[sags]

In 2008 it took awhile for the full effects to take hold, but when it did the layoffs began in earnest, dividends were cut, people were foreclosed on their homes and bankruptcies shot up.

Many older people started collecting early Social Security benefits, much to their later detriment. President Bush enacted laws making it more difficult to declare bankruptcy, and it took years for many people to see their credit scores improve to the point they could access credit again.

For their part, the mortgage lenders foreclosed on homes and let them rot in place, and some reduced their offices or closed down completely.

Banks reduced or eliminated credit limits for HELOCs based on the decline of home prices in some geographic locations.

It was very difficult times for many Americans, while barely causing a ripple in Canada.

 

[sags]

Many may not realize it, but the 2008 collapse was not caused by the Fed or the US government spending.

It was caused by the machinations of Wall Street bankers who created a new breed of MBS (mortgage backed security) derivatives.

They created "tranches" within the MBS that contained sub-prime (high risk) mortgages and AAA mortgages together in the same bond to acquire an investment grade rated bond they could sell to pension funds, large institutions, governments, and other banks. This was concealed from the buyers of the bonds.

A small bank in Iceland invested almost all their assets in these types of bonds and wanted to borrow from another bank. The other bank requested to examine the assets and were shocked to see what those bonds contained. They refused the inter-bank financing and the word spread quickly to other banks there was a big problem in the system.

Alan Greenspan, who had been the Fed Chairman until 2006, recalled sitting in his home office watching the global financial system freeze up in a matter of a few minutes.

The news got out. There were emergency meetings with regulators and big banks held in NY on a Sunday night at midnight. They had to come up with a plan and they did.

It was quite a mess, with the MBS bonds sold and resold so many times that nobody knew who held which mortgage on which house.

In foreclosure courts, judges routinely demanded proof of ownership by the lender and it couldn't be produced, so the people remained in the home and stopped paying their mortgages. There was nothing the lender could do if they couldn't prove ownership of the original mortgage.

Some major historic banks collapsed......Lehman Bros and Bear Stearns, and others were taken over by other banks. Many small regional banks and alternative lenders went bankrupt. Some retrenched out of Canada leaving their mortgage borrowers scrambling to find a new lender when the renewal came due.

All in all..........it was quite a mess.

During the collapse there were people driving around filming new subdivisions full of partially completed homes that were abandoned. Cities ended up bulldozing homes.

People lost their homes, jobs, credit ratings, and had to retire with a much lower standard of living. There was a huge financial impact on almost everyone.

I don't see anything like this happening in Canada, except that some people will lose their homes if they bought within the last 5 years. Some people will lose their jobs.

It won't be like the US in 2008 though........we hope.

 

[sags]

In retrospect, it is easy to see what happened. The 2008 crisis was triggered by the mother of all bank runs; a panicky loss of confidence in the financial system, which had loaded up on lousy mortgages that remained unsafe even though they were wrapped up in new and exotic ways. Financial institutions had made too many loss-making investments, but the bubble they had inflated delayed the day of reckoning—until it didn’t.

Prophet and loss: Alan Greenspan and the making of 2008 financial crisis (theweek.in)

 

[james4beach]

I really don't think this is anything like 2008. The situation back then started in 2007 and it was very chaotic. Banks and mortgage lenders were blowing up all over the place, for example several US banks had started to implode in 2007.

The market was also moving very erratically with enormous volatility. In contrast, today's market has minimal volatility and is moving pretty smoothly. There isn't anything too chaotic or dramatic happening.

I just think the stocks will be "depressed" and not advance for a while. Doesn't mean they have to crash and implode.

 

[Faramir]

That is not because of an unlucky coincidence or the ignorance of analysts and investors, but mainly because everyone's predications are already in the current stock prices. It is only what we can't or don't predict that moves the stock up and down from there.

But what information is the market relying on? Is it believing the naysayers in the Biden Admin who continue to deny the USA is in a recession?

 

[Faramir]

My bet is another ugly year for the economy. The question is when will the market hit bottom, and that is much harder to predict. My hope is a huge correction so I can load up.

 

[james4beach]

My bet is another ugly year for the economy. The question is when will the market hit bottom, and that is much harder to predict. My hope is a huge correction so I can load up.

Also keep in mind, there is a possibility the market won't tank. This is the danger of sitting on a ton of cash and waiting for a big drop. You might not ever get it.

 

[OptsyEagle]

My bet is another ugly year for the economy. The question is when will the market hit bottom, and that is much harder to predict. My hope is a huge correction so I can load up.

When most investors confidently believe that it won't. The market, by its design, will always move in a direction opposite of any point of overly positive optimism or overly negative pessimism. That is because, it is not how investors feel that moves markets but more their buying and selling, and that is using done in advance of those feelings. It is the selling that makes people so negative, not the other way around. The declining market reinforces investors belief that they are right, right up until they hit their last sale that they are able or willing to make. That is the point of maximum pessimism. Also known as the bottom.

In this particular market the bottom may be in our future or it might have gone by when everyone was so confidently negative back in October of 2022. People were incredibly negative in October. I noticed that just about every investor believed that a declining market was a no-brainer.

Since investors can quickly change from pessimism to optimism and back again and measuring the true level of either is very difficult, plus we have unknown events in the future that will always affect sentiment, I can only agree that the stock market is very hard to predict. The best thing you can do, however, is look less at optimistic signs and try to identify periods when investors seem to only sprout widely held very pessimistic opinions...and then buy the daylights out of the stock market and try not to look at it for a while. You will do quite well.

 

[Covariance]

Technically speaking the market reflects all information and all forecasts - on a weighted average basis. One or two people's opinions might be in there that accurately foretell what the future holds for us. But what is priced is consensus. IE the average expectation.

 

[OptsyEagle]

The last two posts pretty much explains to investors the only hope IMO of adding any kind of market timing to your personal performance. As @Covariance has indicated, the first thing an investor needs to acknowledge is that all forecasts and opinions are pretty much baked into the current pricing, making the benefit of their actual opinion virtually useless, and the only thing that can actually move the market are surprises to that opinion.

As I have stated, in the post just above his, is that although their opinions themselves are useless, their sentiment of opinion can be used, but only at the extremes. In other words, at times like now where you can see a combination of both optimistic signs (reducing inflation and the opinions that go with that) and pessimistic signs (rising interest rates and the opinions that go with that) there is virtually no way to time the market IMO. It could go in either direction depending on what UNKNOWN information comes forward to surprise us.

At the extremes, however, when one side, either optimistic or pessimistic, tends to be so strong that even if the other contrary opionion exists out there, those investor feel that they would look totally stupid to even mention it. Those are the times of extremes and placing a bet on the other side of that widely held opinion "has the best odds" of being successful, within a few months, a year at the most. The reason I say "has the best odds" of being successful, is that there will never be a time when you can know what the future precisely holds. What surprises are in store for all of us. Since those surprises tend to be randomly distributed, between good news and bad news, what you will find is when you invest during the extremes the losses you experience by the contrary surprises to your bet, will be significantly less then the gains you earn when the surprises come in your favour. PLUS, since most investors are expecting the extremes, the same degree of confirming news has a much less effect on the stock market, in that direction, then the contrary news, has in the other direction, to portfolio movements.

In other words the benefit of contray investing, when done at the extremes of investor sentiment, is magnify by those investment laws highlighted above in bold. Definitely something an investor needs to learn, either by reading and understanding this OR by losing a boatload of money over a long period of time. Either way gets the learning job done.

 

[doctrine]

My bet is another ugly year for the economy. The question is when will the market hit bottom, and that is much harder to predict. My hope is a huge correction so I can load up.

Predicting is hard. It is interesting to note, however, that virtually all markets worldwide are out of bear market territory, as defined by 20% below their all time peaks reached in the last 12-16 months. This includes Canada, US, developed, and emerging markets. The only major equity market in bear territory is the NASDAQ, i.e. technology. This definitely is no longer a bear market to me. Commodities are very widely in bear markets, which can be very positive for economic growth (i.e. cheap inputs).

As markets are forward looking, I see markets today as anticipating no to low growth over the next year, but hardly a worldwide recession. Whether or not you believe that and wish to take action, would probably require a change in that forecast. If you are holding out for a correction, then you probably should be expecting economic conditions to worsen beyond what is already envisioned.

 

[Faramir]

All good points but some of what is said I recognize as part of the efficient market thesis, which I think is pure hogwash. Just my opinion.

 

[MrBlackhill]

That would be a first in a long time that the US stocks don't crash after a yield curve inversion. I'm betting the market manipulators are going for a bull trap so they could sell high and then buy low when the crash will happen.

My portfolio has been going vertical and it doesn't make any sense to me.

 

[james4beach]

My portfolio is going vertical too. But let's face it, the world market (VT) is now above its 200 day moving average and at least for the short-term that looks bullish.

 

[AlwaysMissingTheBoat]

Interesting development in China and speculation on where things go from here...

https://twitter.com/i/web/status/1615641038151892992

 

[Faramir]

Yes missed some good buys out there because I just thought the Standard and Poors needed to hit $3400 on its last down run. Other words the bounce came sooner and with more power than I predicted. MFC and AC doing well. Knowing the problems with Westjet lately thought I'd participate in AC. But too rich for my blood now.

 

[londoncalling]

‘Don’t just sit there, do something.’ The stock market is telling you to make some hard decisions with your money now. (msn.com)

I enjoyed this article as it aligned with a lot how I feel about the market for the past 6 months. "This time feels different" even though it isn't. However the current inflation and interest rate environment is different than what many of us are used to. I don't have any inkling these days to make any major moves. I may make some small tweaks and should the current rally continue trim some speculative positions. In the meantime I will just watch the portfolio bounce around and make my regular contributions and collect my divvies. Back to the title of the thread I think we can establish a bear market happened. Is it over? Maybe? Are we entering a bullish phase or is it another bounce? Who knows. That's why i's best to stay the course.

 

[MrMatt]

Interesting development in China and speculation on where things go from here...

"Short on stimulus tools"
That's the problem, they're looking for any "stimulus" they can, gotta juice up that economy.

Why can't they be happy with a healthy steady state.
Continuous stimulation isn't good or sustainable.

 

[AlwaysMissingTheBoat]

"Short on stimulus tools"
That's the problem, they're looking for any "stimulus" they can, gotta juice up that economy.

Why can't they be happy with a healthy steady state.
Continuous stimulation isn't good or sustainable.

I don't know the answer to that question. I can say that I recall the last time things were red-hot in the Chinese economy it was fueling a nice run up in commodities and I was well positioned at the time and kept making more stock purchases of various mining companies because the narrative at the time was that the Chinese appetite for metals was voracious and it wouldn't be tamed for decades.

That turned out to be false because China's enormous lower class were unable to keep up with domestic inflation and, apparently, the fear within the Chinese government was that there was a growing chance of a revolt. So there was a pivot in the country's economy and the brakes were artificially put on growth to head off violent conflict.

The air came out of most commodities at that point.

 

[MrBlackhill]

This bounce back is ridiculous. I'm up +12% YTD with only 4 days in the red for this month and I'm out of my drawdown. We're going down soon enough. Tomorrow's Fed announcement shouldn't be any surprise, but then what comes next in the following months will drive the show for this year.