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You'd have to be dumb or crazy to make predictions for 2005 - but we took the task on ourselves a few years back and will try to give some directions for thought.

1. U.S.: The eyes of every economist and forecaster in the world are focused on the U.S., on its huge trade and federal deficits and its reciprocal trade and financial relationships with China and the Far East.

Everyone is convinced that the key to everything in the global economy this year is hidden in the U.S. and its trade partners, which are also financing the nation. The problem is that half the experts in the world claim this year holds an economic and financial crisis in the U.S. that could result in the collapse of the dollar, a leap in interest rates and slowing growth, while the other half believes the U.S. will make a dramatic budget cut, allowing it to continue to move forward in symbiosis with its trade partners.

We tend to believe the U.S. cannot continue ad infinitum raising their standard of living without saving, by taking a huge loan. We are concerned about a gradual drop in American hegemony of the global economy. But we are prepared for the U.S. to surprise us in 2005 too.

2. Interest: Financial stability, the U.S. loan guarantees, and the collapse of the dollar squished potential inflation and allowed the Bank of Israel to reduce interest rates this year to a historic low, despite the fact that the U.S. starting raising rates. In 2005, short- and long-term interest rates will continue to rise in America, and from that perspective it is hard to see another drop in interest. If U.S. rates hop up, then the governor of Israel's central bank will also have to start trekking north.

3. Dollar: It fell, it's low, it's attractive, analysts tell us. We wouldn't bet on it. Even if there is a correction in the coming months in the dollar exchange rate, it is hard to find good reasons for the dollar to strengthen, not in Israel and not abroad. The flow of currency abroad in the coming year is not expected to bring about a sea change in the currency market, since Israel is enjoying a parallel stream of foreign investment.

4. Foreigners: As long as disengagement continues and Nasdaq stays high, foreign capital will keep coming into Israel, to the stock market and to Israeli technology companies. Foreigners hungry for returns and international distribution, will continue expanding their activity on the local capital market and in local technology.

5. Real estate: Another disappointing year is expected in the housing market. Hopes at the beginning of last year for a wave of rises never came true, and apparently, recent projections by contractors and developers that prices will skyrocket in 2005 will prove to be false again.

2005 may also be the year in which it becomes clear that foreign property prices can drop. After five unprecedented boom years in U.S. and British property markets, they will cool off this year, and investors and homebuyers who entered recently will take a painful hit.

6. Banks vs. brokers: In 2005, the mass departure of money from the banking sector into private entities will continue, with more and more major companies and individual investors realizing the depth of the losses they have suffered over the years while they were prisoners of their banks.

But this will also be the year that some of the "stars" among the private brokers begin to squeak, and it will become clear that some of their performances in recent years were based on transitory advantages. It will also become clear which of the private entities rely on conjecture, and which ones have a culture and experience in money management for others.

7. Issues: Even after the huge fund-raising year that ends today, there is still great hunger for cash among companies and business people. As long as the market allows it, it looks like huge offerings of stock and debt for publicly traded companies will continue, as will massive sell-offs by controling shareholders.

8. Openness abroad: The transfer of funds abroad will be largely determined by the dollar's momentum and key Western stock exchanges. As long as the dollar is headed south and exchanges are marking time, institutionals will fear putting money abroad and will stay in the domestic market. Nonetheless, the possibility of sending money abroad will accelerate the development of new financial instruments in Israel, and raise the sophistication and demand from local investors.

9. Netanyahu: Finance Minister Benjamin Netanyahu downshifted this year in economics, and there is no reason to believe he will go into high gear next year. The atmosphere of crisis disappeared, and the loan guarantees provide absolute financial backing for Israel, thereby dissipating the need for painful reform. Netanyahu will fail again this year to implement dramatic reform in the ports and any place with strong unions.

The only reform he has a chance to complete is implementation of the Bachar recommendations to reform the banking sector. If they are adopted, they will have a dramatic impact on the financial market and banking sector, both of which will look entirely different in two years.

10. Internet: Five years after the implosion of the bubble, the Internet will return to the business arena this year. All the wild projections that were rampant in the market some five-to-six years ago will start to come true this year: wireless Internet will spread like wildfire, e-commerce, shopping via the Internet, will increase, Internet usage will continue to grow rapidly, and even cellular Internet will start to work.

The Internet will finish licking its wounds this year, and we will see for the first time in three years new investment in the field.

It is impossible to predict the big tsunamis. It could come from a crisis in the U.S., currency fluctuations in China or a huge natural disaster. The skies look clear over financial markets, and after three years of recovery, no one is planning for catastrophe any more, but experience indicates that the unexpected is difficult to expect.