The absolute irony of this post, is that this was my regularly scheduled article for the week. Last month I had today’s topic slated for this Wednesday. I guess with the recent market turmoil, it was just meant to be…
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The date was July 11, 2008:
His heart was pumping like a freight train. He didn’t know if the thing was going to pop out of his chest and take off running down the street on its own.
Keep calm, he kept repeating to himself. It’s going to be okay.
He had raced down to IndyMac Bank as fast as he could in a frantic flurry. He might have blown through a couple questionable traffic lights on the way, but this was money we were talking about – his hard-earned life earnings, that life force that kept food on the table.
There are times when you play fair and then there are times when you cut corners. Today was the endgame. He knew what was at stake.
The line forming outside the bank was already longer than he had hoped, but he slid right in at the end, cutting off an elderly woman that was shuffling up at the same time. There would be time for redemption later in life.
The conversation was still ringing in his ears from when his brother had called only 20 minutes earlier:
“Stop what you’re doing and get down to IndyMac. Now! I just pulled all of my money out and you need to do the same… ALL OF IT! They’re making a run on the bank and the Feds are going to shut it down any minute. Hurry!”
It was still hard to grasp the situation he was in. This was some 1929 shit. Banks don’t fail in this day and age.
Yet here he was, ready to pull all of his money out of a bank that he literally 20 minutes prior thought was one of the safest institutions in the world. What do you do when one plus one doesn’t equal two anymore?
The line was moving like molasses, but he finally made his way to the teller. Sweat was pouring down his brow.
The teller didn’t even ask a question, he knew why he was here – this was already a routine by now. The guy simply raised his eyebrow and my father gave him his bank account number.
“All of it,” he said, as if to leave no room for interpretation.
The teller clicked in some numbers and then nodded his approval. “It will go through sir,” was all he said.
The man in the next stall started yelling profusely, “What the fuck do you mean it’s frozen?”
The man’s teller started stuttering apologetically, “There’s nothing I can do. They just notified us we’ve been shut down for the day. No more deposits. It’s the government sir. There’s nothing more I can do.”
“Sir,” my father looked back to his teller and the man pushed a crisp cashier check across the counter to him. “Will there be anything else I can do for you?”
“No,” my father answered as he shook his head.
He exhaled the deepest sigh of relief he had ever breathed in his life. It was going to be okay, he thought to himself.
He turned with his cashier check in hand to leave, the crowd was already yelling and working it’s way into a fever pitch. It wouldn’t be safe soon, he knew. But he patted his pocket and smiled. Things were going to be okay, he whispered one more time, as he stepped out onto the crowded street.
The pandemonium had just begun.
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The story above is true in case you’re wondering. My dad was able to pull everything out right before the Feds shut down IndyMac Bank. And back then the FDIC insurance was only $100K, not the $250K it is today.
I remember not too long ago there used to be a lot of talk during 2019 in the personal finance community about the dreaded “R” word… RECESSION. Yet in 2020 everything has died down (until the beginning of this week – the worst two-day selloff since 2015). So I felt what better time than now to write a reflection piece on what the last one was like…
Did you experience the great recession first hand? I sure did. And it changed my life forever.
When the world as you know it comes crashing down, it doesn’t matter what job you have. NO ONE IS SAFE…
If you started your working career after the great recession, I’ll be frank: You don’t get it. You have no fucking clue what to fear.
Read all the books about it you want, think you’re safe with your nifty-difty diversification index funds and the almighty fail-proof VTSAX.
But nope. You aren’t. Your assets will shrink in half, your dividends will be cut, and you will feel the pain. You think you’re prepared, but I’m here to tell you that you’re not. Because there’s no comparison to living it.
I remember the darkness…
When shit hit the fan in 2008, I was 26 years old. Four years out of college and I thought I had the corporate world figured out. Four years was a college degree, right? So why wouldn’t I?
My company was sitting atop its industry, gloating and fat with opulence. The bonuses had never been higher. Our forecasts were off the charts and it was almost impossible not to make money. It was as if God himself had stepped down off his cloudy perch and crowned the U.S. stock market with golden halos.
But I was young and foolish. I didn’t know any better and was believing what everyone was telling me.
Then the dream turned into a nightmare…
I’ll never forget what that year was like after shit hit the fan. It felt like almost every day was a black Friday. If you’ve never been through cuts before, that’s what they do. They do mass layoffs on Friday so that they can issue the last paycheck and terminate you cleanly. Then you learn to dread that day at the end of the week more than anything.
After a few months of sales plummeting, the bloodbath began…
At first, they do the initial mass layoff, it’s all the low hanging fruit. People with 30 years at the company are escorted out the door by security as if they’ve become criminals overnight. Others are crying, they still need to pay for their mortgage and the kids are in private high school. The list goes on and on…
And I’m the one kept, because I’m cheap. This kid who doesn’t really have any major expenses and lives at home. That was one of the worst feelings I ever felt – the survivor’s guilt. It never leaves you after that. You finally see what corporate America is really like.
Make no mistake about what anyone tells you, when it comes down to it, you are just a number.
And don’t fool yourself if you’re kept, because you’re no talent. I’ve seen amazing workers let go and absolute pieces of shit spared. There’s no logic to the madness. It basically all comes down to luck and timing more than anything else.
In the beginning there were announcements, which seemed like some form of order. But as the layoffs kept happening the announcements suddenly stopped and people just started disappearing. At this point it felt as if management was just throwing darts at a dartboard to decide the next round’s fate.
And that’s how it was, my office of 200 was whittled down to 40 after 5 years. The culture was destroyed and it never recovered.
That’s what happens in a recession. If you aren’t careful, lives can be shattered.
So if you’re still sitting there licking your FI chops at this historic bull market run, take off those rose colored glasses. Sure, everyone is sitting pretty right now, fat and gluttonous. Rubbing their bloated bellies because the excess has been a killing.
But while the others are basking in the sun and drinking themselves to sleep, you should be thinking about one question:
Have you thought about the “R” word lately? Because you should…
-Q-FI
P.S. Tell me what effect the last recession had on your life? Were you prepared, or did you learn the hard way like me?
Awesome and timely Q-FI. You are correct, for those who did not experience the rollercoaster of the last (and Great) recession, there’s no basis for any reference. I lost my job and also then plowed my severance into the down market and then borrowed more and did the same. It paid off and I landed a bigger, better job – though it took a while.
Everything moves in cycles and once one understands that, it obviates unnecessary worry over up and down markets. Frankly, the market is (and has been) overheated and needs to cool, so I try to see this week as a good thing as opposed to another “Big One” like 2008. Just my opinion. We’ll see how things pan out.
And you’re correct about the lay-off/job loss scenario. Everyone is expendable and should manage their expectations and life accordingly. As it was famously said,”Never expect much from your company, even if it’s a good one.”
Hey hey Mr. Fate! Thanks for stopping by and reading as always.
Yeah – that took some balls to borrow and invest in that 2008 market. I was buying like crazy, but didn’t have the stomach to leverage myself. But I’ll never forget what one mentor told me, “this will probably be the best buying opportunity you will ever see in your lifetime.” So far he has been right.
I agree with you that the market has been overvalued for awhile now and some corrections have been way overdue. I love your last quote, “never expect much from your company, even if it’s a good one.” I’ll have to start using that.
The last recession? That one was a cake walk! The first recession I remember was the oil crisis in the 70’s. I was just a child, but I remember the tension in the house. Graduating from university in the mid-80’s was no fun. Not a job to be had anywhere. The first mortgage on my house was at 11% in the 90’s. Through all of this I’m in and out of jobs…..
What I’m trying to say is, that which doesn’t kill you makes you stronger. My job was to make sure it didn’t kill me. By the time 2008 rolled around, I was an old hand at recession and had my war chest amassed to deal with it.
That which doesn’t kill you, makes you stronger. Make sure it doesn’t kill you.
Well, well, well… you are going through the archives Veronica. Hahaha. True to your word.
I’ve been very good at making sure things don’t kill me over the years. Been way too close too many times, but I’m still here. Although, now that I’ve said that, it will be something stupid like slipping in the shower or tripping on sidewalk that will do me in.
You’ve definitely been around longer and seen more things than me. The more we endure, the better prepared we can be for next time.
Thanks for sharing some of your experiences and challenges you were able to triumph.