Who knew 2008 would get so ugly?
So long to a year unlike any other and the worst for stocks since 1931. From my past year's columns, I size up the lessons we've learned over these traumatic 12 months.


Strikingly, the Semiconductor Index is now up 6.0%. The strength comes in the face of downside earnings and/or revenue guidance... More

A year ago around this time, banks were trembling, but none had gone under. The stock market was down 4% from its October low but was expected to excel in the coming presidential election year. Few thought that crude oil could sell for more than $100 a barrel.

The Federal Reserve's reputation for rescuing investors through quarter-point cuts in interest rates was intact. Inflation was a clear danger. Chinese growth could only go higher. Emerging markets were a haven. Private equity and hedge funds were the smart money. Home-building, banking and insurance stocks were cheap. Fertilizer and steel stocks were an iconoclastic path to riches.

So much for the conventional wisdom, huh? We will look back on 2008 -- the worst year for the stock market since 1931 -- with all the fondness reserved for hostage takers. But before we say goodbye and good riddance, it's worth pausing a moment to reflect. So here are my own hits, misses and lessons learned from the past year.


Sometimes you get lucky. My good fortune with this column, aimed at forecasting the coming year, was interviewing Paul Desmond of Lowry's Reports and veteran trader Jim Rogers, who explained why the next year would usher in a rip-roaring bear market.

Desmond said his measures of demand and supply suggested investors should go to cash immediately and chill.

"You need to put the idea that the Fed or some other force will ride in like a white knight out of your head," he warned. "Don't buy into lower values too early. Cheap becomes a very relative term in a bear market, as people don't respond to value -- they respond to a sense that they need to just stop the pain, as they'll dump fast-growing, seemingly valuable stocks with abandon."

Rogers declared that Fannie Mae (FNM, news, msgs) was a fraud and that Citigroup (C, news, msgs) was technically bankrupt and likely to fall under $5 a share, yet added he believed the government would not let them fail: "They'll nationalize them in some way. It's wrong, but they can't let the two largest lenders in the nation go down."

Rogers added, "Stocks are done, and many favorites will go down 80% after people figure out how long they've been reporting phony earnings."

And now? Desmond says every metric he follows is screaming that the bear market is at an oversold extreme and should end -- except the two most important metrics: There are still too many sellers and not enough buyers.

His prescription: Stay in cash, and don't come out of the bunker yet.

http://articles.moneycentral.msn.com/In ... -ugly.aspx