September 2008 crash cost $108K per US household

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12 Responses to “September 2008 crash cost $108K per US household”

  1. rebdav says:

    So the joke goes like this:
    Genie pops up beside me as I read this article and offers me a reasonable wish, no million wishes or eternal life.
    OK, that $108K sounds nice I say.
    Poof!
    Flash forward a few years years.
    The scene follows me as I walk into a shop to buy bread, the total pops up on the register for three loaves…
    $108,000
    Damn you Genie!!

  2. hadlock says:

    I think Walt #9 is spot on. Most (all?) markets were heavily overvalued in the recent bubble and those investments are now self-adjusting to where they should be. Nothing of actual value was lost, only the potential profit. Unless you sold everything while the market was in the dumper.

  3. technogeek says:

    As others have said: Paper gains, and paper losses, are both fantasy. What matters is how much you put in and how much you take out WHEN YOU TAKE IT OUT.

    If you can’t deal with volatility — including the possibility of severe swings lasting multiple years — you shouldn’t be investing in the market, and you emphatically shouldn’t be speculating on short-term changes or assuming that real property prices (eg homes) will appreciate faster than maintenance and mortgages and so on consume money.

    Don’t invest money that you will need to take back at any specific time, otherwise you risk being forced to take it out when the market is low and convert the paper losses to real ones (rather than taking advantage of the drop to buy at a better price).

    Anything with a time horizon of less than five years (some would say a decade) isn’t investment — it’s gambling. And gambling against pros. If you aren’t a pro, you don’t belong at that table.

  4. Dave says:

    Well, but here’s the deal on that. Market reforms can eliminate SOME risk, but risk is correlated with return. Lower risk = lower return. People want a higher return, and financiers will find a way to offer it to them. So if you create a safer, more-regulated instrument, people will just migrate to riskier ones in search of better return. That’s just fine if the risk is disclosed and understood. But existing instruments are the most-understood. When you start regulating existing ones to make them safer, new ones get made, and they’re the least understood, meaning the risk of them is most likely to be underestimated or mischaracterized a la CDOs.

    The government has some control over the economy. Tax incentives greatly distorted (and continue to distort) the housing market and obviously interest rates allow for some control, but the first is not under the control of the Fed or anyone with sense and the second is like a three foot rudder on the titanic. Suggesting that this constitutes “control” such that any administration or fed chief can be rightly responsible for “the economy” is laughable.

  5. Notary Sojac says:

    To speak of home “values” being lost from the period 2007-2009 would be analogous to speaking of “body temperature values” being lost on their way down from 103.5 to 98.6.

  6. spejic says:

    I knew the crash was coming so I didn’t own a home and I didn’t have any stocks, so I didn’t lose my share of that $108K. I only got laid off and lost the money I would have made during that time which was… holy crap.

    • dculberson says:

      Not owning a home didn’t protect you from loss; you started with zero equity and remain at zero. People that bought sensibly priced homes and didn’t over-leverage are doing fine. I owned a home and took the opportunity to step up into a nicer (but smaller) house mid 2009. Crisis is not a time to check out but a time to make smart decisions.

    • mdh says:

      Me Too!! I’ve been on sabattical all year. I quit my job risk assessing for banks because they were asking me retarded questions (how do I get this deal done so I can go to Bermuda) rather than good questions (will this explode).

      So right on you lad.

  7. Anonymous says:

    Of course, the value lost in house and stock prices is ‘imaginary money’ – it only ever existed as a theoretical amount that a willing buyer would pay for something. Most people still have the actual houses and stocks and so have only lost “108k” in the most theoretical way. If you still own your house you can still sell it and, assuming that house prices have fallen at a similar rate for everyone, you can still buy a comparable house somewhere else for a similar amount of money.

  8. Chainring says:

    With due credit to Notary Sojak being the first to point this out, it’s not really realistic to say that money was “lost” from artificially inflated home values. Damage was most certainly done, but this does not seem like an honest analysis.

  9. Roy Trumbull says:

    There’s a certain madness that is still underway on the part of hedge funds and similar forms of superstition related to market moves. One such was reported the other day in which a billion dollars in positions was held but any given stock was only in the portfolio for 11 seconds. Talk about buy and hold. This is like a 100 Orcas going after a lone seal pup. They are all leveraged to the moon. There is no incentive to be in the market at all as long as these idiots remain free.

  10. Anonymous says:

    Sojac and Chainring are on the right track.

    This report is purest drivel. Non-cash investments by definition don’t have a fixed value. There would be no point to them otherwise.
    Taking the peak value and saying that the current lower value means you “lost” that much is absurd.

    The only meaningful way to evaluate market swings is to compare your purchase price and sale price. Everything else is fantasy.

    Walt

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