Predictions for 2008

1. The Fed funds rate will be flat or down in the first half of the year.

2. Inflation will pick up steadily through the year.

3. The 10-year Treasury will be flat for the first half but reach 5.75% by year-end, incorporating an increasingly discussed “inflation premium”.

4. Earnings on the S&P 500 decline 10%, to around $81.

5. The stock market, after a rocky start, will pick up a little through the middle of Q2 but then dip drastically in the second half. The S&P will end 2008 at 1,160, down 21% for the year.

6. The dollar will continue weak through Q2 and stabilize with the increase in the 10-yr Treasury rate in Q3.

7. China will host the Olympics, having first made sure to get all the dissidents out of the way. Inflation in China will begin to run rampant, but the currency will be flat or rise very modestly. China’s food imports will rise but there will still be shortages and high prices. There will be continued unrest in the countryside. By Q4, China will be on the verge of a steep recession and the stock market bubble will have burst.

9. Russia will become increasingly aggressive. Putin will be Prime Minister, and the constitution will be changed to radically increase the power of the Prime Minister. The Russian internet will be more tightly censored and controlled. Azerbaizhan, Kazakhstan, Ukraine and Georgia will be de-stabilized, and there will be Russian troops on, or even over, the border of one or more of these. The rouble will continue to rise.

10. Africa will continue to be a battleground. Darfur, Congo will continue in civil war. There will be a military coup in Nigeria and trouble will begin again in Angola. Robert Mugabe will finally be toppled in Zimbabwe and civil war will erupt between the Matabele and the Shona. Tensions will be running high in South Africa. In Kenya, Kibaki will resign and it will finally be the turn of non-Kikuyus to start lining their pockets.

11. The Middle East – who the hell knows? but it will be further de-stabilized in 2008. There will be civil war in Iraq, Al-Maliki will leave the country or be assassinated, and Turkey will make incursions into the North, possibly with surreptitious support from the US. Secular youth will make political gains in Iran and possibly in Saudi Arabia, Kuwait, Qatar and/or other more developed Arab countries.

12. Socialism will take hold increasingly in Latin America.

13. Partly as a result of all the foreign turmoil, John McCain will be elected President of the US.

14. Nike’s sneakers will be back in style, and the Patriots will win the Superbowl.