As 2009 fades away, it’s time to step up to the plate and make my predictions for 2010. While my predictions for 2009 had a few misses, like the one that had the US dollar reaching parity with the Euro, some of my calls were actually spot on. My call on where the S&P 500 would close is within 1% of where it is!

Okay, enough backpatting, let’s get to the predictions:

1- Faced with unprecedented low popularity due to their reckless spending and softness on national defense, the Democrats lose control of congress, as a new Republican revolution sweeps the US.

2- The S&P 500 has another volatile year, but ends up registering a gain to close at 1291

3- The Planet continues to cool

4-After announcing that he will stay in school, University of Washington QB sensation Jake Locker has a great season and wins the Heisman Trophy.

5- A small scale sub-prime crisis hits Israeli real estate. As interest rates move up, and linked mortgages are reset, many recent buyers are unable to make monthly payments and are forced to sell their homes for 10-15% lower than they were purchased for.

6- Speaking of interest rates, the US government 20 year bond hits a 5.1% yield.

7- Zack Miller’s investing book, ” Tradestream Your Way to Profits” (coming out in the spring)becomes a business best seller.

8- The traditional secular stance of the Turkish army is lost as the country moves towards fundamentalism. This creates even more chaos in the Middle East, and Israel and India become very close allies.

9- Gold euphoria ends as common sense enters the market,  sending the price down to $750 an ounce.

10- Prez. Obama actually calls an Islamic terrorist, an Islamic terrorist. Well maybe that should be for 2011!

Happy New Year,

Aaron

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So we have Barack Obama out there just outraged over the bonuses paid to AIG workers, after the company had already received bailout money from the US government, yet no outrage on the wasted money so that he can appear on the Jay Leno show? It costs about $75,000 an hour for Air-Force One, and how much did all the security cost to sterilize the route to get to Leno, and all the other associated costs? All that so that we can hear the Prez. without his security blanket, umm I mean teleprompter, make fun of special Olympians.

Where is the outrage? Can you imagine if former President Bush made a comment about the Special Olympics? Front page in the New York Times, I would imagine. But with Obama, not a mention. Double standard????

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So my wife asked me a question this morning. She asked, ” I just heard that the US government is going to take control over Freddie and Fannie. Does that mean that we can discontinue paying our mortgage?” Well at first glance that doesn’t seem to be a great question, but since my wife asked it, I figured there must be some deeper meaning, so I thought about it for a while, and then realized she had a point. What’s the point you ask? We have officially buried the concept of individual responsibility.

The fact is that aside from terrible mismanagement ( Hey aren’t some of those credited with mismanagement actually economic advisors to Barack Obama?), the main reason that these agencies are on the cusp of bankruptcy is because of the whole mortgage market fiasco. There, as we all know, people who couldn’t afford to buy the homes they purchased, were bailed out by the government. Now the agency, that underwrote half of those mortgages is getting bailed out by the government. To me that means if you do something really stupid, have no fear, because it doesn’t matter, there will be no consequences to suffer because the ever present government will take care of you.

There is an article on Seekingalpha.com written by Matt Cooper ” Frannie Bailout: Private Profit: Socialized Risk” that has some interesting insight on the bailout. There happens to be a spot-on comment written by ‘lavalyn’ which says, “the complaint about “private profit, socialized risk” is simply that of moral hazard and double standards. If you or I were to open a business and lose our shirts the way the GSEs have, the banks would stop lending, and we’d probably lose everything… easily beyond shareholder capital.

This bailout is the taxpayer stepping in to cover for mistakes made, which is already dubious… and that’s before upper management taking in millions in bonuses, shareholders getting dividends… and them then not giving back. In the interest of “limited liability.” The GSEs have been riding the implicit (and now apparently explicit) government backing, while not giving the taxpayer/government any return for it.”

Bingo.

Anyway, since I don’t want to be the only sucker left  that makes monthly mortgage payments I am putting out a shout to Secretary Paulson, to contact me and take down my bank details to start making my monthly payments. Just one favor Mr. Secretary: Please make sure the payment is on time.

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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.

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