The Great Recession - post mortem

[Mac Howard]

Originally Posted by molson

Definitely, and that's kind of enlightening for me because I do think of the world's bigger picture in those kind of terms - i.e, when Bono talks about curing every disease known to man, my first thought is how the hell the earth would manage a population of 50 billion people.

This time and this year are so unimportant in the bigger picture - I obviously could never run for office.

There are no easy solutions. What bugs me are those who say there are and insist they know exactly what the solutions are. In the end we need to react to what happens and try to learn from it so as to avoid seeing it repeated.

[Gary Gorski]

Originally Posted by Tekneek

Nope. My idea has only been that I would prefer the government pay each human being in the nation an equal portion of this bailout money instead of concentrating it on the entities that created the problem. It has nothing to do with you holding a party or taxes or anything else.

Like others have said what good would this do? Do you really want $2300 + Great Depression II? At least with the bailout you are not only hopefully avoiding a global economic collapse but because the taxpayers are going to be contributing the money for it we're investors in the rebuilding of Wall St. That way the profits get spread around all the taxpayers rather than one massive bank and its shareholders. Look at the sweet deals JPM got on WaMu and Buffett got on Goldman. Those deals are to be had on some of these other banks and hopefully we'll be able to look back at this period in time 5 years from now and say that there were some great, great bargains on Wall St. for investors.

[DaddyTorgo]

nikkei's down 0.50% and hang seng is down 2% -- going to be an interesting day today (monday)

[JPhillips]

Wachovia is no more. Sounds like they failed and were bought out by Citi at the same time. Citi takes some liability, but FDIC takes a bunch and gets some Citi preferred stock.

[Gary Gorski]

From TheStreet.com

"The FDIC in a press release stressed that Wachovia did not fail. Citi will take the hit for up to $42 billion of losses on a $312 billion pool of Wachovia loans, while the FDIC will take responsibilities for additional losses. Citi granted the FDIC $12 billion in preferred stock and warrants for assuming the risk.

Wachovia will continue to own brokerage AG Edwards and asset manager Evergreen Investments. Other terms of the deal were not disclosed."

[Flasch186]

Jeez, figure out which bank to short next and you could get rich....oh yeah, cant short

[Gary Gorski]

Originally Posted by Flasch186

Jeez, figure out which bank to short next and you could get rich....oh yeah, cant short

You could always buy puts

[molson]

If anyone wants to read this thing, you know, so in future arguments, you can say, "hey, have you even READ the bailout plan?", here it is:

http://graphics8.nytimes.com/package...ilout_text.pdf

[Flasch186]

Originally Posted by Gary Gorski

You could always buy puts

good point


brutal day today.

[Gary Gorski]

brutal indeed - they haven't even opened Wachovia, Apple's been getting crushed and who knows when/if the bailout will get passed. If anyone's interested you can listen to the House debate the bill at cnbc.com

[MikeVic]

This is why I shouldn't have gotten involved in the market at all... I'm so worried my mutual fund will just keep dropping now.

[Gary Gorski]

You can't beat yourself up over investing - especially in something like a mutual fund. I mean its one thing to sink a bunch of money into some long shot company expecting to become a millionaire but what we're seeing today are truly extraordinary circumstances. I think that over a long period of time there are few if any asset classes that have outperformed the market as a whole.

[Fidatelo]

Originally Posted by MikeVic

This is why I shouldn't have gotten involved in the market at all... I'm so worried my mutual fund will just keep dropping now.

Try this on for size:

According to the propaganda presented to me when I first started, a 20 year-old who invested $2000 a year in mutual funds for 10 years, then just left it until retirement at 65 (so 20k total invested), would come out ahead of someone who put nothing into mutual funds until age 30, then put $2000 a year away until retirement (70k total invested). This was based on compounding and dollar-cost averaging and a 8% yearly return and all the other crap the bankers spew out as being pretty much guaranteed. I believe they estimated that your money would double every 7 years or so.

I've been working for 10 years now, and have been putting money into mutual funds (RRSP) the entire time (with the exception of a 6-month or so period when I moved and wasn't sure of my finances). In fact I think I started back when I was in college, so it's likely been more than just the 10 years. I've put into several different funds during that time, but I've never sold anything, always just taken the long-term view and hold like I was told to. Over time I have slowly increased my monthly contributions from $25 up to $700.

I am now 30 years old. As of today, My book value (the amount of actual money I've invested, so essentially what I'd have under my mattress if I avoided banks at all) is over $5000 higher than the actual value (what I'd get if I sold everything right now). In 10+ years of investing prudently, I have lost money. I will never get those 10 years back. I will never be able to have my money compound the way it was supposed to. I could have put that money in my mattress, taken a trip to Europe, and been in the exact same position.

I no longer know what to believe. I know the worst thing you can do is panic and sell low, but how much longer can I sit and watch my life savings do nothing for me? Sure, I'm still only 30 years old, and when they show you all those lovely charts with the ever-rising line, it spans out over 40+ years. But do I wait another 10 years before acting? What happens if I'm in the same position when I'm 40? At that point I'd almost be screwed.

It's becoming increasingly clear that all these supposed financial experts don't have a fucking clue. I am not impressed.

[Galaxy]

At least oil has fallen back to just under $100/barrel.

[Galaxy]

Originally Posted by Tekneek

It is important to note that not all economists agree with this position. More than a few out there believe Wall St could fix it themselves, if they simply decided to. Instead, the possibility of a bailout looming over the horizon has motivated them to do something else.

How do they propose Wall Street fix itself?

[molson]

Originally Posted by Fidatelo

Try this on for size:

According to the propaganda presented to me when I first started, a 20 year-old who invested $2000 a year in mutual funds for 10 years, then just left it until retirement at 65 (so 20k total invested), would come out ahead of someone who put nothing into mutual funds until age 30, then put $2000 a year away until retirement (70k total invested). This was based on compounding and dollar-cost averaging and a 8% yearly return and all the other crap the bankers spew out as being pretty much guaranteed. I believe they estimated that your money would double every 7 years or so.

I've been working for 10 years now, and have been putting money into mutual funds (RRSP) the entire time (with the exception of a 6-month or so period when I moved and wasn't sure of my finances). In fact I think I started back when I was in college, so it's likely been more than just the 10 years. I've put into several different funds during that time, but I've never sold anything, always just taken the long-term view and hold like I was told to. Over time I have slowly increased my monthly contributions from $25 up to $700.

I am now 30 years old. As of today, My book value (the amount of actual money I've invested, so essentially what I'd have under my mattress if I avoided banks at all) is over $5000 higher than the actual value (what I'd get if I sold everything right now). In 10+ years of investing prudently, I have lost money. I will never get those 10 years back. I will never be able to have my money compound the way it was supposed to. I could have put that money in my mattress, taken a trip to Europe, and been in the exact same position.

I no longer know what to believe. I know the worst thing you can do is panic and sell low, but how much longer can I sit and watch my life savings do nothing for me? Sure, I'm still only 30 years old, and when they show you all those lovely charts with the ever-rising line, it spans out over 40+ years. But do I wait another 10 years before acting? What happens if I'm in the same position when I'm 40? At that point I'd almost be screwed.

It's becoming increasingly clear that all these supposed financial experts don't have a fucking clue. I am not impressed.

Wow. You'll never hear this story in one of those Edward Jones IRA pamphlets.

This goes back to my point about delaying recessions. Over 40 years, an economy will rise and fall, have moments of growth and recession. UNLESS you screw around with it too much. If a government makes huge sacrifices to merely delay a recession for a few years, you might as well tear up all these 40-year projections.

[MikeVic]

That sucks Fidatelo! It makes me want to get out of this thing completely!

[Gary Gorski]

Wow that's terrible Fidatelo - what kinds of funds were you invested in? Were you diversified? I know of people who had major portions of their 401k funds wiped out because they were nearly 100% invested in tech type funds during the dot com bubble. Plus we had 9/11 and now this massive drop in the market - it has not been a good ten years for the market on the whole and I think that the people who tell you to just invest and forget about it are doing customers a major disservice. Sure if you started in 1958 - yeah 40 years later you've got a nice chart to show. In that time the dow has gone from 601 to 10,900 (today) and as high as about 13,500 as opposed to about 10 years ago when the dow was at 9,000. I believe that over time my investments and 401k contributions will appreciate significantly but I am less certain of that now than I was say a year or so ago.

[PilotMan]

Yeah, Fidatelo, you and I are in similar situations. My outlook is still very long term. I am quite diversified, and still have taken a bath over the last couple of years. Still, I think that I am buying at pretty good prices, and when things rebound, they will rebound better than 8% and hopefully can bring that overall curve back up a little. Especially that I will own more stock right now, than if the market would have started to go up on that nice line that we were looking at. Even in our 30's there is a lot of time for things to change.

[Fidatelo]

Originally Posted by Gary Gorski

Wow that's terrible Fidatelo - what kinds of funds were you invested in? Were you diversified? I know of people who had major portions of their 401k funds wiped out because they were nearly 100% invested in tech type funds during the dot com bubble. Plus we had 9/11 and now this massive drop in the market - it has not been a good ten years for the market on the whole and I think that the people who tell you to just invest and forget about it are doing customers a major disservice. Sure if you started in 1958 - yeah 40 years later you've got a nice chart to show. In that time the dow has gone from 601 to 10,900 (today) and as high as about 13,500 as opposed to about 10 years ago when the dow was at 9,000. I believe that over time my investments and 401k contributions will appreciate significantly but I am less certain of that now than I was say a year or so ago.

Here are all of the funds I own units of, with the average unit cost and current price in brackets:

RBC Canadian Dividend (avg: 45.181 | cur: 44.125)
RBC Canadian Equity (avg: 17.216 | cur: 23.934)
RBC Canadian Index (avg: 21.700 | cur: 22.710)
O'Shaughnessy Cdn. Equity (avg: 15.907 | cur: 14.603)
O'Shaughnessy U.S. Growth (avg: 18.251 | cur: 13.038)
RBC Life Science & Technology (avg: 9.919 | cur: 4.878)
O'Shaughnessy Intl Equity (avg: 11.652 | cur: 8.783)
Non-redeemable GIC (n/a)

The amount I've put into each has changed over time, with Life Science & Technology being one that I put into a lot early but gave up on adding to a few years ago, and contributes about $2000 of my losses. My 'big 3' of O'Shaughnessy Cdn Equity, RBC Canadian Equity, and O'Shaugnessy Intl Equity equate for about 65-70% of my portfolio.

Obviously I am fairly equity heavy, but for my age that is supposed to be the case as I understand it. I'm also less exposed to the US than my advisor would like, but so far that gut-instinct of mine to stay more within Canada has actually kept me ahead.

I'm sure with enough detail people could pick it apart and point out each area that I screwed up, but the point is that I have followed all of the basic rules that were explained to me from the start: invest early and often, to benefit from dollar cost averages; don't panic and sell at the first sign of trouble (dot-com bust for example); don't over-manage (buy and hold); diversify (own several different funds); be aggressive (because I'm young). The handful of times I have ignored the advisors I have actually been rewarded for it.

In the last couple years I have started to think that I'd be better off just getting a few market indexed funds, so that I'm always in line with the market (as I believe that fund managers that can beat the market are pretty few and far between, and most probably lose). But now I'm thinking that maybe the market itself will never produce the results I need. Especially when you consider that life spans are increasing. If I live to be 100+ years old, and the market takes another 5-10 years just to get back to the historical high point (which is essentially where a large part of my money went in), there is no way I'll be able to retire at 55 or maybe even 65.

[miami_fan]

I know it is toxic to ask about the past but I am going to do it anyway. I keep hearing that the bailout plan has to be done right now or else we are going into a depression. With the benefit of hindsight, what could have been done before this point? I noticed that this thread started back in March. Could we have done say a hundred billion dollar plan in March that would have kept us from this point? Could there have been more regulations passed? Forced sales? More printed money? Maneuver interest rates up or down more? I ask because it seems that this whole situation jumped from everything is great to everything is okay to the sky is falling in a matter of months. This, in spite of, what now seems to be overwhelming evidence that we were heading to this point.

[Gary Gorski]

I'm certainly no financial manager (and have zero knowledge of the Canadian market) so I wouldn't know if you're in good funds or bad funds but at least you've got different funds and you don't have your eggs all in one basket. You seem to have good knowledge of what you are doing and what you were told is pretty much the standard line that financial managers seem to give out. I think you're also right not to just go with what the advisor says simply because he or she says it. They're sales people at the end of the day and it seems that unless you're putting a massive amount of money to work with them that they're really not going to spend the time caring about people with average portfolios. At the end of the day you're the only one who will be 100% guaranteed to look out for your money and the fact that you know what you own and put some thought into it is a good sign that you will find a way to grow that money over time.

I also don't think that the market can produce the historical results that it did. You have to think about how much our economy has grown in the past 50 years. Is it really possible to continue that growth for the next 50? I'm not saying there won't be growth but look at the numbers on the dow I posted. It's 18 times higher today than it was in 1958. There's no way it can continue on like that in the next 50 years. I still think in the end money can be made in the market but I think its alot harder now especially if you're looking for the returns they show on those charts.

[Galaxy]

Alright, the idiots in the House have decided to crash the economy by not passing the bill and playing politics.

[molson]

Originally Posted by Galaxy

Alright, the idiots in the House have decided to crash the economy by not passing the bill and playing politics.

Or perhaps, they've inadvertendly saved the economy (for now). Time will tell.

[Galaxy]

Originally Posted by molson

Or perhaps, they've inadvertendly saved the economy (for now). Time will tell.

Could be. It's just too political (what else is new?) and this is something that shouldn't be played around with.

[Gary Gorski]

House rejected the bill - dow was down 600 at one point here

[Galaxy]

So, why are Republicans voting against it?

[Gary Gorski]

Not sure - now cnbc has changed the story to say it appears they have rejected it but voting is still going

[Flasch186]

the vote can remain open and votes can switch sides until they close it.

BTW WTF did McCain accomplish exactly?

[Mizzou B-ball fan]

Originally Posted by Gary Gorski

House rejected the bill - dow was down 600 at one point here

It's back up quite a bit. Sanity has been restored from a 15 minute panic fit. There's a bunch of investors that just made a killing with a quick buy-up of stock.

[MikeVic]

What the hell, is that how voting works? I want to be in this House. I'd flip my vote back and forth a million times.

[Galaxy]

Originally Posted by Flasch186

the vote can remain open and votes can switch sides until they close it.

BTW WTF did McCain accomplish exactly?

McCain? Are you in the right thread?

[Mizzou B-ball fan]

Originally Posted by Flasch186

the vote can remain open and votes can switch sides until they close it.

BTW WTF did McCain accomplish exactly?

The bill that was considered before McCain showed up had even less of a chance of passing. Democrats can look within their own party for the failure of this bill. The Republicans had no way to stop it if party lines held.

[Flasch186]

sorry wrong thread but im pissed and shooting off a shotgun. Ignore the McCain stuff.

[DanGarion]

WTF. We are loaning money to the Automakers now too...?

Congress Approves $25 Billion In Loans For Automakers...

[Galaxy]

Originally Posted by Flasch186

sorry wrong thread but im pissed and shooting off a shotgun. Ignore the McCain stuff.

I was wondering where McCain came from.

[Flasch186]

its over.

[Gary Gorski]

Originally Posted by Mizzou B-ball fan

It's back up quite a bit. Sanity has been restored from a 15 minute panic fit. There's a bunch of investors that just made a killing with a quick buy-up of stock.

down 600+ again - this is scary stuff

[Mizzou B-ball fan]

Originally Posted by DanGarion

WTF. We are loaning money to the Automakers now too...?

Congress Approves $25 Billion In Loans For Automakers...

There were a few earmarks in there in addition to that one. I wouldn't have been shocked to see it pass if they would have taken that junk out.

[Galaxy]

Originally Posted by DanGarion

WTF. We are loaning money to the Automakers now too...?

Congress Approves $25 Billion In Loans For Automakers...

I see that.
The Associated Press: Senate sends big spending bill to Bush to sign

[DanGarion]

No chance in passing this bill at all... according to CNBC.

[Mizzou B-ball fan]

Originally Posted by Gary Gorski

down 600+ again - this is scary stuff

It will be relatively volatile. The investment firms have triggers for buying and selling if the market goes up or down a certain amount. That's one of the main reasons you'll see so much change. It tends to overexaggerate the changes if you watch from minute to minute, but it evens out in the end.

[Mizzou B-ball fan]

Originally Posted by DanGarion

No chance in passing this bill at all... according to CNBC.

Voting was closed several minutes ago and there's more than enough votes to kill it.

[Surtt]

Originally Posted by Galaxy

I see that.
The Associated Press: Senate sends big spending bill to Bush to sign

Wasn't that in the budget bill (not the bail out one)?

[DanGarion]

Originally Posted by Galaxy

I see that.
The Associated Press: Senate sends big spending bill to Bush to sign

Well this is what an article I found on it say.

A bill that provides financial help for the big three automakers is headed to the president's desk.

The senate passed a massive spending bill that includes $ 25 billion of subsidized federal loans for automakers.

The low interest loans are intended to help the companies develop new technologies and retool factories to produce more fuel-efficient cars. President bush is expected to sign the bill despite some reservations.

[Gary Gorski]

Originally Posted by Flasch186

its over.

so now what? We just continue to do nothing and hope things change? As much as some of these congressmen and women think they're punishing Wall St for being stupid and greedy its not going to be such a great lesson as that punishment spills over to Main St.

[Galaxy]

Originally Posted by Gary Gorski

so now what? We just continue to do nothing and hope things change? As much as some of these congressmen and women think they're punishing Wall St for being stupid and greedy its not going to be such a great lesson as that punishment spills over to Main St.

That's what I people don't understand. While it's direct to help Wall Street, it is about Main Street. It is about our investments, our jobs, and our credit. Pass the bill, and work out new regulation to fix the problems in a future bill so this doesn't happen again. At least get credit available. Paulson and the bill supporters have done a shitty job on explaining this to Main Street, and why they need this to pass.

[Flasch186]

I pray Ive been wrong, for all of our sake.

[Fidatelo]

Originally Posted by Gary Gorski

I also don't think that the market can produce the historical results that it did. You have to think about how much our economy has grown in the past 50 years. Is it really possible to continue that growth for the next 50? I'm not saying there won't be growth but look at the numbers on the dow I posted. It's 18 times higher today than it was in 1958. There's no way it can continue on like that in the next 50 years. I still think in the end money can be made in the market but I think its alot harder now especially if you're looking for the returns they show on those charts.

I think you're exactly correct here, and this is what worries me. If my money has not grown at all in 10 years, and if we can all pretty much agree that it's not going to be growing much for the next 1 or 2, and then we agree it will take some time to get back up to where it was, and then finally we agree that there is no way our market can possibly grow at rates similar to the last 50 years... how the heck does a person get the necessary returns to ever retire? And yet more and more people have their entire future sitting in the market, pension plans are slowly becoming a thing of the past, and who knows about social security/old age/whatever... ugh.

I hope this doesn't come off like whining. I'm young, I have a good job, and am probably going to be fine. It's just kind of frustrating that everything we've been lead to believe seems to just be a bunch of bullshit, and that the so-called experts don't really have a clue. I guess I just feel like I've been scammed (along with a few hundred million other people).

[ISiddiqui]

Yeah, people who are pissed at the "giveaway" don't realize that if these institutions fail, it's going to hurt them FAR more than extra taxes will. FAR more.