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My Predictions For 2009: Business, The Stock Market, Politics

27 December 2008 3 Comments

2008 was a crappy year for most people. Unless you saw the financial and real estate crisis coming like some people did, you probably lost money. You might have even lost your job. Unfortunately, most of the fundamental causes of 2008’s economic crisis are still in play. Namely, we’re broke, have too much debt, and have a contracting economy.

The good news is that 2009 is a fresh year with fresh opportunities. It’s up to you to take advantage of them. In this article, I will make some of my own predictions and explain my reasoning for each

The Big Three Automakers

With the recent announcement that Bush provided billions in aid to get the Big Three through the end of the year to next March, the question remains: How will these guys get profitable? My prediction: They won’t.

Without the forced restructring of a bankruptcy court, there is little that will change in these companies. The union won’t budge and management has few cards to play. So, what will happen?

My guess is that come March or April whenever the time is up for the automakers to restructure, Obama’s administration and the Democratic congress will give them more money in exchange for an ownership stake in the companies. Also, the Car Czar position will be created. In effect, the government will be in the car manufacturing business which will be an utter disaster long term for our country. With the government running the companies, political agendas such as climate change will take priority over profitability. The companies will become money pits with tax payer money continuously paying for them.

Did anybody hear Bush say if they didn’t restructure accordingly, then in March, they would return the funds that the government just gave them? Yeah right. Don’t they have something like $50 billion in debt? That money is long gone.

The result of all this will be bad news… America’s dying manufacturing base will contract even more.

Real Estate

My guess is that the government will pump enough money into the economy in order to stabilize home values. Now, you have to understand that just because the price of your home stabilizes or even rises in dollars, this doesn’t mean you are building wealth. If the rate of inflation is higher than the increase in nominal value of your home, you are losing wealth.

This is what I predict will happen. We will see that the deflation argument will conclude rather sharply and we will usher in an era of increasing inflation as the government prints more and more money to prop up our failing economy. While people might not lose their homes as fast as in 2008, the price of regular consumer products will start to rise which might pose an even bigger threat to Obama’s beloved middle class.

The Financial Sector

I believe in 2009, you will see more contracting and merging of banks. More banks will fail and more will get bought out. Basically, the number of banks open for business will continue to decline. Banks will need to find new ways to make money and this might prove to be tough with a slowing economy and a broke American public.

The Dollar And Commodities

I believe that our direction is going to be inflation. It may take a little time for us to get there, but eventually it will get here. This means that the dollar will decline in value big time. Inversely, I think commodities will stabilize and begin to rise again maybe even reaching new highs, if not in 2009, then in 2010.

Some believe that if inflation gets bad, we could see a bubble in gold stocks similar to the NASDAQ bubble.

Where Can You Make Money?

i believe the best place to make money next year will be foreign stocks. Fundamentally sound companies in resource rich economies or Asian economies should be sound investments. Look for high yielding stocks to offset the risk; cash flow from a nice dividend yield provides a nice return while you wait for stock prices to shoot higher. I’m currently looking at Canadian Energy Trusts and Asian Commercial REITs; both have very high yields right now.

3 Comments »

  • Doctor S said:

    I hope for your sake and all of our sake, you are right on many of these notions.

    I have to strongly agree w/ you on the notion that banks and financial contracts will merge. There are just too many firms out there who have no clue what they are doing and do not have the interests of their investors on their mind. Hopefully the government will require more transparency from all in this situation.

  • sbf said:

    What about the energy sector?

  • gustongroves said:

    Nice information has been shared. I do agree with your post. Trading in the stock market would be better,long term investments would fetch us more desired results,i think.