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The Worst Stock Picks of 2008

 

The Worst Stock Picks of 2008

By Ron DeLegge, Editor

December 19, 2008

 

SAN DIEGO (ETFguide.com) – There are many ways to destroy $2 or $3 trillion. You can fly over a volcano and dump the money into the mountain’s throat. You can also incinerate the money in garbage dumps of major cities across America.

 

However brash such financial homicide may seem, none of it quite compares to the destructive forces of stock picks gone bad. In this debased regard, 2008 was like few others.

 

Here’s a brief recap of this year’s worst stocks. (Don’t forget to read the concluding lessons learned.)

 

Citigroup (NYSE: C)

During its heyday, Citigroup was the sort of stock you could buy, go to sleep and make money. Today, it’s transformed itself into the sort of stock you can buy, go to sleep and lose money. Just ask Prince Alaweed Bin Talal. As he’s learned, banking is a great way to demolish an oil fortune.

 

One person who’s been happy with Citigroup is former U.S. Treasury Secretary Robert Rubin. Since 1999, he’s vacuumed in $115 million of compensation for serving in various positions of oversight. Thanks to Bob and his clan of corporate oafs, Citi’s stock is 85% lower than it was at the beginning of 2006. I hope he doesn’t forget to add that to his resume of achievements. 
 
  

 
Below is an excerpt from the ETF Profit Strategy Newsletter – Published on Oct.21, 2008
At the time, the Dow was above 9,000. It dropped below 7,500 and rallied into Nov./Dec

Market Meter

Short-Term: published on Oct. 21, 2008
The Dow should find a “trade-able bottom” between 7200 – 7,500
Mid-Term: published on Oct. 21, 2008
Once bottomed, the stock markets will rally into Nov/Dec
Long-Term: >> Sign up to find out


How did you do? >> Sign up for the ETF Profit Strategy Newsletter to be a step ahead


Despite Citi’s horrific performance, maligned investors will be satisfied to know that 12 brave Wall Street analysts still rate the beleaguered Citi a “Buy”, “Hold” or “Strong Buy.” If this is the sort of financial rubbish that’s been scoring analysts juicy year-end bonuses, where do we sign up to join the party?

 

Bear Stearns (Now part of JP Morgan Chase)

In a year filled with so many horrific stock recommendations, few will be more memorable than Jim Cramer’s ill-fated Bear Stearns call. On March 11th, after the company’s stock had closed trading at $62.97, he lectured CNBC’s national television audience that, “Bear Stearns is fine.” Shortly thereafter, the company collapsed and with the U.S. government’s help was eventually rescued by JP Morgan Chase (NYSE: JPM) for a lowly $10 per share.

 

CNBC’s handlers later tried to spin Cramer’s Bear Stearns recommendation saying that he was talking about something other than the stock. Not to worry though. JC’s media empire is still firmly in tact. I project he’ll sell 1 million more books to awestruck novices.   

 

General Motors (NYSE: GM)

Since the beginning of the year, GM’s stock price has slid 81%. Even after scoring a bridge loan from the U.S. government, the company remains a complete mess. In ETFguide’s October newsletter, I told subscribers that GM will be the next component of the DJIA to get booted. (I expect that prediction to soon be fulfilled.)

 

One of the nefarious lies being perpetrated by media types is that Americans don’t want to own American cars. That’s not true. Who of us wouldn’t want to pilot a ’59 Cadillac or a ’63 Corvette? The main problem is that the dummies in Detroit haven’t made the kind of car we Americans would want to own and drive in 40 or 50 years.

 

A dishonorable mention goes to Ford Motors (NYSE: F) whose stock price has been a dead fish in the hot sun.   

 

Tribune Company (Bankrupt)

What do you get when you marry Chicago’s lovable losers (the Cubs) with a real estate billionaire that doesn’t know how to accurately value a media company? Answer: A Tribune Company bankruptcy. And that’s exactly what happened on December 8th. Anybody caught holding Tribune stock, from clueless individual shareholders to unsurprised employees and to bottom feeding mutual fund managers, got stabbed with a 100 percent loss. Repeat after me: Ouch! (OK, your turn.)

 

American International Group (NYSE: AIG)

This year AIG cratered from around $60 per share to $1.50. Back alley stock hustlers will be pleased to know that AIG is now the world’s largest penny stock. Investing in penny stocks has never enjoyed such heights of legitimacy!  

 

One good thing about the recent nationalization of AIG is that Maurice “Hank” Greenberg can go back to playing checkers. Memo to Hank: For the sake of humanity (and shareholders), please stay retired.

 

Thankfully, the Editors at the Wall Street Journal realized that AIG was uninsured and finally gave them the boot as a member of the prestigious Dow Jones Industrial Average. As it turns out Kraft Foods was AIG’s replacement. Put another way: Out with variable annuities, in with Philadelphia Cream Cheese!

 

Circuit City (Bankrupt)

On November 10th America’s second largest consumer electronics retail chain short circuited and declared bankruptcy. I guess its 700 or so stores weren’t selling enough tape recorders and USB cables to stay afloat. According to certain mutual fund managers, CC was supposed to be the next Best Buy. But instead of that, it became the Woolworths of electronics.  

 

Mexican billionaire, Ricardo Salinas Pliego now owns a 28% stake in the broken company. Good luck Ricky, you’re gonna need it.

 

Lehman Brothers (Bankrupt)

What, besides incomplete, would a list of lousy stock picks be without Lehman Brothers? The 158-year old investment firm survived World War I and II along with the Great Depression, but it couldn’t survive the 2008 mortgage and real estate meltdown. Sniff, sniff.

 

Richard Fuld’s October congressional testimony will rank as one of the worst public performances by any corporate CEO (dead or alive) anywhere. If you missed it, his forehead kept bumping into the microphone. For a fellow that once had a net worth just north of $1 billion, you’d think he knows how to operate a darn microphone. Memo to Dick: Your mouth is supposed to project into the microphone, not your head!

 

Lessons Learned

What can we learn from 2008’s worst stocks? The main message is most certainly not that we need to pick our stocks better, but rather, we shouldn’t be wasting our time with such futile pursuits in the first place! If you’ve become infected with “Data Misinterpretation Deficit” or “DMD”, I’m sure you remain unconvinced. In 2009, I project that you will continue to perfect your mistakes.


For the rest of us, the better course of action is to only invest in individual stocks with money we don’t care about or money we can afford to lose. On the other hand, your serious money, if you have any left, should be indexed to the market. REMEMBER: You don’t need to outperform 100% of investors to someday retire comfortably. Winning 80 or 90% of the time should be enough.

 

 

 

 

 

 

 

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