The biggest stock market moments of 2011
These were the most defining moments for the markets in 2011, as decided by me - someone who鈥檚 relentlessly documented every event this year online, on the radio and on television.听 I've deliberately left out certain major world events like the Fukushima earthquake, the Arab Spring, the death of Bin Laden and the Occupy protest movement as I felt that they were not specific to the market even though they were impactful to some degree. - JB
10. 听David Einhorn Savages Green Mountain - In mid-October, the hedge fund manager took on one of the hottest stocks in the market, releasing a 110-slide presentation on why Green Mountain Coffee Roasters was his newest short position. 听Einhorn, known for his very public takedowns of Lehman Brothers and Allied World in the past, laid out a multi-pronged thesis ranging from an overly promotional management team, mysterious transfers of stale inventory, bizarre accounting practices and a looming patent expiration that would lead to a flood of competition. 听Shareholders sold first and asked questions later - the stock was decimated, losing 30 points, dropping from 93 to 64 within a week and a half. 听On November 9th, Green Mountain reported a massive earnings disappointment and the stock promptly dropped another 30% after hours. 听He may have seen his deal to buy the NY Mets slip through his fingers, but in the battle of Green Mountain, it鈥檚 advantage: Einhorn for sure.
9. 听Muddy Waters Slams Sino-Forest - On June 2nd, there was a massive sell-off in shares of Canadian company Sino Forest, a timber concern with it鈥檚 assets in China. 听Sino Forest had become the latest quarry of noted short-seller and research analyst Carson Block of Muddy Waters. 听Block released a blockbuster strong sell rating on Sino essentially alleging that the forests the company claimed ownership of simply didn鈥檛 exist - a shocking allegation given the size of the company and the pedigree of its largest shareholders (hedgie John Paulson was on the hook for a big chunk of stock, as were BlackRock, Hartford and Vanguard). 听The Toronto Stock Exchange promptly suspended trading. 听By year end the stock would practically disappear, wrecking everything in it鈥檚 path down the hill. 听The company is on the verge of default as of this writing having just missed the deadline to file it鈥檚 3rd quarter financials. 听There were many Chinese frauds uncovered and busted on Western markets in 2011 but nothing even came close to the spectacle of the Sino Forest fraud.
听8. 听Raj Rajaratnam Convicted - As the proverbial big fish stemming from a massive investigation into hedge fund insider trading, Raj Rajaratnam had become the focal point of law enforcement鈥檚 desire to score a big win. 听Raj was a billionaire hedge fund manager with ties throughout the industry and hooks into Fortune 100 companies from coast to coast; it is safe to say he is the highest profile Wall Street figure to be tried in decades. 听On May 11, a federal jury hands the Feds exactly what they were looking for: a conviction on all fourteen counts, including conspiracy and fraud, in a lower Manhattan courtroom. 听Raj will eventually be sentenced to fourteen years and ordered to pay a $92.8 million fine to the SEC. 听The traditional hedge fund research methods and intelligence network will never be the same again.
听7. 听Silver Bulls Crushed at the Hunt Brothers High - In late 1979, the Hunt Brothers famously attempted to corner the market in silver and eventually drove the price up to an all-time high of $48.70 per ounce by early 1980. 听And then a cascade of selling and margin calls knocked the precious metal (and its speculators) back into the stone age. 听The fabled Hunt Brothers High stood for thirty years, but as silver began to rally through 30 and then 40, it became obvious that it could serve as a magnet. 听Unfortunately for silver bulls, that old high also served as massive resistance. 听On April 26th, silver printed within pennies of that historic high and then promptly was crushed by 30% within 10 days back down to $32. 听Trend followers and those betting on 鈥渢he big breakout鈥� were hit so hard and so fast, they could barely even speak. 听It was reminder to investors that commodities are not stocks, their only inherent value is the price the next person is willing to pay.
听6. 听MF Global Files for Bankruptcy - For months, shares of MF Global were trading as though something was wrong but market participants just chalked it up to the general fear surrounding financial stocks, particularly those with brokerage operations. 听Then, in October, CEO Jon Corzine admits a $187 million trading loss from speculations he was making in European debt. 听Corzine had gone from golden boy to rogue trader overnight with that bomshell; just two months prior, MF had done a bond offering with a provision guaranteeing extra income if the company lost the former CEO of Goldman Sachs to a role in the President鈥檚 cabinet. 听On Halloween, after a frantic week of trying to save itself, MF Global files Chapter 11. 听It is a $41 billion bankruptcy - the eight largest in US history.
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5. 听Bank of America in Free Fall - Of all the spectacular crashing and burning of 2011, nothing even comes close to the destruction in shares of Bank of America, a company that lost almost two thirds of its market capitalization over the last 12 months. 听Every effort was made by management to please the investor base, from asset sales to mass layoff announcements (40,000!) to open conference calls hosted by mutual fund managers who were in disbelief at how low the stock was sinking with every passing day. 听BAC dropped from a January high of 15 to 10 by August - but it was just getting warmed up; from August to November it was cut in half again, trading to as low as 5.08 by Thanksgiving and wrecking the funds of John Paulson as well as the careers of several boldfaced mutual fund managers like Bill Miller and Bruce Berkowitz.
听4. 听Gold Goes Parabolic - This summer, when the rubber began hitting the road in terms of borrowing costs for sovereigns like Italy, gold finally lived up to the safe haven hype. 听From July 1st through the middle of August, Gold ran an incredible $400 an ounce, from 1440 to over 1840 - a staggering 30% in six weeks. 听This before ultimately succumbing to having become a 鈥渟ource of funds鈥� for hedge funds with no choice but to sell assets.听 As of this writing, gold has notched a 13.7% year-to-date gain, besting virtually any other asset class one could invest in.
听3. 听Greek PM Calls for Referendum - Markets around the world had been smashed beginning in August and culminating with the early October lows. 听As one of the worst-run and most highly indebted of the 17-nation Euro Zone, Greece was the main focus of the turmoil. 听It was postulated that if Greece couldn鈥檛 be saved, all would be lost for both similarly-indebted countries (like Italy and Spain) as well as countries with high exposure to Greek bonds (like France). 听But all of a sudden, the rhetoric coming from Germany and Brussels began to get more constructive. 听US stocks staged a furious rally of almost 20 % from trough to peak into the end of October. 听The Euro ministers had come to an agreement on how to save Greece and for the first time in months, there was hope. 听And then on November 1st, the embattled Greek prime minister George Papandreou announces that he will not agree to the proscribed measures from the Euro Zone without first taking it to the people for a national referendum. 听Ministers in Europe who thought they finally had a resolution were indescribably shocked, markets from China to the US tumbled as investors began to distrust everything and everyone. 听Papandreou will eventually be thrown out of office for this gamble although the underlying issues still remain.
2. 听S&P Downgrades the United States - Yes, Congress ultimately came to an agreement to put off any real decision in time for the normally automatic debt ceiling 鈥渄eadline鈥�. But it was too late, Standard & Poors looked at the political trauma (and it鈥檚 own reputation of always being behind the curve) and decided to act. 听On August 5th, S&P downgraded the Untied States from AAA to AA+ for the first time in history. 听The result was hilarious, US Treasury bonds surged higher as investors dumped almost everything else and bought US bonds in a frenzy of safety-seeking.
1. 听Steve Jobs Resigns as CEO of Apple - We knew that one day, the cancer in Steve Jobs鈥檚 liver would force him out, but we were never truly prepared for the announcement to come. 听After fourteen years at the helm of Apple and one of the most miraculous corporate turnarounds in history, on August 24th Jobs told Apple that he could no longer serve the company in his condition. 听The stock sold off that night on the news but quickly recovered, Steve would live to see Apple trade at a new all-time high and eventually become the most valuable company in America. 听On October 5th, Steve Jobs passes away and the world both mourns his passing and celebrates the amazing revolution he鈥檚 sparked from a garage in Los Altos, California.
