2008 in Review

In the financial markets, 2008 was a year to forget; the worst year in (my) recent memory. But after seven good years, we're allowed to have one clunker, especially since this sets the stage for a rally in 2009. The resource stocks got hit just as hard as every other asset class, with the larger companies down as much as 40-50% and the exploration companies off 80-90%. Because of the credit crunch, some of the smaller companies may not survive, but this only creates opportunities for the better-capitalized survivors. The only asset that held up in 2008 was gold bullion, which actually managed a small gain, year over year. Even its cousin silver declined substantially from July through October. But the year end rally, in which a broad range of mining shares appreciated 100-200% is a portent of things to come.

2008 will be remembered in much the same way 1929 is remembered. It was the year in which the wheels started to come off. The government has already pledged $8.5 trillion in guarantees, bailouts, and assorted rescues, and there is no way even to borrow that much money. It will be created out of thin air, as will the funds needed to finance Medicare and Social Security some day. Bush has managed to delay until he can leave office the total collapse of the financial markets by means of overt manipulation that has gone unreported in the mainstream financial media. But when President Obama has to ratchet up spending another $1 trillion to make up for sharp declines in consumer spending and business investment, the game will be over. All that remains to be determined is which president gets blamed for it. If Obama is smart, he will get the bad news out of the way early.

In sports this may have been the best year ever. It started with the best Super Bowl ever, then the best U.S. Open (Tiger winning a playoff on one leg) ever, then the best tennis tournament ever (Nadal-Federer at Wimbledon) and then the best Olympic performance ever (Phelps 8 gold medals) so I doubt 2009 will measure up.

Leadhead, if you're out there, even you would have enjoyed watching sports in 2008.