8 of the worst market calls since 1929

Editor’s note: As we cringe at the recent volatility in the markets, this article published two years ago (in the ‘good old days’ of investing) gave us some perspective.

Bad stock market calls could fill oceans. To find them you don’t have to go far beyond big market crashes.

That said, with the increasing number of big and “mini” flash crashes, the list gets longer. Here are eight of the worst market calls of all time, although there are many more:

8. The granddaddy of bad calls

Back in 1929, Irving Fisher, a much-heeded economist, predicted days before one of the most famous stock market crashes in history that stocks had hit a “permanently high plateau.”

“I do not feel there will be soon, if ever, a 50-60 point break from present levels,” he said, and in fact, he thought the market would go higher in the next few months.

Starting on Oct. 23, 1929, the stock market dropped roughly 68 points, a 23% drop, which signaled the beginning of the Great Depression.

7. Dishonorable mentions

Though we are focused on stock market blunders, other markets have their own stumbles.

For example, a very bad call and illiquidity in the forex market brought down John Meriwether’s Long-Term Capital Management hedge fund in 1998 when it lost $4.6 billion.

But the move by the Hunt brothers in 1980 to corner the silver market (silver went from about $6 per troy oz. to almost $50 in a year, and then dropped 50% in one day) was bad because they didn’t realize a market could move the goal posts, which is what the Comex metals exchange (and its board of directors) did to save the market (and themselves) from disaster.

6. Big Wall Street banks and mortgage-backed securities

The 2008 financial crisis has many bad actors, but the big Wall Street banks had leading roles.

If your reading of “The Big Short” is up to date, banks from J.P. Morgan and Citigroup to Bank of America and Wells Fargo sold loan tranches filled with junk-rated mortgages without realizing it (or caring about it).

That said, the banks didn’t pay (really) for their obtuseness that almost brought down the global economy, because the U.S. government saved them through the $431 billion TARP bailout.

AIG’s $180 billion government bailout was the second act of the financial crisis, although the firm eventually paid back the government.

5. Don’t put it in print!

Writing books about where the Dow Jones Industrial Average will be by a specific year is dangerous.

People may forgive a television appearance or even a newsletter, but a book lasts forever.

Robert Zuccaro, whose 2001 book, “Dow 30,000 by 2008: Why it’s different this time,” may look better today as the market edges toward 23,000, but timing is everything in the market, and his forecast was definitely off.

4. Google ‘oops’

You can forgive internet shyness after the 2000 crash, but on July 30, 2004, investor Whitney Tilson wrote in a Motley Fool piece that, “It is virtually certain that Google’s stock will be highly disappointing to investors foolish enough to participate in its overhyped offering — you can hold me to that.”

Google’s IPO took place on Aug. 19, 2004, when 19,605,052 shares were offered at a price of $85 per share. Since then, Google’s stock price has risen to $1,050.

3. Tech wars

Prior to Apple’s iPhone release in 2007, Steve Ballmer (photo above), then CEO of Microsoft and, granted, a competitor, predicted there was no chance the new Apple smartphone would get “any significant market share. No chance.”

Perhaps it was wishful thinking or just a bad call, but today Apple’s iPhone, the most recent version of which is iPhone X, has about 34% of smartphone market share.

2. Missing Enron

Here’s some Wall Street irony: Fortune magazine voted Enron “America’s Most Innovative Company” from 1996 to 2001.

Then, in late 2001, Enron stock fell to 6.2 cents (from a high of $90 in August 2000) and the firm went bust, largely because enterprising reporters from Fortune magazine found major balance sheet problems.

Keep in mind, no Wall Street analysts had sell ratings at that time – even as Enron stock was at $20 in September 2001.

1. The James Cramer we love to hate

Odds go up when your job is entertaining an investing public every day on what stocks to buy and sell that you’ll make some bad calls.

But James Cramer has made a lifetime of bad calls, especially while hosting CNBC’s “Mad Money.” His call on Bear Stearns will go down in history as one of his worst.

On March 11, 2008, Cramer told a viewer who was concerned about Bear, “No! No! No! Bear Stearns is not in trouble. If anything, they’re more likely to be taken over. Don’t move your money from Bear.”

Three days later the stock fell on news of the Fed bailout from $159 a share to where the firm was “bought out” by JP Morgan for $2 a share.

Not sure what advice he gave on Lehman Brothers.

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