Remember “That Was The Week That Was?” (If you do, you can’t be young, because it was a TV series aired in the 1960s!) In case your memory doesn’t extend back that far, TW3 was a zany program that took a satirical look at the past week’s news events…something like a weekly version of today’s “The Daily Show,” but with a larger cast of characters.

The reason I bring this up is I’m currently putting together NBR’s annual “Investment Review and Preview” special, which will air on New Year’s Day. It has required me to go back and review the business highlights of 2007. And while I wasn’t looking for humor in the news…it struck me that anyone searching for material for a standup comedy act could have a field day with any of the following

• The Mortgage Mess: 2007 was the year when troubles in the real estate realm spread beyond the “flippers.” In fact, it’s estimated that just among major banks, mortgage-related losses this year will total about $100 billion. (Doesn’t that remind you of Everett Dirksen’s quote: “A billion here, a billion there, and soon you’re talking about real money?” If so, you’re dating yourself again.) But what’s really amazing is the blizzard of errors -- at all levels of the financial business -- that led to that result. Lenders never bothered to check the creditworthiness of borrowers…the investment banks of Wall Street were too happy to “securitize” and sell packages of subprime loans…and rating agencies never alerted securities buyers of the risks of these SIVs and CDOs until they plummeted in value. As someone wrote: What were these guys smoking?
• The Dow Passes 14,000: While the news above was unfolding, Wall Street’s reaction was similar to Nero fiddling while Rome burned. The Dow Jones Industrial Average moved to new highs on three separate occasions: January-February, April-May, and July…only to fall back sharply each time. There was no shortage of reasons to be cautious: oil moving to $60-$70-$80-$90 a barrel, the dollar moving to new lows, an emerging credit crunch -- to cite just a few. And yet, most of the time, Wall Street traders brushed off these fears. Only sell-offs in the Chinese market and increasing recession prospects cooled the party. My take on this: There must be something to behavioral finance theories that say humans are programmed to follow the crowd, rather than invest rationally.
• Good Value = Low Returns: After being winners for several years, the big losers among mutual funds in 2007 were Value Funds. Those funds subscribe to the philosophy that if you buy a stock with a low price relative to earnings, you’ll eventually be rewarded. But as the year went on, “eventually” was nowhere in sight. And it became hard to get excited about “bargains” like homebuilders and financial stocks when their profits kept going down. Nevertheless, professional value investors like Warren Buffett still aren’t worried (or so they say). They contend that sooner or later, their patience will be rewarded…and if money talks -- how can you argue with a guy who’s sitting on $43 billion in cash!

Of course, humor in money matters is relative: if you lost money in 2007, you may be less than amused with these financial foibles. But the holidays are no time for sulking, and when they’re over, investors have the chance to start over again with a clean slate. That’s why in our New Year’s Day special, we also look ahead and try to give viewers some ideas on the best places to make money in the year to come.

So have a great 2008 -- and be sure to start off the year with NBR’s “Investment Review & Preview” special!