2009: The billionaire oracle

If you think that the view of the year ahead is any better from the top of a pile of money, think again. JAMES THOMSON reports on what billionaires are predicting for 2009, and where they hope some light will first appear in the gloomy economic landscape.

By James Thomson

If you think that the view of the year ahead is any better from the top of a pile of money, think again. What are the billionaires predicting for 2009, and where do they hope some light will first appear in the gloomy economic landscape?

To celebrate the start of the new year, the wealth watchers at Forbes magazine asked a dozen billionaires to give their predictions for 2009. The fascinating responses clearly highlight one thing – the super rich are banking on a return to economic growth come late 2009 or early 2010.

The billionaires involved – including media and sports mogul Mark Cuban (net worth $3.6 billion), property developer Richard LeFrak (net worth $6.2 billion), healthcare investor Thomas Frist Jr ($2.6 billion) and hedge fund boss James Dinan ($2.4 billion) – were asked for predictions on a wide range of topics, from the oil prices and the US unemployment rate though to views on the sharemarket and Barack Obama’s key priorities.

On the surface, it appears the billionaires are extremely pessimistic. When asked what is the most alarming trend facing the US economy today, most answers refer to fear felt by investors and consumers and the general decline in confidence across the economy. Allen Stanford, head of Stanford Wealth Management, sums up the feelings of most respondents: “Loss of investor confidence, fear, and outright panic has gripped the US like nothing I have ever seen in my lifetime.”

Predictions about the US unemployment rate are also particularly gloomy, with most of the entrepreneurs expecting the rate to jump from its current level of 6.7% to around 10%, although real estate mogul Leon Charney is tipping the rate could rise to 11%, which would indicate the world’s biggest economy is headed for a deep and ugly recession.

Six of the 12 billionaires say the outlook for investors is rocky too, and the Dow Jones Industrial Average will fall to around 7500 points. Mark Cuban and investor John Catsimatidis predict the Dow will fall as low as 6500 points in the first half of the year. If they are right, global markets could still have 25% further to fall.

Yet despite all this pessimism, the billionaires can clearly see a light at the end of the tunnel. A third of the billionaires believe that the sharemarket has either already bottomed or is close to the bottom. Most believe the price of oil will remain relatively stable or fall slightly. And nearly every billionaire interviewed believes the US economy will start growing again in late 2009 or early 2010.

The reason? President-elect Barack Obama.

“History tells us a fresh start can bring new definition to an American economy needing some revamping and rethinking. Hopefully the new administration will bring about the same fresh thinking that FDR brought in ‘new deal’ regulation following the Great Depression,” says real estate tycoon Theodore Lerner. “While our recovery might not be quick, bold actions could set a more positive direction for the next 50 years.”

The billionaires are hoping for big things from Barack, with many calling for him to implement measures to force banks to lend again, reduce taxes, build infrastructure and shore up financial institutions – basically anything that will stimulate the economy.

“I think it is of paramount importance for Mr Obama to be constantly seen and heard through electronic media as a soothing and confident leader who can instill investor confidence and squash fear,” Stanford says.

The new president will have a lot of live up to.

Finally, it’s worth noting the predictions of the billionaires for the cut-off level for Forbes list of the 400 richest Americans. In 2008, you needed a fortune of $US1.3 billion to make the list; according to the billionaire interviews, you’ll need just $US1 billion in 2009.