I have to admit I was a bit greedy. I bought stocks that I thought were value stocks, but I didn't realize that the world was going to drastically change from 2007. I lost half of my net worth in a period of 3 months, and I have to say I've been greatly humbled by this experience, absolutely humbled.

My parents got greedy too. Because they wanted more and more money, they kept their business too long when they should have sold and lived in a home way too big for their own good. My dad owned 3 cars when he needed only one. Now they won't be able to sell their home or business due to the credit crisis. I think they've been humbled.

In my view of an ideal society I wanted all the greed and super-size nature of this nation and the world wiped out.

I hated the fact that my parents were trying to live beyond their means...
I despised the fact that greedy CEOs were making tens to hundreds of millions of dollars a year...
I hated the fact that baseball players were making 20 million dollars for a game they play for fun...
I hated the fact that Simon Cowell was making 20 million a year critiquing singers...
I hated the fact people were flipping homes for huge profits, defrauding lenders...who in turn defrauded borrowers...
I hated the fact that labor unions were demanding 6 figure salaries for unskilled labor...
I hated the fact that illegal immigrants were leeching off America at the expense of taxpayers and American workers...
I hated the fact that politicians only cared about themselves and big money and ignored the needs of the public...
I hated the fact that Vegas went from a city of gambling and fun...to a mecca of greed and outlandishness...
I hated the fact that people were collecting fat pensions and retirements undeservedly...
I hated Goldman Sachs, Morgan Stanley, Lehman Brothers, Bear Stearns and Merrill Lynch for being so greedy and same went for hedge funds and private equity...although I wanted to be like them
I hated the fact the stock market became nothing more than a war between people who wanted it to keep going up against the people who wanted it to melt down.

In a period of 1 year, John you got your wish and in exchange you became broke too for being greedy too.

Let's not discount the gravity of the fact that we've destroyed 40% of the world's wealth in a period of 12 months. Almost exactly one year ago, the stock markets around the world hit an all time high. Today we are back to levels of 1998 (the year right before the dot com bubble). This is a drastic change, but this is no time to panic. Most of us will still have our jobs (although pay raises, bonuses and promotions are likely a thing of the past), we'll all be able to have food on our tables and we'll still have our friends and family.

Fraudsters don't have people to defraud anymore, bribers don't have money to bribe, bears don't have much of a stock market to bring down and bulls don't have money to rally the stock market.

Let's look at some of the richest people in the world and how they are doing. Carlos Helu Slim (of the America Movil fortune) net worth has been cut in half since the peak. Kirk Kerkorian (of the MGM Grand fortune and Ford Motors) cut by roughly 75% from the peak. Sheldon Adelson who went from having a fortune of 1 billion dollars to over 20 billion dollars in just 3 years from his Las Vegas Sands fortune...is back to having around 2-3 billion dollars after taking an 80% haircut in his stock. And in a last ditch effort he just loaned his company 600 million dollars to keep it from becoming insolvent. And lastly the Ambani Family (of Reliance Industries) and Mittal who both went from running steel mills in India to becoming the wealthiest families in the world...have been cut roughly by 50-75%.

Nobody needs to cry for them. They still have more money than everyone reading this put together multiplied by 1,000,000. But losing 75% of your wealth in 1 year, is a jaw dropping and something that isn't to be taken lightly.

Two people who I admire greatly for their philanthropy and wealth creating magnificence are Warren Buffett and Bill Gates. They both pledged to give away over 90% of their wealth and were doing things the right way. Bill Gates of the Microsoft fortune has sold a bulk of his stock already and what he has kept is just back to 2006 levels, and from knowing his investments he has monies tied up in precious metals and healthcare that are doing just fine. Warren Buffett of the Berkshire Hathaway fortune, is at exactly where he was at the beginning of the year. He warned about the subprime greed 5 years ago, he called credit default swaps "weapons of mass destruction" and people laughed at him when his stock wasn't doing so well over the past few years. Now flush with cash and will, he's gobbling up his greedy competitors and distressed assets at fire sale prices and will make a fortune.

Unionized government workers who regularly striked and bribed their way to insane pensions and extreme pay and overtime for remedial work...good luck collecting on that in the future all state governments and the federal government is going broke. For those welfare and social service abusers out there...good luck collecting on that. For the United Autoworkers Union who demanded and got $50 an hour pay for pushing buttons on robots that built cars...we can say "ha". For politicians who got away with taking bribes from Wall Street, oil companies and fannie/freddie...you can't rely on that anymore, they are all broke and if you don't listen to the people, we are ready to come out with pitchforks and torches. Wall Street fat cats...if you were smart you may have sold out at the top and gotten out and hoarded cash...but how are you going to make the big money in the future?

Illegal immigrants who demanded amnesty and leached off our generous social services and jobs...the door is closing (or has closed actually). The most pro immigrant president in US history George Bush has begun to boot them out and there are no jobs out there and the government is too broke to pay for your social services. Arnold has once again vetoed driver's licenses and college financial aid for illegal aliens. America has to return to caring about its people and not everyone in the world. You can only be generous for so long.

Who's next? Athletes making and demanding more and more money will be humbled soon. Not this year, not next year but soon. How much longer can tv stations pay billions of dollars for tv contracts, when they are going broke and how much longer can sponsors dole out millions for endorsements when they are broke and how much longer can fans pay insane money for ticket prices and concessions to watch a game? Actors and actresses will be hard pressed soon collecting 20 million dollars a pop for starring in movies. Studios are going broke, they can't keep spending hundreds of millions on bad and overpriced movies when the credit market has dried up. People will stop spending $12 for a movie and with internet piracy, DVD sales will soon be dead.

My boss at work who is probably the one of the hardest working and most generous person I know, said to me "people are getting way too greedy" sold his entire stock portfolio in March and went into all cash including his 401k. I was definitely questioning what he did and for awhile it looked like he was wrong when the market ripped into May. But then things went south and now we know what happened. Now flush with cash he's picking out bargains and I am humbled and broke.

Future Outlook
------------------

I really feel this is going to be a very different world we live in going forward. Everyone has to save money, be less greedy, be "green" and help one another. The stock market will recover, but never to its highs again for a long time. Banks are broke, hedge funds are broke and nobody has the capital to inflate the market for awhile. But there are real companies, with real earnings out there and can be bought at once in a generation firesale prices...companies trading for the cash and physical assets they have...companies trading at 5x forward earnings. This is the time to average down but not take any great risks. The central banks around the world have gotten the message and will prevent a further meltdown, I am positive of that.  The coordinated rate cuts were definitely needed and the fact that they were able to convince the inflation hawk Trichet to cut, was a feat on its own. 

I think all the gold believers will be greatly rewarded as every currency in the world is being greatly diluted. Who wants depreciating pieces of paper when gold can be had. Can anyone find gold? Every gold dealer I've visited is out of stock. Physical demand is at an all-time high, but yet prices don't reflect that. Nobody needs to rush in and put their whole remaining life savings in gold, but everyone should be accumulating some gold now.

We're all ultimately paying the price for our own and everyone else's greed.

If you have read my words, thank you very much.

This post is long enough but I felt I have to add to it.

A great number of Americans weren't greedy at all but still gotten taken down just as hard as the greedy ones, that's the unfortunate part. But the root of the problem was that too many people ended up getting too greedy all at the same time and blew up our system. This real estate bubble turned a lot of good people into speculating greedy ones. And of course D.C. and NY/Wall Street provided all the capital needed to fund all of this.

People who worked hard, set aside savings for retirement who followed what has always worked in the past are hurting. They put down 20% for their homes or rented. They worked for a fair salary their whole lives. They invested in conservative stocks that paid dividends and fixed income securities that paid interest. Now those conservative stocks went down 50% and the fixed income securities defaults. Their homes have plummeted in value and now are under the constant threat of losing their jobs.

I work for a broker so I look at portfolios built with the utmost security (and its share of risky/greedy ones) and deal with clients and brokers everyday. Conservative income funds, which have never lost more than 2-3% in a year before...have lost 20-25% in net asset value this year. General Electric, AT&T and Bank of America...the three most blue chip companies passed on for generations have lost nearly 40% on average in the past year and are at levels unseen since 1995. And people who own these are often 60-80 years old and cannot recover from this and have to now resort to selling their homes they built with their own hands often at firesale prices. I feel horrible when I see this. A wildfire takes down everyone in sight, except for a few lucky ones who happened to see it coming and evacuated.

The unprecedented greed by the world is taking down great institutions that survived 2 world wars and a great depression. We now found out Asia and Europe was just as greedy, but this problem originated in the US.

That is a very, very sad post...
Few years ago I would use pretty much the same words, because there still was some time left to change something.
Have to add on the topic of illegal immigration - providing social services for illegals is not the root of the problem with immigration.
Letting H1 Visa holders who come here just to collect insane salaries according to their home country standards and bringing domestic rates down is the problem.
Outsourcing manufacturing to the lower costs country like China and now Vietnam (due to rising labor cost in China) is the problem.
People who say "protectionism" is bad are mostly afraid that some big USA debt holders like China going to completely destroy what is left from American currency, but not to worry - assets will not much longer be priced in USD.
Healthcare is the problem - when bleeding patient is brought into the hospital and is asked "how are you going to pay?" - that is the problem.
TV showing 200Mil mansions to nearly broke, but still delusional John Doe - that is the problem.
Promoting "socially safe" degenerates to management position is the problem.
I need to stop it now or I will never stop.

Let me finish up by stating one thing which is NOT a problem...come on, need some help here...what do we REALLY like NOW?
Come on...
Ah-ha - I know, I know - short memory is good - we are going to begin to like thing we hate today to start hating it 10 years from now - this is THE ONLY way how rotten corrupt social system might continue to function - our own STUPIDITY.
DavidDT

I am thankful for the YouTube, where people were informing others what the media and politicians were sweeping under the carpet.  Mr. Fed was giving real data, not watered down brainwashing in early 2008.

http://www.youtube.com/user/Crashof2008

Mr. Fed influenced me to subscribe to the Financial Times of London.  Details of this meltdown were being published in black and pink for the world to see the things that U.S. media didn't have vocabulary to describe.

I'm not an expert but investment people put way too much faith in history.  What matters is the future, and the future is different than the past.  Using history to game the future is complete B.S. because it always turns out a shade different.  All those people who wrote investment books saying "hold long-term for your retirement" are the problem here when it comes to average people getting hit in their retirement accounts.

They're not necessarily wrong, but did they write a chapter on what to do when the stock market crashes the year you retire?

Did they illustrate how that will affect your gains?

Do schools teach how you should invest for your retirement, since it is now almost required to live a prosperous life?

No... they didn't.  The stock market is risky and one day out many years from now there will be a worse crash than this.  People should understand that and invest in their retirement accounts with that knowledge.  If they do not, they are being negligent with their own money and have no one to blame but themselves and the people who gave them false promises.

Good post!  However, one needs to realize the market goes down a significantly about every 4-5 years, so the fact that the market went down a lot over the past year is really nothing extraordinary.  A lot of pundits were talking about de-coupling and how alternate asset classes would shield investors during a bear market, but it turned out that everything was overpriced (like Jeremy Grantham pointed out).

What is extraordinary this time is the unwinding of this massive credit crisis we find ourselves in.  The incredible and unregulated growth of credit using shaky assets as collateral is something that has never been experienced in the past 50 years.  This condition, aided and abetted by the incompetent Alan Greenspan and U. S. Congress, is what makes this crash more scary than the average bear market.

It appears it will take years to recover from all of this.  Now is the time to begin positioning oneself for the eventual recovery since assets have been marked down by 40%, and much more in some instances.  We will continue to make technological gains and with some intelligent regulation and hopefully wise leadership at the central banks, perhaps the economy can grow without allowing such a precarious foundation to develop in the future.

Ohh by the way, regarding your comment about destroying 40% of the world's wealth, sounds nice and all but fluctuations in the unrealized gains in your retirement accounts are not actually wealth destruction or creation.

An example... I put 100k into a retirement account and never look at it again for 10 years.  Now 10 years go by and the stock market crashes.  My account only holds 90k when I sell it.

In actual dollars, how did this affect the economy?

Someone sold assets to me worth 100k; they may have received a loss or a gain on that sale.  In effect, 100k was put into the economy by me to be used by someone else.  In exchange, I received some assets whose market price fluctuates daily.  The actual value of these assets is not realized until sold.  So when the stock market crashes and I sell for a 10k loss, its important to remember my original 100k is still out there somewhere being used by other people.  The 10k loss on sale was an exchange of wealth not in my favor but the economy did not lose any overall wealth from it.  It would be similar to giving away 10k to charity.

There are winners and there are losers in the equities markets, but wealth isn't generally destroyed.  Being a Jim Cramer fan, I'll give you his 6th trading commandment, "You don't have a profit until you sell."