Was looking at the TV and caught a glimpse of Bernanke marching into his FOMC meeting. With benefit of hindsight, it was pretty smart for the Bush to have appointed Bernanke to the post, with his background on deflation fighting, and being a outstanding student of Depression.
We have to give due credits to the learned academics that they would learn from Japan and steer US away from Japan's 10 years of moribund.
Then thinking ahead with Volcker appointed as the advisor to Obama, one may forsee that a high inflationary world awaits us, once this crisis fades. We would see a high inflationary world knocking on our doors sometime in 2010, 2011.
Long Term
My forecast for the economy would be:
Economy bottoms mid 2009, though unemployment rate may continue climbing. Stock market would confirm a bottom sometime in 1st Quarter 2009, with a good rally.
The equities would continue to slow rally into 2010 (the speed is slow at first). While economy stays at below trend growth, while inflation creeps quickly up.
Sometime in 2011 we would see the peak of the rally, with the end of the next bubble, the world would descend into the next Great Depression in 2012. (probably to conincide with the brewing of the WWIII, with a nuclear facet).
We should reach SPX at sub-500 level in 2012.
As for currency, USD may stage a recovery in 2009, while inflation rises. Commodities rise with USD, a double dose of poison.
2007 weak USD strong commodities
2008 strong USD weak commodities
2009 strong USD strong commodities
Short Term
For the coming Xmas, the politicians and Hank decide to play the tricks one more time with 350billion remaining of TARP funds.
they may stage the next market plunge to nudge the Congress into approviing the remaining 350billion.
Scanning through the markets commentary, I see a lot of Bullish views on crude, like Oil is oversold, hedge Gold position using Oil, Contango, etc.
Let us talk about Crude.
A lot of the Crude meteoric rise to 147 can be attributed to hedge funds rigging, and the China mopping up of crude during the SzeChuan Earthquake. The China has to fly 24 hours sorties of helicopters, airlift to deploy troops.
A oil trader was investigated for rigging. Short of any natural disasters, the demand for oil is not expected to rise. Most business in Asia is looking for a slump of activities after the January Chinese New Year. (Obama inauguration is on 20 Jan). Demand for oil is not expected to rise in the 1st Qtr.
Hence oil would probably fall further, into 30dollars. Hence all the bull talk on oil is just a setup for a bull trap.
Equally we would not expect any significant rally in Equities, or Commodities. The markets would hit another bottom somewhere in March 2009. Expect SPX to touch 600 then. HangSeng Index probably into 10000, now at 15000.
As for next week,
with 350 billion of TARP fund at stake, Hank may stage another market plunge to scare the Congress into approving. Obama is now on holiday in Hawaii, (as Nostradamus said, the prince from the seas). SPX may break or touch 800 one more time to confirm Nov bottom.
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2 comments:
Awesome commentary! I agree that commodities will rise in 2009 as inflation takes place but probably not the 1st quarter of 2009. Which commodities will be the best to jump into?
China would be on a infrastructure building spree, and policies supporting the residential housing market, industrial metals should do well.
Probably Gold and Silver would ride the waves as well.
Soft commodities as well.
I dun trade particular commodity, just the Indices and ETF.
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