Observations and Reflections for 2009

Despite the great challenges before us, I think 2009 will be a great year. However, I think things will get worse before they get better. That’s because this country has seldom found itself facing such adversity—the housing crisis,  millions losing their jobs and/or their homes, and an overall economy mired in deep recession. And that’s just stuff related to money.

We also face the continued prospects of being bogged down in two wars, a Middle East conflict that could escalate at any time, and the real threat of terrorism that hangs over us constantly—as well as all countries in which Westerners live or travel.  Given those problems, it is easy to be pessimistic. However, I have always been an optimist by nature. That’s because, despite all of our problems, we live in the greatest country in the world. I know that’s an oft told truism, but a significant one for me. My parents were not born in this country and they—and their families—were deeply involved in the most brutal and murderous period in world history. That’s why my parents never let me forget how rich the freedoms are that exist in this country. I take heart that I will never have to face such a brutal reality, nor will my wife, children or grandchildren.

There are other reasons for real optimism. Our incoming president is working on a highly anticipated trillion-dollar stimulus package that could help alter the calculus on the economy. It will not be the quick fix Wall Street has been betting on, but it will provide a much-needed psychological boost that can provide something that had been in short supply in 2008—confidence. Above all, our financial institutions and our financial markets require confidence to function smoothly.  Without it, we will continue to see dislocations in the credit market, hundreds of bankruptcies, and the worst stock market since the Great Depression (with the S&P 500 down a stunning 45 percent). 

Wall Street has been anticipating this record-breaking stimulus package for the last few weeks, which is why the Dow closed 2008 by finishing above 9,000 for the first time in months. 

Yet, there are still deep-rooted problems that will have to be remedied if we are to see a real turnaround in 2009.  The biggest problem is still the housing crisis. That’s the cancer that will not allow the rest of the body to fully recuperate. Unless we put in some sort of a bottom and end the record number of foreclosures we will remain mired in recession. Unemployment will continue to rise with the real prospect of double-digit unemployment by year-end.

However, I think the housing crisis will bottom in 2009 (albeit late 2009). There are hundreds of billions being thrown at the problem and many smart people are focused—and determined—to end this debacle as soon as possible. Once the cancer is removed the patient can—and will—recover. That is the reason the Dow will close above 10,000 in the next twelve months. That’s what I see in the year ahead, and to make sure that I am held accountable for my own predictions, I will check back in a year to see how I did. 

In the meantime, best wishes for a better year in 2009.









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