The business world left many dazed and confused after a wild ride filled with economic turmoil and criminal wrongdoing during 2008. Is it possible to trust the people on Wall Street, the people in Washington DC and any of the regulators wherever they may be after this train wreck?
Is “business credibility” an oxymoron or can it be earned back? Each of us has to determine our own answer, but it is clear that 2008 is a year that few of us will forget anytime soon.
I received an email from my LinkedIn colleague, JC Brandon (http://www.jcbcapital.com), who shared some sobering statistics about the economy from 2008. I can’t take credit (or blame) for the information below but it is interesting.
The 2008 losses are terribly serious:
Global Markets fall from $62.6 trillion [10/31/07] to $27.6 trillion [10/27/08], losing $35 trillion or 56%:
DJIA falls 48.2% from 14,279 to 7,392.27 [10/11/07 – Nov 21]
S&P 500 falls 52.9% from 1,576 to 741.02 [10/11/07 – Nov 21]
NASDAQ falls 54.7% from 2,861 to 1,295.48 [10/31/07 – Nov 21]
MSCI Europe Index falls 54.7% from 1,388 to 628.89 [7/13/07 – Nov 21]
MSCI Pacific Index falls 57.8% from 173.1 to 73.11 [11/1/07 – Oct 28]
S&P Latin America 40 falls 68.2% from 5,862 to 1,862.84 [5/20/08 – Nov 20]
Japan’s NIKKEI Index falls from 18,297 [6/20/07] to 6,994.90 Oct 28 – a 61.7% fall.
Germany’s DAX Index falls from 8,131 [6/20/07] to 4,014.60 Oct 24 – a 50.6% fall.
Britain’s FTSE Index falls from 6,754 [7/13/07] to 3,665.20 Oct 27 – a 45.7% fall.
France’s CAC Index falls from 6,168 [6/1/07] to 2,838.50 Nov 21 – a 53.9% fall.
Canada’s TSX Index falls from 15,154 [6/6] to 7,647.11 Nov 21 – a 49.5% fall.
Brazil’s BOVESPA Index falls from 73,920 [5/29] to 29,435 Oct 27 – a 60.1% fall.
Russia’s RTS Index falls from 2,498 [5/19] to 549.06 Oct 28 – a 78.0% fall. India’s
Bombay SENSEX Index falls from 21,113 [1/9] to 7,697.39 Oct 27 – a 63.5% fall.
Shanghai Composite falls 72.8% from 6,124 (Oct 16 ’07) to 1,664 (Oct 28) in 1 year – 2007 the
Shanghai Composite was the best performer up 161%.
These returns need to be adjusted for local currency gains/losses:
US dollar (70.80 on 17 March 2008 to 89.25 on 11/19) – up 24.9% in 7 months.
Japanese yen (.8087 on 11 June 2007 to 1.149 on 12/17) – up 40.9% in 18 months.
Chinese renminbi (8.11/.123 on 21 July 2005 to 6.84/.146 on 10/28). – up 18.6% in 3 years.
Euro: $1.60 on Jul 15 to $1.23 on Oct 23, -22%
Canadian Dollar: $1.10 on Nov 5 2007 to $0.768 on Oct 28, -30%
British Pound: $2.11 on Nov 5 2007 to $1.44 on Dec 4, -31.2%
Indian Rupee: 39.1 on Feb 1 2008 to 50.3 on Dec 1, -28%
Russian Ruble: 23.2 on Jul 11 2008 to 28.3 on Dec 22, -21%
Can the financial community earn their business credibility back? Based on the statistical damage that was done, there is a long way to go to get back to even. There are a few lessons that we can all take to heart from this experience:
1. Economies only stay strong for so long – in other words, what goes up must come down, or at least some of the way down.
2. Borrowing from my colleague Jay Goldinger, 2008 was a perfect example of Jay’s theory that the masses would rather lose in company than win alone. Using the excuse that the S&P was down 40% but your portfolio was down only 30% is a poor substitute for disciplined investing.
3. Depend on yourself to make your money. Then take the investible portion and diversify it between multiple investments. Always remember that betting on yourself is the best investment.
As bad as 2008 was financially, if you have your health, then it was a good year and be thankful for it.
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