Predictions 2009

[selkirk]

the predictions started on the internet in late 1998 conerning 1999 so 10 years online at various places the print version has been ongoing since 1994.

if you disagree or would like to add your own please feel free.

Predicitons 2009

Oil a wide range
last year oil ran from 100-140+then fell all the way back to below 35.
Oil will have a range this year of High 70 to a low of 25, (actually probaly only 30). the first six months will be ugly as supplies will continue to build up so oil will trade in the 30-50 range.
in the last half of the year oil may rebound however it does not break above 70 that is the story in 2010.

Oil price depnds on Demand
many people believe opec cutback will decide oil, this is wrong for the most part. first opec cheats, cheats, cheats, only when their system face collapse would they consider large cuts that would be needed. most opec countries have trouble running their governments on oil prices ranging from 38-22. depend on the nation. this is not what they produce oil for this is what they need to run their national economy.
when their is increase demand that is the biggest reason for a rally in oil.

Oil Sands was so 2006
when 60 minutes does a story on the cdn oil sands and they get all of that press, wait 6 months and that is probably a top. most projects will not be developed. same for most large projects, the oil off of Brazil, VZ oil sands, ect. this will cause oil to have a bigger run in the fuuture the longer it stays below 50.

Natural gas
top is $8, however probably even lower, supplies are building up quickly even in the winter, and the weak overall world wide economy has caused more LNG in 2008/2009. also all of the projects are coming on from 1-2 years ago.
so natural gas goes 4-8, however most of the year it stay in the low range 4-6.

see the trend, no one will look for natural gas at 4, so again this is a story for 2010. in the first six months of 2009 it is just pure pain for the natural gas producers. who starting shutting in production.

Drilling
Drilling for oil nat gas come to a grinding halt, no one want to look for this stuff, these are boom/bust, well the bust is not over yet.

Gold
Gold is great insurance and from time to time may own some sr. or large midcap, own Yamana and may even make money on it.....gold is insurance but do not see it breaking much over 1000.
few reasons. 1. the US dollar will be strong, sure it may be overvalued however when in doubt by some TBILL that pay nothing.
2. jewelry demand in the US and in places like India (almost a form of currency because they do not trust their money) will be weaker to the economy.
so gold trades from 700-1200, and for the most part 750-1000.

Ford GM Chrysler
are going bankrupt, their shares prices will go to zero and their common shareholder will get wiped out, or close to it....
Ford 2.63 GM 4.03
a couple of years ago was very bearish on the car companies and of coarse the best performer on the dow was GM, should have said in two three year, as GM was the worse performer.

the bonds are trading for half or less, and if their are asked to take a cut then what will be left for shareholders.

Gorodon Murray is designing a car small than the smart car and cheaper to produce, also it gets 60-70m/gallon, and can go freeway speed. He desinged the Mclaren Supercar, it will be for cities and mainly in Europe.

the point is that you will have to produce a car for $10000 and make a profit. the big three cannot do this at present.
they have to many brands, dealerships, to high of costs.

maybe if the volt comes and is a big hit, and the govt. forgives all of the money given, and car sales actually grow, though those are big ifs, chances they go to zero.
common shareholder get wiped out, debt is reduces, they lay off 60% of their employees and cut dealerhsips by 1/2 or more, and only GM and Cadilac brands still remain. for GM.
Ford will also cut brands.

Recession will be in the list for the top 3 worse recessions since WW2.
and will probably take 1st or second. there is hope the economy recovers late in 2009, and the US spending package works, though it probably helps it does not do all is promise...and fall short.

Markets
well the economy may come out by late 2009, and until then the markets will be weak however the markets will be up to flat for the year....markets see ahead and there is a great deal of cash and the US govt. will keep spending.

so there either will be a recovery or a large crash...so tepid recovery is what we will choose....

thanks
selkirk

 

[DOGS THAT BARK]

I might add I have had the good fortune to read everyone of your yearly predictions including those prior to inception of Madjacks.

I certainly agree on the the big three--little to no hope and throwing good money after bad--main premise--GM had the 2nd largest revenues in history in 07--yet recorded the largestest loss (2008 data not out yet) in automotive history.:scared

on 2009--will add my thoughts -though they will not be nearly as eloquently stated and just some general thoughts.

I think we might get short term mini spike on change of command--but over all do not like outlook--and think issue of just how bad will depend on how hard they push for alternative fuels.Did they learn their lesson on ethonal fiasco or will they bow to the greenies.

from WJS--
Of course, the ethanol industry wouldn't even exist without the more than $25 billion in taxpayer handouts over the past 20 years. Congress only recently passed energy and farm bills that further greased ethanol production with a 51 cent a gallon tax credit, corn subsidies, plus increasingly stringent biofuel mandates. We were told, as usual, that profitability was just around the corner.

The uglier realities of corn ethanol are at least becoming more widely recognized, even on the political left. The Environmental Working Group and five other environmental organizations said this week they oppose a bailout because subsidies "for corn-based ethanol have produced unintended, yet potentially catastrophic environmental consequences, with little or no return to taxpayers in energy security [or] protection from global warming."

Don't expect Congress to listen. Ethanol may never be profitable in the real world, but in Washington it's a lucrative business that provides jobs and votes. Like Fannie Mae and Freddie Mac, ethanol is a business created by Congress that now has to be bailed out to save Congress from embarrassment.
++++++++++++++++++++++++++++++++

Would not have elaborated on this subject but is key to how I will invest or not invest in 09 and despite doom and gloom scerio believe the future will hold some of greatest opportunities in my lifetime


I think the path to greatest rewards with the least risk--will be in natural resources (and was happy to see Kirk elaborate in those areas).

Primary reason in many are 80% off their all time highs--and while we all know if your portfolio drops 50% in year you have to make 100% to recover--we have opposite effect here--they only have to return to 50% of their previous high to return 100% gain.

the key question is at what point in time will that occur--any time in next 5 years will be fine with me.

--and I think it will be sooner than that.
--a couple reasons
As Kirk alluded in post--when prices come down many processes are not profitable--and as we have seen in cycles in past--production slows-supplies dwindle--prices go back up--supply and demand.

On the demand--recession will certainly cool demand temporarily--but don't think as much as has already been written in. Much of these stimulous intiatives have been directed to infrastructure and heavily in U.S. and China--what will they need--resources.

I think one resource that has taken unwarrented lumps and which is now a four letter word--is coal. -especially in China where they won't be taking on unecessary deficits nor submit their people to exorbant energy cost on premise of being PC.

when times get tough you cut cost--and coal is most abundant and least costly form of energy.

so in 09 will look to add to new and current positions in resources and and dabble in some shipping again (prices also rock bottom)

Some methods in choosing--will try to dicipline myself to but only those with with high cash to debt ratio--and preferrably paying dividend with payout ratio of less than 50%.


Will try and stay diciplined and buy selectively in small portions monthly or maybe even quarterly depending on price (would prefer price to be within 10 to 15% of 52 week lows but hard for me to do sometimes

Biggest trap I see in coming year is hype you will get on these alternative fuels. I can still remember the days of the dot com when stocks that had never had positive earning were selling on nothing but hype--and we know what happened then.

Way to many companies out there with strong earnings and balance sheets--selling at bargain prices to venture into these hype and hope companies.

The best to all in 09--and appreciate your sharing your thoughts with us again Kirk--and looking forward to others input as well.

 

[selkirk]

DTB agree with you on ehtanol it may work in Brazil, Sugar, however not currently in North America. diverting food to fuel has to be questioned, when demand is increasing around the world including the US.

growing populaiton and limited land, also there has been declining food in storage despite record production. What happen if we experience 2-5 years of below average ag. production.....

there will be great buys, however always have stop, and be very selective.
have a great 2009 DTB and everyone else in the stock forum.

thanks
selkirk

 

[DOGS THAT BARK]

Thought I'd put up a few stocks I like in in line natural resources per 09 predictions above and see how they pan out this year.

Natural gas play- CHNG.OB
Coal play-YZC
Aluminum play-ACH

Probably no surprise to those that follow China thread--these have all been purchased previously.
--and while china stocks taken just as big as hit as rest--I look for them to be 1st to rebound--basically they have over trillion in reserves vs over trillion in debt and one of few expected to have positive GDP in 09. They are putting out lots of bucks (which they have)to stimulate their own economy and believe they are looking ahead knowing growth needs to be directed from within now vs old means of primarily exporting.

CHNG Had owned this stock preciously in China thread and sold 1/2 when it doubled in 7-07 @ $6.40 Is currently $2.72 and per its growth chart
http://caps.fool.com/Ticker/CHNG.OB.aspx?source=ifltnvsnq0000004
--can see no reason for decline other than panic--and look for it to bounce back stronger than ever at some point in time.

ACH Sold 1/2 position @ $46.97 in 8-07 (china thread) when it double from purchase price.
currently @ $12.05 .See lots of upside potential with not much downside--and project forward div of almost 3%

YZC was recent purchase for $6.65 in 10-08
Coal big part of China's economy and will continue to be so. Have not seen stock at this level since 04.--Again can't see much downside but lots of room for recovery.Production has declined somewhat in slowdown--but on plus side you get huge company with practically no debt (LT Debt to Equity ratio .01) and very healthy div of around 17% projected while you wait--and that is with payout ratio of a meager 3%.
http://caps.fool.com/Ticker/YZC.aspx

 

[BobbyBlueChip]

This is the strongest automotive has looked in 10 year. There will be no BKs - or at least GM and Ford aren't going anywhere

________________________________________

Detroit OEMs Approaching a Competitive Business Model
by Craig Fitzgerald
Universal Advisor, 2008 Issue No. 3



Turbulent. That?s the best word to describe the last several years for the Detroit 3 automotive industry and its suppliers. Some of the more severe conditions have included (1) banks? increasing unwillingness to fund anything automotive, (2) continuing bankruptcy announcements, (3) shift in buyer vehicle preference from big and fast to smaller and more economical, (4) substantial loss in ?wealth effect? caused by declining real estate prices, (5) unprecedented home foreclosure rates due to subprime excess, and (6) slowing growth rates in nearly all automotive markets including Europe, Japan, China and other low-cost regions.

This turbulence is confounding Detroit 3 initiatives to reduce their internal capacity, align model capacity with market demand, develop coherent brands, introduce ?wow? products, consolidate dealers, and reduce structural costs. The race is on by each of the Detroit 3 to shrink in North America, align capacity with market demand, and restructure their businesses to a sustainable, coherent business model ? before their cash is depleted.

How long will the Detroit 3?s cash last? That?s anyone?s guess. It?s reported that Ford has the greatest cash and availability, followed by GM and then Chrysler. What?s certain, however, is that despite the substantial pain incurred by countless communities losing more than 225,000 well-paying auto manufacturing jobs over the past five years, there?s still more pain to come. The proverbial silver lining is this: once restructuring efforts are complete and relative calm has returned, the Detroit 1, 2, or 3 automotive manufacturers and their supply chains will be much different. Let?s hope this can be accomplished without Big 3 bankruptcy, but absent government intervention, there are no certainties.

What changes will we see? Important change issues include:

Powerful brands, and the right cars within a brand.
Sales and production footprint, or the right capacity in the right geography.
Product flexibility, or the ability to change mix in assembly plants quickly.
Global engineering networks ? low cost and 24 hour/day engineering capability.
Leveraging scale economies, including components, platforms, engineering, and capital investment.
Innovative powertrains with reasonable pricing premiums.
Enhanced supplier relations with powerful supply chains.
Speed to market with the lowest total investment cost.
After we pass through the other side of the turbulence, the Detroit 3 will still enjoy substantial market share, probably fewer brands, fewer and stronger suppliers, and far fewer dealers. But they?ll have brand power and the right products to compete with European and Japanese automotive companies. Moreover, North American restructuring efforts will be complemented by the strong positions that GM and Ford, in particular, have in Europe and many emerging markets.

Success, as always, is measured by bottom-line sustainability of strong and predictable cash flow and the ability to adeptly anticipate and react to changing customer desires, economic conditions, and regulations. While the Detroit 3 will not reestablish themselves as the dominant North American leader that they once were, they will have revitalized their enterprises and restored solid profitability, strong positive cash flows, and they?ll be very strong competitors in both North America and the various overseas markets in which they participate. Given the extreme turbulence ? which has only been exacerbated by the recent economy ? that?s a pretty compelling future.

 

[selkirk]

Bobby thats what makes a market two different viewpoints. The big three are in a great deal of trouble....they probably will be still around.. maybe Chrysler gets broken up, however they are all in trouble.

the marketplace is poor, even Toyota and Honda will report large losses, however when did the big three ever make money in the last few years.... some numbers reported could be questioned.

just look at how much the pension plan is underfunded... in Canada alone it is over 6 billion, that is not counting most of the market losses this year...as the fund was heavily in equities.

part of the reason the cdn. govt, is going to give them billions is because Ontario may be on the hook for a company that completely underfunded the pension plan for years.

in the US the number is much larger, though the US govt may step in,...not sure. let us say the pension plan is underfunded by 15 billion this is on the low side.

agree with the article they will have to rework their business model and lower their costs, cut brands wether they can do this with out BK is the question.

maybe unions will rework their deal and govt...step in with 200 billion grant or so.....how can they afford to pay loans and put even more debt....what ever the govt. borrow they will not see again.... will be forgiven.


agree with the article however why they did not do this 5 years ago...must be harder said than done.

also ford spent billions on volvo, Land Rover, jag, and Autsin Martin. the only reason they never took money, and they will is that they are selling these... for a huge loss, their premium division is a crushed dream that never worked out....

Land rover and jag always had quality issues, and losses...however never will understand selling Austin Martin... a halo car that just made money (though small compared to the size of ford) every single year... why sell a division that just cranks out profits??????????

when bonds are going for less than 50 cents, has to make you wonder,...bond traders are very good at telling you the state of a company.

wish them the best however a major restructer occurs and equtiy holders, get all but wiped out...

thanks
selkirk