My Brave New Universe
Greetings Earthlings,

My interdimensional self-awareness indicates I have been propelled through some hellish wormhole in my sleep. I find myself in a parallel dimension; an alternate universe. My new reality is in many ways superimposed on the one that you know and I knew, but I suspect you may find events in my new cosmic paradigm beyond the capacity of your constricted terrestrial parameters. Allow me to explain.

In my old universe, it would have been fair to say Obama and Reagan were ideological anti matter. Reagan was the ineffaceable image of conservative ideology. Barack Obama was a confirmed left-winger, a big bureaucracy tax and stimulate liberal, a progressive fellow who had adopted a covert anti-colonialist bent. Not so here. In my new cosmic diggs, Barack Obama is extraordinarily similar to Ronald Reagan. So much so, they are pals on the cover of a magazine! Eerie huh? And I don’t know how the President resonates politically anymore where you are but when he makes speeches here, he channels the spirit of Ronald Reagan. I know! All the press says so, folks like Andrea Mitchell, Jeff Greenfield, Christiane Amanpour, Katie Couric, and the LA Times use words like “Reaganesque”. Eerie, but true, so I cannot be delusional!

Can you sympathize with my shock? The Obama in my old world was once declared the most liberal senator in the U.S. senate by the National Journal. He had dubious associations with radicals, even in his own administration. He loved to demonize and tax producers of wealth while spending vast quantities of public money based on Keynesian drivel. He used the government coffers to buy major corporations and passed a law to allow the government to incrementally co-opt his country’s healthcare system.

Ronald Reagan once said, “Government is not a solution to our problem, government is the problem”. The other-dimensional Obama thought colossal centralized government was always the solution to his nation’s ills and government must “win the future”. In fact, your Obama seemed to believe there was not a problem his administration could not solve. Reagan said, “You can’t be for big government, big taxes, and big bureaucracy and still be for the little guy.” I just know my new President Obama agrees because he’s always for the little guy too!

So I guess I should be happy. No complaints here with presidents Obama and Reagan being so similar and all. Things are much better in my brave new world.

Yes, I’m very happy.

Predictions for 2011

My Predictions for 2011 and Beyond   12/31/2010

      The following viewpoints should in no way be considered as financial or personal advice or a recommendation for any course of action.  They are simply my predictions of possible events occurring in the next year and beyond. 

1.  Let’s start with something positive.  American agriculture will continue to boom in 2011.  This will be one of the brightest spots for American exports.  Farmers will use their windfall profits to increase production, buy more equipment, machinery, fertilizer etc.  There will also be a push towards developing a more efficient infrastructure to get American agricultural production to foreign markets.  Good stuff, Maynard!

2.  Oil and Gas:  Oil prices will climb to over well over $100 a barrel by the middle of 2011 due to several factors.   Domestic energy companies will continue to battle federal regulators over drilling and emissions and there will be continued delays in offshore drilling.  Globally, we’ll see a higher demand for oil from emerging markets while we see cuts in production and the supply tightens.  Oil commodity speculators, seeing oil as a safe play, will also participate in driving up the price of oil.  Prices at the gas pump will likely reach $4/gallon in 2011 and perhaps $5 in 2012.  (We may get some relief in June of 2011 when the OPEC nations convene but don’t hold your breath.)  Of course, these rising energy costs will reverberate throughout the economy with a loss of personal discretionary spending, increased transportation costs, food costs, airline ticket prices etc.  Use your imagination.  Higher oil and gas prices will act as a depressant on the sputtering economy as a whole.  If we start to see the effects of the Federal Reserve’s inept monetary policy in 2011, i.e. inflation, the devaluing American dollar may make this commodity even more expensive for the U.S. since we import the vast majority of our oil and we’ll buy the Non-Texas-Tea with those less valuable dollars.  However, I anticipate the inflationary effects of a cheaper dollar will be a greater factor in the 2012-beyond economy because the Fed will continue to keep interest rates artificially low for the time being.  Coal prices will have an even greater upside than oil due to emerging market demand which will be led by China.

3.    Euro zone  (EU) Crisis:  The PIIGS (Portugal, Ireland, Italy, Greece, Spain) debt fiasco will not only continue to be front and center but will get worse, continuing the uncertainty in world financial markets.  The Greek government, still lost in an Olympic-sized fog, has totally mismanaged their recovery by imposing extreme tax increases rather than drastically cutting spending entitlements.  Expect continued unrest there.

Ireland seems to have passed the worst for now but in 2011 look for some combo of Spain, Italy, Portugal, and even perhaps Belgium to be the new poster children for socialistic entitlement debt.  We will see widespread civil unrest in these countries by students, unions and generally those who feel their ox has been gored.  This debt restructuring will put continued negative pressure on the Euro, making it an ugliest dog contest in the currency markets between the Euro and the American dollar.  Euro powerhouse, Germany, along with France, will expect to call the shots on the policies that rescue their EU counterparts with debt restructuring.   If Germany doesn’t get its way it will start softly humming “Happy Trails” in Deutsche and reminding folks that, “half of our citizens would be okay going back to the Deutschemark”.

4.  Israel and Iran:  This could get hot.  Israel has now resigned itself to the fact that the Obama administration is wholly ineffective in containing Iran’s nuclear ambitions.  Israel also understands the White House lacks the necessary motivation to do so, and President Obama is prepared to accept a nuclear Iran.  Israel will feign complacency with the status quo by muting its public statements and softening the imminence of the threat. The recent statement by the Israeli minister of strategic affairs that Iran’s nuclear capabilities are at least three years away is a rhetorical smoke screen meant to keep Iran complacent.  Israel can’t verify that timeline and they can’t chance the apocalyptic threats to their existence by the treacherous Iranian regime.  The option of waiting until 2013 for a more aggressive and sympathetic American president is also not palatable.  Israel’s only option will be a surprise surgical air strike against Iran’s nuclear facilities.  Syria has already publicly told Iran it would not strike back at Israel should the Israeli jets fly over Syrian airspace for such an assault.  The Syrian statement may be an implicit message for Israel’s benefit, encouraging Israel to take care of business.  There is no love lost for Iran in the Middle East. Iran’s president and the hard line clerical regime alarms its neighbors and none of the other nations in the region desire to participate in nuclear proliferation which they would be forced to do should Iran develop a nuclear weapon.   When the Israeli strike occurs look for temporary dramatic spikes in commodity prices such as oil and precious metals and a sharp short-term hit to the stock markets. 

5.  Domestic Political:  The 2012 presidential race will begin to take shape with a Republican Party without a front-runner.  This is unusual for Republicans and they may not know how play nice.  (Thou shall speak no evil of a fellow Republican.)  This leaves the field wide open.  There will be as many as ten or more Republican’s who announce their candidacy in 2011, including Sarah Palin.  The far left of the Democratic Party along with union leadership and liberal organizations will threaten President Obama with a possible candidate from their/his end of the political spectrum.  Russ Feingold, former Wisconsin senator (possibly Dennis Kucinich), will be mentioned consistently for that spoiler/stinker role.  The left will use this threat to keep President Obama close to home should he think about pulling a Bill Clinton circa 1994 and triangulating for political expediency.  The president will do a few transparent “head fakes’ to the center as attempts to garner political brownie points from Independents, but his personal ideology will keep him bearing hard left so he will comply and track with the left wing.  This will politically hamstring the president and he will not regain the support he lost from Independents and conservative Dems in 2010. Since Obama is tied to the left’s apron strings; this leaves room for Secretary of State Hillary Clinton to “save the Democratic Party” and move in from his right (still left of center) and announce her candidacy should Obama’s approval polls remain at or below 40%.  The Republicans’ failure to capture the majority status in the Senate will be a blessing in disguise.  The Obama administration cannot easily play the blame game or use the ‘party of no’ rhetoric when their party controls half the legislative branch.  Don’t get me wrong.  The president will continue to use the ‘party of no’ rhetoric as he goes into hand-to-hand political combat with the Republican led 112^th congress. An increasingly skeptical and Obama-weary American public will say, “Party of no? Excellent!”             

The new congress, fresh from its election mandate to be the ‘party of no’, will come in looking to kick butts and take names, not prisoners.  The new congress will adopt the political guerilla tactic of disrupting Obama’s initiatives by limiting appropriations. In other words, not funding the laws the Obama administration has put into place, such as Obamacare.

The 22 Democratic senators up for reelection in 2012 will be far less likely to walk the plank for the Obama Administration’s policy initiatives.  The 2010 election has now definitively proved to legislators that an awakened American public does in fact have (uncharacteristically) a collective memory superior to a brass doorknob and they will hold legislators accountable for their votes.

The Tea Parties will continue to garner wide-spread support despite the far left and media elite hostility which will become increasingly transparent in the public’s awareness as little more than political posturing. 

We will see Tea Parties 2.1 as the leadership becomes more effective from lessons learned through the successes and failures of their 2010 election experience. The various Tea Party leaders will show greater sophistication in recruiting and grooming candidates with more ‘electability’.  The Tea Parties will also hold Republican legislators’ (old and new) feet to the constitutional/fiscal sanity fire.  The Tea Parties will make a priority of monitoring and targeting ‘liberal’ Republicans; marking big spending “RINOS” (Republicans In Name Only) for a primary challenge in 2012.   Some factions of the Tea Parties will become more involved with conservative social issues.  The socially conservative Tea Parties will have less success, meet greater public resistance, and be more fractious than those Tea Party factions who remain consistent with the broader goals of fiscal sanity and constitutional priorities.

6.  Economic Issues:  Unemployment rates will dip but continue to remain just below 9%.   The GDP numbers will look promising for a few quarters but will disappoint.  Look for noticeably higher food prices starting next spring due to higher farm commodity costs being passed on to consumers.  Clothing prices will also increase due to higher cotton prices.  Don’t look for the higher prices to be included in the Consumer Price Index CPI.  The pointy-heads in D.C. don’t like the “I word” (inflation).  Although the government bean-counters will continue to massage the CPI numbers, chatter about deflation will give way to chatter about inflation due to the higher costs of those commodities and energy costs, except natural gas, which will remain relatively low for the first half of the year but natural gas prices will start to edge up in the latter half of the year. 

The stock market will lose some of the steam (hot air) the Federal Reserve has been supplying through quantitative easing, in other words, creating vast amounts of money out of nothing.   Stocks, already overbought, will then have a pullback before summer.  The financial talking heads on TV will call it a “correction”.  Stocks will lose favor with some investors. Bonds, especially municipal bonds, will become the red-headed step-children of the investing world.   Money will continue to flow to all commodities including metals.  Look for the precious metals to continue their run higher along with oil and farm commodities as investors’ worries about inflation continue.  China will continue to very quietly off-load U.S. dollars and buy more gold and silver.  

The Republican Congress will diligently try to bring Fed Chairman Ben Bernanke and his back-door monetization policies to heel.  2011 will bring unprecedented scrutiny on Federal Reserve practices and the Fed Chairman Ben Bernanke.  Texas Congressman Ron Paul, the Fed’s worst nightmare, will become the head of the Monetary Policy Subcommittee of the House Financial Services Committee. Congressman Paul will have subpoena power so look for Ben Bernanke’s butt imprint on Paul’s witness chair.  This Ron Paul-Ben Bernanke match up will supply some epic, engaging and highly enlightening battles.  Conservatives and Libertarians would dole out cold cash to watch those meetings on pay-per-view if necessary. 

Housing prices, nationally, will not find their bottom despite the happy cheerleading from the business news networks.   Foreclosure rates will continue to climb in 2011 as banks refine and renew their foreclosure policies.  Banks will be more aggressive about dumping inventories including the ‘shadow inventories’ they have tried to keep off the books to keep the numbers from becoming too scary and keep some stability to housing prices.  If interest rates go up…well…bar the door Katie because we’ll have an entirely new wave of foreclosures as a much larger percentage of homeowners find themselves under water and give their house keys back to the banks and walk away.  We’ll probably see more of that in 2012.  Housing prices may not find a true bottom until 2015.

States and municipalities will come under increasingly intense financial pressures; some more than others.  States like Illinois and California will be 2X4ed into fiscal reality as they realize the numbers just don’t work.  The Republican congress, backed by the common sense sentiment of the American electorate, will refuse to bail out these irresponsible states who apparently thought they could eat rainbows and crap butterflies. These states and municipalities will see the cold, gray light of dawn.  They will adopt the New Jersey Governor Chris Christy model and “go all Jersey” on public union employees and their exorbitant pensions and benefits.  The states will force renegotiation of contracts, pensions and benefits and make dramatic cuts to their social services.  Most of these same states already have heavy tax burdens which the electorate will not support increasing.  The unions and special interest groups will fight back.  Expect massive demonstrations, threats of political retribution, civil unrest and even some violent confrontations with police as demonstrators feel betrayed by legislative folks they considered their own.  Broad public sentiment towards unions will become increasingly unfavorable and unions will be seen as more a problem rather than a solution.

7.  Obamacare:  Expect more waivers to be requested by and issued to companies and unions that wish to be exempted from Obamacare.  If the new Republican led congress cannot effectively starve funding for Obamacare, and they will try their darndest. Health insurance companies will continue to dramatically increase premiums as they prepare for the actuarial hit they see coming at them like a runaway Mac truck.   Support for Obamacare will continue to decline in the polls.  Obamacare will still be front and center as a major issue in the next election cycle.  Look for the Supreme Court to weigh in on the private insurance mandate sooner rather than later as the Obamacare issue heats up in the congress.