Did 2008 Recession Spoil You?

[Olbidness]

Having retired July of last year I wondered how I would react to a market correction now that I don't have an actual paycheck coming in. I have 2 years of living expenses in cash so that helps with sleeping at night. I would like to think having survived the black Monday in '87, dot-com bust, the great recession in 2008 have all contributed to make me a more seasoned investor. Now as before I look at a market downturn as a buying opportunity, I pray that inclination does't bite me in the buttocks.

 

[copyright1997reloaded]

But I tend to take a long view. Like 15-20 years out, even though I'll be 80 by then.

I think one of the most underestimated and under used phrases in the market is "over time". IMO, most things people worry about in the short term get sorted out over the long haul.

Downdrafts are not pleasant but for me, it allows me to go "back in time" so-to-speak and take advantage of pricing on good companies that I missed back then. Wouldn't it be nice to go back to 2016 and buy Apple at $92?

Just remember that if Apple is back at $92, there will be all kinds of news about the economy suffering, about them losing market share, about soft phone sales, about ... in other words risk of further loses.

 

[ExFlyBoy5]

I haven't really paid too much attention to the ups/downs of the market recently. The news [-]noisemakers[/-] love to banter on endlessly about "DOWN 300 POINTS!!!" but with the market as high as it is, this works out to be a very small percentage.

At any rate, I do think there is a significant correction coming and I have planned accordingly. I am still pretty darn young, so I am not really sweating it too much. However, my Dad is approaching 91 years old and until (very) recently was weighted very heavily in stocks...but I have taken most of that off of the table. He was initially skeptical about reducing his stock holdings, but I told him he has REALLY won the game, so it was time to cash out.

 

[foxfirev5]

The OP are taking about stock market behavior.

Recessions are a different thing.

The Great Recession was a huge economic event regardless of what happened in the markets. Unemployment went way up - higher than it had been in a long time, and took a very long time to get back to “normal” range. Layoffs and foreclosures were everywhere. Credit is still tight.

And it did take several years for the markets to regain the old highs, while the economy was stuck in a slow growth environment.

I think people have short memories.

But yes - at these lofty levels a 10% stock market correction means nothing to me.

Get us back to early 2016 levels and I might start paying attention.

Oh, don't worry. I know the difference between the stock market and the economy. However there is a mighty strong correlation although the timing may vary considerably.
Working in a cyclical industry (construction), I always dealt with the situation that when stocks were cheap the job situation was usually shaky as well. Despite all that I kept buying for decades. More like a deer in the headlights than a financial wizard.

 

[copyright1997reloaded]

You do realize the "national debt" is completely made up? It has absolutely no meaning. Its simply a talking point that politicians like to throw around to make themselves look good and others bad.

The federal reserve (private company) prints its own money at will. The USD is no longer backed by anything. If our government needs more money they just print more.

If someone can point me in the direction where the national debt is id like to know. If you're going to direct me to a spreadsheet that shows a negative balance...skip it. Again...we print our own money...national debt is a joke. the government does not pay back loans they take from private companies.

Yes, they can print money at will. That doesn't mean that they can cause goods and services to be created at will. So let's play a game. Let's say they simply go 'poof' and give themselves $20 Trillion dollars to pay off all of the debt. What happens next? (I will give you a hint, it starts with i and isn't a phone.)

 

[kgtest]

But I tend to take a long view. Like 15-20 years out, even though I'll be 80 by then.

I think one of the most underestimated and under used phrases in the market is "over time". IMO, most things people worry about in the short term get sorted out over the long haul.

Downdrafts are not pleasant but for me, it allows me to go "back in time" so-to-speak and take advantage of pricing on good companies that I missed back then. Wouldn't it be nice to go back to 2016 and buy Apple at $92?

Yes, especially since I have a lot more cash. I bought at $96 back then. It's been my best move so far. Problem is, when do you sell....when AAPL looks to be tanking? When AAPL growth slows, whihc does happen in history but comes roaring back...or do you just keep holding today

 

[W2R]

With the market seemingly taking a 300+ point drop every day of late, my general reaction is 'meh!'.

Having white-knuckled the 2008 Great Recession and survived it quite profitably, I'm wondering if one of the side benefits was for folks to have learned to not over-react to such drops.

So, did anyone else change their view of market drops/corrections after 2008? In addition to now viewing market plummets as buying opportunities, are you more relaxed about a big air pocket than before '08? Did the recession of '08 spoil you or ruin you?

I feel more confident now that I can survive another crash. I don't think I am especially relaxed when the market drops, but I am not now (and never was) inclined to sell low or do anything, really, in response to these drops. I know what works for me, which is to do nothing, and luckily I find that for me fear has a tendency to produce exactly that result.

2008-2009 also taught me that the often repeated mantra of "This time it's different!" in some respects was just total hogwash, because the market did recover as always. So, maybe that will help in future crashes. Or, maybe not.

I feel like it's part of our job to reassure any newbie investors that may appear on the forum, and do some handholding if necessary. Whether now or in 2008-2009, I am always concerned that some may over-react and lose much of their retirement nestegg. But there hasn't been much or any handholding needed lately. I think that is probably because we have not had the giant market drops of 2008-2009; these are awfully small by comparison.

 

[Mdlerth]

That the sky hasn't fallen is proof that it's about to

I'm dodging answering the OP's question, and posing my own: Am I the only person who thinks this thread is amusing? (Admittedly, I also think "pull my finger" is funny. )

There will undoubtedly be bear markets again, but the next one hasn't even occurred yet and already I'm hearing "This time it's different?"

The market's gone up too far for too long. It's all based on Fed fiddling. Too much debt everywhere. Investors are too complacent. Buffett is stockpiling cash. CAPE10. Derivatives. China this, Russia that.

It's as if we just can't accept that the world may not be coming to an end.

 

[NW-Bound]

I'm dodging answering the OP's question, and posing my own: Am I the only person who thinks this thread is amusing? (Admittedly, I also think "pull my finger" is funny. )

There will undoubtedly be bear markets again, but the next one hasn't even occurred yet and already I'm hearing "This time it's different?"

The market's gone up too far for too long. It's all based on Fed fiddling. Too much debt everywhere. Investors are too complacent. Buffett is stockpiling cash. CAPE10. Derivatives. China this, Russia that.

It's as if we just can't accept that the world may not be coming to an end.

The world is not coming to an end. But it may go through 7 biblical years of famine. I think I can handle it.

 

[audreyh1]

Yes, people do have short memories.

I pay attention everyday, even without a market correction, market up or down, even though I do not trade every day. Gotta keep my eyes peeled for opportunities.

I deliberately picked an investment style that lets me ignore the markets for a whole year if I so choose!

 

[NW-Bound]

Sure. But you couldn't ignore the market, and still have to see what it is doing.

I like to see what the market is doing. It's interesting to see people running back and forth, and all the chaos.

The husband of my wife's sister truly does not care about what the market is doing. He has been in CD since around the time of 9/11. He couldn't hack the market gyrations.

PS. I don't have access to CNBC at the main home. I simply watch the indices on the Web, and look how my own stock holdings bounce like yo-yo. Lots of churning, running to and fro... And when I can't stand that craziness, I make a buy or sell against them.

 

[bigcmagor]

I would have to say that period of time ruined me as an investor and burned me out as a leader. Twenty years of investment gains and employer matching funds vaporized. Had to choose which 140 of 360 close-knit employees to lay off. Best friend and next door neighbor committed suicide - he was a home builder.


I've been in and out of the market since and recovered financially but scared to death with the prospect of facing those days again, especially on the verge of retirement.

 

[audreyh1]

Sure. But you couldn't ignore the market, and still have to see what it is doing.

I like to see what the market is doing. It's interesting to see people running back and forth, and all the chaos.

The husband of my wife's sister truly does not care about what the market is doing. He has been in CD since around the time of 9/11. He couldn't hack the market gyrations.

PS. I don't have access to CNBC at the main home. I simply watch the indices on the Web, and look how my own stock holdings bounce like yo-yo. Lots of churning, running to and fro... And when I can't stand that craziness, I make a buy or sell against them.

Oh I go through long periods of ignoring the markets. Gosh - it might sometimes be two months before updating any tracking spreadsheets.

If I’m watching during the year it’s purely for entertainment.

I don’t watch any broadcast TV let alone financial news networks. I have the CNBC app with a watch list and occasionally see some headlines. That’s way more than enough.

 

[Live And Learn]

There are only two things that worry me lately (a) sequence of return risks and (b) healthcare and being able to get "reasonably priced" coverage for pre-existing conditions since I still have 10 years to Medicare.

On the other hand, the last two years have brought me from being a daily market watcher to a being a busy retiree who has little time for watching television or reading the news (therefore no talking heads to get my panties in a bunch).

If things get really bad I reserve the right to freak out just as much as I did in 2008 - 2009 !

 

[NW-Bound]

Oh I go through long periods of ignoring the markets. Gosh - it might sometimes be two months before updating any tracking spreadsheets...

Two months is not as long as a year though.

Can you imagine logging to your account after 1 year, and see that you now have 60 cents on the dollar? Like in 1998?

Well, I am sure that, unless one is on an island cut-off completely from the outside world, he is not going to miss something like the Great Recession.

I did go for 2 months or longer without making a trade. But with the yo-yo market, I can pick up a bit of money here and there. I like it.

 

[audreyh1]

Two months is not as long as a year though.

Can you imagine logging to your account after 1 year, and see that you now have 60 cents on the dollar? Like in 1998?

Well, I am sure that, unless one is on an island cut-off completely from the outside world, he is not going to miss something like the Great Recession.

I did go for 2 months or longer without making a trade. But with the yo-yo market, I can pick up a bit of money here and there. I like it.

Of course, but I can go a year without paying attention if I so choose. That was the design.

It’s long term investing. Other than annual rebalancing I don’t care it there is a sudden move during a given year. If I miss a mid-year rebalancing, no big deal.

60 cents on the dollar in 1998? What was that? Maybe if you were holding mostly international currencies.

 

[marko]

Just remember that if Apple is back at $92, there will be all kinds of news about the economy suffering, about them losing market share, about soft phone sales, about ... in other words risk of further loses.

My comment was in reply to another poster who felt that we were currently in the midst of an economic "perfect storm". My point was that a good pullback allows one to 'go back in time' and take advantage of 'what you know now'. With a few rarities, good companies will survive and prosper over time.

But, as the OP, the real question is if the aftermath of 2008 emboldened you. It did me and the current violent swings are only interesting at best. I knew a lot less about the market 10 years ago but I did know that I had little choice but to hold on and ride it out. Selling everything (as my oft mentioned neighbor did in Feb 09) was not a good option.

 

[audreyh1]

But, as the OP, the real question is if the aftermath of 2008 emboldened you. It did me and the current violent swings are only interesting at best.

I can’t say it emboldened me as an investor. I think it made me slightly more conservative both in terms of equity exposure, and tilting my fixed income towards overall higher quality bonds.

But it does make me yawn at 10% corrections, although I am NOT yawning at CAPE10 currently far exceeding 2007 levels.

 

[Bikechuck]

In 2008-09 I had (i thought) 15 years of w*rk and saving in front of me, so while it hit me hard, beneath the barely suppressed panic I knew I had time to recover.

Ten years later, having just retired, I have concerns about sequence risk. So I suspect my white-knuckle moments will be amplified when the next BIG downturn occurs. The current volatility has my attention.

I was about to post something very similar. In 2008 I kept my allocation the same and just kept investing in my 401K. It did not bother me much at all.

The recent volatility has me concerned as I am now in the deaccumulation phase. If the erosion continues I will learn something(s) about myself. I hope that I behave well and in my own best interests.

 

[NW-Bound]

Oops, meant 2008 when some balanced funds became 60 cents on the dollar in a year.

Anyway, back to the OP's question, having been through the tech meltdown in 2001 and 9/11, and then the Great Recession, I will be able to handle the next downturn better.

But I don't think the GR will be repeated. Rather, we may just have a long drawn-out period of poor market returns for both stocks and bonds, causing retirees to slowly drain their stash.

With SS to supplement my expenses, I will be OK. I am also older now. Less time on earth to worry much about running out of money. I will most likely run out of time first.

Still want to make money when I can, because it is a challenge and fun thing to do. Can't travel all the time, and too much travel turns it into work.

 

[justakrusen]

I guess you're wife really likes her job (since you say you two already have more money than you'll ever spend and thus shouldn't have a need to work)?

Yes she does. The Grandkids also help. If only I could talk our kids into moving south.

 

[foxfirev5]

My comment was in reply to another poster who felt that we were currently in the midst of an economic "perfect storm". My point was that a good pullback allows one to 'go back in time' and take advantage of 'what you know now'. With a few rarities, good companies will survive and prosper over time.

But, as the OP, the real question is if the aftermath of 2008 emboldened you. It did me and the current violent swings are only interesting at best. I knew a lot less about the market 10 years ago but I did know that I had little choice but to hold on and ride it out. Selling everything (as my oft mentioned neighbor did in Feb 09) was not a good option.

Upon further reflection- did 2008 embolden me? NO. I feel very fortunate to have not sold early in 2009 when Jack Bogle waffled and stated that when you can't afford to lose any more you need to sell. Fact. I got some BS from the BH forum that sometimes you need to change course in a storm. However, I feel very fortunate that I plodded along, sold my spec lots in '07, kept my job and lost nothing in the process. From my first investments in '72 and through history I've learned plenty . Nothing fancy just plod along.

 

[athena53]

"Spoiled" isn't the right word- it gave me perspective. It wasn't the first crash I'd been through and the good stuff recovers. I have a graph of my net worth by month going back 25 years, the last 4 with no new money, and the crashes are mere blips now.

 

[harley]

Yes, especially since I have a lot more cash. I bought at $96 back then. It's been my best move so far. Problem is, when do you sell....when AAPL looks to be tanking? When AAPL growth slows, whihc does happen in history but comes roaring back...or do you just keep holding today

I originally bought AAPL at (split adjusted)$.79/share. Over the years I sold all of it, at incredible profit levels. I sold when I had plenty of AGI room to get the 0% CG tax break. Since I won't be seeing those opportunities again (too much income), if I still owned it I would just keep it and let it pass on to DD after DW and I die, so she would get the cost basis step up. Now that I think about it, I'm in the same boat with BRK.B. I don't need the money from it, and don't want to pay the taxes. Luckily over the years I've moved the majority of my gambling account into a Roth IRA so I don't have to worry about these little issues.

 

[Markola]

I deliberately picked an investment style that lets me ignore the markets for a whole year if I so choose!

audreyh1, What is that style, please? I’m curious. I think I recall elsewhere that you use a fixed withdrawal % and park excess cash for use in the down years. What else makes you bullet-proof?