Your 2008 Financial Crisis Stories

[rockket]

Having not been in the position to invest at that time, I'd love to hear about people's experiences (financially, psychologically, emotionally, etc.) living and investing through the last cycle.

 

How did you respond to the downturn? How difficult was it to double down when times were tough? What was the investing media telling you would happen in the markets?

 

Saw a similar thread on the financialindependence subreddit which turned up some great responses - would love to see what people say here!

 

 

[T-bone1]

A few anecdotal observations fwiw:

 

In the beginning (market down 20%) it was very easy to double down on things. There was a general perception that the government would step in and that the "greenspan put" protected the downside.

 

Towards the bottom, it was very difficult to double down on things and we (like many value investors) were only allocating funds towards distressed fixed income investments that we were sure were "money good" under a very wide range of outcomes - because at the bottom the range of possible outcomes seemed very wide indeed. 

 

I think the Bear Stearns bankruptcy really shocked a lot of people - up until that point in the cycle you could do no wrong buying something at 25% of "tangible book value"... and then a lot of people lost 90% overnight doing just that. That led to the type of mentality that allowed Klarman to buy AIG paper a few days from maturity for half off (doubling his money in a few days). 

 

In general it sucked... the opportunities were great and we made money coming out of it, but it is a whole different world when things go down 80% (once in a lifetime bargain!!!) but you know they might go down 90% (you just lost half your money in a month!!!). Given the above, I'm not sure how to really do things differently. Knowing what I know now, I think I would still take the safe 40% IRR in fixed income, but possibly adding 10-15 1% positions across industries in highly distressed equities (knowing they might go down another 50% the following week).

[Jurgis]

Here you go: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/plagarizing-stock-picks-by-the-greats/20/

 

There is another thread on this in 2014 too...

[rockket]

Here you go: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/plagarizing-stock-picks-by-the-greats/20/

 

There is another thread on this in 2014 too...

 

Thanks for the link, though couldn't turn up the 2014 thread (not the easiest site to search, and I did search before posting this!).

 

I'd really like to focus on the psychological/cognitive aspects of investing during that time, which that January thread covers, but does not directly address.

[no_free_lunch]

It was scary.  Start extrapolating a downward line in earnings, employment and an upward line in debt.  Everything looked like hell.  Media was good at the beginning as T-bone said.  Before Lehman they talked like you were stupid if you didn't invest.  After lehman it all changed and the general concensus was to stay away, or at least on the sites I went to.  Things change a tiny bit when Buffet made his comment in october /november but still overall everyone was very pessimistic.  Obama's green shoot comment seemed to mark and maybe even generate the bottom.

 

I sold all financials a month before lehman so I did ok.  However, very tough to get back in.  I got in at SP500 level of 800 in late march 09 I believe, ONLY because some very pessimistic perma bears were suddenly less pessimistic.  Still, even at that level people were talking about SP500 at 300-400 to match depression era levels.  When I went back in I was scared and mostly went via broad etfs.  I had little confidence in the market in anything less than the next 20 years.

[Jurgis]

Thanks for the link, though couldn't turn up the 2014 thread (not the easiest site to search, and I did search before posting this!).

 

Here you go:

 

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/your-20082009-experience/

 

Maybe different from what you want.

[rkbabang]

I was heavily invested in Fairfax, WEST, SNS and the MIDD/OVEN merger, so I didn't even have a down year from 2007-2009.  Unlike last year where I was down 9% in an up market. :/