Yesterday, we took a gander at the highlights so far in 2008.  Today I’ll attempt to predict the future.

I hate to make too many guesses.  As I’ve learned from a book I’m reading, even the best stock pickers are only right about 60% of the time.  So how right am I going to be by speculating over the next 6 months?  After consulting my colleagues, Ms. Cleo and Mr. Magic 8-Ball, we came up with the following:

While the housing and credit nightmare will continue, we will start to see the silver lining.  Getting credit will be tough for a few years to come, but it looks like the bank stocks are bottoming out and the Q2 results will probably be the worst of the year.  We don’t realize we’re recovering until we’re recovered, so I expect Q3 and Q4 will the “recovering but not really noticing” stage.  That being said, I think we’re still in for a surprise or two.  Maybe a big bank buy-out,  a GM bankruptcy, or federal intervention with Fannie and Freddie.  We’ll see.

With the 1st 1/3 of the year filled with Fed rate cuts to bail out the banks and folks with adjustable mortgages and the middle 1/3 likely filled with no cuts, I expect the year to wrap up with rate increases.  Despite the needs of the banks, the Fed will shift its focus to inflation and the dollar.  The last month of Q2 saw inflation rise at a rate faster than any since June 1982.  1982 was the end of the 70s which were plagued with inflation.  We are teetering on the edges of the first few years of the 70s and will need the Fed to increase rates to make the dollar more valuable, thus controlling some inflation.  But of course, a lot of it stems from high gas prices.  Which leads me to…

I strongly believe we are nearing the peak of the oil bubble with $150 a barrel.  The psychology of that benchmark will keep traders from pushing the price higher.  We watched two oil sell offs around $145 because the traders are taking their profits.  Naturally, the market will probably sort this out before Congress can actually enact some kind of legislation.  Oil might jump up to $200 and I’d be dead wrong, but my prediction is the bubble will pop or deflate down to $100 or so by the end of the year.  Expect $3.50 a gallon to be the lowest average we’ll see for the rest of the year.

Though yet to make an endorsement, The Weakonomist believes Barack Obama will win the election in November.  Sometime before election day I’ll talk about where each candidate stands on our economic issues and make an endorsement.  Along these lines I expect many Republicans to take back their seats in Congress, thus giving us another 730 days of bi-partisan bickering.  I love America.

Finally, I expect the US to dominate at the Olympics sending the message to the rest of the world we can still do a mean dismount from the balance beam, even if we can’t pay our bills.

So there you have it, my predictions for the future.  I’m opening up the comments for this post to see if any of you readers have other predictions.  If someone reminds me, we’ll check back in January 2009 to see how right or wrong we were.

Related posts:

1. Weakonomics Economic Review of the First Half of 2008
2. New Word:  Freeconomy
3. Another Buy: Citi Wants a Piece of Wachovia’s Badonkadonk
4. Weakon 180: Intro to the Fed, Part I
5. Ken Thompson Canned: Financial Services Industry Shakedown

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