Nothing is ever a lock in the world of capital markets, and nothing ever happens the way it feels like it should, so let's think about some scenarios for 2009. None of them are pure plays, so to speak, and people will likely find something appealing/unappealing in more than one. They are, however, ways to mull some directions things could go from here.
To explain my motivation in a different way, I generally think it's important to have in the back of your head what you're expecting, what you're worried may happen, and what you think is impossible. In my own case, I then try to insulate yourself to varying degrees from the latter two scenarios, while positioning for the former.
1) The Straight Line Lower
This one is the favorite of uber-bears and logicians and the Schiff-ian sorts, and it works out pretty much as described: The economy and markets sink deeper into depression as it becomes obvious to all sentient sorts (and most semi-sentients) how egregious credit market excesses have been. We see massive wipe-outs in retail, commercial real estate, tech (yes), insurance, etc., plus a give-up on GM later in the year. Bears are on TV non-stop, and at least one bear gets a column in a major magazine/newspaper/webthingie, assuming any sort of media industry still exists 12 months from now.
In terms of key bits and pieces of the financial machinery, the dollar tumbles, gold soars, Russia collapses, and global markets tank, with worldwide trade tumbling by something like what happened during the Great Depression, on the order of 30% or more. There are no signs of inflation, what with deflation everywhere we look. We maybe get out of the year without a new war though, and the Colorado snow pack looks decent, so we have that going for us.
Dow: 5,000. Nasdaq: 900. S&P 500: 500 Oil: $25 Gold: $17002) The Non-Boring Flat Line
No-one is talking about this, so it's at least worth throwing into the mix: The market races higher early in the year as Obama-nomics looks real and fun, and then tanks mid-year as the economy refuses to get off the floor despite lots of happy-talk, a few new bridges across things, and some state bailouts....MUCH MORE
Wednesday, December 31, 2008
Scenarios for 2009: Straight Lines, Moonshots, EKGs, etc.
From Infectious Greed: