What should business leaders and investors do to prepare themselves for the difficult year(s) head? David Rhodes and Daniel Stelter of The Boston Consulting Group have compiled an excellent guide in which they consider 4 possible economic scenarios. Included are detailed actionable steps that companies and investors can take right now to prepare themselves for 2012 and beyond. Simply enter your email below to download this important, must-read report.

 

"Lying here, during all this time after my own small fall, it has become my conviction that things mean pretty much what we want them to mean. We'll pluck significance from the least consequential happenstance if it suits us and happily ignore the most flagrantly obvious symmetry between separate aspects of our lives if it threatens some cherished prejudice or cosily comforting belief; we are blindest to precisely whatever might be most illuminating."

-- from Transition, by Iain M. Banks

Still a man hears what he wants to hear
And disregards the rest

-- The Boxer, by Paul Simon

This will be my tenth annual forecast issue. Time has flown by, and I enter a new decade of writing Thoughts from the Frontline. And even as I write about the high level of uncertainty of the current times, I am optimistic that at the opening of the next decade we will look back and realize that there has been an enormous amount of progress made. None of us will want to revisit the pleasures of the past ten years in some nostalgic dream. I am so ready for a new decade. And speaking of Paul Simon (above), reading the lyrics of The Boxer, one of my favorite songs from my youth, another few words seemed to hit home:

...Now the years are rolling by me, they are rockin' even me
...I am older than I once was, and younger than I'll be, that's not unusual
...No it isn't strange, after changes upon changes, we are more or less the same

It is not just the US that is in recession. The world is slowing down, and rapidly. This week we quickly survey the rest of the world, and then come back to the US. We follow up with the implications for corporate earnings worldwide, and specifically address my speculations about earnings forecasts for 2009.

Let's start with some charts from my friend Simon Hunt, out of London. The following chart shows World Merchandise Export Values and World Industrial Production falling off a cliff. This is the worst such period since the end of World War II. And as the data we will examine next indicates, it is likely to get worse. Simon notes that consumer spending is about 60% of world GDP, and it is not just in the US that spending is slowing down. Consumers all over the developed world are in shock, as assets such as stocks and houses, real estate, and commodities fall in value. Unemployment is rising.

We think that almost 2,000,000 lost jobs in the last three months in the US is a catastrophe. China lost a reported 20,000,000 jobs in the last quarter, and migrant workers came back to the cities after Chinese New Year to find factories and jobs simply gone. Unemployment is rising rapidly in Europe, as the demand for goods has clearly been falling since last October.

Where are we headed in 2009? We will explore that in detail over the next few issues of Thoughts from the Frontline, but today we will start with some of the larger forces which will have a major impact on the economies of the world, and I will end with my usual attempt to forecast the various markets. We will look at deflation, deleveraging, the fallout from the stimulus plans (note plural), housing, consumer spending, unemployment, and a lot more. There is a lot to cover. But first two quick announcements.

Along with my partners Altegris Investments I will be co-hosting our 6th annual Strategic Investment Conference in La Jolla, California, April 2-4. I have invited some of the top economic minds in the country to come and address us, giving us their views on what seem to be a continuing crisis. It will be a mix of economic theory and practical investment advice. Already committed to speak are Martin Barnes, Woody Brock, Dennis Gartman, Louis Gave, George Friedman (of Stratfor), and Paul McCulley. I anticipate adding another stellar name or two. This is as strong a lineup as we have ever had, and on par with any conference I know of anywhere.

Due to securities regulations, attendance is limited to qualified high-net-worth investors and/or institutional investors. Early registrants will get a discount. Last year we had to close registration, and I anticipate we will run out of room again, so I would not procrastinate. Simply click on the link below, give us your name and email, and you will be sent a form next week to register.

It's that time of year, when I throw caution to the wind and present my annual forecast issue. Jumping to the conclusion, I think a recession has begun, so the relevant question is to ask when the recovery will begin. We will look at the housing market, the continued implosion of the credit markets, and the deteriorating employment picture. Will the Fed worry more about employment and recession or about the very real inflation pressures? Oil? Gold? Which way the dollar? I am going to make some unusual calls, as well as highlight what I think will be the next looming problem in the growing credit crisis. We'll try to cover it all in just a few pages.

But first, one quick commercial note. I am looking to establish a relationship with a few venture capitalists, and/or broker-dealers who specialize in private equity placements. If such a relationship might interest you, please feel free to contact me. And now, let's jump into the letter.

As is usual for the forecast issue, we begin by looking at how I did last year. All in all, not bad. I correctly predicted the housing and subprime crisis, noted that there was a potential for the credit crisis to spread (which it did), and suggested that we would end the year in recession. As I will make the case later in the letter, I think we did just that in December. I got the direction of the dollar right, as well as energy, but I was wrong (as usual) about the stock markets. I thought a recession would lead to a lower stock market for 2007. It now looks like that lower stock market will show up in 2008.

For the last 10 days, I have been reviewing over 500 pages of forecasts, predictions, and data from a wide variety of sources. Some have been extremely bullish and others make you want to just slit your wrists and get it over with. But even ignoring the extremes, which are almost always universally wrong, never in all my years have I seen such a wide range of opinion and disagreement accompanied by an increased hardening of those opinions. With a few notable exceptions, there are a lot of analysts who seem more sure of their view of the future than they have been in the last few years.

I promised in my January 2003 forecast I would re-visit my predictions, giving you a mid-year update. Faster than I can believe, that time is upon us. Once again I dare to venture where wiser minds will not trod: into the territory of economic predictions.

We cover the globe, currencies, the US economy, bonds, stocks, deflation, inflation, gold, oil and more!

For the last three years, making annual predictions has been relatively easy, at least as compared to this year. You try to discern the dominant theme for the year and then everything else usually flows from there. In 2000, it was an over-valued stock market. In August of 2000, the interest rate yield curve went negative, and as I wrote at length at the time, Federal Reserve studies (among others) showed that a recession always followed a negative curve by about 12 months. I saw no reason for that not to be the case this time. I suggested strongly to readers that the safe move was to get out of the stock market entirely at that time.

My annual predictions letters for the last two years have been easy to write, and with one glaring exception, have been generally on target. I start with a basic premise - one key economic factor -- and work out from there. I look for the one thing I believe is going to affect the economy more than anything else in the coming year. If I am wrong on my basic premise, then everything else is likely to be wrong.