Talk about a roller coaster ride. 2007 presented investors with many surprises -- and quite a few expected problems -- ranging from subprime mortgage defaults to term auction facility to sticky inflation. Agriculture boomed, the Fed surprised, homebuilders collapsed and Google (GOOG - Get Report) and Apple (AAPL - Get Report) were unstoppable.
As we launch into 2008, now is a good time for us to look back and reflect upon what lessons 2007 provided us. For those who paid attention, there were many insights to be gained, even wisdom to be attained. Some of these we learned through observations; others, we learned the old-fashioned way (painfully).
What follows is a mix of
1. Ignore market rumors: Sometimes the big bucks don't even have to make the buy; they need only to be rumored to be kicking the tires. That was never truer than in 2007. It seemed every time some firm was in trouble, the same gossip was floated that Warren Buffett was about to buy it. Time and again, these tales proved to be unfounded money-losers.This year's most egregious example was Buffett's imminent purchase of Bear Stearns (BSC). I don't know who bought on the rumor that Mr. Derivatives-Are-Financial-WMDs was going to buy the poster child for bad CDO bets, but if they merely gave it even a millisecond of thought, they would have seen how obviously absurd it was.