Here is a PREVIEW of 2008 and beyond for Market Witch readers plus some of 2008’s oncoming issues and concerns. Here are investment subjects and trends you should be aware of:
-2008 is the year gold becomes by consensus the new global currency, first adopted by business industry and global commerce and later by the world’s general publics. Central Banks will try to stop this. So will the United States whose huge federal debt will have to be paid in more expensive rather than less expensive money, which is impossible. Paper currencies not tied to something tangible- gold, silver, land- are on the way out and that means the Euro and the Bolivar too. Most importantly the US dollar’s reign as the global reserve currency is over.
-The US economy is in much worse trouble than anyone in authority is willing to admit. A dollar destroyed by trade deficits and an out-of-control credit-based monetary plan plus a federal budget deficit that grows at the reported rate of a million dollars a minute means Weimar Republic- era inflation while Americans are losing jobs, homes, and their ability to pay credit card debts and the grocery and gas station
-The world’s strongest upcoming economies are Canada, Brazil, Russia, and only secondarily China. Because of the Olympics it’s very much China’s year. But China’s savaging of its environment and its dependency upon sales of counterfeit and back-engineered products may backfire and take a heavy toll on China’s economy and currency. China’s now legendary growth rate will slow but Russia’s will top 12%
-The Euro is near its peak against the dollar and the ECB is in the same fix our own Fed is in with a deteriorating paper currency. By late 08 the Euro will be dealing with inflation and value relative to gold
-Expect to see the Candian dollar reach $1.20-1.25 and the Brazilian real reach 65-70 cents reflecting these strong economies. You may find to your delight that cash is king but you may be disappointed to find that cash is not king if its US dollars
-Gold will find a floor of $1000 this year with spikes toward $1100. High gold prices rampant American inflation and foreign currencies gaining value against the dollar may spark ‘runs’ on America’s regional consumer banks which do not offer accounts in foreign currencies
-During 2008 the mortgage rates of more than 500 BILLION DOLLARS’ worth of US homes are scheduled to be reset. Some 2 million homes are at risk. We are looking at something close to if not worse than America’s First Great Depression during the 1930s as defaults on house payments and commercial real estate payments as well continue to increase. A best buy of the year may turn out to be distressed farmland and 5-acre McMansions whose residents can no longer afford the gas to commute to work
- The “commodities supercycle” will continue after a brief respite and in spite of the ‘liquidity’ crisis created by corrupt American banking/landing practices, and copper will head toward $4, aluminum toward $1.50, silver to near $25, while wheat soybeans rice et al will remain dearly expensive. Oil at up to $115 will deal the final death blow to any pretense that America still has a Middle Class, and the USA will begin to appear to the world as a 3rd world nation, 95% poor 5% rich, a nation not much different than Argentina during the ‘Evita’ era
-America has remained the world’s greatest consumer economy until this year, buying $4 trillion a year of the world’s products. That figure may fall by 15% or more during 2008
-2008 will bring the first skirmishes of a new Class War to America. By the end of 2008 america will have nearly 600,000 households with a net worth of more than $10 million and these households are pouring $$$$$ into art, private jet travel, designer clothing, commercial real estate, farmland, jewelry, private schools, wine collections (there is a shortage of champagne in the United States and also a shortage of luxury cheeses, consumption of both is up more than 50% in a decade but prices are up 30% in a year) and tax-free offshore financial accounts. The art market is inflated as is real estate in SF NYC and Miami, but elsewhere real estate prices are falling. More importantly, some 50 million Americans have no health care at all, no hope of climbing out of debt, and some 40 million live below the poverty level. This invites large-scale political and social backlash as the American Dream vanishes
- Global iron ore prices will increase dramatically and because of this, so will steel
- The golden rule “whoever has the gold, rules” applies also to the world’s metals and mineral resources companies as consolidation creates a few huge 21st century mining companies which own all the world’s resource reserves. A surprise development is the interest ‘sovereign funds’ have in ownership of these companies, and they may fall victim to China or Saudi Arabia
- South American countries will continue to rely on and model their economies after Brazil’s. A newly-created South American development bank, Banco del Sur, will aid this process
- Copper, Gold, and platinum have been the strongest metals plays for three years and likely you’ve made $$$$$ on this if you followed us into Brazilian and Australian mining stocks starting in 2004. As this decade draws to a close and the new one starts, steel and aluminum will become the most sought-after metals.
- Agricultural commodity prices have skyrocketed not only in the US but worldwide as well while the world discovers it must feed itself but also create a crop-fuel industry to replace a fossil fuel one
- Until such time as we have widespread fusion energy or much advanced renewable biofuels not based on grains or even sugar but on bioengineered plants (global warming has its advantages and
one of them is increased arable farmland) we will be increasingly dependant upon uranium as a global energy source and in order for that to happen safely, Islam, which is basically a stone-age
culture with nuclear weapons sourced by black market theft of information, will have to be contained/neutralized/ rid of nuclear weapons and crazed power mad ideology, much as the stone-age native
americans were deconstructed as a culture to make way for what became the United States. In a decade or two, Islam may very well become a source of cheap specialized labor and have become a manufacturing
In the interim: stand back, let Western governments do their job, and don’t fly or spend time in American port cities any more than is absolutely necessary
- The scramble for global resources means Africa, with its enormous natural resource wealth and mostly unstable politics, will continue to be a magnet of activity as other nations vie for control of a continent that is literally up for grabs. Africa is becoming both an exploration hotspot in a world desperate for natural resources, and a new source of cheap labor if its nations can be politically stabilized. Currently the must successful exploiter of Africa is China,somewhat corrupt and somewhat unstable and making resource deals with corrupt unstable governments in Africa
- Capital will continue to migrate to locations where labor is cheapest. Two new ones are Islam and Africa
- Our new ‘warm’ and ‘green’ world means formerly frozen areas of both Canada (Yukon Territories) and Russia (Siberia), will first become ‘gold rush’ lands for mining exploration and later land rush destinations in a world grown too small
An additional most-sought-after: WATER. We’ve talked about this for eight years: wars may be fought over water. USA can emulate the Brazil model and become energy independent with bioethanol. But unpolluted fresh water is fast becoming rare and valuable and unless massive desalination industries are begun, there will be trouble. Look for Corning (GLW) to begin manufacturing substrate materials for water and sewage filtration systems as well as diesel engine ‘clean-air’ products
- A new global optical cable build out- spanning the Pacific and connecting Asia and Indonesia- will begin in 2008. A global wireless boom is under way as well. But the US is becoming a bandwidth backwater, and its enhanced cell phones were until 2007 and the introduction of AAPL’s iPhone years behind products available in Japan Holland France Korea and China
Americans are beginning to discover that the role of Superpower requires a real, a young, a highly-trained, and a very large, military. Public policy cannot be enforced by 35-year-old American weekend warriors with wives homes small children and National Guard status. The US will have to reinitiate a military draft or will find itself soon unable to back up its policies, and USA’s Superpower status may be lost
- Globalization together with the effects of outsourcing and the relative economic successes of economies in Russia, South America India, China Indonesia and Mexico , has both RAISED the poor world’s standard of living and LOWERED ours. Working class Americans are headed toward comparatively Third World wage scales, the ongoing effects of NAFTA and global wage and price competition. But the decade of globalization is about over and a powerful new nationalism has taken hold in many nations, most obviously in Russia and China. This spirit of New Nationalism has not taken hold in the United States yet. But it will
- America’s manufacturing base has been enormously damaged. Traditionally, America always has been able to pull itself up by its bootstraps when new ideas new inventions and new technologies, often discovered and created during wartime and funded via a combination of military and civilian R&D, then spill over in peacetime into the consumer marketplace. Spawning new consumer products, new technologies that have broad consumer application, and creating new American industries. Which in turn brings Americans the untold wealth everybody became used to for half a century. We believe this may happen again. But not for five to ten years. It also may not happen at all. Because the US public education system has been badly damaged
- The re-emergence of gold as money foretells a state of affairs not much different than 1000 years ago, or 3000. The Federal Reserve, faced with “stagflation” and poverty, will have to lower Fed rates to 3% or even lower to try to jumpstart the US economy instead of raising rates to quell inflation. Either way the dollar is victim
- 2008 marks the fourth year we spoke of a phenomenon we call “monetization” in which a profession, an industry, or a field of endeavor, once and formerly a “cottage industry,” is essentially taken over by “big money” and by entrepreneurs who have no other motive than to exploit the field and make the most possible profit to the detriment of all else. During the 1970s we saw this happen with American banking and insurance, and oil. During the 1980s “big money” took over medicine and “health care” and one result now is that fifty million Americans have no health care insurance. During the 1990s this same phenomenon affected law and education. One result now is that an undergraduate “college education” costs $125,000 and is not cost-effective, and leaves graduates hugely debt-burdened and WITHOUT any “credential” that ensures a high-paying job or career.
- This first decade of the new century brought with it the global monetization of commodities, basic materials, and natural resources. (See Market Witch April 2004: Too Many Ants, Not Enough Picnics). There now is an acute global awareness that there is simply “not enough to go around” …
…and the world is scrambling for iron ore, aluminum, nickel, titanium, gold, copper, agri-products, fresh water, and the rest. These circumstances will not go away. And these shortages will grow more acute next decade, when the world begins a new wave of global infrastructure buildout, and there is not enough steel. Or copper. Or Aluminum. But inside the United States, what was “monetized” and destroyed in the process was the homeloan industry
- We are LESS likely to have a hot war now than we were a year ago. We Americans are not really IN World War III yet, even though Islam already has declared it. Historically, it’s approximately 1938-1939. By the time it becomes 1941 Iran will have nukes and may use them.But Pakistan already has more than sixty of them and Pakistan is a “nation” of warlords and militarist would-be dictators without a stable government. So while we are in less danger of war but in increased danger of having a major port city nuked. A mitigating factor may be that oil-rich Islam, rather than bombing the United States, will simply buy usHere is a list of the top ten largest countries in the world, by area in square miles:
- Russia 6,592,850 square miles
- Canada 3,855,101
- United States 3,794,083
- China 3,705,405
- Brazil 3,300,169
- Australia 2,969,906
- India 1,269, 211
- Argentina 1,073,518
- Kazakhstan 1,049, 155
- Sudan 967,500
This is 19th century not 21st century thinking. View ISLAM not as a series of small “tribal” nations but rather as a SINGLE UNIFIED FORCE intent upon (a) bringing down the United States and (b) ruling the world under Islam.
These “nations” of Islam are “fantasy” nations, many of them arbitrarily cobbled together by the British Crown during the early days of the 20th century. Let’s tally
them up, West to east, to create ISLAM: Morocco, Algeria, Libya, Egypt, Saudi Arabia, Yemen, Oman Syria, Jordan, Turkey, Iraq, Iran, Afghanistan, Pakistan.
Now the list of the world’s ten largest countries looks like this:
If we add some of the wilder and more marginal and under developed “nations” of Islam like Sudan, Kazakhstan etc, the two largest countries in the world are Russia and Islam, a dead heat. Many of these “nations” of Islam have enormous wealth in many natural resources, not just oil, resources that are in short supply and gaining in value weekly. TWO of the world’s very strongest economies, Iran and Saudi Arabia, are ISLAMIC. A THIRD one, Afghanistan, has the world’s largest and most financially successful Outlaw Economy (poppies/opium) on earth.
Islam is a backward, misogynistic medieval and violent culture. But it may be Islam’s destiny to rule the 21st century.
What stands between Islam and its goal? US. The USA. And we are 6% of the world population.
The American presence in Iraq has dramatically strengthened Islamic Fascism’s support base all over the Islamic world. But make no mistake about it, America’s occupation of Iraq and our insistence in fighting a sporadic war on Islamic turf not our own has worked. Islam may in just a few years become a source of cheap industrial labor
- Back in the United States, the price we’ve paid inside the USA for a decade of indulgence of primitive fundamentalist religious zealotry is the destruction of the country’s knowledge, education, science and research & development base. The USA has only six per cent of the world’s population, and cannot hope to maintain a leadership position without science and technology and highly-educated Americans. Our country also is so deeply divided culturally and politically that it may not be able to defend itself or its interests in the event of a real war
- Europe is in deeper trouble with Islam than we are. Key traditional European cultures are being challenged and damaged by immigrants who have no intention of assimilating, but are in fact intent on transforming western Europe into an Islamic land France, Germany, and Holland (Dutch politico Geert Wilders, who has compared the Koran to Mein Kampf, was named 2007 person of the year in a huge media poll) all are more aggressive and less tolerant of Islamic residents than we are
- The USA is world’s purveyor of bio-agriculture and bio-engineered products: genetically-engineered plants and foods, additives, metal-substitutes, construction materials, fuels, even medicines and pharmaceuticals. Monsanto (MON) is always on our STRONG BUY list. 2007 was the year of CORN sprouted as a new energy source, and the year ETHANOL begins to achieve validity as a global transportation energy source. But in the US, Big Oil is dead set against the incursion of ethanol as a transportation fuel. 2008 likely will be the year Big Oil is thrown from power in the US
2008 is not the year to be investing in NASDAQ, except for a very few monopoly-style companies like AAPL, ADBE, MSFT, NUAN, NVDA. Beware theNASDAQ and beware high-P/E stocks.
But on the Internet, video and VoIP (Voice over Internet Protocol) are taking hold, both via handhelds and giant flat wallscreens. Panasonic will market a 150-inch screen this year, 6 feet high eleven feet across. Despite an America in economic crisis, our businesses and industries are reportedly still experiencing data growth of 50% per year: don’t let anyone tell you “tech” and “networking” is in decline. Four key phrases define America’s current digital/electronic world:
- On-Demand World: entertainment on demand coming to Americans via the Big High Speed Digital Pipeline, through HDTV, and through various hand-held mediums. ALL ‘video’ will become ‘on-demand”
- Enhanced Wireless World: there are now 2005 million cell phone users in the US, way past the “tipping point,” and the iPhone begins to make available the kind of “enhanced” cell phone features and services-including streaming video- that have been available in other countries for many years
- Hand-held World: videogames, teleconferencing, live market tapes, movies and television shows, spread-sheets broadcast from one end of the LAN to the other (and soon from one end of the country to another) via various hand held PDAs? It’s here. YouTube is just the start
- Wall-Screen World. Big digital flat glass screens are everywhere: in restaurants in sports arenas, in the airport, at stadium rock events, in lobby security at your office building, and on the wall of your living room, replacing art. In 2008 they’ll begin to become huge
We began our Market Witch efforts thirteen years ago studying American mainstream and pop culture and investing in America and American companies and products on that basis… Barbie® dolls, Harleys, Pentiums, iPods, Oreos… but as the US has lost economic clout and become a Third World country, we’ve moved to a global perspective and we go with the worlds strongest economies and their products. WE are still not investing in China or India, but we are investing in American companies that do. We believe the economies of both India and China are more fragile and vulnerable than most people realize and may actually be weaker at the end of the decade than they are now. Currently the strongest economies beyond the failing United States are Brazil and Canada, with other South American economies plus Russia on deck. Europe, and especially, Germany, is much stronger than it was a year ago. The two strongest investment opportunities of the coming year will be in commodities, mining and metals, “exchange” stocks like Brazil’s Bovespa, steel, and in gold and silver. The dollar will continue to decrease in value this year both against other developed nations’ currencies and against metals.
This is NOT an America we are pleased or proud to present. The United States currently has an inflation rate of more than 10%- nearly 1% a month- which is being reported as 3% in order to print more money to “pay for” (on credit) a war which should be tax-based and to put enough meaningless paper dollars out thereto solve the “liquidity” crisis.
Most of the world despises us, is jealous of us, envies us, wants to see us diminished, brought down, destroyed. This attitude also is a popular one among many Americans themselves, people who do not understand what they have placed at risk.
The United States now has a majority of citizens who are evangelical fundamentalist Christians, and these people now may find themselves in the very position they supposedly emulate and espouse, that of Jesus, as the United States sacrifices itself on the altar of the world economy for the good of the world, its very physical presence exchanged for an idea of America- once a physical reality- an ideal of democracy equality equal opportunity and the pursuit of happiness. The United States is in great danger of dematerializing and of becoming a ghost or a spirit, something intangible and spread throughout the world as an ideal, something like Santa Claus or Ancient Greece, and continuing to affect the world while itself ceasing to exist. It may be too late to prevent this. But it also still may be our choice. 2008 is America’s most dangerous year. We will likely find out this year if America is salvageable. Or not.
The America of the 20th century has receded into history…but as always, we expect that some new idea that originates here in the US (not in China, which steals its technology from our patents) (not in Islam, which does not have the technology to build a flashlight unless that technology is purchased on the black market or downloaded from an American website) will spawn a new technology and a new industry…and that the US may retain its preeminent position as the world’s cradle of invention. Ben Franklin said: “An investment in knowledge always pays the best interest.” Our country would do well to remember these words.