How were so many clues missed by so many?
Looking back over the past 1 1/2 years, it seems hard to understand how financial planners, mutual fund managers, pension fund managers, hedge fund managers, CNBC pundits, and investors missed all the clues that the economy was falling apart.
In September 2007, the first cracks in the subprime mortgage crisis was beginning to show.
Next in January of 2008, Bank of America purchased Countrywide at bargain basement prices.
In February 2008, congress passed the 2008 stimulus package when unemployment was still below 5%.
In March 2008, JP Morgan purchased Bear Stearns at a bargain basement price. By then, it became very obvious that the US had a major problem with subprime mortgages especially with the Fed and Treasury intervening and guaranteeing $ 27 billion of Bear Stearns debt.
By April, banks around the world had written down billions of dollars due to subprime loans. By then UBS had wrtten down $ 32 billion, Merrill Lynch $ 25 billion, Citigroup $ 37 billion, Credit Suisse $ 14 billion, Bank of America $ 4 billion, HBOS $ 6 billion, RBS $ 4 billion, Fortis $ 3.5 billion, Deutsche bank $ 3.5 billion, and $ 3 billion for JP Morgan for a total of over $ 300 billion for all banks.
During this time, CNBC pundits were saying buy, buy, buy. Anyone watching the clues could have sold their stocks at a very good price anytime during that period (dow was at a minimum of 12,300 during that time).
It has been stated that the stock market predicts the economy 6-9 months in advance but yet with all those clues, nothing was being predicted.
Now CNBC pundits are again saying buy, buy, buy. However, from everything I can see, there aren’t any clues that would indicate the economy will turn around 6-9 months in the future.