I don’t think a day goes by that someone doesn’t ask me where I think the economy is going – today I think I got a half dozen.
What has changed since my “Economy” post? A bit. The guys that I thought were playing it smart have started to look like they’re stumbling – Citi, JPMorgan Chase, BofA. Internationally, Ireland has nationalized Anglo-Irish Bank and the Royal Bank of Scotland has posted record losses. I was thinking of opening a British bank account and considered both of these – I would have been concerned if I had money in them.
What about the big three? No change. I still thank that Tata will pick up an American automobile brand in the next few years along with a Japanese company. Ford? Who knows? It will either merge with another giant or be taken private by the Ford family again. There was talk about it when the price was more than double what it is today.
Let me tell you… The market is ripe for bargain hunters. I could almost buy Ford myself with my 401k! (well… maybe if you add about six or so zeros to the 401k number). Right now Ford’s market cap is $5 billion. At its low point it was less than half of that – that’s so low that Nike could buy them with cash on hand! Look for some surprising mergers to be announced soon by unlikely bedfellows. Most will go over as well as AOL/Time Warner.
I definitely still see the bailout(s) breaking the budgets. The $700 billion bailout is going downhill fast. I originally thought it would hit $900 billion, but with Detroit added to the tab (and who knows what will be announced) I think we’ll see $1.1 trillion in the bailout by the end of the year – potentially to $1.3 trillion.
The markets will continue to bounce around like a BB in a box car for a few more months ( five is my guess), then the street will lick their wounds for four to six months and then go in to “oh-shit” mode on selected industries when they start to realize how undervalued they left the market. Dow won’t be confidently above 10,000 for another two years, but there will be an increasing number of break-away stars that make a lot of people a lot of money (hopefully me included).