We are going out on a limb and are going to say the US will see a recession in 2008, and that many asset classes will struggle to have returns anywhere near their 10 year average. Keep in mind that in a survey in March 2001- 95% of economists said there would not be a recession – even though we were already in one at the time.1. Some say that private equity tends to lead the rest of the economy. If this is true, the US economy may be in for a rough year in 2008. Private equity deals tend to rely heavily on debt (like the rest of the economy). Consider that many of the brightest minds are in private equity. Also consider that the number of private equity deals have plunged in 2007 and nobody expects things to pick up soon.2. Around 70% of US GDP is generated by the consumer. This is a higher proportion that other G8 economies. US consumers are facing: sliding house values (no more ATM machine), the prospect of rising interest rates, higher fuel & food prices driving inflation, and a weakening jobs market.  Household debt as a % of disposable income has soared from 70% to 130% since 1985.3. Some automotive industry pundits are forecasting a 10% decline in auto sales for 2008. This would be the largest decline since 1991 (there was a recession then).4. In the past 6 months credit spreads between high yield corporate debt & treasuries has doubled. This means we can expect an increased rate of defaults.5. 2008 may be the year that many OPEC countries diversify out of buying US treasuries. Add China and Japan to this, and you could see in increase in the rate of decline of the US dollar.

6. The 2 worst global recessions in recent decades were each preceded by sudden rises in oil prices (just like now).