With the economy in turmoil, people from the highest level of government to the man on the street are trying to figure out how exactly we got where we are, and why we didn’t see it coming.
However, if we look back a little more than a year ago- before the collapse of the big banks, before the big government bailout- TWST interviewed one person who did.
TWST spoke in November 2007 with portfolio manager Thomas Au of R.W. Wentworth and Co. about his predictions for 2008:
“I had been calling for a correction in the markets in the last three years. We’ve been talking, but have been early, except recently with regard to financials. The reason I was early is because there had not been a trigger event. Three years ago, I did not understand the importance of the trigger events to the extent that I do today.
There is now a trigger event: that’s the collapse of the subprime bubble and the fact that the so-called low-doc, nothing-down mortgage is the modern version of the 10% margin on stocks that was prevalent in the 1920s and brought about the 1929 crash. The low-doc subprime mortgages are coming home to roost as we speak, just as the 10% margin on stocks came home to roost in the 1920s. That’s why the market is in far greater danger today than it was prior to the collapse of the subprime bubble.
When I’m talking about the potential for a market pullback, it’s not the usual 10% to 20%. I’m talking about an order of magnitude adjustment which would be on the order of 50%.”
TWST recently interviewed Mr. Au about his review of 2008 and his outlook for 2009. The interview will run in an upcoming issue of TWST. Watch this space for excerpts.
For now take a look at this week’s Investing Strategies Report for interviews with other portfolio managers, giving their current stock picks, and outlook for the future.
The Future of Online Retailing
August 28, 2007
An Ambiguous Short-Term Future For Copper
February 11, 2010
Gaming Industry Heavyweights Discuss the Future of Post-Recession Gambling
April 19, 2010
Equinix (EQIX) CMO and WSJ “All-Star” Analyst Discuss Future of Volatile Data Storage Giant After Stock Plunges 30%
October 13, 2010
Uranium Rally is Evidence of Future Demand Growth
April 20, 2011
