Our 2009 Predictions
Roger Wiegand
Dec 22, 2008
"We think we now have enough data from both the fundamentals and technicals to
make some serious forecasts and predictions for 2009. While 2008 was a nasty
year when lots of things imploded, they are far from being repaired. Treasury
Secretary Paulson told us this week there are no more surprises, which tells me
we haven't even discovered but a small portion of this monster derivative mess.
His ripping-off of the taxpayers to the tune of $700 billion is only a warm-up.
However, the larger question for traders and investors is what could happen
next and when.
In the following report we take the key global economic points and suggest the
outcome for 2009."
-Traderrog
The most important news for 2008 was the destruction of the big global banks'
net worth and their badly wounded ability to conduct normal business and make
market-moving loans. Ben & Hank's bailout only helped the bad-boy banks
reliquify themselves to remain somewhat solvent and stay in business. They are
doing nothing to extend credit to any business enhancing western or global
economies. The 2009 result will be no significant banker lending, taking more
bailout money and sweeping additional bad loans of all stripes under the
banker's rug and hiding the rest in back rooms.
The largest surprise in our view was the massive disaster at insurance giant
AIG. Despite numerous injections of bailout billions, AIG remains in very
serious trouble hanging on by their proverbial fingernails. The 2009 result
will be a surprise crash and failure of AIG frightening the world at large
causing ripples of failures throughout western and Asian nations unable to
conduct business without mandatory insurance policies. Most folks have no
comprehension as to the monster fallout this will create. It is in our view
literally immeasurable, and this is why Paulson handed them so much money.
Our new president is determined to hand out $860 Billion to One Trillion
dollars in a Herculean effort to literally buy a new economic recovery. While
some of his ideas are noble indeed the overall plan will have little effect and
Great Depression II shall take hold in 2009 with crashing stock markets in May
and September-October 2009. We think the worst of the worst hits in later
September 2009.
During the spring of next year we see:
(1) A second larger wave of residential housing mortgage failures; (2) The
first big wave of auto loan failures and repossessions; (3) Over $40 billion in
credit card defaults, smashing the bank lenders; (4) The first wave of
commercial mortgage failures and foreclosures on shopping malls, office
buildings and other commercials; (5) And finally, the grand smashing finale of
CDS Credit Default Swaps originated with No margin money or down payments! We
heard today the total is 500 trillion! I cannot even fathom that number. These
five converging train wrecks could take the Dow from a dead cat bounce of
10400-10800 back to 7250, or even 6600, or 5600.
Shares traders and investors have one more solid quarter, in our view to regain
some stock market losses on the forthcoming Obama Trillion Dollar handouts. We
think the rising share markets will help most all sectors gain some recovery
and provide the illusion the bottoms are in and new bases found. The stark
reality hits home after shares peak in April or early May taking an
unprecedented selling high dive scaring the wits out of Americans and the
watching world.
Even with these events and rising unemployment and social problems, economic
observers and analysts could continue to plead the worst is over, the bottoms
are in and a fine, new, shiny world of trading and investing in our bright
economy lies just ahead for the fall of 2009. Then, in later September and
early October, the New York, London, Tokyo and Asian markets take a monster
crash. How low is low and how bad can it get? We think the Dow could end-up on
November 1st, 2009 anywhere from 5,600 to a low of 3,000 or even 1,500. One
guideline will be a falling overshoot of PE's on our largest, so-called
international corporations posting lows of 4 to 7. Today, many of them are near
18. What does this tell us about the severity of our projections?
Unemployment nationally in the USA is now touching 16%. The officially posted
number is somewhere near half of that. By the fall of 2009, American REAL
UNEMPLOYMENT WILL BE NEAR THE ALLTIME 1930'S DEPRESSION HIGH OF 25% UNEMPLOYED.
SADLY, THAT IS NOT THE WORST AS IT GETS MORE DIRE. WE PREDICT REAL, USA
UNEMPLOYMENT REACHES 30-40%. IN THE RUST BELT STATES OF MICHIGAN AND OHIO,
WHILE 40% IS NOT UNREALISTIC.
Several European nations have larger, more established social safety nets for
the unemployed. In the USA, local, regional and national authorities are not
nearly as prepared. The American federal government departments for food stamps
and the job of providing welfare provisions will be overwhelmed. This will be a
Katrina event for the hungry citizens of the United States. Urban areas will
see skyrocketing crime and in parts of some cities, life could become totally
uninhabitable.
The last report we've seen on those receiving food handouts and related welfare
amounted to 11 million USA citizens with 700,000 children going hungry each
day. We suspect the true amount of those needing food help will rise to
35,000,000 with an untold tragic number of them being little, defenseless
children. Governments remain in denial and are not prepared for this national
emergency whatsoever. As things worsen, food riots and others with violence
aimed at the "haves' are common.
The number of bank failures over the next three years will be in the thousands.
In addition, the US Dollar's valuation could break recent lows near 70.00 on
the index, dropping to 46.00 by 2011 or 2012. Inflation or potentially
hyperinflation is quite real as the Federal Reserve and US Treasury strain to
print and circulate cash to prod our stalled economy. It is simply not working
even with the dramatically lower interest rates of late. Benny Bernanke is out
of rate cut running room.
Consumers are broke and going broker. Households of interrelated families are
doubling and tripling up even with several employed members being under one
roof. Basic costs of rent, mortgage payments, health care, food, utilities and
taxes are too much to bear on stagnant and in some cases falling wages. In some
areas of America, there are entire subdivisions of homes totally abandoned or
existing with only a hand full of occupants. The millions thrown at lenders for
new mortgages are not getting through to buyers, as there are fewer of them. We
are witnessing system breakdown.
Municipalities and states are sinking into a spending, debt-ridden morass. It
was reported today that 22 of 50 USA states are in serious budgetary trouble.
California is one of those in terrible condition and Michigan is already
technically broke as are many of her cities. Detroit will file bankruptcy in
2009 and there will many other surprises as well. There will be a cascade of
bond defaults and the outcome will cap the ability of these cities, states and
counties to borrow ever more.
The shining light through all of this is the faster we find the bottom the
faster we can recover. Sadly, the recovery process will take years. Futures and
commodities traders should continue to earn steady profits as the stock markets
slide into oblivion for years. We see no recovery until 2015.
Trader Rog - Roger Wiegand
Editor, Trader Tracks
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