There's a lot of change coming in the world over the next year. The only constant going into 2009 is the uncertainty that capital markets, economies a...
There's a lot of change coming in the world over the next year. The only constant going into 2009 is the uncertainty that capital markets,
economies and individuals face.
As investors, we've actually had it pretty good for quite a long time. Sure, the technology meltdown in 2000/2001 was difficult, but the vast majority of investors saw that coming after an unprecedented period of wealth creation (or should I say, "wealth speculation?") in the technology sector. Now, we're back in the same situation again.
The stock market melted and, quite interestingly, the market's most recent low this past November is almost identical to the low set in late September 2002. We recovered from the technology meltdown and we'll recover from the real estate/subprime induced recession of today. The only thing that's uncertain is the amount of time it will take for the situation to right itself. It took the S&P 500 Index five full years to recover from its highs set in 2000/2001. I suspect it's going to take a similar amount of time for the stock market to recover to its most recent 2007 highs.
The investment business is an industry that will continue to be in turmoil throughout 2009, but I think one of the most attractive areas will actually be in private equity. There are all kinds of companies out there right now available at fire sale prices. If you've got a big wallet, the best opportunities now are buying entire businesses outright. The mergers and acquisitions (M&A) business will be booming later in 2009. How can it not? Sun Microsystems, Inc. (NASDAQ/JAVA) is trading on a per-share basis for about the same amount of cash it has in the bank. Technology M&A should be hot over the coming quarters.
I've written a lot about the coming inflation problem and the fact that gold should do very well over the next several years. If you haven't noticed already, the spot price of gold has been ticking higher. Once it breaks $900.00 an ounce, $1,000 is a cakewalk.
There is going to be a big recovery in select commodity prices in 2009/2010, and gold is going to lead the way. There's too much turmoil and too much government debt in the world for big institutional investors to ignore gold for much longer. I also think agricultural commodities will be much stronger, more so than other precious metals and oil.
I really think that 2009 is going to be a trader's market. In fact, it could be a trader's dream market. Big stock market swings are the new norm in the equity speculation business and there is a lot of opportunity out there to play both sides of the market. Currencies are going to be volatile, as governments try to deal with the global recession. Commodities are going to be volatile, because they always are. Chinese stocks could very well recover big-time in 2009. I suspect the government over there will do just about anything to keep the economy growing unless it wants civil unrest. Finally, a back-to-basics philosophy will prevail in 2009, both on Wall Street and on Main Street. At the end of the day, I think this will be a good thing.
Profit Confidential
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