The following are my predictions for 2010. Of course these are just my predictions and by no means investment advice. For these predictions, I do not pretend to know the exact dates, I just believe they are coming. You should only use these as a means to do further research if you believe there is any validity to them.
1) The Dow and S and P 500 will have a major correction this year. With the unprecedented stimulus that took place in 2009, it is no wonder that the general equity markets rebounded strongly coming out of March. This rally has been strong percentage wise but lacking in volume and fundamentals. So, I would simply say this: Be prepared to see the Dow drop to below the 9,000 level. Of course the Dow could run up first, past 11,000, before taking a serious breather. The wild card here is that the Federal Reserve continues to stimulate the economy and the market gets pushed higher. As I write this there is hardly a bear in the woods, which leads me to believe this correction could be coming sooner than later.
2) Gold will hit $1650 an ounce. With unprecedented money printing that will continue into the foreseeable future, look for gold to reach another all time high this year. The US Treasury will be facing increased entitlements, lower tax revenues and will ultimately need to turn to the “printing presses” once again in 2010. Additionally, Central Banks around the world are becoming net buyers of gold.
3) Silver will reach $35 an ounce. As gold reaches new all time highs, people will finally see silver as a more affordable option to participate in the precious metals market, which leads to the next prediction.
4) Precious metals (Buying Gold and Silver) will become more acceptable and mainstream among regular investors. The entry this year of new investors to this market will not be like the tech bubble (94-00) where people over allocated (50%-70%) of their portfolios to the technology sector, but a more rational means of investing 10-15% of overall portfolio assets into gold silver as insurance. At some point gold and silver will become irrational and go into the blow off phase but I don’t see that happening in 2010; that will most likely occur sometime in 2012 and run for 2-3 years.
5) Unemployment will reach 15%. This will be the result of more job cuts in the private and public sectors. In the private sector, many company’s are completely restructuring their business models and becoming leaner. While the worst may be over in terms of the initial shock, corporations are learning how to get by with less. If you haven’t noticed, the number of retail outlets like Blockbuster and Starbucks are closing stores “left and right.” This is the result of consumers cutting back as they are paying down debt and saving more. This is the quintessential vicious cycle.
6) Self-Employment Trends Will Boom – As unemployment increases people will begin to venture out and seek control of their personal income as they grow leery of counting on a job for financial stability. People will also learn to ignore the spin coming out of Washington D.C. This will be an emerging trend in 2010 but hit full force as we head into 2011-1012. I also believe that 2012 will be an excellent year for the economy but that growth will come from industries that just aren’t so obvious today.
7) Possible “Black Swan” Terrorist Event - This is a prediction that I hope I am wrong about. As Gerald Celente always says “Current Events form Future Trends” If you’ve noticed the individual terrorist attacks are on the rise lately: November shooting in Fort Hood, recent Detroit airplane bomber, then you realize that these events are on the rise. This just tells us that eventually, there will most likely be a much larger attempt/attack sometime in 2010.
Closing Note: One of the things you should be very careful of today is the prevalence of doom and gloom talk. There are some very “dark-minded” people who are convinced the world is coming to an end. I understand why they believe this but in many cases these people actually want things to fall apart completely. What they don’t understand is the concept of “Creative Destruction” which was first introduced by the Austrian economist Joseph Schumpeter.
The term is used to describe the process of transformation that accompanies radical innovation and occurs after certain companies and/or trends hold a monopoly on industries for long periods of time. Companies that once revolutionized and dominated industries – for example, Xerox in copiers or Polaroid in instant photography - have seen their profits fall and their dominance vanish as rivals launched improved designs or cut manufacturing costs. I see the investment banking and mega banking industry getting turned on their heads (but this will be a prediction for 2012). Also, we are coming out of the largest debt-cycle ever. These excesses have to and are being worked off. The after-math is like a hangover and there is no way of getting around the pain. But eventually, this will run it’s course.
I will sum this us with one of my favorite phrases which is the key for success in 2010: Adapt of Get Left Behind. You don’t have the convenience of letting negative talk run you down. The “smart people” are on to the next great things…the things that will create the current events and future trends of tomorrow.
I did not forget about real estate. I am working on a post that will cover Real Estate (including commercial) and the level of overall debt. I am still doing research and hope to post these next week. Have a great 2010.
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