2008 crash - any witnesses who didnt adjust investing?

[UnleashHell]

I did have Lehman. I also had a company called FFH which did very nicely at that time. my portfolio stayed the same in 2008. Just a shame it was so small.
I evened out Lehman with a nice big chunk of BOA shares at a very low level.
paid for most of my divorce!!

[StarBright]

Lol I bought Ford for something like 50 cent or a dollar a share during the recession. Didn't make me rich but they're still around. Glad I stayed away from Leman. I was soooo tempted for awhile.

We never stock pick but bought Ford and BOA during the recession, when things are a buck a share, you think, why not?. Of the three major US car companies Ford was definitely sitting better than the other two, but stock prices took the same hit across the board.

[Villanelle]

Just to clarify, I'm certainly not saying it wasn't a very hard time, or that many people weren't hurt and truly struggling and suffering.  I just never considered, or heard anyone else say they considered, that it might be a fundamental shift in the way things were done. 

Like Spartana, I lived in SoCal.  My DH is military (which means he and his peers were basically entirely insulated from employment concerns).  I worked at a university (their non-profit/research foundation) and we couldn't keep ourselves fully staffed.  We were always hiring.  I was there two years and I don't think there was every a time we weren't actively looking to fill empty desks. Our home, purchase in 2004, lost probably 25% of its value (from purchase price, more from the high).  We had upgraded rom a home we owned 2001-2004, on which we did well so we had a lot of equity, and more importantly, we didn't have to sell even when we left.  Our neighborhood was moderate, older townhouses, and I think there was only 1 foreclosure, likely because there were longer term owners, not a lot of moving, and because most people probably didn't stretch to get in to these homes. But the people we know who got weird loan products in order to be able to afford giant new construction with upgrades did often have yard after yard with "foreclosure" or "short sale" signs.   As I said, I have friends and acquaintances who lost jobs and homes, and it was awful to see, but it never felt like anything more than a regular ol', very bad, recession, whatever that means.  It never felt like we weren't going to recover and eventually get back to business-as-usual, as a nation (not that it wouldn't have long term, serious repercussions for individuals). 

It was just interesting for me to read here several people saying they felt this might be different and more than just a severe, recoverable downturn, as that perspective was entirely absent from my radar until it came up here recently. 

[Blueberries]

Just to clarify, I'm certainly not saying it wasn't a very hard time, or that many people weren't hurt and truly struggling and suffering.  I just never considered, or heard anyone else say they considered, that it might be a fundamental shift in the way things were done. 

Like Spartana, I lived in SoCal.  My DH is military (which means he and his peers were basically entirely insulated from employment concerns).  I worked at a university (their non-profit/research foundation) and we couldn't keep ourselves fully staffed.  We were always hiring.  I was there two years and I don't think there was every a time we weren't actively looking to fill empty desks. Our home, purchase in 2004, lost probably 25% of its value (from purchase price, more from the high).  We had upgraded rom a home we owned 2001-2004, on which we did well so we had a lot of equity, and more importantly, we didn't have to sell even when we left.  Our neighborhood was moderate, older townhouses, and I think there was only 1 foreclosure, likely because there were longer term owners, not a lot of moving, and because most people probably didn't stretch to get in to these homes. But the people we know who got weird loan products in order to be able to afford giant new construction with upgrades did often have yard after yard with "foreclosure" or "short sale" signs.   As I said, I have friends and acquaintances who lost jobs and homes, and it was awful to see, but it never felt like anything more than a regular ol', very bad, recession, whatever that means.  It never felt like we weren't going to recover and eventually get back to business-as-usual, as a nation (not that it wouldn't have long term, serious repercussions for individuals). 

It was just interesting for me to read here several people saying they felt this might be different and more than just a severe, recoverable downturn, as that perspective was entirely absent from my radar until it came up here recently.

Unfortunately it wasn't.  Many of the things that led to the Great Recession are still around and happening.

As to the other things you've said, it isn't just people here that feel that way.  The Great Recession was definitely not your run-of-the-mill recession.  Something like 1/55 homes were in foreclosure, unemployment was the highest it had been in 50+ years, large banking institutions were failing, etc.  That isn't a normal occurrence for a recession. 

[Villanelle]

Just to clarify, I'm certainly not saying it wasn't a very hard time, or that many people weren't hurt and truly struggling and suffering.  I just never considered, or heard anyone else say they considered, that it might be a fundamental shift in the way things were done. 

Like Spartana, I lived in SoCal.  My DH is military (which means he and his peers were basically entirely insulated from employment concerns).  I worked at a university (their non-profit/research foundation) and we couldn't keep ourselves fully staffed.  We were always hiring.  I was there two years and I don't think there was every a time we weren't actively looking to fill empty desks. Our home, purchase in 2004, lost probably 25% of its value (from purchase price, more from the high).  We had upgraded rom a home we owned 2001-2004, on which we did well so we had a lot of equity, and more importantly, we didn't have to sell even when we left.  Our neighborhood was moderate, older townhouses, and I think there was only 1 foreclosure, likely because there were longer term owners, not a lot of moving, and because most people probably didn't stretch to get in to these homes. But the people we know who got weird loan products in order to be able to afford giant new construction with upgrades did often have yard after yard with "foreclosure" or "short sale" signs.   As I said, I have friends and acquaintances who lost jobs and homes, and it was awful to see, but it never felt like anything more than a regular ol', very bad, recession, whatever that means.  It never felt like we weren't going to recover and eventually get back to business-as-usual, as a nation (not that it wouldn't have long term, serious repercussions for individuals). 

It was just interesting for me to read here several people saying they felt this might be different and more than just a severe, recoverable downturn, as that perspective was entirely absent from my radar until it came up here recently.

Unfortunately it wasn't.  Many of the things that led to the Great Recession are still around and happening.

As to the other things you've said, it isn't just people here that feel that way.  The Great Recession was definitely not your run-of-the-mill recession.  Something like 1/55 homes were in foreclosure, unemployment was the highest it had been in 50+ years, large banking institutions were failing, etc.  That isn't a normal occurrence for a recession.

Yes.  I guess I'm not articulating quite what I mean.  It was a terrible--far worse than an average-recession.  More people lost more money (and jobs, and homes) than in a less-severe recession.  But that's very different than fearing it could lead to the collapse of financial markets as we knew them. 

[ctuser1]

Just to clarify, I'm certainly not saying it wasn't a very hard time, or that many people weren't hurt and truly struggling and suffering.  I just never considered, or heard anyone else say they considered, that it might be a fundamental shift in the way things were done. 
....
It was just interesting for me to read here several people saying they felt this might be different and more than just a severe, recoverable downturn, as that perspective was entirely absent from my radar until it came up here recently.

Unfortunately it wasn't.  Many of the things that led to the Great Recession are still around and happening.

As to the other things you've said, it isn't just people here that feel that way.  The Great Recession was definitely not your run-of-the-mill recession.  Something like 1/55 homes were in foreclosure, unemployment was the highest it had been in 50+ years, large banking institutions were failing, etc.  That isn't a normal occurrence for a recession.

Yes.  I guess I'm not articulating quite what I mean.  It was a terrible--far worse than an average-recession.  More people lost more money (and jobs, and homes) than in a less-severe recession.  But that's very different than fearing it could lead to the collapse of financial markets as we knew them.

Probably just a matter of perspective.

I worked at a consulting firm before the recession, then moved to a big investment bank right before the crisis hit really hard, went through three cycles of layoffs where my position was made redundant and I hung on by managing to jump onto something else, and nine other cycles where my position was not impacted directly but many others around me were!

Between 2008 Oct till well into 2009, there were persistent fears that the faith/trust based monitory system is on the brink of collapse. The biggest crisis moment, when everyone was afraid we were just about to collapse into a cashless bartering economy was right after Lehman.

I forgot who, probably Bernake, or someone similarly high ranking like him have admitted later that not pushing hard enough to save Lehman from collapsing was the most terrible miscalculation they had made in their careers. The "right wing" lunatics gang in the legislature and government were blocking effective intervention till this point, and caused the system to come much closer to collapse than it had to!!

[EscapeVelocity2020]

Yes.  I guess I'm not articulating quite what I mean.  It was a terrible--far worse than an average-recession.  More people lost more money (and jobs, and homes) than in a less-severe recession.  But that's very different than fearing it could lead to the collapse of financial markets as we knew them.

It was a very weird and unpredictable time once the derivatives (and associated credit default swaps) that were rated AAA became impossible to value (or at least, no one wanted to have to mark them to market).  Had the Fed and Congress not stepped in after the collapse of Lehman Brothers, it is hard to know if the financial system would've collapsed and had to be recapitalized or if we would have eventually hit bottom.  Probably worth watching "Too Big to Fail" if you are not familiar with the source material.  One shocking statement in a related Wikipedia entry -

Over the next six months, TARP was dwarfed by other guarantees and lending limits; analysis by Bloomberg found the Federal Reserve had, by March 2009, committed $7.77 trillion to rescuing the financial system, more than half the value of everything produced in the U.S. that year.[19]

We are still in a somewhat experimental global economy running on 'quantitative easing' and negative interest rates as a result of 2008, the Fed lost its appetite to unwind its balance sheet last year when the market dropped amidst quantitative tightening.

[Imma]

I've heard that in the US you can just hand in your keys to the bank and you don't have to pay the mortgage anymore, but in my country you still have to pay the remaining debt even when the house is sold at auction by the bank.

That is only true for 12 US states:
Alaska, Arizona, California, Connecticut, Hawaii Idaho, Minnesota, North Carolina, North Dakota, Texas, Utah, and Washington

There are 38 recourse states where the lender can still pursue you. It is a different matter, however, that the lender may decide you are so broke it is better to cut the loss and write off the loan. However, if you have a good steady job or some other reason why banks feel they can extract the money from you then they will chase you.

Source: https://www.legalmatch.com/law-library/article/what-is-a-recourse-state.html

The reason why a next recession scares me is because this time we don't have the remedies that we had 10 years ago: we can't possibly lower interest further than this. And the EU is not going to survive a second big political crisis either.

Europe's problem is not tools, it is demographics.

Economic Output = # of working age people X productivity.

The above formula is an accounting truth, not an opinion.

Most European countries have a shrinking population. That is a headwind that no amount of economic tools can help!! UK, being the most immigrant friendly, probably stands the best chance of returning good economic growth - brexit or not - in the next couple of decades!!

I can relate with this because I live in a state (Connecticut) in US that is battling the same macro issue. Immigrants don't really settle in CT - they go to either NYC or Boston. So we had the population shrink in CT for the past 10 years. It is showing signs of reversing only in the last year or so.

I'm hopeful that the current phase of Victor Orban's will pass and EU countries can become immigrant friendly someday.

I'm in one of the states in the EU that has the best birthrate (relatively) and is fairly open to immigrants, but I share your fears. And I think this goes for large areas of the US as well.

There's a big correlation between high income and a higher birthrate and higher acceptance of immigrants in the EU countries. Many countries with a low birthrate are dirt poor and have high unemployment levels. People feel very insecure about their future and that's why they aren't starting families and are hostile to immigrants. In wealthier countries this is much less of an issue, plus there are more facilities to make life a little bit easier for young parents, like paid parental leave. What scares me for the future is that the difference between the affluent (urban) areas and the more rural poor) areas is getting bigger and bigger. And the UK is a prime example of that. London will always be booming, but there are many areas in the UK that are very impoverished.

As for how close we came to the total collapse of the banking system: when the Great Recession hit I was a political science student. In 2009 I was in an economics class taught by professor who was also in my country's Senate (which is a parttime job) and she managed to get our State Secretary of Finance as a guest speaker who had been in that job since 2007. In Oct 2008 he nationalized the biggest bank of the country and a second big bank collapsed. Less than a year later, this man told our class "you have absolutely no idea how bad it was and how close we came" and he was sincere. All the back-up plans for a complete collapse of the banking systems were ready to be set in motion - as in, blocking all accounts, emergency rationing, etc.

In 2019 we know how the story ends, but in late September and early October 2008 nobody had any idea what was going to happen next, on the news every day a different bank was collapsing. First the American banks, then the first week of October the biggest bank in my country was nationalized, later that week an Icelandic bank collapsed that was very active in our market, and then the next week another very well known bank was the victim of a bank run and also collapsed. At that point some of the most important institutions had collapsed seemingly without any warning and many people were in deep trouble. Everyone knew someone who was directly affected, who had lost their life savings, who got into debts, many businesses got into big trouble because they suddenly lost all their credit facilities which meant they had to let go workers. Everything looked very bleak from my perspective.

[seattlecyclone]

I held on to my investments in 2008, kept investing in my 403(b), and even increased my payroll contributions a bit. I knew that was the right thing to do for the long term and I did it. This was perhaps a bit easier because I was still in grad school and had a net worth of about 2% what we have now. It seemed like a lot at the time though! I like to think we'll be able to stay the course over the next recession now that we're FIREd with a much bigger stash. Time will tell.

[ctuser1]

Probably worth watching "Too Big to Fail" if you are not familiar with the source material.

Good movie. I just watched yesterday after reading your comment. It's interesting and It explains the systemic risk in much simpler yet accurate terms than I thought a Hollywood movie could!!

It's not the complete picture, however! It kinda paints the bankers as just victims of circumstances. That is very much not a complete picture. Paulson, the treasury secretary, is shown as the "hero" in that movie. He was in GS before his government role. There, he was a big time champion of the deregulation bandwagon leading up to the Gramm-Leach-Bliley act of 1999. This act effectively rescinded the Glass Steagal act from 1933 that mandated that main street and wall street banking be kept separate. This new act officially allowed mixing them together again and helped create the too big to fail entities.

Many of the "heroes" in this move depicted (correctly) as saving our a**ses during 2008 won't come out smelling of roses when you look at what their roles were leading up to the crisis.

[EscapeVelocity2020]

Probably worth watching "Too Big to Fail" if you are not familiar with the source material.

Good movie. I just watched yesterday after reading your comment. It's interesting and It explains the systemic risk in much simpler yet accurate terms than I thought a Hollywood movie could!!

It's not the complete picture, however! It kinda paints the bankers as just victims of circumstances. That is very much not a complete picture. Paulson, the treasury secretary, is shown as the "hero" in that movie. He was in GS before his government role. There, he was a big time champion of the deregulation bandwagon leading up to the Gramm-Leach-Bliley act of 1999. This act effectively rescinded the Glass Steagal act from 1933 that mandated that main street and wall street banking be kept separate. This new act officially allowed mixing them together again and helped create the too big to fail entities.

Many of the "heroes" in this move depicted (correctly) as saving our a**ses during 2008 won't come out smelling of roses when you look at what their roles were leading up to the crisis.

Glad you watched it, makes my day!  Indeed it is a digestable 'intro to the financial crisis" 101 course.  Economists have been looking at this for years (did the Fed do enough, did they do too much?) and I'm sure many interesting biographies could be written about the main characters.  What worries me lately is that the little bit of protection that we taxpayers paid for handsomely back then has been rolled back egregiously now.  We are just financially manipulating what looks like economic progress now because we think we have to.  The US is in a leadership position, being able to afford to resist lower borrowing rates or having giant off balance sheet assets, and yet we are caving in...

[sisto]

I stayed the course and even upped my 401K contributions when I got my annual raise. It was hard to see, but I kept telling myself dollar cost averaging, I'm buying on sale right now. If I recall correctly I lost nearly 50% of my portfolio value. I remember hearing and talking to people about home loans and thinking interest only loans were dumb. People just kept arguing with me that market was just going to go up. I would say, but you are only paying interest and nothing towards your principal. It fell on deaf ears and I know a few people that lost their house/s. I will add that I also survived the dot com bubble and bought my house in 1999. To me that one was harder than 2008, but it was more due to my financial and career situation at the time of both.

[Villanelle]

I stayed the course and even upped my 401K contributions when I got my annual raise. It was hard to see, but I kept telling myself dollar cost averaging, I'm buying on sale right now. If I recall correctly I lost nearly 50% of my portfolio value. I remember hearing and talking to people about home loans and thinking interest only loans were dumb. People just kept arguing with me that market was just going to go up. I would say, but you are only paying interest and nothing towards your principal. It fell on deaf ears and I know a few people that lost their house/s. I will add that I also survived the dot com bubble and bought my house in 1999. To me that one was harder than 2008, but it was more due to my financial and career situation at the time of both.

I almost choked when I heard that "neg-am" loans were a thing.  Pay *less* than the interest each month, so you are intentionally growing the amount due!  WTF?  Who would to that (and for a primary residence!)?  Well, I know at least one "who", and unsurprisingly, it ended badly for them. 

If I recall correctly, this particular person's loan product allowed them to pay the P+I payment, the IO payment, or the neg-am payment.  They chose the latter.  It *almost* serves the bank right for even offering such nonsense that they had to foreclose and when they did so, they lost *more* than the original loan amount. 

[Dicey]

If I recall correctly, this particular person's loan product allowed them to pay the P+I payment, the IO payment, or the neg-am payment.  They chose the latter.  It *almost* serves the bank right for even offering such nonsense that they had to foreclose and when they did so, they lost *more* than the original loan amount.

OMG, I'd forgotten about those!

I remember reading an article in the LA Times about young homeowners. One woman in particular went on and on about why she needed a place with SS appliances and granite countertops. In the next breath she justified her overspending by saying the market would go up, then, "It has to go up." It made me wince at the time. IIRC, it was less than a year before the crash began. I always wondered what happened to her. I suspect it didn't end well.

[Rollin]

Dumb luck - but I pulled everything just before the crash and put all back in just after the low point. Was getting super returns on the way up. Again, market timing, but not based on anything but a gut feeling. Even though I made out very well I will never do that again. Retired in 2016 and only make minor adjustments from time to time with consultation of my Vanguard advisor.