These are some financial predictions by my pal and former neighbor Derek Wilson. He doesn’t have a blog and asked that I put his picks on the record. My posting of his picks is not an endorsement. His 10 year timeline is much longer than anything I would attempt to predict.
- Residential housing: slow decline real terms: 1-2% average annual increase or 22% in 10 years
- Non energy commodities, more tied to economic cycle: agriculture/metals: light inflation 2-7%/year: up 48% in 10 years
- Gold: -10% to +15% swings, drop in physical demand offset by speculative holdings, up 100% over 10 years
- Wages: 22% higher in 10 years, 20% lower in real terms (9% higher vs CPI)
- Energy: oil 8% average inflation next ten years, potential 10-20% annual spikes offset occasionally by technology, without technology improvements, prices 80% higher in 10 years
- Interest rates: next 24 months, short term flat and low, afterwards driven by tax policy: a moderate tax rise with emphasis on spending cuts = mortgage rates in 6% range (short term in 3-4% range), moderate tax increases with no spending cuts = interest rates in 8-9% range (in a low wage inflation environment)
- Dollar value: annual loss of 2%, 18% loss over 10 years
- Stocks from 8/25/2009: 8% average return over next 5 years: can hit 2007 high again in 2014: 12% better than inflation over 10 years: up 116% over ten years,
- Inflation: real inflation over ten years 4.2%, CPI 2.9% : TIPS break even: govt CPI understates inflation by 1.5% year in most areas
Ranked by relative return:
Stocks over inflation 60%
Gold: 54% over inflation
Mid term/Long term bonds: (laddered) 49% over inflation: buy after rates rise in 3 years
Energy 37% over inflation
Non energy commodities 5% over inflation
Short term bonds 3% over inflation
Housing and Wages 2% over inflation
Foreigners holding in dollars: loss of 61% or 2% annual in real terms