2009 economic predictions can be found at:
The predictions below are from December 10,2007 for 2008:
The Dollar will continue to fall in value.
Why? The US has NOT seen the full fall out of excessive run up of Home Prices. The rise was not only way out of kilter from historical rises, it was fueled by investor speculation as well as an excessively aggressive Realtor sales tactic as well as mortgages that were designed to capitalize on this wild run up in prices.
AS you may have seen even PRIME mortgages are now defaulting in addition to Sub-Prime Mortgages.
It does NOT matter if the Fed Reduces Interest Rates, or pumps more money into the economy… or for that matter “bails out” certain classes of borrowers… there are more serious issues that are being ignored by the media (for which I speculate is to try and stem panic).The Banks do not seem willing to take “risk” no matter how much they have available from the Fed or how low the interest rates go. Then there are the falling FICO Scores (see below).
Banks have been burnt, and the full effect of how much they have been burnt is still not known. The effect is that CREDIT has become the issue. While many people borrowed against their home equity for Credit Cards and for Vacations and for enjoying life… that equity has not only disappeared in many cases but is not even solid for the future as housing prices continue to fall around most of the country.
One only needs to walk around the shopping malls on a Saturday or Sunday this past weekend and see that the crowds are way down… so consumers are feeling poorer as well.
The national savings rate has been negative.. personal wealth for the AVERAGE American has declined.. but increased according to the Federal Government (I do NOT trust those numbers anymore) and the cost of energy as well as food has increased substantially.
Now the next serious Credit Crunch is coming from the Credit Card Market… and defaults and delinquency rates are rising almost daily…. but this is also being ignored by the media…. You do not need to be an economist (and I am not) to see that there is more bad news to come over the next 1 to 3 years in our economy. And what is not being reported is that FICO scores for millions of Americans are falling every month and FICO will not tell you or anyone else how they calculate your FICO score because it is a trade secret!!!
The US economic woes will eventually turn global. I expect actual trade wars to erupt across the globe by the end of 2008 and more WTO grievance filings.
Unemployment will rise as the war winds down unless all the illegal immigrants leave the country.. but even then only lower paid jobs will be available. Congress may even start steps in withdrawing from NAFTA (personally I think that would be best for most Americans for jobs and personal income.).
China will reduce its holdings of the Dollar as the dollar continues to fall. More countries will go to the Euro. While a temporary problem for the US… it will work in the dollars favor as the US will be the first to rise out of the global recession that I see coming.
Oil will go all over the place in prices … from a potential low of 75 dollars to as much as 125 dollars or more in 2008.
Economists never tell us we are in a recession until it is over… so do not expect the US Government to admit there is a problem. Personally I do not feel they trust us to know the truth about what is really going on.
The Stock Market will raise and fall on the latest news… but the real VALUE of the Dow is about 9,000 in my opinion… but that will not be seen… instead we may see 12000 as the ultimate floor… with an upper level of 15000.
DO NOT Watch Fox Business from 12 to 2 PM Eastern… not only is the male host hubris but he is also pushing his own agenda and feeding people with false hope for the future of this economy and refuses to give time or credence to any guest who disagrees with him… even Dennis on CNBC seems delusional during the same time slot….
I am not a bear.. or a bull… I am a pragmatic realist who is looking to hear the truth and when I do get to hear some of it those legitimate economists are often silenced by the hosts or those who depend on a HIGH Stock Market…. but the reality I see in the USA is a dismal future for millions and millions of Americans looking to just have a stable life.
The Housing Market can only continue to weaken based upon a credit crunch… this means that there is a cycle that will not slow down until the Median Price of an AVERAGE Home is in proper ratio to the Median Household income in each market… only then will we see the end of this as there is no future in buying a home for appreciation until there are enough people and enough income to settle this market… that may take years and not the months that the pundits on TV are telling you… besides they are so limited by the need to run a commercial that you cannot get a full explanation of the facts behind their predictions… and then if you dare to say what I have said… then you are branded by some to be un-American… talk about suppression of free speech to promote an agenda!!
Of course this is compounded by a knee jerk Washington D.C, reaction, A do-nothing Congress, Partisan Politics, and too much intervention that will only prolong this financial crises in the USA. But what do I know….lol
TWO WEEKS AFTER I MADE THESE PREDICTIONS I MADE THE FOLLOWING IN THIS BLOG AS WELL!!
More 2008 Predictions from Craig Eisele:
RETAIL: As I write this the bulls are still either saying it is a good season or hoping that last minute shoppers will make it one. Lets look at this in another way. I have been shopping EVERY weekend from Thanksgiving on… and what I have seen is dismal. This year, I have NEVER had to look for a parking space or needed to walk from the far end of the parking lot… I have seen LESS people in the Mall this year and many many more sales. Sometimes so bad I thought that it was March weekend shopping (meaning low numbers of people). I was extremely unhappy with FoxBusiness TV today when the announcer in a shopping mall was saying that the people were starting to flood in and I barely saw 10 people shopping in a wide-angle shot. Only later did ONE gust on the show tell it like it is… MANY of the retail Companies are having LOWER sales… and those sales that are moving are either in Electronics (lower profit margins) or in SALE merchandise… hence LOWER Profit margins… so even if you see higher sales… which is unlikely… the PROFITS WILL BE LOWER!
Credit Card Evaluation by Moody’s is showing a huge number of defaults in the 90 day ranges… and as those of you with Credit Cards you will know that ONE missed payment can mean a jump to 29 percent annual interest rates or higher. Capital One and Bank of America are shown as being at worse rates and possible doubling since their October numbers in their November reports. This does not bode well for Retail and some say as much as two thirds of our economy is consumer spending driven.
Remember that Saving Rates in the USA are AGAIN Negative (meaning we are spending more than we are making), Homeowners no longer have access to their home equity that they had in the past because of declining values and Credit card companies have been increasing interest rates based on your total credit report meaning that if you take out another credit card or even cancel some credit cards or are late on payment to ANY other creditor you can be hit with high interest rates on your credit card balance.
Because of the new bankruptcy laws these credit cards may still have to be paid off entirely but your interest payment may be stopped…. I predict a change in the Laws by a Democratic Congress to make it easier to have these and Mortgage related debts forgiven to better protect the consumer and to allow for MORE consumer spending fostering a recover in the economy. This does not favor the Financial Companies.
Talking about Financial’s… there is great excitement about foreign funds coming to the rescue of the various Financial Businesses… but what you generally do not hear is the COST of those investment… many are for PREFERRED STOCK…. With GUARANTEED rates of 8 to 12 percent… remember that Preferred Stock Holders are often given their payments before there is dividends to the Common Stock holders… and there are still more write offs to come for many companies.
Personally, as I said earlier, the “credit” market, especially for the consumers, will be tight and unless you have stellar credit there is most likely no way you will get a loan or if you do your rates will be high. Even Fanny Mae and Freddie Mac have indicated continued price and value declines through 2008 and MAYBE a slow recovery starting in 2009. When Housing prices do go up (and some analysts and pundits say the opposite of me here) the price increase will be slow because of the Credit requirements that will have to be slowly reduced as well as many people who will be wary of a repeat of the last 2 years and finding out that it is actually CHEAPER to Rent a home than to own it and risk their equity on another potential downturn. And for Zero Down Mortgages.. forget it… those days better be over!!
Simply ALL of those rosy predictions of a good 2008 are for the benefit of companies who want to keep your money in stocks without regard to the real possibility that this economy is in for a rocky 2008.
Recession: Do not expect to be told that this economy is in a recession until it is either extremely sever or until there is a reversal of the current trend, at which time you will be told that we WERE in a Recession. The “powers” behind the Financial information as well as the Government does not believe you are rational human beings capable of knowing the truth until after the fact. They are afraid you will panic and that is not good for business. Right or wrong that seems to be the way the general population of the United States is treated.
I stand by my predictions in the previous post, for the Euro vs. Dollar exchange and the price of Oil for 2008.