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Old 11-25-2008, 06:45 PM   #1
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This Time

I was saying to the wife the other day that I thought this downturn might be a little different than the real old ones. For instance, I think that it may harm the Harvard endowment crowd a lot more than the working stiff. I always judge this against the last several episodes.

Like in 1987 and 2001, when I looked out over the Sausalito Yacht Harbor and wondered how many of these customer's yachts were owned by doctors, lawyers, and business executives who had recently just lost nearly half of their net worth. While the firemen testing the hydrant,the cop on the beat and the guy skin diving for lost eye glasses had come out comparatively well.


After the dot-com-bomb,which has been widely misunderstood as a failure of new technologies to change the world, as opposed to yet another Wall Street caused implosion I pointed to the fact that the new technologies did change the world. Amazon and Ebay and Google and many others have changed the business world forever. No over-hype there.I well remember when it was a novelty to see a telephone brought to a table in the Polo Lounge of the Beverly Hills Hotel. Who needs a house phone anymore,they've got a fax machine in their Mercedes and a cell phone permanently attached to their ear.


Yet, once again another smash-up.

I went for dinner at, "Jeanty at Jack's" in San Francisco recently. Alfred Hitchcock ate there so much, when it was just called "Jacks", that he had his own private wine cellar.I certainly didn't need the reservations I'd made. Very slow Saturday night. Yet,the pub across the bay in Berkeley was packed. Has everyone just moved down scale? Perhaps, but I think it's more than that.

I think this time rich folk are going to get hurt big-time and the long haul trucker, if he can keep his job, which is a big if, will be all right.

As I told my buddy the other day. "I am going to name a job that is bullet proof. Not vulnerable to hi-tech or off-shore replacement in any way shape or form. What is it? Beer truck driver. They aren't ever going to stop drinking beer and you can't ship it over the Internet."

boont
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Old 11-25-2008, 07:35 PM   #2
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Bet against the rich folks at your own risk... The rich folks I know don't seem to suffer too much right now. For them it's business as usual. They always seem to land on their feet no matter what. Now, the people who lived like they were rich, buying things they couldn't afford, those are the people who are going to take a bath...
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Old 11-25-2008, 07:46 PM   #3
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I was saying to the wife the other day that I thought this downturn might be a little different than the real old ones.
It's always really different this time...
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Old 11-25-2008, 07:49 PM   #4
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I think this time it is different than the 1970s and earlier. There are several issues coming together at once.
1. The number of people invested in stock/bond etc markets is greater
2. Debt load of all levels of society greater
3. Debt load of the all levels of government greater
4. Everyone will be affected by housing market decline - even if they have their house paid in full
5. Expectations of what is expected out of life is greater
6. We don't know what will happen next
7. The seeds of a greater problem are being sowed now.

http://www.jeantyatjacks.com/jeanty-dinner.pdf
nice menu - how did you know about the place?
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Old 11-25-2008, 08:28 PM   #5
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6. We don't know what will happen next
How is that different from the 1970s?
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Old 11-25-2008, 08:34 PM   #6
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I think this time it is different than the 1970s and earlier. There are several issues coming together at once.
1. The number of people invested in stock/bond etc markets is greater
2. Debt load of all levels of society greater
3. Debt load of the all levels of government greater
4. Everyone will be affected by housing market decline - even if they have their house paid in full
5. Expectations of what is expected out of life is greater
6. We don't know what will happen next
7. The seeds of a greater problem are being sowed now.
can't this be said of most every downturn?
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Old 11-25-2008, 08:36 PM   #7
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Well it's certainly true that rich people have more money to lose so they'll end up losing the most in absolute dollar terms . . . but I'm not sure that is the right way to judge things. Who's in better shape, the guy who started with $2MM in the bank and just lost 50% or the single mom with $202.00 in the bank and just lost her job?

Remember also that this isn't a 1987 style stock market crash, or even 2001. This started because millions of people can't afford their mortgage. And those that still can are seeing their home values go down by historic proportions. When you talk about the balance sheet of a typical family, you're looking mostly at residential real estate on the asset side of the ledger. As much as this may seem like a Wall Street centric crisis, these "Joe Six Pack" cops and plumbers are getting hurt pretty badly, even if they manage to keep their jobs.
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Old 11-25-2008, 09:42 PM   #8
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After the dot-com-bomb,which has been widely misunderstood as a failure of new technologies to change the world, as opposed to yet another Wall Street caused implosion I pointed to the fact that the new technologies did change the world. Amazon and Ebay and Google and many others have changed the business world forever. No over-hype there.
Personally, I don't think I ever heard anyone say the dotcom meltdown was a failure of technologies to change the world. I've always heard (and thought) that it was just another bubble situation. They are all caused by new technologies being created, and then too many people getting too excited over the opportunities to make money, because "it's different this time".

Quote:
I think this time rich folk are going to get hurt big-time and the long haul trucker, if he can keep his job, which is a big if, will be all right.

As I told my buddy the other day. "I am going to name a job that is bullet proof. Not vulnerable to hi-tech or off-shore replacement in any way shape or form. What is it? Beer truck driver. They aren't ever going to stop drinking beer and you can't ship it over the Internet."
I agree with Firedreamer. The rich tend to stay that way. It's usually second or third generation rich that lose the fortune, and they don't lose it in the stock market. More like Vegas, or maybe up their noses. And as far as the beer truck driver, just wait until I get me teleporter working...
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Old 11-25-2008, 09:52 PM   #9
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"People who go broke in a big way never miss any meals. It is the poor jerk who is shy half a slug who must tighten his belt."
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Old 11-25-2008, 09:54 PM   #10
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I think the future looks bright for me. For the rest I dont know. But in the end ill do okay Maybe its different this time
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Old 11-25-2008, 10:02 PM   #11
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can't this be said of most every downturn?
"I think this time it is different than the 1970s and earlier."
This is a key term - that I may not have been clear about.
In the 70's and earlier, most of the items I mentioned were not true.
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Old 11-25-2008, 10:08 PM   #12
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How is that different from the 1970s?
In the 70s we knew that the problems were caused by the oil shocks.

We did not know, so much, that is was because our factories were out of date.

We also knew it was because of the guns & butter policies of the 60s.

In other words; we could understand the why and how it could play out.

Now, it is difficult to understand the causes and how it will play out.

Bottom line, this time we are not willing to take the medicine we need and sowing the seeds of future and worse problems.

That is why I will be focusing on investments outside the USA in the future.
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Old 11-25-2008, 10:22 PM   #13
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Chowhound

"Jeanty at Jack's" "how did you know about the place?" dex

Well, I'm a long time San Francisco restaurant buff so I keep up with this stuff. Also, like to read "Chowhound" which is like Zagat's guide except on the Internet.

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Old 11-25-2008, 10:30 PM   #14
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I've always thought that Jeanty at Jack's was a place for an old-fashioned "businessman's lunch" not a Saturday night place. My company had its holiday lunch there last year but couldn't get reservations the year before.
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Oh yeah?
Old 11-25-2008, 10:44 PM   #15
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Oh yeah?

"It's always really different this time..." Nords

Nords, this is really getting tiring. In the school yard the bully always says, "Oh, yeah?" to everything the other kid says.

Well, my answer to your "Oh yeah"? Is... "Yeah".

If you don't think it's different this time then you are not paying attention. When do you recall every major bank in the U.S. being technically bankrupt?

When were all three major automakers at or near bankruptcy?

When was it that all financial institutions world-wide from Switzerland, to Germany, to Saudi Arabia, to China, to Japan all on the ropes?

Here is the latest news...

" WASHINGTON (AP) - Rolling out powerful new weapons against the financial meltdown, the Bush administration and the Federal Reserve pledged $800 billion Tuesday to blast through blockades on credit cards, auto loans, mortgages and other borrowing. Total bailout commitments, loans and pledges of backing neared a staggering $7 trillion."

Without these massive government bailouts you and me and ever one else is sunk. Do you deny this?

Nords, when did this happen before?

Be specific. We are long past funny lines like "psst..." and "it's different this time, yeah right?"

b.
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Old 11-26-2008, 12:48 AM   #16
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It is always different each time. The underlying causes vary from bubble to bubble, the social and economic factors also vary. And each time the pundits scream it is different this time and you must do things differently investing wise. They have always been proven wrong in the long term. Now you can glue yourself in front of the TV and listen to CNBC or whatever flavour of news you like and make investing decisions based on the "sky is falling" or you can ignore that which you cannot control, assume that the US and global economy will recover and invest as you have been and it will most likely work out OK for all in the end. If it doesn't all these discussions about how to survive/profit from the bear market will be pointless and you should invest in guns, bullets, gold and a usefull end-of-the-world-as-we-know-it skill...

DD
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Old 11-26-2008, 02:18 AM   #17
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DblDoc, your reply is so full of red herrings about guns, bullets and the sky is falling that I can hardly understand what you are saying. I certainly don't recognize my own comments in your version.

I mentioned none of that. Yes, it will come back, I assume that. That is not the point.

The point is to understand what the hell is going on. And this stupid pig headed refusal to admit the obvious is not only dangerous it borders on being irresponsible.

Someone is going to have to take responsibility for telling people on this site to not protect themselves with enough ready cash for the near term.

No one I know of is advising dumping out at this point. Again, that is not the point.

But to continue to goad and pretend "buying opportunities" just because stocks are cheaper than they were at the peak is going to cause some poor fool to lose their retirement options.

I joined this site to share in the wonders and the novelty of early retirement from a life time of work. So I strenuously object to the regular suspects here who regularly brow beat anyone who doesn't agree with them.

boont
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Old 11-26-2008, 04:51 AM   #18
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DblDoc, your reply is so full of red herrings about guns, bullets and the sky is falling that I can hardly understand what you are saying. I certainly don't recognize my own comments in your version.

I mentioned none of that. Yes, it will come back, I assume that. That is not the point.

The point is to understand what the hell is going on. And this stupid pig headed refusal to admit the obvious is not only dangerous it borders on being irresponsible.

Someone is going to have to take responsibility for telling people on this site to not protect themselves with enough ready cash for the near term.

No one I know of is advising dumping out at this point. Again, that is not the point.

But to continue to goad and pretend "buying opportunities" just because stocks are cheaper than they were at the peak is going to cause some poor fool to lose their retirement options.

I joined this site to share in the wonders and the novelty of early retirement from a life time of work. So I strenuously object to the regular suspects here who regularly brow beat anyone who doesn't agree with them.

boont
I really think we can all identify many, many things that were wrong, are wrong, or now going wrong and, potentially some that could go wrong, in the near to mid-future. But being, more or less, "ordinary" people, just what can we do other than what we think is prudent and right for ourselves? And, after all, we have our opinion(s), and are entitled to them, IMHO. One of the things I have liked about this board, usually, most read others opinions, and if they do not agree they just "let it slide" or at least provide, respectfully, their own differing one. Frankly, identifying a problem is, more or less, easy, it is the solutions that are difficult. And it is ALWAYS different, IMO history does not repeat itself; it just seems that way.
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Old 11-26-2008, 09:07 AM   #19
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The point is to understand what the hell is going on. And this stupid pig headed refusal to admit the obvious is not only dangerous it borders on being irresponsible.

Someone is going to have to take responsibility for telling people on this site to not protect themselves with enough ready cash for the near term.
Frankly I haven't seen much of that on this site. I have, however, seen several comments about "having 5 years of cash" etc. etc. It's worth considering that much of these basics (such as having an emergency fund; or maybe "buckets" of investments; or an asset allocation that fits your tolerance for risk) have been covered extensively on this site. So much so that repeating them as a preamble to every post is not really necessary.

I read the "It's different this time" comments as an admonishment to stick with the plan you started with and not abandon historically sound investment principals during a market panic. Sage advice, in my view. It's also a reminder that every crash (and bubble too) is accompanied by people who claim that "this time is different". Those people have invariably been proven wrong and will again in this crisis, unless of course . . . this time is different.
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Old 11-26-2008, 09:19 AM   #20
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I'd also add that there is no such thing as a "safe" self financed retirement plan. It's an exercising in balancing risks. Chief among these is the risk of losing purchasing power vs the risk of losing principal. These risks are compounded by the risk that emotionally driven investing almost always leads people to protect against one when they should be protecting against the other.
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