I’m not too optimistic about 2010. Below are my prognostications in the areas of the economy, domestic politics, global geopolitics, and the investment markets. Words: 681

In further edited excerpts from the original article* James Quinn (www.seekingalpha.com) goes on to say:

1. Double Dip Recession Will Commence by June of 2010
To date, the Federal Reserve has printed
a) $700 billion wasted on a bank bailout,
b) $787 billion wasted on a stimulus package
c) $3 billion wasted on Cash for Clunkers ($24,000 per vehicle),
d) $28 billion squandered on the $8,500 homebuyer tax credit, and
e) $300 billion of mortgage-backed securities purchased by the Federal Reserve and Treasury and all we’ve received is a 2.2 percent increase in GDP. As the government stimulus winds down in the first half of 2010, the true weakness of the economy will reveal itself.

2. Official Unemployment Rate Will Grow to More Than 11% by Late 2010
With the economy sinking back into recession, the true non-government manipulated figure will approach the Great Depression levels of 25 percent. The side effects from this fact will ripple through the country for years.

3. Foreclosures Will Surge in 2010
A tsunami of Alt-A and Option ARM mortgages will reset in 2010. These two developments will lead to another surge in foreclosures.

4. House Prices Will Fall a Further 10% in 2010

5. Commercial Real Estate Foreclosures Will Reach Record Numbers in 2010

6. Retail Bankruptcies and Store Closings to Increase in 2010

7. Bank Failures Will Reach 500 in 2010
The bulk of these losses will be borne by regional banks. There were 150 bank failures in 2009. The FDIC just announced they would add 1,600 employees in 2010, doubling their work force.

8. The 2010 Deficit Will Increase to Almost $2 Trillion
The Federal Budget for 2010 anticipates a $1.5 trillion deficit. I believe the Obama administration will pull out all the stops to boost the economy before the 2010 elections. This means more spending.

9. Interest rates Will Rise in 2010
The bond market and foreign buyers will choke on this amount of debt. The result will be much higher interest rates. Ten year Treasuries will start the year at 3.8 percent. By year end, rates will exceed 5 percent.

10. The US Dollar Will Fall by 15% to Record Low in 2010

11. Gold Will Surge to $1500/oz. and Silver to $20/oz.
A falling dollar will result in a surge in gold and silver.

12. Oil Prices Will Exceed $100
As world demand increases and peak oil becomes acknowledged, oil prices will exceed $100 a barrel further depressing the U.S. economy.

13. A New ‘Jobs Program’ Stimulus Program Will be Implemented
Obama will announce another stimulus program and call it a “jobs program.” This will cost another $200 billion.

14. Democrats Will Have Huge Losses in the 2010 Congressional Elections
The Democrats will lose 50 seats in the House and 6 seats in the Senate.

15. The Stock Market Will Drop 30% in the First Half of 2010
After the Republicans regain power in Washington DC, the stock market will rally.

16. Isreal, Iran, Iraq, Afghanistan, Pakistan and India Tensions Will Escalate into Additional Hostilities
a) The uprisings in Iran are likely to provoke the current leadership to stir up more trouble in Afghanistan and Iraq.
b) The imposition of sanctions by the U.S. could also provoke Iran to lash out against Israel.
c) I expect Israel to attack Iran’s nuclear facilities before the end of 2010.
d) Iran’s response will be to disrupt the flow of oil through the Strait of Hormuz.
e) This will bring the U.S. Navy into conflict with Iran.
f) Oil prices will soar when this conflict breaks out.
g) The conflict in Afghanistan will worsen.
h) Tensions between Pakistan and India will increase as terrorists again attack within India.

17. Greece, Latvia and Hungary Will Default on Their Debts in 2010
Economically, Eastern Europe will crash with Greece, Latvia, and Hungary defaulting on their debt. This will plunge European banks into deeper losses and cause the next leg down in Europe. These foreign risks have the potential to spiral out of control.

[Now you know why] I’m not too optimistic about 2010. Let’s hope I’m wrong.

*http://seekingalpha.com/article/181126-2010-economic-outlook-the-tipping-point

Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given.
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What did the investment bankers at Bear Stearns ever do to earn their millions of dollars in bonuses? Where were the regulators when traders at Bear and other Wall Street firms peddled trillions of dollars in mortgage-backed bonds and derivatives, only to realize, too late, that no one had a clue what they were worth? The author keeps the you-are-there factor high much like a Shakespeare play, complete with three acts and characters dialoguing their way on and off stage. ; Words: 689

In further edited excerpts from the original review* Chris Farrell (www.BusinessWeek.com) goes on to say:

The author, Kate Kelly, is spot on with her storytelling instinct. Bear’s collapse over a weekend in March 2008 was high drama, even if it was soon overshadowed by the federal takeovers of Fannie Mae (FNM) and Freddie Mac (FRE), the bankruptcy of Lehman Brothers, and the semi-nationalization of AIG (AIG). At its full strength, Kelly writes, the credit crisis “killed every firm with a large mortgage business, too little diversification to offset losses from bad loans, and the inability to be proactive.”

A little more than a year before it imploded, Bear was flying high. Under the leadership of three colorful Wall Street legends—Cy Lewis, Alan “Ace” Greenberg, and Jimmy Cayne—it had forged a reputation for disciplined risk-taking, and its stock had reached an all-time high of 172. A cigar-smoking bridge champion, Cayne—who was CEO from 1993 until January 2008—had become the richest honcho on Wall Street, owning shares valued at well more than $1 billion. Bear’s executive triumvirate—Cayne and his co-presidents, Warren Spector and Alan Schwartz—took home almost $100 million in total compensation in fiscal 2006. By early ’08, the federal government had nearly let JPMorgan pocket the storied firm for $2 a share (the final price was $10).

Kelly keeps the you-are-there factor high. Here’s JPMorgan CEO Jamie Dimon on the phone with then-New York Fed Chief Timothy Geithner on the same day Dimon bought Bear: “There’s just no way. There’s just a much bigger hole than we thought.”

Problems, however, crop up in the book’s execution. In many places, seemingly significant events take place, but there isn’t enough information to connect all the dots. In other instances, Kelly fills in the knowledge gaps, but the tension of Bear’s final hours dissipates. If readers wish to learn how Bear strayed from the bold but pragmatic methods ingrained by Ace Greenberg in the 1980s and early ’90s, they should turn to William D. Cohan’s “House of Cards”, a detailed and historically rich tale of Bear’s fall (BW—Mar. 16).

Still, Kelly’s technique brings to life the toll exacted on senior management and government officials as the firm’s prospects dimmed. It’s amazing how many critical decisions were made on the fly with sketchy information by sleep-starved, pizza-and-soda-fueled people. Kelly’s account rings true and evokes that panicky state as Bear’s leaders street-fight on—and eventually realize they have lost control of their fate.

There are a number of bittersweet “what if?” passages in the book. We learn of a mathematically gifted employee who spent years devising a risk-assessment matrix for pinpointing the firm’s exposure to the markets. What if Cayne hadn’t summarily dismissed the idea? When Geithner ran through options for then-Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, he briefly touched on letting Bear go under and protecting any firm that got into trouble in the aftermath. What if that option had won out?

The book’s title refers to Bear’s toughness. The firm had the chip-on-the-shoulder attitude of a trading culture, and an employee’s pedigree didn’t matter one whit. What mattered was the ability to make money and that obsession appears to have been Bear’s undoing.

*http://www.businessweek.com/magazine/content/09_21/b4132068863144.htm

Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given.
- Sign up to receive every article posted via Twitter, Facebook, RSS feed or our Weekly Newsletter.
- Submit a comment. Share your views on the subject with all our readers.
- Buy the book below from Amazon.