Monday, January 14, 2008

Predictions 2008

As a follow-up on the WSJ story "Where Market Surprises Lurk in 2008", we'll link to Fund My Mutual Fund's post "13 Outlier 2008 Predictions":

#1 I have been stating since late in the summer 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 rate to 2.75%. The central UK bank follows suit (as fellow 'financial innovators'), and arm twisting gets the Canada central bank to lower rates substantially as well. Only the stubborn European Central Bank holds out, wondering what the heck this world is going too. 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 aka USA.

#2 Now that 2007 bonuses are secure, financial CEO's start laying the axe down 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, 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 they have to be mindful of 2008 bonuses, and cannot keep carrying "dead wood" such as ... workers. Despite hundreds of thousands of job losses throughout the country through 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 someone else's problem soon enough.

#3 Food inflation ramps worldwide causing serious issues and front page news in countries across the world. The US 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.... aka "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 its 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.

#4 Political Scenario A: Not 1, but 2 independent candidates emerge to make an unprecedented 4 horse run to the White House....MORE