We are not fortune tellers or prophets, but for some reason every year at the end of December we feel compelled to look ahead and try to see just over the horizon. Here are our predictions for 2008. I hope you will let us know what you think and share with us your predictions.
1. We predict that Hillary Clinton will win the Democratic nomination, and Governor Mitt Romney will win the Republican nomination. The general election is still too close to call. Governor Mike Huckabee may win Iowa, but the big story will be how close Governor Romney is to him and how Hillary lost it. Iowa will be Huckabee’s high point and Hillary’s low point. If Rudy Giuliani comes back to win Republican primaries in New York, California and Florida then he can make a race out of it, but a Romney win in South Carolina, Michigan and Nevada could create momentum too great to counteract. With a Hillary vs. Romney showdown in the offing, Mayor Michael Bloomberg will have trouble staying out of the race. Bloomberg will doom the Hillary campaign the same way Ross Perot hurt the elder President George Bush.
2. America’s media are currently predicting that we will fall into recession in early 2008. We just don’t see it happening. Housing is already in recession, but it is at its low and will not head much lower. The de-leveraging of financial assets has mostly happened and stocks are already priced for recession. Earnings will not fall as far as past slowdowns because profits from abroad are boosting America’s companies.
3. Oil prices will moderate in 2008. When we say moderate, we mean 60 to 70 dollars a barrel in the late winter and spring of 2008. We expect that if a recession doesn’t show up and global growth continues, oil and gold will both head higher in the fall of 2008. If Hillary Clinton is somehow elected, expect the gold market in particular to enter a new supercharged bull phase. This will be a repeat of the bull market in gold that came after the inauguration of Bill Clinton in 1993 and didn’t stop until Newt Gingrich was elected Speaker of the House of Representatives on January 4, 1995.
4. The dollar will go up in value in 2008. With the economy remaining strong, the Federal Reserve will once again begin to focus on fighting inflation in 2008. When the Fed changes direction and starts to raise interest rates then we will see the start of a new bull market for the greenback. The dollar still has happy days ahead. But longer term inflation will win the battle and return.
5. Divided government is here to stay. If a Republican wins the presidency, then Democrats will continue to control at least the Senate and most likely both houses of Congress. The only way the Republicans can fight back to win a majority in the US Congress is if they lose the presidency. Then they can win Congress in 2010 because of frustration on the part of voters toward the rule of Clinton the Second.
6. Your taxes are headed up. Congress and the president have to agree on extending the Bush tax cuts. The only way this will happen is with a Republican sweep, which we don’t see as likely. A Republican president will not be able to get a Democrat Congress to go along with an extension of all the Bush tax cuts. If we have a Democrat elected president, she won’t even try to keep taxes down. As Hillary said in a recent debate, "we have to get back to the hard work…of raising revenues."
7. Healthcare in America will be changed forever, and not for the better. A President Romney or a President Hillary will both attempt to reform healthcare. Corporate America is tired of paying this bill and their business lobbyists in Washington are working overtime to increase the government’s role in healthcare finance. No matter who wins the Congress or the presidency, the powers in Washington will rewrite the healthcare laws and the losers will be innovation, high quality care, personal control of healthcare decisions, and your pocketbook.
8. The troop presence in the Mideast will be made permanent. The surge is working and calm is settling over Iraq. This will take Iraq off the front pages for the 2008 election. President Bush will likely announce that troop levels will be reduced in 2008, but they are unlikely to be totally out of Iraq, even with a Democratic presidential victory, until 2010 or later. With a pull-down in Iraq by midyear 2008, troop levels in the Middle East are still not likely to be greatly reduced. American soldiers will be a trip wire in the Mideast to protect Saudi Arabia, the UAE and any other friendly governments with lots of oil in the ground.
So now we have shared our eight predictions for 2008, you can come back periodically throughout the year and hold us accountable. But then again, this year we just might be right.