Thursday, January 1, 2009

New Years Resolutions & Predictions

Hooray!! 2009 is here and we have finally pulled the curtain on 2008 -- the single worst financial year in American history (measured by losses in stocks, bonds, and real assets).

Think of all the surprises that we witnessed in 2008: The collapse of oil prices after a rally of historic proportions. Oil climbed to 155 in July and finished the year at 45. Stocks reached an October 9, 2007 high of 14,160, began 2008 slightly above 13,000, rallied to finish 2008 at 8,776 down 34 percent for the calendar year. Most other indices were far worse, especially in non-US markets. Barrack Obama, a minor candidate with no hope of defeating the Hillary machine, is now the President-elect. Elliot Spitzer's dark horse chances to win the Democratic nomination for President took a walk on the wild side. Bernie Madoff's absolute return strategy proved once again that the risk free rate is not 8 to 12 percent as the hedge funds would have us believe. A Republican Administration spent $ 350 billion bailing out Wall Street firms and GM and Chrysler. A conservative Republican chief of the Federal Reserve expanded the Fed balance sheet to historic proportions, opened the discount window to virtually anyone and everyone, and finished the year with a an open ended plan to buy mortgages directly from the market. The big five investment banks either became commercial banks (Goldman, Morgan Stanley) or got sold to commercial banks (Bear Stearns, Merrill) or went bankrupt (Lehman).

Think of the surprises that we didn't see: 1) Unemployment never reached seven percent; 2) The foreclosure rate did not reach one percent of American homes; 3) Inflation did not reach three percent or fall below zero percent; 4) Iraq did not descend into chaos; 5) Hugo Chavez did not win his mandate to perpetuate his rule in Venezuela.

So, be of good cheer!!

New Year's Resolutions:

1) Finish book about the financial crisis
2) Gain zero pounds
3) Spend less money
4) Figure out what happened to the stock market(s) in October and November of 2008
5) Enjoy life

Predictions:

1) Big stock market rally in January and February
2) Home prices hit bottom in Spring of 2009
3) Unemployment hits high of 8.5 percent in April of 2008
4) Credit markets improve dramatically in the Fall of 2009
5) Endowment losses much heavier than earlier reported; colleges and universities under major fiscal pressures
6) Card check fails in the Congress
7) Hillary and Obama at odds before year ends.
8) Chavez overthrown in Venezuela, Iran and US reach rapprochement, US and Cuba normalize relations
9) Obama maintains popularity during first year in office
10) Prof Burton reaches quarterfinals of US Nationals in his age group (not telling)


So, there you have it...enjoy!!

1 comment:

Aybab said...

Happy new year!

Looking forward to 2009, can you offer a perspective on the outlook for buy-side firms like private equity and hedge funds?

The Boston Consulting Group had recently come out with a 2009 report that had a very bleak forecast for private-equity firms:

The consultants expect 50% of all companies backed by private-equity funds to default on their debt; as many as 40% of buyout firms to shutter their own operations and only around 30% of partnerships to survive intact through the next few years; $1 trillion of losses from any PE shakeout; and that the few PE portfolio companies that are sold will go for fire-sale prices. (source: WSJ - Deal Journal)