The Future for Investors

Ouch!! That's how I felt when I read my stock market prediction for 2008. Not only did I think that the market would do well last year, but I thought financial stocks would lead the way. Instead, 2008 turned into the worst year for the markets since the Great Depression, and financial stocks led the way down, not up.

I did hit one nail right on the head. I warned that a major risk to my forecast was the price of oil, stating, "If oil surges past $100 a barrel, we will be in trouble. Three dollar gasoline did not prove to be the tipping point for the consumer in 2007. But with a weak housing market, I believe $4 gasoline would do considerable damage to consumers' pocketbooks in 2008. And $4 gas would happen if oil rose to $120 a barrel or higher."

Indeed, oil soared past $147 a barrel and gas topped $4 a gallon in July, greatly accelerating the economic downturn. But I certainly didn't predict the depth of the subprime crisis. It is important to explain why I, like so many others, didn't believe the downturn in real estate would tank our major financial institutions -- and why this has relevance for the 2009 forecast.