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Three Predictions for 2009

William J. (Bill) Lynott |

As I write this, the financial world is in turmoil. Consumer confidence is at near-record lows, the subprime mortgage mess shows no sign of letting up, and bank failures have shaken confidence in our most trusted institutions. I can’t remember a time our economic future has been so clouded.
Even so, it seems natural to wonder what the coming year will bring. Even in stable economic times, predicting future developments is an unwise indulgence; in times like these, it’s madness. But it’s a weakness many of us can’t resist — myself included. Here, then, are my three predictions for the financial year ahead.INFLATION
The signs are there. Oil — the commodity that affects almost every aspect of our lives, including food, transportation, clothing and medical care — continues to exert a powerful influence over the health of the economy. Some industry experts are now saying that it’s no longer a matter of whether oil producers are willing to increase production — it’s whether they’re able to do so.
“Our good friends in Saudi Arabia — long thought to be sitting on the world’s largest oil reserves — have apparently been fudging the truth about their ability to meet demand,” says Stephen Leeb, Ph.D., in his financial newsletter. “If you tracked Saudi oil production, you’d know that production there actually peaked 25 years ago. Even with today’s sky-high prices, the sheiks can’t suck more oil any faster.”
The bottom line? The inflation rate is going to rise significantly in 2009. I don’t think it will hit double digits, but it may get close before retreating to more acceptable levels.
With this in mind, this is probably a good time for you to consider adding inflation-protected securities to your portfolio. The federal government’s TIPS bonds and I bonds are designed to cushion investments from inflation. To find out more, visit the Treasury Department at www.treasurydirect.gov.ALTERNATIVE ENERGY
While the development of alternative energy sources has been growing gradually for years, the current oil crisis has had at least one positive effect: growing awareness of the fact that we’d better get down to business on finding new ways to satisfy our thirst for energy.
More money will be spent in 2009 on alternative energy sources than ever before. Nuclear energy has long been a significant part of U.S. energy production, but wind, geothermal and solar are destined to join it as major sources of energy.
Even with the stock market in flux, you may wish to add companies involved in alternative energy production to your portfolio. Wind is the fastest-growing source of alternative energy, and while there are a few American companies in the field, foreign companies are far ahead of us.
In Denmark, wind power produces approximately 19% of electricity; in Spain and Portugal, it’s 9%. Germany and Ireland are up to 6%. Recent changes in the tax laws will help bring America up to these levels; ask a broker about the leading companies.REAL ESTATE
The housing market will eventually bottom out and start a slow recovery; the question, of course, is “When?” Some experts forecast a long, painful abyss; others suggest that we’re close to a reversal in the decline.
After reviewing the opinions of a broad spectrum of industry observers, I believe that early 2009 will see the average selling prices of homes decline further. However, I also think that we’ll reach bottom by the end of 2009, and see the first indications that prices are set to move back up. The timing will vary from one region to another, but a national trend will be established.
If you’re thinking of selling your home or business, it may pay off for you to wait at least another year. Of course, if you’re in the market to buy, grab those bargains while they exist.
 

About the author

William J. (Bill) Lynott

Freelance Writer

William J. (Bill) Lynott is a freelance writer whose work appears regularly in leading trade publications and newspapers, as well as consumer magazines including Reader’s Digest and Family Circle. You can reach Lynott at blynott@comcast.net.

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