Somehow predictions almost never work out at this time of the year.
So why do people even try? Mostly predictions are straight line extrapolations of "current trends" into the indefinite future.
And, of course that never comes to pass. Sooner or later, markets become over-bought or over sold, and the predictions seem to go haywire.
Reality seems to be cyclical not linear. So what to do?
I think that looking into BIG MACRO-TRENDS is a safer bet.
WHAT ARE THE BIG ISSUES? WHAT ARE THE BIG GLOBAL TRENDS THAT ARE WASHING ACROSS THE GLOBAL ECONOMY?
These LARGER TRENDS seem less likely to disappoint longer term.
Consider these:
1. GOLD. Remember how central banks used to beat up on gold? They feared the ability of gold to upset the monetary apple cart of central bank planning for more growth, or more wild paper asset speculation, whichever you choose to believe.
WELL, GOLD WON OUT IN 2004. FINALLY.
AFTER BEING THE LAUGHING STOCK OF THE FINANCIAL COMMUNITY FOR YEARS,
DECADES EVEN, GOLD HAD IT'S DAY IN 2004.
AND OIL TOO! BIG TIME...! .OIL IS SIMPLY ANOTHER HUGE AND IMPORTANT
COMMODITY LIKE GOLD, ALTHOUGH OIL IS MORE DRIVEN BY GLOBAL ECONOMIC
ACTIVITY.
Is it over for Gold and Oil in 2005? Probably not.
After being surpressed by the SECRET CULT OF SPECULATIONS AND BUBBLES at world central banks for years; there is still plenty of room for gold and oil to run in 2005. But there will be the usual set-backs and market epiphanies along the way.
2. The Dollar: DOOMED BY DUBYA!
The GLOOM AND DOOM of four more years of Dubya could drag the dollar down BIG in 2005.
I mean, the US Trade and Budget deficits, a/k/a "the twins," are TOTALLY STRUCTURAL NOW.
There are really no answers to the problem of "The Twins" on offer anywhere.
The Twins' sad parents, the Kongress and the Fed, have given up on them!
The only solution now is to let the world's central banks act the role of MONETARY POLICE. And throw the macro-economic textbook at the out-of-control delinquents!
This will be painful and probably very very recessionary!
3. THE MIDDLE EAST IS TOTALLY OUT OF CONTROL NOW.
The Iraqi elections are supposed to be another HOSSANNA MOMENT in the middle east.
But so was the Top-Gun Speech. The Capture of Saddam. And the "handing over" of sovreignty to the New American Puppets in the Green Zone!
NOTHING WORKED. AND NOTHING WILL WORK.
ONLY A COMPLETE WITHDRAWAL OF US TROOPS FROM THE MIDDLE EAST WILL
SATISFY THE MUSLIM MILITANTS NOW.
My suggestion to Dubya and the Neocons would be to set up American Bases in the smaller boutique states in the region like the UAE.
Why try to "take over" a large Muslim nation like Iraq, and perhaps soon Iran! It's nuts.
If a military presence is required in the middle east, put those bases in Afghanistan or in the small boutique states in the southern gulf region.
IRAQ IS A DISASTER AND IRAN WILL BE A CATASTROPHE FOR DUBYA IF HE DOESN'T ABANDON THE MILITARY OPTION FOR DIPLOMACY IN 2005.
My hunch: More slow low-grade military "burn" in Iraq for most of the new year.
And, I doubt that even the Crazy Neo-cons and Pentagon Likudnics have an appetite for invading Iran in 2005. After the Iraq Debacle.
Note also that the collapse of the dollar could be a major NEW factor in foreign policy in 2005! The US is a Global SuperPower BUT using OTHER PEOPLES MONEY to finance the operations!
If the world really wants to stop US imperialism? All they have to do is keep selling the dollar in 2005! That'll do it quicker than any demostrations, protests or diplomatic initiatives!
4. JOBS AND THE US ECONOMY.
First jobs ain't comin' back. Ok? Here again it's all STRUCTURAL.
The Cult of the CEO still runs Wall Street and the Korrupt Kongress.
And the CEO Cultists want more money for bonuses and stock options, not hiring!
Any job growth will be low-wage, low-skilled and no benefit type jobs. And remember, with a little churnning you can make 50,000 or 70,000 of those "jobs" each month.
THE AMERICAN BUBBA WORKER IS DOOMED! BUT, AT LEAST HE STILL HAS HIS "VALUES" AND JESUS'S PERSONAL "BUDDY" IN THE WHITE HOUSE.
SORRY BUBBA, BUT NOBODY EVER SAID THAT BEING STUPID WOULD BE EASY! NOW FEEL THE LASH OF REPUBLICAN COMPASSION! TALK TO THE WHIP IN 2005, BUBBA!
5. STOCKS AND WALL STREET.
The gradualism of the G-Man's rate hikes were intended to make it easy on The Street to transition from CARRY TRADE AND BUBBLE BACK TO REALITY based growth patterns.
It didn't work in 2004! Ok?
Bonds crashed, then soared! Thanks to who? Wall Street? China? Who?
It's still a mystery why the BIG SPRING BOND CRASH was another head fake.
Clearly, bonds will follow the Fed AT SOME POINT. WHEN? In 2005 I suspect.
The Carry Trade is still alive and well, but it's getting old and tired.
And, there is always the G-man's promise of more rate hikes to come.
Only now the G-Man might be looking more at the dollar, than at what Kudlow and Cramer are saying about him on CNBC each night!
In 2004, the Dow was punk. Small caps soared on the ever present and foolish hope that the "Next Microsoft" is your's for the finding.
But that will end in 2005. The big caps were and are punk because they are NOT CHEAP even now.
EVERYTHING ON WALL STREET IS STILL "BUBBLE PRICED." OR, PRICED "AS IF" THE BUBBLE WAS "COMING BACK SOON."
CALL IT THE "SECOND COMING" PRICING SCHEME IF YOU LIKE, OR IF YOU'RE A "BORN-AGAIN."
THE DECLINES THAT SHOULD HAVE HAPPEN AFTER THE BIG BUBBLE BUST OF 2000
WHERE NOT ALLOWED TO HAPPEN!
GREENSPAN WENT TO COSMIC LEVELS WITH EVER LOWER RATES TO ARREST THE
NORMAL POST BUBBLE DECLINES!
THE G-MAN TRASHED EVERYTHING TO SAVE HIS BELOVED "NEW ECONOMY" BUBBLE!
THE BUSH TAX CUTS AND SPENDING WERE BLESSED BY THE G-MAN!
THE DOLLAR WAS ALLOWED TO PLUNGE!
THE TWIN DEFICITS WERE ALLOWED TO SOAR!
REAL ESTATE SPECULATION WAS RAMPANT!
AND CONSUMER DEBT IS NOW TOTALLY OFF THE CHARTS!
IN 2005, THE ECONOMIC CHICKENS ARE GOING TO COME HOME TO ROOST;
AND THEY ARE GOING TO FIND AN 800 POUND GORLLIA WAITING FOR THEM IN THE HEN HOUSE!!
AND THAT GORLLIA'S NAME WILL BE: "MACROECONOMICS!"
Postscript: These are my "predictions" for 2005. Let's hope that some of them are wrong! Enjoy. And stay tuned for more during the New Year.
