My 10 Predictions for 2008

I can’t help but to think that I am setting myself up here. There are so many variables that could throw a wrench into my predictions, and tarnish my flawless reputation (cough). Nevertheless, I can’t help but to jump into the 2008 forecasting game and give my readers some ideas for what I believe is in store for 2008. Without further adieu, here are my 10 predictions for 2008:

1) Economic conditions in the U.S. will deteriorate further and we will finally get consensus that the dreaded “R” word is a reality. The Fed will intervene and do everything possible to avert it, but it has been delayed for so long that the any Fed plans to prop up the economy will ultimately fail.

2) The sub-prime crisis will intensify with additional write-downs and massive quarterly losses for the financial giants. Bailouts will never seem to be enough and any relief will be short-term with announcements of additional cash infusions being necessary. At least one major bank or financial institution will go under and cease to exist by the end of Q2.

3) Real estate prices will continue to fall in 2008. A new round of rate resets will usher in a second and larger wave of foreclosures. The worst of the financial and real estates crisis is definitely ahead of us, not behind us.

4) The Fed will continue to lower rates (below 3%) and flood the market with dollars in an attempt to prop up the economy, but it will be too little too late. There will be rallies, but the muted and fading effect of Fed intervention will create a panic in the markets that will cause a massive sell off, albeit prolonged.

5) The dollar will suffer tremendous losses as the printing presses kick into high gear and foreign central banks and commercial institutions rush to the door even faster than they did in 2007. China will continue to diversify its reserves out of dollars, creating additional downside pressure and pushing the Euro closer towards becoming the world’s new reserve currency. The unwinding of the yen carry trade will be another factor pushing the dollar to new lows in 2008. There will be several mini-rallies along the way that will convince people that the dollar is going to rebound, but it will end the year losing another 10-15% in value.

6) Oil will dip towards $80 per barrel due to the slowing economy and release of additional supplies. However, continued inflation and war in the Middle East will push oil back above $100, and could even see the price spike towards $150 in the event of war with Iran.

7) Gold will post its highest gain yet during 2008, outpacing the 31% gain of 2007. Investors will start to take more interest in gold as it becomes hard to ignore the massive advances from lower rates, the lower dollar and higher oil Gold equities will catch up to the metal and return to offering impressive leverage. Junior miners will outpace the majors, and silver will outpace gold by a small margin. Prices will become much more volatile with $50 days in either direction, and a trading range between $770 - $1,120 during 2008. Gold will suffer a major correction at some point, but it will be shorter than previous corrections, and any dips will prove to be excellent buying opportunities.

8) Political unrest will increase with major events taking place in Iran, Pakistan and beyond. The U.S. will enter another country and start another war, despite being spread thin already. Tensions will increase with Russia and China, who view U.S. moves as both a power grab and a threat to their interests in the region.

9) I won’t offer a prediction as to who wins the U.S. presidential election, but I will forecast high voter turnout, plenty of controversy and a focus on voter fraud from the use of electronic voting machines. Recounts, lawsuits, protests and a much divided America, especially as the economic slowdown hits consumers in the pocketbook.

10) Alternative energy stocks will continue to do well in 2008, led by the solar sector. Global warming will continue to be a hot topic (pun intended). Government subsidies will increase, especially if the Dems win the white house. New technologies will continue to make alternative energy more efficient and viable.

2008 will be a difficult year for many investors, but I don’t intend to be one of them. There are opportunities in the markets at all times. I will continue to be long gold and silver, picking up quality juniors along the way. I am also long on clean energy stocks, including solar, wind and uranium. On the short side of things, I am positioned to gain from further declines in real estate and financials by owning the Ultrashort ETFs: UltraShort Real Estate ProShares (SRS), and UltraShort Russell1000 Growth ProShares (SFK). Peace and prosperity to all in 2008!

Comments

[SDBryan:]

So nothing about a biochemical weapons attack, nuclear winter, or army of super-intelligent polar bears coming to exact revenge for global warming?

2008 Jan 13 05:33 PM

[M in Baltimore:]

i am similarly opined, and invested / or plan to be, but what will trigger gold's correction, do tell? Perish the previous poster's comments!

2008 Jan 13 07:24 PM

[Greg Pinelli:]

So that's the 10??? Very pedestrian..that means "ordinary..of little distinction..." My suggestion is if next years list has the insight of this years..keep it private. We don't need to see your picture...we're not Mommy.

2008 Jan 13 07:58 PM

[TA:]

I agree with the previous poster - this is just another pile of garbage 10 other guys posted. Seriously, the search function on this site really works properly

Try it, search for predictions for 2008 and just make a comment 'I agree with this piece of trash the herd mentality is buying into' and be done with it

2008 Jan 13 09:58 PM

[NoFate:]

Wow, tough crowd! For what it's worth I thought it was a decent article... and I agreed with much of it.

My primary differences:

- The US $ may not drop, since other economies may suck worse than ours eventually. Plus with equity in homes being destroyed, this may kill bank leverage and reduce the number of $s floating around.

- I doubt another war ...seems a bit of a stretch with less than a year left and most of the neocons (except Chaney who is elected) have scampered away to hide.

- A Democrat will win the Presidency ...unless the Republicans get smart enough to get behind McCain ...or Bloomberg runs as Independent. Then it's any body's guess ...though I would give the edge to Bloomberg, then the Dem, then McCain.

2008 Jan 14 12:27 AM

[Al from CT:]

More doom and gloom . . . these guys are just so incredibly wrong.
The ramp in the export market has already offset the sub-prime mess. All of the financial world and anyone else who can claim a linkage will write off 300% of the real impact in Q4, so they can look like heroes in 2008 when they sneak the 200% back into their results.

I predict he goes 0 for 10.

2008 Jan 14 02:04 PM

[mavericks:]

I would be more impressed if these were his 10 predictions for 2007 since it is nothing more than what has gone on for the past year, only getting worse. I, on the other hand, think when the press and pundits start throwing the 'R' word around as if they were the 1st to recognize it, then I think we are closer to the bottom. The US may be declining but its NOT taking down the rest of the world like it would 20 years ago. The rest of the world is on a tear and it is much bigger than the US. When you've got a weak $ and foreigners buying $10 million apartments in NYC as if they were on fire sale, it won't be long until they start buying stakes in our banks and other depressed assets. Oh wait...they already are!!

2008 Jan 14 02:38 PM

[deuxsous:]

isn't "quality junior" a golden oxymoron?

2008 Jan 14 03:20 PM

[Globaloutlook:]

Good article. It is indeed gloom and doom for US Economy neither Ben and his printing press nor the great US leader can save the economy quickly. BRIC Countries are stronger and more independant now and international trade will offset US Weaknesses. Global stock markets will remain strong compared to America, with the possible exception of China since their primary consumers are USA
As always, no one can predict, but it is highly unlikely to see a bullish US Market from any angle - for 2008

2008 Jan 18 08:15 AM

[Globaloutlook:]

Good article. It is indeed gloom and doom for US Economy neither Ben and his printing press nor the great US leader can save the economy quickly. BRIC Countries are stronger and more independant now and international trade will offset US Weaknesses. Global stock markets will remain strong compared to America, with the possible exception of China since their primary consumers are USA
As always, no one can predict, but it is highly unlikely to see a bullish US Market from any angle - for 2008

2008 Jan 18 08:26 AM

[Jason Hamlin:]

Are these comments for real?

Please Georealist. My views are contrarian, not pedestrian. I appreciate the vocabulary lesson, but you are plain wrong about these views being "ordinary." And if you don't want to read other people's views on the markets, what are you doing on Seeking Alpha?

And Al from CT - 0 for 10, eh? I am already 9 for 10 and it is only March.
You guys are a bunch of armchair quarterbacks, tossing around insults without putting your own views on the line. Maybe you are just bitter because you keep making the wrong picks and losing money. I can help. Subscribe to view my portfolio and you will start to turn things around. Much love to the haters.

I appreciate the positive comments, but where these posters disagreed, they were wrong. The dollar has continued down sharply and global markets have been dragged down with the U.S., as predicted in my original piece.

2008 Mar 17 02:47 PM

[mw92101:]

Mr. Hamlin,

Your insight to the financial disruptions have turned out very well, of course it took a few months on the commodities calls and oil to come round, but 9 for 10 is pretty good. I'll look forward to your post for 2009.

Any hints on how I can approach my economic and market study to be able to do something similar. Thanks for any tips.

Mike

2008 Oct 23 12:51 AM

[Precmet:]

To all the haters....I've known "J" for quite some time, he is wise beyond his years and always has been. I've always kinda thought he was in his own little world, but look at where it got him. Keep reading his articles...you may learn something. Great read J, I'll take 90% any day. Look forward to what you have in store for us in 09! Hope for the best as far as the economy, but I'm afraid we haven't hit bottom yet!

M

2008 Nov 26 10:12 AM

[Precmet:]

I'm curious to see what happens with the "Big 3". Will the Fed just fork over the money or will they take control. In my opinion, the oil companies should be the ones to bail them out. Makes sense.....doesn't it?

2008 Nov 26 10:23 AM