Losers stand out in ‘08 financial mess

As 2008 ends, you may feel like the year’s biggest loser is you.

If you have a job, it probably feels shaky. If you have a 401(k), you can’t bear to open the statements. If you bought a house in the last five years, you feel like a sucker (unless you were the winning bidder at a foreclosure auction).

It’s cold comfort to know that the financial crash upended everyone.

High diesel prices as the year began ran independent truckers off the road. Soaring summer commodity costs choked businesses from bakeries to airlines. Frozen credit markets left small-business owners dialing their moms for loans.

Many of the biggest winners of the past lost their shirts in 2008.

The kings of Wall Street watched as their banks either disappeared through mergers or bankruptcy or received injections of tax dollars to stay alive. Investors who had trusted Bernard Madoff with $50 billion saw the money manager who had given them steady returns for decades admit it was all a Ponzi scheme.

The financial hurricane made the winners stand out even more.

Hedge fund manager John Paulson made billions by betting against the housing boom. Economist Nouriel Roubini and money manager Peter Schiff, who’d been laughed off as economic Cassandras, were proven right as their dire predictions came true, again and again. Despite conventional wisdom that the labor movement is near death, Boeing Co.’s machinists union flexed its muscle during an eight-week strike.

The year’s many losers and scant winners are below, listed by group:

LOSERS: Private-equity kings

Private equity champ Edward Lampert looked smart when he bought Kmart out of bankruptcy, then began selling off its real estate. Wall Street anticipated another success when he scooped up Sears. It hasn’t turned out that way. Sears Holdings Corp. lost $146 million in the most recent quarter, the stock is down about 60 percent for the year and the company is still searching for a chief executive, nearly a year after its last CEO resigned.

Likewise, real estate mogul Sam Zell burdened Tribune Co. with $13 billion in debt when he bought the company last year, leading it to file for bankruptcy in December. While he blamed the economy, employees and observers blamed him.

LOSERS: Pollyannas

Jerry Yang, Yahoo Inc.’s chief executive, kept waiting for Microsoft Corp. to offer a better price than $47.5 billion for Yahoo. It never happened. Instead, Yahoo’s stock sagged near five-year lows, making his refusal look less like an effort to get the best price for shareholders and more like excessive optimism. Yang said in November that he’d step down and Yahoo, in December, overhauled its severance plan in a move that would save a buyer somewhere between $462 million and $2.1 billion.

LOSERS: U.S. automakers

The CEOs of the Detroit Three went to Washington to beg for billions in bailout money. But it wasn’t on their hands and knees. As new-car sales cratered, the group flew private jets to D.C. in November to ask for billions in bailout money. Worse, they came without a plan. After they drove to Washington for a repeat visit, the Senate quashed a bailout, but the Bush administration approved a $17.4 billion rescue loan.

“Allowing the auto companies to collapse is not a responsible course of action,” Bush said.

WINNERS: Cassandras

As markets plummeted, the dourest economic observers gained respect.

Nouriel Roubini, a New York University economics professor, said in 2006 that the worst recession in four decades was on its way. He predicted that mortgage defaults would spread, investment banks would no longer exist in their current form and Fannie Mae and Freddie Mac would tumble.

Peter Schiff, president of Euro Pacific Capital, has been saying for years that the economy was built on too much consumption and not enough saving. “The disease is all this debt-financed consumption,” he said on a 2006 CNBC appearance. “The cure is that we stop consuming and start saving and producing again.”

Dean Baker, an economist the Center for Economic Policy and Research, has been tracking the housing bubble since 2002, when he published a paper titled, “The Run-up in Home Prices: Is it Real Or Is it Another Bubble?” His answer: Bubble.

Talk to us

More in Herald Business Journal

Yansi De La Cruz molds a cheese mixture into bone shapes at Himalayan Dog Chew on Thursday, Sept. 21, 2023 in Arlington, Washington. (Olivia Vanni / The Herald)
Give a dog a bone? How about a hard cheese chew from Arlington instead!

Launched from a kitchen table in 2003, Himalayan Pet Supply now employs 160 workers at its new Arlington factory.

Cash is used for a purchase at Molly Moon's Ice Cream in Edmonds, Washington on Wednesday, Aug. 30, 2023. (Annie Barker / The Herald)
Washington minimum wage to top $16 an hour next year

Meanwhile, some salaried workers and rideshare drivers could see their earnings rise from other state-required adjustments.

Inside the new Boeing 737 simulator at Simulation Flight in Mukilteo, Washington on Wednesday, Sept. 20, 2023. (Annie Barker / The Herald)
New Boeing 737 simulator takes ‘flight’ in Mukilteo

Pilots can test their flying skills or up their game at Simulation Flight in Mukilteo.

An Amazon worker transfers and organizes items at the new PAE2 Amazon Fulfillment Center on Thursday, Sept. 14, 2023, in Arlington, Washington. (Ryan Berry / The Herald)
Amazon cuts ribbon on colossal $355M fulfillment center in Arlington

At 2.8 million square feet, the facility is the largest of its kind in Washington. It can hold 40 million “units” of inventory.

A computer rendering of the North Creek Commerce Center industrial park in development at 18712 Bothell-Everett Highway. (Kidder Mathews)
Developer breaks ground on new Bothell industrial park

The North Creek Commerce Center on Bothell Everett Highway will provide warehouse and office space in three buildings.

Dan Bates / The Herald
Funko president, Brian Mariotti is excited about the growth that has led his company to need a 62,000 square foot facility in Lynnwood.
Photo Taken: 102312
Former Funko CEO resigns from the Everett company

Brian Mariotti resigned Sept. 1, six weeks after announcing he was taking a six-month sabbatical from the company.

Cash is used for a purchase at Molly Moon's Ice Cream in Edmonds, Washington on Wednesday, Aug. 30, 2023. (Annie Barker / The Herald)
Paper or plastic? Snohomish County may require businesses to take cash

County Council member Nate Nehring proposed an ordinance to ban cashless sales under $200. He hopes cities will follow suit.

Catherine Robinweiler leads the class during a lab session at Edmonds College on April 29, 2021. (Kevin Clark / The Herald)
Grant aids apprenticeship program in Mukilteo and elsewhere

A $5.6 million U.S. Department of Labor grant will boost apprenticeships for special education teachers and nurses.

Peoples Bank is placing piggy banks with $30 around Washington starting Aug. 1.
(Peoples Bank)
Peoples Bank grant program seeks proposals from nonprofits

Peoples Bank offers up to $35,000 in Impact Grants aimed at helping communities. Applications due Sept. 15.

Workers build the first all-electric commuter plane, the Eviation Alice, at Eviation's plant on Wednesday, Sept. 8, 2021 in Arlington, Washington.  (Andy Bronson / The Herald)
Arlington’s Eviation selects Seattle firm to configure production plane

TLG Aerospace chosen to configure Eviation Aircraft’s all-electric commuter plane for mass production.

Orca Mobility designer Mike Lowell, left, and CEO Bill Messing at their office on Wednesday, Aug. 16, 2023 in Granite Falls, Washington. (Olivia Vanni / The Herald)
Could a Granite Falls startup’s three-wheeler revolutionize delivery?

Orca Mobility’s battery-powered, three-wheel truck is built on a motorcycle frame. Now, they aim to make it self-driving.

Members of Gravitics' team and U.S. Rep. Rick Larsen stand in front of a mockup of a space module interior on Thursday, August 17, 2023 at Gravitics' Marysville facility. Left to right: Mark Tiner, government affairs representative; Jiral Shah, business development; U.S. Rep. Rick Larsen; Mike DeRosa, marketing; Scott Macklin, lead engineer. (Gravitics.)
Marysville startup prepares for space — the financial frontier

Gravitics is building space station module prototypes to one day house space travelers and researchers.