Here is a collection of some of the predictions made in this blog. The blog missed the full scope of the Chinese bubble burst. I thought -40%, it turned out to be -70% and was 6 weeks early from the top. Sornette, Gott and yield spreadsheets are helpful tools. They are available here or for the asking.
China shares bubble bursting (thanks sornette)June 2007
First article on house decline June 2007
Warning of mark to market problems June 2007
A handy free prediction tool made public July 2007
Suggestion CDO would lead to global economic crisis July 2007
Home values lead to $6.6 trillion in losses Aug 2007
Discussion of the panic of 1893 as a pre-cursor to today
Warning on Citibank debt Nov 2007
Anti-VAR and Model Rant, yes I am a recovering quant now value focused Dec 2007
The ratings agencies are SEC abomination Dec 2007
Commercial real estate should be avoided Feb 2008
Fair Value on the Dow 8,800 March 2008 (the simple prediction tool in Excel free download)
Value at Risk is more dangerous than useless, have alway thought so March 2008
Municipal bonds will take a hit March 2008 this is still playing out
Indications that housing could still fall faster. April 2008
Civilian employment peaked in 1999 May 2008
Recurring indication of overpriced equities dow 8,500 June 2008
CDS netting risk July 2008
We weren't saving enough(not a prediction just a pointed fact) Aug 2008
Hints of deflation when inflation was fashionable.Aug 2008
The real scary stuff is in 3-5 years when Basel 2 is in place.
China could experience radical political change in 6-12 months
The sad reality is that equities in the US are -40% from the highs and will need 60-70% in returns to get to break even. Based on historical average equity returns that equates to 10 years depending on dividends and inflation. Breakeven is 2018
The point of this post is that active listening to the numbers and ignoring popular opinions or the "wisdom of crowds" could help spot problems.
There is a fascinating cultural phenomenon I call collective myopia. It is powerful, in that groups can seemingly perform the heroic, stupid, foolish or sublime all while being oblivious to the obvious. Understanding collective myopia and being able to listen for it, see it or spot is a useful skill.
Hopefully our regulatory, legal and political institutions will learn from current mistakes, but there really isn't anything new under the sun here. Read Kindelberger, we have been going through financial crises for centuries and will invent new debt instruments and buy "things that only go up" well into the future because our neighbors do it. We are social animals and take our cues from each other, as Kindelberger says, "nothing makes a person lose common sense more than to see a neighbor get rich."
What should you do?
Advice to get into Norwegian T-bills May 2008 this could look good over the next year or two.
According to Morningstar of 9,900 US mutual fund managers 3 were positive over the last 1 year period, and yes I am up for the last year, but it is no reason to be smug, I am just as scared as the rest of you, for the near future is uncertain.
Tomorrow Oct 10th may be the day without money, but have faith. Banking, money and credit are cultural phenomonon and will be back. In 5-10 years we can learn to create new dreams, it is the human drama playing out in all its Shakespearian form...all the world's a stage.
Please note, I do not and am not allowed to discuss positions related to the fund I work with in public forums. I also believe portfolio theory and VaR type models had a lot more to do with today's crisis than is discussed.
