MENU

Jeremy Siegel on why so many experts missed the crash

The GFC crash was so obvious — in hindsight.

In the U.S., big banks such as Citigroup and Bank of America were lending enormous sums of money to borrowers who stood no chance of paying it back. Housing prices were so clearly overvalued. Consumers were keeping spending up only by borrowing unsustainable amounts.

Here in Australia we were blindly following along. Although, to date anyway, we seem to have dodged collapsing home prices, we paid the price in different ways.

Over-leveraged companies like ABC Learning, Allco Finance and Babcock & Brown went bust.

Other blue chips like Westfield Group (ASX: WDC), QBE Insurance Group (ASX: QBE), AMP Limited (ASX: AMP) and Suncorp Group Limited (ASX: SUN) are still 60 per cent down from October 2007.

And then there are the real basket-cases, Macquarie Group Limited (ASX: MQG), Goodman Group (ASX: GMG), Asciano Limited (ASX: AIO), Qantas Airways Limited (ASX: QAN) and OZ Minerals Limited (ASX: OZL) — all down more than 70 per cent since October 2007.

How could we have missed it?

Yet so many of us — even (or especially) the experts — did.

Earlier in December, Morgan Housel sat down for a wide-ranging interview with famed Wharton finance professor Jeremy Siegel. Here’s what he had to say when Morgan asked him why so many experts missed the crash.

Are you worried about another market crash? The Motley Fool has a free report titled Read This Before The Next Market Crash. Click here to request your copy now, whilst it’s free and still available.

More reading
5 Safe haven ASX stocks for 2012

This article originally published on Fool.com. It has been updated. Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.