The Economy: It will be much worse than expected, especially in Q2 and beyond. General Motors (GM) will probably file for bankruptcy in the first half of the year, supported by a credit line backed by you and me. Fourth-quarter 2008 GDP — once revised — will turn out to be a negative 6% (or more), and GDP outside of fiscal stimulus will shrink almost as much in 2009.

President-elect Obama: The stimulus package will be passed, but the TARP program won't be renewed in its current form. The big question will be: what then?

The Banks: There will be new surprises from old problems, led by Citigroup (C). Citigroup will be the biggest problem as it will ask for capital from Uncle Sam or a European bank sometime in the first half of the year. There will also be surprises from a new problem manifested by all the forms of debt — residential mortgages, commercial mortgages, credit cards and auto loans. Finally, look for mortgage defaults and foreclosures to begin to climb again in Q1, with little help forthcoming for the situation.

Housing: Home prices, nationally, won't stabilize — surprise! Every government program proffered will likely fail to stem foreclosures; mortgage interest rates will fall to 4.5% or lower, but barely lift demand; and one or two major home builders will go bankrupt in the first half of the year.

Consumer Spending: Q4 2008 will turn out to be as terrible as expected, but Q1 and Q2 2009 will be much worse than expected. The stalwarts — deep retail discounters — will disappoint. New credit card regulations and growing mortgage defaults will lead to ever-greater tightening in credit standards. And unemployment will climb above 8%.

Tech and Biotech: The tradition of strong companies using recessions to gain market share and spending capital on information technology will falter. Chip sales — already predicted to decline 16% — will decline as much as 25%. Selected names in this segment will fall further or go out of business, such as Sun or Palm. Biotech will, at best, muddle along and big pharma companies will get hit as Obama changes Medicare Part D.

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