The Sunshine Report

9 Predictions for 2009

Set forth below are my pre­dic­tions for 2009. Let’s hope that at least some of them come true.

1. Early in 2009, the banks start lend­ing again

   In Jan­u­ary, the banks will real­ize that they can­not avoid lend­ing for­ever. The Fed­eral Reserve will finan­cially pun­ish any bank that refuses to lend by manip­u­lat­ing inter­est rates so that banks that hoard cash lose money. From the indus­try ashes a bank­ing prophet will emerge who will preach the gospel of pos­i­tive net inter­est spread through respon­si­ble lending.

2. The Obama Admin­is­tra­tion passes the largest fis­cal stim­u­lus pro­gram in the his­tory of the United States
   

   The fis­cal stim­u­lus plan will be big­ger, bet­ter and more socially respon­si­ble than any­thing the Fed­eral Gov­ern­ment has ever done before. When the pro­gram starts to kick in James Carville will declare Obama has earned his place in his­tory as “one of the greats” and will sug­gest he should be imme­di­ately added to Mt. Rush­more. Oth­ers will declare that the fis­cal stim­u­lus plan proves that Obama is a Marxist.

3. GDP falls in Q1, sta­bi­lizes in Q2, begins to rise in Q3 and is in full recov­ery by Q4
   

   Despite most econ­o­mists pre­dict­ing Depres­sion 2.0 and the “end of the world as we know it”, the econ­omy will begin to recover in 2009. How­ever, the day after inau­gu­ra­tion, right wing talk show hosts will declare the begin­ning of the “Obama Depres­sion”. When the econ­omy starts to do bet­ter, the same right wing talk show hosts will pro­claim that Bush was right when he said the econ­omy was “basi­cally sound” and will give Paul­son credit for engi­neer­ing the recovery.

4. Defla­tion fears give way to infla­tion fears
   

   It turns out that the Fed­eral Reserve wasn’t able to un-print money any­more than Eve could un-eat the apple. Econ­o­mists will be relieved that they can pre­dict Hyper­in­fla­tion 1.0 and the “end of the world as we know it”.

5. Europe and Asia do worse than the U.S.

   If you think it is bad here, just go over there. Jean-Claude Trichet will be exiled to the Island of Elba for start­ing his 2007 pre­emp­tive eco­nomic war on infla­tion. Tichet won the war but lost the econ­omy. Lib­eral EU politi­cians will real­ize that exile is very “19^th Cen­tury” and Elba is really kind of nice (good wind­surf­ing, scuba and cute female Elbans). Trichet will escape but will be recap­tured and made to work in the ECB audit depart­ment (after all reg­u­la­tory audit work is worse than exile).

6. Hedge funds, funds of funds and other money man­age­ment prod­ucts are reg­u­lated and taxed.

   Dis­traught for­mer fund man­agers still won’t be able to accept that Mad­off killed the golden goose. Soon, no one will be able to find an investor that actu­ally admits to ever hav­ing put money in hedge funds; it will be as if the indus­try never existed. A rumor will spread that before the end of the Cold War hedge funds were invented by the Soviet Union to destroy Amer­ica. Ann Coul­ter will say that Democ­rats invented the hedge fund indus­try to destroy the Bush legacy.

7. Obama makes enforce­ment of secu­ri­ties, bank­ing and con­sumer pro­tec­tion laws a priority.

   Wall Street bankers will burn Sarah Palin in effigy. After all, if she hadn’t blown the Katie Couric inter­view things could have been dif­fer­ent. Aspir­ing white col­lar crim­i­nals will have to deal with pros­e­cu­tors and reg­u­la­tors who actu­ally try to do their job. 20 and 30 year old for­mer invest­ment bankers will be found in bars all around Tribeca try­ing to fig­ure out what to do next. Grad­u­ate school will be out because they will all already have MBA’s and their par­ents will refuse to pay for more school. Some will get “real jobs” and hate it.

8. Stocks go up then down then up then down then up then down. But, major stock indexes end the year up.
   

   Investors real­ize that mar­ket ana­lysts don’t have a clue whether indi­vid­ual stocks will go up or down. But, liq­uid­ity cre­ated by the Fed­eral Reserve, a slowly recov­er­ing econ­omy and mas­sive fis­cal stim­u­lus all con­spire to push the Dow, S&P and NASDAQ up by year end.

9. Regional ten­sions rise and coun­tries face inter­nal strife because of the poor global econ­omy. Most of the U.S. is an island of sta­bil­ity.
   

   Sarah Palin does the ulti­mate mav­er­ick thing and declares that Alaska has seceded from the U.S. and will be its own inde­pen­dent nation. Palin becomes Vice Pres­i­dent (even if it is only Vice Pres­i­dent of Alaska) and Ted Stevens becomes Pres­i­dent. Stevens hopes that by being Pres­i­dent of Alaska he will be able to avoid going to jail. After watch­ing Palin and Stevens, Illi­nois Gov. Rod Blago­je­vich imme­di­ately declares Illi­nois’ inde­pen­dence. Around the same time, dis­senters in China chal­lenge the sta­tus quo (inde­pen­dence isn’t openly dis­cussed because in China exe­cu­tion is the penalty for sedi­tion). Eco­nom­i­cally moti­vated riots break out in Viet­nam and other parts of South­east Asia. See­ing weak­ness in the EU, Rus­sia con­tin­ues to expand its influ­ence. The Mid­dle East remains a prob­lem. But, in a moment of his­toric unity and at a con­fer­ence spon­sored by CNN and Ander­son Cooper, Arabs and Israelis agree that noth­ing has changed and the “world will con­tinue as we know it”.