I wont rule us out just yet, but as the things current stands I just cant see us winning CL or Scudetto. Our star players are aging and with the exception of Nedved and Buffon, I reckon they will underperform once again. And we havent got the balance in the team: there is a glaring weakness at the back, and we lack genuine width down at the flanks. Furthermore, last year we were desperately lacking in depth (though insane series of injuries didnt help) and we didnt nothing to address this issue ATM. Capello is a terrific coach, but there is limit to what he can do. The team has to show hunger, desire, and willingness to work as a team, which were absent last year, and with all their success as players I doubt that they still have that extra bit of gas left in their heart.
My pick to be favorites in both competition is Milan: They have balance, depth, class and wooses with class at times: Had it not been for the freak result against Depor, I am certainly that they would have made a meal out of Porto or Monaco. I mean they have Stam, Nesta, Maldini in defence, Pirlo, Rino, Seedorf in midfield and Kaka, Sheva, Crespo in attack. And Dida, Abbiati arent too shabby for GK either. They will also have likes of Simic, Kaladze, Ambrosini, Dhorasoo, Tommasson, Inzaghi, Billy, Cafu, Rui et al at the bench. That is one hell of a team, and it will take some special effort to beat them for Serie A. While Real and Man U wil always be competitive, I am not keen on both sides. I would like to see how Zizou, Figo, Carlos, Beckham play next year, and they still need that midfield anchorman IMO. In another words, too much name and not enough substance to match those hype. Man U on the other hand lacks genuine talent to be considered as the favorites. Giggs, Scholes (He was never that good anyway), Keane are obviously declining players, and I wonder how Nisterlooy would motivate himself next year with his apparent feud with Fergueson.
My pick for outsider is Valencia: I think they have what it takes to win CL but their thin squad can get in the way.