For most investors and traders, 2008 was a tough year. But while many people saw their portfolio take a merciless beating and watched their retirement vanish into thin air, there were a select few who made a killing.
In fact, if you had been on the right side of any of these bets, you could have banked enough dough to make up for your losses and then some.
Here are five trades everyone wishes they had made in 2008:
#1 Shorting 'Chindia' the day after New Year's: The Chindia experience peaked in Beijing with Michael Phelps, and the market knew it would a year and a day before the Closing Ceremonies.
#2 Getting long and staying long the 30-year Treasury bond: This strategy went from being a modestly successful trade through October to a hero-sized trade in the past 45 days.
#3 Shorting oil on the Fourth of July: The drop in oil prices has been nothing short of unbelievable. Those that had the fortitude to short crude in early July (and had the stones to stay with that trade) made a killing.
#4 Buying DryShips (DRYS) at the November low: Following its meteoric rise to $116, the stock careened all the way down to $3. But if you went long then, you saw the share price quadruple in less than a month.
#5 Shorting 'too big to fail' Fannie and Freddie: This shorting strategy defied all odds and pretty much defined the year for the stock market.
Whether a novice or a pro, we all may mistakes investing.
Sadly, for many of us, 2008 proved to be a year rich with bad options and negative results -- or, as I prefer to call them, learning opportunities.
Here's a review of some of the most painful learning opportunities in 2008:
#1 Going long the specialty retailers: If you made a bet on the specialty retailers leading up to the first $600 taxpayer rebate stimulus package, you got hammered.
#2 Betting on the China bull: Several ETFs that gave investors indexed exposure to Chinese stocks saw their values get hit for as much as 70%.
#3 Buying non-durables: Seems the kitchen and bathroom stocks didn't work this time around.
#4 Buying financials: Buying the financials while the Fed was aggressively cutting interest rates was supposed to be a no-brainer.
#5 Betting on peak oil: Crude is now trading around $40 -- down $107 per barrel in less than six months. Unbelievable!
This oil trade takes the cake.
At the zenith of the speculative bubble in the oil patch -- when crude hit $147 per barrel in July -- you had everyone from T. Boone Pickens to Prince Alaweed touting $200-per-barrel oil by the end of the year.
Crude is now trading around $40 -- down $107 per barrel in less than six months. Unbelievable!
And this latest drop comes after OPEC voted to cut daily production by an eye-popping 4.2 billion barrels per day.
Looks like the world is awash in crude oil.
Needless to say, those euphoric longs in the oil stocks got destroyed. Most energy stocks lost 50% to 70% of their value during the course of the sell-off in crude.
Well, natural gas prices are down 60% from their mid-year highs.
Buying the financials while the Fed was aggressively cutting interest rates was supposed to be a no-brainer.
Banks, brokerages, insurance companies and other financial-related businesses rally in tandem to lower rates, which translates into cheap money for lending and investing.
A million and one professionals bought into this theme, and made the mistake of thinking the worst-case scenario for the credit markets was baked in back in June.
By mid-July, the bloodletting in the financial sector revealed giant writedowns being charged against earnings for huge exposure to subprime debt at the biggest banks and Wall Street firms. The rest is history, which is still being written to date.
Typically, when the economy enters a recession, companies that are in the consumer non-durable sector, i.e., consumer staples, see their stocks trade higher as money flows into bulletproof subsectors of the economy that don't suffer from spending cuts.
Companies like Proctor & Gamble (NYSE: PG), Heinz (NYSE: HNZ), Hormel (NYSE: HRL), Kraft (NYSE: KFT), General Mills (NYSE: GIS), Johnson & Johnson (NYSE: JNJ), Pepsi (NYSE: PEP), Coca-Cola (NYSE: KO), Campbell Soup (NYSE: CPB), Colgate-Palmolive (NYSE: CL) and even Berkshire Hathaway (NYSE: BRK.B), which was down a whopping 49% before getting a year-end bounce.
I think Warren needs to get off TV and get back to work.
My point here is that all of these fortress names got beat up to the tune of 30% to 50% when they were supposed to be the go-to names that would put in a stealth rally in a bear market.
Seems the kitchen and bathroom stocks didn't work this time around.
Many people believed the Beijing Olympics would spark a multi-year bull market for China.
Leading up to the summer Olympics, the best think tanks in the world were putting out glowing reports of a new juggernaut economy that would lap the United States in a few short years.
At the start of the games, the Chinese market quickly came unglued.
Several ETFs that gave investors indexed exposure to Chinese stocks saw their values get hit for as much as 70%.
The iShares Xinhua/FTSE China 25 Index Fund (NYSE: FXI), which was listed by Barclays Global Investors in October 2004, is the most widely traded of all the China-related securities listed in the United States.
The ETF gained 83% in 2006 alone, but the bull run came to a sudden end in late 2007, and the ETF suffered a massive correction.
The FXI saw its shares dive by 50% in the months following the Olympics.
If you made a bet on the specialty retailers leading up to the first $600 taxpayer rebate stimulus package, you got hammered.
Talk about a government plan backfiring big time.
That $300 billion in checks that fell out of the sky from government helicopters back in the March to May timeframe didn't find its way to the malls at all.
Instead, people paid down credit card debt, and tuition, medical and other bills, leaving little for spending on non-essentials.
The result was a litany of store closings nationwide, with several old-line, brand-name retailers going out of business.
It's game over for names like Circuit City (OTC: CCTYQ), Cache (NASDAQ: CACH), Talbots (NYSE: TLB), J. Jill, Wickes Furniture, Levitz, Bombay, Linens 'n Things, Movie Gallery, Wilson Leather, KB Toys and The Sharper Image.
Traders that leveraged into darling names, like hedge fund idol Eddie Lampert's Sears Holdings Corp. (NASDAQ: SHLD), got smoked. Shares of SHLD were trading at $105 when the checks when out. Today the stock is around $40.