List of the Biggest ‘Gems’ of Economic Predictions for 2008

Leading American economists and politicians have “celebrated” their economic predictions for 2008, with Business Week listing the top 10 “gems” among them.

The first place went to the estimate that a “very powerful and lasting recovery is likely,” but that “it may take a few more days for it to show,” made by Richard Bend, editor of Profitable Investing Letter, urging investors to “hang in there” and “have faith.” At the time of this forecast, at the end of March, the New York stock index Dow Jones Industrial Average was at 12,300 points, only to plummet to 8,500 by the end of December.

The second place is held by Bijan Moazami’s assessment, an analyst at Friedman, Billings & Ramsey, made in May, stating that AIG, the leading American insurance company, could “achieve significant profits in the second quarter.”

However, it turned out that AIG had a loss of five billion dollars in that quarter, and in the following quarter, even 25 billion. In September, the American government took over the loss-making company, which will spend 150 billion dollars in aid and loans for its bailout.

“I believe Freddie Mac and Fanny Mae are fundamentally sound. They are not in danger of failing. I think they are in a good position to move forward,” stated Barney Frank, a Democratic congressman from Massachusetts and chairman of the House Financial Services Committee, in mid-July. Thanks to this statement, he found himself in third place.

Two months later, the American government placed the two mortgage giants under supervision and promised to “pump” up to 100 billion dollars into them. The outgoing American president George W. Bush also made the list in fourth place with his statement from mid-March that the “market is in a correction process.” Throughout the rest of the year, the market continued to correct and correct – downward.

“No! No! No! Bear Stearns is not in trouble,” stated Jim Cramer, a colorful commentator for the cable network CNBC on March 11, and thanks to that, he secured fifth place on the list. Just five days later, the leading American bank JP Morgan Chase took over Bear Stearns with the help of the American government, during which its shareholders were almost completely “wiped out.”

Next on the list of worst predictions is the assessment from the National Association of Realtors at the end of last year that “sales of used homes in 2008 would show a trend of growth.” However, a year later, the same group announced that sales in November were down 11 percent compared to the previous year, marking the worst recession in housing construction since the Great Depression of the 1930s.

In seventh place is T. Boone Pickens, chairman of the investment fund BP Capital Management, thanks to his estimate from June 2008 that oil prices would reach 150 dollars per barrel by the end of the year. At that moment, the price was 135 dollars, but it is currently below 40 dollars per barrel.

Eighth place on the list of worst erroneous predictions went to Ben Bernanke, chairman of the American Federal Reserve, who at the end of February said he expected “some bankruptcies,” but did not foresee “any serious problems of that kind among the large internationally active banks that make up a very significant part of our banking system.”

Bernanke was seriously mistaken as Washington Mutual went bankrupt in September, becoming the largest financial institution in American history to fail. In November, Citigroup also found itself in financial trouble.

In ninth place is Bernard Madoff, former chairman of Nasdaq, who at the end of this year was suspected of financial fraud that caused investors a loss of about 50 billion dollars. Madoff stated in October of last year that “in today’s regulatory environment, it is practically impossible to break the rules.”

Tenth place on the Business Week list went to a prediction that only indirectly belongs to the sphere of economics. It is a book by Shelby Steele, a black conservative commentator from Chicago, published in December of last year, titled “A Bound Man: Why We Are Excited by Barack Obama and Why He Can’t Win.” Index.hr