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Thursday, December 31, 2009

Top Eleven Predictions for 2010

I suppose it's fitting and proper for this year to be laid to rest on a Friday. Over the weekend investors can cleanse themselves of the last 12 months and prepare for the final chapter of the first decade of the 21st century with hope of a less discombobulating investment environment. On Monday, we can all pretend, again, that it's alright, nothing's changed.

Unfortunately, I believe the damaged done to the financial system and the balance sheets of individuals and municipalities won't allow much tranquility near term. The year 2009 was a relative experience. Compared to 2008, almost any activity was a net positive which underlines how low expectations were for the preceding 12 months.

Beneath the fa├žade of business as usual or the new normal, that's being and been programmed into the Wall Street meme for 2010, silent cries of anxiety continue to roam the dance floor of profits, knowing a true dance partner will never come to recapture all the wealth squandered in this lost decade of financial tango.

So, without regurgitating the gruesome details of two stock market bubbles, one real estate bubble, one regular recession, one Great Recession, four quarters of negative GDP growth (Depression), a collapse of the banking and credit systems, a quantitative easing monetary policy, zero job growth, and trillions of dollars of new federal debt and guarantees on debt, I give you my top eleven predictions:

  1. The bond market will suffer its worst lost since 1994.
  2. Gold will surpass $1,800.00 per oz.
  3. The Democratic Party will lose the House and barely retain the Senate.
  4. The FDIC will face temporarily run out of funds to shut down bad banks.
  5. At least two states will default on their general obligation bond interest payments, roiling the municipal bond markets.
  6. Either, Tim Geithner, Lawrence Summers, of Ben Bernanke, will leave the administration before 2011.
  7. State and Federal taxes will rise in 2010.
  8. Inflation will rise above 5% at least one quarter in 2010.
  9. The yearly high for stocks will occur in the first half of the year.
  10. At least one western democracy will fail and be replaced with another democratically elected government.
  11. Residential real estate prices will drift lower YOY.

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