1. The US will hurt, a recovery probably won’t happen in 2009, certainly not in the first half of the year,
2. The UK will hurt as well.
3. Some oil rich countries will hurt.
4. I’m expecting a major plunge in the USD, though I’m still uncertain as to whether it will happen in 2009 or 2010.
5. Strength in EUR.
6. Weakness in GBP (relative to EUR).
7. Some strength in AUD.
8. Some small recoveries in Commodities.
9. Do I think we’ve seen the end of this financial meltdown? not a chance. More coverups and failures in 2009.
10. I’m expecting major problems in markets which have thus far managed to get away unscathed… Credit Card debt is an obvious though by no means the only one.
11. The IMF will be busy saving countries.
12. Caution will be a key theme of 2009.

I’m aware that they are pretty weak positions that I’m taking… a lot of fence sitting…. I think that will be most peoples position for most of 2009 hence no strong opinions.

The predictions I made are as follows with my comments now about each prediction in bold/italics:

1. Oil is going UP… this has been my view for a long time now, and don’t see it stopping until there is a viable alternative fuel for cars.
   YUP… until it plunged
2. Soaring oil prices will increase the demand for alternative energy, expect some fairly major developments. Though nothing to suddenly fix the worlds problems.
   Not such a good call
3. The US is going to have more hard times this year, subprime was just the trigger (and it is far from over yet) that will see more pain for the whole US economy.
   Hey this was a great call! I’m pretty sure I meant for the USD to be lower though luckily didn’t put that in writing
4. With the US going down Gold is going UP.
   Good call… sort of… it fell also and is about even now.
   
5. US interest rates will keep falling.
   Good call
6. Commodities in general will continue going up.
   Happened… sort of… until they plunged
7. My bravest prediction is that the AUDUSD is going to get to parity with the USD.
   Not a bad call, got damn close.
8. Expect strength in the EUR, JPY, CAD.
   EUR: Bad Call, JPY Great Call, CAD Bad Call
9. Expect weakness in the GBP (particularly against the EUR), whether the EUR can maintain the strength for the whole year will be interesting.
   Good Call
10. I see less political conflict for the year ahead. In the US elections the Americans will finally fix the mistake they made 4 years ago and the republicans will get their asses handed to them. Which will be a good thing for America and the world.
    That was a good call

Overall, I think I actually didn’t do too badly… I totally didn’t see the plunge in currencies and commodities and the massive climb in USD.

I will post another post soonish with my predictions for 2009, it should be an interesting year!

I just read an interesting interview with an analyst called Stephanie Pomboy talking about the USD with Barrons though I read it courtesy of 1440 Wall Street.

A key quote for me looking at the USD:

If we rely on foreign creditors to lend us the money to sustain our lifestyles—and that’s what we do—we need to compensate them for that risk of lending to us. As the economy weakens and our credit quality should theoretically be deteriorating, the only way we can really attract that same capital is by offering a higher interest rate or making our assets cheaper to them, in this case by having our currency be weaker.

Thanks to 1440 Wall Street for the cool title and excerpts from the interview.

I’m not sure I’ll have a lot more to write about between now and the end of the year (I expect everything to wind down a bit), so I should probably take this opportunity to say I hope you enjoy the break and have a happy and profitable new year.

I’m rather disappointed with my November results at a bit more than -10%. It won’t discourage me, I like the strategy though it needs some better stop losses.

At present my strategy is still doing ok in the automated trading championships in 56th out of ~700 though the charts below are great at showing the reason it isn’t performing better, and also help to illustrate my November result.

MAE

MFE

Might be an idea to cap those losses at around -$2k

Anyway, there’s an excellent read (pretty long in on screen reading terms) written by Michael Lewis on Portfolio.com. It has a good look at the complete scam that has been banking and the unravelling of it.

I’d really recommend everyone to have a read through this story, it will take a while though well and truly worth it.

With Switzerland having a GDP of about $300billion, they can’t afford to bail out UBS and Credit Suisse, interesting times ahead.

More to read on FT Alphaville, Portfolio.com and Crooked Timber.

Make sure to have a look at this chart which I borrowed from FT Alphaville… it is scary.

So… what’s the impact on currency… it would seem long USDCHF might be a good position to take… or perhaps even better if you (like me) think the USD is going to struggle in the coming years… long EURCHF?

I haven’t taken a position, though I might have a look at it as a possible trade.

I read an interesting story about corporate culture at Toyota, even in tough times they don’t lay off workers, instead they train them, shift them to plants which are understaffed etc. In the last couple of years GM has laid off 34,000 workers, Toyota (in the US) ZERO.

At the bottom was a link to an old (2006) article about Honda. They really come across as the masters of diversification, and some very solid reasons why they will probably be around for a long time. It’s also interesting that they are run by engineers, where big car companies in western countries are run by accounting types.

Their slogan

“To be a company that society wants to exist.”

Not a bad goal, though it makes good survival sense

Honda believes that society does not cotton to companies that melt ice caps and kill coral reefs. Cars that create less pollution also cost less to fill up.

And interestingly they’ve never had a losing year. Would be interesting to see how the current economic climate has affected them.

Some months back I visited Japan and was very impressed with their efficiency (particularly the subways), when you compare it to Sydney or London their efficiency is amazing, everything is designed around getting things done quickly and efficiently. I should mention that this isn’t true for everything in Japan, try to get something out of the ordinary done that requires someone making a decision and chances are you’ll go crazy!

China’s fears that America’s $700 billion bailout plan may make the US budget deficit balloon to well over US$1 trillion this fiscal year.

The US government will fund the bailout by printing new money or issuing huge amounts of new debt, either of which will put severe pressure on the value of the greenback and on government bond yields.

This article has some good thoughts about where the dollar is going.

“The fact that the dollar is gaining rapidly is only temporary,”  Rogers recently told a group of private bank clients.

“Within a year you’ll have to get rid of the dollar,” he said.

Rogers has spent a career being one step ahead of mainstream investment thinking.  Amongst his many accomplishments, Rogers was co-founder with George Soros of Quantum Fund. During his ten years with the fund, the portfolio gained more than 4,000%, while the S&P rose less than 50%.