Happy New Year!

Wishing everyone a festive and joyous new year and hope you all have a drink for the coming 2010.   I would be lying if I were to say that politically speaking 2009 was a good year.  America has suffered from a massive erosion of freedom, confiscation of more private wealth, expansion of government at both the federal and state level.  Of course none of this is particularly unique to 2009, but the rate in increase is hard to ignore. 

From my humble vantage point it would appear that 2010 will be a scary, strange and exciting year.  While it is always difficult to prognosticate, below are several facts that are important to remember.
  • Debt levels are still out of control.  Due to the policy of the Bush/Obama administration virtually no contraction has taken place and we are deeply in debt.  Not only America, but the entire civilized world. 
  • Stocks are inflated.  The current stock market is a manifestation of a liquidity pump engineered by our central bank and commercial interests afraid to lend.
  • Real estate is still very vulnerable.  Despite 30% slides in some regional markets, many mortgages are still fundamentally broken with California/Arizona/Nevada drowning in Option ARMs.  In other parts of the country overly expensive interest payments are clashing with people's incomes.
  • Government is growing.  Whether it be TARP, 787 Billion stimulus package, HAMP, CforC or the coming ObamaCare the spending levels of government have exploded. 
There are more, but these should suffice in painting a large picture which I believe is important to keep in mind in the face of "green shoots".   Here are several important predictions for 2010.

  • Long term rates will climb.  Our debt levels cannot inspire confidence, nor should they.  According to several sources, it would appear that foreign appetite for our debt has virtually vanished.  This spells higher rates for long term rates.  In other countries like Ireland, Spain, Greece, Lithuania, Ukraine and others in EuroZone crushing debt implies sovereign defaults.
  • Stocks will correct sharply.  Because stocks have climbed for no particular reason and are sporting P/E ratios resembling a growing economy, their upward trajectory is limited.  A falling stock market is actually helpful for our government because a flight to safety could be a boost to treasuries!
  • Housing will continue to decline.  Just like 2007/2008 experienced a wave of Subprime maturity, 2010 will experience a wave of OptionARM maturity and with climbing long term rates the ability to refinance will be inevitably crippled. Expect more foreclosures in certain areas of the country and tumbling values.
  • Democrats will be punished.  While America has fundamentally shifted left by electing Obama and granting Democrats majorities in both houses buyer's remorse hit hard.  While the GOP is licking it's lips at the prospect of reclaiming the House the majority of American's interests will once again be neglected.  Despite the popularity of the Tea Party movement there are still too many emotional Americans willing to impulsively swing to what they perceive to be the opposite of today's Democrats.  Sadly most of the GOP is nothing more than a wolf in sheep's clothing.  There are hopeful signs like Rubio in Florida, Toomey in PA and Dodd's/Reid's paltry ratings the overall sentiment is depressing.  We still suffer from a largely uninformed voting populace and things have to regrettably become much worse before Americans realize the GOP is just Democrat-lite. 
On that cheery note, time to celebrate!   Thanks for reading everyone!

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