The start of 2008 prodded market bloggers to offer a few startling predictions for the upcoming year and look back at 2007's machinations. The broad negative sentiment we're currently hearing is important for all investors to note -- but could also be understood as a contrarian indicator that 2008 will offer significant upsides for savvy investors.
Let's meet back here in 12 months and see what happened.
2008: Pessimism Abounds
Wall St. Journal blogger David Gaffen notes that strategist Byron Wien had some dead-on predictions for 2007, and summarizes Wien's largely bearish calls for 2008, including the S&P 500 index falling 10 percent and the United States suffering its worst recession since 2001.
Fellow skeptic Tim Iacono is confident that despite the widespread housing weakness last year, housing prices will fall another 10 percent nationally, and "this is not one of those cases where it would be better to go against the crowd." Iacono believes the dollar will continue to fall, crude oil will spike to $130 a barrel, U.S. equities will suffer, and inflation "will be the least of the country's problems by summer." Iacono predicts that with job growth turning negative, "help-wanted signs at coffee shops and restaurants will slowly disappear -- which will be unfortunate for those teenagers who finally have to start looking for low-paying jobs to buy their next iPod or cell phone because their parents have spent all their home equity."
CNBC and TheStreet.com personality Jim Cramer echoes Iacono's expectations for rising oil prices and, as a hedge, suggests buying the stock of the company under whose sign you filled up your car today. Alternatively, Cramer suggests buying a driller -- Transocean (RIG) is his favorite -- "then sit back and make money." Other 2008 predictions from Cramer: Apple (AAPL) stock will reach $300 and take over the music business, and European companies will take advantage of the weak dollar and "swoop in" to snap up U.S. giants Merrill Lynch, JP Morgan, Colgate, Clorox, Whirlpool, and Black & Decker.
Barry Ritholtz takes a quick run through fund manager Doug Kass' yearly predictions, ranging from a drop in corporate profits and higher market volatility to a resurgence of the Japanese market and an acceleration of the housing bust. Stock-wise, Kass expects "bubble status" for Research in Motion, Apple, and Google. In the M&A department, Kass suggests Yahoo! and eBay will merge, as will Amazon and Overstock.com.
Portfolio's Felix Salmon has two trade ideas for 2008. One is highly speculative -- to go long the ABX subprime index on the assumption that it's oversold; the other is highly defensive -- to buy 10-year inflation-indexed Treasury bonds, as Salmon believes official inflation figures have been artificially low of late.
Matt Callow encourages further exposing portfolios to China in 2008, buying the Canadian dollar, and panning for gold. Callow's fully behind the "Ag boom," as he expects "just about anything tied to agriculture (from machinery, to food production) to do well in 2008." Given this and related trends, macro expert Gary Dorsch says the commodity "super cycle" should be "ready to rumble" in 2008.
ETFtrends' Tom Lydon says global markets will no longer be in sync with slower-growing U.S. markets, and that international exchange traded funds are the most compelling method to capture this trend. Lydon's looking at ETFs tracking Europe and Asia, fixed-income ETFs, and the entrance of big players like Fidelity and T. Rowe Price to the ETF provider market. He believes that as more investors learn about ETFs, they'll be running to their financial advisors, asking, "Why aren't these in my portfolio?!"
IndexUniverse's Matthew Hougan offers his wish list of five such ETFs he'd like to see hit the market this year, and notes that the remarkable recent growth of the ETF marketplace enables individuals to buy "a diversified portfolio that includes everything from Emerging Markets stocks to commodities futures ... for just 13.4 basis points [0.13 percent in yearly fees]."
David Fry says "good riddance" to a "sloppy" 2007 and, noting the growing importance of international Sovereign Wealth Funds (SWFs), speculates that this year SWFs may begin buying up precious metals miners as a hedge against the declining dollar.
Trader Charles Kirk says that despite the weak opening so far to 2008, "we are far from being oversold... and have a good way to go before we are again." Kirk's current plan? "[T]o wait until we are [oversold] again or until I have information and analysis to indicate a different plan of attack."
Finally, alternative energy expert Tom Konrad has a multipart series on investor "gambles" in that emerging sector for 2008. Konrad is bullish on the LED market with Cree, Inc., and Lighting Science Group, which got great publicity in Times Square on New Year's Eve. If that's not an incentive for the new year, what is?
2007: Meltdowns, Volatility, Globalism, and Deal-making
For financial bloggers, the major event of 2007 was the housing crisis, or as Trader Thoughts phrases it, watching "the world of structured finance go upside down and unravel faster than a ball of wool in a basket of kittens." The "contagion spread" as more than 25 subprime lenders declared bankruptcy and S&P and Moody's (belatedly?) downgraded more than $12 billion worth of bonds backed by subprime mortgages. Meanwhile, the European banking system suffered a credit crunch while U.S. inflation surged at the year's end.
The market may have seemed very volatile in 2007, with the big late-summer drop and Fall recovery, but Bespoke Investment Group notes that by one standard, the S&P 500 was actually less volatile in 2007 than its long-term trend.
PlanetQuant demonstrates that "anyone who made the decision to invest internationally in recent years has been well rewarded," and brings hard numbers that suggest this "golden age of global investing" will continue.
David Schrader's grandfather believes he should be depressed about the state of global economic and political events. Yet Schrader is an optimist. Retail was weaker than expected, while the state of the housing market remains "bent, but not yet broken." Financial institutions "need transfusions" to stay alive, but the stock markets were, all-in-all, positive. Schrader's hoping that the lesson of 2007 is that "things may be better than they seem."
Some bloggers measure 2007 by the deals that got done -- NewsVisual votes for Rupert Murdoch as this year's "king of deal-making" for his take over of Dow Jones. New media commentator Ashkan Karbasfrooshan couldn't agree more, calling Murdoch's Dow Jones acquisition "one helluva deal." Karbasfrooshan has a list of top M&A deals in web-oriented sectors -- he likes Yahoo!'s acquisition of Zimbra to improve offline office suites. WSJ's Stephen Grocer says deal-making in 2007 was "the tale of two halves" of the year and offers a "by-the-numbers look" at what was the biggest M&A year on record.
Himanshu Pandya deems 2007 a "Solar Year on Wall Street," with leader First Solar's stock up nearly 800 percent and 11 other publicly traded stocks in this sector up over 100 percent on 2007.
Finally, David Gaffen plays the blame game, looking back at the situations in which a company or executive decided that the ultimate responsibility for a problem lay with someone else. At Morgan Stanley, CEO John Mack blamed a massive $9 billion write down on just "one desk," while some housing industry players, amidst the worst downturn in decades for their business, preferred to blame the media for their current woes.
That's a sign that regardless of what 2008 has in store, market bloggers will play an important role in defining and chronicling it for the individual investor.
(Source finance.yahoo.com)
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