13 Predictions for 2008 23 comments
-
Font Size:
-
Print
- TweetThis
One of my favorite yearly reads is Doug Kass's "Annual Predictions" over on Realmoney.com. Now, unlike most prediction lists, he posts things that are way outside the box, and amazingly a good proportion of these do happen (generally, a third to a half ). So, instead of doing a non-descript "Predictions for 2008," I thought I'd follow his script and make some predictions that are not part of conventional thinking. I want to get this posted before he posts his list, so that I am not influenced by his comments.It is important to keep in mind that by the very nature of this list, quite a few will not come to fruition due to the extreme difference versus conventional wisdom, and a few will be a bit tongue-in-cheek.
The following are my predictions for 2008:
Since late in the summer, I have been stating that I expected the Fed, in a desperate attempt to mimic Uncle Alan's intervention policies, to cut rates to 3.5% by the Spring, despite lip service about inflation. By year end, as the financial world contracts, and despite raging inflation in things that affect Americans, the Fed cuts the rate to 2.75%. The central U.K. bank follows suit (as fellow 'financial innovators'), and arm twisting also gets the Canadian central bank to substantially lower rates. Only the stubborn European Central Bank holds out, wondering where the heck this world is going. However, a housing implosion in Spain causes the ECB to cut rates to some degree during the year, but nowhere near the level of the subprime nation, also known as the United States.
Now that 2007 bonuses are secure, financial CEO's start laying down the axe, and over 100,000 financial jobs are lost in Q1 2008. Workers are outraged, but CEOs say, "Well, that's how it works" - we get the reward from our dumb decisions, and you get the pain. Social acrimony in this country only continues to increase. Another round of major layoffs hits in summer, as the spring "housing boom" never materializes. CEO's mention that they have to be mindful of 2008 bonuses, and cannot keep carrying around "dead wood" such as workers. Despite hundreds of thousands of job losses throughout the country during 2008, the unemployment rate only bumps up to 5.2%. George Bush smile knowingly and can point to a "raging bull economy," and wonders what all the complaining is about. Anyhow, it's going to be someone else's problem soon enough.
Food inflation ramps worldwide causing serious issues and front page news in countries across the world. The U.S. central bank says, really who cares, after all its not part of core inflation. Somewhere a defeated Ron Paul exhales loudly and exclaims, "If they only had listened to me." Inflation becomes an evil term, and part of the mainstream vocabulary again, even by non-investing types, also known as, "Milk for $6, what the hell, this is ridiculous inflation." Private equity firms and hedge funds start snapping up farmland in the greater Midwest, as this is the "next great investment front," driving up prices to record levels and sparking talk of a "farmland real estate bubble." Food banks report shortages and inability to feed the poor in the country, as people are finding it too expensive to hand out such an expensive commodity for free. They'd rather give peso donations, err, dollar donations, as it's a much more worthless commodity than say, beans. Gold spikes to over $1000, and pawn shops become a huge business as people start selling jewelry to pay for gas and food.
Political Scenario A: Not 1, but 2 independent candidates emerge to make an unprecedented four-horse race to the White House. Ron Paul, after winning every online poll every devised, decides the public swell is too great, and he must, out of principle, run after the Republican party refuses to acknowledge there is a person in their party with the name Ron Paul. Mike Bloomberg announces his candidacy in April 2008, and with the public's utter disgust with the two major party's incompetence, wins the four-party election with a 34% majority.
Political Scenario B: In a stunning comeback, John McCain finishes a respectable third in Iowa, and moves on to win New Hampshire. McCain, not Romney or Guliani, emerges as the anti-Huckabee candidate. A series of primary battles between "experience" and "religion conservatism" break out, with the experience of McCain winning over enough Republicans, especially after the machine that is the Clintons wins the Democratic nomination despite a great run by Obama. After a spring and summer dominated by economic concerns on the political trail, a major terrorist attack in a Western country during the summer sets in motion the groundwork for a McCain presidency. In a major icing of the cake, Mike Bloomberg is brought in as McCain's VP, setting up a dream ticket and trouncing the conventional wisdom that this election is the Democrats election to lose.
A major hurricane hits the southern U.S., causing crude oil prices to spike to $125 a barrel, and sending gas to almost $4 a gallon, in the middle of an economic slowdown. Natural gas prices spike temporarily, hurting profits for corporations for one quarter, but quickly fall right back down as a slowing U.S. economy continues to put a cap on pricing. Coal continues its ascent as voracious appetites for energy across the world continue. The Fed ignores this and says, well it's not part of the core inflation rate so really if a tree falls in a forest and no one is there to hear it, did it really happen? Senior citizens on fixed incomes who are only getting cost of living adjustments equal to government 'official' statistics become agitated and confront the government.
After over two and a half years of not suffering a down 2% day dating through early 2007, volatility in the stock market takes over as the theme of the year, as 2% daily increases and drops become a weekly occurrence. The market suffers its first 20% drop (from Oct 9, 2007 peak) in the first half of 2007 as consensus emerges that "a major slowdown" (which dared not be called a recession due to the coming elections), is happening. The first half of 2008 is marked by major downward revisions in '08 estimates, and a 'cheap market' doesn't look so cheap, anymore. The major terrorist attack in a Western country (to try to influence U.S. elections), along with a record increase in oil prices due to hurricanes (along with a Google (GOOG) warning - see the next prediction), mark a dramatic bottom in the markets through late summer/early fall. Markets make a dramatic rally off these lows as all the worlds banks coordinate to flood massive infusions into the system (all of this money needs to go somewhere) - and in conjunction with this, a massive wave of foreign investment hits U.S. firms (non-financial) thereby driving up equities late in the year. Investors are giddy before realizing a 10% return in equities marked with 9% inflation really only means 1% return, but they clap like seals anyhow. Pundits will claim how resilient the economy is without realizing we are selling it off in large pieces. The market ends the year down only 2.78% as economic-based bloggers throughout the world wonder what it takes to make the market ever go down?
Google is finally hit by an earnings miss by Q3 2008. It won't be a major miss, but enough to rock psychology. An advertising slowdown, led by a U.S. recession, excuse me, not a recession but a "slowdown" (it's a political year folks), finally hits Google, despite secular growth. Google will be seen as human and a company that is not immune to the business cycle, driving the stock down. Baidu.com (BIDU) will suffer a 40% loss as investors, not realizing that Baidu is in China and Google is in the U.S., think U.S. advertisers will cut their spending with Baidu.com as well. Or maybe, it's just too expensive. In a sick twist of fate Yahoo (YHOO) emerges as the best performer in the space as News Corp (NWS) comes in with a buyout as the stock trades listlessly again in 2008.
Not one, not two, but three of the top 12 homebuilders file for bankruptcy after the spring and summer of 2008 see no serious rebound in the real estate market. Bankers, finally seeing the light, stop extending life support to these homebuilders who just continue to build homes no one needs, in order to create cash flow. This creates a major tradeable low in the homebuilders in the fourth quarter and massive rallies on order of 50% are seen in the remaining players. While the ultimate bottom is still a year away, a great trading opportunity is created. Meanwhile, throughout the year, the National Association of Realtors pushes out their date of "major rebound in all real estate markets" from January 1, 2008 to March, to May, then July, then September, then November, and then January 1, 2009 - at the stroke of midnight.
After writing off every kitchen sink in America, the five major investment banks, after having a poor first half of 2008, stage a massive rally in fall 2008, proving once again that the black box rules the world. Goldman Sachs (GS) attributes its weak first half of 2008 to:
We were too busy in strategy sessions figuring out how many government posts should be filled with ex-Goldman executives in the next administration, so our core business of milking the financial system for all it's worth and transferring wealth from the middle-class to the upper-class suffered. So while we didn't have our eye on the ball, in a way we were. I mean complete dominance of all parts of the world economy, both economic and political, is important, no?This disclosure will be found on page 143, footnote 17, in the 2008 10K. Goldman executives are named to 53 of the 54 top posts in the McCain/Bloomberg administration. The other goes to Bill Richardson so Republicans can be seen reaching across the aisle, and win over the Hispanic votes in 1 fell swoop (Goldman, of course, advised this move.). Somewhere, Ron Paul screams. Money-centered banks suffer another year of disaster with no end in sight. Repeated dead cat bounces prevail but the increasing defaults in auto loans, consumer loans, and the "that's so 2007" mortgage loans continues to puncture them.The Federal Reserve takes unprecedented actions, buying bad loans and keeping them "until markets return to normal" instead of overnight or for 25 days, etc. Normal doesn't return for 2-3 years. Another 2-3 waves of foreign capital infusion from the Far East and Middle East is needed, but at that point these investors realize these banks really are toxic waste dumps. Citibank (C) trades to $23. Even the best run like Wells Fargo (WFC) cannot escape the coming defaults by the overextended American consumers.
In 2008, credit cards become what 'subprime mortgages' were in 2007. Defaults rage across the country, and politicians, clueless to what is happening in the real world, haul credit card executives back to Washington to make a circus about their tactics (yet again). After this song and dance to try to impress the peeved electorate, they whisper post-meeting, "I'm not really mad at you, this is just for show - just keep doing what you are doing and please make sure you contribute at least $2300 to my campaign."
Apple (AAPL) continues its run to become the largest market cap stock in the U.S., tacking on another 50% to finish at $300 by end of 2008. Steve Jobs puts his pinkie to his lips and cackles like Dr. Evil as he quickly positions Apple to be THE consumer electronic convergence BRAND of our lifetime. Macs quickly approach 10% market share, and consumers in foreign countries flee to Apple as a consumer cult brand like a Nike (NKE) or Adidas (ADDYY.PK). iPod Touch is a surprise massive hit, and the revenue sharing agreement (on subscriptions) from the iPhones is finally realized as the Trojan horse brilliant idea that it is.
As worldwide laptop sales burst past desk tops, Apple unveils a new consumer convergence product, something bigger than an iPod but smaller than a laptop, but something so good, so sexy, so necessary, people will want to have it surgically attached to their arms. Apple investors will tell you "I told you so," and "please join the cult," and Apple naysayers will say "just wait until next quarter, it's overpriced I tell ya." Dell (DELL) announces it is buying Apple brand computers for its corporate headquarters (okay, just kidding on that last one).
China has a raging success in its Olympics, although everyone notices no cars are allowed to drive during the two weeks (smog and all). Meanwhile, the decoupling effect is proven to be yet another farce by CNBC pundits, and major foreign markets, and following the lead of the U.S. market, fall in line. China Shanghai market drops 30%, and daytrading housewives countrywide panic. Taxi cab drivers go back to driving taxis instead of trading stocks. China's sovereign fund decides to simply keep buying Chinese stocks in a desperate attempt by the government to keep the prices high.
Sports: The Indianapolis Colts travel to Boston for the AFC championship game, and in a stunning victory beat the Patriots 35-34. Oh nevermind, we can't get that crazy - I have to retain some credibility.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
TraderMark
-
2
Don Dion
-
3
Cliff Wachtel
-
4
Mike Havrilla
-
5
James Quinn
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 23 comments:
I can't count how many stories I've seen on the Internet of people that plan to vote for the first time specifically for Ron Paul. Many tales are out there of "selling your soul", i.e. registering Republican, just to vote for Dr. Paul.
The simple truth is that very few politicians understand economics. To them it is purely about taxes. Ironic that no Democrats understand inflation, since inflation is essentially a targeted tax on the poor.
The milk-for-$6 prediction is exactly right. I'm sure the 2008 candidates will be making a big deal out of the cost of milk and bread as the election draws nearer. They'll probably think that Congress can do something about it. Maybe they'll start sending out more food stamps. Yeah right. The only thing Congress can do is to start overseeing the Fed -- a job they've ignored for 90 years.
I hope your comment on Bloomberg comes true...he would be the best president...although unlikely to become one.
Seeking Alpha usually has some delay before they bring things over from the blog to SA.
www.fundmymutualfund.c...
In retrospect we had a lot of almost identical predictions which is interesting :)
Colts will roll over Patriots. They don't care about the season record, but they are going to beat the Patriots again. This is supposed to be about the coming year, and you Pats fans are still in denial about LAST year. :-)
All he has to do is regurgitate these ideas in an effective way. What does he do? He stumbles over the questions, looks very weak and afraid. The other night on CNN with Jeff Beck, Paul had a full hour. He answered questions with a, “yeah,” instead of a “Yes.”
He is the last chance for Freedom, and is blowing it. I sent him money, worked the town, etc. Not any more. Paul is a little Jerk, a huge disappointment.
Libertarianism is exactly the same as communism, it just takes longer to get there. The Libertarian masterminds knew it'd be easier to keep people down with a slow societal takeover than a revolution. Read Ayn Rand's non-fiction... she was, much like L Ron Hubbard, quite explicit that it was all a scam to part idiots from their money (and keep power concentrated).
Here's a clue: Adam Smith was very much against an "unfettered" free market, knowing what it leads to. Look it up.
Anywho - R.Paul has a strong and simple message, but (to second what's been said here) his delivery is... well... I hope he gets better at it soon.
The way things are going - we either need a revolution or serious hangover therapy - which means rough seas ahead. Inflation, currency replacement, internal and external insolvency driven foreign policy, or all of the above plus creative extras... It's not going to be borring I'm sure.
6 1/2 Years of GOP Misrule =
NO Border Security
NO Immigration Reform
NO Social Security Reform
NO Health Care Reform
What have they offered? Rubber Stamp policies to an ineffectual president, and now that they are in the minority, only obstructionism and complaints.
I voted GOP for Years. If bush and suck-ups like mccain are the best they have to offer, I (and a lot of others) am voting for the Democratic Nominee, regardless of who it is. At least the Democrats aren't pandering to the Rich.
But if there is a major terrorist attack on US soil in summer, people will flee to experience. And "hope" of Obama will be an afterthought. Both parties are ineffective, the things you listed could apply to both parties - they are too busy fighting to do anything for the American people. That is why the two people who actually seem willing to work across the aisle are attracting attention.