Just about everybody got wrong-footed by 2008, but some forecasts were spectacularly off the mark. In no particular order, here are 10 of the worst predictions.
1. "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
At the time of the prediction, the Dow Jones industrial average was at 12,300. By late December it was at 8500.
2. AIG (AIG) "could have huge gains in the second quarter." — Bijan Moazami, analyst, Friedman, Billings, Ramsey (FBR), May 9, 2008
AIG wound up losing $5 billion in that quarter and $25 billion in the next. It was taken over in September by the U.S. government, which will spend or lend $150 billion to keep it afloat.
3. "Freddie Mac (FRE) and Fannie Mae (FNM) are fundamentally sound.... 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 forced the mortgage giants into conservatorships.
4. "I'm not an economist, but I do believe that we're growing." — President George W. Bush, July 15, 2008
Nope. GDP shrank at a 0.5% annual rate in the July-September quarter. On Dec. 1, the National Bureau of Economic Research declared that a recession had begun in December 2007.
5. "I think Bob Steel's the one guy I trust to turn this bank around, which is why I've told you on weakness to buy Wachovia (WB)." — Jim Cramer, CNBC commentator, Sept. 15, 2008
Two weeks later, Wachovia nearly failed as depositors fled. CEO Steel eventually agreed to a takeover by Wells Fargo (WFC). Wachovia shares lost half their value from Sept. 15 to Dec. 29.
6. "Existing-Home Sales to Trend Up in 2008" — Headline of a National Association of Realtors press release, Dec. 9, 2007
On Dec. 23, 2008, the group said November sales were down 11% from a year earlier in the worst housing slump since the Great Depression.
7. "I think you'll see $150 a barrel [of oil] by the end of the year." — T. Boone Pickens, June 20, 2008
Oil was then around $135 a barrel. By late December it was around $40.
8. "I expect there will be some failures.... I don't anticipate any serious problems of that sort among the large internationally active banks." — Ben Bernanke, Federal Reserve Chairman, Feb. 28, 2008
In September, Washington Mutual (WAMUQ) became the largest financial institution in U.S. history to fail. Citigroup (C) needed an even bigger rescue in November.
9. "In today's regulatory environment, it's virtually impossible to violate rules." — Bernard Madoff, money manager, Oct. 20, 2007
On Dec. 11, Madoff was arrested for allegedly running a Ponzi scheme that may have cost investors $50 billion.
10. "There's growing evidence that parts of the debt markets...are coming back to life." — Peter Coy and Mara Der Hovanesian, BusinessWeek, Oct. 1, 2007