This is my forecast for the upcoming years. The 2008-2010 section is light on causes and consequences, but is merely intended to highlight a few key points about the situation. The 2010-2012 section has my direction forecast with some details as to why. It could and should be more in depth, but this is the first draft. Last section is just some random guesses. The document might have better readability in word. There are a lot of bears out there right now, especially in main stream culture. I see this as a contrarian indicator. I think we are headed towards a more fiscally conservative government and I think Obama is going to be far closer to the center for the rest of his presidency. This may actually produce a more effective government with surprising results. A government style similar to that of the Clinton years. 2008-2010 highlights The business structure was very aware of market conditions and was able to adjust to demand quickly. Companies cut production and well run companies survived. Our businesses operate on better information than previous generations and are able to make critical business decisions more efficiently. The Housing bubble was the cause of the collapse, and developments in the financing community made things worse. The housing bubble focused our economy on producing houses. Company outlooks were all built with growth in that sector as a major focus. The breaking of this bubble requires the country to restructure its growth. Companies had to reevaluate their direction and determine how to be competitive in a Global Marketplace. Since the influx of modern technology into business, America has needed time to detach itself from the suburban growth story and to understand how to best utilize technology to increase wealth and productivity. 2010-2012 Companies now have a better understanding of where growth is headed and have picked projects to achieve the companies growth plans. Companies have been attempting to fund these projects over the last several months to a year. However, this market is currently being crowded by treasury markets. I believe one of the main reasons for QE2 is the Fed buying t-bills to push out other banks so they will lend in other markets. This is why junk bonds have been rallying since the Feds move. I think we will continue to see movement out of t bills and into higher yielding bonds and equities. I think the market rallies and the economy comes back much quicker than most people are now expecting. Once growth starts I think the interconnectedness of the system will accelerate the recovery. The system has found a stable state and has been waiting in it for some time. As soon as you see some growth you will see quick acceleration. The outline Obama has put out for a tax structure revamp is very pro business and fiscally conservative. It broadens the tax base and cuts personal and corporate taxes across the board. It also would end mortgage interest deductions ending government manipulation of that sectors growth. This produces a large amount of revenue and ends government promotion of housing growth. This trims debt without increasing corporate or personal income taxes. Similar to the Feds action with QE2 reducing the current deficit equals an increase in funds available for other bond markets. These markets fund business projects which create jobs, produce national revenue, and more efficiently allocate resources. A change in tax structure should also greatly increase the number and profitability of projects. A changing national mood is most likely going to be present. A more positive outlook will be noticeable. Fashion trends will move in a preppier direction and there will be less movies about the end of the world. Partisanship will wane a great deal as Obama will be working with mostly republicans and center democrats to achieve his goals. 2012-? Internationally I think we will see markets open up in Cuba and North Korea sometime within the next five-ten years. Other markets may open but these two will be growth leaders. Cuba will help American growth, specifically in South Florida and the Gulf region. I think you will see less trade barriers and a re-commitment to Globalization. I'm not advocating any particular path, this is just my outlook on the future. I'd be interested in alternative opinions or thoughts on my forecast.
Where have you been since 2008, the markets are up almost 100% since that time and stocks up hundreds of percent, dozens of stocks up thousands of percent. Even GDP growth at 1-2% is quicker growth than where is should be with the fed throwing worthless monopoly dollars at the upside down economy. This economy is already seeing growth however that growth is nothing but an illusion. Take away all the trillions and bailouts by the fed and the economy would be sitting on a negative GDP rate, that's why all this recovery you see now is being done with easy money policies by the fed. Bubble ben bernanke only grows economies with asset bubbles!!!
I think we see further appreciation in equities. I also think we will see higher GDP growth in the upcoming years. I think it will be convincing growth and will be accompanied by job growth. The unemployment rate may be stagnant while several hundred thousand jobs are being created a month. This is due to how the number is calculated. As currently discouraged workers re enter the workforce the number calculated as unemployed will grow canceling out some to all employment gains. When the entire excess reserve is worked off you will finally start seeing a rapid decrease in the unemployment rate. That's my take on it.
I see this as a contrarian indicator. _______________________________________________________ Once again, more speculation based on old school thinking. Very few bears out there to be honest. Just the same ones in the spot light. Nevertheless, there are simple signs as to where 2011-2012 is going. Follow Japan. Watch their bonds and see what they signal. So far, as of tonight, they signal years of deflation. China is looking at raising rates again to curb inflation. Follow the money trail for the US MARKET, since 07 and the Trillion dollar printing machine, the stock market is climbing. Hummm, lets see, more printing, QE 1 and 2 and the market is going higher. Sure, we may see Dow 12000 or even 13000 if not higher ....as long as feds continue to print money. So, we have a rally built on hot air....a BUBLE. Watch to see if Spain ends up in bailout. Watch to see how Greece and the UK people react, more riots to spread through europe and possible signals of riots in the US by end of 2011? 2011 unemployment numbers will drop below 4000 per month but, jobs will continue to be lost and the "Real" unemployment numbers will rise at a slower pace, but rise at that. Inflation in China at around 5% and in the US? Gas heading to 4 or 5 per gallon with oil near 100 by summer? Wake up....we have only started to slide down the incline....what is beyond the incline is the cliff. Only time will tell if the US and EU will be able to dig their heels in, just before falling off the cliff. Odds are, it's gona get far worse before it gets better even if the DOW goes to 15000. And very few people with Wealth are in the Stock Market. I see the possiblity of Germany leaving the EU and shaking up the ECU. I also see the US taking a nose dive in 2011. I see Zero Job creation and I see more capital outflows into Emerging Markets, cash and some hard assets with Smart Money. The typical 9to5er will still be in his/her 401k as they have no choice and those with no wealth or little wealth will feel Energy and Food inflation harder than they thought.
My view is on the optimistic side. It assumes a lot of other things work themselves out. One example is my belief the EU will find a way to stay intact. The cost of it dissolving would be high on all parties. I'm about half as optimistic as you are pessimistic.
This belief is in line with what this article is promoting. http://www.bloomberg.com/news/2010-...th-exploring-commentary-by-william-pesek.html The history and future of Japan is the reason we are trying QE2. We know their strategy doesn't work and we are trying something new. The Fed is trying to push money off the sidelines and into circulation.
I also think you are going to see some hot real estate markets. They will be mostly in urban areas that have a more consistent demand. New grads are moving to these locals and will most likely not return to the suburbs in the numbers they once did. Tools such as zillow will make the market more efficient and construction growth will more accurately target real population growth. That kind of tool should help decision makers all the way from the top to the consumer make more informed and efficient decisions.
Simple question. Government is unable to finance itself. The only source of financing is the Fed. Monetization will continue or government must get rid of deficit completely within 3 years, which is impossible do you understand what will happen if Fed prints 1.5 trillion every year I bet in 3 years Fed will be abolished, US will be in depression and tea party president will implement gold standard
So how long would the markets and the broader economy have to be doing well to get enthusiasm on the long side? I don't think there has been enough yet for the general public to get on board, but how long do you think that takes? The countries mood can shift drastically very quickly. Maybe the new year will be a turning point?