Wednesday, December 30, 2009

GammaBoy's 10 Outrageous Predictions for 2010 - PART 1

2009 is coming to a close, so I thought it was time to give a report card on my predictions from 2009, and notwithstanding the mediocre grades, forge ahead and make some more predictions for 2010.

First, in this post, the report card....

A major riot in a U.S. city
The populace was chastened by Obama's election, government goodies, and a levitating stock market. There was some turmoil surrounding various state government cuts, like education in California, but even prime candidate Detroit has been relatively quiet. I underestimated the government ability to appease its citizens over the short-run, but I am not giving up on this prediction in 2010.

Shortages of Goods/Supply Chain Breakdowns
The credit turmoil of late 2008 and early 2009 subsided and everything held together. The only shortage I know of was Xmas superstar Zhu Zhu pets and that was certainly not what I had in mind when I wrote the prediction. I take some solace in the failure of this prediction in the massive revocation of credit cards facing many Americans, but it is still an epic fail.

Pensions are the #1 financial crisis story
Mortgages and foreclosures still seem to have the limelight as financial crisis story #1, probably followed closely by unemployment. Nonetheless, the visibility of the coming pension debacle has been raised during the year, and if you were one of the many Delphi retirees who awakened to see your pension benefits slashed by the PBGC, you are feeling it directly. This manner of failure of this prediction seems to be shared by many others in that I assumed the effects of the continuing financial crisis would become obvious much more quickly than they have. That does not change my underlying belief that this will happen. I prefer to consider myself early, rather than wrong. Dangerous for a trader, but no so much for an wannabe oracle with nothing more than pride on the line.

Inflation/Deflation mix
My Maslow theory seems to be holding up, although with so many different markets flashing different signals, it is difficult to assess this prediction precisely. Prices on many high-end goods have been slashed dramatically even as prices for more basic things like energy and food seem to have flatlined or increased. This will continue. It will be very visible in the real estate market, where homes above $1 million are basically unsellable right now, even as bidding wars have erupted for low-end foreclosures. Further, there is a core cultural change taking place in Americans' willingness to buy shit they don't need.

Russia goes nuts
To be honest, I threw this prediction in here, so I would have a necessary tenth prediction, although in retrospect, 9 predictions for 2009 would have had a nice ring to it. Anyway, it failed. Russia has been active undermining Ukraine and Georgia and throwing their heft around in the Middle East, but they have done it quite calmly and methodically. Going forward, I expect Russia to be more visible in efforts to capitalize on American weakness.

The Euro crumbles
The Euro ran roughshod over the dollar this year, but I still stand by my statement that "2009 will be the beginning of the end of the Euro as a functional currency". The very beginning admittedly, but the Euro is starting to slide, and I expect it to keep sliding throughout 2010. The debt situation, especially in East Europe, will start to pull pieces apart. And whispers have started of the possibility of countries leaving the Euro, although to be fair, Greece was not on my radar as an initial possibility.

Crude trades above $100 again
FAIL, but not EPIC
$100 did not happen, so strictly speaking I was wrong, but my basic sentiment was right: "my sense is that the recent fall in crude prices is a short-term anomaly and prices will rise again. Along with all other commodities actually." I am now leaning the other way and think commodity prices will test or blow through their recent lows. The world economy is in that bad a shape.

War and more war
Plenty of war as always, but no more than usual, with the tension in Mexico and Obama's expansion of Afghanistan potentially saving me from the "EPIC" modifier. Again, I think I was early here, rather than wrong. Actually, since these were predictions were for 2009, I was wrong, but you get what I'm saying.
Bonus prediction: Crime levels explode in the United States.
Crime has apparently decreased, not increased, despite our economic woes. I find that a bit of head-scratcher, but I completely underestimated the ability of the government to appease people with goodies.

Ron Paul movement strengthens
Finally, I can claim unabashed success. RP went from a fringey also-ran to a frequent guest all over television news, and the Tea Parties and their resulting controversy made it clear that Ron Paul ignited a more substantial political movement. It still remains to be seen if the GOP rejects this movement, embraces it, or is overwhelmed by it. Two interesting Congressional candidates that will help decide this question are Rand Paul, Ron Paul's son, who is leading in Kentucky's primary as a rank party outsider, and financier and fellow doomer Peter Schiff in Connecticut, who is trying to steal the party's nomination as they collectively assault scumbag Chris Dodd.
The party hierarchy loathes both candidates, and it will be curious to see if strong grassroots support for these candidates will be able to upend the party machine.

Secession discussions
Another success, even if I would have bet against it compared to some of my failed predictions. Texas was the first to gain notoriety for such blasphemous ideas, but in the wake of the health care legislation, "autonomy" movements have blossomed in a couple of dozen states. It's still all very fringy, but the talk will become louder as debacles in 2010 unfold.

All in all, a mixed bag. The prediction I was most certain about, a riot, was an abysmal failure, while the biggest reach, talk of secession, actually happened. Not that even complete failure would stop me from setting myself up for more failure in 2010.

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