10 economic predictions for 2009 ! Diferents articles

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10 Predictions for 2009
January 04, 2009

Tim Iacono

After a year like the one that has just concluded, it is more difficult than ever to see clearly into our dark and murky future, but that doesn't seem to have stopped people from making predictions of one sort or another about what might lie ahead.

Such is the case here, despite the brightly glowing orb to the right.

After taking a close look at last year's predictions the other day, it's pretty clear that things would have been a lot easier to call if it was known in advance that Armageddon was finally going to arrive.

Discounting Armageddon has been a profitable investment strategy up until last year.

The question today is whether what happened in 2008 was Armageddon - Part I, or just plain Armageddon. As you'll see below, from my vantage point, it looks more like the latter.

Off we go...

1. Another Bad Year for Housing

Once again, more pain in housing seems inevitable with liar loans and option ARM products reaching their critical years. If it already hasn't, that second home/investment property that seemed like such a good idea back in 2004 will turn into a nightmare in 2009.

As was the case last year, only real estate sales types will be predicting a rebound for home prices in 2009 though home sales will probably make a lasting bottom. Late-2009 and 2010 will be the time to start looking to buy property again, but there will be no need to hurry - contrary to what real estate sales types tell you, prices are not headed back up anytime soon. They may not go too much lower in 2010, but, except for places like Washington D.C. where the bailout business is booming, prices will be mostly flat through 2011 or 2012.

Next year, housing prices will fall another 10 percent nationally, based on the year-over-year change to the 20-city S&P Case Shiller Home Price Index for October 2009 (this report gets released at the end of December and showed an 18 percent decline last week.) It seems that home price declines have to ease up. For example, based on their current trajectory, by the end of next year the median home price in Los Angeles would be below $200,000, down from a high of $550,000 in 2007.

2. The Dollar Will Go Down

The trade weighted U.S. dollar rose in 2008, but that was an anomaly. There are many bad currencies in the world (most of them are bad, actually, the pound now probably the worst) but the greenback will have a hard time looking good on a relative basis after big negative GDP numbers are reported along with even bigger job losses.

The source of most of the world's financial market troubles over the last year or so will finally be appreciated by those who've been buying U.S. Treasuries and, despite the best efforts of the big players at the Comex, many of these people will buy gold instead.

By year-end, the U.S. Dollar Index will be at 70, after dipping into the 60s briefly, and economists will again marvel at how the trade deficit is shrinking due to higher U.S. exports, helping the U.S. economy to recover.

3. Broad Equity Markets will Rise

The Dow (DIA) and the S&P 500 Index (SPY) will gain 10 percent and most investors will be happy about this, not realizing that it would have to repeat this performance for the next four or five years to make up for the losses seen in 2008. It won't.

Foreign stocks will do much better than U.S. stocks - up about 20 percent on average by year end - and stocks in China will rise 30 percent. Here too, most investors will fail to appreciate the cruel nature of large declines and advances expressed in percentage terms - this will leave Chinese stocks 55 percent below where they began 2008 (i.e., before last year's 65 percent decline).

Gold and silver mining stocks will outperform all other equities in 2009 (this process is already well underway) and many retail investors will add gold stocks to their portfolio for the first time only to sell in a panic during the first correction.

4. Short-Term Interest Rates Will Stay at Zero

Short-term interest rates in the U.S. will end the year where they began - at zero.

Instead of the Fed funds rate, the new metric that will be used to gauge what the Federal Reserve is doing will be the Fed's balance sheet. Now at $2.2 trillion, this will grow to over $4 trillion by year-end, by which time the weekly H.4.1 report will become a major news event.

Ben Bernanke aged five years over the last twelve months - over the next twelve months he will only age two years.

5. Energy Prices Will Rebound

After dipping below $30 a barrel in the spring, the price of crude oil will rise to $100 by the time Hurricane season is over (hey, there's no election in '09) and end the year at $85.

Just when people were getting used to $1.50 gasoline, taking advantage of dealer incentives to buy Suburbans and Escalades again, the price at the pump will be back up over $3 and they won't be happy about it.

6. Gold and Silver Will Soar

The price of silver will double before ending the year at around $20 an ounce and gold will again surpass the $1,000 mark, finishing the year at $1,150. Inventory at the SPDR Gold Shares ETF (GLD) will increase to over 1,000 tonnes and there will be 10,000 tonnes of silver in the iShares Silver Trust ETF (SLV). We still won't be sure whether the ETFs really have the metal, but no one will care.

An increasing number of retail investors will buy gold and silver for the first time and they'll sell in a panic during the first correction they encounter. They'll look back and think, "Precious metals are no more volatile than that S&P 500 Index fund I sold last year. Why did I sell in a panic again? Maybe I should just invest in Hummels."

People will start talking about junior mining stocks at cocktail parties - just like internet stocks in 1997. (As noted the last couple years, I'm going to keep saying this until it's true).

7. The U.S. Economy and its Consumer Engine will Hit Rock Bottom

The personal saving rate will rise to four percent and both layaway programs and Christmas savings clubs will grow in popularity. This won't be good for the U.S. economy which will contract during the first two quarters and post anemic growth rates in the last two.

Much of the Christmas savings money will be raided late in the year as many consumers will think they've served their penance and, with money gushing out of the government and central bank, they will regain their spendthrift ways before year-end making for a spectacular Christmas shopping season as compared to the one that just concluded.

8. Reported Inflation will Dip into Negative Territory

We'll hear lots of talk about deflation as the overall Consumer Price Index dips into negative territory on a year-over-year basis by mid-year. At this point, we'll all be bathing in a virtual government money shower as policymakers desperately try to avoid the ignominious honor of being the first group to ever cause real deflation within a fiat money system (no, what Japan had was not real, hard-money style deflation - that was just baby-deflation).

The policymakers will succeed.

By the time the leaves start falling, we'll all be talking about inflation again as energy prices rise in what will look like an inverse, smaller magnitude version of what happened last year.

9. Four Million Jobs will be Lost

Nonfarm payrolls will decline by three million in 2009 and there will be downward revisions of about one million to prior years' payrolls data as the Labor Department grapples with its birth-death modeling once again, publicly confessing that it has utterly failed to provide any meaningful statistics about the labor market in real time.

Health care will be the only employment sector that adds jobs in 2009.

Teenagers all across the country will become disillusioned after having lived their formative years during the biggest financial bubble in the history of Mankind and then seeing it come to an abrupt end as home equity withdrawals are relegated to the history books. They will actually go out and seek work, though few will find any this year.

10. Websites will not Wise-Up

A growing number of websites will continue to annoy readers by automatically playing video clips when the page is opened (didn't we already go through this process about four years ago?). They'll believe their marketing staff that this really is an effective advertising technique, but they will fail to understand just how many readers are leaving, never to return, after having to search so many times for that damn Pause button.

2009 Market Outlook: I'm Taking the Middle Road
January 04, 2009 |

Dan Hartzell

As 2009 begins and the predictions for the year start, we’re hearing gloom and doom or sunshine and roses. I’m taking the middle road. Why you ask? Because, I try to look at both sides of an issue before making my decisions. And here’s why:

Stock Market: I’m looking at a gain for the year of about 3% - 5%. The first part of the year will be a continuation of 2008 with more loses as 4th quarter figures start coming in. After that, I’m looking for a slow rise as investors start buying. 401(K) investments will increase as people will finally begin to realize that their money will go farther this year in regards to their retirement savings.

Job Market: Agreeing with other analysts, I’m looking at an 8% unemployment rate, maybe even by the end of the first quarter. Then a slow drop through the 3rd quarter and possibly a larger drop during the 4th quarter as holiday sales call for more seasonal employees. Also, I think our new President will be instituting new policies that in turn will help create new some new jobs.

Economy: I'm predicting a little pick up for the second half of 2009. OPEC’s production cuts will start to be felt in the coming months. I think the price of oil will rise modestly then level off. $50 a barrel sounds about right to me. As unemployment begins to drop, the economy will start to pick up. Also, consumers have been putting off non-essential purchases. Small splurges will begin and the start of a ‘trickle up’ effect.

Housing: Because I’m looking at a rise in unemployment, foreclosures will rise into the 2nd quarter, and then level off as well. As banks begin to loosen up on their lending, refinancing will increase. Although housing prices will fall early in 2009, they will begin to stabilize. As fear of losing your job decreases, people will begin to start buying again

Nine Ways to Profit in 2009
January 02, 2009

Matt Callow
The Big Picture:

Resist the urge to jump into this sick market. Anyone looking at 2008's near 40% decline will feel tempted to jump in at these bargain-basement levels. If you reference the year 1930 (one year after the start of the Great Depression), you may think twice. Despite all the fiscal and monetary stimulus being thrown at our economic mess, the US, and the world economies will look a lot like they did in 2008.

Political and Economic Predictions:

Oil falls into a range of $20-$30 where it settles for a short period. Be on the lookout for a complete collapse of Russian and Venezuelan economies as they cannot exist on such a low oil price. Expect military conflicts to ensue around the world, which will raise the price of oil somewhere between $45 and $85 by year end (depending on severity of conflicts).
Eastern Europe's massive debt loads and Western Europe's over consumption, and economic infighting cause massive upheaval within the EU. Expect European banks to rapidly erode, followed by the fall of the Euro, and maybe some major EU partners pulling out of the EU, or at least pulling out of the Euro.

Global recession continues. Talk of resisting isolationism is overcome by reality. Isolationism and protectionism accelerate global recession, causing commodities to continue the path of deflation. Talk of hyperinflation will be prevalent in 2009, but will not be seen until 2010 or later.

Hedge fund industry (with massive amounts of cash on hand, ready to move back into the market) cannot save the economy. Calls for new regulation, and inability to make profits under the current "2-and-20" high watermark standard leads to massive hedge fund closings. We have only seen the tip of the iceberg on this one.

Gold ultimately trades higher. I expect gold to waffle around its current price in the near-term, with a possible trend to the downside (due to commodity deflation), followed by a year-end rally (flight to safety) that closes out above $1000/oz.

2007 was the subprime crisis, 2008 was the credit crisis, 2009 will be the consumer crisis. Unemployment will hit double digits (maybe not until 2010), housing markets will continue to fall, consumer defaults on mortgages, credit cards, and student loans will explode. Expect retail, and automakers to continue to struggle. China's economy will continue to falter (at a more rapid pace) due to the falling US consumer demand. Tech stocks finally take a long-overdue beating.

Despite attempts to lower mortgage rates to 4%, the move will fail to kick start the housing market. Refinancing will balloon, leading to a further split between the "haves and the have-nots."

Nine Ways to Profit from 2009

One lesson learned from my 2008 predictions was not to lock myself into any theme for a full twelve months. All of these predictions will be employed with the ability to trade in and out of themes as prices and conditions warrant. All moves will be posted before they are made on my blog.

The following themes investments will make up the 2009 Aggressive Trader Portfolio:

Theme 1: Short Banks. We have not seen the end of this story.
Action: Buy FAZ.

Theme 2: Short Oil to $25, then reverse and go long.
Action: Buy SCO.

Theme 3: Short Technology.
Action: Buy REW.

Theme 4: Long Gold.
Action: Buy DGP.

Theme 5: Short REITs.
Action: Buy SRS.

Theme 6: Short China.
Action: Buy FXP.

Theme 7: Short Europe. Although I'd like to short the Euro, that currency play would be too risky. With the Fed publicly acknowledging its plan to use Quantitative Easing, (and the ECB's lack of willingness to do the same), I cannot feel confident that the Euro will fall, relative to the US Dollar. Instead, we will short European markets by shorting the MSCI-EAFE Index, which contains about a 70% share of European weighting.
Action: Buy EFU.

Theme 8: Short Retail
Action: Buy SCC.

Theme 9: Short Toyota Motors (TM). Although it is in a healthier financial position than any of the Big Three Automakers, Toyota is facing the same falling demand, and the same discerning consumer. On top of that, expect the new administration to throw billions more at the American companies with nothing going to TM. Finally, a strengthening Yen makes US auto sales less meaningful and less rewarding to the company's bottom line.
Action: Buy TM.SK (July '09 Put Options 55.00 Strike Price)

As always, standard disclaimers apply. No guarantees are implied. Do your own research and invest at your own risk. Good luck in 2009.

Disclosure: Long SRS.

Craig Brown

I have seen a lot of people posting on predictions for 2009, so what the heck, let me give it a stab. Let me warn you in advance, this is not going to be warm and fuzzy.

Housing will continue its decline, probably for most if not all the year. Why? Well, for one thing there are a lot of adjustable rate mortgages (ARMs) resetting in 2009. Now you might think the low rates will allow them to reset lower, and in some instances that is likely correct, but the wonderful lenders came up with a nice product called an option ARM that lets the buyer chose among various payment options, which can include paying interest only or even less than that. Moreover, while rates are low now, ARMs almost always start with artifically low teaser rates well below where the reset will go, despite low rates today. Accordingly, there will be a host of new foreclosures adding pressure to prices, along with unemployment and other factors. Some markets are near a bottom already, like parts of California, but overall, I suspect housing will continue its decline throughout 2009.
Credit will continue in a nearly frozen state for the year. The banks we look to for lending are simply in a horrendous situation and will not be looking to lend their money any time soon. Housing declines will continue to pressure them, as will CDSs, off-balance sheet vehicles and their debtors going belly-up. Some local and regional banks might be more willing to lend, but increasing problems in commercial real estate will impact them too. Continue to look to the government (federal government only) as the lender of only resort.
The stock market. I am going on the record here and predicting that the market in the U.S. will be lower at the end of next year than it is right now, and I expect a good 10-20% lower. Not many people are predicting this direction for the market, so you are asking why. After all, doesn't the market typically start to rebound six months or so before a recession ends? Well, the problems we are facing are deeply entrenched and so far we are not doing the right things to fix the problem. I have ranted here enough about the TARP and other moves being taken, so I will not repeat it again. It is possible the next administration will make smarter moves, but I fear even the right moves will not avoid a few years of pain. Yes, a few years of pain. We are in some rather severe spirals that will take a long time to escape.

Bankruptcies, and lots of them. And I am talking the Chapter 7 liquidation kind becasue debtor in possession (DIP) financing is very hard to come by right now, which means Chaper 11 reorg is near impossible. For the shareholders and creditors of those that go under this is bad news, but overall for the economy it is a healthy move. We no longer have the massive debt-driven consumption that enabled all the companies to exist, much less the easy credit that let them make ends meet when they probably should have folded instead. Time to thin the ranks.

Unemployment over 8%. Even using the government's bogus unemployment numbers I anticipate unemployment going over 8% by year-end 2009. The real unemployment rate is already above that but the government plays games with the numbers to keep them artifically low.

Crime will be on the increase as desperate souls seek to make ends meet. Not a surprising call, but often overlooked. Lock those doors.

Political instability. A number of countries will become increasingly unstable over the next year. Riots and public protests, like those taking place in Iceland and Europe, will increase. What is truly troubling is the prospect that countries will increasingly turn to military action as political frictions escalate between countries.

EU with no U. The strains on the EU have never been greater and Germany's reluctance to play ball with the rest of the union will, in my opinion, cause a rift that cannot be fixed. I doubt the EU will disband in 2009, but pressures will reach a critical point and it may well happen in 2010.

Well, there you have it, for better or worse (actually no better here). I am first in line to hope that all these predictions are dead wrong.

Disclosures: None.

Market and Economy Predictions for 2009
January 01, 2009

Calafia Beach Pundit

Here's hoping that next year is much better to all of us. Above all, I hope that Obama does a fantastic job. Here's what I think will happen to the economy and the markets:

Inflation: Headline inflation has gone down, but core inflation hasn't; once oil prices bottom (which I think is happening), all measures of inflation will head higher. I don't see a hyperinflation yet, but I do see inflation that is significantly higher than what is priced into the bond market. The main driver of higher inflation will be the Fed's inability to withdraw its massive liquidity injections in a timely fashion. They will prefer to err on the side of inflation rather than risk a weaker economy.

Growth: The economy is going to recover sooner than the market expects, with the bottom in activity coming before mid-2009. The recovery will be sub-par however, due to the drag of increased fiscal spending and slowly rising inflation.

Housing: The bottom in construction activity has essentially arrived; whether construction drops another 10% or not is at this point immaterial; housing prices are rapidly approaching a bottom, which should come well before June '09; mortgage rates are now low enough to make a huge difference.

Interest rates: Treasury yields are essentially at their lows and will be significantly higher by the end of next year. TIPS yields will hold steady or fall as nominal yields rise.

Spreads: Spreads have seen their highs and will continue to narrow.

Equities: We have seen the lows in equity prices; equity prices will lag other risk asset prices, but they will be significantly higher by the end of next year.

Commodities: Prices are essentially at their lows; whether they drop another 10% is immaterial; prices are beginning a bottoming process; oil prices are unlikely to drop below $35; commodities may take awhile to move higher, but they will be higher within 2 years.

Dollar: The dollar is unlikely to make further gains against most major currencies, given the Fed's hyper-easy stance, and is likely to fall against emerging market currencies as commodity prices rise.

Here's what UBS told CNBC just before Christmas, could be "Some [of the] Surprises for 2009".

1) Oil prices fall below $20 per barrel.
2) The dollar falls to new lifetime lows.
3) Global growth is negative for 2009.
4) Gold goes to $300. [I don't believe this at all.]
5) Corporate default rates don't rise significantly.


No Housing Recovery, No Bottom (Period, End of Story)

Posted Jan 02, 2009 02:36pm EST

With the stock market rallying to kick off 2009, recent data remind us of a tried and true saying: It's the economy stupid.

The bulls are buying now in the hope the economy bottoms mid-year, if not sooner. That may yet prove true but recent data suggest the recession is intensifying:

Today's ISM Manufacturing Index hit its lowest level since 1980 (and manufacturing surveys in Europe and China also nosedived).

The Coming Commercial Real-Estate Crash

Posted Dec 12, 2008 01:50pm EST by Paul Kedrosky in Investing, Products and Trends, Recession

As investors unravel out of commercial-real estate equities, commercial real estate is poised to follow the residential housing market in an "apocalyptic" tumble.

So says my guest, investor and "Infectious Greed" blogger Paul Kedrosky. Weak retail sales also are hurting commercial real estate. In some cases anchor stores, such as Starbucks, are closing and taking the fate of an entire retail complex down with them. Some urban regions are experiencing commercial vacancies of 15 percent to 20 percent.

Are more defaults far behind?

U.S. consumer confidence fell to a record low in December, as reported Wednesday.
Also Wednesday, the Case-Shiller Index registered a record 18% drop in October vs. year-ago levels, bringing the decline from housing's peak to 25%.

There are obviously many moving parts to the U.S. economy but it seems unfathomable a meaningful recovery can emerge as long as housing prices keep falling, more especially if they keep accelerating to the downside. The government is expected to keep pulling out all stops (and then some) to lower mortgage rates and prevent more foreclosures, but trying to stop home prices from falling is not the answer, as Henry Blodget writes.

Given rising unemployment and little apparent confidence at this juncture in President-elect Obama's stimulus plans, any hopes for a "bottom" in either the economy or stocks in the foreseeable future is likely to prove terribly misguided, at best.