Nine Predictions for '09

Set forth below are my predictions for 2009. Let’s hope that at least some of them come true.

1. Early in 2009, the banks start lending again

   In January, the banks will realize that they cannot avoid lending forever. The Federal Reserve will financially punish any bank that refuses to lend by manipulating interest rates so that banks that hoard cash lose money. From the industry ashes a banking prophet will emerge who will preach the gospel of positive net interest spread through responsible lending.

2. The Obama Administration passes the largest fiscal stimulus program in the history of the United States
   

   The fiscal stimulus plan will be bigger, better and more socially responsible than anything the Federal Government has ever done before. When the program starts to kick in James Carville will declare Obama has earned his place in history as “one of the greats” and will suggest he should be immediately added to Mt. Rushmore. Others will declare that the fiscal stimulus plan proves that Obama is a Marxist.

3. GDP falls in Q1, stabilizes in Q2, begins to rise in Q3 and is in full recovery by Q4.
   

   Despite most economists predicting Depression 2.0 and the “end of the world as we know it”, the economy will begin to recover in 2009. However, the day after inauguration, right wing talk show hosts will declare the beginning of the “Obama Depression”. When the economy starts to do better, the same right wing talk show hosts will proclaim that Bush was right when he said the economy was “basically sound” and will give Paulson credit for engineering the recovery.

4. Deflation fears give way to inflation fears.
   

   It turns out that the Federal Reserve wasn’t able to un-print money anymore than Eve could un-eat the apple. Economists will be relieved that they can predict Hyperinflation 1.0 and the “end of the world as we know it”.

5. Europe and Asia do worse than the U.S.

   If you think it is bad here, just go over there. Jean-Claude Trichet will be exiled to the Island of Elba for starting his 2007 preemptive economic war on inflation. Trichet won the war but lost the economy. Liberal EU politicians will realize that exile is very “19th Century” and Elba is really kind of nice (good windsurfing, scuba and cute female Elbans). Trichet will escape but will be recaptured and made to work in the ECB audit department (after all regulatory audit work is worse than exile).

6. Hedge funds, funds of funds and other money management products are regulated and taxed.

   Distraught former fund managers still won’t be able to accept that Madoff killed the golden goose. Soon, no one will be able to find an investor that actually admits to ever having put money in hedge funds; it will be as if the industry never existed. A rumor will spread that before the end of the Cold War hedge funds were invented by the Soviet Union to destroy America. Ann Coulter will say that Democrats invented the hedge fund industry to destroy the Bush legacy.

7. Obama makes enforcement of securities, banking and consumer protection laws a priority.

   Wall Street bankers will burn Sarah Palin in effigy. After all, if she hadn’t blown the Katie Couric interview things could have been different. Aspiring white collar criminals will have to deal with prosecutors and regulators who actually try to do their job. 20 and 30 year old former investment bankers will be found in bars all around Tribeca trying to figure out what to do next. Graduate school will be out because they will all already have MBAs and their parents will refuse to pay for more school. Some will get “real jobs” and hate it.

8. Stocks go up then down then up then down then up then down. But major stock indexes end the year up.
   

   Investors realize that market analysts don’t have a clue whether individual stocks will go up or down. But, liquidity created by the Federal Reserve, a slowly recovering economy and massive fiscal stimulus all conspire to push the Dow, S&P and NASDAQ up by year end.

9. Regional tensions rise and countries face internal strife because of the poor global economy. Most of the U.S. is an island of stability.
   

   Sarah Palin does the ultimate maverick thing and declares that Alaska has seceded from the U.S. and will be its own independent nation. Palin becomes Vice President (even if it is only Vice President of Alaska) and Ted Stevens becomes President. Stevens hopes that by being President of Alaska he will be able to avoid going to jail. After watching Palin and Stevens, Illinois Gov. Rod Blagojevich immediately declares Illinois’ independence. Around the same time, dissenters in China challenge the status quo (independence isn’t openly discussed because in China execution is the penalty for sedition). Economically motivated riots break out in Vietnam and other parts of Southeast Asia. Seeing weakness in the EU, Russia continues to expand its influence. The Middle East remains a problem. But, in a moment of historic unity and at a conference sponsored by CNN and Anderson Cooper, Arabs and Israelis agree that nothing has changed and the “world will continue as we know it."

Comments

[socrateazz:]

Interesting predictions.... I agree with most of them. I think Europe will indeed do worse than the US. I think asia in general will improve. The Stock Market very well may be up next year. During 2009 I expect both a 25% increase and a 25% decrease in stocks. Change is what you will see. As much bad change as good change. That prediction on right wing talk show hosts show you are indeed a liberal. Those talk show hosts do believe Democrat policies led to the current problems. And to a degree they are right. Some Republican policies contributed to the current problems. The biggest problem is the same one that has existed through the ages. Everybody wants their own problems solved. Consequences often result from any actions. Most can not be fully predicted. Most consequences are not immediately recognized. Most markets are really liberal trade parties. Too many people trying to squeeze wealth out of the actual builders and producers. If producers can not make enough to justify producing they leave the game. And the next few years will be marked by marginal producers leaving their professions. That will cause more problems than you see today. Somewhere in the future more producers will emerge. But not when
their efforts are not rewarded. Todays workers are mostly wealth redistributors. Look at the top professions. Insurance, Banks, Government, Investments. All just make money on other peoples efforts. More wealth can not be added to such a society.

2008 Dec 29 09:56 AM

[User 327806:]

Asia will do better than the west. US will do really bad for many years to come. The reason being, the masses in Asia realize that bad ethics is what kept their countries down for so long. It's the opposite here. US has rewarded bad behavior and now the good people want to be bad, just to get even. REAL productivity will fall as the lower level workers don't want to slave to provide corporate jets and other perks to the top management. More investors will want to put their money outside of US or in their own small business ventures. The big company model has failed as it runs like a government. Departments hire help and increase spending just so not to lose their alloted annual spending budget

2008 Dec 30 12:48 AM

[Long Silver...:]

My Predictions: We're headed for hyper-stagflation in Q3 2009, wiping out any remaining savings of the middle class, political instability and mass unemployment by 2010. There will be massive devaluation of fiat currencies worldwide against gold, silver and other hard assets, as a historic transfer of assets from creditors to debtors takes place. Formal monetary systems will be eclipsed by private gold-based currencies, such as GoldMoney.com (the new Switzerland) as financial survivors lose all trust in governments. Regional wars will flare up all over the globe, as political instability translates into armed conflict and leaders attempt to divert attention away from domestic problems to foreign affairs. There will be attempts to grab physical gold/silver stocks in nearby nations. The rise of political fringe groups to power will come next, as mainstream politicians cannot deal with the problems. There will be further destabilizing effects as corporatism (facism) rears its head again, and the government represses individual freedoms of dissenters worldwide. With major powers focused on their own problems at home, nuclear weapons will proliferate in Iran and other trouble spots. A nuclear conflict with Israel will result, in which Israel launches preemptive strikes at several neighbors at once. Later, Israel will be attacked and its cities will be largely destroyed. After a radical Islamic takeover of Pakistan, nuclear exchanges against India and against American troops in Afghanistan will follow. We will retaliate against Pakistan, destroying its major cities. Russia will retake border areas of its former empire, while China will take Tawain, creating tensions among the superpowers, and a final thrust toward world communism and eventual showdown with the West. Timeline: 2012.

2008 Dec 31 11:50 AM

[billineverett:]

The usa will soon head towards hyperinflation by 2012. Hundreds of thousands of people will be out of work and homeless, living in tent cities. Food shortages, with the national guard shooting at fellow americans, to maintain order, while food is dispersed. Americans will be shooting at Mexicans across the border. Crime in all major cities will be rampant in the usa. There will be a race war in the usa. The us govt will outlaw the ownership of gold and guns, and hire special groups to go house to house to enforce this law. In 2012 in December a large planet will get close to the Earth, blocking the sunlight for 3 days and 3 nights and causing the Earth's axis to tilt by 10 to 15 deg, causing many islands to go under the ocean and many new lands will rise and form. Winds reaching 600 mph, Seaside oceans rising to 300 feet high and traveling inward from the ocean across the beaches worldwide by 20 miles. The earth will be like a woman just before birth. The stars will appear to be dancing, due to the Earth shaking. Freeway overpasses falling down. Electrical power lines down. In 2013 Iran and Russia launch nuke missiles to W europe and send Iranian and Russian troops to take over W Europe. Many cities in W Europe get totally wiped. The usa sends troops to the blue helmets (United Nations) to fight Russia and Iran in WEurope. The UN pushes the Russians and Iranians east. The Chinese send their troops west. All the armies of the world in the year of 2025 fight it out in Armegeddon, in the north part of Israel. Christ is resurrected. The Chinese are the final victors. The 1000 years of true peace begins.

Mar 08 04:32 AM