Mark Lamb | Wednesday, 14 January 2009

2008: Annus horribilis

Weekly international investment round up to 13 January 2009

• 2008 will be recorded as a horrible year

• Among the losers there were actually some winners

For Christmas, I asked for a new dictionary as I had used up all the words relating to disasters in my last one! The investment history books will surely recall 2008 as a horrible year.
Together with longstanding banks entire countries went bust and evidently there is even one small town in California called Mountain House which is now known as the ‘Credit-crunch City’, due to the fact that 90 per cent of the community’s home owners owe more on their mortgages than their houses are worth.
Surprisingly, it was our near neighbours Tunisia who saw their stock market crowned ‘Best Performer of 2008’ as their index increased by a creditable 10 per cent while the island state of Iceland with a population not too dissimilar to our own will go down in infamy as the year’s worst, crashing by a whopping 94 per cent.
‘Iceland 2008’ seems to epitomise the whole credit crunch disaster. Its inhabitants once enjoyed one of the highest standards of living on earth boosted by the profits generated from their banks rapid overseas expansion. However, their banks debts were worth about ten times their country’s actual GDP which left it badly exposed to the financial crisis and the rest is now history.
As the previous year’s best major world market performer many thought China’s stock market roll could only but continue. In my January 2008 article entitled ‘Outrageous Predictions for 2008’ I put forward my reasons why I didn’t think this would be the case and predicted a massive fall, the CSI Index which tracks yaun-dominated ‘A’ shares listed on China’s two exchanges went onto lose 66 per cent in 2008, its first ever annual loss. Unfortunately, another of my predictions from the same article also came true. Contrary to the views put forward by those ex-expert analysts at Lehman Brothers in London who predicted the FTSE 100 would end the year up at 7,300 points I suggested that after many years of expansion the UK economy would end the year in negative growth territory, with obvious consequences for its markets. The FTSE 100 ended last year 30.9 per cent down, it’s worst ever performance.
With its export dependant economy Japan saw its stocks post their largest ever decline in 2008 with the Nikkei 225 stock average sinking 42 per cent while America’s S&P 500 fell 38 per cent over the same period reflecting the fact that the US lost more jobs in 2008 than at any time since the end of the Second World War, a pressing problem for their new President to tackle. General Motors fall of 87 per cent was the Dow Jones worst performer of the year and reflects a bad year for almost all car manufacturers.
Given the choice between gold and chocolate which would you choose? While gold was last year’s best performing metal ending higher for its seventh consecutive year, up nearly 6 per cent, cocoa was the best performing commodity of 2008 rising by 31 per cent proving that when times are either good or bad we all still eat chocolate! Goodbye and good riddance 2008, next week we shall consider what may lie ahead in 2009.

This article does not intend to give investment advice and its contents should not be construed as such. Information in this article has been obtained from various public sources and is given by way of information only. Readers are always encouraged to seek financial advice before making any investment decision.



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2008: Annus horribilis





14 January 2009

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