With each New Year, predictions thought out to be sagacious and sometimes offbeat are advanced by the gurus of Wall Street. The consensus this year seems to be that an improving economy will enable the stock market rally to continue but then be vulnerable in the second half to pressures from a rising dollar and higher interest rates, which probably ensures the opposite might happen. With levity the object, The Conservative Economist provides herewith an implausible alternative to the usual fare from the financial establishment, half in jest and half serious, which disturbingly seems possible in these unsettled political and economic times:
- In 2010 the financial markets continue to heal. Goldman Sachs stock more than triples, topping $400, based upon speculation that carbon credit trading will be a major new profit source. In the meantime, access to cheap capital and a continuing bull market provides it with enormous cash flow. It takes over Berkshire Hathaway in complex deal that takes into account the ability to cancel billions of dollars of derivatives undisclosed by either entity until after the deal is consummated. Buffett retires. Most top Goldman executives step down, and many move into key government positions. Similarly, as a precondition for the deal, many outgoing government administrators are promised key management roles that they may assume once the 2012 election cycle is complete. In recognition of the potential for carbon trading, Al Gore is placed on the firm's Board of Directors, but he is "forced" to sell his carbon trading investments to AIG, and these contain opaque structured investment vehicles ("SIVs") potentially worth trillions of dollars should environmental regulation tighten. New taxes that favor rail transportation in the guise of environmental conservation cause a surge in Berkshire's anticipated profits from the newly acquired Burlington Northern. Analyst Meredith Whitney becomes bullish, and makes Goldman her top pick again.
William Baker
Author of Endless Money: The Moral Hazards of Socialism
Editor, The Conservative Economist
Disclosures:
Long and short equities. Long gold, gold derivatives, and gold equities including many with significant West African mining operations.
My apologies to Senator Lieberman for his use in a hypothetical scenario for humorous purposes. His political courage is admired, and the author would be deeply saddened by the unfortunate military developments contemplated that might precipitate such an occurrence.