5 Biggest Market Blunders of 2011

From bad calls to missing money, these 5 flubs are the worst

By Jim Woods, Editor-in-Chief, Successful ETF Investing, Stock Investor's Blueprint


thumbs downSanta Claus has come and gone, but not everyone received pleasantly wrapped gifts under the tree. No, some were given a lump of coal for their blunders, mishaps and misdeeds. In fact, I can’t remember a time when it was so easy to find so many bad market blunders to choose from when compiling my annual list of the worst of the worst missteps.

In 2011, we saw bad management, bad decisions, bad calls, bogus data and what could possibly be criminal malfeasance by an über high-profile Wall Street titan:

#5: NAR’s Bogus Real Estate Numbers

In December, we received word from the National Association of Realtors that they had overestimated their existing home sales metric — for the past four years! The NAR revised existing home sales 14% lower since 2007, a drop that represents the loss of more than 2 million sales from the original bogus data. These numbers tell us that:

  1. The nation’s housing market is a lot tougher than we originally thought.
  2. The credibility of the NAR’s data cannot be trusted.

Whether just an error in calculation or an attempt to put a positive spin on the numbers, the NAR’s existing home sales revision is a reminder to be skeptical of trade groups created to promote an industry.

#4: Research In Motion’s Decline

A few years ago, it was virtually unthinkable that Research In Motion (NASDAQ:RIMM) would be a cellar-dwelling stock replete with takeover rumors, but that’s how far down the BlackBerry maker has fallen in 2011. The stock has lost 76% year-to-date and now trades at an eight-year low. The popularity of Apple’s (NASDAQ:AAPL) iPhone and Google’s (NASDAQ:GOOG) Android-operated smartphones made the BlackBerry far less popular in 2011. Then there was the massive worldwide service outage in October that lasted about three days, which then was followed by a not-so-well-received apology and offer of free BlackBerry apps. Research In Motion’s troubles in 2011 show us that no company — and no stock — is immune from suffering a devastating defeat.

#3: Netflix’s Double Whammy

Sometimes good CEOs make horrible decisions. That can certainly be said of Netflix (NASDAQ:NFLX) CEO Reed Hastings, who made two very poor decisions this year that caused the value of his company’s stock to sink 60% in 2011. The Netflix decline began in earnest when the company raised its subscription price. That didn’t go down well with subscribers — or Wall Street — but even worse was the company’s launch of a new business called Qwikster. The theory was that Qwikster would operate the company’s DVD rentals, while Netflix would concentrate on digital streaming. The problem was that customers would now have to deal with multiple accounts, multiple credit card charges and multiple headaches. After hearing a resounding chorus of negatives, Hastings pulled the plug on Qwikster, but by then the damage had been done.

#2: Meredith Whitney’s Bad Bond Call

This year wasn’t very kind to famed analyst Meredith Whitney. Last December, the proprietor of the Meredith Whitney Advisory Group appeared in a now-infamous 60 Minutes interview where she proffered a dire warning about the coming wave of municipal defaults that would bring down the muni-bond market. But rather than the hundreds of defaults predicted by Whitney, there were virtually no municipal bond defaults in 2011. As a matter of fact, municipal bonds were one of the best-performing asset classes this year. I think Whitney is a brilliant analyst with keen insights, but the fact is that her bond call for 2011 never materialized, and those who followed her advice missed out on a lot of gains. Of course, Whitney could turn out to be correct on her muni-bond default call, and if she is I’ll be among the first to say she was right. But in 2011, her bad bond call turned out to be one of the biggest market blunders of the year.

#1: John Corzine $1.2B Vanishing Act

The bankruptcy and alleged fiscal malfeasance at securities firm MF Global shook the financial world. Former Democrat New Jersey governor, former U.S. senator and former Goldman Sachs (NYSE:GS) chief John Corzine was put in the hot seat by Congress to explain what happened to the $1.2 billion in missing customer funds. Corzine famously told Congress, “I simply do not know where the money is.” That sad coda came after thousands of investors lost big money in MF Global, and after more than 1,000 employees were laid off when the brokerage house went bust in October. This infuriating story demonstrates that even politically connected Wall Street titans can put investor capital in jeopardy. Because of the size, scope and negative implications the MF Global meltdown has had on investors on Main Street and Wall Street, Jon Corzine and his firm’s bankruptcy easily win the award for biggest market blunder of the year.

This article originally appeared on Traders Reserve.

Article printed from InvestorPlace Media, https://investorplace.com/2011/12/biggest-market-blunders-2011-meredith-whitney-john-corzine-rimm-nflx/.

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