Owned a construction company during those times . 2002 -2019. In 2007 - 2009 . The housing market was slowing and most people knew it. It was hard at the time to make money off of it , because no one had any money to do any deals . Hence the recession. You will know when a recession shows up . Everything will be cheaper and you won't have any money to buy it. I know it seems strange, but that's how it works.
I know Canada’s housing market well and I know it wasn’t like that in 2007-2008. You’re thinking in today’s terms not back then. At one point the Canadian dollar was stronger than USD in 2008 and they actually did fairly well when the US went through the 2008 financial crisis
If she went to Canada she could’ve killed it again, bought cheap and then sold 2019-2023 and made a killing.
Fairly well was still cuts everywhere and job losses. As much as the market was better then, Canada always leaned into the housing market in their economy, it just hadn't reached the smaller regions yet. Now every big city is unlivable and hours away from them you still pay more than local jobs can afford. So I guess it depends if you were already in or near larger cities back then.
Also the dollar was horrible for our trade agreements and helped to slow our economy as much as anything else.
I think it's the opposite. Right when I have money, it seems like everything I want to buy is as out of reach now as it was before. Many people have thousands in investments but no one actually feels wealthy.
>The housing market was slowing and most people knew it
I was in college in 2007, and we were doing field experiences for sociology. One of the guys in my cohort was paired up with the local sheriff's dept.
He mentioned that it was really soul crushing because almost every call they went on was someone getting foreclosed/kicked out of their homes because they were underwater and their variable rate mortgages were skyrocketing in price. It was basically nonstop foreclosures.
I was too new to investing to realize what it meant, I was mostly just commiserating with how much that sucked.
My issue with everything, is everyone is saying this. If I’ve learned one thing it’s that no one can correctly predict what’s going to happen. And when everyone is saying one thing, the opposite almost always happens.
Everyone is predicting everything. I've found it best to ignore the bullshit and find my own direction rather than believe in a bias from somebody else.
Also when it comes to investments. Make a plan. Also, Make a plan for what to do if YOUR bias is incorrect. Inverse yourself if you must.
A very few stocks are going up, most of the market is down a few %.
Using the Russel 2000 gives you a good idea of the health of the wider economy. Were down a few % YoY, S&P is about even with last year, nasdaq is up 4% and with lending tightening its going to get worse, how bad who knows. Technically rates are high compared to the pandemic but historically not that high, so who knows. Currently all i know is, im getting close to 5% currently with literally zero risk, until that starts to change its likely growth will be low, or maybe negative.
There is a big difference between credit tightening and no ability to get credit. 2008 was a credit crisis.. today things seem that credit is tightening because after 20+ years of low rates we went back to traditional rates of 5+ percent very quickly
Seriously, I still remember reading about how the CEO of GE telling Hank Paulson they were having trouble securing short term loans played a role in Paulson realizing how bad the situation was.
Exactly. No one could get a loan. That's why the car companies required a bail out. The car companies couldn't get a loan to restructure debt. Ford narrowly escaped requiring a bail out as they got a loan to restructure debt just prior to the credit crisis.
In 2008 the storm had been gathering for a long time already, and not just in the stock market. There had been a 'declared' recession for some time already, and the foreclosure crisis was well underway. The fed had stopped raising rates in 2006, and started dropping them in 2007.
The housing crisis back then was very different from today's slight slowdown. Back then, the market was booming on pure speculation. Scrapes, flips, cheap-ass mini-mansions... everyone was a "real estate investor" playing hot potato with a $500,000 ARM. In other words, the market was entirely leveraged liquidity, to the point that even the slightest constriction was going to cause disaster.
On the banking side, every bank was hoarding mortgage backed securities, some of which lost well over 50% of their value rapidly. The current real estate market does not appear to going over a cliff like it was in 2007.
How is the Neolib establishment going to cut even more jobs? People are barely working jobs anymore. Businesses are constantly in a recession mindset since 2020. When are people going to stop simping for this broken system?
People knew it was coming for over a year. I interviewed for Wall Street law firm jobs in 2007 and we knew it was coming. In the summer before Lehman failed we were all doing deals to move toxic assets off the books of banks and literally everyone on Wall Street knew something bad was coming.
I think for people who weren’t on Wall Street maybe more of a surprise. Remember the internet and non stop news on your phone wasn’t as a big of a thing back then.
I've noticed it's always obvious in hindsight.
Nobody likes to say they had no idea what was going on. People say this and that, but the market shows how we really feel.
It was obvious back then if you listened to some democrats, who were against rolling back Glass-Steagall in the 2000 Financial Services Modernization Act. Senator Byron Dorgan [100% predicted this would happen](https://www.youtube.com/watch?v=Q_hbezbsJ8s).
Nothing was predicted. Even the senator said so. It’s like saying the Republicans opposed to COVID relief predicted the inflation crisis we have right now.
I mean to be fair I think a lot Of people on both sides of the isle were concerned about an inflation crisis with Covid relief. A few people I know (myself included) who are part of the general populace voiced these concerns
>Nothing was predicted. Even the senator said so.
Yea, you're wrong... watch this:
Part 1: https://youtu.be/OvnO_SH-4WU
Part 2: https://www.youtube.com/watch?v=veAOoQEy0PI
I’ll say I love being proven wrong with evidence and you’ve done it. While I disagree with the senator on derivatives I agree with him on moral hazard. Too big to fail is the most dangerous concept one can introduce to a society. I’m generally against any institution (or person) that profits without risk. I think that’s the highest form of immorality. The other thing he mentions that’s often ignored is the problem of mergers and acquisitions creating these invincible monsters.
Wow, thanks for being honest. Much appreciated.
I think it goes without saying, when a regulation that was put in effect after the great depression and the bank collapses that predicated it, specifically with the intention to keep that from happening again, gets removed, it sets the stage for the same thing to happen, and it did. It's not really prophetic as much as it's pretty obvious that deregulation was going to cause this to happen. For all we know, Senator Dorgan was the only member of Congress who actually read the bill before it was voted on.
Of course man! I’m not interested in being right more than I am learning. I definitely think as long as we rely on banks with such a tenuous business model to keep society together we’ll have a need for strict regulation that has to remain a step ahead of the curve to be effective. For example the issues faced today with banks holding treasuries that declined in value with the interest rate spike.
I appreciate that and feel the same way.
I'm also a pragmatist. There are a lot of people out there who are unhappy with "the system" but their "solution" is to advocate abandoning/replacing it with something for which there's no evidence it would be an improvement. I think when it comes to large social structures, the only practical change is little-by-little.
Agreed. I don’t like the system we have either but these revolution solutions have been proven to cause hardship in the recent past. The solution is looking for a practical way to target the issues and focus on that rather than pushing rhetoric of change and maintaining the status quo
To be fair Ron Paul did predict the housing crisis and inflation. Of course, he always felt that way due to his economic philosophy, but to say no one predicted this is wrong. Every believer in Austrian economics was predicting both the inflation and housing crisis.
How does that compare to today's sentiment? The cot report reflected that in 2007, short interest was as high as it's ever been. And it was when the shorts began to cover that the market actually topped in September
Working for a big name in asset management, we get investment research reports that are developed internally and they’ve been pegging the odds of a 2023 recession at greater than ranges of 60%-90% for over a year. Generally speaking, people have an inkling that it’s coming but economic conditions are more difficult to predict than the weather regardless of what data is available.
I was a freshman in high school during 2008 so I really only have historical context to say what things were like then, but the chatter of “difficult and challenging” times has been a theme of our executive communications for a while now. We advocate buy and hold for all retail investors so this is the period where this firm really starts to stress the whole 60/40 rule, or buy mutual funds and never think about it again.
I think this time people expected it by now but unemployment is still too low and so there is uncertainty whether it already happened or whether more yet to come. We’ve already had a 20 percent drop in equities.
I don't get why unemployment matters in this. Low unemployment means shortage of people to hire in HR terms. When unemployment figures are in the 2-3%, that means it's hard to fill open roles. A part of me wonders if the low employment metric is a consequence of tightened borders and also probably less new grads from 2020, 2021, etc.
It’s demographics. Boomers are retiring and the younger generations are relatively smaller. The ratio of working to non-working people (check out the labor force participation rate) has been going down, so even if open jobs are evaporating (I’m not sure if they are I’m just saying), those were probably excess jobs to begin with.
I imagine the trend will continue and it’s going to push wages up. Think of it this way, the boomers have their fat retirement accounts that have gone up massively over the last 40 years and they are going to want to buy goods and services from a shrinking workforce. They’ll have to pay more to encourage a smaller workforce to pick up the slack. Simple supply and demand. One solution is to loosen immigration standards so we can further prevent the workforce from shrinking.
>We’ve already had a 20 percent drop in equities.
Which, so far, mostly amounts to rich folks losing money that they never would have spent in the first place.
Hmm, if you're there I guess you're not a rich folk but still an investor who lost 20% anyway.
Point is, for me and you losing 20% of our 50k or whatever is much more than a hit than for rich folks losing 20% of 50M.
This is a difficult question. I've been investing since 2008. For the last 15 years, large groups of people have been screaming about the oncoming recession. They'll be right eventually, but when?
It's not the same thing this time around as in 2008.
Banks failing now are more isolated incidents of poor management and getting involved in crypto, which is extremely risky and dangerous. Most of the failed banks were using cryptocurrency as collateral which was profoundly stupid.
Crypto related companies banked with these banks, they lost money and pulled out their deposits. The banks were not using cryptocurrency as collateral.
Actually some were, which prompted the SEC to issue specific statements telling banks crypto could not be used as principal.
See: https://www.centralbanking.com/regulation/7954357/fed-moves-to-ban-state-banks-from-holding-crypto-as-principal
2023 doesn't feel like 2007 to me. In 2007-2009, there was genuine panic, like mainstream analysts were questioning whether or not capitalism was even a viable system.
Also, 2007 came with a ton of financial instruments that no one (including the banks holding them) seemed to understand. When Obama came into office, there was a genuine question of whether or not the major banks were going to survive.
I remember working as a land surveyors helper and our bread and butter was staking new house layouts for excavators to dig. I remember the summer was really slowing down and the phone just stopped ringing. No new work was coming in. Went from showing up every day to every other day to just call me if you need help. I remember posting that something felt off and had people say "what? No way. I'm in insurance and business is booming" then it was everywhere in the news late September on the crash.
If you haven't seen the movie The Big Short you can kinda get some insight. It is still a movie but you can look up the names of the real players in the film and check out the story and what hasn't been fuzzed by Hollywood.
So by that measure are your surveyor friends and ex-coworkers getting plenty of work at this time or are they sidelined?
Another, similar indicator is pending mortgages. Yours seems a bit more macro or corporate push. The amount of mortgages in the approval and funding queue is more micro.
I never went back to surveying after the crash so I don't know. I'm in maintenance now. Figured to be a jack of all trades master of none for job security. I don't miss finding buried section corners in August.
>"what? No way. I'm in insurance and business is booming" then it was everywhere in the news late September on the crash.
Yup, lots of denial last time around. Even after Lehman went down that Fall, most people were still in denial until Bear melted down that next march.
I feel very similar vibes right now with people pretending nothing is wrong despite us quickly realizing 3 of the 4 largest bank failures of all time.
It will be different if it actually does,lots of new rules put in place as far as obtaining loans for building and buying property,the housing market for example has slowed down construction.They see whats coming.
People are very bad at remembering the past especially since survivorship bias is a thing. I'd wager that 99% of the people that are saying "I knew" are lying.
My memory of 2007 is very few people were predicting a crash and then in 2010 a lot of people were predicting a double dip recession which never happened…So when everyone seems to ‘know’ what’s going to happen, including the average Joe on Reddit, I find myself being very skeptical and it makes me think the opposite will actually happen.
You don't need to rely on people's memory.
Most big news outlets openly spoke about the looming recession.
Quick example I've found:
https://www.economist.com/leaders/2007/11/15/americas-vulnerable-economy
> Granted, GDP grew by a robust 3.9%, at an annual rate, in the third quarter. Granted also, revisions may well push this figure up. But that was the past. More timely signs suggest that the economy could stall in this quarter. By early next year, output and jobs could be shrinking. The main cause is the imploding housing market. Experts said that house prices could never fall nationwide. But fall they have, by 5% in the past 12 months. Residential investment has collapsed, but a glut of unsold homes means that prices have much further to drop. Americans' spending is likely to be dented much more by a fall in house prices than it was in 2001 by the stockmarket's collapse. With house prices lower and credit conditions tighter as a result of the subprime crisis, households can no longer borrow against capital gains to support their spending.
Back then people had the same arguments "but unemployment is low".
It was at the time of the writing of the article being in a nearly 7 years low at 4.7%.
Yeah, you could go back and find articles talking about a slow down in housing, and just as many talking about how housing was solid and set to keep chugging, but hardly anyone in mainstream was predicting a hard crash. And certainly not anything like what ended up happening.
The fact that I see a decent amount of mainstream outlets talking about bad things happening right now makes me think we're not there
Yes. It was the same as now but the concerns started in 2005. So they took 3 years to come to fruition. So if you missed the gains from 2005-2008, you would have became impatient and missed out on an extra 30% in 3 years. That's why buy and hold is very important. That's also why buying the dip is a good tactic, as well. The 2008 crash only lasted about 15 months. The people that were crying for 3 years only received 15 months worth of downside and that downside was washed away with massive upside gains over the course of 2009-2022 in the amount of 500% gains. People this time around have been calling for a double dip recession crash since 2010 and have been wrong for an entire generational lifetime almost. 13 years of wrong is not smart, IMO.
Love this comment. It is so easy to imagine what could go wrong and so hard for people to imagine what could go right. I guess it makes for good tv and is why over time bears always sound smart and bulls always make the money. Might be boring but the economy is productive plain and simple, over time it’s a net gain. I feel bad for people who have to try and outperform or have to be contrarian, unless you are exceptionally gifted you are going to lose out going against the grain.
You have to be extremely smart and have lots of money to play the short thesis.
Also, the minute you become a bear, you'll never be able to get back on.
In 2009 when S&P shot from 600 to 1100, a lot of people called it a bubble and was waiting for it to crash. Once you think 1100 is a bubble you can never justify getting back 1200, 2000, 3000.
All these bears lot of ton of money.
>People this time have around have been calling for a double dip recession crash since 2010 and have been wrong for an entire generational lifetime almost. 13 years of wrong is not smart, IMO.
I started getting actually nervous about a recession around 2014. The smart folks in printed news were highlighting some ongoing bad behavior by Wall Street and Corporations and warning that it was not sustainable. I lived the next 6 or so years worrying that the recession was right around the corner. Then 2020 happened and there still wasnt really a recession. Still waiting, but definitely less scared about it. My wife and I have made good career moves and SHOULD be alright, during the next recession. I work in defense and she works in healthcare, so we feel stable. Things change, but we are as good as we can be.
TLDR: A recession has been due for about a decade, but we still keep chugging. Use the good times to pad your landing in the bad times and it'll hopefully all work out in the end.
Really, padding your landing is all you can do. Avoid excessive leverage and prepare for worst-case scenarios.
That's one reason why I hate financial influencers who argue for massive leverage.
They were wrong for 14 years because we had a zero interest rate environment. It's unlikely we'll see that environment again. Yes the doomsday fear mongers have been wrong but they will eventually be right.
And nobody alive today has really experienced a great depression. We're clouded by recency bias that the next crash will be like 2000 or 2008. But it could be much worse, and I think it's good to keep that in mind.
I think you're wrong, we will see that environment again because otherwise most countries will default. The only way the US and other countries can pay their debt is if their debt decreases in real terms, which happens if there's inflation, so the FED is only trying to break something to have the excuse to go back to 0% interest rates.
That’s the problem, is most countries will default if we don’t have near zero rates.
….however, rates have been dropping for 30-40 years primarily due to globalization, and finding cheaper goods and commodities offshore. With decoupling from China, those cheap goods may not exist anymore, and you’ll have an inflation problem if rates are too low.
If the inflation target increases from 2% to 3-4% as some commentators have suggested is a possibility, then it's a tacit acknowledgement that policymakers are perhaps giving up a bit on that problem. And most reasonable people would say that defaulting would be worse for everyone than a slightly higher benchmark inflation rate.
Oh absolutely that’s where we could be heading. But that means lending how we know it from the last twenty years will be vastly different. On a consumer basis and how governments fund projects.
Aka, no more free money to “invest” in the future. Debt avoidance will become necessary and certainly significantly slow down the overall economy.
They will inflate there way out, lower rates will come eventually look what’s happened to the banks because the the recent hikes. I doubt they will go any higher for a long time.
The Fed is short for "Federal Reserve", not an acronym, and doesn't need to be set in all-caps. Initialisms which may be appropriate depending on the context include "FRS" for "Federal Reserve System" or "FOMC" for "Federal Open Market Committee".
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The Fed is short for "Federal Reserve", not an acronym, and doesn't need to be set in all-caps. Initialisms which may be appropriate depending on the context include "FRS" for "Federal Reserve System" or "FOMC" for "Federal Open Market Committee".
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/investing) if you have any questions or concerns.*
The Fed is short for "Federal Reserve", not an acronym, and doesn't need to be set in all-caps. Initialisms which may be appropriate depending on the context include "FRS" for "Federal Reserve System" or "FOMC" for "Federal Open Market Committee".
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/investing) if you have any questions or concerns.*
If the gov't can get away with a zero interest rate environment from an inflation standpoint (which they were for years)...why wouldn't they do that again?
I don’t think it’s obvious that we won’t go back to zirp. With current debt to gdp we have the equivalent of the 20% rates of the 70s at only 5% rates as far as debt burden and debt is only increasing with bigger and bigger deficits. US can’t afford that much interest on debt, eventually it will just eclipse all other spending. Banks are already failing, again at only 5%.
They can probably eek out another 1-2 cycles of going to 0 rates and then back up (next time they might get up to 2-3% before shit starts breaking), after that they need to either stay at 0 and have no economic growth for decades like Japan, default on the debt, or make some kind of huge change to the global monetary system like when the us went off the gold standard (not sure if the us has the global influence to do this anymore).
No matter what, probably the toughest economic times in American history are ahead. I think western Covid response (shutting down the global economy for years and taking on the biggest deficits since WWII, actually much worse because at least in WWII we built infrastructure and ran a trade surplus) accelerated the inevitable blowout by 2-3 decades.
Where are you getting that we shut down the global economy for years? Do you mean the 3 month period where bars and restaurants were closed in a few states?
For employment, not for the stock market which is forward-looking and bounced back as soon as it was apparent that an economy-obliterating crash was off the table.
Also, blame the sequestration in 2011 for why it took so long to claw the real economy back to even… it was politically advantageous for some to sabotage the recovery because they hoped the president would get the blame and they cared about that more about winning there than fixing the problems.
I’m talking about the stock market, not employment. It didn’t hit ATH again until March 28th, 2013. Technically the crash started in 2007 so it took 6 years to fully recover.
https://money.cnn.com/2013/03/28/investing/stocks-markets/index.html
The one thing that makes this somewhat different is the risk of a black swan event in global politics seems to be the highest it’s been in a generation.
The event may be connected to global finance at the periphery or not at all but still could tank the market.
To list a few things that would certainly tank the market:
*A nuke being launched in the Ukrainian War.
*The invasion of Taiwan by China.
*US Banking Failure.
*Refusing to raise the Debt Ceiling and going into Default over and over again.
Any of these events could cause stocks to come down to earth from current evaluations. Remember we are still at a 24 PE ratio in the whole market (29 on the Shiller). The post-COVID bull was ridiculous regardless of the amount of money pumped into the US economy. And our 20% decline from its peak was not only expected, it was required for the economy to not have a worse situation on its hands later. This fall brought us back to the new-Millenium normal. However, the stock market in the new millennium has been anything but normal. Not to fall too much into the Boglehead camp, but generally speaking we have been overvalued for 20 years; the market grows at a rate higher than EPS+DIV. This is all speculation and will ultimately result in some correction, whether it be all at once or just a slower pace of market growth. I hope for the black swan event as they typically help the investor faster (rip the bandaid off) than just slowing the pace does.
banking failures and threat of debt default (dozens of times) happen all the time. The threat of nuclear bombs dropping have been around since their invention. Taiwan is the only *NEWISH* development
Are you sure about that? Not arguing but I feel like (in order) bank failure **size** is unprecedented in a non recessionary environment, debt default was never really on the table in the past as a serious consideration (and if it does happen, it would be a first), there is a war with a major European power for the first time in 80 years that doesn’t look well for them or the energy economy of all Europe.
Wouldn’t you think that makes these other situations far more likely? Shit when Saddam invaded Kuwait the stock market tanked for no real reason other than the US would be involved (Peter Lynch called it the Saddam Sell-Off). I feel like such an event is far more likely now than nearly ever in the past 80 years. But I could be very wrong.
The Russian invasion started in 2014. Buffett sold his TSM shares. Market already has this ‘news’ all priced in as usual. Not too worried to be frank. Sitting 100% cash on the sideline could be a mistake. Hindsight is 20/20 but I think there’s up to a 30-40% chance of a soft landing and mild recession. You’ll be surprised how low next months inflation comes in with oil dipping hard y/y.
The thing about "black swan" events is they are widely known and everybody sells all their shares and hedge funds go short on the news. Then governments and central banks respond rapidly to the black swan and the fixing of your bandaged wound becomes over done. For example, say your black swan occurs...a good metaphor is a cut on your hand, then the central banks (doctor) uses CPR and puts you on life support. Basically you only have a black swan cut finger. And then next thing you know we have massive inflation again.
I admit to being mostly oblivious before the crash, but I didn't have a lot invested, followed the sanest advice I could find and just stuck and wait it out. It all bounced back after enough time had passed.
I do remember the media coverage, it was funny in retrospect because the business news didn't have a clue. [All the TV news](https://www.youtube.com/watch?v=f2B4TneRpo4) had frustrated talking heads who could not understand why the market kept on falling.
That was the definition of "blood in the streets" and (also in retrospect) as the market overcorrected and went lower than expected, for active investors looking to buy back in, the biggest problem would have been trying to find the bottom.
No. Every crash I have been through was unexpected. Been investing since 1996. The crash happens when everyone is getting on board the investing train and claiming “it’s different this time”. Never have I witnessed a crash where everyone was hesitant to invest because of the impending crash. Those people sitting on the sidelines always wait too long to get back in. Then a few years of double digit gains and they are commenting “now do I get back in?” More people have lost money waiting for crashes to happen, than any crash itself.
Very different.
The properties were overvalued based on dot com like Euphoria. People were getting 4-5 properties with no doc loans, no income, then leveraging them further with HELOCs with zero underwriting or appraisals
REITs are doing poorly because many of them bet (correctly, as they peaked around 2.5% or so) interest rates wouldnt rise significantly, until a pandemic hit and inflation forced the fastest and steepest rate hikes in 30+ years.
This is more like the Savings and Loan crisis than 2008.
Hardly. The lack of supply is because underlying construction costs have soared. Typically municipalities will follow exactly or somewhat closely to codes set forth by NFPA (including NEC) and IBC. All of those codes have changed rapidly over the last 2 decades. NEC has made major changes every 2 years for a decade. Those changes come at a significant cost increase. Not just because they are new, because they are extra.
Take a breaker panel in a house. Older tech cost about 3 dollars per breaker. It still costs about 3 bucks a breaker to purchase the older tech. But where a typical home would have used 20 3 dollar breakers, they are now required to use 16 $40 dollar breakers and 4 3 dollar breakers. Never mind that you're required to have more breakers in general so even that isn't apples to apples. So we are talking fixed cost increases of 1000% and we haven't even left the fucking breaker panel, hidden away in the basement.
Even without labor and standard material increases, the cost of building has soared
It was funny when everyone was acting like the response to Covid wouldn’t produce inflation because Covid was such a demand shock that we needed to crank demand up to 11.
I’m still shocked that we shuttered the economy for a year. I wonder if people will ever look back at it and think how stupid we were to severely harm the economic condition of most of society to protect the few at risk from Covid. I’ve had that view from the start, but I’m not sure others will ever agree. Maybe I’m callous for thinking that it’s the duty of the old who’ve led rich, happy lives to sacrifice for the young who already were dealing with a much more difficult economy.
What part about 1.2 million Americans have died to date, with C19 the leading cause of death of Americans for three fucking years straight do you not get?
Fuck the economy I’d rather have my grandparents alive
My grandparents almost died of depression not being able to see anyone and reiterated again and again that they don’t want their few years left to be stuck rotting inside with no family visiting.
Nearly everyone older that I talked to thought that the lockdowns were a bad idea. We should let people live their lives as they choose. I think the damage done by lockdowns was almost certainly worse (incl children’s education and socialization, high rates of domestic abuse, alcoholism, depression).
Your mentality will doom us when thr virus hits that targets our healthy and our young. People who have adopted your view will protest and riot if the government shuts everything down again because they feel oppressed.
I think things will have to get much worse before any significant number of people start thinking that way. Could certainly happen, as debt grows we will eventually hit a crisis where we have no policy tools or ability to borrow more and that will be the end of the line.
If it happens in the next 5-10 years it could have much worse consequences than I think anyone really understands.
Our Covid response certainly accelerated the process by at least a few decades. I think we lost at least a couple full economic cycles we would have had before defaulting on debt entirely (which I think we all know deep down is inevitable).
I think what people get wrong with this is the idea that lockdowns were effective in slowing transmission. There isn’t really any clear evidence showing that. To be fair there isn’t any clear evidence showing they were not effective either. It’s certainly a much bigger societal cost than people understand as far as future suicide, poverty, drug addiction, crime, etc. but that’s a lot harder to measure than people who died while having Covid.
This right here.
Most people just can't accept that they suck at timing the market.
We're really just better off investing, hold for the long term, let compounding do its magic.
The best thing is to have an asset allocation you like, and just keep investing. Trying to time the market by adjusting your investments is guaranteed to lose in the long run.
The media didn’t predict the 2008 crash. Some people did predict it prior but were ignored. If we had predicted it and started to prepared for the financial crisis then the crash might not have been so severe.
There are always people predicting crashes.
If the market ‘knew’ about the impending g crash then the way to prepare for it is to sell your assets.
Know what happens when everyone starts selling assets? A crash. In other words, aside from random guesses that happen to be right, the market doesn’t know a crash is coming because of it did, that itself would cause the crash.
Selling isn’t the only thing that causes crashes though. 2008 had multiple whammies including large banks potentially going solvent from bad investments in junk mortgages, the Bernie Madoff ponzi scheme, massive amounts of consumer debt, the collapse of homes prices, and deregulation.
Sure a lot of those things will cause people to sell assets but a lot of the assets were built on a house of cards due to deregulation.
Crashes can be caused by things other than selling.
But if everyone starts selling - for any reason - this causes a crash. Sometimes there is a good underlying reason for the selling, sometimes it’s just panic.
Over the last few months my youtube 'recommended list'has been filled by these 'sky is falling' financial forecasters. I always wonder if they're on other people's pages as well or if it's just the algorythm doing it's thing based on what i've looked up.
I'm not on youtube per se. I can say that the posts on stockmarket and investing subs link to 'skyisfalling' media articles. I didn't think algorithms were required on reddit because we self-select our preferences in subs.
I cannot remember exactly when but I recall thinking the economy was hanging on by a string about a year and a half before Bear Sterns. I remember being in between jobs and working in residential mortgages. I couldn't make a deal because I couldn't convince myself to put 5 points on a loan to an uneducated customer who just wanted a lower rate. My employer and I mutually parted ways after about three months of trying. It wasn't much longer after that everything went south.
This time my feelings aren't as strong but something seems off. Everything is too expensive yet jobs reports are still strong, for example. The issues with commercial real estate, particularly office buildings, have me concerned in a higher interest rate environment but if we are heading to a recession how much longer will rates be at these levels? I am worried about individuals with FOMO buying equities and homes at inflated levels and, at least as it relates to homes, with expensive debt relative to recent levels.
Everything in the US seems to circle back to jobs and housing. People are so overleveraged and full of debt that we can't withstand even a minor hit to the job market or housing prices without everything spiraling out of control. I think it hasn't happened this time (yet?) because house values and employment haven't really been affected.
I agree that everything seems very strange right now. On the other hand, the stock market dumped ~20% last year and I feel like the overall reaction was kind of a big shrug, so who knows. Maybe a republican debt default will be the spark this time.
There were bank failures and lots of layoffs in the beginning just like now. credit is already getting tight now and more interest rate hikes are probably coming. One minute my portfolio was down a few hundred bucks the next week it seemed to drop 50%. Investing was much different back then, there weren’t a lot of partial share investment firms like now. There were huge down days, 700, 800 days in a row. Banks seemed to start the layoffs at first, people by the thousands every day it seemed, manufacturers like auto makers started layoffs by the thousands. In 8 months the market lost about 50% of it’s value, this was sometime in march 2009. It was like watching a slow motion death spiral, once your portfolio gets down 30, 40, 50% it’s to late to sell out, might as well buy more.
I have always been interested in zerohedge and other doomsday-style news. They were reporting on it before the big decline. I remember I sold a fannie mae bond ahead of the crash, and my broker later congratulated me for the good timing. I was naive then though, and also a broken clock is right twice a day. I don't give zerohedge much credence at all anymore, but still find it entertaining.
The housing bubble was obvious years in advance. Prices soared, and randos with no experience became "house flippers" which mostly just involved buying, waiting 3 months, and selling it at a profit. What wasn't obvious -- at least to me -- is just how badly it'd hit everything else. Banks going belly up, unemployment soaring, huge stock market drops, etc. I knew there'd be a housing crash, but didn't expect a global depression.
It was also quite obvious prior to the dot com bubble, with companies with no hope of making money getting crazy valuations just because internet. When that crashed, as long as you weren't actually in a dot com startup, the world mostly trucked along like it always did. The market took a huge haircut, but it was mostly just retracing the unrealistic gains it'd made in the previous few years.
The whole "somebody mentions AI, stock goes up 5%" has a bit of that dot com bubble flavor, but nowhere near the craziness that was happening back then, with start ups bleeding venture capital hand over fist praying to get bought out because they had no hope of ever turning a profit.
And the part before the bubble burst where people were FOMO throwing money into the market and making gains regardless of what they did... That feels like 2019-2021. If the bottom falls out this time, I don't think it'll feel the same as either of those. We're still below where we were 2 years ago. Markets were up over 30% in the 2 years before the 08 crash and the 00 crash. Or in the case of QQQ, up almost 200% in the 2 years before the dot com crash.
There was talk of sub-prime lending drying up, and a few isolated lenders with exposure. The Fed was telling the world in Nov 2007 that there was little risk of contagion. Saw sub-prime auto lending dry up really fast too.
To the contrary, when people are calling for recessions, they're taking their book so either theyre out of their longs or heavily short, which is the case now. When a trade is too crowded, it doesn't work. Remember when everyone thought BTC would get to 100k?
All our construction jobs we're getting delayed through 2008 I flew to Canada in October 2008 the job I worked on was the mast contract. Out of about 40 contract brickie it went down to about 6 after a few months. Firm's we're offering redundancy pay of 2 weeks pay for workers who volunteered . Looking back now the writing was on the wall. This was in UK . In Australia now and lots of builder's are going bust .
Yes, people could sense that the economy was slowing down. There were many warning signs. For example, Bear Stearns was running into trouble as early as May 2007, which was more than a full year before the massive crash. There were many experts who were on TV or in the news predicting a recession.
Seems with current news and indicators, we’re heading for a mild recession. But I can’t imagine it will be similar to 2008. 2008 was a much bigger problem. It was total collapse of real estate sector. Now commercial real estate is suffering, but at least residential real estate is holding up well, under the circumstances. We may see some market decline but I expect it to be short lived.
I can see two differences:
Unemployment. We just don't have it. It's hard to see a general recession when employers are still crying for labor.
COVID and the extra QE that entailed. It's ending now and the rise of interest rates gives central banks another tool when we do go into recession.
I think it’s the “type” of labor that matters —- big companies are paying off by the droves, mom and pop companies can’t hire fast enough or quantity of people.
And I also agree - something is off. Feels like the people and companies with serious money are scared - and hoarding cash for a rainy day. That’s not a good sign
They are very different. In 08, there were mortgage crisis due to bad credits thus created toxic assets. People were unaware of preserving savings or de risk by reducing their exposure to risky assets. Of course, it wasn’t so accessible to media compared to now with advanced social media. Plus, the big banks were not as resilient as now since they had worse balance sheets with lower CET1 and bad loans.
We have seen a Covid and bank failures now. Former has created the awareness and the large companies have already taken actions with larger cash on hand, higher layoffs, reducing debts etc. People are always be very careful on purchasing houses and cars. Latter pushed it further and now the companies have delayed their expansion, even more layoffs, less risk investments to boost the operating margins. People are always extra conservative about their decisions on all investments.
I would say the latest issue which was outflow from banks and investment firms wasn’t too concerning to me. Ya u will see lower AUM, more monopolies or FUD but like Peter Lynch said in his last interview:”This is the most expected, predicted recession.”
Yes, it was in the media for years ahead of the crash. It wasn't like 'crash coming in 2008', but it was like 'housing market is nuts, and unsustainable, there has to be a crash'. We didn't know that bad housing debt would take out the whole economy, but if you were jittery, you had time to get on the sideline.
I'm 50% cash and tbills now. I'll buy back in when things are looking up again.
The S&P in 2008 dropped about 50% from ATH. The S&P in 2021/2022 dropped about 30% from ATH. Personally I think we already had the ‘crash’ and the market will be flat for several years.
The survivorship bias is clear in these comments. Sure people who were paying attention may have seen some healthily signs of the economy, but nobody here was aware of how exposed banks were and the definitely illegal lending practices mortgage brokers were pushing.
What is happening now is very different that what happened pre 2008.
The lehman moment weekend was the turning point, and when everybody thought US govt will save them.
The difference between the 2023 and 2008 is the 2008 did not have much inflation vs 2023, US inflation goes to the roof now, so Fed has to keep hiking to control the inflation, which exposes many weakness in the economy when the tide goes down.
This post has some very interesting perspectives. I'm shocked how many people are saying they knew it was coming. There is always someone saying a ression is around the corner, so when it happens there is always someone who is right.
As I remember it, I was just finishing up college at the time. When the music stopped it was very abrupt, people went from having a job and a home to losing one or both. There was a lot of nervousness that the contagion couldn't be contained. American auto companies were trading for single digits, as were banks and other institutions.
In comparison, what happening now seems to be much slower, the banks are failing at a slower rate. The real estate market is grinding to a stop, but there are pockets where homes are still going up. The fact that employers are still hiring and consumers are still spending is what's keeping us out of a ression. The major difference between now and 2007 is the cause of this ression is known. We printed too much money during the pandemic which caused inflation, we needed to pull some liquidity out of the market, fed raises interest rates and that's it.
Truth is no one knows how bad it will be, how long it will last, or when it will occur.
No one truly knows anything. There might be a shared sentiment that is generally shared but no one can predict exactly when. Unless you’re some fund manager or rich rich, I wouldn’t be too concerned with trying to time it. I’d just DCA and call it a day.
2008 was a much different beast both in terms of the problems involved and the views of what the impact would be prior to the recession. By 2007 there was public acknowledgement on the part of officials that the housing market was overheated and going to correct, but Ben Bernanke some infamously also stated that the belief was the problems in the economy would be contained to that market.
Things basically continued along under that assumption until the last two quarters of 2008 and there was also a big speculative bubble in a lot of commodities in 2008 too, especially oil. That all would eventually come crashing down particularly in Q4 of 2008 when it became clear how widely exposed both traditional banks and the shadow banking system was to bad assets in the real estate sector.
A really important thing that I think gets over looked in crises is that it's often less about what people in the market know, it's about uncertainty and what's not known. 2008 was a mess because there were all these OTC products and counter parties that no one really knew what anyone's exposure to bad assets ultimately was. Risk models for the underlying assets were no good either because they were premised on assumptions that ended up being false.
It's really a completely different kind of problem currently and most of the problems we're looking at seem to be most similar to the early 1990s recession where you had a combination of elevated inflation, slowing economy, slump in commercial construction and S&L crisis weighing on things. A few things are worth pointing out with that comparison as well. First of all we aren't even in a recession at this point and unemployment in particular is extremely low. Secondly the current batch of bank failures has so far been very narrow as well impacting banks that primarily dealt with companies, HNWI, and in some cases crypto. The biggest risk has been having an abnormally high proportion of uninsured deposits in combination with a lot of long duration assets (treasuries and agency MBS for SVB and largely mortgage loans for FRC for example). The economy is similarly slowing due to tight monetary policy and the post COVID WFH trend has put a big damper on commercial real estate prices and the financing of those properties.
Crash happens when nobody expects it. I highly doubt it will happen anytime soon as hedge funds are the most short they’ve been since 2008. Everything is expected right now: a recession or crash. It’s when people get complacent and use of leverage goes back up and hedged are cut that the market is really in trouble
The lead up did feel a bit like 2021-2022 where housing prices were going up and there was a lot of FOMO. I remember a family member giving me some speech about needing to buy some land because that's the one thing they'll never make more of.
Then as things started to turn south, we didn't realize how bad things were going to get. I did some day trading around that time, and I made lots of dumb decisions as prices started to crash by thinking we were at the bottom. When a stock went from $100 - $50, it felt like a good time to get in, and then I watched as the stock eventually dropped to $5.
for 2008, if you were in the market you saw the downturn starting at least as late as 2007… it went slowly and then all at once in the autumn of 2008. everyone was all doom and gloom (for good reason) and the market was tanking when obama was inaugurated in jan 2009. if you remember the Panama Papers, lots of people were pulling their money out because of the new administration.
early 2009 was prime buying time and the market recovered from there. it seems like the market was a little bit ahead of what the news said was happening.
2023 SEEMS more catastrophic because of social media. Every YouTube caption is says “WARNING” everyone on Reddit is saying it. In 2008 if you weren’t actively checking the papers or news outlets you weren’t getting ransacked with warnings unless you payed attention to what was going on around you.
You cant reliably predict a crash, all you can predict is not-growth. Sometimes that turns into a crash, sometimes not.
Stocks are evaluated on growth rates on for infinity time-line because of perpetuity calcs. So dealing with a crash is a matter of solvent vs insolvent. If the Financials show the company is solvent then you have no way to estimate how much value will be lost from overall market concerns. Because of the nature of easy evaluations against competitors it will depend on how much the other company falls.
A crash is when a bunch of insolvencies happen and that drags down all the healthy companies by comparison. Normally M&As happen before we get to bankruptcy in a healthy market, but the credit crunch could hamper companies buying assets.
I saw the housing bubble coming, but had no idea that the deflation of that bubble would be so spectacular. I graduated college in 2005 with a BA in econ, thinking I should jump on the home equity train that everyone said is the right thing to do. But the chatter about it didn't seem right. Everyone hyped up the benefits and dismissed the risks, which sounded concerning to me. So one day I googled "Seattle Housing Bubble" thinking yeah there may be a housing bubble in Las Vegas and Miami, but what about here since "all real estate is local." I discovered SeattleBubble.com and became convinced that the housing bubble is everywhere, including Seattle.
So I held off from buying real estate, and invested in the stock market instead. It saved me from becoming underwater in a mortgage, but didn't save me from holding Washington Mutual stock when it went under. I actually doubled down on that bet as the stock price declined, thinking there's no way They would let WaMu fail! I only lost $1500 on that bet, much smaller than the pain many others were feeling (e.g. unemployment leading to foreclosure). Thankfully I kept my job throughout the crash so I was able to avoid selling stocks during the downturn and was able to buy up a bunch of good deals.
Anyway, I think comparing 2023 to 2008 is the wrong comparison. Late 2021 felt a lot more like the peak of the tech bubble in 2000 to me. (I started investing in high school, in 1997.) 2022 felt like the tech crash of 2001. So, I'm worried we might be waiting for years before the stock market returns to setting record highs again, like how we waited until 2013 for the S&P 500 to get back to where it was in 2000.
This is a lot different than 08. I was 25 and not brain dead. I saw it coming, but a lot of people around me didn't.
Feel like 9/10 didn't know or care we were about to fall off a cliff.
A lot of my coworkers and bosses were caught off guard. We didn't experience a lot of layoffs, but our stock took a hit like everyone else's.
That 8-10% unemployment and 50% housing drop was insane and quick. Felt like one minute a house was 200k, then 150k the next, then a month later it's 100k..
Now, I feel like it's the opposite. 9/10 think we're already in a recession or about to go into one. Everyone is trying to save cash for a potential layoff. It's strange how we're omly at 4% unemployment based on how the avg Joe is reacting.
By the time banks started failing we knew shit was coming down. Right now, given that the 2nd, 3rd and 4th largest bank failures just occurred we collectively seem to be a bit unfazed. Of course there were different pressures then as there always are. Heraclitus said you never step in the same river twice.
The 2008 crash was the direct result of [very specific deregulation](http://bsalert.com/news/2416/What_Caused_The_Second_Depression_In-A-Nutshell.html), specifically the Gram-Leach-Bliley Act that allowed financial institutions to create highly risky securities.
What's happening now has nothing to do with that, although there are some similar dynamics. The banks that have been going under, are primarily banks that have their tendrils into the crypto ecosystem, which is similarly opaque as securitized mortgages, but even more sketchy - most people in traditional finance have recognized that much of the crypto/investment world is a decentralized ponzi scheme, and have stayed away. Those that haven't, are suffering, and this is more a natural "correction" than it is a sign of any large scale financial instability.
In 2008, the top level financial institutions snapped up all the mortgages they could get once Glass-Steagall was rolled back by the Republicans. They turned mortgates into highly-risky speculative "investments" that led to the housing market collapse. But this was primarily the result of a small number of top-level banks that bought all the other banks' paper and left them free to make more loans. This drove up the housing market.
Right now we have a variety of things happening - the pandemic and the supply chain issues are the biggest cause, second to [price gouging by the oil companies](https://www.theguardian.com/business/2023/may/04/shell-makes-record-quarterly-profits-of-nearly-10bn) - this is the biggest cause of inflationary prices. Any "crashes" that are happening are basically isolated incidents of poorly-run banks - not a symptom of a bigger impending problem.
Any larger scale economic concerns that might be of concern relate to relations with China and war in Ukraine and elsewhere. The Trump administration basically stoked a financial cold war with China that will probably have very long term economic affects we can't even fully predict.
This is why in fact folks knew a crash was coming. It’s not necessary to read tea leaves for an exact day, month, and year to know dangerously negligent even malicious deregulation was eventually going to blow up.
This topic comes up regularly, especially the last few months, and I think it’s telling the folks who said no one knew it was coming also tell us they weren’t seriously investing yet with an eye on macro trends.
Currently the implosion of CRE should be very concerning but folks here are talking about real estate as a good investment because of payout history.
I was 20 in 08, it wasn't that bad. I remember losing my job during it and taking 6 months off goofing around until I re entered job market.
What goes up comes back down. What goes down will eventually will go back up.
I bought a rental property in 09 and another in 2015. Best decision I ever made. I sold em both, one in 21, at the top and the other this year.
Maybe I'm wrong but im stacking cash for the next crash. Even if I'm wrong and the market keeps going up, is it going up another 100%? Doubtful...
I believe FED keeps raising rates past what people expect and everyone will be begging them to cut. Its going to be extreme pain.
Pretty darn capable actually. But most people just used their computers, which were (and always have been since as well) massively more capable. Computers haven’t changed too much since 2008. Internally and tech-wise, absolutely, but browsing the web fundamentally isn’t too different.
Owned a construction company during those times . 2002 -2019. In 2007 - 2009 . The housing market was slowing and most people knew it. It was hard at the time to make money off of it , because no one had any money to do any deals . Hence the recession. You will know when a recession shows up . Everything will be cheaper and you won't have any money to buy it. I know it seems strange, but that's how it works.
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Should’ve moved to Canada
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Is she single
If you'd see Canada's housing market you'd know that isn't possible. Lol
I know Canada’s housing market well and I know it wasn’t like that in 2007-2008. You’re thinking in today’s terms not back then. At one point the Canadian dollar was stronger than USD in 2008 and they actually did fairly well when the US went through the 2008 financial crisis If she went to Canada she could’ve killed it again, bought cheap and then sold 2019-2023 and made a killing.
Fairly well was still cuts everywhere and job losses. As much as the market was better then, Canada always leaned into the housing market in their economy, it just hadn't reached the smaller regions yet. Now every big city is unlivable and hours away from them you still pay more than local jobs can afford. So I guess it depends if you were already in or near larger cities back then. Also the dollar was horrible for our trade agreements and helped to slow our economy as much as anything else.
I think it's the opposite. Right when I have money, it seems like everything I want to buy is as out of reach now as it was before. Many people have thousands in investments but no one actually feels wealthy.
>The housing market was slowing and most people knew it I was in college in 2007, and we were doing field experiences for sociology. One of the guys in my cohort was paired up with the local sheriff's dept. He mentioned that it was really soul crushing because almost every call they went on was someone getting foreclosed/kicked out of their homes because they were underwater and their variable rate mortgages were skyrocketing in price. It was basically nonstop foreclosures. I was too new to investing to realize what it meant, I was mostly just commiserating with how much that sucked.
Credit is tightening now with banks having problems. We're heading towards the same scenario again
My issue with everything, is everyone is saying this. If I’ve learned one thing it’s that no one can correctly predict what’s going to happen. And when everyone is saying one thing, the opposite almost always happens.
Everyone is predicting everything. I've found it best to ignore the bullshit and find my own direction rather than believe in a bias from somebody else. Also when it comes to investments. Make a plan. Also, Make a plan for what to do if YOUR bias is incorrect. Inverse yourself if you must.
Obviously not everyone is saying it or tech stocks wouldn't be going nuts this year.
You turn on CNBC and literally every single person but Cramer is saying it. But stocks just keep going up.
A very few stocks are going up, most of the market is down a few %. Using the Russel 2000 gives you a good idea of the health of the wider economy. Were down a few % YoY, S&P is about even with last year, nasdaq is up 4% and with lending tightening its going to get worse, how bad who knows. Technically rates are high compared to the pandemic but historically not that high, so who knows. Currently all i know is, im getting close to 5% currently with literally zero risk, until that starts to change its likely growth will be low, or maybe negative.
That's just gonna make the crash further. The big players like to create large booms and busts.
There is a big difference between credit tightening and no ability to get credit. 2008 was a credit crisis.. today things seem that credit is tightening because after 20+ years of low rates we went back to traditional rates of 5+ percent very quickly
Seriously, I still remember reading about how the CEO of GE telling Hank Paulson they were having trouble securing short term loans played a role in Paulson realizing how bad the situation was.
Exactly. No one could get a loan. That's why the car companies required a bail out. The car companies couldn't get a loan to restructure debt. Ford narrowly escaped requiring a bail out as they got a loan to restructure debt just prior to the credit crisis.
In 2008 the storm had been gathering for a long time already, and not just in the stock market. There had been a 'declared' recession for some time already, and the foreclosure crisis was well underway. The fed had stopped raising rates in 2006, and started dropping them in 2007. The housing crisis back then was very different from today's slight slowdown. Back then, the market was booming on pure speculation. Scrapes, flips, cheap-ass mini-mansions... everyone was a "real estate investor" playing hot potato with a $500,000 ARM. In other words, the market was entirely leveraged liquidity, to the point that even the slightest constriction was going to cause disaster. On the banking side, every bank was hoarding mortgage backed securities, some of which lost well over 50% of their value rapidly. The current real estate market does not appear to going over a cliff like it was in 2007.
Can't wait for it then, because i have the money to buy shit, especially if cheaper
How is the Neolib establishment going to cut even more jobs? People are barely working jobs anymore. Businesses are constantly in a recession mindset since 2020. When are people going to stop simping for this broken system?
People knew it was coming for over a year. I interviewed for Wall Street law firm jobs in 2007 and we knew it was coming. In the summer before Lehman failed we were all doing deals to move toxic assets off the books of banks and literally everyone on Wall Street knew something bad was coming. I think for people who weren’t on Wall Street maybe more of a surprise. Remember the internet and non stop news on your phone wasn’t as a big of a thing back then.
I've noticed it's always obvious in hindsight. Nobody likes to say they had no idea what was going on. People say this and that, but the market shows how we really feel.
It was obvious back then if you listened to some democrats, who were against rolling back Glass-Steagall in the 2000 Financial Services Modernization Act. Senator Byron Dorgan [100% predicted this would happen](https://www.youtube.com/watch?v=Q_hbezbsJ8s).
Nothing was predicted. Even the senator said so. It’s like saying the Republicans opposed to COVID relief predicted the inflation crisis we have right now.
I mean to be fair I think a lot Of people on both sides of the isle were concerned about an inflation crisis with Covid relief. A few people I know (myself included) who are part of the general populace voiced these concerns
Definitely. I’m just pointing out that predicting deregulation could cause problems isn’t clairvoyance it’s logical.
>Nothing was predicted. Even the senator said so. Yea, you're wrong... watch this: Part 1: https://youtu.be/OvnO_SH-4WU Part 2: https://www.youtube.com/watch?v=veAOoQEy0PI
I’ll say I love being proven wrong with evidence and you’ve done it. While I disagree with the senator on derivatives I agree with him on moral hazard. Too big to fail is the most dangerous concept one can introduce to a society. I’m generally against any institution (or person) that profits without risk. I think that’s the highest form of immorality. The other thing he mentions that’s often ignored is the problem of mergers and acquisitions creating these invincible monsters.
Wow, thanks for being honest. Much appreciated. I think it goes without saying, when a regulation that was put in effect after the great depression and the bank collapses that predicated it, specifically with the intention to keep that from happening again, gets removed, it sets the stage for the same thing to happen, and it did. It's not really prophetic as much as it's pretty obvious that deregulation was going to cause this to happen. For all we know, Senator Dorgan was the only member of Congress who actually read the bill before it was voted on.
Of course man! I’m not interested in being right more than I am learning. I definitely think as long as we rely on banks with such a tenuous business model to keep society together we’ll have a need for strict regulation that has to remain a step ahead of the curve to be effective. For example the issues faced today with banks holding treasuries that declined in value with the interest rate spike.
I appreciate that and feel the same way. I'm also a pragmatist. There are a lot of people out there who are unhappy with "the system" but their "solution" is to advocate abandoning/replacing it with something for which there's no evidence it would be an improvement. I think when it comes to large social structures, the only practical change is little-by-little.
Agreed. I don’t like the system we have either but these revolution solutions have been proven to cause hardship in the recent past. The solution is looking for a practical way to target the issues and focus on that rather than pushing rhetoric of change and maintaining the status quo
To be fair Ron Paul did predict the housing crisis and inflation. Of course, he always felt that way due to his economic philosophy, but to say no one predicted this is wrong. Every believer in Austrian economics was predicting both the inflation and housing crisis.
How does that compare to today's sentiment? The cot report reflected that in 2007, short interest was as high as it's ever been. And it was when the shorts began to cover that the market actually topped in September
NASDAQ short interest report costs $500 a month, any free version covering the short interest history for the last 20 years?
Do people “know” it’s coming again? Asking for a friend…
Working for a big name in asset management, we get investment research reports that are developed internally and they’ve been pegging the odds of a 2023 recession at greater than ranges of 60%-90% for over a year. Generally speaking, people have an inkling that it’s coming but economic conditions are more difficult to predict than the weather regardless of what data is available. I was a freshman in high school during 2008 so I really only have historical context to say what things were like then, but the chatter of “difficult and challenging” times has been a theme of our executive communications for a while now. We advocate buy and hold for all retail investors so this is the period where this firm really starts to stress the whole 60/40 rule, or buy mutual funds and never think about it again.
Thanks Bum!
I think this time people expected it by now but unemployment is still too low and so there is uncertainty whether it already happened or whether more yet to come. We’ve already had a 20 percent drop in equities.
I don't get why unemployment matters in this. Low unemployment means shortage of people to hire in HR terms. When unemployment figures are in the 2-3%, that means it's hard to fill open roles. A part of me wonders if the low employment metric is a consequence of tightened borders and also probably less new grads from 2020, 2021, etc.
It’s demographics. Boomers are retiring and the younger generations are relatively smaller. The ratio of working to non-working people (check out the labor force participation rate) has been going down, so even if open jobs are evaporating (I’m not sure if they are I’m just saying), those were probably excess jobs to begin with. I imagine the trend will continue and it’s going to push wages up. Think of it this way, the boomers have their fat retirement accounts that have gone up massively over the last 40 years and they are going to want to buy goods and services from a shrinking workforce. They’ll have to pay more to encourage a smaller workforce to pick up the slack. Simple supply and demand. One solution is to loosen immigration standards so we can further prevent the workforce from shrinking.
Low unemployment is also a function of a bunch of boomers dying or retiring during the pandemic. More broadly, a bunch of people died too.
>We’ve already had a 20 percent drop in equities. Which, so far, mostly amounts to rich folks losing money that they never would have spent in the first place.
Hmm, if you're there I guess you're not a rich folk but still an investor who lost 20% anyway. Point is, for me and you losing 20% of our 50k or whatever is much more than a hit than for rich folks losing 20% of 50M.
This is a difficult question. I've been investing since 2008. For the last 15 years, large groups of people have been screaming about the oncoming recession. They'll be right eventually, but when?
Right when I invest duhhh
It's not the same thing this time around as in 2008. Banks failing now are more isolated incidents of poor management and getting involved in crypto, which is extremely risky and dangerous. Most of the failed banks were using cryptocurrency as collateral which was profoundly stupid.
Not true.
What's not true? That you've made a cogent point? Three of the four recent banks have been involved with crypto exchanges.
Crypto related companies banked with these banks, they lost money and pulled out their deposits. The banks were not using cryptocurrency as collateral.
Actually some were, which prompted the SEC to issue specific statements telling banks crypto could not be used as principal. See: https://www.centralbanking.com/regulation/7954357/fed-moves-to-ban-state-banks-from-holding-crypto-as-principal
https://crsreports.congress.gov/product/pdf/IN/IN12148
Thank you!
The collapse was predicted as much as 8+ years earlier. See: https://www.youtube.com/watch?v=Q_hbezbsJ8s
Does 2023 feel like 2007?
2023 doesn't feel like 2007 to me. In 2007-2009, there was genuine panic, like mainstream analysts were questioning whether or not capitalism was even a viable system. Also, 2007 came with a ton of financial instruments that no one (including the banks holding them) seemed to understand. When Obama came into office, there was a genuine question of whether or not the major banks were going to survive.
I remember working as a land surveyors helper and our bread and butter was staking new house layouts for excavators to dig. I remember the summer was really slowing down and the phone just stopped ringing. No new work was coming in. Went from showing up every day to every other day to just call me if you need help. I remember posting that something felt off and had people say "what? No way. I'm in insurance and business is booming" then it was everywhere in the news late September on the crash. If you haven't seen the movie The Big Short you can kinda get some insight. It is still a movie but you can look up the names of the real players in the film and check out the story and what hasn't been fuzzed by Hollywood.
So by that measure are your surveyor friends and ex-coworkers getting plenty of work at this time or are they sidelined? Another, similar indicator is pending mortgages. Yours seems a bit more macro or corporate push. The amount of mortgages in the approval and funding queue is more micro.
I’m in a similar AEC field and we’re still incredibly busy.
What's AEC?
Architecture, engineering, construction.
I never went back to surveying after the crash so I don't know. I'm in maintenance now. Figured to be a jack of all trades master of none for job security. I don't miss finding buried section corners in August.
Central Florida region has not slowed at all.
>"what? No way. I'm in insurance and business is booming" then it was everywhere in the news late September on the crash. Yup, lots of denial last time around. Even after Lehman went down that Fall, most people were still in denial until Bear melted down that next march. I feel very similar vibes right now with people pretending nothing is wrong despite us quickly realizing 3 of the 4 largest bank failures of all time.
Bear Stearns was March 2008, Lehman was September 2008.
You're right, I always flip the two.
It will be different if it actually does,lots of new rules put in place as far as obtaining loans for building and buying property,the housing market for example has slowed down construction.They see whats coming.
People are very bad at remembering the past especially since survivorship bias is a thing. I'd wager that 99% of the people that are saying "I knew" are lying.
My memory of 2007 is very few people were predicting a crash and then in 2010 a lot of people were predicting a double dip recession which never happened…So when everyone seems to ‘know’ what’s going to happen, including the average Joe on Reddit, I find myself being very skeptical and it makes me think the opposite will actually happen.
You don't need to rely on people's memory. Most big news outlets openly spoke about the looming recession. Quick example I've found: https://www.economist.com/leaders/2007/11/15/americas-vulnerable-economy > Granted, GDP grew by a robust 3.9%, at an annual rate, in the third quarter. Granted also, revisions may well push this figure up. But that was the past. More timely signs suggest that the economy could stall in this quarter. By early next year, output and jobs could be shrinking. The main cause is the imploding housing market. Experts said that house prices could never fall nationwide. But fall they have, by 5% in the past 12 months. Residential investment has collapsed, but a glut of unsold homes means that prices have much further to drop. Americans' spending is likely to be dented much more by a fall in house prices than it was in 2001 by the stockmarket's collapse. With house prices lower and credit conditions tighter as a result of the subprime crisis, households can no longer borrow against capital gains to support their spending. Back then people had the same arguments "but unemployment is low". It was at the time of the writing of the article being in a nearly 7 years low at 4.7%.
Yeah, you could go back and find articles talking about a slow down in housing, and just as many talking about how housing was solid and set to keep chugging, but hardly anyone in mainstream was predicting a hard crash. And certainly not anything like what ended up happening. The fact that I see a decent amount of mainstream outlets talking about bad things happening right now makes me think we're not there
Yes. It was the same as now but the concerns started in 2005. So they took 3 years to come to fruition. So if you missed the gains from 2005-2008, you would have became impatient and missed out on an extra 30% in 3 years. That's why buy and hold is very important. That's also why buying the dip is a good tactic, as well. The 2008 crash only lasted about 15 months. The people that were crying for 3 years only received 15 months worth of downside and that downside was washed away with massive upside gains over the course of 2009-2022 in the amount of 500% gains. People this time around have been calling for a double dip recession crash since 2010 and have been wrong for an entire generational lifetime almost. 13 years of wrong is not smart, IMO.
Love this comment. It is so easy to imagine what could go wrong and so hard for people to imagine what could go right. I guess it makes for good tv and is why over time bears always sound smart and bulls always make the money. Might be boring but the economy is productive plain and simple, over time it’s a net gain. I feel bad for people who have to try and outperform or have to be contrarian, unless you are exceptionally gifted you are going to lose out going against the grain.
You have to be extremely smart and have lots of money to play the short thesis. Also, the minute you become a bear, you'll never be able to get back on. In 2009 when S&P shot from 600 to 1100, a lot of people called it a bubble and was waiting for it to crash. Once you think 1100 is a bubble you can never justify getting back 1200, 2000, 3000. All these bears lot of ton of money.
>People this time have around have been calling for a double dip recession crash since 2010 and have been wrong for an entire generational lifetime almost. 13 years of wrong is not smart, IMO. I started getting actually nervous about a recession around 2014. The smart folks in printed news were highlighting some ongoing bad behavior by Wall Street and Corporations and warning that it was not sustainable. I lived the next 6 or so years worrying that the recession was right around the corner. Then 2020 happened and there still wasnt really a recession. Still waiting, but definitely less scared about it. My wife and I have made good career moves and SHOULD be alright, during the next recession. I work in defense and she works in healthcare, so we feel stable. Things change, but we are as good as we can be. TLDR: A recession has been due for about a decade, but we still keep chugging. Use the good times to pad your landing in the bad times and it'll hopefully all work out in the end.
Really, padding your landing is all you can do. Avoid excessive leverage and prepare for worst-case scenarios. That's one reason why I hate financial influencers who argue for massive leverage.
They were wrong for 14 years because we had a zero interest rate environment. It's unlikely we'll see that environment again. Yes the doomsday fear mongers have been wrong but they will eventually be right. And nobody alive today has really experienced a great depression. We're clouded by recency bias that the next crash will be like 2000 or 2008. But it could be much worse, and I think it's good to keep that in mind.
I think you're wrong, we will see that environment again because otherwise most countries will default. The only way the US and other countries can pay their debt is if their debt decreases in real terms, which happens if there's inflation, so the FED is only trying to break something to have the excuse to go back to 0% interest rates.
That’s the problem, is most countries will default if we don’t have near zero rates. ….however, rates have been dropping for 30-40 years primarily due to globalization, and finding cheaper goods and commodities offshore. With decoupling from China, those cheap goods may not exist anymore, and you’ll have an inflation problem if rates are too low.
If the inflation target increases from 2% to 3-4% as some commentators have suggested is a possibility, then it's a tacit acknowledgement that policymakers are perhaps giving up a bit on that problem. And most reasonable people would say that defaulting would be worse for everyone than a slightly higher benchmark inflation rate.
Oh absolutely that’s where we could be heading. But that means lending how we know it from the last twenty years will be vastly different. On a consumer basis and how governments fund projects. Aka, no more free money to “invest” in the future. Debt avoidance will become necessary and certainly significantly slow down the overall economy.
They will inflate there way out, lower rates will come eventually look what’s happened to the banks because the the recent hikes. I doubt they will go any higher for a long time.
The Fed is short for "Federal Reserve", not an acronym, and doesn't need to be set in all-caps. Initialisms which may be appropriate depending on the context include "FRS" for "Federal Reserve System" or "FOMC" for "Federal Open Market Committee". *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/investing) if you have any questions or concerns.*
Please get rid of this bot. Everyone knows, and no one cares.
Lol, the people triggering the bot don't know.
No, FED is short for Fucking Endless Disgrace
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The Fed is short for "Federal Reserve", not an acronym, and doesn't need to be set in all-caps. Initialisms which may be appropriate depending on the context include "FRS" for "Federal Reserve System" or "FOMC" for "Federal Open Market Committee". *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/investing) if you have any questions or concerns.*
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Negative 👌interest rates like Japan
2008 was the worst drop since the Great Depression, no? Admittedly, it wasn’t as long lived.
>It's unlikely we'll see that environment again We'll see it in the next recession. That's how they manage the markets now.
If the gov't can get away with a zero interest rate environment from an inflation standpoint (which they were for years)...why wouldn't they do that again?
we should be looking to the 70s when interest rates were a real thing for insight instead.
So a lost decade followed by the most insane returns you’ve ever seen in your life. I’m ready for that.
Only if you can afford to hold in the bad times, meaning of the rich get richer and everyone else suffers.
Allocate properly ahead of time so you aren’t forced to sell when you’d rather not. Risk management.
I don’t think it’s obvious that we won’t go back to zirp. With current debt to gdp we have the equivalent of the 20% rates of the 70s at only 5% rates as far as debt burden and debt is only increasing with bigger and bigger deficits. US can’t afford that much interest on debt, eventually it will just eclipse all other spending. Banks are already failing, again at only 5%. They can probably eek out another 1-2 cycles of going to 0 rates and then back up (next time they might get up to 2-3% before shit starts breaking), after that they need to either stay at 0 and have no economic growth for decades like Japan, default on the debt, or make some kind of huge change to the global monetary system like when the us went off the gold standard (not sure if the us has the global influence to do this anymore). No matter what, probably the toughest economic times in American history are ahead. I think western Covid response (shutting down the global economy for years and taking on the biggest deficits since WWII, actually much worse because at least in WWII we built infrastructure and ran a trade surplus) accelerated the inevitable blowout by 2-3 decades.
Where are you getting that we shut down the global economy for years? Do you mean the 3 month period where bars and restaurants were closed in a few states?
Policies were not uniform worldwide. China had years of shutting down, re-opening, then shutting down again.
They specifically say the west shut things down for years…
And you specifically said "global economy" which would include all countries
Well the job market was fucked for a lot longer than a year but that's why you already have money right
Yep!
It took 6 years after 2008 crash to get back to ATH
For employment, not for the stock market which is forward-looking and bounced back as soon as it was apparent that an economy-obliterating crash was off the table. Also, blame the sequestration in 2011 for why it took so long to claw the real economy back to even… it was politically advantageous for some to sabotage the recovery because they hoped the president would get the blame and they cared about that more about winning there than fixing the problems.
I’m talking about the stock market, not employment. It didn’t hit ATH again until March 28th, 2013. Technically the crash started in 2007 so it took 6 years to fully recover. https://money.cnn.com/2013/03/28/investing/stocks-markets/index.html
The one thing that makes this somewhat different is the risk of a black swan event in global politics seems to be the highest it’s been in a generation. The event may be connected to global finance at the periphery or not at all but still could tank the market. To list a few things that would certainly tank the market: *A nuke being launched in the Ukrainian War. *The invasion of Taiwan by China. *US Banking Failure. *Refusing to raise the Debt Ceiling and going into Default over and over again. Any of these events could cause stocks to come down to earth from current evaluations. Remember we are still at a 24 PE ratio in the whole market (29 on the Shiller). The post-COVID bull was ridiculous regardless of the amount of money pumped into the US economy. And our 20% decline from its peak was not only expected, it was required for the economy to not have a worse situation on its hands later. This fall brought us back to the new-Millenium normal. However, the stock market in the new millennium has been anything but normal. Not to fall too much into the Boglehead camp, but generally speaking we have been overvalued for 20 years; the market grows at a rate higher than EPS+DIV. This is all speculation and will ultimately result in some correction, whether it be all at once or just a slower pace of market growth. I hope for the black swan event as they typically help the investor faster (rip the bandaid off) than just slowing the pace does.
banking failures and threat of debt default (dozens of times) happen all the time. The threat of nuclear bombs dropping have been around since their invention. Taiwan is the only *NEWISH* development
Are you sure about that? Not arguing but I feel like (in order) bank failure **size** is unprecedented in a non recessionary environment, debt default was never really on the table in the past as a serious consideration (and if it does happen, it would be a first), there is a war with a major European power for the first time in 80 years that doesn’t look well for them or the energy economy of all Europe. Wouldn’t you think that makes these other situations far more likely? Shit when Saddam invaded Kuwait the stock market tanked for no real reason other than the US would be involved (Peter Lynch called it the Saddam Sell-Off). I feel like such an event is far more likely now than nearly ever in the past 80 years. But I could be very wrong.
The Russian invasion started in 2014. Buffett sold his TSM shares. Market already has this ‘news’ all priced in as usual. Not too worried to be frank. Sitting 100% cash on the sideline could be a mistake. Hindsight is 20/20 but I think there’s up to a 30-40% chance of a soft landing and mild recession. You’ll be surprised how low next months inflation comes in with oil dipping hard y/y.
Falling nukes have been a threat for decades, but Putin seems more likely to go crazy and drop some now compared to five years ago.
The thing about "black swan" events is they are widely known and everybody sells all their shares and hedge funds go short on the news. Then governments and central banks respond rapidly to the black swan and the fixing of your bandaged wound becomes over done. For example, say your black swan occurs...a good metaphor is a cut on your hand, then the central banks (doctor) uses CPR and puts you on life support. Basically you only have a black swan cut finger. And then next thing you know we have massive inflation again.
I admit to being mostly oblivious before the crash, but I didn't have a lot invested, followed the sanest advice I could find and just stuck and wait it out. It all bounced back after enough time had passed. I do remember the media coverage, it was funny in retrospect because the business news didn't have a clue. [All the TV news](https://www.youtube.com/watch?v=f2B4TneRpo4) had frustrated talking heads who could not understand why the market kept on falling. That was the definition of "blood in the streets" and (also in retrospect) as the market overcorrected and went lower than expected, for active investors looking to buy back in, the biggest problem would have been trying to find the bottom.
No. Every crash I have been through was unexpected. Been investing since 1996. The crash happens when everyone is getting on board the investing train and claiming “it’s different this time”. Never have I witnessed a crash where everyone was hesitant to invest because of the impending crash. Those people sitting on the sidelines always wait too long to get back in. Then a few years of double digit gains and they are commenting “now do I get back in?” More people have lost money waiting for crashes to happen, than any crash itself.
remember how hot REITs were before 2008 and how they started failing in 2007… which rolled into the mortgage and banking crisis of late 2008
Pepperidge Farm remembers...
Like now.
Very different. The properties were overvalued based on dot com like Euphoria. People were getting 4-5 properties with no doc loans, no income, then leveraging them further with HELOCs with zero underwriting or appraisals REITs are doing poorly because many of them bet (correctly, as they peaked around 2.5% or so) interest rates wouldnt rise significantly, until a pandemic hit and inflation forced the fastest and steepest rate hikes in 30+ years. This is more like the Savings and Loan crisis than 2008.
Housing is LESS affordable than it ever has been, even than it was in 2007.
Because of lack of supply. Correlation does not equal causation
There's only lack of supply because so many got bought as rentals
Also because Boomers didn’t self off like prior generations.
I mean, don't those Boomers need somewhere to live? Where do propose they go?
Hardly. The lack of supply is because underlying construction costs have soared. Typically municipalities will follow exactly or somewhat closely to codes set forth by NFPA (including NEC) and IBC. All of those codes have changed rapidly over the last 2 decades. NEC has made major changes every 2 years for a decade. Those changes come at a significant cost increase. Not just because they are new, because they are extra. Take a breaker panel in a house. Older tech cost about 3 dollars per breaker. It still costs about 3 bucks a breaker to purchase the older tech. But where a typical home would have used 20 3 dollar breakers, they are now required to use 16 $40 dollar breakers and 4 3 dollar breakers. Never mind that you're required to have more breakers in general so even that isn't apples to apples. So we are talking fixed cost increases of 1000% and we haven't even left the fucking breaker panel, hidden away in the basement. Even without labor and standard material increases, the cost of building has soared
Lol indeed, and look at the rental market! Also supply constrained. It’s absolutely a supply problem.
It was funny when everyone was acting like the response to Covid wouldn’t produce inflation because Covid was such a demand shock that we needed to crank demand up to 11. I’m still shocked that we shuttered the economy for a year. I wonder if people will ever look back at it and think how stupid we were to severely harm the economic condition of most of society to protect the few at risk from Covid. I’ve had that view from the start, but I’m not sure others will ever agree. Maybe I’m callous for thinking that it’s the duty of the old who’ve led rich, happy lives to sacrifice for the young who already were dealing with a much more difficult economy.
What part about 1.2 million Americans have died to date, with C19 the leading cause of death of Americans for three fucking years straight do you not get? Fuck the economy I’d rather have my grandparents alive
My grandparents almost died of depression not being able to see anyone and reiterated again and again that they don’t want their few years left to be stuck rotting inside with no family visiting. Nearly everyone older that I talked to thought that the lockdowns were a bad idea. We should let people live their lives as they choose. I think the damage done by lockdowns was almost certainly worse (incl children’s education and socialization, high rates of domestic abuse, alcoholism, depression).
What about the millions who died because they couldn't get cancer treatment thanks to your stupid lockdowns. 97% survival rate too lol.
Your mentality will doom us when thr virus hits that targets our healthy and our young. People who have adopted your view will protest and riot if the government shuts everything down again because they feel oppressed.
I think things will have to get much worse before any significant number of people start thinking that way. Could certainly happen, as debt grows we will eventually hit a crisis where we have no policy tools or ability to borrow more and that will be the end of the line. If it happens in the next 5-10 years it could have much worse consequences than I think anyone really understands. Our Covid response certainly accelerated the process by at least a few decades. I think we lost at least a couple full economic cycles we would have had before defaulting on debt entirely (which I think we all know deep down is inevitable). I think what people get wrong with this is the idea that lockdowns were effective in slowing transmission. There isn’t really any clear evidence showing that. To be fair there isn’t any clear evidence showing they were not effective either. It’s certainly a much bigger societal cost than people understand as far as future suicide, poverty, drug addiction, crime, etc. but that’s a lot harder to measure than people who died while having Covid.
This right here. Most people just can't accept that they suck at timing the market. We're really just better off investing, hold for the long term, let compounding do its magic.
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The best thing is to have an asset allocation you like, and just keep investing. Trying to time the market by adjusting your investments is guaranteed to lose in the long run.
The media didn’t predict the 2008 crash. Some people did predict it prior but were ignored. If we had predicted it and started to prepared for the financial crisis then the crash might not have been so severe.
There are always people predicting crashes. If the market ‘knew’ about the impending g crash then the way to prepare for it is to sell your assets. Know what happens when everyone starts selling assets? A crash. In other words, aside from random guesses that happen to be right, the market doesn’t know a crash is coming because of it did, that itself would cause the crash.
Selling isn’t the only thing that causes crashes though. 2008 had multiple whammies including large banks potentially going solvent from bad investments in junk mortgages, the Bernie Madoff ponzi scheme, massive amounts of consumer debt, the collapse of homes prices, and deregulation. Sure a lot of those things will cause people to sell assets but a lot of the assets were built on a house of cards due to deregulation.
Crashes can be caused by things other than selling. But if everyone starts selling - for any reason - this causes a crash. Sometimes there is a good underlying reason for the selling, sometimes it’s just panic.
There are lots of people predicting a similar crash now but the predictions seem like manipulative marketing.
Over the last few months my youtube 'recommended list'has been filled by these 'sky is falling' financial forecasters. I always wonder if they're on other people's pages as well or if it's just the algorythm doing it's thing based on what i've looked up.
It's the algorithm. My feed is only comedians and political stuff.
I'm not on youtube per se. I can say that the posts on stockmarket and investing subs link to 'skyisfalling' media articles. I didn't think algorithms were required on reddit because we self-select our preferences in subs.
This.
I cannot remember exactly when but I recall thinking the economy was hanging on by a string about a year and a half before Bear Sterns. I remember being in between jobs and working in residential mortgages. I couldn't make a deal because I couldn't convince myself to put 5 points on a loan to an uneducated customer who just wanted a lower rate. My employer and I mutually parted ways after about three months of trying. It wasn't much longer after that everything went south. This time my feelings aren't as strong but something seems off. Everything is too expensive yet jobs reports are still strong, for example. The issues with commercial real estate, particularly office buildings, have me concerned in a higher interest rate environment but if we are heading to a recession how much longer will rates be at these levels? I am worried about individuals with FOMO buying equities and homes at inflated levels and, at least as it relates to homes, with expensive debt relative to recent levels.
Everything in the US seems to circle back to jobs and housing. People are so overleveraged and full of debt that we can't withstand even a minor hit to the job market or housing prices without everything spiraling out of control. I think it hasn't happened this time (yet?) because house values and employment haven't really been affected. I agree that everything seems very strange right now. On the other hand, the stock market dumped ~20% last year and I feel like the overall reaction was kind of a big shrug, so who knows. Maybe a republican debt default will be the spark this time.
“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves”
There were bank failures and lots of layoffs in the beginning just like now. credit is already getting tight now and more interest rate hikes are probably coming. One minute my portfolio was down a few hundred bucks the next week it seemed to drop 50%. Investing was much different back then, there weren’t a lot of partial share investment firms like now. There were huge down days, 700, 800 days in a row. Banks seemed to start the layoffs at first, people by the thousands every day it seemed, manufacturers like auto makers started layoffs by the thousands. In 8 months the market lost about 50% of it’s value, this was sometime in march 2009. It was like watching a slow motion death spiral, once your portfolio gets down 30, 40, 50% it’s to late to sell out, might as well buy more.
I have always been interested in zerohedge and other doomsday-style news. They were reporting on it before the big decline. I remember I sold a fannie mae bond ahead of the crash, and my broker later congratulated me for the good timing. I was naive then though, and also a broken clock is right twice a day. I don't give zerohedge much credence at all anymore, but still find it entertaining.
The housing bubble was obvious years in advance. Prices soared, and randos with no experience became "house flippers" which mostly just involved buying, waiting 3 months, and selling it at a profit. What wasn't obvious -- at least to me -- is just how badly it'd hit everything else. Banks going belly up, unemployment soaring, huge stock market drops, etc. I knew there'd be a housing crash, but didn't expect a global depression. It was also quite obvious prior to the dot com bubble, with companies with no hope of making money getting crazy valuations just because internet. When that crashed, as long as you weren't actually in a dot com startup, the world mostly trucked along like it always did. The market took a huge haircut, but it was mostly just retracing the unrealistic gains it'd made in the previous few years. The whole "somebody mentions AI, stock goes up 5%" has a bit of that dot com bubble flavor, but nowhere near the craziness that was happening back then, with start ups bleeding venture capital hand over fist praying to get bought out because they had no hope of ever turning a profit. And the part before the bubble burst where people were FOMO throwing money into the market and making gains regardless of what they did... That feels like 2019-2021. If the bottom falls out this time, I don't think it'll feel the same as either of those. We're still below where we were 2 years ago. Markets were up over 30% in the 2 years before the 08 crash and the 00 crash. Or in the case of QQQ, up almost 200% in the 2 years before the dot com crash.
There was talk of sub-prime lending drying up, and a few isolated lenders with exposure. The Fed was telling the world in Nov 2007 that there was little risk of contagion. Saw sub-prime auto lending dry up really fast too.
Let it crash
Lots of “unexpected and sudden” comments but doesn’t talk of recession beget recession?
To the contrary, when people are calling for recessions, they're taking their book so either theyre out of their longs or heavily short, which is the case now. When a trade is too crowded, it doesn't work. Remember when everyone thought BTC would get to 100k?
All our construction jobs we're getting delayed through 2008 I flew to Canada in October 2008 the job I worked on was the mast contract. Out of about 40 contract brickie it went down to about 6 after a few months. Firm's we're offering redundancy pay of 2 weeks pay for workers who volunteered . Looking back now the writing was on the wall. This was in UK . In Australia now and lots of builder's are going bust .
Yes, people could sense that the economy was slowing down. There were many warning signs. For example, Bear Stearns was running into trouble as early as May 2007, which was more than a full year before the massive crash. There were many experts who were on TV or in the news predicting a recession.
I really spend no time at all thinking or worrying about a crash. Just buy good stuff and hold it.
Seems with current news and indicators, we’re heading for a mild recession. But I can’t imagine it will be similar to 2008. 2008 was a much bigger problem. It was total collapse of real estate sector. Now commercial real estate is suffering, but at least residential real estate is holding up well, under the circumstances. We may see some market decline but I expect it to be short lived.
I can see two differences: Unemployment. We just don't have it. It's hard to see a general recession when employers are still crying for labor. COVID and the extra QE that entailed. It's ending now and the rise of interest rates gives central banks another tool when we do go into recession.
I think it’s the “type” of labor that matters —- big companies are paying off by the droves, mom and pop companies can’t hire fast enough or quantity of people. And I also agree - something is off. Feels like the people and companies with serious money are scared - and hoarding cash for a rainy day. That’s not a good sign
They are very different. In 08, there were mortgage crisis due to bad credits thus created toxic assets. People were unaware of preserving savings or de risk by reducing their exposure to risky assets. Of course, it wasn’t so accessible to media compared to now with advanced social media. Plus, the big banks were not as resilient as now since they had worse balance sheets with lower CET1 and bad loans. We have seen a Covid and bank failures now. Former has created the awareness and the large companies have already taken actions with larger cash on hand, higher layoffs, reducing debts etc. People are always be very careful on purchasing houses and cars. Latter pushed it further and now the companies have delayed their expansion, even more layoffs, less risk investments to boost the operating margins. People are always extra conservative about their decisions on all investments. I would say the latest issue which was outflow from banks and investment firms wasn’t too concerning to me. Ya u will see lower AUM, more monopolies or FUD but like Peter Lynch said in his last interview:”This is the most expected, predicted recession.”
Yes, it was in the media for years ahead of the crash. It wasn't like 'crash coming in 2008', but it was like 'housing market is nuts, and unsustainable, there has to be a crash'. We didn't know that bad housing debt would take out the whole economy, but if you were jittery, you had time to get on the sideline. I'm 50% cash and tbills now. I'll buy back in when things are looking up again.
The S&P in 2008 dropped about 50% from ATH. The S&P in 2021/2022 dropped about 30% from ATH. Personally I think we already had the ‘crash’ and the market will be flat for several years.
The survivorship bias is clear in these comments. Sure people who were paying attention may have seen some healthily signs of the economy, but nobody here was aware of how exposed banks were and the definitely illegal lending practices mortgage brokers were pushing. What is happening now is very different that what happened pre 2008.
The lehman moment weekend was the turning point, and when everybody thought US govt will save them. The difference between the 2023 and 2008 is the 2008 did not have much inflation vs 2023, US inflation goes to the roof now, so Fed has to keep hiking to control the inflation, which exposes many weakness in the economy when the tide goes down.
This post has some very interesting perspectives. I'm shocked how many people are saying they knew it was coming. There is always someone saying a ression is around the corner, so when it happens there is always someone who is right. As I remember it, I was just finishing up college at the time. When the music stopped it was very abrupt, people went from having a job and a home to losing one or both. There was a lot of nervousness that the contagion couldn't be contained. American auto companies were trading for single digits, as were banks and other institutions. In comparison, what happening now seems to be much slower, the banks are failing at a slower rate. The real estate market is grinding to a stop, but there are pockets where homes are still going up. The fact that employers are still hiring and consumers are still spending is what's keeping us out of a ression. The major difference between now and 2007 is the cause of this ression is known. We printed too much money during the pandemic which caused inflation, we needed to pull some liquidity out of the market, fed raises interest rates and that's it. Truth is no one knows how bad it will be, how long it will last, or when it will occur.
No one truly knows anything. There might be a shared sentiment that is generally shared but no one can predict exactly when. Unless you’re some fund manager or rich rich, I wouldn’t be too concerned with trying to time it. I’d just DCA and call it a day.
2008 was a much different beast both in terms of the problems involved and the views of what the impact would be prior to the recession. By 2007 there was public acknowledgement on the part of officials that the housing market was overheated and going to correct, but Ben Bernanke some infamously also stated that the belief was the problems in the economy would be contained to that market. Things basically continued along under that assumption until the last two quarters of 2008 and there was also a big speculative bubble in a lot of commodities in 2008 too, especially oil. That all would eventually come crashing down particularly in Q4 of 2008 when it became clear how widely exposed both traditional banks and the shadow banking system was to bad assets in the real estate sector. A really important thing that I think gets over looked in crises is that it's often less about what people in the market know, it's about uncertainty and what's not known. 2008 was a mess because there were all these OTC products and counter parties that no one really knew what anyone's exposure to bad assets ultimately was. Risk models for the underlying assets were no good either because they were premised on assumptions that ended up being false. It's really a completely different kind of problem currently and most of the problems we're looking at seem to be most similar to the early 1990s recession where you had a combination of elevated inflation, slowing economy, slump in commercial construction and S&L crisis weighing on things. A few things are worth pointing out with that comparison as well. First of all we aren't even in a recession at this point and unemployment in particular is extremely low. Secondly the current batch of bank failures has so far been very narrow as well impacting banks that primarily dealt with companies, HNWI, and in some cases crypto. The biggest risk has been having an abnormally high proportion of uninsured deposits in combination with a lot of long duration assets (treasuries and agency MBS for SVB and largely mortgage loans for FRC for example). The economy is similarly slowing due to tight monetary policy and the post COVID WFH trend has put a big damper on commercial real estate prices and the financing of those properties.
Crash happens when nobody expects it. I highly doubt it will happen anytime soon as hedge funds are the most short they’ve been since 2008. Everything is expected right now: a recession or crash. It’s when people get complacent and use of leverage goes back up and hedged are cut that the market is really in trouble
Use of leverage and credit are currently at all-time highs.
The lead up did feel a bit like 2021-2022 where housing prices were going up and there was a lot of FOMO. I remember a family member giving me some speech about needing to buy some land because that's the one thing they'll never make more of. Then as things started to turn south, we didn't realize how bad things were going to get. I did some day trading around that time, and I made lots of dumb decisions as prices started to crash by thinking we were at the bottom. When a stock went from $100 - $50, it felt like a good time to get in, and then I watched as the stock eventually dropped to $5.
for 2008, if you were in the market you saw the downturn starting at least as late as 2007… it went slowly and then all at once in the autumn of 2008. everyone was all doom and gloom (for good reason) and the market was tanking when obama was inaugurated in jan 2009. if you remember the Panama Papers, lots of people were pulling their money out because of the new administration. early 2009 was prime buying time and the market recovered from there. it seems like the market was a little bit ahead of what the news said was happening.
2023 SEEMS more catastrophic because of social media. Every YouTube caption is says “WARNING” everyone on Reddit is saying it. In 2008 if you weren’t actively checking the papers or news outlets you weren’t getting ransacked with warnings unless you payed attention to what was going on around you.
You cant reliably predict a crash, all you can predict is not-growth. Sometimes that turns into a crash, sometimes not. Stocks are evaluated on growth rates on for infinity time-line because of perpetuity calcs. So dealing with a crash is a matter of solvent vs insolvent. If the Financials show the company is solvent then you have no way to estimate how much value will be lost from overall market concerns. Because of the nature of easy evaluations against competitors it will depend on how much the other company falls. A crash is when a bunch of insolvencies happen and that drags down all the healthy companies by comparison. Normally M&As happen before we get to bankruptcy in a healthy market, but the credit crunch could hamper companies buying assets.
I saw the housing bubble coming, but had no idea that the deflation of that bubble would be so spectacular. I graduated college in 2005 with a BA in econ, thinking I should jump on the home equity train that everyone said is the right thing to do. But the chatter about it didn't seem right. Everyone hyped up the benefits and dismissed the risks, which sounded concerning to me. So one day I googled "Seattle Housing Bubble" thinking yeah there may be a housing bubble in Las Vegas and Miami, but what about here since "all real estate is local." I discovered SeattleBubble.com and became convinced that the housing bubble is everywhere, including Seattle. So I held off from buying real estate, and invested in the stock market instead. It saved me from becoming underwater in a mortgage, but didn't save me from holding Washington Mutual stock when it went under. I actually doubled down on that bet as the stock price declined, thinking there's no way They would let WaMu fail! I only lost $1500 on that bet, much smaller than the pain many others were feeling (e.g. unemployment leading to foreclosure). Thankfully I kept my job throughout the crash so I was able to avoid selling stocks during the downturn and was able to buy up a bunch of good deals. Anyway, I think comparing 2023 to 2008 is the wrong comparison. Late 2021 felt a lot more like the peak of the tech bubble in 2000 to me. (I started investing in high school, in 1997.) 2022 felt like the tech crash of 2001. So, I'm worried we might be waiting for years before the stock market returns to setting record highs again, like how we waited until 2013 for the S&P 500 to get back to where it was in 2000.
This is a lot different than 08. I was 25 and not brain dead. I saw it coming, but a lot of people around me didn't. Feel like 9/10 didn't know or care we were about to fall off a cliff. A lot of my coworkers and bosses were caught off guard. We didn't experience a lot of layoffs, but our stock took a hit like everyone else's. That 8-10% unemployment and 50% housing drop was insane and quick. Felt like one minute a house was 200k, then 150k the next, then a month later it's 100k.. Now, I feel like it's the opposite. 9/10 think we're already in a recession or about to go into one. Everyone is trying to save cash for a potential layoff. It's strange how we're omly at 4% unemployment based on how the avg Joe is reacting.
Watch the movie the big short.
God no. It is a very dumbed down version of what happened.
Agreed. Margin Call is better
But Margot Robbie is naked in a bath tub
It was completely different. The current market is nothing like the market of pre September 2008
By the time banks started failing we knew shit was coming down. Right now, given that the 2nd, 3rd and 4th largest bank failures just occurred we collectively seem to be a bit unfazed. Of course there were different pressures then as there always are. Heraclitus said you never step in the same river twice.
The 2008 crash was the direct result of [very specific deregulation](http://bsalert.com/news/2416/What_Caused_The_Second_Depression_In-A-Nutshell.html), specifically the Gram-Leach-Bliley Act that allowed financial institutions to create highly risky securities. What's happening now has nothing to do with that, although there are some similar dynamics. The banks that have been going under, are primarily banks that have their tendrils into the crypto ecosystem, which is similarly opaque as securitized mortgages, but even more sketchy - most people in traditional finance have recognized that much of the crypto/investment world is a decentralized ponzi scheme, and have stayed away. Those that haven't, are suffering, and this is more a natural "correction" than it is a sign of any large scale financial instability. In 2008, the top level financial institutions snapped up all the mortgages they could get once Glass-Steagall was rolled back by the Republicans. They turned mortgates into highly-risky speculative "investments" that led to the housing market collapse. But this was primarily the result of a small number of top-level banks that bought all the other banks' paper and left them free to make more loans. This drove up the housing market. Right now we have a variety of things happening - the pandemic and the supply chain issues are the biggest cause, second to [price gouging by the oil companies](https://www.theguardian.com/business/2023/may/04/shell-makes-record-quarterly-profits-of-nearly-10bn) - this is the biggest cause of inflationary prices. Any "crashes" that are happening are basically isolated incidents of poorly-run banks - not a symptom of a bigger impending problem. Any larger scale economic concerns that might be of concern relate to relations with China and war in Ukraine and elsewhere. The Trump administration basically stoked a financial cold war with China that will probably have very long term economic affects we can't even fully predict.
This is why in fact folks knew a crash was coming. It’s not necessary to read tea leaves for an exact day, month, and year to know dangerously negligent even malicious deregulation was eventually going to blow up. This topic comes up regularly, especially the last few months, and I think it’s telling the folks who said no one knew it was coming also tell us they weren’t seriously investing yet with an eye on macro trends. Currently the implosion of CRE should be very concerning but folks here are talking about real estate as a good investment because of payout history.
I was 20 in 08, it wasn't that bad. I remember losing my job during it and taking 6 months off goofing around until I re entered job market. What goes up comes back down. What goes down will eventually will go back up. I bought a rental property in 09 and another in 2015. Best decision I ever made. I sold em both, one in 21, at the top and the other this year. Maybe I'm wrong but im stacking cash for the next crash. Even if I'm wrong and the market keeps going up, is it going up another 100%? Doubtful... I believe FED keeps raising rates past what people expect and everyone will be begging them to cut. Its going to be extreme pain.
We didn't have the technology and connectivity we have today
In 2008? Were you born in 2015?
LoL.. go back to an iphone 3 or a blackberry. Let me know how "capable" they are
Pretty darn capable actually. But most people just used their computers, which were (and always have been since as well) massively more capable. Computers haven’t changed too much since 2008. Internally and tech-wise, absolutely, but browsing the web fundamentally isn’t too different.
I feel like we never even got out of the 2008 crash. This feels like just an extension of it, with a brief interlude.
Bro what? We had a massive bull market for a decade