January 2, 2012

New Year Predictions!

Readers have some predictions for the new year and beyond. “If 2011 was Occupy then 2012 will be long hot summer…”

Another said, “I predict OWS will regain momentum, hone in on a few major points, and possible field a leader. Economy will remain in ’suspended animation.’ Protests begin in more benign locations like flyover, BFE, X-GSVille, etc. Gov. Scott will continue to ruin Florida. I will not buy a house.”

And this, “I predict a decent year for the economy, despite a continued slow decline of housing prices. Obama gets re-elected as a result. The sub-3.0% GDP growth, falling income relative to inflation (except for the rich and retired public employees), and small employment gains will become par for the course, but people will get used to it.”

“I don’t think the long term problems have been solved. These include an excess of consumption in the U.S., an increasingly unequal distribution of income here, and the reliance of producers across the world on U.S. workers who no longer have money or the ability to borrow. An aging population that didn’t save. And a poorer younger population which cannot pay as much for houses and other assets as those coming before. These problems will take decades to overcome as the country gradually de-leverages, asset prices fall, and Generation Greed passes on.”

“In the short run, however, the housing bubble and bust has done most of the economic damage it is going to do. Construction can only go up from rock bottom levels, generally in smaller units in locations that provide short commutes, and no one is borrowing against homes to finance short term consumption anymore.”

“The heart attack is over, and unless the Republicans in Congress or the Europeans succeed in taking the economy, it won’t recur. The cancer continues.”

One had this, “There is still so much money sloshing around this state. Every time I turn around there is some announcement that Lockheed has won another contract or such and so has won a grant. These grant announcements seem to be made quite regularly w/higher education and medical being (I think) the usual beneficiaries. I have to say I am really surprised because I thought the stimulus money was supposed to be drying up right about now. I’d really like to follow the money back to it’s sources and also do a little digging as to who specifically is benefiting. Somehow I don’t expect to find out it’s the average Joe on the street.”

“The Lockheed contracts have been particularly interesting. I don’t want those people to lose jobs, believe me. It’s just there’s a sense of disconnect when you hear the government is broke and then every few months you hear of a new contract being awarded.”

“Aren’t the federal and state governments supposed to be out of money? Where is all this funding coming from?”

A reply, “It’s only broke when it comes to our benefits. Remember there is an infinite supply of currency available to them. The variable being confidence in the Fiat.”

Another, “The economy will continue to divide Americans into two classes. 1) Americans with money and or good jobs. 2) Americans with crummy jobs or no jobs and no future.”

“Home prices will go up in areas aligning with No1 above and continue down in the No 2 areas. Wild card: government debt how long can it continue without problems?”

And finally, “I predict a ten to twenty percent gain on the S&P 500 index in 2012 and Obama will be re-elected. I predict a surprising boost in tax revenues at federal and local levels for the 2011 tax year.”

From a year ago. “Here are my predictions for 2011. It will be a year of continued financial turmoil, combined with more of the same extend and pretend issues. The big predictable financial crisis will be Spain, and the EU will decide to print their way out of this ever spreading mess just like the US. Smaller banks will continue to fail at the same rate. We will see QE3 - 4, gas prices will continue to climb as will commodities, metals and silver. The disparity between wealth and poverty will not diminish. Home prices where I am, coastal socal, will continue to drop at a rate too slow for my liking. I expect a 5-10% drop at most in 2011. Unless something crazy happens, there will be no major collapse, no additional US wars, and our government will continue to kick the can down the road. Amazingly, it will be more of the same.”

Another, “I predict that Estonia will rue their adoption of the Euro, scheduled for midnight tonight. I predict that China will demand an increase in US bond interest rates - or they won’t buy any more.”

“The conflagration in the PIIGS is the new ‘Reichstag fire’, and will be used by Germany to extort concessions in the EU. There will be a constant threat to withdraw from the Euro, but these will remain a threat for about 2 years. I predict Ein Neues Deutschmark to come in 2013. I predict that Her Majesty’s Government will tell the EU to ‘get stuffed’ when the EU presses the demands for the UK to adopt the Euro.”

“I predict that housing prices will trend down softly in most markets.”

And another, “Gold will continue to increase to around $2,000 / oz and we will see Silver over $45. We have just completed the first dead cat bounce on the real estate side, and prices will continue to fall at an accelerating rate. Around the middle of the year, alarmed by the new wave of walk aways, the Federal Govt will again attempt to intervene, putting a floor on prices for the balance of the year. It is highly likely FB’s will be invited to ‘rent’ rather than foreclose.”

“Unemployment will continue to increase and wages will generally fall. The business climate will continue to get progressively worse, and major credit card issuers will start to exit the credit card market, causing further erosion in Americans buying power. We will see record personal and business bankruptcy filings, possibly on the order of 3.5 million or there abouts.”

“Apple will hit a snag and has most likely already peaked. Energy costs will continue to skyrocket as will medical insurance costs, probably 20% each. Oh yeah, almost forgot…Cheer up it could possibly be worse and Happy new year all!!!”

One from two years ago, “A sure lesson of 2009 is that crazy hangs on longer than anyone expects.”

“I see an increasing number of people thinking that the worst is probably well behind us and we should start getting back up to normal just any time now. Most of my friends are much worse prepared for another shock than they were in the fall of ‘08, many of them say they could not survive another round of trouble. More than a few of these poster children have loaded up on debt in ‘09 to ‘maintain’, wasting a valuable stretch of time to better prepare.”

“My take is that Normal, in the sense of something sustainable, is still a long way down there. We are headed there in fits and spurts, dragging and clawing all the way. Likely we will get in a wave at Normal without the train stopping at the station.”

“The lesson for me is not to take the day as an end game, but to live, work, play and love hard all along the way. In the last year of this decade I see good things for Blue Skye:

Overhauled engines in my boat.
Ten pounds lost before I lie naked on the beach at Oka again with my beautiful Canadian Redhead.
A superb vintage of applejack.
New and interesting projects at work.
Living below my means whatever comes.
Freedom from debt.

Happy New Year all!”

Can Anyone Afford To Retire These Days?

Readers suggested a topic on retirement. “Weekend topic can anyone afford to retire these days? Or is it work until you can’t anymore?”

A reply, “Retire? Those that set up income streams will be doing better than the rest. Think Capital Gains, not 1099’s or W-2’s for income in your later years.”

The Press Democrat. “Still hovering in the shadow of the recession, 2012 is expected to produce business growth, but at a rate that in earlier recoveries would have been considered sluggish. The county’s unemployment rate, a key measure of economic health, averaged about 9.9 percent for 2011, down from 10.5 percent in 2010. A key reason unemployment remains so high is due to the collapse of the real estate and construction sectors.”

“For existing homes, the median single-family home price was $325,000 for the first 11 months of the year, down 3 percent from the same period in 2009 — previously the worst year since prices plunged. The annual median price is now the lowest in more than a decade. It peaked in 2005 at $595,000.”

“For the coming year, economic threats remain, especially due to potential debt crises in Europe and elsewhere around the globe. But even if the threats disappear, county residents likely will see relatively high unemployment and rather tepid economic activity. ‘We have just have to get used to the idea that the next few years are going to be stable,’ said Sonoma State University economist Robert Eyler, ‘but it’s just going to be at a lower growth rate.’”

The Seattle Times. “Buyers aren’t purchasing homes as short-term investment vehicles anymore, says principal Jeff Bell of Cobalt Mortgage in Kirkland, and that’s a huge shift. ‘The whole system is different now,’ he says. ‘We’re going back to the way real estate was 20 or 30 years ago.’”

“Seattle economist Matthew Gardner, who analyzes the market for Windermere Real Estate, concurs. Before the bust, he says, ‘it wasn’t, ‘This is my home.’ It was, ‘This is going to make me money.’ Among buyers today, Gardner says, that expectation is all but gone.”

The Financial Post. “Canadians owed more than a trillion dollars on their mortgages as of March of 2011, according to a report released Thursday by the Canadian Mortgage and Housing Corp., which says the record level of household debt in this country is a ’serious issue.’”

“The CMHC reported that housing-related spending of about $330 billion a year in 2010 has risen by 67 per cent since 2001 and now comprises 20.3 per cent of Canada’s gross domestic product in 2010 — which underlines the importance of that debt load, and what might happen to the economy if for any reason Canadians crack under its burden.”

“‘Concerns expressed about household indebtedness have been largely driven by the total household debt-to-disposable income ratio,’ the report says, noting that the ratio hit a record high of 1.506 in the second quarter of 2011. ‘The major risk in the mortgage market is impairment in a household’s ability to pay, often due to job loss. Recession or other adverse economic scenarios, such as rising interest rates, could certainly pose a challenge for some Canadian households.’”

“Meanwhile, low interest rates, and a relatively small inventory of homes for sale, helped push existing home prices 5.8 per cent higher in 2010, to an average $339,042, and the new housing price index rose 2.2 per cent last year.”

From Presseurop. “Victims of unemployment, the housing bubble and bank loans too easily offered, thousands of families have been forced to abandon their homes. They have lost their jobs, their house, their furniture, their illusions, their hope. Instead, they live with a debt clinging to their ankles, one that will drag along after them for the rest of their lives.”

“Paradoxical as it may seem, the worst is not to be without a home, but what comes after the foreclosure. ‘I’m condemned for life to have no property in my name. I cannot collect a salary, or have a telephone contract, or buy a car, or pay rent if I don’t want them to come after me for the debt,’ laments Elena Parrondo, sitting next to her husband in their flat in the Madrid suburb of Meco that they’re about to lose.”

“‘It’s not something to be relished – being put out into the street with two young children. If we don’t pay the mortgage it’s not because we don’t feel like it, but because we can’t. The banks should be more aware of families’ situations. They’re being left with thousands of homes that remain unoccupied after the foreclosure,’ Elena insists.”

“Lino Samuel Moreno has suffered deeply from the auction of his home. His property went up in smoke, along with his dream of living in Spain. Coming here from Ecuador, he never thought that his dream would become a living nightmare. He arrived around 2002, and in 2006, with all his papers in order, he decided to take the plunge and buy a flat in the Madrid suburb of Valdemoro.”

“Everything went smoothly until he lost his job in 2008. Since then he hasn’t managed to find work for more than four months at a time. The first monthly payment that year went unpaid, then the second, then the third… He tried to renegotiate the payment, but in vain. On October 7 of last year, the dreaded court order to vacate the flat arrived. ‘At 10 a.m., the police showed up to tell us to leave. I embraced my wife. At that moment we got a call from the court telling us we had been granted an extension of three months – but we no longer had any furniture,’ Lino adds, his voice quivering. He now lives in a rented house in Valdemoro, thanks to the City Council, and pays 450 euros a month for it.”

Bits Bucket for January 2, 2012

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