposed to just starting the accumulation phase.

Didn't have a strategy to follow, but I knew enough not to sell. Kept buying in 401K/IRA. I stopped looking at the account statements, because the raw numbers were just too depressing.

It wasn't fun.

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Re: What was the 2008 crash like in real time?

Post by livesoft » Tue Jun 23, 2015 11:49 am

This thread made me go through some of my posts from back then. Here is an interesting thread:
http://www.bogleheads.org/forum/viewtop ... 60#p411160
where I wrote in Feb 2009:
livesoft wrote:Just imagine the posts on this forum in the year 2014 when the stock market drops by 10%. All the newbies will be gnashing their teeth and beating their breasts. The folks who were around in 2008-2010 will simply think, "Hmmm."
Here is a thread on rebalancing from then:
http://www.bogleheads.org/forum/viewtop ... =1&t=32256
Last edited by livesoft on Tue Jun 23, 2015 11:53 am, edited 1 time in total.
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Re: What was the 2008 crash like in real time?

Post by surveyor » Tue Jun 23, 2015 11:50 am

I really, really hope to never see an economic and market condition like that ever again. I think everyone knew someone who got laid off and you just knew they weren't going to find a job, at least a job similar to what they were doing and making. There was a lot of despair. Unless you were in healthcare, education or a federal employee it seemed you were affected. Investments were one thing but I felt lucky to even have a job (even though as a small business owner I didn't always get paid). Our company laid off good people. 401k balances weren't too high (very early 30's) and the loss seemed kind of trivial or not even real. I do recall feeling like my every two week contribution was essentially gone by the time the next two week contribution came. Like throwing money into a pit.

We had a kid born in 2008 and another born in 2009 almost a year later. That was a challenging time in a lot of respects.

With fewer workers all striving to stay employed, 2009 and 2010 productivity rates were insane. Check the BLS.

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Re: What was the 2008 crash like in real time?

Post by dh » Tue Jun 23, 2015 11:52 am

ajacobs6 wrote:I'm in my 20's, so I was not investing in 2008. I have 20% in bonds because I'd like to have some money to buy low if the market crashes. Did everyone here stick to their strategies during the crash? Did some people here buy a ton of stocks when they were tumbling?
Great question. I went off my game plan (50 Int./50 US; 60/40 stocks to bonds) and rebalance only once per year. I remember several points when I kept thinking this has to be it (this is the bottom!) and rebalanced several times within one year. Needless, to say I learned what the phrase "don't try to catch a falling knife" truly means.

I would have far better off staying the course, letting the Mr. Market what Mr. Market wanted to do, then rebalance back into equities one time per year. I will not make the same error. Having said that, I do not suggest you do what I do. I do suggest you do something I did not do: create a written plan to keep your emotions in check and stay the course (not just something in your head--my error).

Remember ajocobs6, you have a long time horizon of investing ahead. Rather than wish for specific market valuations, interest rates, etc. I would trade for a longer time horizon!!! You do have that. Use it to your advantage.

Best wishes!

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