Sunday, January 4, 2009

Jaded 2009 Predictions

The Jaded Apprentice is ready to make a few predictions for 2009. Let's start with the markets overall:

  • Stocks will rally briefly as Obama comes into office, but as quarterly reports come in for Q1, the reality of the challenge will re-test November lows
  • Those who go long in the depths of the 2009 re-test will be rewarded handsomely as the massive short squeeze that follows will prove to be the best trading opportunity of the year
  • Apart from that re-test and short squeeze, stocks remain sideways overall and by the end of the year we'll finally see widespread capitulation among long and short traders as the volatility (most visible through the VIX) will once again subside to the sub-20 levels by year's end.
  • Gold and Oil, after enjoying a brief resurgence at the beginning of the year, will drop to surprisingly low prices as deflationary pressures prove stronger than expected for the rest of the year. Those who wait until the end of the year to buy will get the best prices in decades and will be well positioned for the inevitable turn towards inflation that will happen in the coming decade, but there will be trading opportunities throughout the year as oil-producing countries attempt to push prices upward but ultimately discover all such attempts are doomed to failure this year.

Next, let's talk technology:

  • The hottest IT topic in 2009 will be Unified Communications but most organizations will struggle to understand UC in the same way they struggled with Web Services. Cisco, Microsoft, and Avaya will remain the top players as business issues force Nortel, Alcatel-Lucent, and Siemens to the sidelines but each will define UC in terms that play to their natural strengths. No winner will be crowned in 2009, but by the end of the year we'll know who is firmly in control of their own destiny after winning the battle for mindshare. After that, it will only be a question of execution and none of the contenders have consistent records in that department.
  • The Intel-AMD wars will come to a sad final conclusion, not with a bang but a wimper. Intel will close the year with at least a 25% stock gain after it proves once again that during the hard times in tech, execution is the only thing that matters. Despite the value gap opened up by ATI, quality issues that can be traced back to the botched handling of the ATI-AMD acquisition will doom their attempt to stage a comeback against nVidia. ATI will become another poster child for what happens when you chase out high-priced talent after an acquisition in the short-sighted pursuit of cost savings as all the progress they made in 2008 disappears under the weight of a twice-bitten customer base.
  • Gateway will disappear and some assets will be bought out by HP or Dell (likely on the cheap during bankruptcy proceedings) - nobody will attribute it to poor customer service except its customer base, another victim of the "twice-bitten" effect.
  • The Information Security community will discover to its chagrin that blowback from irresponsible disclosures will cast the entire community under an uncomfortable spotlight and most organizations will re-think their security governance processes with an eye toward more tangible cost-benefit savings realizations. An immense industry consolidation among security startups will begin to cascade by the end of the year as VC firms begin pulling the plug on unprofitable investments.
  • IT contract work will skyrocket as cost-saving investments are greenlighted while new hires are not.
  • Patent and Intellectual Property disputes reach all-time highs as business conditions make out-of-court settlements less palatable to firms in desperate situations. The whole concept of software patents becomes hotly debated again after a series of irreconcilable judgements threatens to make a mockery of the patent system as a whole. Congress will be asked to step in to clear things up but they will not--at least this year.
  • Google begins to consolidate gains and after further stock price erosion due to it's high P/E ratio finally declares a dividend and begins building a base that will eventually form a 10-year low. By the end of the year, it will be considered a legitimate blue chip but it won't return to its 2008 peak this year in spite of remarkably strong revenue.

Finally, some social and political predictions:

  • Obama will allow the Bush tax cuts to expire on time but will propose middle-class tax cuts in the interim. Congress will not move quickly enough as the issues of "fairness" tie up both ends of the political spectrum, ensuring logjam.
  • Despite putting millions of people to work on infrastructure projects in 2009, Obama won't be able to recapture the job loss of 2008. By the end of the year, it will become clear that apart from direct government contracts and a few minor tax breaks that will only be useful to employers with other reasons to hire, Obama's team isn't doing anything substantial to incentivize risk taking by potential employers.
  • "Card Check" legislation becomes a political tar baby that ultimately fails to find a champion willing to push it through congress and on to the President. In the end Obama will be grateful he doesn't have to deal with it
  • Splinters and divides within the Republican party will worsen as the lines between fiscal conservatives and social conservatives become more pronounced. The culture war meme is tried one too many times and begins to backfire.
  • As some global warming trends fail to materialize during 2009, Al Gore will be famously quoted as being grateful the 2008 financial meltdown came when it did since it finally allowed mankind to reverse course. Later it will be determined that there had been no substantial decrease in carbon emissions over the past few years and the cause of the reversal had little or nothing to do with activities under the control of humans. The volume of Ice around Antarctica sets new records, even as the northern ice cap continues to recede.
  • With George Bush finally out of office and Obama carrying out an inclusive centrist agenda, the radical left will call the honeymoon over by July. Be the end of the year, the few that remain will be more isolated and disempowered than ever before and become far more embittered with Obama than they were with George Bush. With Bush, the betrayal was expected and impersonal. With Obama, the blindside is personal and made that much the worse by his overwhelming popularity with the center-right. By the end of the year, they will accuse Obama of having hijacked the Democratic Party and rail at The New York Times in 2009 as if it were Fox News in 2008.
  • California and Illinois will prove to be the tip of the iceberg when it comes to fiscal irresponsibility at the state and local level. New Jersey, Michigan, and Florida will soon follow. Obama will respond much like Ford did to New York City in 1975: after encountering initial resistance to a federal bailout, sobered leaders will do what it takes to cut back government, then Obama will deliver the goods with some significant strings attached. Colorado will become Obama's model for state fiscal responsibility and show strong signs of recovery by the end of 2009 but other states will have difficulty replicating its success.
  • The trickle of migration out of the Northeast, Michigan, and California will grow to a flood. Primary beneficiaries will be the Northwest, Mountain West, and Texas. Growth in Denver will be the most unexpected upside surprise, as strong growth trends in cities like Portland and Dallas are not particularly new. Chicago, Phoenix, and the greater DC area will prove resilient as increases in outward migration are met with inflows that more than offset for a small net gain.

It's entirely possible that some of these predictions are a bit early and may take more than 2009 to realize. And next year the Jaded Apprentice will single out the most glaringly wrong prediction for special abuse and humiliation along with props for the reader who first calls it. Now it's your turn. What's on your list of predictions for 2009?

2 comments:

  1. Awesome predictions. I agree with many of them, especially the short term pop. Any international predictions?

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  2. I may post some international predictions later this month. I'm sure China holds many of the keys to a successful recovery but I'm still working out what kinds of international dynamics are likely. In the mean time I've got small positions in FXI and FAX to have some China and Asia-Pacific exposure, respectively.

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