What To Expect in 2008

January 2nd, 2008

I hope you all had a Merry Christmas and I wish you all a Happy New Year! Looking back at 2007, I think it will be safe to say that it was the year that market turbulence really began to become part of the normal investing climate. Looking forward I think it’s safe to presume that market turbulence will continue. Here are some of the things I think will occur during 2008.

USD Falls More

I’ve spoken on this topic time and time again… nothing seems to be changing - the same fundamental reasons the USD is losing value are still in place. Record deficits and mass printing of U.S. dollars have been occurring for several years. The real change is in the way foreign governments use the USD; They are beginning to switch away from the USD for trading oil. I do believe we will hear more about foreign governments using other currencies to trade oil. With many governments switching away from the USD, I suspect the value will fall lower. I just hope no panic sets in - that is when trouble can really brew. Do you want to know how much the USD fell against the CDN last year?

Jan 1, 2007: $1 USD = $1.1657 CND.

Jan 1, 2008: $1 USD = $0.9977 CND.

That is a HUGE difference in one year. Remember, The U.S. and Canada are the largest trading partners in the world. In the first 10 months of 2007 (’till October) the U.S. did $467.34 B in trade with Canada and $318.57 B in trade with China. If the falling USD doesn’t concern you, perhaps this will: In a rare move, the Federal Reserve began coordinating with other central banks. It’s old news, but it is a signal.

Price Of Oil

I suspect the price of oil will continue to increase as the USD falls. Everyone seems to think that the price of oil is out of control. WRONG. The falling value of the USD is out of control and causing all commodities to increase in terms of USD. It’s funny how everyone gets mad at the oil companies when oil is rising - yet they don’t get mad at the government for spending so much money and causing the value of the dollar to decrease which is one of the main drivers of the increases in the price of oil as of late.

Gold

Will Gold Hit $1,000? I think its SAFE to say it will during 2008! It currently sits at $855.70 as I write this. Once again, the main fundamental driver will be the USD.

Inflation Hits the U.S.

I believe this is the year in which the U.S. will really begin to feel inflation. With the USD falling so fast and almost ALL products being imported from other countries, I think this will be the year when the U.S. citizens REALLY notice inflation. If I’m wrong, I’ll be shocked!

Economy

This may be a good time to reiterate there are things you can do to protect yourself from any possible downward swings in the economy. Okay, I’m bearish! With a USD falling so rapidly its hard to think good things will happen. That said, I don’t think the sky will fall… In fact, the U.S. economy will probably post a positive growth rate (very low though): Most of this “growth” I suspect will be inflation. You know how they always claim inflation is lower than it really is!

U.S. Election Year

November 4, 2008 is the main date the entire stock market and economy will be focused on. The elections are the one wild card that will decide the future. To be honest, it doesn’t matter who wins the election (Republican or Democrat) as the front runners for both parties have their own agenda and focus which seem to revolve around change from the status quo. The changes can be good or they can be bad, but they will be the main wild card that can affect how the year goes. Either way, changes are in store! Go check out Ron Paul’s views. He is the best thing I’ve seen in politics for a LONG TIME.

Remember, most election years have historically been positive for the stock market and economy. I guess one reason would be due to the politicians all promising the world - people tend to get that positive tingly feeling when each politician describes the utopia they will create - if elected.

I INVITE ALL READERS TO PUBLICLY POST A COMMENT ON WHAT THEY THINK WILL HAPPEN DURING 2008. 

Entry Filed under: News