Open thread to discuss best stock portfolios, worst performing assets, equities, commodities, bubbles, the bond market and other economic indicators.
Are you bullish on US Treasuries like those interviewed in the Washington Post? Or are you in a more bearish camp with Murphy and Higgs?
Who will ask for big bailouts next? Will there be another September 15th — or is it onward and upward here on out?
Gold $100 or $1000? Oil?
{ 42 comments }
Gold > $1000, silver > $25, oil > $150. We all know that the Fed won’t take the drastic steps it needs to in order to reduce the amount of money it just created, so we can expect a huge inflationary explosion once banks begin to lend. At the very least, at the very, very bare minimum, commodities will reach their previous peaks. This will be complicated by the fact that US debt will need to be paid off.
I think we need to all look into alternative energy and technology-oriented stocks for the short term, which I think will boom before the even bigger crash comes.
Asian stocks are good long term investments, I feel. I’m not sure how they’ll perform in 2009, but if you’re investing for the next 5-10 years I would suggest you get Asian stocks. With increased liberalization undoubtedly coming in China, Asia will just have to experience a wild bull market soon.
The worst is yet to come, after Obama’s hope turns into fear more people will be forced to look at reality.
Gold $1500 but oil may be lower due to a global depression lowering demand.
Fiat money will continue it’s demise as more wake up to the fact the USD is worthless.
US bonds will increase in the size of it’s bubble and pop, timing will be difficult, I think a large event will cause it.
Wars will be a main story of 2009 I believe.
I foresee massive price inflation. Let me begin by presenting some figures found on the various Federal Reserve websites:
Currency = 903 billion dollars
Reserves = 881 billion dollars
Demand Deposits = 459 billion dollars
Consequently, the Monetary Base (currency + reserves) is currently greater than the Money Stock (currency + demand deposits). This is a very unusual and troubling situation.
Given the reserve requirement of 10%, potential demand deposits could be 8.811 trillion dollars. That means the potential Money Stock is 9.175 trillion dollars, which is about 900% more than the current Money Stock of 1.362 trillion dollars. I don’t think we’ll see prices go up by a factor of 9, but I can’t imagine how we can avoid massive price inflation. It will take time (probably more than a year) for the massive price inflation to kick in, but it seems inevitable.
Those who follow Mises.org are aware of what Rothbard called the “Immediate Redistribution Effect”, the prospect that those who receive the newly created money first benefit at the expense of those who receive the newly created money late or not at all. Translation, get in front of the line and get your hands on the new money early in the inflation process.
I agree that gold, silver, platinum, energy (oil/coal), and agriculture will perform well and can help preserve purchasing power. Good luck to everyone during these hard economic times, this is a category 5 monster.
Hyperinflation will make the dollar valuation of goods meaningless.
I have no idea.
The only expectation I have is large scale financial and political degradation and destabilization. The only question is to how much of a degree that things will get worse.
I can’t see how there could be a positive outlook.
The only good thing I see happening is that there’s a good chance that the overseas war machine has to be drawn down due to lack of funding.
the punt: short us t-bonds! the end of a quarter-century bull-market.
i also like palladium, piggybacking off both platinum and the happy survival of the holy trinity of detroit.
Tremendous inflation, decreased consumer spending because everything costs more. So long-term, prices dropping due to lack of consumer demand. Gold (and all metals) much higher. Pray for a return to true capitalism and a 100% gold standard; but don’t hold your breath.
I will tell you what we won’t see in my opinion. We will not see a change in the Fed’s overall inflationary policies. We will also not see the Federal Government’s spending and borrowing decrease at any level. There just is no political or social will to do it at the moment. In fact, I think we will see massive increases in the Government’s overall borrowing and spending in 2009. The bailouts and Government ownership of various businesses, industries or possibly even cities and states will continue. The massive stimulus package currently being worked on will be followed by other packages one right after the other throughout the year. Furthermore, I can see calls for more socialist policies to include increasing the minimum wage for example. All of this obviously will lead to increasingly higher prices followed by massive increases in the trade, budget deficits and national debt.
I can see a rapidly devaluing U.S. dollar, much higher gold and silver prices and a flight from the current safety found in U.S. treasury bonds. This will be followed by rampant stock speculation, possibly new Ponzi schemes popping up, and even more political corruption. At some point during the year and into 2010 I think we will see nations and individuals seriously question the credit worthiness of the United States which will be followed by a deliberate monetization of the debt by the Fed. Needless to say, I think hyperinflation is a definite possibility.
Anyway, those are my predictions.
Farming and all the industries that support agriculture. So, industrial machinery (tractors, food processors, etc) with an emphasis on tech that improves efficiency (hybrid power plants, etc). IT (especially B2B and industrial use) for previously 3rd world countries like China and Russia so they can manage all that recent growth they have had (recessions are about cost cutting).
Medicine. Anything that streamlines medical service and makes it cheaper. So I am not really focusing on new technologies or products, just making already existing things (normal doctor check ups, vaccinations, diagnosis) much cheaper using IT, new business models. Obviously this won’t work in places like the US or the EU given the encroachment of the government into the healthcare industry.
Retiree focused services. Again, emphasis on any technologies (IT, diagnosis equipment, see medical paragraph above) that makes retirement homes cheaper, but not necessarily nicer.
The important thing will be the roll out of high speed internet in places like China, Russia, Brazil, etc (BRIC countries) and the fall in demand from the US and EU which will allow people in BRIC countries greater ability to purchase computer hardware, etc. This is important for what I wrote above.
Sorry if the English was bad, I had a lot of coffee today.
Growing up in the 80′s, “Japanese Inc.” was the great bogeyman, and led to lots of accusations of invasion and down-home bigotry in the U.S…until the 1987-2002 “lost decade” showed up.
Now, we have everyone believing China will some how dominate the next century. Labor costs, regulation, and corruption are already rising in China, and manufacturing will move on to the next location. Economic cycles and forces are moving faster than ever before, and we’ll probably see China equalizing to some plateau, and stagnating within a few years.
My insurance policy is bullion, not something underwritten by some players in a $400 trillion derivative Ponzi scheme, or their bailout wingman at the Fed’s printing presses. Pity the fools who have been paying premiums to these imbeciles who claim to provide safe harbors during times of need. Au $1500/oz.+ by next December.
Last person, holding USDs wins a OW ticket to Harare and quadrillion Zim dollars!
Consistant students of Austrian Economics are almost always accurate in their predictions, but with one common shortcoming; timing.
When will the price of gold break and hold at over $100? When will the US Dollar collapse? when will Governments start ordering all the commodities and equipment needed to execute their regal plans to build Infrastructure?
A good comparison would be to consider the problems faced by Astronomers who tried to make predictons on the orbits of comets based on an Earth Centric Universe. That’s about where the Keneysians are when it comes to economic prediction.
The Austrians are dealing with the correct premises. However, when it comes to investments, they tend to underestimate the time between cause and effect.
We know that the Tsunami is coming, but right now the water is receding and there are many formerly hidden treasures that can be had, provided you can grab them and get out in time.
Translated into investment strategy this means buy commodities that will be used during the bubble like concrete (symbol CX).
Ethanol subsidies are likely to continue and people will eat, if food is available. The helicopter will continue to drop money on ADM and CAG.
As the US dollar weakens and we discover that natural gas and oil are still needed, the Canadian Royal trusts (PGH and PVX) will offer three advantages.
They pay dividends that exceed our rate of inflation. The Canadian currency will gain against the US Dollar, and Canadian supplies are not yet subject to political instabilities that plague the Middle East and Africa. Yes there is a tax situation on the horizon for the CANROYS (Canadian Royal Trusts),
but much of that has already been discounted.
Those are some of the treasures that have been laid bare by the receding water that comes ahead of the Tsunami.
The Keneysians are calling it Deflation. Austrians see it in a different context. For Austrians, it’s not a queston of What, but When.
I have an extensive hit list of investments and have suggested a few that seem appropriate at this time. It’s also important to have alternatives and be prepared to make changes instantly as new economic decrees are anounced.
The use of stops can help take some of the psychology out of the selling decision.
Somewhere, probably in Auburn, there is a student who sees the coming Tsunami as a once in a lifetime chance to catch the big wave and surf to undreamed of success. I hope he does and shares the methodolgy he used.
Shevchenko
hey can you give me more stocks you believe that will be safe to buy? It is 7-2011.
I will wager that gold breaks $400 to the downside, and possibly $300. Us Austrians, who have been so correct about things, will get our spirits broken. This is what deflation will do. Almost by definition, this needs to happen before we will recover.
Most people have and continue to underestimate the scale of the credit crunch. There will be no exceptions when all assets decline in value against cash. Yes, gold is cash, but it also isn’t.
Those predicting $1,000 gold will have their day, but it is long off. The bond market will need to reflect it first.
Apparently, we won’t need to guess who will be the next bailout, although officially, it is an emergency loan.
http://news.bbc.co.uk/2/hi/americas/7809212.stm
My next guess is that next line will be either airlines or construction companies. But I am prepared to be wrong. What I can predict (I believe everyone here has said) is that Obama will disappoint a lot of his supporters. And things won’t go his way. The US dollar might either crash or slightly decline. Maybe some recovery in the early periods of 2009. I expect that uncertainty will increase as the year goes on. Like a lot of people have suggested on their comments, commodities such as gold might be a better investment. But if we see gold prices rising rapidly, expect governments suspending gold trading all over the world or imposing price controls on everything.
If I find myself actually motivated to invest some money, I plan on buying stocks which I expect Obama’s plans to influence. For example, there is talk of spending ~$45Billion on broadband access. So Cisco is a safe choice as well as qwest and verizon. buy those, wait for some sort of announcement or a bill being passed which rallies the stocks and then sell them. Then buy gold or whatever metal you choose.
If I find myself actually motivated to invest some money, I plan on buying stocks which I expect Obama’s plans to influence. For example, there is talk of spending ~$45Billion on broadband access. So Cisco is a safe choice as well as qwest and verizon. buy those, wait for some sort of announcement or a bill being passed which rallies the stocks and then sell them. Then buy gold or whatever metal you choose.
People and workers and small business men will now be more motivated to work harder. What effect will the recession have on the work output of the average worker. I believe the increased saving and increased work output of the average Joe small business man and average Joe worker will help overall productivity; and help retard the onset of inflation or at least hyper inflation.
Invest in lower priced apartments in locations close to work centers in large or midsized cities in the lower mid-west.
Inflation will be a reality, and people need to be responsible to not invest with and reward crooks like Bernie Madoff.
The Big One may or may not come in 2009, but it is coming. To prepare for this, here are two simple steps I’ll be taking to invest in my family’s future: (1) sell stuff on ebay and use the money that accumulates on paypal to buy gold and silver. You don’t get the best price and the fees will add up, but you get to clean out your garage and attic. Appeasing the wife is also a definite investment in your future happiness (2) Participate and invest in the local economy. Many different disaster scenarios would involve a huge blow to the global economy (what if the internet is severely disrupted for a month? or if the protectionists gain more legislative traction?) Being plugged into the local economy will allow one to transition easily to any sort of new “new economy” that emerges. The idea here being to hedge one career with another.
I believe we will see a continuation in the fall of prices during February. The new administration will begin implementing spending sprees to “create” jobs in the construction industry.
The Fed, will then fire up the printing presses and March-April-May will see an increase in prices as the new money flows into the economy through the new programs created.
This scheme will be successful on the surface, but will have difficulty when it comes to large ticket items such as housing, cars, and small business investments. By year end, a new approach to banking will arise. The new “New Deal” will involve direct “Loans” by the Fed to individuals through a Federal Reserve Creditcard. Private Banks will be lining up to service this new credit line, and take fees on the transactions. In other words, the “lender of last resort”, will become the “Only Lender of any resort”.
Think of it as the Fannie and Freddie of big-screen TVs, cars, boats, and spending-as-usual. Only the Fed will be tracking this spending directly.
Insentives packages will be passed down through no-interest offers on targeted industry purchases, giving the Fed a tighter reign on the direction and placement of bubbles from the bottom up.
Monetary metals will be legal to hold, but only redeemable through the Fed Credit system. Trade in these metals outside the Fed system will be illegal, and true market value redemption will be impossible. The Fed will set the “Price”.
This will be done to “stimulate” manufacture and infrastructure building. Copper will be the first to be regulated as it is needed for wire and such. Gas and oil will also be tradeable only through the Fed system. Credit cards will only buy these things if the cards bank is a member in good standing of the Fed Credit system.
Single payer healthcare will be next. Have the Fed-Card and you can have by-pass surgery or kidney transplant. Don’t have the card? Oh well, too bad for you. Go to Mexico and take your chances spending (What? Dollars?). You’ll need gold, or silver there, because the new “new deal” will bring about a new “Black Market” that runs on the gold, silver and other comodities that the Fed controls inside the US borders.
That’s my prediction.
Bailouts will continue, and I believe it will eventually turn into something like FDR’s WPA.
“The Arts” are clamoring for a bailout: http://www.washingtonpost.com/wp-dyn/content/article/2008/12/28/AR2008122801274.html
I try to avoid making predictions, if possible. Too much depends on what policymakers decide to do, and policymakers are not always very predictable. I mean, we can assume “they’ll do something stupid”, but exactly what that will be is hard to say.
That said, if the Fed keeps all those additional reserves out there, then we’ll see massive inflation… eventually. For that to happen, we’d have to see banks start lending at an increased pace. At the moment, they’re not, which is understandable. Default rates are high, and people are losing their jobs. Reserves earning very very little interest (if I recall correctly, under ZIRP, they should be earning basically zero interest) is still better than handing out loans that are going to default.
Using that from the starting point, agriculture should have good performance as long as weather doesn’t kill it. They have the lowest default rates at the moment (so if the new money goes anywhere, it will probably be agriculture), and prices on many agricultural goods are holding up better than most.
What about US Treasuries? I think bearish is the most rational way to go. On the one hand, the Fed might not fight the inflation that will come when banks start lending all that new money. If they don’t, then gold (as a traditional inflation hedge) will start performing better and demand for treasuries will collapse. If they do, then the supply of treasuries will explode, as the Fed is forced to dump them onto the market to soak up the money they created. Either way, prices drop… and this is ignoring the fact that the new President has plans for lots of new infrastructure “investment” which will have to be funded with debt – also increasing the supply of treasuries.
Next big bailouts – hard to say. Financial system was unsurprising, since they were the ones who had the most direct losses. Auto makers always like bailouts, and have systemic problems in the industry. The one that jumps to mind as a possibility is airlines, but I have little real reason to suggest that.
Gold should increase… $1000 being reasonable, and higher would be unsurprising. Gold is an inflation hedge, and inflation will eventually happen. I think that the “credit crunch” is far overblown. Total loans on banks’ balance sheets have fallen relatively little (they’re almost down to where they were in September… oh no!). So, when inflation sets in, gold will see its price go up. That said, if the credit crunch actually gets bad, then we might see deflation first. Personally, I doubt it.
Oil – not my area of expertise. I have a hard time trying to explain oil prices. But, I don’t expect them to go up much. I think the heights they went to were something of a bubble, and that bubble has burst. They should probably increase some, but not too much faster than most prices. But, that’s just a guess.
The price of many commodities will be stagnant, as the deflationary impact of the loss of excessive “funny money” runs head first into the inflationary impact of excessive money creation. In other words, we’ll lend less, print more out of thin air, and the recipients of the bailout will artificially benefit as others don’t receive the deflationary benefit on their own cash holdings.
Oil will remain below $100/barrel and possibly stay well below that, as its rise above that number was really a small commodity bubble
Real estate will continue to fall thoughout the year, with the biggest bubble markets continuing to fall farther and faster.
Taxes will rise in almost every state in some way to account for massive budget deficits related to excessive spending in the last few years.
I believe, that in the Austrian context, defining future is quite a speculative thing, as peoples subjective value could change a lot (regarding Treasuries, they are subjectively valued a lot at the moment, but will/should drop to the middle or back of utility function).
But as been said, those reserves don’t look so friendly with their potential to skyrocket the prices – inflation has been already caused, as those reserves are only another fiat commodity, which isn’t covered with a true medium of exchange – gold.
Regarding Treasuries, as i stated above, they are a bubble, and only will maintain such low yields as long as the stocks wont climb: but when people will allocate the capital to stocks, the yields should go back to their earlier levels and, if prices start to increase or will cause such expectations, then the yields will have to go even higher. It will be interesting to see, how the dollar will go against the euro – i think a lot will go down to which currency has been printed and issued more, which is hard to say at the moment. Another risk for the dollar is that other countries are turning more to euros as their reserve currency and, if i am correct, even oil is being traded in euros in some markets and regions – in such a context dollars demand should weaken. Furthermore, i am suspecting, that with zero interest rates the dollar could be more demanded by carry traders, and such behaviour in the short run could also decrease the green back’s value.
In my opinion, the oil prices will be affected by several variables: how will alternative energy develop, the preference of the consumers, the development of cars, run by other types energy… As I know, in recent months a lot of oil has been bought and stored for future contracts maturing after a year, if I am correct, thus in this case the supply is being limited in the short run, but after that year that oil will have to be sold, thus it could decrease the prices, but it will also depend, how the contract holders will react. Probably the current price is quite reasonable and wont deviate a lot – except, if the inflation takes it’s toll.
As for global relations, I hope that more peace will come, as there are greater problems, than to fight against someone.
I think there will be a rally in all financial assets during the first quarter of 09. Followed by another round of sell offs. I am bullish on MSFT, Cisco, gold/silver, oil, food, uranium. Neutral on industrial metals.
Inflation will not return until late 09 or 10.
Inflation, deflation, and devaluing the dollar are the players. We do not talk business strategy, because they are all just trying to hold on like investors and consumers. One other factor is world currencies do not want to let the dollar go. They will before it is over. Those are the major considerations in investing. Technical analysis of those that use them, I do.
Devaluing the dollar will push everything up in price, yet deflation will push property down. Inflation at this time will push up essentials that one lives on.
That would leave stocks at best sideways. Devaluation would raise prices with weakening dollar like inflation does. Yet, devaluation would also create less demand as there is less money to invest and buy. Deflation is just starting to hit commercial property and this will drive stocks down. At best some stock picks for short rides would be profitable. Not my game though.
Property is deflating. Housing already has a healthy start(about half done) Commercial is just getting started and I suspect Ag land will start shortly also. Not wise investment for me.
Commodities will be a mixed bag. Inflation and devaluation of the dollar will drive prices up slightly. Consumers abroad should find more value that would drive prices even more. At first analysis it would appear agriculture as a go to the sky.
Consumers here will hold prices down. Foreigners most interested will have lower oil incomes and buyers domestically with the d evaluated dollar will have less to spend. So prices will hold steady here also.
Stocks not good unless you like very short term trades against the trend. Short them all.
Property deflationary times, down all year.
Commodities
Oil $70 or less
Cattle and hogs-not much higher then present
Grains about the same
SP- not over a 1,000 to lower.
Dollar has good prospects of much higher both fundamentally and chart pattern. Like it for long term trade investment. Should be up most of the year.
Looking at another 3-5 years with a low to be hit of sorts mid this year.
Hold sentimental farm land,
sold house/city properties/stocks in 2006-07. Retirement funds out of stocks into treasury bills. Start looking for a solid bank to put cash for preservation. Some short term treasury bills in case banks take an holiday(should be able to get to this still). Trade SP on swing and day trading for income. Investments otherwise look dismal.
So investors at best are hanging on with hope. Not a money clincher year.
http://www.economicsjunkie.com/2009-an-outlook/
No one knows, the large ammount of cash in the system is being held in reserve for unforeseen defaults.More than 800B has been removed, and more importantly the velocity of money has dropped below 1 (St.Lou.Fed). Additional cash infusions do little good, without a leap in spending. Perhaps only war can achieve the stimulation it will take to escape deflation. I sure don’t have any money to spend, nor anything to spend it on, unless it were to be gold, our once and future currency.
I’m bullish on all commodities because at the end of the day they will never lose their value no matter what happens to the dollar. As countries start to come out of recession and demand for commodities goes back up so will price. The United States will be hit especially hard due to all this money that the Fed keeps printing, so inflation is going to be a problem in the near future for us, especially as we will still be in recession for a while. This is why commodities are a good bet- since they are safe and their value will increase (my favorites are gold, oil, wheat, and natural gas.)
Difficult enough to anticipate the maket future, even more so with the interference of an unpredictable centralized power.
We have moved what little equity we held in stocks to liquid accounts and are holding for clarity. We have access to raw gold through offshore connection at 20 percent under world market price, samples assayed pure.
Our small home based business has been fairly solid since 2004 yet we see a steep decline in sales for the second half of Q4. Thus, will be investing in marketing to resurrect growth.
Solutions that help small to medium size enterprises successfully promote with measurable ROI will be in demand. Perhaps non-traditional media outlets via the internet and other forms of direct marketing will prove worthier than MSM?
First, let me say how much I have enjoyed everyone’s comments, especially deefburger’s and Beta Hater. It’s rare that I can find a board with such intelligent, well written and civil commentary. Congratulations to all.
My take is a little different than the rest of yours. I’m looking for people to show me my errors, so feel free to fire away.
FRAUD
Besides the Ponzi-type schemes, we’re going to see the rampant fraud from real estate loans in the U.S. come home to roost. I don’t think Wall Street has a “real world” grasp as to how much graft there truly was, plus, honestly, I’m not sure they want to know. I believe it’s being underestimated by 30%. Again, I think this comes home to roost starting July/August 2009.
Unfortunately, I believe SEC investigations are going to reveal more Madoff-type scams. While they most likely won’t be of that size and scope, we will see a greater number of them, somewhere in the range of seven to twelve, taking investors down for (including Madoff) about $150 billion. After the third relatively large bust (say $21 billion or so), investors will panic and start demanding funds from trustworthy managers, who will have to liquidate, driving the market down 15-20% in one week. I’m thinking July/August.
I also believe this won’t end the problem, it will only exacerbate it. Once these discoveries are made, and as people who are left in the market pull their money out, a few money managers who are used to flying in Lear jets and being driven to their office via chauffeurs will, in essence, “take the money and run.” To Belize. To Costa Rica. To Rio. To who knows where else. They’ll have theirs no matter what. They aren’t about to lower their lifestyle. Not all, mind you, but enough to drain another $150 billion out of the system. Small foreign banks will need capital and will gladly accept their money. Find them if you can. We’re going to wake up one day and realize that between six to 12 fairly large managers have vanished. And it won’t be due to the rapture. My guess is money is quietly being drawn into accounts for get-away-day as you are reading this.
GOLD
Because of the fraud on Wall Street, AU hits a high of around $1700-$1800 very briefly, likely around Sept/Oct ’09. But countries such as China and Russia begin to liquidate some of their reserves to raise cash due to the low price of oil. It’s that or go to war. After a three-week period, gold drops back to $800-$1000 per oz. By Jan. 2010 it doesn’t matter what the price is because most people won’t have the cash to buy it with. It will be about as worthless as dental floss. It plunges to $350 per oz.
OIL
By September, two large, promising wells will be developed in Israel. In addition to this, in the mountains of Northern Israel and off its coast, huge deposits will be found, making Saudi Arabia, Russia, Venezuela and Iran look like chumps in the market. This will not sit well with OPEC and Putin, and the discovery will drive prices into the $22-$28 per barrel range. It will also severely piss environmentalists off. Obama and Congress raise Fed taxes to make gas a flat $3.33 per gallon. Due to this, OPEC becomes angry. Why should they do all the hard work and have the U.S. Government reap all the profits? In November, they announce they will (similar to Chrysler and GM) completely shut down their wells for two weeks in December to cut down supply and get the price of oil back up to $100 per barrel. For once, OPEC sticks to its guns. It raises the price of oil. Quickly. This helps to kill Christmas sales (that were already going to be bleak). Obama and Congress are furious. So are the American people. We can do nothing.
UNEMPLOYMENT
By April, the government admits to 9.2%, but it’s really at 13.5%, not counting the 5% that haven’t bothered to look for a job for a year.
COMMODITIES
Floods in the midwest for the second straight year drive grain, corn & soy futures to all-time highs by July. Hog futures are also out of control. In August/September hurricanes once again hit the southwest, briefly disrupting oil refineries, but more importantly destroying infrastructures such as highways and bridges. Brief gas shortages and food shortages hit the southern parts of the U.S, disrupting supplies for 2-3 weeks.
OBAMANOMICS
Word is we’re going to have a stimulus of between $600 billion and $1 trillion. Obama says the bulk of it will be used to build bridges, roads, schools, etc. That’s fine and dandy. We need those things. But here is the problem with doing it all so quickly, so hap-hazardly:
Civil engineering construction employment is down only 7% through this recession. That’s 75,000 jobs. According to CRH, 35,000 jobs are created for every $1 billion spent on roads. I personally find that number a bit high to believe, but hey, would the government or Obama lie to us? For the sake of argument, and to be conservative, let’s cut that number in half. If we spend $200 billion on infrastructure, that would equate to 3.4 million new construction-related jobs. (17,500 x 200). And if the higher estimate (35,000 per 1 billion spent) is correct, that number would be 6.5 million new jobs. If we have only lost 75,000 jobs during this downturn, where are we going to find the other 3.325 million workers for all these jobs? MEXICO.
Not all of these jobs are going to be filled by ex-accountants or former ACORN reps. Contractors are going to need people who can get to work rather quickly. They won’t have time to train people how to pour concrete, make forms, tie re-bar and move steel.
If you think we have seen immigration problems now, if you think our schools are overcrowded now, if you think are jails are overcrowded now, if you think our social programs have exploded beyond belief now, if you think our hospitals are being over run now, just wait. Think of the costs associated with this. It will far exceed the temporary benefit (sooner or later these building programs will end just as they did in the 1930′s).
And another prediction: Most of these jobs – because they are government-financed creations – are going to be “prevailing wage” jobs. We’re going to have men and women holding sticks and wearing traffic vests making $30 per hr. All of this money – minus the dollars being sent back to Mexico via Western Union – is going to be flooding our economy. So we’re going to have a ton of dollars chasing few goods. All of a sudden, the tsunami of rapidly rising energy costs, “quantitive easing”, rising commodity prices and cash from workers hits the system. Normally people would invest a portion of this money into the market, but a large majority won’t because of a lack of trust in the system (see Madoff) and because Obama and Co. keep telling them to “get out and spend money.”
We will have serious inflation, which will cause the Fed to raise interest rates, which kills the economy …. and thus the cycle begins again. Only this time we have too much debt, too much angst and too many social programs to turn back.
America is over.
While I believe hyperinflation will be in the cards, it will happen later rather than sooner. The big tipping point will be whether banks start to lend and consumers rush to spend that money. And that is a BIG if. Consumers and businesses are still up to their knees in debt. Real estate values will continue to plummet as people continue to lose their jobs and foreclosures pick up speed. Meanwhile I expect to see deflation devour our economy until debt has been completely liquidated. Then hyperinflation will set as those trillions in bailouts and printed money will finally come back to haunt us. But this phase is still a few years away.
It’s hard to predict what’s going to happen or what is the best investment, because the measuring stick of success is being wrenched out of the hands of the free market. The traditional value of money, profits, and savings is becoming meaningless. The path to corporate success is no longer to be profitable, but to be as unprofitable as possible in order to make a case for receiving a bailout. To be a successful entrepreneur or investor is to invite envy and confiscation. Thus you could see gold confiscation if precious metal investing turns out to be a winner, virtual nationalization of agriculture if farming is a winner, windfall taxes if energy investments take off, and so on. Because many people’s retirement savings plans are going to perform very badly you might see them nationalized. The stated reason will be to give a hand up to the losers, but the real reason will be for the politicians to get their hands on the significant amount of cash and solid stocks, bonds, etc. in the winners’ savings plans – as a very short term fiscal prop.
Yes this will kill their national wealth but why should they care? Anything short of a total catastrophe actually helps politicians, because the more chaos and the more financial problems that occur the more reasons they will have to seize more power.
My gut is telling me we are going to see long-term stagnation in which practically all investments and strategies are either total failures or are nullified by confiscation or regulatory restrictions. The tried and true political solution to stagnation and the slow sinking of the economy into a miasm is, I’m sorry to say, war. The deeper the miasm, the bigger the war.
The easiest investment play is to short long US Treasuries. TBT is a great choice.
Energy will rise check out ERX or XTO, UPL or IGE (do to demand and war)
Agriculture will hold its own. Cash will be king for 2009.
The biggest bear market in nearly 300 years, lasting the better part of a century! Gold has seen its highs for now, and is stair-stepping its way down to $100/ounce by the time it’s over (and when I plan to load up on it). Oil has seen THE high for our lifetimes, if not for all time (tulip bulbs have never regained their extremely high bubble valuations – neither will oil). We can easily see oil below $10/barrel, perhaps bottoming between $1 and $5. The Dow should bottom somewhere around 400. We will see $1.5 million mansions go for $25,000 as the credit component, accounting for roughly 97% of (currency + credit) gets wiped out in a massive deflation. The roughly $800 trillion of derivatives will be revealed as practically worthless as debt defaults destroy credit far faster than banks can find willing, creditworthy borrowers for the credit creation necessary for inflation. There will be no credit available, and all transactions will require cash in full at time of sale.
Banks won’t lend, rightly fearing their borrowers can’t pay them back, and there will be few willing borrowers, with those able to repay paying back 30+ times the original amount borrowed in real terms. The federal government will be able to issue 30-year bonds with interest rates under 2% and buy back all the bonds paying higher interest. The Treasury may even be able to issue T-bills with negative interest rates and reduce the national debt some that way as the only entity one can trust to make good on its debt. Bailouts will come to a screeching halt when the government’s own ability to borrow becomes threatened. The government dares not turn on the printing presses for currency inflation while it its ability to borrow money still works.
The Democrats as the party clearly in charge get thrown out of office in 2010 and 2012, and third party candidates win seats in Congress, and probably at least one state governorship. Somewhere around the bottom of the market, the U.S. gets into a SERIOUS, MAJOR war, perhaps involving nuclear weapons. Radical solutions will be sought for all the problems of the day and be tried. Those that work will become standard practice for decades.
When the free market has finally beaten all the excesses out of the system, and finally beaten all government attempts to override the free market, recovery can then occur, and we may then see gold soar to thousands of dollars per ounce.
Silver will continue to Yo-Yo its self for a few more months befor sky rocketing when inflation kicks in and then rise slowly for the rest of our lifetime due to the fact that unlike gold, we actually use silver in electronics and photography so one day we will have a shortage of silver. we may not see the day but the day will come when silver is worth more than gold, unless we cant somehow find a way to extcract silver from sea water.
if your looking to build a nest egg for ur future then save your money rapidly now and buy silver in mid april 2009. buying it slightly later may be cheaper but do u want to run the risk of the ttrain taking off befor u get on it? the prudent opption would be to buy it now however we havent seen the lowest silver will go yet at we may not till april.
I’m impressed! You’ve mngaaed the almost impossible.
After May 2009 more than eight hundred thousand mor of work force will loose their jobs, dollar will lose it shining luster,
Gold will reach 1020 Dollars ,gas will start rising up
due to value less dollar, and new pessmitics will face the American Nation. Only those saved good euro money will survive.
Abdillahi Nur
Predictions:
-Gold, silver, and other metals will be hit by deflation as people continue to hold dollars rather than use them. Eventually, prices will soar, but that will be down the road when all these liquidity infusions hit the system and drive inflation through the roof.
-Unemployment will rise well over 10% by the end of the year. Bear in mind that if unemployment were measured as it was during the depression, we will be at or around 20%…just like the depression.
-The stock market will steady the first half of the year, but will recede further as it becomes ever more clear that bailout after bailout cannot be sustained and firms (primarily financial and manufacturing) are forced to be liquidated. I’m guessing to about 6,000-6,500 by the end of the year.
-Other credit bubbles will burst, primarily commercial real estate and credit card. These are rarely discussed in the mainstream media (I know, go figure), and they should begin to show themselves this year and it will be much worse than what will be reported.
-The sub-prime crisis will inevitably spread to “prime” mortgages. As unemployment increases, these mortgages have to be affected; it is only a natural progression.
The problem with most of these predictions is that they are negative, but more importantly, they cannot be timed. In an inflationary system, everything will be propped up delaying the eventual bottoming out. While I cannot predict exactly when, I feel confident that these things are a matter of time.
The economy will only get better if more American Citizens get the new jobs at $30 an hour(holding a sign for road construction etc..) Americans will use the money to stimulate this economy and we will save an incredible amount of money on unemployment.
Many do not realize that thousands of Healthcare employees have been laid off, hospitals working with skeleton crews. Cheap labor jobs are now sought after by people like myself who have worked in hospital for years training people from the Phillipines whom were allowed in on a limited license by our US Government but now jeopardize the health of our loved ones. What some consider cheap labor cost All Tax Paying Americans a BUNDLE in healthcare, workman’s comp.
For 8 years I have said “This country will collapse from within”.
Friends you have not seen anything yet, it is going to be catastophic…..
# Jim
“I will wager that gold breaks $400 to the downside, and possibly $300.”
LOL so jim what happend to your god awful prediction??? lol you clearly are not a student of Austrian.
Is it legal for me to have [url=http://www.web-chamber.com]offshore companies[/url] explained here?, and bank accounts? How to start? Can I move my existing business offshore
Thanks
Only prediction that is full proof is the Bible. Bible predictions are coming true. The reason USA is not prosperous is because we are idolizing money. My equation to all this problem is: human=greed=money=idol=downfall.
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