I was intending writing a post about all the crap people talked about 2008 before it happened. I would have thought that bankers would have been the cream of the crap, because they usually are. Up until now of course they have been able to get away with it, but 2007 and 2008 have shown them up for what they are.
Anyway I don't need to hunt around the Internet finding all the nonsense people were spouting at the start of the year as someone has already done it.
So here are a selection of the worst predictions about 2008, with thanks to Peter Coy
Will we see some more for 2009?
- "A very powerful and durable rally is in the works. But it may need another couple of days to lift off. Hold the fort and keep the faith!" —Richard Band, editor, Profitable Investing Letter, Mar. 27, 2008
The DOW was at 12,300 at the time, it is now under 8,500.
- AIG "could have huge gains in the second quarter." —Bijan Moazami, analyst, Friedman, Billings, Ramsey, May 9, 2008
AIG lost $5 billion in the second quarter and $25 billion in Q3! In September the U.S. government nationalized it, and spend or lend $150 billion to keep it afloat.
- "I think this is a case where Freddie Mac and Fannie Mae are fundamentally sound. They're not in danger of going under…I think they are in good shape going forward." —Barney Frank (D-Mass.), House Financial Services Committee chairman, July 14, 2008
Two months later, the government placed them into conservatorships with a pledge to invest up to $100 billion in each.
- "The market is in the process of correcting itself." —President George W. Bush, in a Mar. 14, 2008 speech
[A bit unfair including Bush in the list, we all know he hasn't got a clue about the markets - Ed. ]
- "No! No! No! Bear Stearns is not in trouble." —Jim Cramer, CNBC commentator, Mar. 11, 2008
Five days later, Bear Stearns was taken over by JPMorgan Chase with help from the government, almost wiping out shareholders in the process. [I generally like J C but this time he seems to be talking out of his other end].
- "Existing-Home Sales to Trend Up in 2008" — National Association of Realtors press release, Dec. 9, 2007
On Dec. 23, 2008, they said November sales were 4.5 million—down annually - 11% from a year earlier— and we are in the midst of the worst housing slump since the Great Depression.
- "I think you'll see [oil prices at] $150 a barrel by the end of the year" —T. Boone Pickens, June 20, 2008
Oil was around $135 a barrel at the time. It is now below $40 [although to be far it did get up to $147].
- "I expect there will be some failures. … I don't anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system." —Ben Bernanke, Federal Reserve chairman, Feb. 28, 2008
Six months later Washington Mutual became the largest financial institution in U.S. history to fail. In November Citigroup needed an even bigger rescue.
- "In today's regulatory environment, it's virtually impossible to violate rules." —Bernard Madoff, one-time Nasdaq Chairman Oct. 20, 2007
A year later, Madoff admited that he had cost investors $50 billion in what he referred to as a Ponzi scheme.
- A Bound Man: Why We Are Excited About Obama and Why He Can't Win, the title of a book by conservative commentator Shelby Steele, published on Dec. 4, 2007.
Mr. Steele, meet President-elect Barack Obama.
Well, personally I would have ignored the political comments, as we know that politicians are generally dishonest and clueless, except when it comes to helping themselves - Let Them Eat Waste! Gordon Brown. Maybe Obama will be different? [I'm not holding my breaht.]
But I would have expected financial experts and analysts to have been a bit less clueless, but I guess they had their axe to grind too.
In the interests of impartiality I should really go and find quotes from people who got it right.