My surprise list for 2008 hit on a number of themes that dominated the investment landscape this year: the extent of the weakness in worldwide economic activity, the severity of the housing downturn, the collapse of retail spending, the obliteration of the hedge fund industry, the reawakening of market volatility, the spike in oil, the cessation of private equity deals and the steady drop in large bank shares.

  • "The housing depression of 2007 morphs into the retailing depression of 2008."
  • "With a continuation of the credit and liquidity crises and an increased recognition that financial retrenchment will take years (not months), volatility pushes even higher. Daily moves of 1% to 2% become more commonplace, serving to further alienate the individual investor."
  • "The hedge fund community is disintermediated in 2008. Outflows accelerate, abetting an already conspicuous trend of rising volatility in a market that behaves more like a commodity than ever."
  • "Job losses begin in mid-2008."
  • "An unprecedented and abrupt drop in personal consumption expenditures occurs."
  • "Retail stocks, especially women's apparel, are among the worst-performing stocks in 2008."
  • "The Federal Reserve embarks upon a series of moves to ease monetary policy in 2008. Nearly every meeting is accompanied by a 25-basis-point decrease in the federal funds rate, even despite continued inflationary pressures. Nevertheless, the economy fails to revive as the Fed pushes on a string."
  • "Growth in the Western European economies deteriorates throughout the year."
  • "Financial stocks fail to recover. No financial company is immune to the eroding market conditions, spike in market volatility, the uneven direction in commodities and currency prices. Even the Leader of the Pack, Goldman Sachs (GS), makes several bad bets in the derivative, currency and commodity markets, and its shares begin to underperform its peers as profit forecasts move lower. Citigroup (C) halves its dividend.... Asset sales and writedowns leave the bank crippled."
  • "Bear Stearns investor Joe Lewis loses nearly $350 million on his near 10% position in the brokerage firm."
  • "Mutual fund outflows and uncertainty regarding the integrity of money market funds result in the asset management stocks being among the worst-performing sectors in 2008."
  • "With private equity deals at a standstill, Blackstone (BX) shares trade down close to $10 a share."
  • "Reversing its recent strength, the U.S. dollar's value falls by over 10% in 2008, and gold rises to over $1,000 an ounce."
  • "The price of crude oil eclipses $135 a barrel."
  • "There are several major Enron-like accounting scandals in 2008, causing investor confidence to plummet; these will come in some large financial companies in Europe."

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