10 Worst economic predictions in 2008

(Source: BusinessWeek)

1. “A powerful and durable rally is in the works. But it may need another couple of days to lift off. Hold the fort and keep faith” – Richard Band when Dow Jones at 12,300 in March, 2008.

2. “AIG” could have huge gains in the second quarter” – Bijan Moazami in May, 2008.

3. “Freddie Mac and Fannie Mae are fundamentally sound. I think they are in good shape going forward.” – Barney Frank in July, 2008.

4. “I am not economist, but I do believe that we’re growing” – US President Bush in July, 2008.

5. “ I think Bob Steel is the one guy I trust to turn this bank around, which is why I have told you on weakness to buy Wachovia” – Jim Cramer, CNBC Commentator in September.

6. “Existing home sales to trend up in 2008” – National Association of Realtors. These brokers same similar things all over the world.

7. “I think you will see $150 per barrel by the end of 2008” – Boone Pickens.

8. “There is growing evidence that parts of debt markets are coming back to life” – Peter Coy.

9. “In Today’s regulatory environment, it is impossible to violate rules” – Bernard Madoff. Unbelievable!

10. “I don’t expect any serious failures of large investment banks” – Ben Bernanke, US Federal Reserve Chairman.

Do we need more quotes?

What happened after that?

Dow Jones collapsed to 7,500 and AIG along with Freddie Mae and Fannie Mac were saved by American Government from bankruptcy. Republican Party miserably lost in American elections.

Why am I writing about all this?

Many investors blindly believe in the predictions by analysts or experts like Rakesh Jhunjhunwala and statements by PM and FM. They take their investment decisions just basing on their advice without doing proper research on the Company and economy. Investors overreacted in October due to panic and Sensex crashed to 7,800 levels and then recovered to 10,300 by the end of December. Meanwhile, economy deteriorated further in November-December and hopes of mid-2009 recovery were permanently evaporated. Sensex moved in exactly opposite direction to economy (Just as it did in November-December, 2007 after US Subprime crisis). Will it crash once again? 7,800 levels are unreasonable levels when you compare with economic situation in October, 2008 but they will be reasonable levels for BSE Sensex in February, 2009 and those levels may become expensive ones if you think in the context of forward valuations in February, 2009.