The Best News of 2008

As 2008 winds to a close, it's hard to remember the year as anything other than 365 days of financial shock and awe. Real estate plummeted. Foreclosures surged. Banks disintegrated. The stock market crashed. Bond markets went haywire. Wall Street as we knew it died. Ditto for GM (NYSE: GM  ) and Ford (NYSE: F  ) . Nouriel Roubini became an A-list celebrity. It was a mess.

But was everything really doom and gloom?

Not at all. In fact, some of the biggest headlines of the year might go down as some of the best news we could have ever asked for. As Oscar Wilde once put it, "We are all in the gutter, but some of us are looking at the stars." Here are a few of the best news stories of 2008.

People started saving money again
In 2005, consumers actually spent more than they made, creating negative nationwide savings rates for the first time since the Great Depression. As real estate surged relentlessly higher, and risk awareness practically vanished, the thought of saving part of your paycheck for a rainy day seemed like financial suicide. Perpetual sunshine was here, baby!

Happily, those days are toast. In the second quarter of 2008, consumers saved more than they had since 1995, and 10 times more than in the first quarter. August was the first month in more than a decade that consumers paid off more debt than they borrowed. Why is that important? Because a country that doesn't save a dime relies on other countries' savings to fund everything from deficit spending to technology investments. That same reliance on other people's money pushed the current financial crisis into overdrive.

High oil prices woke us up
"The cure for high prices is high prices," the saying goes. As painful as this summer's bout with $4 gasoline was, it was the only thing that could get consumers to change their driving behavior, and spur the investment community to take alternative energy projects seriously.

Sure enough, we drove billions upon billions of miles less than in previous years, public transportation usage exploded, "peak oil" became a household phrase, companies like Sasol (NYSE: SSL  ) , First Solar (Nasdaq: FSLR  ) , and Tesla Motors started to really catch people's attention, and the country got the first taste of what sky-high gas prices taste like since the '70s. As hard as the changes were, it was the best medicine a country addicted to foreign oil could ever ask for.

Of course, now that oil prices are the cheapest they've been in years, a lot of that necessary change has gone out the window. It's a step in the wrong direction, but at least we now have an inkling of what it'll feel like when high energy prices inevitably return. Baby steps here, people.

The 800-pound gorillas are gone
Every one of the big financial institutions that was overleveraged and overly stupid to a point of no return is pretty much toast ... save for maybe Citigroup (NYSE: C  ) . 

After the death (or buyouts) of Countrywide, Bear Stearns, Lehman Brothers, Wachovia, Washington Mutual, AIG, and, ahem, Bernard Madoff, all that remains of the finance world are banks like Wells Fargo (NYSE: WFC  ) and Bank of America (NYSE: BAC  ) . While these companies undoubtedly have a treacherous road ahead, they aren't nearly as vulnerable to the kind of spectacular collapses that filled 2008.

I don't think anyone would ever say we're out of the woods, but the true stars of "Wall Street's dumbest criminals" are, for the most part, history. For those still remaining, the dumbest-of-dumb practices that got us where we are --subprime lending, 30-to-1 leverage, and insuring mountains of CDOs even Houdini couldn't untangle -- are a thing of the past.

The financial system didn't completely collapse
Say what you will about the $700 billion bailout, but its mere announcement helped prevent the financial system from a complete collapse back in September. Yes, it's still a bloody mess, but banks didn't completely collapse in a way that would have permanently shut down anything and everything related to lending, which is exactly where we were heading in September.  

As easy -- and seemingly appropriate -- as it is so say, "let them all die," that's taking the wishful assumption that the entire economy as a whole could survive without a properly functioning banking industry. I don't think Ben Bernanke was being a sensationalist drama queen when, on the eve of the bailout, he said, "If we don't do this, we may not have an economy on Monday."

On that somber note, here's to a better, more prosperous, and hopefully quieter 2009.

For related Foolishness:

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Sasol is a Motley Fool Global Gains selection. Sasol and Bank of America are Motley Fool Income Investor recommendations. The Motley Fool is investors writing for investors.


Read/Post Comments (1) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 31, 2008, at 6:06 PM, cjwirth wrote:

    The top story of the year is that global crude oil production peaked in 2008.

    The media, governments, world leaders, and public should focus on this issue.

    Global crude oil production had been rising briskly until 2004, then plateaued for four years. Because oil producers were extracting at maximum effort to profit from high oil prices, this plateau is a clear indication of Peak Oil.

    Then in July and August of 2008 while oil prices were still very high, global crude oil production fell nearly one million barrels per day, clear evidence of Peak Oil (See Rembrandt Koppelaar, Editor of "Oil Watch Monthly," page 1). Peak Oil is now.

    Credit for accurate Peak Oil predictions (within a few years) goes to the following (projected year for peak given in parentheses):

    * Association for the Study of Peak Oil (2007)

    * Rembrandt Koppelaar, Editor of “Oil Watch Monthly” (2008)

    * Tony Eriksen, Oil stock analyst and Samuel Foucher, oil analyst (2008)

    * Matthew Simmons, Energy investment banker, (2007)

    * T. Boone Pickens, Oil and gas investor (2007)

    * U.S. Army Corps of Engineers (2005)

    * Kenneth S. Deffeyes, Princeton professor and retired shell geologist (2005)

    * Sam Sam Bakhtiari, Retired Iranian National Oil Company geologist (2005)

    * Chris Skrebowski, Editor of “Petroleum Review” (2010)

    * Sadad Al Husseini, former head of production and exploration, Saudi Aramco (2008)

    * Energy Watch Group in Germany (2006)

    Oil production will now begin to decline terminally.

    Within a year or two, it is likely that oil prices will skyrocket as supply falls below demand. OPEC cuts could exacerbate the gap between supply and demand and drive prices even higher.

    Independent studies indicate that global crude oil production will now decline from 74 million barrels per day to 60 million barrels per day by 2015. During the same time, demand will increase. Oil supplies will be even tighter for the U.S. As oil producing nations consume more and more oil domestically they will export less and less. Because demand is high in China, India, the Middle East, and other oil producing nations, once global oil production begins to decline, demand will always be higher than supply. And since the U.S. represents one fourth of global oil demand, whatever oil we conserve will be consumed elsewhere. Thus, conservation in the U.S. will not slow oil depletion rates significantly.

    Alternatives will not even begin to fill the gap. There is no plan nor capital for a so-called electric economy. And most alternatives yield electric power, but we need liquid fuels for tractors/combines, 18 wheel trucks, trains, ships, and mining equipment. The independent scientists of the Energy Watch Group conclude in a 2007 report titled: “Peak Oil Could Trigger Meltdown of Society:”

    "By 2020, and even more by 2030, global oil supply will be dramatically lower. This will create a supply gap which can hardly be closed by growing contributions from other fossil, nuclear or alternative energy sources in this time frame."

    With increasing costs for gasoline and diesel, along with declining taxes and declining gasoline tax revenues, states and local governments will eventually have to cut staff and curtail highway maintenance. Eventually, gasoline stations will close, and state and local highway workers won’t be able to get to work. We are facing the collapse of the highways that depend on diesel and gasoline powered trucks for bridge maintenance, culvert cleaning to avoid road washouts, snow plowing, and roadbed and surface repair. When the highways fail, so will the power grid, as highways carry the parts, large transformers, steel for pylons, and high tension cables from great distances. With the highways out, there will be no food coming from far away, and without the power grid virtually nothing modern works, including home heating, pumping of gasoline and diesel, airports, communications, and automated building systems.

    It is time to focus on Peak Oil preparation and surviving Peak Oil.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 802670, ~/Articles/ArticleHandler.aspx, 10/24/2014 9:06:25 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement