Wednesday, January 7, 2009

2009 Expectations and 2008 Reflections

Bye bye 2008 and good riddance. 2008 was a bad year for the Economy to say the least. The S&P 500 index dropped 38% and the prospects for recovery in 2009 are non existent. Seems like leadership is doing their best to destroy America using the Japanese 1990 playbook. In this post I'd like to discuss 2008 in review, 2009 Trends that may develop, and How to profit in 2009.

2008 was a very interesting time to live through to say the least. We are living through the second great depression or at best the worst recession since the 1930's. 2008 saw the real estate market collapse, the failure of a few investment banks, and a trillion plus dollars of bailout money thrown at companies. America certainly doesn't seem like a capitalist society anymore. I warned my friends of Japan in the 1990's and that stock markets can go down for years. I got out of the stock market on March 17th the day JPMorganChase bought Bear Stearns for $10 a share and I felt like I was late to the dance. Not many people listened to me and most of my friends are expecting the market to rally back to previous levels. I say good luck with that and 2009 will be just as bad.

What I expect to develop in 2009-2010 is the economy will deteriorate further and unemployment with go to double digits. I expect the US Long Bond will collapse and the yields will move higher. This environment will be similar to the 1970's with the Burns FED. The US will start to save more because credit will be less available especially since the home equity refinance will not be an option. I expect the S&P 500 will move to around 600 and possibly even lower.

To profit in 2009 I would stay in cash or cash equivalents. In these types of economic conditions the best thing to do is preserve capital. Remember it's not what you go into a bear market with, it's what you come out of a bear market that really matters. Wealth preservations is key. Take Care and God Bless.

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