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The equity market is off to a great start for 2009.

A lot of people are looking at infrastructure/materials and healthcare as the two boom sectors for 2009. With a nearly $1 Trillion infrastructure stimulus package on the way from the incoming administration, these companies could benefit enormously. And healthcare is seen as recession-proof in a lot of ways.

On the other hand, retail and financials could be hammered in 2009. Retail is going to be a total dog as consumer spending drops to all time lows and record store closings occur. Financials, well, they've still got a ton of mortgage resets coming, which means massive foreclosures, unwanted housing inventory, and huge credit default swap troubles on the way.

Where will the DOW go? To 6000? To 11,000? My prediction is that we're at about 10,300 on December 31st, 2009.

As far as commodities, it's anyone's guess. Oil was $38 and gold was $860 on December 31st. One group predicts oil at $25 and gold at $300 in 2009. Another group predicts oil at $75 and gold at $2000. Oil is already at $46 (up $8 or 21%) since New Year's Eve. I'm conservative but I think we'll see increases -- oil at $60 and gold at $1000.

The dollar will almost certainly go lower in 2009, first during deflation as it fails to keep up, then as it begins an unprecedented inflationary cycle and starts to drop like a rock. Reputable economists and groups are forecasting frightening inflationary rates for the years ahead, higher than anything we saw in the 1970s. You have to be ready for it or you're going to get burned.

Housing is a sticky situation. Layoff/unemployment fears are looming large, and having a new mortgage when being laid off is practically a financial death sentence. Mortgage rates are low right now, but this fact is spurring unprecedented refinancing applications, which could drive rates right back up without reducing inventory much. Saving money during asset price deflation is a good idea -- cash is king, house prices are coming down, etc. However, a violent turn toward inflation will absolutely SPANK savers. By the time we start seeing record inflation, if you're not in a house you might as well give it up. Your savings will be shrinking faster than you can contribute to it and house prices will be speeding away, out of reach. High inflation punishes savers and blesses asset holders and debt holders. So you have to factor in the interest rate environment, deflation vs. inflation, your personal savings, house prices, your employment prospects, and of course the new mortgage terms.

There will be no more "no doc" mortgages, no more 50% debt-to-income ratio mortgages, no more $0 down mortgages. ARMS, interest-only, and 0 interest teaser loans will be going away. Better get that FICO up. All these are GOOD things. Home ownership is NOT a right, and is NOT something everyone should be able to aspire to, that is just a fact. The past year has given AMPLE evidence of this.

I will continue to contribute 20% of my income to my 401K, which is augmented by another 7% from my employer and another 10% as profit-sharing from my employer each year -- so 37% of my gross income. I'll continue to put $800 to $1000/month into my non-retirement brokerage savings, and fully fund my IRA with $5000/year. It looks like I'll be keeping my job. I've cut nearly every expense imaginable and sliced my budget to the bone. I won't be spending anything on anything.

I've got a lot of money in FGOVX -- Government Income (treasuries). This has been HUGE for 2008 and is one of the reasons my 401K had only a few percentage points of overall loss for the year (of course my net increase is high due to my contributions). But if inflation begins then treasuries are going to sink like a stone, so I'll have to be very cognizant of that. I recently bought several thousand of DBC, a commodity index ETF spread between oil (50%), agriculture (25%), and gold (25%). I have some non-retirement funds in ATOIX, an extremely stable tax-free muni bond fund. I bought DOM a few weeks ago and intend to hold it and see where the dividend goes. The share price is already up 15%. I like UDN, FXA, and FXC for betting against the strength of the US dollar later in the year, but I don't have anything in currency currently. I have significant amounts in FFFAX, a 15% equities/85% assorted bonds fund, FSENX, an energy stock fund, and FSAGX, a gold miners and holders stock fund. I'm considering infrastructure and healthcare. I'll probably continue to day trade with a couple thousand dollars here and there on the intraday volatility, including short-term index options.

There are a few interesting financial choices I want to make in 2009. One is converting my IRA into a Self-Directed IRA, which allows all kinds of alternative investments such as real estate, precious metals (the actual material, not the ETFs or funds), art and any other collectibles, mortgages (commercial and residential), private equity, tax liens, franchises, partnerships, LLCs, FOREX, trusts, insurance, and others.

Another thing I'd like to get into is trading on Intrade, the Prediction Market. Unfortunately, due to the US Congress anti-gambling act, it's much harder to trade on Intrade, so much so that Tradesports, Intrade's sister site, recently collapsed. Thanks, Congress, for saving me from myself, whew that was a close one.

Another thing I'm looking to do is earn interest on LendingClub. This is a peer to peer lending organizer. People can get loans at 8% to 18% from other members. Borrowers get loans they couldn't get from a bank AT ALL at rates that are lower than credit cards, while lenders get interest far far greater than that paid by corporate bonds, treasuries, or CDs. It's a very interesting new market that is gaining momentum.

2009 will be an interesting year to say the least. Store closings, more foreclosures, high unemployment, low consumer spending, lots of bankruptcies, rising gas prices, the specter of looming inflation, horrible economic news, record national debt, commercial real estate collapses, more market volatility, more bank failures, etc.

Keep your job, save every single penny you can, don't spend on anything, make wise investments, watch the deflation/inflation situation like a hawk, invest in gold, etc. Now is the time to live WAY below your means and change the way you look at your standard of living...