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Just a friendly reminder for any newbie investors (8/5/2024)


"Tonight it's just your money, not your life. Everybody who really loved you a week ago still loves you tonight - and that's a heck of a lot more important than the numbers on a brokerage statement. The robins will sing, the crocuses will bloom, babies will gurgle, and puppies will curl up in your lap and drift happily to sleep even when the stock market goes temporarily insane."
- Louis Rukeyser 10/23/87

Full pithy episode (worth watching - lots of the comments/questions are still relevant today, esp. from John Templeton)

Louis Rukeyser on the 1987 Crash


... and for something lighter, SNL's parody of WSW following Black Monday.
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Comments

  • Excellent. Thank you.
  • ditto.
  • Thanks.
  • Maybe just a reminder that it's all one big manipulated casino....and don't get to greedy...cash is king at times like this... balance in life and in your portfolio

    Don't listen to that bullshit you're young you have time be heavy into stocks...

    And be careful not to get suckered into the relief rally...
  • edited August 5
    Thanks @rforno. Always one of my favorite editions of WSW. Class act. The show puts to shame whatever passes for media financial analysis today. Pity.
  • edited August 6
    Thanks for the vintage WSW link.
    Parts 2 and 3 of the original broadcast are also worthwhile.
    Unsurprisingly, John Templeton provides sage advice.
    While I frequently watch the current iteration of WSW, it pales in comparison to Mr. Rukeyser's version.
    Pity indeed...
  • edited August 9
    @Baseball_Fan

    >> Maybe just a reminder that it's all one big manipulated casino....and don't get too greedy...cash is king at times like this... balance in life and in your portfolio
    >> Don't listen to that bullshit you're young you have time be heavy into stocks...
    >> And be careful not to get suckered into the relief rally...

    Except for that last sentence in your first paragraph, this seems to be all complete crap, every word

    Else meaningless
  • edited August 9

    While I frequently watch the current iteration of WSW, it pales in comparison to Mr. Rukeyser's version.
    Pity indeed...

    If Lou were alive today he might sue Bloomberg for misrepresentation. I hope the “newbies” this thread is dedicated to realize that there is precious little similarity in substance, content, or in talent between the WSW named show of the 70s-90s and that of today.

  • @davidmoran. I appreciate the feedback. I'll try harder in my next post to meet your standards.

    Enjoy your day

    Baseball fan
  • +1 to Baseball_Fan advice post.
  • Without realizing it at the time Lou of WSW is probably the reason I got interested in Mr Market. It was must watch TV every Friday for me.
  • Yeah, same here.
  • gman57 said:

    Without realizing it at the time Lou of WSW is probably the reason I got interested in Mr Market. It was must watch TV every Friday for me.

    And same here.
  • edited August 9
    Yeah I really miss Lou…. He always had the best guests and made the whole investing process fun. He had such a great sarcastic sense of humor. I used to watch him with My Dad who recently passed. Very fond memories
  • @davidmoran. I appreciate the feedback. I'll try harder in my next post to meet your standards.

    Shouldn’t be hard.
  • BTW... I'll never forget Black Monday...the faces on the fifty some year old engineers... walking around with a blank shell shocked expression at work.. similar looks from colleagues during the draw down during COVID...looked like someone stole their dog ...no joy...that far away look in their eyes...

    Definitely a lesson done somewhat learnt in 1987....my Dad covered me that evening..he took on the role of the central bank...told me whatever your drawdown was today if you're still in the hole one year later, I'll cover you.

    I remember my last large flush in the early 2000's...had a serious six figure drawdown... absolutely knew the bubble was going to burst the day I flew into Frisco and drove down to silicon valley...took me no time in traffic when usually it was a parking lot on the freeway...many of the little cafes in the office parks were closing....some clients who were extremely wealthy were getting out of the market...I should have taken action..

    I believe us humans have a psychological mechanism in which we block out unpleasant memories otherwise we'd never invest in the markets...
  • edited August 10
    ”The reason bear markets go down three to four times as fast as the preceding bull market, is because fear is a much more powerful emotion than greed, which grows more slowly until it maximizes at the final top of the bull run. As the Chinese saying goes, ‘...confidence is merely fear, asleep...’

    (Excerpted from Bill Fleckenstein’s ”MarketRap” August 8 / Posted by a well informed reader) I’d hate, however, for the newbies drawn to this thread to interpret Monday’s action as a bear market. It definitely was not. Possibly more like a cautionary early “shot across the bow.”
  • edited August 10
    That's the mistake people make bailing after a big drawdown, getting afraid, leaving the market and locking in their losses. I lost (on paper) 6 figures 3 times AFTER retiring, (2008-2009), 2020 & 2022. 2022 was actually my biggest drawdown. Even after all of that I still have more than when I retired because I didn't panic leave the market and lock in losses but just waited for the recovery to recover.
  • edited August 10
    gman57 said:

    That's the mistake people make bailing after a big drawdown …

    @gman57 - Could you please clarify which post or suggestion your “that” refers to? It’s likely a reference to the quotation I posted above (“The reason bear markets go down three or four times as fast …”) ?

    To be clear - Neither I nor the quote’s author meant to advocate selling into / at the end of a bear market. I view the clip as simply an attempt to explain why bear markets fall at an accelerated rate compared to the rate at which the preceding bear climbed.


    Here’s another unrelated thought - Nobody rings a bell at the bottom of a bear market signifying “It’s safe to come back in.”

  • That was mostly referring to the Black Monday/Covid post of people walking around shell shocked. If you've been there before and know how to handle drawdowns they are not shocking. If it's your first time I can understand panicking and selling. It got me once.
  • edited August 10
    Thanks @gman57 for clarifying.

    @BaseballFan is spot-on in terms of the mood of most investors during those uncommon but spine-chilling episodes. Yes, the ‘87 flash-crash (about 25% down in a single afternoon) is emblazoned in my mind. Some of the older guys at work who were on the eve of retirement resembled pale ghosts walking the hallways the following day.

    Can still remember overhearing a young guy freaking out on his cellphone at the Atlanta airport sometime in 2000 while we waited for a connecting flight. His portfolio had fallen double-digits on several consecutive days and stocks were crumbling again as he spoke. (See data on NASDAQ 2000-2002 at bottom of post.)

    And in the spring of ‘08 I bumped into a long-lost HS friend (from the 60s) while shopping in a local market who appeaed sickened by having lost more than 30% of his IRA assets in the last 6-8 months. I gathered that he had been led to believe junk bonds were “safe” investments. He’d loaded up on them.

    The above merely paints an image of how humans in different situations react at these times. It’s not intended to exculpate them from blame or offer any advice going forward.


    *** “In 2000, the Nasdaq lost 39.28% of its value. In 2001, the Nasdaq lost 21.05% of its value. In 2002, the Nasdaq lost 31.53% of its value.” (Data from Google)
  • And wouldn't you know? After all the sound and fury earlier in the week, we're almost right back to where we were before that short paroxysm. In '08-'09, I stuck it out, still throwing money into the 403b. Glad I did.

    Mr. Market always overreacts both to good and bad news.
  • In 2008-2009 I rode it out, in 2020 I flinched, sold and took a big loss (dumb), 2022 rode it out. Riding it out is much better in the long run and why you need assets set aside to handle/spend during drawdowns.
  • gman57 said:

    In 2008-2009 I rode it out, in 2020 I flinched, sold and took a big loss (dumb), 2022 rode it out. Riding it out is much better in the long run and why you need assets set aside to handle/spend during drawdowns.

    Correct! And having a source of income during those times doesn't hurt either even if that source is contained within your portfolio. Otherwise you'll find yourself juggling hand grenades that have had the pins removed.

    If nothing else I hope that folks who might have been all-in or thought they could handle days like last Monday pause, reflect and readjust as appropriate.
  • Assessing Your Risk Tolerance, from the beautiful people at INVESTOR.GOV.
    https://www.investor.gov/introduction-investing/getting-started/assessing-your-risk-tolerance

  • edited August 12
    I didn't have much money allocated to equities in 1987 since I was young and "poor."
    Having read a bit about investing, I thought the 1987 market crash might present a buying opportunity.
    Despite this knowledge, I didn't actually take advantage of the situation.

    During the dot-com bubble (circa 1995 - 2000), I was employed in the tech industry.
    Many coworkers were discussing massive gains in Yahoo, Cisco, and the like.
    It was very difficult to ignore this continuous chatter - FOMO is real!
    Since markets appeared to be in a bubble, I resisted the siren song of the dot-coms.
    I didn't panic during the subsequent crash but should have purchased more equities afterward.

    The Global Financial Crisis (GFC) of 2007 - 2008 was very challenging for me.
    There were many bankruptcies, multiple bailouts, bank runs on money market funds
    (Reserve Primary Fund "broke the buck"), and rising unemployment.
    Congress initially rejected the Emergency Economic Stabilization Act of 2008
    ($700B Troubled Asset Relief Program was a component) which led to a ~9% decline
    in the S&P 500 and Nasdaq Composite that day. The legislation was passed a few days later.
    The seemingly endless onslaught of severe economic events caused significant anxiety.
    To me, it felt like the US economy might suffer a precipitous decline analogous to the Great Depression.
    Once again, I didn't panic but should have increased equity purchases after this major crash.
    I hope to never experience a similar scenario again during my lifetime!
  • gman57 said:

    Without realizing it at the time Lou of WSW is probably the reason I got interested in Mr Market. It was must watch TV every Friday for me.

    Me too. Always a lot of common sense on his show.
  • edited August 12
    “Riding it out” works. I take it from @gman57 that he mostly sat tight without making any sales or acquisitions during the ‘07-‘09 market meltdown. However, in that case what you’re riding at the onset may be of import. Was it all in global growth? You might have been left with 35-cents on the dollar by March ‘09 - a blip on the radar screen to someone having a 40-year time horizon. Unnerving nonetheless to most of us mere mortals. Might even have had you wondering whether your 35-cents would be worth only 17 cents in another year …

    I doubled down. Beginning in October ‘07 with a 60/40 mix, I gradually shifted 100% into domestic equities and then, about a year in (December 2008) I moved all that to a couple global growth funds which had fared substantially worse than domestic. Next, by a stroke of luck I converted about 40% of these badly depreciated assets into a Roth in early March ‘09 (Roth - The gift that keeps on giving). I’d just begun taking SS and the additional income covered the tax hit. The markets turned up on March 9, 2009.

    Don’t know what the next step would have been. Probably would have floated a loan sometime in late ‘09 to convert the remaining IRA holdings into a Roth . Then, had the bear market continued into 2010, I’d have mortgaged the house to pour all of its equity into the most aggressive growth funds I could find (likely tech-heavy or international). Had it continued into 201l, not sure what I’d have done … (maybe start praying or simply drink more).

    If you take the tack I did, it’s incumbent to back off a bit as markets rise so that you have some capital to reinvest next time things go to hell. I won’t say my way was more profitable than just riding it out. But it may have been less stressful in that you at least feel like you’re making decisions that may impact your fortunes. Stress is sometimes defined as feeling helpless to control your own fate.
  • As far as I can remember, I guess I'd say I road the storm out.
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