Curried Wealth Building
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January 4, 2009

Predictions

 
 
 

This year I want to start with my predictions.  Obviously, no one can know exactly what is going to happen, but I believe these are some good guesses given the current circumstances.  As always, these predictions are worth every penny you paid for them, and I assume no liability should you decided (foolishly) to follow them. 

 

Economy

 
 

With the added stimulus the government is going to lavish on the economy it would be easy to say that things will turn this year.  However, I believe that we are past the tipping point and the only effect of more spending will be is to delay the inevitable collapse a couple months.  The most likely outcome this year is further recession with a good chance of entering a depression.  Remember that the government controls the GDP numbers, which signal recessions/depressions so anything could happen.  Bottom-line; believe your eyes, not the government.  When restaurants and stores are half empty, it’ a recession.

 
Stock Market

 
I see the stock market going up for a couple months or so and then once Spring hits I see another leg down, perhaps hard.  The problem for the stock market is the economy is horrible and without earnings stocks can’t really go up too much.  By the end of the year I look for something below 8000 for the Dow and below 800 for the S&P 500.  Too much risk here for my money.

 
Precious Metals

 
 
I see this as the one sure thing in the coming year.  Gold has made gains in eight straight years, and I don’t see that changing now.  Silver, finally had a down year, but I see it taking out at least $15 an ounce this year.  Gold is scarce and comes with huge premiums and/or waiting periods.  This will be the go to investment as the paper markets continue to collapse.

 
 
Congress
 

CONgress will continue to act in an unconstitutional manner and with complete democratic control the nonsense will likely reach new heights of idiocy.  Look for the give-aways to continue and even be expanded/accelerated as the economy’s nose dive quickens.  Continued erosion of personal rights will only add to the misery and quicken us down the road to socialism.

Insert cartoon from Jesse

 
 
Inflation/Deflation
 
 
This is a hotly contested argument amongst the money experts and I think it really doesn’t matter.  In fact, I believe we will continue to have BOTH.  It will depend on the asset class.  Precious metals, food, oil, and some other commodities will inflate in price while housing, stocks, and bonds will deflate.  Gold will perform well in either scenario.

Housing
 

Housing will not bottom until at least 2011.  This is based on resets in mortgages that were made a couple years ago.  As these reset the “owner” will not be able to afford the new payment and with the loss in value he will be out of luck. (Barring a government hand out)  My advice remains to buy a house now only if you can afford it easily and won’t mind seeing the price go down another 20-30%.  My best advice is to rent.

 
Dollar
 
 
I think this year will see the resumption of the dollar’s downtrend and a likely new low.  This will obviously help the precious metals and all commodities for that matter.  The dollar’s days are numbered but don’t count it out just yet as the death may take more than one year.  Avoid dollar-based assets.

 
Interest Rates

 
This is a very tough area to predict.  There is so much government intervention that it won’t necessarily be based on fundamentals or facts.  The truth of the matter is that interest rates should be much higher now based on the lousy condition of the country’s financials.  The Powers that Be couldn’t afford higher interest rates so they drove them down by out right buying of treasuries.  (Monetizing the debt) 

I believe the plan now is to control interest rates at a very low rate to let as many “homeowners” as possible refinance.  Unfortunately, this will probably leave them as serfs to the state.  Backing the mortgages will leave most citizens at the service of Big Brother.  Avoid this at all costs.

 
Oil/Gas
 

Use this current gift of low gas prices to get things done that were too expensive when prices were higher.  Any long distance road trips or travel plans should be done sooner, rather than later.  The price of oil will gradually make its way back up to at least $70 this year and maybe even higher.  Peak oil is a fact so make vehicle purchases and home locations with that in mind.

 
Other Commodities
 

I am not sure what commodities in general will do but I won’t be making any bets on them spurting higher in the next year.  The global recession (depression?) will deepen and this will not be good for consumption.  China’s growth has come to a screeching halt and there is talk of outright contraction, an absurd idea, just 6 months ago.  Inventory levels have risen in all but a couple commodities (see below) so look for price pressures to continue.

The one exception to all this may be in the food area.  Grains and other “softs” have unimpeded fundamentals for growth as inventories are at all- time lows.  This should propel food prices higher and shortages are not out of the question.

 

United States

 

State and local governments, with a shrinking tax base, will really start feeling the pain.  Look for employment cuts and perhaps large cuts in spending/expansion.  The days of unbridled growth in government are over.  As the pain deepens watch for civil discord and unrest to spread. 

 
What to do

 
1.     Make sure you have at least 10% of your assets in precious metals.  This includes metal and mining stocks. 

2.     Pay down your debt.

3.     Have at least 1 month of CASH living expenses in a place you can get to easily. (not a bank)

4.     Sell your gas-guzzling vehicle now while the gas price is lower.

5.     Stock pile some food that has a long shelf life.

6.     Spend less than you make.

7.     Invest in the general stock market at your own peril.

8.     Get more money into your control and out of the rule makers.  (IRAs, Roths, and retirement plans can easily be changed to your detriment)

9.      Increase your skill set.

10.   Spread the word.

Have a Great New Year!