EDMOND — “Is that all there is, is that all there is? If that’s all there is my friends, then let’s keep dancing. Let’s break out the booze and have a ball.”

Perhaps those words from Peggy Lee’s 1969 hit song “Is that all there is?” are an appropriate opening for my annual predictions column. The investment mood has changed along with a general feeling that the worst is behind us, things are getting better and maybe things were not so bad after all.

Or perhaps not. I hate to rain on everybody’s parade, but maybe that’s not all there is. The global economy, as I see it, is in a period between two crises. In 2007-08 we had the global credit crisis, the private-sector banking crisis and the bursting of the real estate bubble. Now we are in a period of cleanup with a respite from the chaos.

Unfortunately, we didn’t fix anything and have mostly sown the seeds for what will eventually be another crisis. Things seem stable now but there is a lot of unfinished business. Sadly, we swept it under the rug and transferred the problem from the private sector to the public sector, i.e. you and me.

We bailed out different institutions and people who had positioned themselves incorrectly. We created “too big to fail” instead of “you have an opportunity to succeed or fail.”

As Yogi Berra famously said, “Predictions are tough, especially when it concerns the future.” In 2009 I was right on 100 percent of my predictions for the markets and the economy, and in 2008 nearly so. And for 2010? Well, not so hot. Maybe I should follow cowboy logic: “If your horse dies, I suggest you dismount.”

I don’t think the horse is dead yet, so your fearless forecaster continues on. Having said that, I could use a little extra ketchup on that crow I’m eating.

Here is what I said in January 2010 and what actually happened:

1. “The Dow climbs to 11,300 but heads lower in the second half of 2010, falling back to the 8,500 level by year end.” I got the first half right but missed on the 8,500 part. I had not counted on the Fed throwing another $600 billion into the market in the form of quantitative easing, commonly called QE2. I still think I’m right on the second part, but it looks like I’m about a year or so early.

2. “The housing market improves slightly in the first half of the year and then falls again by late 2010 as a tsunami of Alt-A and Option ARM mortgages reset this year, leading to another surge in foreclosures and home prices falling another 10 percent.” Mostly correct.

3. “The national unemployment rate remains stubbornly high and exceeds 11 percent by late 2010.” Missed on this one. Unemployment dropped to 9.4 percent but is still exceptionally high and most experts, including the Fed, think it will remain high for several years.

4. “The U.S. federal budget for 2010 runs another $1.5 trillion deficit. U.S. government debt hits 94 percent of GDP.” Right on this one. Our No. 1 problem is too much spending and too much debt, so we’re fixing it with more spending and more debt. Huh?

5. “Oil prices inch higher in 2010 and hit $100 a barrel, further depressing the U.S. economy.” Almost, but not quite. Oil hit $91 but the resulting increase in gasoline prices already has taken $67 billion out of household income. Higher energy prices are great if you’re a producer, painful if you’re a user.

6. “U.S. economic recovery continues with positive GDP growth in first and second quarter, mostly due to inventory rebuilding. The recovery stalls and we see the early signs of a double dip recession by the end of 2010.” Half right. Double dip is probably off the table until 2012 because of continued government spending and stimulus.

7. “The Fed raises interest rates earlier than expected. The 10-year Treasury bond yield hits 4.7 percent by late 2010.” The Fed has not raised interest rates but the bond market did it for them to some extent with 10-year rates going from 2.3 percent to 3.5 percent in the last quarter.

8. “The U.S dollar explodes higher in 2010. Although we have lots of problems, the world realizes that we’re not as bad as they thought and everyone else is not that great.” Correct.

9. “Gold will likely fall below $900, although it could go to $1,300 first.” Gold corrected to $1,050 but never saw $900. It got to a high of $1,432.

10. “Over 500 U.S. banks fail in 2010, up from 150 in 2009. Several major European banks fail due to defaults in former Eastern block countries and the weak links in the Eurozone, the so-called PIIGS (Portugal, Ireland, Italy, Greece and Spain), triggering the next leg down in Europe.” Correct on Europe but wrong on U.S. banks. Only 157 banks failed in the U.S. in 2010, up from 150. There are still more than 800 U.S. banks on the FDIC’s watch list of troubled banks.

Next week we’ll take a look at what will happen in the year ahead.



NICK MASSEY is a financial adviser and owner of Householder Group Financial Advisors in Edmond. Massey can be reached at www.nickmassey.com. Securities offered through Securities Service Network Inc., member FINRA/SIPC.