By James Altucher
With $500 billion in stimulus money still to be sent and the Senate now debating another $1 trillion in spending, there will be “weak dollar” fears. Not to mention the fear of China dumping dollars and also the reality that the government is probably pursuing a weak-dollar policy while talking a strong-dollar policy (a twisted version of Rubinomics).
Also, take a look at my favorite chart from the Fed is the change in business inventories.
Businesses de-stocked like it was the Great Depression — but it wasn’t. Once inventories rise it will lead to not only the market going up but the next two predictions.
2.) Unemployment goes down to 8%.
Starting in Q1, unemployment will slip a half percentage point per quarter. How come? Well, look at the chart above. Who’s going to make the new inventories that have to be restocked? Not necessarily all of the people that recently were laid off but certainly some of them. We’re already seeing average work-week hours go up and number of temp workers go up. This is always the precursor to employers ultimately hiring new full-time employees.
3.) GDP hits an annualized 6% by Q2 as inventories get restocked.
4.) Dendreon (DNDN) is acquired.
Someone please put this stock out of its misery. Day traders either love it or hate it, so it has huge short interest and wild swings and even wilder rumors. And for all the haters on the Yahoo message boards: I was always bullish on this stock in my videos on thestreet.com (TSCM). Stop saying I flipped! (Disclosure: I am long DNDN).
Dendreon has only good things in front of it. It’s on its way to all approvals for a blockbuster drug that has a multibillion-dollar a year market. Someone is going to want a piece of that for their pie.
5.) AOL gets bought by Microsoft.
AOL is a private-equity dream come true at current levels. Over the next four years it is going to generate more cash than market cap and then the rest is gravy if it can figure out how to wind down or sell the business without losing too much money or, heaven forbid, transform the business so it becomes exciting again. But, before that happens, why wouldn’t Microsoft buy it? Check out this chart comparing aol.com + yahoo.com + msn.com.
Rather than buy Yahoo for $22 billion it can buy AOL for one-tenth of that and now compete face-to-face against Yahoo. It’s a no-brainer and I expect it to happen in 2010 once the dust settles around its spinoff/IPO from Time Warner (TWX).
6.) B will the best letter in the BRIC countries: Brazil, Russia, India, China.
China’s going to be grappling with growth issues plus still is a tough regulatory landscape for investors to navigate. Ditto for Russia. India has been riding the outsourcing wave but with the dollar so cheap it now pays to “insource” inside the U.S. rather than send your IT needs out to India.
My last big project I outsourced out to India. Guaranteed, the next one I do will be with U.S. programmers. Brazil meanwhile has a very business-friendly leadership, its banking system remained intact throughout the global recession, and it is able to get cheap goods from the rest of South America to service its industrial needs as it continues to take over the world. I expect Brazil’s market to outperform the other two, even though they were also up about 100% this year.
7.) Health care will greatly outperform the S&P in 2010.
In 2009, the healthcare ETFs have been grossly underperforming the market. Investors loathe uncertainty and given the ongoing debate on healthcare reform there’s no sector more uncertain than healthcare. What will it mean for pharma? For insurers? For health-care IT? For hospital REITS? Etc. Who knows?
Well, in 2010 we’ll know. There’s that saying, “buy the rumor, sell the news.” When it comes to health care everyone’s been selling the rumor. Next year they will buy the news. You can get a sector ETF if you want to play it or I prefer owning a basket of Warren Buffett’s health-care plays: JNJ SNY GSK BDX.
8.) Banks start lending money again.
Here’s the critical shot: That’s the Fed chart for the excess reserves. Note that its zero forever and then shoots up in the past year. That situation will unravel.
9.) Either Apple or Amazon will develop the killer tablet computing product (or be close to it for 2011).
Here’s all I need in an “iTablet.” I need either a big iTouch (made by Apple) or a Kindle (made by Amazon) with open-environment operating system so developers can make independent apps for it. One of these guys will do it. It will be great, and my life will become so much better.
10.) The world will not end.
That’s not to say the media won’t try to convince you it will. Again and again. We will see the usual headlines: pandemics, global warming, terrorism, financial collapse, hyperinflation, nuclear proliferation, celebrity cheating, on and on. The media can’t survive without every week scaring you into thinking we all only have a few weeks to live (e.g., Al Gore saying that the North Pole would melt within the next five years. It’s just not true).
But the world’s end isn’t near. In fact, things will be better than ever.
James Altucher is a managing partner of Formula Capital, an alternative asset management firm, and an author on investment strategies. Unlike Dow Jones reporters, he may have positions in the stocks he writes about.
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