Saturday, October 14, 2006

My Investment Assumptions

Investment Assumptions through 2007:

Inflation should peak sometime during the next six months and slowly decline during the rest of 2007.

GDP should grow at a 2% pace during the first half of 2007, with a flat or mild decline observed in the second half.

Employment should decline in the second half of the year – unemployment may rise throughout most of the year.

Yields on the 10 year Treasury bond should decline to nearly 4% by the end of 2007. Yields on junk bonds will rise.

Commodity prices for building supplies such as lumber, cement, and copper will decline significantly.

Oil will decline to under $50 per barrel by the end of 2007. This is a cyclical decline within a longer term rise.

Residential real estate prices will decline by about 10% during 2007 in major cyclical markets such as Los Angeles. The declines will be very uneven depending on the area and type of housing. Condos will decline by more than houses. Florida condos will have a bloodbath.

I worry that the current strength of the stock market is a sucker’s rally. I hope it lasts for another six months or more. However, I will continue to slowly sell into this strong market, and then sell more quickly if I see the decline that I am expecting.


At October 22, 2006 1:48 AM, Anonymous Anonymous said...

More money is lost anticipating or trying to time recessions than from the recessions themselves.

At October 25, 2006 7:14 PM, Anonymous Zephyr said...

I believe that is true. Studies have shown that most people are worse off for their market timing efforts. However, for every badly timed trade there is someone on the other side of the trade making a comparably well-timed trade.

Market timing can be a very good boost to returns for those who do it reasonably well.

I have had good fortune on market timing, and I am thankful to all those momentum buyers who wait for the market highs to jump in - and who despair at the bottoms and sell.

At October 26, 2006 8:16 AM, Anonymous ~ Nona said...

Zephyr, I always look for your comments on Barry's blog. They are invariably thoughtful. Thank you for contributing.

At December 02, 2006 10:33 PM, Anonymous Anonymous said...

Actually the Kennedy asassination does have something to do with M3. Kennedy dared to issue $5 billion in silver certificates without borrowing them from the Jewish Federal Reserve bank. He was immediately murdered and his certificates taken out of circulation by the banks on orders from the Federal Reserve. I still have some of these certificates. R.S.


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