December 30, 2008

Global Market Comments for December 30, 2008
Featured trades: (MS), (GS), (WM), (BS), (FNM), (FRE), (AIG), ($GOLD), (WTIC)

I thought I would resend you the market forecasts I sent a year ago, in case you missed them.

1) A young black guy you never hear of, whose middle name is Hussein, will be elected President in a landslide, trouncing Hillary Clinton.

2) The Dow will crater 6,000 from the current level of 13,500 to 7,500. Economic growth will decline from a current 5% rate to minus -10% next year. After a hugely success summer Olympics, China's growth rate will collapse from 12% to zero.

3) The subprime crisis will explode, and incinerate all debt markets, driving Lehman Brothers into bankruptcy. Shareholders in Washington Mutual (WM), Bear Stearns (BS), Fannie Mae (FNM), Freddie Mac (FRE), and AIG Int. (AIG) will be wiped out. The US financial system will be nationalized.

4) Morgan Stanley (MS), now at $60, will plunge to $5, but CEO John Mack will keep his job. Goldman Sachs (GS) at $200, will drop below its $60 IPO price.

5) Yields on the best grade junk bonds will rocket to 25%. The Fed will lower the funds rate to zero and the ten year bond will trade at 2%.

6) Crude (WTIC), now at $80, will nearly double to $150, then fall off a cliff to $30. Gasoline will go from $5/gallon to 99 cents. Investors will go gaga over alternatives in the first half, then develop amnesia in the second half.

7) The dollar will end the year as the world's strongest currency.

8) The Japanese will emerge as the world's best managed banks.

9) The prices of all commodities will double in the first half of the year, and then drop by two thirds in the second half.

10) Despite all of this mayhem, the traditional safe haven of gold will drop like a stone.

Merry Christmas from the California State Hospital for the Hopelessly Insane :)