Monday, December 28, 2009

Reply:Predictions for 2010

Greg A said...

You are very mistaken if you are referring to the US economy "improving" in 2011. I recently read your book and found many good suggestions; however I had already taken all of those precautions and more. 99% of people here in the US are TOTALLY unprepared for what is coming in the next couple of years. I am a CPA/ Economist by Profession and I wonder as to what your reasoning is for your projection of an "improving" economy in 2011.

Hi Greg, sounds like you have things sorted out. You already have taken all the precautions I mention and more. A couple years worth of food, other gear and supplies, firearms and weapons training, hand to hand fighting training and physical conditioning. A hardened and defendable home, financial security and alternative plan b and c in other countries. If you don't mind me asking, what other precautions did you take (when you say "and more)?

I prefer to be rather cautious regarding how bad things will get. You usually end up sounding like a fool when you predict terrible events every year and your prophecies dont become true. Even if they do to some degree, if you spent your entire life crying out like Chicken Little, even when things do happen, you didn't predict anything, it was just bad things happening sooner or later.
It's simply impossible to predict with accuracy such events, you can only see if things will be better or worse, the general trend.
Yes, 2010 will be bad, but how bad it will get is impossible to tell, too many variables.

Why do I believe 2011 may start to look better? First, its USA, not some pathetic collapsed nation. After another year of unemployment things may change.
Second, other European counties are just now getting fully into the crisis, a process that started already in USA last year. Therefore, the recovery of USA will be sooner than the one of many EU countries.

3rd, the housing prices wont go down much more. After next year prices will level themselves and maybe by 2011 maybe will even start going up a little bit due to the speculative market that took advantage of the low prices, plus the people that found real estate to be a way to protect money from inflation.
Maybe 2011 wont be the inflection point and it will take until Obama leaves, that's another possiblity depending on how bad Obama messes things up, but again, I prefer to keep a positive attitude.



Anonymous said...

Commercial real estate here in the US is on the verge of collapse, and there's a lot more money wrapped in that than there was during the housing bubble. There's going to be a lot of financial pain and jobs lost when that bubble finally bursts.

Speaking of bubbles...

More housing ARMs are set to reset in 2010 and 2011 than they did in 2008, which is what led to the collapse of the housing market. This chart says it all. Whether the banks and government will plan for this and try to mitigate the damage remains to be seen, I don't expect it will be good for the housing market overall. A lot of people have been unemployed for awhile and are still waiting for the jobs to come back--how many of them will be able to afford the increased mortgage payments?

I'm not going to say "X bubble is going to burst on Y date". I don't even know if these bubbles will burst in 2010 or 2011. But, just looking at the numbers, it's obvious that the next few years are going to be rough, and the recovery won't be as quick as the government and media cheerleaders want us to believe. In the mean time, I'm going to continue preparing.

FerFAL said...

I assure you, so will I. :-)
The important thing is, next year will be a rough one, later on we'll have a more clear picture of what to expect for 2011.
Maybe if even if things do get a bit better or at least settle themsleves by 2011, there still will be problems but of other type, an overgrown, controling big government.


CapnRick said...

Hmmm... lots of thought provoking issues to consider on both sides of the "2011 - UP OR DOWN" question. What do you guys think of the 2010 US election wild card?

Think of the ramifications of a third political party if the Repubs and Tea Party don't develop a joint strategy to regain control of Congress. While both major parties are full fledged activists for the bankers, the progressives give the unions anything they ask for, which slows business investment. The job creation engine in the USA is small (less than 1,000 employees) businesses, who would not be hiring right now even if they could get expansion loans from bankers. Until a businessman can tell what the real cost of adding employees is going to be, they won't be hiring. That won't happen until conservatives have a serious say in Congress. Without job creation, the "jobless recovery" will flatten or fall... only with defined health care policy and incentives to add employees are present, I cannot forecast real recovery.

My feeling is that 2011 results depend upon the 2010 elections... therefore it is premature to forecast 2011 conditions.

Suerte -CapnRick

Bones said...

The key to the next few years will be the government's ability to manage the stress to the economy brought on by continued mortgage defaults. The drop in real estate value does have an up side-housing and commercial space becomes more affordable. Keep in mind that the real estate market is only a small (but crucial) segment of the economy as a whole.

There will certainly be more churn in jobs and overall we won't be better off, but catastrophic collapse will probably not occur. The collapse will be in slow motion and potentially mitigated in many ways we cannot now see. In the end the problem will be the amount of government debt incurred to help manage these problems and in the long run that debt will have to be reduced.

FortiTeneManu said...

I am also a USA CPA who has taught investments to fellow CPAs in a major state, spoken nationally to CPA/Attornies, published peer reviewed articles, listed in Who's Who and lectured at the Trust Dept of a notorious Wall Street Bank. The first CPA & economist is exactly correct. I applaud his honesty and diligence. It is quite probable that June 2011 will be a major turning point, followed by 2016. I suggest reading of economist http://www.fairfieldweekly.com/article.cfm?aid=16014 and his web site, doing a search for interviews of trend forcaster Gerald Calenti, followed by daily checking the economic news at www.jsmineset.com, and background reading concerning historical & economic cycles at http://www.scribd.com/people/documents/10432015-kris . None of these people are employed by govt, seek research grants nor speak for the sellers of financial products. The last, Martin Armstong, a genius, has been emprisoned for 9 years on contempt of court (with a charge) by Bush's cousin, a NY judge. Armstrong writes in the tradition of Toynbee and Gibbons (The Rise and Fall of the Roman Empire) about cycles in civilizations & markets, but with the advantage of massive computing power to analyze a couple dozen preceeding civilizations, quantifying the debasement & devaluation of their currencies and then reflecting the measurable time cycles that are revealed. An architect will be interested to know that economic/market cycles also are influenced by the Fibonacci Ratio.

mikej said...

If I could predict the future, I'd probably be too busy to submit comments to anybody's blog. On the one hand, America's future appears apocalyptic. We Americans import most of our petroleum and manufactured goods, and pay for it all with a fiat currency that owes its value solely to the Tinkerbell Effect. I can't explain why anyone outside the U.S. still takes our Monopoly money.

On the other hand, perhaps the Republicans will regain a Congressional majority in next year's election. The Republicans aren't really any better than the Obammunists, but at least they won't pass any of Obama's Marxist legislative program. All we'd need is another juicy White House sex scandal, and we might just see a repeat of the Clinton years, complete with another stock market boom. Please, Lord! Just one more! I promise to piss it all away this time!

Anonymous said...

"I'm not going to say "X bubble is going to burst on Y date". I don't even know if these bubbles will burst in 2010 or 2011."

Don't sacrifice accuracy in a quest for precsion. No one can know the timing and it is not important so long as the long term trend is understood thoroughly. It's not 'when', but 'if'. Too bad if some have short attention spans.

Mortgage defaults were up 85% in 2009 over the previous record year, 2008. The Residential real estate bubble has burst and is entering warp 2 right into the black hole. The commercial is popping. They need at least another trillion or two to buy these bad assets in 2010 and bailout say for example, California with a 500 billion overrun. The Fed must raise rates to sell the dollar. As interest rates in the market rise, the 12 trillion lent to zombie banks in Oct 2008 will start to be lent and the dam holding that massive amount back can flood the market with dollars. The credit crunch has them screaming. The 3% interest the Fed pays these banks to leave the deposits back at the Fed, will at some point not be good enough. And the Fed is outta bullets. The Fed wants to soak up about 1.5tn this year as it fears hyper inflation, yet the administration wants a upwards of a trillion in stimulus asap. Expect another 2 trillion to be added to the Current Account Deficit this year. Again, the Fed publicly states that if it cannot take money out of circulation (1.5tn) it fears that hyper inflation may result. This is right out of the horses mouth folks. Hello, hello.... the Fed is being usually honest here...
The melt down of the U.S. economy is fast reaching nightmarish proportions that most cannot grasp.

I expect a deep depression worse than the Great Depression lasting 4-5 years at it's depth with a genuine recovery beginning in something like 10-15 years. The EU will be out of it before the U.S. and Asia will thrive. The best the U.S. can hope for is protracted stagflation, that is high inflation rates coupled with declining or stagnate wages and assest values. Hyperinflation is not certain, it only 'looks' likely at this time.

As Ferfal mentioned, there is the risk of sounding like Chick Little with all this Doom and Gloom. Unfortunately the long list of sources I follow were collectively correct in 2007 and continue to be proving out. They have been proven to be realists. Having known and been convinced to the point in 2007 to take serious action way back then, has been a huge advantage. Unfortunately I now have even more confidence in the analysis than before. 95% will continue to call guys like us nuts right up to the bitter end. Denial is a powerful psychological phenomena.


Don Williams said...

1) There have been several important developments --within the past week -- that have not been widely reported in the US News Media but which will likely have major impacts on US citizens as we go forward into 2010.

2) Event one is that Obama has dumped UNLIMITED LIABILITY for Fannie Mae/Freddie Mac's debts onto the US taxpayers. Those are the semi-governmental organizations that deal in US house mortgages.

This act was done ..er..under cover of darkness on Christmas Eve as the American People were unwrapping their presents and finding a lump of coal in their healthcare insurance stocking.

Opening up the back door to the US Treasury on the Evening of Christmas Eve was A neat trick to bury the news --you wonder why bank robbers don't pick up on the idea.

3) Obama's act was an Extravagent Gift to the Financial Industry --since everyone can now dump their worthless mortgage securities into Freddie Mac/Fannie Mae and leave the taxpayers holding a box of smelly cat litter.

See http://money.cnn.com/2009/12/28/news/companies/fannie_freddie/

Disclosure: I'm a registered Democrat (for now) who donated money to -- and worked as a volunteer in -- Obama's Presidential campaign.

Don Williams said...

Note also that Fannie Mae/Freddie Mac recently fired their own Inspector General -- the independent overseer who is supposed to look out for crime and protect the interests of the taxpayers:


So that $6 TRILLION in assets is just sitting there, with the watchdog sent off to the vet to be put to sleep.

Fredo said...

I have to disagree with you on the US housing market. The US housing market still needs to go down a significant amount, if you compare the current prices to the long-term ratio between purchase price and rental cost.

Home foreclosures continue to increase and 70% of the foreclosed houses have not hit the housing market yet. Unemployment is still rising with Shadowstats.com putting total unemployment at 22%.

The only reason the drop in housing prices slowed this year was due to the $8000 tax break. When that runs out, expect things to start dropping as normal.

Anonymous said...

Well, I have to say, that living in Poland is sometimes a good thing, never really out of a crisis, never really into a crisis.

But I must say, that this time, maybe we are into a big one.

Happy new year guys and gals.
I wish us all a very boring year (although I don't think this wish will come to pass).

AHA said...

Issue 3 will probably be up tomorrow. There are like 17 predictions or something crazy like that, most of them way more pessimistic than you :)

Unknown said...

Hey FortiTeneManu I love all of your resources, particularliy Martin Armstrong and I concur with your read of the situation. I would also like to recommend a finance resources if you don't already know about it zerohedge.com.

Unknown said...

I could not agree more with FortiTeneManu's read of the situation, especially when it comes to armstrong's prison writings. Also if you are looking for truthful economic information look no further than zerohedge.com

Anonymous said...

As a mother, my real focus is on the food supply and how it gets to the store. I live in the Midwest & many of the farmers were unable to plant crops because of the rains. Then I read Christmas Eve, Arrow trucking closed operations and then the largest trucking company is in the fight of it's life. Even if there was a bumper crop, who is going to bring it to market?
If I were to predict something for 2010, it will be an increase in food prices. That, and the emptying of the homes in my neighborhood down the street as their ARMs will reset in 10&11.. and then my home will lose value as well.

Anonymous said...

To Don Williams,
I also have a confession to make. I was a republican. More so than ever before, we have a "two headed one party system". They ignore the Law of the Land almost entirely, or pass laws designed to usurp. Some of these guys are brazen enough to consider it a joke... If there are no rules other than what they dream up, then anything can happen. I'm afraid we could be in for some very serious trouble, so much so that I'd like to leave the country. If it were not for my old age and poor health, I would for sure. This goes for nations as well, "the bigger they are, the harder they fall". Of the 3,800 fiat currencies that have failed throughout history, the only fiat currencies that have not, are the ones currently in use and failing.

BTW, good catch on Obama's midnight move. I'll bet that is a quicker and easier way to quietly and efficiently absorb the toxic assets. The FED no longer needs to come up creative ways of absorbing and hiding the losses, inflating the currency in the process, nor will they have to demand bailout monies for the purpose and *concern* the masses. The game must continue for as long as possible. Another neat accounting trick might be to hide it, marking it to myth instead of 'mark to market', or simply bury it in the books, the second set of books.
The rules of legitimate business mean nothing to a government agency. I'm guessing about how this bill works, but it's easy to imagine that there will be much more of that sort of thing... They will use crisis and any opportunity. The Main Stream Media will continue to remain silent whenever possible. They are complacent, beholding to their owners, a network of corporations who will mostly gain from maneuvers such as you just alerted us to. They are heavily burdened with of all types derivatives, including Mortgage Backed Securities. They know their losses will be backed with public money, that we will pay via price inflation. In years to come, those 'assets, currently toxic, will be once again be privatized, sold back to the same or different corporations for next to nothing. Learn Chinese not because we are planning on a trip, but because we will be bought up by the 'new king of the hill', and work for them as well as other foreign investors. As shared here, what happen to Argentina is happening here, yet on a scale that is nearly unimaginable and uniquely American, or is it? Perhaps American in origin and name, even home bred corporations have gone Global. Their operations and wealth is spread out across nations. They are without a home. What happens to this country or any particular country is no longer an issue. The real issue is how much loot they can escape with as this country collapses.


Lamb said...

I think the telling comment is the one "99% of people in the US are unprepared".
I concur, but I include many *preppers* and *survivalists* in that number.
Even if you have all your bullets and beans, you have to be MENTALLY prepared for the Great Chaos yet to come.
I know people with 5 years worth of LTS foods that don't know how to prepare it! Yes, they have buckets of wheat and a nice grain grinder (lets hope it's not electric), but they have never used either.
Many have never gone camping or hiking.
Most do not know how to start a fire without a lighter or matches.

Many people are simply unprepared with the *disconnection* one feels when they become unemployed or homeless.
I suspect that as things get worse here, the amount of people seeking mental health care is gong to skyrocket. People will be popping more and more anti-depressants and other psycho-tropic medications as fast as they can get them. Talk about opiates for the masses!
Our government will find some way to encourage this--a sedated populace is a compliant populace.
Expect new diagnosis to sprout up...maybe something like "Post Employment Stress Syndrome" or such.
Of course, under the new health care legislation, medical records can be shared with gov't. agencies, so if you accept those pretty pills, expect a friendly visit from the BATFE (which has MASSIVELY increased it's size and budget) to take away those nasty firearms you are no longer considered competent enough to own!

Don Williams said...

1) Re Anon's comment at 1:17am, another unreported development is a nasty war brewing within the Democratic Party between the leftist Progressives and the Corpostatists, who are VERY friendly with Big Business and with Plutocrats who donate to the Democratic Party in exchange for ..er ..favors.

2) Progressive leader Jane Hamsher, who blogs at Firedoglake.com, warned Progressives months ago that Obama was going to sell us out on healthcare reform --and events have played out as she predicted.

So Jane is now recommending that the Progressives join with the grassroots on the Right to fight the Two-Headed Plutocracy in Washington.

3) She went on Fox and Friends to argue why the current Healthcare Reform bill should be killed -- because it is a sellout for the benefit of the Insurance industry.
(Mandatory payments)


4) Recently, she joined with Conservative leader Grover Norquist
to call for the resignation of Obama's Chief Of Staff, Rahm Emmanuel, over his service on Fannie Mae's Board of Directors:


Anonymous said...

To Lamb,
Thanks for the heads up.

"Of course, under the new health care legislation, medical records can be shared with gov't. agencies, so if you accept those pretty pills, expect a friendly visit from the BATFE (which has MASSIVELY increased it's size and budget) to take away those nasty firearms you are no longer considered competent enough to own!"

Anonymous said...

FerFal is right on when he said "it's USA, not some pathetic collapsed nation." We have been in much worse situations and prevailed. A bad economy, war, infation, civil unrest and a terrible choice for a President are nothing new for America.But you have to let your elected Congress and President hear you.You have to vote in elections and be active politically.Everyone is not going to sit on the sideline and complain, hide in the hills or leave the country.America will survive this and be much stronger for it.There is no such thing as a spread the wealth, let the Government take care of us Utopia. But unfortunately ever now and then we have to be reminded of it to straighten things out.But we can and we will.