That whole thing was a dumpster fire.
My question is, “where did that money go?”
Money doesn’t disappear—it changes hands.
If you put $10M into a stock, and the stock tanks, the money doesn’t go poof. It’s your broker’s money now.
And that money goes to employees and shareholders. They in turn spend that money.
Right? Am I missing something?
$10T doesn’t just disappear.
The $10 trillion figure often mentioned in connection with the 2008 housing crash refers to the estimated losses in economic output due to the crisis. It’s not about a specific entity making that much money, but rather a broad economic impact. The crash led to a significant contraction of the economy, with some estimates suggesting losses of up to $10 trillion in lost output.
Here’s a more detailed breakdown:
Not about a single entity making $10 trillion:
The $10 trillion figure represents the overall economic damage caused by the crisis, including reduced consumer spending, business investment, and lost jobs.
Causes of the crisis:
The crisis was triggered by a combination of factors, including the growth of subprime mortgages, unregulated markets, and the collapse of the housing market.
Impact on the economy:
The crisis had a significant impact on the economy, causing widespread job losses, a decline in economic activity, and a significant decrease in the value of assets.
Estimates of the losses:
While the exact amount is difficult to pinpoint, estimates suggest that the crisis led to trillions of dollars in lost economic output.
Specific examples:
Some key events included the collapse of Lehman Brothers, a major investment bank, and the failure of other financial institutions.
The role of the housing market:
The crisis was largely driven by the collapse of the housing market, as housing prices declined and many homeowners found themselves with negative equity in their homes.
Though it can be difficult to invest in a stock when its price is falling, there are certain individuals who have a knack for doing so. In this article, we’ve outlined five investors who demonstrated remarkable timing by making big investments during the 2007-2009 financial crisis, eventually generating big gains as a result.
You can’t really understand the philosophies and actions of successful investors without first getting a handle on the financial crisis. What happened in the lead-up to the crash and the Great Recession that followed afterward remains stamped in the memories of many investors and companies.
The financial crisis of 2007–09 was the worst to hit the world since the stock market crash of 1929. In 2007, the subprime mortgage market in the United States collapsed, sending shock waves throughout the market. The effects were felt around the globe, and even caused the failure of several major banks, including Lehman Brothers.
Panic ensued, with people believing they would lose more if they didn’t sell their securities. Many investors saw their portfolio values drop by as much as 30%. The sales resulted in rock-bottom prices.
In October 2008, Warren Buffett published an article in the op-ed section of The New York Times, declaring he was buying American stocks during the equity downfall brought on by the credit crisis. As he once said, investors should “be fearful when others are greedy, and be greedy when others are fearful.”1
His buys included the purchase of $5 billion in perpetual preferred shares in Goldman Sachs (GS) that paid him a 10% interest rate and included warrants to buy additional Goldman shares. Goldman also had the option to repurchase the securities at a 10% premium. This agreement was struck between Buffett and the bank in 2008. The bank ended up buying back the shares in 2011.2
Buffett did the same with General Electric (GE), buying $3 billion in perpetual preferred stock with a 10% interest rate and redeemable in three years at a 10% premium.3 He also purchased billions in convertible preferred shares in Swiss Re and Dow Chemical (DOW), all of which required liquidity to get them through the tumultuous crisis.4 As a result, Buffett not only made billions for himself, but also helped steer these and other American firms through an extremely difficult period.
Hedge fund manager John Paulson reached fame during the crisis for a spectacular bet against the U.S. housing market. This timely bet made his firm, Paulson & Co., an estimated $20 billion during the crisis.5
Paulson quickly switched gears in 2009 to bet on a subsequent recovery and established a multibillion-dollar position in Bank of America (BAC) as well as approximately two million shares in Goldman Sachs. He also bet big on gold at the time and invested heavily in Citigroup (C), JP Morgan Chase (JPM), and a handful of other financial institutions.6
Paulson’s 2009 overall hedge fund returns were decent. He also posted huge gains in the big banks he invested in. The fame he earned during the crisis also helped bring in billions in additional assets and lucrative investment management fees.
Jamie Dimon used fear to his advantage during the crisis, making huge gains for JP Morgan. At the height of the financial crisis, Dimon used the strength of his bank’s balance sheet to acquire Bear Stearns and Washington Mutual, which were two financial institutions brought to ruins by huge bets on U.S. housing.
JP Morgan acquired Bear Stearns for $10 a share, or roughly 15% of its value, in March 2008.7 In September of that year, it also acquired Washington Mutual. The purchase price was also for a fraction of Washington Mutual’s value earlier in the year.8 From its lows in March 2009, shares of JP Morgan more than tripled over the next 10 years and made shareholders and its CEO quite wealthy.9
As the former head of the Federal Reserve (Fed), Ben Bernanke was at the helm of what turned out to be a vital period for the U.S. central bank. The Fed’s actions were ostensibly taken to protect both the U.S. and global financial systems from meltdown, but brave action in the face of uncertainty worked out well for the Fed and underlying taxpayers.
A 2011 article detailed that profits at the Fed came in at $82 billion in 2010. This included roughly $3.5 billion from buying the assets of Bear Stearns and AIG, $45 billion in returns on $1 trillion in mortgage-backed security (MBS) purchases, and $26 billion from holding government debt. The Fed’s balance sheet tripled from an estimated $800 billion in 2007 to absorb a depression in the financial system, but appears to have worked out nicely in terms of profits now that conditions have returned to normal.10
Carl Icahn is another legendary fund investor with a stellar track record of investing in distressed securities and assets during downturns.
His expertise is in buying companies and gambling firms in particular. In the past, he acquired three Las Vegas gaming properties during financial hardships and sold them at a hefty profit when industry conditions improved. Icahn sold the three properties in 2007 for approximately $1.3 billion—many times his original investment. He began negotiations again during the crisis and was able to secure the bankrupt Fontainebleau property in Las Vegas, Nevada, for approximately $155 million, or about 4% of the estimated cost to build the property. Icahn ended up selling the unfinished property for nearly $600 million in 2017 to two investment firms, making nearly four times his original investment.11
The global financial crisis began with cheap credit and lax lending standards that fueled a housing bubble. When the bubble burst, banks were left holding trillions of dollars of worthless investments in subprime mortgages. The Great Recession that followed cost many their jobs, their savings, and their homes.
Warren Buffett is a legendary value investor in Nebraska who turned an ailing textile mill into a financial engine that powered what would become the world’s most successful holding company, Berkshire Hathaway. Known as the “Oracle of Omaha” for his investment prowess, Buffett has amassed a personal fortune in excess of $162 billion, according to Forbes.12
The Federal Reserve System is the central bank of the United States. Often called the Fed, it is arguably the most influential financial institution in the world. It was founded to provide the country with a safe, flexible, and stable monetary and financial system.
One key differentiating factor for these investors is their ability to stay calm during a crisis. They are examples of how to take advantage of the market when it is in a panic. When more normalized conditions return, savvy investors can be left with sizable gains, and those who are able to repeat their earlier successes in subsequent downturns can end up quite wealthy.
This is closer to what I meant.
So, these banks lost $73B. I was asking who did all these banks’ money go to?
And you answered thar by listing all those different investors.
Thanks for sharing that info!
There is no question that during a crisis, some individuals are definitely profiting from it.
A very small tatse for me
Haha yeah. Just to know what it tastes like.
I can guarantee that you’ll say, “Yup, tastes exactly how I thought.”
Yeah, “use by” dates are a suggestion. Worth paying attention to, though.
Some people like to tackle some tasks on their own. But if you’re an amateur, accept that it’s likely to be imperfect. And it’s also gonna take longer than expected.
Or just hire professionals and get it over with.
@SmallPaul Are there any parts of a kitchen remodel you would do yourself? Or would you just hire professionals to do it?
My days of DIY are over with
My DIY Projects
Scary stuff…
Even crews made up of certified professionals make mistakes.
Imagine investing 20% of your money into a promising real estate project. You and your partners hire professionals to take on the job. And then, seven stories into the 10-story project, the whole thing collapses.
That’s rough.
I hear you. They’re fun. But, if there’s a time limit, I’ll just pay someone.
If it’s a car renovation, and it’s just a project in the garage, I’m ok with that.
But if the roof’s leaking, or the kitchen needs remodeling, I’m not even picking up a hammer. Forget that.
The majority of nations ban this kind of stuff in their food.
More than 10,000 chemicals are allowed in food sold in the U.S. These chemicals include food additives, color additives, and substances used in processing food.
The U.S. Food and Drug Administration (FDA) estimates that many of these chemicals are authorized or considered “generally recognized as safe” (GRAS) for use in food. However, some of these chemicals have not been thoroughly reviewed or re-reviewed by the FDA in decades.
Food & Drug Administration (FDA) maintains a list of approved additives and those considered GRAS.
10,000+ Additives:
.
The U.S. allows a large number of chemicals in food, including food additives, color additives, and chemicals used in food processing.
GRAS Designation:
.
Many of these chemicals are classified as GRAS, meaning they are generally recognized as safe by experts. However, some of these chemicals have not been reviewed or re-reviewed for safety by the FDA in decades.
FDA Oversight:
.
The FDA plays a role in ensuring the safety of food additives, but some substances are approved without FDA review. Environmental Working Group (EWG) and other organizations have raised concerns about the lack of FDA oversight of some food additives.
Potential Health Concerns:
.
Some chemicals have been linked to potential health risks, including increased risk of cancer, developmental harm, and hormone disruption.
Industry Oversight:
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Many food additives are approved by manufacturers and trade associations without FDA review. The Pew Charitable Trusts
