Bad stock market calls could fill oceans, and 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 much 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 “The Big Short” reading 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!