2010 Predictions
Most financial bloggers do this. So I'll do it too.
1) I see 2010 looking a good bit like 2008. Deleveraging.
2) The U.S. Dollar Index makes it's way up to 92 or so, with a stop and a correction that takes place at around 82 or 83. The Euro heads down to 1.20 or 1.15 or so against the dollar. Parity between the two is not out of the question.
3) Short term treasuries hang in there for the most part. However, the longer end of the curve in notes and bonds doesn't. Rates rise but I'm not putting out any predictions on what the yields will be, as different policies around the world may affect what treasuries do and policies can be so insane, that they just aren't predictable. I don't think the bond bull is dead yet. But it's older and needs some time to rest.
4) Gold and silver get a pretty decent correction. Silver takes a harder hit than gold. Gold corrects below $1000, maybe as low as $900 or $850. Think of this as deleveraging just as what took place to 2008. However, global instability (war and economy) keep gold from dropping as far as many other commodities probably will.
5) Commodities in general take a hit. Countries with commodity driven economies see their currencies take a big hit. Oil gets cut in half the first part of this year.
6) China's property bubble brought on by insane increases in debt slows. China repeated what the U.S. did from 2003 to 2006. By the end of the year, it becomes obvious to all that China is entering deflation. Many of the analysts and pundits who claim China is going to be the next superpower start backtreading on their predictions, as they start to realize that same was said about Japan 20 years ago in the co-dependent economic relationship Japan had with the U.S. at that time. China is following in the U.S. and Japanese footsteps. It's just a few years behind.
7) Europe is in worse shape than the U.S., especially the banking sector. It shows greatly in the Euro this year.
8) Baltic states default in mass. Or at least get bailed out.
9) Many U.S. states and municipalities end up relying on Federal aid to keep functioning. California, New Jersey, and Michigan immediately come to mind. Illinois, Rhode Island, and Nevada have major issues. Many state governments have major spending cutbacks, essentially reversing any of the stimulus the Federal government has provided thus far. LOL.
10) Japan, the second largest economy in the world, is just screwed. And everybody realizes it in 2010.
11) The FDIC starts closing smaller and regional banks much more aggressively. We see a return to all banks taking write downs due to FASB accounting changes since there will be more things that will not be off the balance sheet in 2010.
12) Oh what the hell... Wells Fargo fails in 2010. Probably not that likely but if there was a big one to go, that's the one I pick.
13) Small company bankruptcies continue to increase in 2010.
14) Unemployment rises, although slowly by official numbers due to the BS at the BLS. U6 might explode though.
15) Housing takes a tumble as interest rates rise. Foreclosures rise as the ARM resets come back in force from 2010 to 2012.
16) The U.K. is screwed.
17) I'll go way out on a limb on equities. The high for the first half of the year will be 1175 on the S&P 500 and will occur on January 15th. I'll take the bet that it's the high for the whole year too.
18) Talk of cutting the Federal budget starts to heat up at the end of 2010, as a U.S. default in 2011-2012 starts to look likely.
To really sum it up. I see conflict heating up around the world in the second half of 2010. Gold corrects the fist half of 2010 due to deleveraging again but gets a bid the second half of the year. I see the same for the long end of the curve of U.S. treasuries. I see oil getting cut in half in the fist part of the year only to be resurrected by the global instability, much in the way gold might be as well.
The only real difference I see between 2008 and the first half of 2010 is that long dated treasuries don't get a bid this time around during the deleveraging due to government spending. There ends up being very few places to hide this time around except for cash itself. Most of this year ends up being about looking for safe havens. I see the dollar and short term treasuries as being the safe havens most of the year with gold coming in to play later as a safe haven again after deleveraging in it is completed. And maybe oil enters in to the equation later in the year.
The real question for 2010 is going to be gold. Just how big of a bubble is it? Will it collapse or will the potential global instability keep it rising?
