Almost everyone got off to a bad start in 2008, but some people’s mistakes were truly spectacular. By Peter Coy
Editor’s note: This new version of the “10 Worst Predictions of 2008” changes three of the 10 predictions after some suggestions from Businessweek’s internet users and editors. CNBC’s Jim Cramer and President Bush are still on the list, but author Shelby Steele has been dropped from the list and replaced by two Businessweek reporters.
Here are some of the worst predictions announced for the year 2008. Enjoy, because it’s not every year that we reap such harvests!
1. A very strong and lasting rebound in the economy is on the way. But it should take two or three days before it starts up again. Hold the fort and keep faith! – Richard Band, editor of the Profitable Investing Letter blog, March 27, 2008;
At the time of this prediction, the Dow Jones Industrial Average (DJIA) was at 12,300 points. By the end of December, it was down to 8,500 points.
2. AIG Group (AIG) ‘could have made huge profits in second quarter’ – Bijan Moazami, Financial Analyst at Friedman Firm, Billings, Ramsey, May 9, 2008;
AIG ended the year losing $5 billion in the second quarter and $25 billion the next. The group was bought in September by the US state, which will have to pay or lend it $150 billion to keep it afloat.
3. “In my opinion, despite the current economic situation, Freddie Mac (FRE) and Fannie Mae (FNM) banks remain fundamentally sound. There is no risk that they will go bankrupt…I think they are well on their way to moving forward. – Barney Frank (Democratic Senator from Massachusetts), Chairman of the House Financial Services Committee, July 14, 2008;
Two months later, the state forcibly put the mortgage giants under its tutelage and promised to inject more than $100 billion into each of the two companies.
4. “I am not an economist by profession, but I do believe that our country is developing. – President George W. Bush, during a press conference held on July 15, 2008;
Uh no. The annual rate of gross domestic product in the United States fell 0.5% in the July-September quarter. On December 1, the National Bureau of Economic Research said a recession began in December 2007.
5. “In my opinion, Bob Steel is the only person who can be counted on to take this bank in a different direction, which is why I mistakenly suggested that you invest in the Wachovia company. – Jim Cramer, CNBC reporter, March 11, 2008;
Two weeks later, Wachovia went bankrupt within hours as depositors left the facility. Steel finally accepted a takeover of his company by the financial group Wells Fargo. Wachovia shares lost half their value between September 15 and December 29.
6. “Trend for 2008 of the Existing-Homes Sales group is on the rise”, according to the front page of a press release published on December 9, 2007 by the National Association of Realtors;
On December 23, 2008, the group announced that the annual number of sales for the month of November reached 4.5 million (thus having fallen by 11% compared to the same period the previous year) while raging the worst real estate crisis since the great Depression.
7. “I think by the end of the year they (oil prices) will hit $150 a barrel. – T. Boone Pickens, June 20, 2008;
At the time, a barrel of oil was around $135. By the end of December, it was below $40.
8. “I expect there will be some failures…but in my view, no serious problems of this sort will affect the large internationally active banks that make up much of our banking system. – Ben Bernanke, Chairman of the Federal Reserve, on February 28, 2008;
In September, Washington Mutual became the largest financial institution in US history to fail. That of the company Citigroup (C) in November required an even greater relief.
9. “Given the current regulatory environment, it is impossible to break the laws.” – Bernard Madoff, asset manager, on October 20, 2007;
About a year later, Madoff (formerly chairman of the Nasdaq) revealed to investigators that his Ponzi scheme had cost his investors $50 billion.
10. There are growing signs that parts of the debt market…are coming back to life. – Peter Coy and Mara Der Hovanesian, Businessweek reporters, October 1, 2007.
