The Crystal Ball for 2008

Greetings for the New Year!

Despite the fact that it is well known that u00e2u20acu0153he who uses the magic crystal ball to predict the future will end up eating ground glass,u00e2u20ac I will now take a peek at 2008. So here are a few observations and prognostications as a result of gazing through my crystal ball:

u00e2u20acu00a2 Massachusetts Governor Mitt Romney will be the new President of the United States (POTUS). Actually, my prediction is really a wish rather than a solid prediction. Iu00e2u20acu2122ve known Mitt since he was 10 years old, and I worked for and ran for political office with his father, George. Though my judgment is clearly tainted by personal connections and history, nevertheless, Iu00e2u20acu2122ve watched his extraordinarily successful career in politics, business (where he made a couple of hundred million as the first head of Bain & Company), and philanthropy (he rescued the 2002 Winter Olympics). My support goes so strong, I even tried to join the Mormon Church, but unfortunately they wouldnu00e2u20acu2122t give me an exemption from the “no martini” rule. Ah, well.

u00e2u20acu00a2 The stock market will recover and end the year higher than it started. (Note: This type of prediction is accurate 75% of the time.)

u00e2u20acu00a2 By year end, interest rates will be moving up, and a yield curve will exist once again.

u00e2u20acu00a2 Citicorp will select Banker of the Year Thomas S. Wu to be its new CEOu00e2u20ac”a selection greeted with great applause by the investment community! It will be a great improvement over his predecessor.

u00e2u20acu00a2 Oil prices will exceed a $100 a barrel and so much ethanol (from corn) will be produced that it will likely be used to fertilize the corn crops.

u00e2u20acu00a2 Womenu00e2u20acu2122s fashions will return to shoes that look like shoes instead of skis (required by the large number of accidents caused by long toes spearing other folks).

u00e2u20acu00a2 Banking trade groups will make an all-out effort to reduce regulatory burdenu00e2u20ac”with zero results, after expenditures of millions.

u00e2u20acu00a2 Credit unions will grow faster than any other financial institution (and will continue to pay zero taxes). Foreign citizens will be included in the common bond.

u00e2u20acu00a2 The subprime mortgage problem will get worse, because it will be discovered that substandard mortgages at all levels are involved. However, the huge losses will not imperil the U.S. economy because a substantial part of the losses have been shared with our foreign friendsu00e2u20ac”securitizations of financial instruments will be reduced by at least 90%. No more foreign buyers.

u00e2u20acu00a2 Finally, and here I must warn you, the crystal ball is beginning to cloud, community banks will be the most profitable part of the industry, exceeding investment banks, monster banks, credit card banks, and bankers banks.

May it come to pass! Happy New Year from your humble senior citizen friend and adviser.