2009; 2010 to 2019

Lessons learned from 2009:

1) When the Fed pours $1.2 trillion and the U.S. government pours $787 billion of financial booze into the economy, you get one heck of a party.

2) When banks can borrow from the government at below 0.5% and lend at 4+%, they can experience HUGE loan losses and still make TONS of money.

3) When you combine 1) & 2) above, you get a HUGE rally in bonds, stocks and commodities, even without fixing the underlying problems that caused the economic mess in the first place.

Educated guesses of what may happen between 2010 and 2019:

1) Bonds will turn out to be much less safe than most people think.

2) Stocks and commodities will climb, then crash, then rally, then crash. Commodities will do better than stocks during most of the upcoming decade. When everyone thinks commodities are the only smart investment and stocks are for idiots–which will happen before 2019–a new secular bull market in stocks will be born.

3) China’s experiment in command “capitalism” (not just a ridiculous oxymoron, but an invalid concept) will go form boom to bust, then from boom to wipe-out. Unless things change dramatically in China, it will end up looking like Japan over the last 20 years, but with civil war/revolution in the mix.

4) Gold will become a fad investment that will end in tears, but not until after dramatically out-performing stocks, bonds and other commodities for most of the decade.

5) The Middle East and South Central Asia will be a mess (that seems obvious…). At some point over the decade, oil prices will rocket because of conflict there, most likely due to problems with or in Iran. The influence of this part of the world will diminish toward the end of the decade as the issues of commodity scarcity fade into the background.

6) Japan will wallow in freakish misery for half the decade, then finally get to work solving its governmental debt problem and demographic issues (after multiple crises). It will lead the global bull market that starts in the second half of the decade.

7) Europe will continue to play fiddle as Rome burns. Western Europe will continue its decline as Eastern Europe continues its ascendancy, but both will become less important to the rest of the world (accept as a wonderful tourist destinations!).

8) The U.S. dollar will do much better than most think, then much worse, then much better. It will continue to climb because “everyone” thinks it must decline, then tank when markets fully grasp the U.S. debt (& obligation) to GDP ratio, then rally as policy changes finally emerge after multiple crises (like Japan, but over less time).

9) Canada, Norway and Australia will become more rich and powerful as commodities out-perform and each government remains more prudent than most.

10) Latin American and Africa will thrive during the early part of the commodities boom, but will succumb to the corruption that must result from a boom without the right political structure.

Happy New Year!
