On January 2, 2007 the Wall Street Journal provided a wonderful review of the year’s events. I thought I would highlight some of these events and mention some of the year’s major themes.
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The year ended with several major sectors of the economy showing such weakness that many economists now predict that in 2008 we will suffer a recession: Housing, Autos, and Retail Sales were particularly weak.
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The subprime debacle negatively impacted institutions globally requiring both the Federal Reserve and Foreign Central Banks to provide close to $1 trillion dollars to maintain confidence in the banking system. Enough commercial banks could not borrow funds that the Central banks needed to provide lending windows to those institutions.
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Asset-backed securities lost credibility because their rating declined precipitously from AAA status to junk bond status precipitously. The losses suffered by institutions globally from their investment in these securities put a severe damper on derivate securities.
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The tremendous losses by financial institutions such as UBS, Citicorp, Merrill Lynch, and Morgan Stanley led to significant declines in their market value and the need to restore their balance sheets from investments by Sovereign Corporations—the investing arm of Asian governmental bodies
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Merger activity declined precipitously in the second half of the year, because of much tighter credit restrictions.
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The Justice Department and the CIA suffered significant negative publicity because of deep-seated concerns that they engaged in illegal activity.
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Pakistan, Iran, Iraq and Afghanistan remain major world trouble spots.
January
1/04/: Home Depot Chief Executive Officer Robert Nardelli stepped down with an exit package worth $210 million dollars. Under his leadership, Home Depot Stock declined. During 2007 we witnessed an incredible number of outlandish golden parachutes for executives who had performed miserably.
1/26/ Ford Motor announces a $5.8 billion loss for the fourth quarter of 2006 and 12.7 billion loss for the year.
February
02/02/ Exxon Mobil announced profit for 2006 at $39.5 billion, about 9.5% above the prior year.
02/08 Blackstone Group $23 billion dollar buyout of Equity Office Properties, owner of the biggest portfolio of U.S. office buildings sends ripples through the real-estate world.
HSBC says its subprime mortgage problem was worse than previously indicated, and bad debts will exceed $1.76 billion.
02/10 Fortress Investment Group shares surge 68%. The firm becomes the first private-equity firm and hedge fund manager to sell shares on the U.S. markets.
March
03/07 Lewis “Scooter” Libby is found guilty on four counts of perjury.
03/09 New Century Financial Corp’s creditors force the subprime lender to stop making loans and speculation intensifies that the firm will file for bankruptcy
April
04/17/ A gunman kills 32 students at Virginia Tech.
04/19 Supreme Court upholds ban on certain late term abortions 5-4.
May
05/07 France elects conservative Nicolas Sakozy as president by a solid margin.
05/09 Paul Wolfowitz resigns as president of World Bank amidst charges of misconduct.
5/15 Daimler Chrysler announces they are selling an 80.1% stake in Chrysler group to Cerberus Capital Management for $7.4 Billion
5/21 Lebanese forces fight Islamic militants in Tripoli
5/26 NASDAQ announces $3.7 Billion deal to buy Nordic
5/29 U.S. holds first formal talks with Iran in decades
June
6/1 Dell announces first layoffs since 2001, saying it will cut 10% of work force.
6/13 US Treasury bonds hit a five-year high as investors continue to sell Treasuries with the yield on the benchmark 10-year note rising to 5.249%.
6/22 Blackstone Group initial public offering priced at $31 a share
July
7/3 Bush commutes former White House aide Lewis “Scooter” Libby 2.5 year sentence
7/20 Dow Industrials close above 14,000
Warren Spector Bear Stearn’s co-president quits, because of burgeoning subprime-lending fiasco.
Fallout from credit crisis intensifies, triggering central-bank intervention. European Central Bank and Fed inject cash into money markets to keep rates down. Countrywide Mortgage Company, the largest independent mortgage company, warns market disruptions could hurt its financial condition.
Central banks pump money into financial system to ease liquidity strains.
August
8/1 New Corp seals $5 billion accord to buy Dow Jones
8/2 Mattel says it will recall 967,000 toys that may contain hazardous levels of lead paint. Toys were made in China
Gold soars to 27.5 year high of $732 a troy ounce
8/13 Karl Rove, President Bush’s longtime assistant announces his resignation.
Goldman Sachs Group says it leads a group of investors putting $3 billion into the firms flagging Global Equity Opportunities Fund which had lost more than 30% of its value.
Secretary of Treasury Paulson said that turmoil in financial markets “will exact a penalty” on U.S. growth rates.
8/19 Fed cuts discount rate on interest rate it charges on loans it makes to banks to 5.75% from 6.25%. Central bank encourages banks to borrow from discount window by lengthening term from one day to thirty days.
8/22 A report faults Central Intelligence Agency leaders for failing to halt Al Qaeda before 9/11. Report blames George Tenet for lack of a plan to counter Osama bin Laden.
8/23 Bank of America acquires $2 billion equity stake in Countrywide. Lehman Brothers shuts unit that originates sub prime mortgages.
8/28 Attorney General Alberto Gonzales quits
September
9/15 Tepid retail sales and manufacturing in August offer more signs the economy is softening
9/18 Iraqi government bans Blackwater Worldwide from working in Iraq following gun battle between Iraqi insurgents and Blackwater security guards.
9/19 Federal Reserve cuts the federal-funds rate, the benchmark target rate for overnight lending, have 50 basis points to 4.75%.
9/25 General Motors and the United Auto workers reached a pact that covers about 74,000 U.S. workers. The UAW traded company-provided retiree health care and longstanding insistence on equal pay for all workers in return of GM commitments to invest in plants and fund $29.9 billion for a new health-care trust.
October
10/1 UBS says it will write down $3.4 Billion in fixed-income assets, including securities tied to subprime mortgages.
10/4 Merrill Lynch announced losses may equal or exceed analyst’s estimates of $4 billion
10/5 A three-way consortium led by Royal Bank of Scotland makes the largest bank deal ever, acquiring ABN Amro Holding NV.
Pakistan’s president, General Musharraf and former Prime Minister Benazir Bhutto forge an agreement to let them shepherd nation from military rule to civilian government.
10/13 Al Gore wins Nobel Peace Price for his work on publicizing the threat of global warming.
10/18 Michael Murkasey wins confirmation as attorney general, ending 10 months of scandal and resignations at the Justice Department.
Stan O’Neal, Chairman of Merrill Lynch retires, walking away with $161 million in restricted stock, options, and retirement benefits.
10/26 The White House imposes sanctions on Iran.
November
11/1 The Federal Reserve cuts interest rates 25 basis points to 4.5%
11/3 Gold futures clime to $805, the highest level since January 1980.
11/8 GM posts a $39 billion loss due to a tax-credit write-down, one of the biggest quarterly losses for a U.S. company
11/10 Merck agrees to pay $4.8 billion to settle lawsuits tied to Vioxx.
11/15 Merrill names John Tahn, its new CEO
11/21 Scientists in U.S. and Japan create a human embryonic stem cells from mature cells in a breakthrough that avoids destroying human embryos.
11/27 Citigroup gets $7.5 billion capital infusion from an investment arm of Abu Dhabi government.
December
12/7 The White House unveils a plan to help one million homeowners hurt by subprime mortgages.
The CIA says it destroyed videotaped interrogations of terror suspects.
12/11 UBS announces write-downs of $10 billion, and receives a $11.5 billion capital infusion from Singapore’s investment arm and a Middle Eastern investor
12/12 The Federal Reserve cuts interest rates by 25 basis points to 4.25%
12/14 Citicorp bails out seven affiliated structured-investment vehicles denting its capital base.
12/20 Morgan Stanley posts a $3.59 billion loss, its first quarterly deficit in 21 years. The firm receives a $ 5 billion investment from a Chinese fund in exchange for a 9.9% stake.
12/21 Bear Stearns posts a $854 million loss, the first in its 84 year history
12/26 Berkshire Hathaway purchases for $4.5 billion 60% of Marmon Group. This is the biggest acquisition outside of the insurance industry.
12/28 Ms. Bhutto is assassinated.
12/31 Dow Jones ends the year up 6.4%. NASDAQ rises 9.8% for the year. The S&P 500 climbs 3.5%. The Russell 2000 declines 2.7%.
