Edwin Sumcad

Straight Light

Edwin Sumcad

More About: Future Predictions

My Take: A Positive-Negative Mix But Critically Conditional For The Year 2009

      The capital market faces a remarkable challenge on the road to recovery. But the rally will be strong in a turn for a bright economic outlook. 

      “As the closing bell rang” for 2008, the “third worst stock market year in history has ended”.  This market declaration is unanimous. 
        I was looking at the New York Stock Exchange as traders confer at the final day of trading for the passing year. At the Merrill Lynch trading station, it was on December 31, 2008 when the day of optimism for the coming year started as the new stewardship of Bank of America takes effect January 01, 2009.

       What I just cited is an index of “mergers” or “consolidation” if you may, as the badly battered economy tightens up to excrete out the air of “bubbles” in the market, and businesses regroup and prepare to surge in 2009.

      In the pipeline, “nearly $9 trillion in cash is on the sidelines, waiting to be invested.” [1] The market will become so buoyant in a way never seen before in recent years as if we are looking at it with a great surprise as it bounces back with vengeance in the wake of a financial turbulence that brought havoc to the local and international landscapes.

       I don’t buy for a moment, the wailing of the counselors of doom that the economy would hardly survive a recession in the magnitude of the 1920s-1930s this year. That kind of pessimism is generally shared by doomsayers, not by optimists who see the vibration of life in the future rather than the dead side of the glass of gloom seen darkly through one’s Crystal Ball.

      But because many market players were badly hurt in 2008, caution is what is holding back, and the return to normalcy is in this sense what I describe as “sticky”.

      Fear of another market collapse is a kind of financial paralysis that the economy will get over with.  When the results of the massive stimulus re-ignite the economy, the bogeyman would eventually be laid to rest. 

      The bogeyman still walks the street and scaring investors while nervous people are running out of their wit.  Fear slows down recovery when there is nothing to fear but fear itself. The nagging belief still persists that the people’s tax money now being used to save the tilting market about to submerge and drown us all, is going down the drain.

      “Fixing” by the Treasury and the Federal Reserve, has been going on for the public’s peace of mind since Congress passed the law on rescue package or bailout.  The people’s money in the Treasury is “borrowed” by the Fed with interest [“fixing” and “borrowing” are layman’s terms used in lieu of the technicality of instrumentalities and procedures they stand for]. This massive amount is pumped into the financial sector to rescue banks and lending institutions in order to sustain liquidity without which mega corporations that create wealth and millions of jobs, will not be able to function, and the economy will ground to a halt. If this happens, you may imagine some kind of explosion, maybe similar to a nuclear bomb, that would wipe out the economy.

      When the economy begins to expand as a result of this massive “financial infusion”, the “borrowing” private sector or the so-called “bailed out” entities, will begin to pay-off their “loans” with interest to the Federal government through the Fed.  Your money which cynics think is going to the drain, is rerouted back to where it came from so to speak, meaning it earns and/or multiply x-times [multiplier-effect].

        Why do you think on record Canada and Japan wanted to participate in this huge super bailout? Those who understand what investment means know the answer like they know the back of their palm.

        It is unfortunate that the gargantuan rescue package is still the bone of contention among the arguing fearful innocents, which probably will continue until the middle of this year when recovery is clearly felt. I feel their concerns which by their very nature are humanly legitimate.   

        However, the premise of my own version of recovery is simple:  Fed’s major focus will be on expanding its balance sheet, while Congress will force banks and lending institution to lend funds after receiving the stimulus.  The Obama government’s stimulus program is now being calculated to be over $500 billion, and may actually end up more within the range of $800 billion-$1 trillion.

        By experience, the housing industry will automatically correct itself.  The inventory of unsold homes with quite a number of foreclosures will be sharply reduced as the level of building permits falls.  A dramatic improvement in housing inventories will be one of the pleasant surprises in the overall economy by the middle of this year.
        But decline begins when Obama starts his wealth redistribution program.  The 5%-10% top corporations that are barely recovering will begin to feel the brunt of siphoning of income through taxation.

      And the cycle of economic boom and recession starts all over again.

      The socialist philosophy of running the economy will be tested whether or not the wealth-generating sector of the economy will accept or reject it.  If Capitalism holds the forth, it could lead to anarchy.

       This leads us to the next level of analysis. If the problem of national security preempts recovery, then rewind this economic prediction back to where it started. 

       When Al Qaeda, and the likes of American bomber Bill Ayers claim their reward by supporting Obama win the presidency, and as a result dirty nuclear device explodes in Los Angeles or New York, then that is another subject of predictive analysis as to what the future will ultimately be.

        Overall, we are a nation of risk-takers. We make history. It started late last year when the nation verged towards the left by electing Barack Obama president of the United States. #

© Copyright Edwin A. Sumcad. Freedomsphoenix.com access December 30, 2008.

The writer is an award-winning journalist. Know more about the author by reading his published editorials and feature articles or you may e-mail your comment direct to ed.superx722@yahoo.com.sg


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