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!”

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Comment by Realtors Are Liars®
2011-12-31 07:49:36

-ReaItors will continue Iying and distorting market fundamentals.

-ReaItors will continue telling the public to buy housing as prices head down.

-ReaItors will continued misrepresenting the truth about housing

Comment by Ben Jones
2011-12-31 09:09:35

‘continued misrepresenting the truth’

The thing about predictions is do people compare these thoughts to reality? Like the NAR having to admit they overstated sales for years, and now they can say ‘we’re up from last year!’

Never has critical thinking been more necessary and at the same time, never have people been less capable of it. We’ve become so numb to spin, that the plain truth seems odd or is unrecognizable. Everything gets spun these days; unemployment numbers? 50 different interpretations, all with an agenda behind them. House sales; boom or doom, depending on who you ask.

The US is the most powerful economy in history, but if we let some corporation (which most people have never heard of) fail, we’re all going down baby!

It seems like we’re kept in a perpetual false reality, waiting to be told what tomorrow means.

Comment by Cantankerous Intellectual Bomb Thrower©
2011-12-31 09:17:10

“The thing about predictions is do people compare these thoughts to reality?”

One thing I learned from my recently-immigrated Russian teacher in the early 1980s was that the Russian people never fully bought into the propaganda in Pravda (the Soviet-era newspaper whose name translates into English as “Truth”). Rather they always checked the stories in Pravda against the facts on the ground.

Now that many U.S. MSM sources seem to have begun substituting propaganda for facts, I am sure most thinking people here do the same as the Russian people did during the Soviet era.

Comment by Ben Jones
2011-12-31 09:30:31

When I listen to Fox Radio, they always end each new segment with “fair and balanced”. And before all the Fox haters pile in, I don’t see anything else fair and balanced either. For instance, NPR is basically the media arm for the NAR.

On one of the older prediction threads I linked, one poster said ‘in Soviet Russia we didn’t have predictions.’ Look at the coverage of the guy in North Korea dying. One would think this man was the greatest person on Earth if you believed the scenes of mourning. But I’d bet most of the people living there would get the hell out if they could.

I watched some youtubes from the Occupy thing in some city. This 20 something young man was extolling the economic virtues of Cuba.

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Comment by Professor Bear
2011-12-31 09:34:36

“One would think this man was the greatest person on Earth if you believed the scenes of mourning.”

Well he was, after all, their ‘Dear Leader,’ wasn’t he?

Comment by Professor Bear
2011-12-31 09:41:50

Humankind owes The Economist editors collective thanks for trying to set the record straight, even before the wailing and gnashing of teeth has died down.

North Korea after Kim Jong Il

We need to talk about Kim
Regime change in the worst country on earth should be planned for, not just hoped for
Dec 31st 2011 | from the print edition

TO HIS many victims, and to anyone with a sense of justice, it is deeply wrong that Kim Jong Il died at liberty and of natural causes. The despot ran his country as a gulag. He spread more misery and poverty than any dictator in modern times, killing more of his countrymen in the camps or through needless malnutrition and famine than anyone since Pol Pot. North Koreans are on average three inches shorter than their well-fed cousins in the South. One in 20 has passed through the gulags. Once somebody is deemed a political enemy, his whole family can be condemned to forced labour too. Now, Kim Jong Il will never be held to account.

Kim was pathologically indifferent to the misery of his people. By his own lights, life was sweet. He enjoyed cognac, fine cheeses and sushi. He relished wielding power over his people and his ability, through nuclear provocation, to milk and manipulate the outside world. He bombed an airliner. He indulged his passion for cinema by kidnapping a South Korean director. The whole country was his movie set, where he could play God and have the people revere him (see our obituary). He was often portrayed as a platform-heeled, bouffanted buffoon—a cartoon villain. Yet he was coolly rational and, in the final reckoning, successful. Not only did he himself die at liberty, but he protected an entire generation of the narrow elite who rose with him. And above all, Kim, the family man, ensured that he passed his movie set to a chosen heir, his pudgy third son, Kim Jong Un.

Comment by AmazingRuss
2011-12-31 10:54:23

He was “Dear Leader, or Else”

Comment by RioAmericanInBrasil
2011-12-31 13:31:58

He enjoyed cognac, fine cheeses and sushi.

for every breakfast….

Comment by DebtinNation
2012-01-02 22:20:18

“Yet he was coolly rational and, in the final reckoning, successful.”
Unless you believe life on earth isn’t the final reckoning, in which case, he’s in deep doo-doo.

Comment by Professor Bear
2012-01-02 23:34:46

“…final reckoning…”

Obviously Dear Leader was either woefully irrational or else an atheist. A rational believer in eternal consequences would have avoided screwing over his own people in so many creative ways with no concern about the eternal damnation he would face in the afterlife.

Comment by skroodle
2012-01-01 16:36:11

Never believe anything until its been officially denied.

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Comment by Realtors Are Liars®
2011-12-31 12:02:17

Wow BJ. No flattery intended here brother but your post should be at the top of the HBB.

Comment by CarrieAnn
2011-12-31 13:48:09

Nice last day of year thread Ben and Happy New Year. Thanks for all you do for us here.

I think there are those who are incapable of critical thought and don’t really get what’s happening. But then there are the others that are quite aware of the details and yet get stuck at the part of what to do about it. I think a lot of what we think is inability to recognize is actually a state of frozen in fear w/a shake of gallows humor to keep from going mad.

I predict that after a longish state of suspended animation, the black swan will arrive that will push everybody hanging quietly by over the edge. We know from most fights that you don’t need a majority to take action, only a critical mass. So many will just sit on the sidelines and hang on for the ride, emerging when they think they get the “all clear” sign. I think the black swan will take place in Europe. The US will be too busy trying to get a President reelected and so the PPT/HFT desks will be out in force controlling the markets in a way that keeps the fleece going.

Thank again, maybe the John Corzine/MF Global affair will be our black swan. When you realize the implications that nothing is really safe, at some point the realization that we can trust no one will reach critical mass and the panics begin. I still think this situation will be suppressed as much as possible until after the election. In the meantime look at the big names who are festering due to their losses. They’ve started to eat their own. That’s got to indicate how close we are to the end game.

Comment by CA renter
2012-01-01 05:08:48

“They’ve started to eat their own. That’s got to indicate how close we are to the end game.”


Bingo, CarrieAnn. You’ve hit the nail on the head.

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Comment by skroodle
2012-01-01 16:37:28

I think its hilarious that the rich are resorting to steal from the rich.

Comment by Carl Morris
2012-01-01 17:44:36

Isn’t that how wars get started?

Comment by GrizzlyBear
2011-12-31 16:51:58

What I find most disappointing about the state of this country is the fact that lying is not only widespread, but an acceptable practice.

Comment by BetterRenter
2012-01-02 16:33:24

My county has its triennial (?) re-eval of property values due. It was a solid 17% average drop in 2009. I predict a similar hit this time (at least 12%). The county probably has no real plans for yet another drop in tax revenue. (Yes, this county is dominated by Democrats. How’d you guess?)

Since I bought my home in ‘Oil City’ to live in it until I die, it is in my best interests to go down to my property hearing and make the case for a lesser assessment. And that’s what I’m going to do. I did that in 2009 and was greatly rewarded. The property Inflationistas can just go and suck it.

Comment by seen it all
2012-01-02 19:40:46

What state are you in?
Doesn’t the county just jack up the multiplier to get the $$$ it “needs”?

Comment by BetterRenter
2012-01-02 20:40:53

Oh, it’s “high” in the middle.

Anyway, my county doesn’t do what you indicate. I never understood why people allow their local governments to do that. A government that gets blood out of you and there’s nothing you can do about it? Your assessment goes down but you still owe the same tax? That’s anti-liberty.

I guess governments get away with that when people are making good incomes. Around here, businesses continue to flee. There’s some comeback, but those are like 1% returning for each 30% that flees. And they are located far in the boonies from the cities, to avoid taxes and Black people; that just makes we who are willing to work, spend a lot on gasoline.

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Comment by Cantankerous Intellectual Bomb Thrower©
2011-12-31 08:14:03

I predict the U.S. Treasury Bond market will finally peak. I only base this on the knowledge that yields are currently as close to zero as ever in my lifetime.

DECEMBER 30, 2011, 6:54 P.M. ET

Dow Gains 5.5% in 2011, as S&P Ends Flat

The S&P 500 closed the year down 0.04 point at 1257.60, its smallest annual move since at least 1970. The Dow closed the year up 5.5% at 12217.56. The Nasdaq Composite closed the year down 1.8%. Jonathan Cheng has details on The News Hub.

NEW YORK—The three main U.S. stock indexes offered something for bulls, bears and the indifferent this past year: the Dow was up, the S&P was flat and the Nasdaq was down.

Within the Dow, McDonald’s was the top gainer in 2011, rising 31% for the year. Bank of America was the biggest loser, falling 58% in 2011.

The “Santa Claus Rally” remained intact on Friday, but just barely. The S&P 500 has gained 0.3% from the Dec. 22 close. The last five days and first two of the new year have been good for an average 1.5% gain in the S&P 500 since 1950, according to the Stock Traders’ Almanac, as investors ready their portfolios for a new year.

Those periods when Santa failed to show have often been painful for the stock market in the coming year. The index lost 2.5% over the seven days bridging 2007 and 2008, a period when the financial crisis was taking shape.

The major stock indexes in 2011 significantly underperformed U.S. Treasury bonds. The biggest star was the 30-year Treasury bond, which registered a 35% return, while the benchmark 10-year note gained 17%, with the yield finishing below 2% for the first time since at least 1977.

Comment by Cantankerous Intellectual Bomb Thrower©
2011-12-31 08:55:57

There was a financially knowledgeable regular here named Hoz several years ago who advised us all to invest in some kind of exotic derivative fund whose value would go up with increasing Treasury yields. Luckily I ignored his advice. In all fairness, nobody could have foreseen Operation Twist, which has helped suppress Treasury yields for longer than expected.

Comment by GrizzlyBear
2011-12-31 17:24:22

Perhaps his gun exploded in his face when he was shooting his neighbors’ cats.

Comment by seen it all
2012-01-02 19:55:37

It’s not just twist,
It’s people and institutions bailing out of europe as well as other safe haven seekers.

Comment by Prime_Is_Contained
2011-12-31 12:16:02

“I only base this on the knowledge that yields are currently as close to zero as ever in my lifetime.”

That statement has been just as true at the beginning of each of the past couple of years… But each time I thought they couldn’t possibly go lower, they did.

Comment by seen it all
2012-01-02 19:57:21

If treasury rates get move 25 basis points now, it’s huge in percentage terms!

Comment by Professor Bear
2011-12-31 16:29:22

ft dot com
Last updated: December 30, 2011 7:20 pm
Foreign central banks cut US treasuries
By Michael Mackenzie in New York

Holdings of US Treasuries by foreign central banks has fallen by a record amount over the past four weeks according to the latest Federal Reserve data.

The net $69bn drop in Treasury holdings registered at the Fed by foreign official institutions comes as benchmark yields ended 2011 near record low levels and when the US central bank is conducting Operation Twist, its $400bn programme to sell shorter-lived Treasury bonds and buy those with longer maturities.

The decline in foreign holdings of Treasuries in recent weeks has not resulted in higher yields and lower prices because other investors have sought the safety of US debt.

“Given where the 10-year Treasury is ending the year, it’s difficult to say the flows are a bearish move,” said Ian Lyngen, strategist at CRT Capital.

The yield on 10-year notes was set to end 2011 below 1.90 per cent on Friday and the Barclays Capital index of long-dated Treasuries has rallied nearly 30 per cent this year, its best annual performance since 1995.

“While other buyers have willingly taken up the torch up to this point, it seems clear that this [foreign official flows] source of demand has waned since Operation Twist took yields to these levels and this investor base has little interest in sub-2 per cent 10-year yields,” said John Briggs, strategist at RBS Securities.

Comment by Cantankerous Intellectual Bomb Thrower©
2011-12-31 08:21:46

“If 2011 was Occupy then 2012 will be long hot summer…”

The way to make money is to buy when blood is running in the streets.

– John D. Rockefeller

Comment by skroodle
2012-01-01 16:40:05

So I am guessing you have been loading up on Iraqi Dinar futures and Afghanistan bonds?

Egyptian cotton futures? There are endless investment opportunities these days it seems.

Comment by Cantankerous Intellectual Bomb Thrower©
2011-12-31 08:24:34

“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.”

Does the Fed still have a printing press technology?

Comment by Cantankerous Intellectual Bomb Thrower©
2011-12-31 08:38:44

Easy eurozone predictions:

1) The latest band-aid measures to fix the eurozone debt crisis will prove insufficient to offset the real economic forces which are pushing them into recession.

2) Megabank, Inc will discover myriad ways to profit from eurozone hardship, particularly through strategically-placed bets on further too-big-to-fail bailouts.

3) Unrest will continue among the portion of the eurozone citizenry facing austerity measures.

4) The wealth gap between rich and poor eurozone nations will increase.

Euro Falls Below 100 Yen, 1st Time Since 2001; Aussie, Kiwi Rise
December 30, 2011, 6:05 PM EST
By Catarina Saraiva

Dec. 30 (Bloomberg) — The euro dropped below 100 yen for the first time since June 2001 in a sixth straight day of decline on concern Europe’s debt crisis will weigh on the region’s economic growth.

The 17-nation currency had its first back-to-back annual decreases versus the dollar in a decade. The Australian and New Zealand dollars rose as stocks rallied before reports next week forecast to show the U.S. economy is recovering, increasing demand for higher-yielding assets. China’s yuan climbed to a 17- year high on signs the central bank favors the currency’s appreciation to prevent capital outflows.

“You have the dismal growth outlook for the euro zone, that only adds another weight around the single currency,” said Joe Manimbo, a market analyst in Washington at Travelex Global Business Payments, a currency-exchange network. “Taking out that 100 level against the yen, that doesn’t bode too well for the euro going into next year.”

The euro fell 1 percent to 99.66 yen at 5 p.m. in New York after dropping to 99.51 yen, the lowest level since December 2000. The shared currency was little changed at $1.2961. The yen gained 0.9 percent to 76.91 per dollar after reaching 76.89, the strongest since Nov. 22.

Comment by Cantankerous Intellectual Bomb Thrower©
2011-12-31 09:02:58

Euro hits 10-year low vs yen, more trouble seen in 2012
Fri, Dec 30 2011
One hundred Euro banknotes lay on top of various Swiss Franc notes in this picture illustration at a bank in Warsaw, July 18, 2011. REUTERS/Kacper Pempel
By Steven C. Johnson and Luciana Lopez
NEW YORK | Fri Dec 30, 2011 4:27pm EST

(Reuters) - The euro capped off the most tumultuous year in its short history on Friday, slipping to a 10-year trough below 100 yen and struggling to hold gains against the dollar, a trend traders expect to continue in 2012.

The euro fell 0.9 percent to 99.77 yen and looked set to end the year down more than 8 percent against Japan’s currency.

It held up a bit better against the dollar, shedding 3.1 percent since the start of 2011, but day-to-day trading for most of the year was extremely volatile.

From around $1.33 in January, the euro soared to $1.4939 by May, then began a steady descent as a euro zone debt crisis that began in smaller countries such as Greece and Ireland spread to the larger core economies of Italy and Spain.

On Friday, the euro traded at $1.2940, less than a cent above its 2011 low hit earlier this week. The dollar lost 0.9 percent to 76.95 yen and ended the year down 5.2 percent against Japan’s currency.

“Given that we are closing the year below $1.30, the path seems to be set,” wrote Dennis Gartman, an independent investor and author of the daily Gartman Letter.

He predicted the euro would drift toward $1.20 in early 2012 “as the resolve on the part of the political, fiscal and monetary authorities in Europe are put to test.”

The focus shifted to Spain on Friday after the country’s new government said the 2011 budget shortfall would be much larger than expected, and it announced tax hikes and wage freezes that could push Spain back to the center of the crisis.

The news drove the euro below 100 yen, though it later recovered some ground against the dollar, partly as traders took some last minute profits and closed their books on 2011.

Related News
Euro hits 1-year low against the dollar at $1.2887
Wed, Dec 28 2011

Comment by Cantankerous Intellectual Bomb Thrower©
2011-12-31 09:13:06

How about another way-too-easy bearish prediction:

A massive centrally-planned capital glut coupled with recession-led drops in demand for Chinese exports from its Western trade partners will result in a “worse than expected” Chinese economic downturn.

P.S. Shanghai economist Li’s announcement that “the U.S. is expected to slow down” in early 2012 is news to me; can anyone provide corroborating references?

Contraction in China’s Manufacturing Boosts Easing Case: Economy
December 31, 2011, 8:50 AM EST
By Bloomberg News

Dec. 30 (Bloomberg) — China’s manufacturing contracted for a second month in December as Europe’s debt crisis cut export demand, fueling speculation that the central bank may cut lenders’ reserve requirements within days.

A purchasing managers’ index was at 48.7 in December from 47.7 in November, HSBC Holdings Plc and Markit Economics said today. A reading below 50 indicates a contraction.

Export orders fell in December for the first time in three months and domestic demand was “sluggish,” today’s report said. Demand for cash ahead of the week-long Chinese Lunar New Year holiday starting Jan. 23 may give officials an additional reason to cut banks’ reserve ratios after a reduction last month that was the first since 2008.

“A reserve ratio cut is likely to happen by Jan. 3, before markets resume trading,” said Li Wei, a Shanghai-based economist with Standard Chartered Bank. China’s exports are under threat because “the euro area is slipping into a recession and the U.S. is also expected to slow down in early 2012,” Li said.

Comment by Professor Bear
2011-12-31 09:22:23

Since this is the Housing Bubble Blog, I am curious how others who read and post here believe looming economic problems in China and the eurozone might impact the U.S. housing market in 2012? My knee-jerk assumption is that U.S. housing prices will drop by “more than expected” as a result of spillover from overseas economic turmoil, though I have to doubt the direness of my own dismal prognosis, as I am a professed bear.

Comment by Prime_Is_Contained
2011-12-31 12:19:05

I’m not sure I understand the channel by which a downturn in China would spill over into the US housing prices…


Comment by Cantankerous Intellectual Bomb Thrower©
2011-12-31 13:49:50

I live on the West Coast, where all-cash Asian (e.g. Chinese) investors snap up real estate on the expectation that real estate will soon always go up again. So I am quite sure my perspective is biased.

Comment by Prime_Is_Contained
2011-12-31 16:08:57

I concur that that channel could have an effect on certain markets. But in terms of more wide-spread contagion, I just don’t see it.

The only major channel I can think of would be if the Chinese significantly reduced their purchases of our debt. Interest-rates would go up as a result, tanking housing nationwide.

Those were the only two channels that jumped to mind for me, btw; would love to hear others…

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Comment by Professor Bear
2011-12-31 17:56:46

“But in terms of more wide-spread contagion, I just don’t see it.”

Perhaps a scenario would help you see it:

Suppose that the contagion effect of twin recessions in the eurozone and China have a larger-than-expected negative economic impact on the U.S. labor market. Soon the nascent labor market recovery hits a speed bump and goes up in smoke.
The anticipated materialization of pent-up housing demand flows into low-priced rental units, while owner-occupied housing demand continues to languish at the lowest level in decades.

Comment by CA renter
2012-01-01 05:16:57

I’m with you, PB. I think that a LOT of the all-cash purchases over the past few years have been transacted on behalf of Asian (esp. Chinese) investors.

If China fails, the west coast and Canada will likely feel the effects.

Comment by measton
2012-01-01 20:26:36

Here is the channel.
China is the great hope that is paraded to investors around the globe.

What happens to commodity prices if China tanks.
What happens to the US companies counting on exports to China?

If commodity and stock market implode what will that do to confidence in the US?

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-01 20:52:48

It all sounds pretty coupled to me — ideal conditions, in fact, for another perfect storm of global financial contagion.

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Comment by 2banana
2011-12-31 09:25:15

Predictions for 2012:

1. Everyone still tries to kick the can down the road. In Europe it does not work anymore.
2. No more bailouts or stimulus in the US. The US goes into recession.
3. Obama loses. Not by much.
4. More war in the middle east. This time the US is not involved
5. Housing continues to slide
6. China/Australia/Canada hit the wall
7. The US Dollar actually climbs quite a bit
8. Stocks get hammered
9. Cash (USD) is king
10. States actually take on insane public unions and win (they actually have no choice so this is an easy prediction)
11. Manufacturing actually starts to come back to America
12. Solar and the green energy industry implode (again – easy prediction as they were never economically viable in the first place)

Comment by Professor Bear
2011-12-31 09:44:02

“3. Obama loses. Not by much.”

You can wish in this hand and #### in the other, and see which one fills up the fastest.

Comment by Ol'Bubba
2011-12-31 18:30:52

Does a Cantankerous Intellectual Bomb Thrower #### in the woods?

Comment by Professor Bear
2012-01-01 02:07:29

Only when I go camping and there are no facilities.

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Comment by hack renter
2011-12-31 09:55:11

4. More war in the middle east. This time the US is not involved.

Even without troops on the ground, I’m sure we would be involved.

Comment by Cantankerous Intellectual Bomb Thrower©
2011-12-31 10:18:16

“7. The US Dollar actually climbs quite a bit
8. Stocks get hammered”

What is it about plunge protection policy that you don’t get?

Comment by Ol'Bubba
2011-12-31 18:32:06

Does a Bear #### in the woods?

Comment by polly
2011-12-31 11:20:53

How can the dollar go way back up and manufacturing come back?

If the dollar gets a lot higher manufacturing will get hammered.

Comment by Prime_Is_Contained
2011-12-31 12:20:10

+1, polly…

Comment by measton
2012-01-01 20:30:44

How can the dollar go way back up and manufacturing come back?

Chinese riots.

The destruction of foreign manufacturing would drive up the dollar and collapse commodity prices and drive US manufacturing.

I really don’t like the sounds of what I just typed.

Comment by Prime_Is_Contained
2012-01-02 09:11:59

WAR—yep, that would do it.
Chinese riots—nope, it would still be cheaper to produce there, even in the face of widespread unrest.

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Comment by SDGreg
2012-01-03 11:54:07

“How can the dollar go way back up and manufacturing come back? If the dollar gets a lot higher manufacturing will get hammered.”

Manufacturing for domestic consumption, not export. As energy/transportation costs rise, the cost advantages of manufacturing abroad will decline. I view this as more of a trend for the next decade versus something too noticeable during the next year.

But consumption will decline over time too, so the amount of manufacturing will not be as great as in the past, even as manufacturing comes back.

Comment by scdave
2011-12-31 11:21:05

#3. To whom ?

#9. Yep…

#11. Yep…

#12. IMO, wrong…The China (Et. Al’s.) will bring the cost down so far for solar that it will become feasible to put it on every roof-top that has the weather to support it (South & West)…

Comment by 2banana
2011-12-31 13:31:59

#12. IMO, wrong…The China (Et. Al’s.) will bring the cost down so far for solar that it will become feasible to put it on every roof-top that has the weather to support it (South & West)…


The jokes just write themselves.

And no, not even the Chinese can save this industry.


Local News Unpaid bill may leave a struggling solar-materials factory in Pocatello in the dark
Idaho Statesman | December 31, 2011 | JOHN MILLER

Idaho Power Co. told a southeastern Idaho polysilicon manufacturer that the utility could turn off its power by Tuesday if it doesn’t pay an electricity bill from November.

Honolulu-based Hoku Corp., which has survived so far with help from Chinese financiers, lodged a formal protest with Idaho Public Utilities Commission regulators after getting a termination of service notice on Dec. 22.

When Hoku missed the Dec. 21 payment, Idaho Power sent a notice that power would be shut off on Jan. 3 — unless Hoku came up with the money.

Comment by Professor Bear
2011-12-31 09:25:57

“A sure lesson of 2009 is that crazy hangs on longer than anyone expects.”

That’s a natural consequence of extend-and-pretend policy rather than rip-off-the-band-aid-and-let-the-festering-wound-heal policy.

I expect extend-and-pretend to continue in 2012.

Comment by Professor Bear
2011-12-31 09:32:57

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

And I, in turn, predict that markets formerly labeled by Alan Greenspan as ‘a bit frothy,’ which have so far only experienced limited price corrections, will begin to catch up with other areas within the same region or other parts of the country where prices have already bottomed out, as demand flows away from relatively overpriced areas towards relatively more affordable ones.

Once huge price disparities create arbitrage opportunities for relocation to areas where housing is far more affordable, all real estate is no longer local.

Comment by CA renter
2012-01-01 05:19:21

It’s already been happening from what I’ve been seeing.

Comment by mmmarvel
2011-12-31 09:46:10

Predictions, your predictions are worthless, remember, 2012 is the end of the world according to the Aztec calendar (it ended there so naturally everyone figures it ended because the world ends - ah where is a crackpot preacher when you need one …)

Actually, I believe taxes and gas prices will go up this next year. The economy will continue to stagnate, if we are lucky the populace will figure out that Obama doesn’t have the answers, never did and will get rid of him. Unemployment will remain high, hopefully Obamacare will be found unconstitutional, that in and of itself will help the economy. Housing prices will just muddle in the same circle/area that it presently finds itself in. Still too much inventory, too many owners (be that a bank or person) who want too much for what they are selling. The elections COULD change things but it will depend on who gets in, if the democrats continue to hold the white house and either one of the chambers of congress, get ready for four more years of what we’ve been going through. If the republicans take the white house and one or both houses of congress, we have a chance - not a great chance, but a chance of finally turning things around. Wish I could be more optimistic, but that’s really what I see. And since the world is ending, well then, who cares.

Comment by AmazingRuss
2011-12-31 10:58:31

When we get rid of Obama, we’ll just get a functional duplicate toting a bible… Unless Ron Paul gets the nomination.

Comment by Ben Jones
2011-12-31 11:04:31

‘according to the Aztec calendar’

I don’t think I’ve ever owned one of those, but I used to see them in Mexican food places all the time.

Comment by m2p
2011-12-31 11:38:52

When family members mention the Aztec calendar and the end of the year prophecies, I tell them my wall calendar ends every year on December 31st. Then I get “the look”.

Comment by m2p
2011-12-31 11:44:37

end of year, should be, end of world.

Comment by SaladSD
2011-12-31 12:05:34

Explain how a GOP controlled government would improve things. Seriously. I hope, in that case, that Ron Paul is President. We’ll see how people like laissez faire air travel and food. A couple of major air crashes and poisonings just do the trick.

Comment by AmazingRuss
2012-01-02 10:40:20

Fear compels you to support the status quo.

Comment by RioAmericanInBrasil
2011-12-31 13:38:44

If the republicans take the white house and one or both houses of congress, we have a chance - not a great chance, but a chance of finally turning things around into the banana republic, fascist utopia the .01% desire.

Comment by Professor Bear
2011-12-31 09:50:19

I predict Congressional gridlock will continue in 2012.

This Year In Congress: Much Drama, Little To Show
by Tamara Keith
Weekend Edition Saturday
[4 min 10 sec]

House Speaker John Boehner, surrounded by Republican House members, speaks during a news conference in Washington in December. The House initially rejected a plan to extend a tax cut for two months to buy time for talks on a full-year renewal. It later compromised — a rare event in 2011.
Susan Walsh/AP
December 31, 2011

Congress got plenty of attention this year, but it was for all the wrong reasons.

There were at least three countdowns to shutdown, there was the debt-limit fight, plus the will-they-or-won’t-they drama earlier in December over the payroll tax holiday. Looking at how few bills were actually signed into law this year, one might conclude this session was mostly sizzle and not much steak.

“I mean, I knew it was going to be bad this year, but I didn’t realize like how bad it was,” says Tobin Grant, an associate professor of political science at Southern Illinois University.

Grant developed an index to measure Congress’ productivity. After looking at the numbers, he says this Congress is on pace to be the least productive since the ’80s — not the 1980s, but the 1880s.

Grant says he’d consider very few of the 80 bills signed into law so far this session to be major legislation.

Multiple bills continue funding that had already been ongoing. Others, he says, include “taking a bold stance in favor of 9/11 heroes and autism” with the Combating Autism Reauthorization Act and the Fallen Heroes of 9/11 Act. Congress also passed 10 resolutions naming post offices.

Now, this is the first of a two-year Congress, and the first year is always less productive. This one, though, has been especially unproductive.

In 2011, Congress did pass the Deficit Reduction Act, three free-trade bills and a patent-reform measure. However, much of its time was spent racing against those countdown clocks, passing short-term extensions to keep the government open for business and fighting right up to the brink over matters that in the past have been routine.

“When you’re dealing at this level with issues that are so polarizing, they will basically suck all the oxygen out of both chambers,” says Ross Baker, a professor of political science at Rutgers.

Comment by Anon In DC
2011-12-31 17:39:38

For one I am glad Congress is not productive. The framers intend it difficult to pass leglistlation to protect the governed.

Comment by Montana
2012-01-02 15:46:35

Same here. And I resent the media’s insistence that I am “angry” and “frustrated” with the deadlock in DC.

Comment by Sammy Schadenfreude
2011-12-31 10:10:46


Somebody is going around torching houses and cars in Hollywood. I predict more “anti-social” behavior like this against the successful or wealthy as America’s social fabric continues to unravel, and sociopaths from the gutter all the way up to Wall Street realize they can act with impunity.

Comment by bill in Phoenix and Tampa
2011-12-31 11:29:03

I think it will be mostly outside the U.S. Lots of sports to watch in the U.S. And distract any dissent.

Comment by Sammy Schadenfreude
2011-12-31 11:52:26

Outside the US doesn’t concern me as much as what’s happening inside the U.S. You know, where I live.

Comment by jeff saturday
2011-12-31 18:38:44

“Outside the US doesn’t concern me as much as what’s happening inside the U.S. You know, where I live.”

Just in case I am mistaken for a successful or wealthy American where I live.

Dr. jeff prescribes 1

Arsenal Saiga SGL21-61 Rifle, 7.62×39

SGL21 (Saiga) - Black Stockset Russian made stamped receiver, 7.62×39 caliber, chrome lined hammer forged barrel, front sight block with bayonet lug and 24×1.5 right-hand threads, muzzle brake, standard mil-spec. handguards with stainless steel heat shield and Warsaw length buttstock, 1000 meter rear sight leaf, scope rail, accessory lug. Comes with 5rd. magazine!

http://www.firearmsprostore.com/arsenalsaigasgl21-61rifle762×39.aspx - 47k -

and 5 or 6

Mag AK-47 TAPCO Intrafuse 7.62×39 30 Round Black Rugged Black Exterior Lifetime Warranty

This U.S. made magazine holds 30 rounds of 7.62 x 39 ammo. Along with a rugged exterior, the mag also features a heavy duty mag spring and anti-tilt follower.

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and 1 or 2 thousand rounds of…..

Brown Bear® 7.62×39 125 - gr. Soft - Point Ammo.

http://www.sportsmansguide.com/ - 133k -

Happy New Year

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Comment by 2banana
2011-12-31 13:37:53

I’ll put a case of beer that (when caught) these criminals will be (or a combination):

1. ELF
2. Muslims (google car burnings and France)
3. OWS
4. Illegals

Just another day of hope and change…

Comment by SDGreg
2012-01-03 12:09:39

Who gets the beer? The person arrested was a German national here apparently legally.

Comment by Robin
2011-12-31 19:32:00

The arsonist(s) is/are targeting middle class apartments with carports mostly.

I do, however, wonder how middle class middle class is in those areas when I saw one woman complaining that she had just bought her husband a new BMW for Christmas and now would have to replace it.

Comment by measton
2012-01-01 20:41:39

This is just it.
When the masses get angry they want to lynch someone.
The elite live in walled compounds with security miles from any middle class population. They have helicopters that can wisk them away.

The upper middle class will bare the brunt of the mob.

Comment by jeff saturday
2011-12-31 10:28:07

Predictions for 2012:

Anger, lots and lots of anger.

Comment by Sammy Schadenfreude
2011-12-31 11:53:41

And precious little reflection, soul-searching, or personal accountability.

Comment by 2banana
2011-12-31 13:21:32

Anger, lots and lots of anger.

If even the predicted GROWTH of government free cheese gets cut…

We are…Greece

2011-12-31 13:48:40

It’s gonna get cut. Count on it!

What can’t get paid won’t get paid.

Comment by Cantankerous Intellectual Bomb Thrower©
2011-12-31 13:52:44

Only work or successful gambling activities will pay. Good luck to those who don’t work or gamble successfully.

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Comment by ahansen
2011-12-31 11:37:55

I foresee the year of the default, with municipalities and pension funds throwing in the towel in a massive pile-on. We’ll see civil service strikes and marches, most likely joined by a second wave of OWS/TP sympathizers.

Increasingly, the country will turn vegetarian as cattle and feed prices soar due to drought, corporate price fixing, and crop diversion to bio-fuels. Fast “food” franchises will begin offering veggie burgers, curries and chilis in addition to whatever-it-is they pawn off on the oblivious feeder as “meat” products.

Housing prices will continue to drop, though not as rapidly as in recent years. The underground RE economy will flourish and gain a certain legitimacy, as zoning laws are flouted and rental scams abound.

Rental REITs will make a comeback after some enterprising syndicate touts it as an investment for Everyman and advertises it heavily in secondary markets a la Countrywide/Cash for Gold/cancer lawyers.

Chinese PACs will sway the Republican nomination toward Huntsman, but he’ll end up as the Secretary of State in the new Obama administration after Romney/Palin lose in a landslide. Or something.

Happy New Year’s Eve, to all. Please celebrate responsibly in the safety of your own bathrooms. ;-)

Comment by Prime_Is_Contained
2011-12-31 12:48:46

“Fast “food” franchises will begin offering veggie burgers, curries and chilis in addition to whatever-it-is they pawn off on the oblivious feeder as “meat” products.”

What will they use as fake beans, to substitute for the fake-meat?

2011-12-31 13:03:40

Increasingly, the country will turn vegetarian as cattle and feed prices soar due to drought.

One can only hope!

I’m far from vegetarian. In fact, I embody the omnivorous ideal. If you’re gonna kill something, waste nothing!

That having been said on percentage basis, I’m probably 90% vegetarian, and mostly 8% pescatarian with the rest left for meat.

Comment by Prime_Is_Contained
2011-12-31 16:10:27

That’s a great approach, FPSS…

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Comment by jeff saturday
2011-12-31 20:27:36

“I foresee the year of the default,”


On a morning from a Bogart movie
In a country where they turn back time
You go strolling through the crowd like Peter Lorre
Contemplating a crime

She comes out of the sun in a silk dress running
Like a watercolor in the rain
Don’t bother asking for explanations
She’ll just tell you that she came

In the year default

She doesn’t give you time for questions
As she locks up your arm in hers
And you follow till your sense of which direction
Completely disappears

By the blue tiled walls near the market stalls
There’s a hidden door she leads you to
These days, she says, “I feel my life
Just like a river running through”

The year of default

Why she looks at you so coolly?
And her eyes shine like the moon in the sea
She comes in incense and patchouli
So you take her, to find what’s waiting inside

The year default

Well morning comes and you’re still with her
And the bus and the tourists are gone
And you’ve thrown away your choice and lost your ticket
So you have to stay on
But the drumbeat strains of the night remain
In the rhythm of the new-born day
You know sometime you’re bound to leave her
But for now you’re going to stay

In the year of default

2011-12-31 12:33:48

I’ll take a stab:

[1] Very bad year in the EU zone. Possible breakup of the currency or massive monetization. (Either way short the euro.)

[2] Bad year in China. Desperate efforts to have an unsustainable thing going but basically fail. Commodities crash.

[3] Very bad year in India. Basically fail at every level.

[4] Moderately bad year in Russia.

[5] Moderately bad year in Brazil. Everything looks OK but the first derivative still portends doom for 2013.

[6] Epically bad year in Australia. Total crash.

[7] Bad year in Canada (you get to hear “we’re different” more than a few times) and then you get a very bad 2013.

[8] Oddly enough, the US kinda muddles through it fine. (Logic is based on the ol’ “if you’re gonna devalue, devalue first.”)

I’ve left out Japan which is ironic since I speak the language but I don’t have a good read for it.

Comment by Cantankerous Intellectual Bomb Thrower©
2011-12-31 13:54:01

“if you’re gonna devalue, devalue first.”

We can thank Bernanke for that!

Comment by Prime_Is_Contained
2011-12-31 12:50:27

“[8] Oddly enough, the US kinda muddles through it fine. (Logic is based on the ol’ “if you’re gonna devalue, devalue first.”)”

So the dollar ends the year stronger?

2011-12-31 12:56:06

Against what?

EUR/INR/AUD for sure (IMO - but that’s just restating what I said above.)

Let me put it this way - I’m long USD. I’m putting my money where my mouth is.

Comment by Cantankerous Intellectual Bomb Thrower©
2011-12-31 13:55:14

“I’m long USD.”

That makes me feel better. I’m long USD, too. Except for the $8K in cash I just used to buy a new (made in 2011) violin.

Comment by Cantankerous Intellectual Bomb Thrower©
2011-12-31 13:48:32

I predict big name investors with over-inflated self-confidence due to recent lucky successes will continue to get burned by the unpredictable volatility of an ever-treacherous bear market.

Soros Sees Gold Prices on Brink of Bear Market
By Nicholas Larkin, Maria Kolesnikova and Debarati Roy - Dec 29, 2011 2:16 PM PT

One thousand gram gold bars are shown at the Istanbul Gold Refinery in Istanbul. Photographer: Kerem Uzel/Bloomberg

Gold is poised to complete its 11th consecutive annual gain, the longest winning streak in at least nine decades, on the brink of a bear market.

George Soros, the billionaire who two years ago called it the “ultimate asset bubble,” cut 99 percent of his holdings in the first quarter, Securities and Exchange Commission data show. Hedge fund managers John Paulson, Paul Touradji and Eric Mindich also sold bullion this year. While speculators in New York futures are the least bullish (.MMGCNET) in 31 months, the median estimate in a Bloomberg survey of 44 traders and analysts is for prices to rally as much as 39 percent to $2,140 an ounce in 2012.

The divergence of views is widening after prices declined 19 percent from a record close of $1,900.23 on Sept. 5, or 1 percentage point away from a bear market. As some investors retreated to cash amid a $10 trillion slump in global equity values since May, others bought more metal, taking holdings in exchange-traded products to an all-time high two weeks ago. Bullion’s 8.1 percent gain in 2011 means it’s on track to beat stocks, bonds and the dollar for a second straight year.

“It’s done its job this year of protecting investors,” said Michael Cuggino, 48, who helps manage about $15 billion of assets, including $3 billion in gold, at Permanent Portfolio Funds in San Francisco and correctly predicted in February that prices would keep rising. “Gold has been all over the place. If you bought gold at $1,800 then you aren’t too happy. Some people will get out of gold, but the longer-term investors will remain.”

Trading Partners

Bullion for immediate delivery settled at $1,545.97 today, below this year’s average of $1,572.79 and six times more than when the bull market began in 2001. The MSCI All-Country World Index (MXWD) of equities declined 9.8 percent, on track for the worst year since 2008, and the Dollar Index (MXWD), a measure against six major trading partners, advanced 1.7 percent. Fixed-income securities around the world gained 4.3 percent this year, the weakest performance since 2007, Bank of America Corp. indexes show.

Investment in physical metal is cooling. The U.S. Mint’s sales of American Eagle gold coins in November were the weakest since June 2008, data on its web site show. Holdings in bullion- backed ETPs fell about 35 metric tons since reaching a record on Dec. 14, according to data (.GLDTONS) compiled by Bloomberg. They are still 140 tons higher than at the start of 2011 and the total of 2,326 tons, valued at about $116 billion, exceeds the reserves (001.046) of all but four central banks. ETP holdings climbed 0.3 percent yesterday, the first increase in two weeks.

Federal Reserve

Demand had strengthened most of this year as Europe’s debt crisis widened and the Federal Reserve pledged to keep interest rates near zero until at least mid-2013. The European Central Bank cut rates to 1 percent on Dec. 8, matching the record low of the euro era that began in 1999. That increases the appeal of bullion because it generally earns investors returns only through price gains.

“The longer-term trends, mainly government fiscal and monetary policies, haven’t changed,” said Tom Winmill, who helps manage more than $200 million of assets from Walpole, New Hampshire, for Midas Funds and whose Midas Perpetual Portfolio may increase its 19 percent investment in bullion and gold mining companies in the next quarter. “Gold has that preservation-of-wealth role and was probably used quite a bit in the last several weeks.”

Options traders are also bullish, with the top nine holdings all betting on higher prices. The two most widely held contracts give holders the right to buy gold at $2,000 by the end of March and May, data from the Comex exchange show.

Hedge Funds

That contrasts with money managers, who cut their wagers on a rally to 117,151 futures and options in the week ended Dec. 20, from as many as 253,653 in August, according to data from the Commodity Futures Trading Commission. The hedge funds and other speculators are now the least bullish since May 2009, a month in which gold jumped 10 percent.

Paulson, the billionaire fund manager mired in the worst slump of his career, sold 36 percent of his stake in the SPDR Gold Trust (GLD) in the third quarter, an SEC filing showed. New York- based Paulson & Co. remains the biggest investor in the largest gold-backed ETP, with a stake valued at $3.17 billion.

2011-12-31 15:36:32

I predict big name investors with over-inflated self-confidence.

If by “big name” you mean “in the public eye”, then we must agree to disagree.

I know some shockingly smart people who the world has never heard of. They tend to understand that it’s the probability game of macro (you don’t need to be consistently right just more than half the time.)

Comment by Cantankerous Intellectual Bomb Thrower©
2011-12-31 16:08:38

I’m decidedly not talking about folks who use probability-based strategies, but rather those who make too-clever-by-half Hail Mary play investments in special asset classes (e.g. long gold, short Treasuries, etc) on the presumption that they can outsmart Mr Market using transparently simplistic strategies. I’m guessing your shockingly smart friends end up on the opposite side of many such greater fool gambles.

2011-12-31 16:11:37

They don’t do “Hail Mary”, that’s pretty clear.

They are also subtle thinkers, and do fairly subtle stuff (not the kinda thing that people here regularly talk about.)

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Comment by Cantankerous Intellectual Bomb Thrower©
2011-12-31 16:20:37

I don’t regularly talk about my more subtle strategies here, either. (Well, I did mention the violin purchase, but if others decided to follow suit, it could only work in my favor.)

Speaking of violins, I looked at many rather average quality instruments in recent months that seemed priced to sell to a nonexistent class of musicians with lots of money. It led me to believe the credit bubble may have spilled over into the violin market in recent years. All the violin dealers I spoke with (and there are four in San Diego within 20 minutes drive from home) assured me that violin prices always go up.

Any thoughts on this?

Comment by RioAmericanInBrasil
2011-12-31 17:30:44

They are also subtle thinkers, and do fairly subtle stuff

Subtle thinking? Really? You should learn from them Pussycat. Being consistently vulgar and insulting in addition to disregarding macro economic facts, using straw-men/false arguments and misrepresenting other’s arguments to the point of absurdity is not the sign of a subtle thinker.

Comment by Professor Bear
2011-12-31 16:24:33

Try not to catch yourself any falling knives or to get hit in the head with any shoes dropping out of the sky in 2012.

ft dot com
December 30, 2011 7:07 pm
$6.3tn wiped off markets in 2011
By Robin Wigglesworth in London

A trader gestures next to the German DAX curve in the trading room of the stock exchange in Frankfurt

Almost $6.3tn was erased from global stock markets this year as the eurozone financial crisis reverberated across the world in the latter half of 2011, calling into question the future of the world’s largest currency bloc.

Global stock market capitalisation dropped 12.1 per cent to $45.7tn according to Bloomberg data, while the euro ended the year as the worst performing major currency after finally starting to succumb to the continent’s financial and economic woes in December.

The euro had proved resilient for much of the year – burning hedge funds that bet on a steeper decline – but on Friday touched a 10-year low against the Japanese yen, and is near lows against the dollar last touched a year ago.

Investors were more optimistic at the start of the year, but as the year progressed they were forced to come to grips with the debt levels in the western world,” said Navtej Nandra, the international head of Morgan Stanley’s asset management arm.

Comment by Patrick
2011-12-31 14:08:27

- Canada’s real estate continues into it’s bubble bursting.
- Mining hits a wall; commodity prices dive
- Keystone gets the green light (or else Kitimat is approved)
- USA’s North Dakota becomes an energy giant
- Five megawatt windmills start replacing 1.5 ones
- Europe prints and prints and prints - inflation
- US realizes it hasn’t been their domestic globals improving
- New technologies show just how vast the offshore BC oil field is
- First Nations people advance long term ownership of reserve based projects to 51% and do so by paying 51% of development costs
- I hope someone eventually finds a solution to the housing crises. I think they should be listening to Diogenes for help.
- Not only Realtors will be called skallywags: so will Stock Shovellers

Comment by Muggy
2011-12-31 15:19:07

Happy New Year Y’all!

Friendly reminder: you can get wine in a box (no disclosures, I simply like like large amounts of wine in plastic bags).

Comment by Doug in Boone, NC
2012-01-02 15:20:01

“you can get wine in a box (no disclosures, I simply like like large amounts of wine in plastic bags).”

Glad to see that you, too, are a fan of boxed wine. It tastes great in plastic wine glasses!

Comment by Wizard of Oz
2011-12-31 17:41:17

California is helping the home moaners/debtors (Jerry, Jerry, Jerry)

So they have this program “Keep your Home California”


Looks like they have $159.4 mil allocated for this? (from us taxpayers!!)

One of the deals mentions principal reductions. Bank or loan owner 50K, Cali 50k for a $100k reduction. Now I don’t for a minute think we’ll see many banks giving away 50K, to allow homedebtors to stay, and then default again.

Eligible incomes by area, some high income limits there too.

Were will this end.. I find myself speechless as to advising how I feel.


Comment by Robin
2011-12-31 21:25:37

In SoCal, I see prices dropping rapidly in condos where association dues hover around $400 per month.

Expect further drops in 2012.

Comment by Anon In DC
2011-12-31 17:44:07

No surprise - falling houses. In my local market Arlington, MA (suburban Boston) three new listings today for the spring market. Guess they got to beat the crowd. More and more I see not bad prices though still lots of pie in the sky prices. But I think locally and overall prices will drop 10% to 15% in 2012.

Comment by Professor Bear
2011-12-31 18:24:21

Thank heavens for MSM market watchers who don’t subscribe to the porcine beautician school of prediction.

Dec. 30, 2011, 12:01 a.m. EST
In 2012, something’s gotta give
Commentary: Stocks, bonds, the euro, China — all under pressure
By Brett Arends, MarketWatch

BOSTON (MarketWatch) — Get ready for 2012.

Because if the markets around the world are to be believed, this is the year when something’s gotta give.

Sorry to be gloomy at this festive time, but there it is.

Will it be U.S. stocks? Could be. They are already trading at lofty levels. Shares are about 21 times average earnings for the past 10 years, says Yale economics professor Robert “Irrational Exuberance” Shiller. That’s about 25% above historic norms, he says. This measure has a very good record of predicting future returns.

A similar picture is borne out when you compare stock prices to the cost of replacing company assets, the so-called Tobin’s q measure first discovered by the late economist James Tobin. This measure, too, has an excellent record of predicting future returns.

Both are saying gloomy things for stock investors.

Of course, maybe they’re wrong. Maybe company profits will keep on booming. It’s hard for companies to boost margins by slashing more costs, of course. They’ve already laid off everybody they can (try to reach a customer service call center if you don’t believe me). But maybe the economy will start to pick up. Maybe a nice new boom will come along and rescue stocks.

The only problem? If that happens, you had better look out below in the bond market.

Right now U.S. Treasury bonds are positioned for gloom. Ten year Treasury bonds are yielding less than 2% and 30 year bonds less than 3%. By the standards of modern times these are very, very low.

A good, old-fashioned resurgence in growth is likely to knock them to the wall. Investors don’t want to hold paper paying 2.9% a year for 30 years when they can earn a lot more on stocks. For that matter, they don’t want to hold that paper if inflation picks up.

A slump in Treasury bonds would hit corporate bonds hard, too, as they are generally priced in relation to Treasurys.

It’s nothing new for the stock market and bond market to disagree, but watching the bond market argue with itself is another matter. While regular U.S. Treasury bonds are priced for a sluggish economy with steady or even falling prices, inflation-protected Treasurys — so-called TIPS bonds — are braced for inflation. These bonds have now locked in negative “real” yields — in other words, yields adjusted for inflation — over the next decade. Historically, these TIPS bonds have tended to yield inflation plus about 1 to 2% a year. Bonds with negative real yields almost guarantee instead that investors will lose purchasing power.

The prices of these bonds most make sense if investors expect to see stagflation — poor growth and quickly rising prices. For very technical reasons, they might also make sense if investors expected a total, 1930s-style economic collapse, with plummeting prices.

The markets can’t all be right. In 2012 we can’t see a good old-fashioned boom with rising employment and falling spare capacity (which is what the stock market wants), a slump with tons of spare capacity and flat prices (which is what the regular bond market wants) and either a slump with no spare capacity and surging inflation or a 1930s meltdown (which is what TIPS seem to want).

Comment by Terry1948
2011-12-31 18:29:16

This is an easy one…Obama gone in 2013. There is nothing there to save him. Good riddance to the worst President ever.

Comment by Ol'Bubba
2011-12-31 18:40:50

I’m no fan of Obama, but I wouldn’t be so quick to dismiss his chances for re-election. There’s an awfully big advantage to being an incumbent and he’ll have a huge amount of campaign cash.

The republicans are trying to pick a candidate from a fragmented pool of B team players.

This one is too early to call.

Comment by Happy2bHeard
2012-01-01 21:22:34

I have to agree with too early to call. McCain was gaining on Obama in early September 2008. Then the bottom fell out of the economy.

All of the Republican candidates have vulnerabilities. It remains to be seen how well they will be exploited by the Democrats. And the Republican party has been shooting itself in the foot in the last year.

Obama also has significant vulnerabilities, including world events outside his direct control that could negatively impact the US economy.

I expect that Romney will get the Republican nomination. He is well funded and well organized and his base of support has been solid. I think he will place in the top 3 in all of the early primaries and that the other candidates will do well in one state and not in others. Ron Paul may end up being the last not-Romney standing. He is also well funded and well organized with a solid base of support. But it seems that his base is a bit smaller than Romney’s.

The final result will depend a lot on what happens in the fall.

Comment by SaladSD
2011-12-31 23:28:59

Sorry, that spot is reserved for the Shrub. Remember him?

Comment by Professor Bear
2012-01-01 02:18:56

“This is an easy one…Obama gone in 2013.”

Since this is so easy, why not go one step further and tell us which Republican candidate could beat him? Is there even a Republican candidate who is both viable in a national election and who would satisfy the Republican party base? I think not, but since you are so good at predictions, perhaps you could enlighten us further.

Comment by In Colorado
2012-01-01 09:53:19

That’s the kicker. Obama sucks, but he sucks far less than any of the Jokers in the GOP clown car and the GOP won’t nominate Ron Paul.

And even if they did, the man has a few skeletons in his closet plus once he starts yammering about dismantling SS and Medicare only the hard core conservatives will vote for him. He is on record for saying that young people today will get “nothing” from SS when they retire. Really? Nothing? Had he said a reduced benefit I could concede that, but nothing?

Comment by AmazingRuss
2012-01-02 10:44:21

That’s his main problem: He doesn’t tell comforting lies.

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Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-02 11:35:48

Isn’t that an essential part of the CIC’s job?

Comment by Anon In DC
2012-01-01 16:33:47

Don’t know that I would call Obama the worse. Maybe just not the right person for the times. Initially I was luke warm on Romney. But the more I hear him talk about how government should not spend money it does not have, the more I like him. Sure hope he mean heavy on the spending cuts and light or no increase on the already sky high taxes.

Comment by combotechie
2011-12-31 18:38:36

New Year Predictions:

1. Cash will remain king. That’s because there will continue to be a growing shortage of the stuff.

2. This growing cash need will move up the economic chain; The need will move from Joe6Pack to those who depend on Joe6Pack. Those who depend on Joe having cash are just as hosed as Joe if Joe is fresh out.

3. But these people are not hosed right away. If Joe is out of cash then Joe is immediately hosed because Joe doesn’t have any reserves. But those who depend on Joe probably do have reserves, and these reserves are what will be tapped into.

4. Reserves used to earn a good return, but now they don’t. And since they don’t these folks will have to start tapping into their principal - their float - instead of living off what their principle use to earn. Many of these guys are in finance, a field that used to be an easy place to make a lot of money, but the easy days are now over. Hence look for the finance sector of the economy to continue to shrink and the number of financial employees to shrink.

5. Tapping into financial reserves means selling financial assets. The return on principle is not there anymore but the principle is. Principle in this case means stocks and bonds and other things such as gold.

6. Being a big shot financial guy is expensive, which isn’t such a big deal when money is easy to get but becomes a big deal when money becomes hard to get. Look for the selling in order to raise cash of the favorite items the big shots like to own.

Keep in mind that the ultimate source for the economic high end’s prosperity all these years was due to the low end’s economic prosperity, just as the prosperity of whales depends on the prosperity of the krill.

The low end guys bought into the idea (an idea cleverly sold to them by the high end guys) that they should go to work every day and send a big chunk of their paycheck to the high end guys. The low end guys would still be doing this EXCEPT they no longer have the money.

Such as it is, IMHO.

Comment by Professor Bear
2012-01-01 02:21:32

7. Due to the detrimental economic impact of an omnipresent and increasing shortage of cash, the Fed will feel compelled to alleviate the problem through invoking QE3. The stock market will rally as a consequence.

Comment by CA renter
2012-01-01 05:36:19


I’m just going to echo your predictions, if you don’t mind.

IMHO, you are totallly spot on.

Comment by WT Economist
2012-01-01 07:14:32

“Cash will remain king. That’s because there will continue to be a growing shortage of the stuff.”

Cash has been trash because the Federal Reserve keeps printing the stuff. I, and presumably you, lost 2 percent vs. inflation last year, with more to come.

I’m mostly sticking with it because every other asset is overpriced. How long can that go on? Perhaps through mid-2013?

Comment by measton
2012-01-01 21:00:02

I’m mostly sticking with it because every other asset is overpriced. How long can that go on? Perhaps through mid-2013?

You can’t say cash is trash unless you can post a better place to put your wealth. You obviously don’t think cash is trash. Compare you’re 2% loss vs inflation to the massive stock market crash that we had in 2008.

If you are saving to buy a house, a computer, a flat screen TV your money has gained in it’s purchasing power. Stocks are next. The customer is dead and that reality is going to sink in at some point.

Comment by Prime_Is_Contained
2012-01-02 09:54:54

“Compare you’re 2% loss vs inflation to the massive stock market crash that we had in 2008.”

I made a conscious decision five years back that I was willing to accept small losses to inflation for some number of years, rather than the large losses that appeared likely in most other asset classes. So far, I don’t really regret it.

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Comment by WT Economist
2012-01-02 10:47:23

I made the same decision, of course. But when the value of your cash is going down, you don’t get the feeling that anybody is saying “your highness” to it.

“If you are saving to buy a house, a computer, a flat screen TV your money has gained in it’s purchasing power. Stocks are next. The customer is dead and that reality is going to sink in at some point.”

If you talk about the wealthiest generations, those born from 1930 to say 1956 or so, they aren’t dead yet. But they are selling to pay for their retirement, and those coming after generally have no money to buy. That’s what’s behind Social Security in stocks, BTW. Looking for a greater fool.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-02 11:40:00

“But they are selling to pay for their retirement, and those coming after generally have no money to buy.”

There is the problem for retirees trying to sell their houses and their stocks: Generation Penury behind them won’t be able to purchase the houses or stocks at a price level which meets expectations.

Comment by WT Economist
2012-01-02 13:51:31

I guess they can try selling to the Chinese Government. That would spice up the coming class war, eh? Everyone working for and renting from the Chinese, Indians, Arabs and Russians.

Comment by bill in Phoenix and Tampa
2011-12-31 19:03:30

How long has cash been king? Since 2001 when gold was $270 per ounce? Or 2005 when gold was around $450 per ounce? Okay, unfair. Let’s assume gold takes a dive and falls in price by 2/3 of its peak since its peak of $1800? Fair prediction since gold fell from $800 to $270 in (wow) 20 years. Not necessarily an overnight crash. So gold could fall to $600 per ounce…over the next 20 years… Cash would be king for those whose gold basis is $900 per ounce in event of such a crash.

I guess cash is not likely to be king for those with a cost basis of 2001 price per ounce for gold.

How about relative to Series I Savings bonds? Cash is a pauper relative to those, or even Series EE savings bonds.

I am certain cash is king relative to those who have debt.

My company 401k went to a different fund family. Due to my asset allocation of 68% large company stock fund, 23% Europacific, and 9% small company stock fund, my average annual return since January 1 2009 is 12%. That does not even account for the increase due to contributions.

Guess I should have stayed in cash!

Of course, about 8% of my portfolio really is in cash!

Comment by combotechie
2011-12-31 19:40:20

“How long has cash been king?”

I’d say about five years or so, since somewhere around 2006. That’s when the long-running Great Expansion began to peter out and gradually turn into what seems to be the Great Contraction.

Debt creation powered the Great Expansion, debt destruction is powering this Great Contraction.

Money then was borrowed into existence enmass and became plentiful enough for strawberry pickers to buy McMansions. That was “Then”.

“Then” is being replaced by “Now”.

Comment by Neuromance
2012-01-02 20:15:33

Question: What is the mechanism by which stocks should go up? Is it reliable?

I put 10K in an S&P 500 index fund about 10 years ago. I pulled it out last year, just before the big July slide. I managed to get back 11K. The investment was negative for the majority of that time.

I was diversified, via the S&P 500 fund, which itself is supposed to be diversified. Do we just accept we need to be astute poker players?

If I don’t understand something, I don’t get involved with it. I don’t understand the mechanism by which we can reliably depend on the stock market to generate returns.

I do understand interest. I understand dollar cost averaging. One tries to reduce the average price of their shares by buying more when the price goes down. If the market share price goes up, you can make more money as the average price per share you paid should be lower.

But the stock market - I don’t understand how it is a reliable mechanism to generate returns. I look at my personal experience on the NYSE, and at the the Nasdaq and the Nikkei.

I understand “the house” - brokers - make money as they make money on the transaction. But as an observer once asked a broker when shown a bay full of wealthy brokers’ yachts: “Where are the clients’ yachts?”

Comment by rms
2011-12-31 20:58:52

A friend who is a contractor had his credit line drastically reduced early this year despite a good cash-flow history. He has never had any bonding problems either. The problem now is that without that higher credit line he can’t bid on the larger jobs where the gravy is thicker. At first he was confident that smart minds would prevail and solve the credit crisis, but now that hope has faded. I tried to explain my California experience to him years ago, but none of it registered. Today I just listen and nod that I understand.

Comment by Blue Skye
2011-12-31 23:46:44

Several years ago I advised a friend in a similar business to draw down his credit line and keep the money in a different bank to fund his jobs in case his credit line got cut. He did, but he spent the money a year later on fleet upgrades. Now he’s screwed. His prediction for 2012 involves bankruptcy.

Comment by FB wants a do over
2011-12-31 22:12:06

1. Mortgage paid off (took 10 years).
2. Unemployment relatively unchanged to slightly higher by year end.
3. Another recession.
4. More people on SNAP (food stamps).
5. Ron Paul wins the GOP primary.
6. Bill and RAL will continue not to get along.
7. Another war/conflict. - U.S. directly or indirectly involved.
8. 72 bank failures in the U.S.
9. Lower house prices.
10. Higher gold prices.
11. Euro won’t collapse.
12. The world won’t end Dec 21st.
13. Faster P posts his 2013 new year’s eve party food items.

Comment by CA renter
2012-01-01 05:38:40

Congratulations on paying off your mortgage, FB!!! :)

Comment by clarkely
2011-12-31 23:49:07

Once again, I’ll guess, they’ll do the things that will make things absolutely worse.

As an aside, after years of reading here on HBB about the overbuilding and extravagance in Florida during the boom years,… even I wasn’t prepared for what I saw when I visited the state,… all I can say is, Wow.

Comment by Professor Bear
2012-01-01 02:23:56

“…even I wasn’t prepared for what I saw when I visited the state,… all I can say is, Wow.”

You can enjoy the same experience on a driving tour of California. For good measure, head east and end your trip in Las Vegas.

Comment by Professor Bear
2012-01-01 02:09:26

Published: Sunday, January 1, 2012
Housing probably hasn’t hit bottom
By Steve Tytler

Every year I write my annual housing market review and projection for the coming year.

First, let’s take a look at what I predicted last year for the 2011 housing market in my column published on Oct. 14, 2010:

“I was hoping that I might be able to report that we had finally reached the elusive ‘bottom’ of the housing market by now, but we are not there yet.

“I think we are in for another year of slowly falling prices next year. I do not expect a dramatic crash in home prices, but I think there’s a good chance that home prices will continue to drift downward by an average of about 5 percent.

“But again, home price appreciation/depreciation will vary widely from neighborhood to neighborhood with some doing much better and some doing much worse than the overall average.”

I was pretty close to the mark. According to Standard & Poor’s/Case-Shiller index the most recent stats show that home prices in the metro Seattle housing market declined 6.2 percent from October 2010 to October 2011.

We don’t have end of the year stats for 2011, but that’s pretty close to my prediction of a roughly 5 percent average drop in overall home prices for 2010.

Case-Shiller includes everything from Everett to Tacoma in its Seattle housing market, and as we all know there is a very wide range of different neighborhoods within that broad region.

Some neighborhood home prices lost much more than 6.2 percent while others fared better. Therefore, it’s always hard to make general statements about the overall Puget Sound region housing market.

Still, I’m going to go ahead make my annual prediction for the 2012 housing market.

Once again, I wish I could say we have finally hit “bottom,” but it’s too early to call a bottom. You can only truly know that the housing market has hit bottom after home prices are appreciating on a consistent basis. Unfortunately, we are not there.

Comment by Prime_Is_Contained
2012-01-02 09:14:38

It’s refreshing to see a commentator in the MSM _not_ calling a bottom for a change, isn’t it? :-)

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-02 11:45:37

It took some hunting, but I found a few. But it seems the vast majority of MSM commentators can only notice housing price declines through the lens of the rear view mirror.

NOVEMBER 30, 2011

Home Prices Edge Downward

Glut of Foreclosures Keeps Pressure on Housing Market; Consumer Confidence Jumps

Home prices declined in September and are poised for a grim winter as banks step up their efforts to take back and sell foreclosed properties.

Prices fell 0.6% from August, according to the widely watched Standard & Poor’s/Case-Shiller index of 20 major metropolitan areas, breaking a five-month run of increases during the spring and summer, when higher sales volumes typically firm up prices.

For the third quarter, prices were down 3.9% nationwide compared with a year earlier, a slight improvement from the 5.8% annual decline recorded at the end of June, according to the Case-Shiller National Index.

Prices remain under pressure as the housing market continues to digest high volumes of foreclosed and other “distressed” properties that tend to sell at a discount. Though sales picked up at the end of the summer, analysts said buyers were only closing deals they perceive as a bargain, which could help explain why prices are sliding again.

“Buyers don’t want to tell their friends ‘I bought a home.’ People look at you sideways. But if it’s a foreclosure, they pat you on the back,” said John Burns, president of a home-building consulting firm in Irvine, Calif. “People need to feel like they’re getting a great deal.”

Comment by Professor Bear
2012-01-01 02:16:13

I predict anti-bank sentiment will continue to gain strength in 2012, particularly against the parasitic Wall Street Megabanks, which use their blood-sucking proboscises to drain the life out of local economies in parts of America which lie to the west of Manhattan. This will pose a dilemma for all the serious presidential candidates, who will have to balance sensitivity to the plights of American households facing foreclosure and high bank fees against the need to solicit campaign funding from Wall Street.

Watch for new bank fees
You can fight back against being nickeled-and-dimed
Last reviewed: November 2011

Banks are looking for new sources of revenue now that federal regulations have reined in the amount they can earn from credit cards, overdrafts, and debit-card merchant fees. So the next time you get a letter or an e-mail message from your bank, don’t be surprised if it brings news of higher fees, fewer rewards, or tougher account requirements. But you might be able to avoid paying more if you’re vigilant, willing to change your habits, and ready to switch banks for a better deal.

The latest blow to bank profits, effective last month, is a federal rule that limits the so-called “interchange” fees large banks can charge retailers whenever people swipe their debit cards to pay for a purchase. The fees are now capped at 21 cents to 24 cents per transaction, about half the average amount banks had been charging. This change follows separate regulations that took effect in 2010, limiting the ability of credit-card issuers to raise interest rates on cardholders’ balances and barring banks from charging overdraft fees in connection with ATM and debit-card transactions unless customers opt for overdraft protection.

Because of the new restrictions and a continuing weak economy, banks have lost billions of dollars in revenue—and they’re taking steps to recoup some of that through new fees or reduced rewards for account holders. “We are taking a hard look at the fees and benefits of all our payment products, including debit cards,” said Tara Burke, a Bank of America spokeswoman.

Comment by Neuromance
2012-01-02 20:18:07

This will pose a dilemma for all the serious presidential candidates, who will have to balance sensitivity to the plights of American households facing foreclosure and high bank fees against the need to solicit campaign funding from Wall Street.

They’ll have to say what the voters want to hear during the election, then do what fills the coffers and consolidates power once elected.

Comment by Professor Bear
2012-01-02 23:36:15

Dilemma solved!

Comment by Blue Skye
2012-01-01 09:16:13

“I see good things for Blue Skye”

This made me smile! All of those predictions came true. I suppose I cheated by only commenting on things that I could influence directly.

For 2012 I expect more positives personally, and on a broader scale continuation of the unwinding of a generation of lavish spending and debt accumulation.

One thing that I would really like to see develop is less denial on a braod scale and a more positive attitude about adjusting well to inevitable changes with realistic expectations and practical solutions.

Comment by Professor Bear
2012-01-01 14:01:09

I predict foreclosures will continue to drag on forever. The lag effect on the timing of a housing bottom will prove larger than the serial bottom callers expected, making the timing of their predictions far too early.

Foreclosures Drag on Longer Than Ever

Due to robo-signing, underwater mortgages, and the sheer number of homes that have gone into foreclosure, the average loan in foreclosure has been delinquent for a record 631 days nationwide.

December 30, 2011 /24-7PressRelease/ — The October 2011 issue of the Mortgage Monitor, a report from LPS Applied Analytics, indicated that the average loan in foreclosure has been delinquent for a record 631 days nationwide.

In Michigan, nearly 12 percent of homes are noncurrent, but they had declined 15 percent from last year.

Some of the age of this backlog is attributable to the sheer number of homes that have gone into foreclosure in the last couple of years. The main factor now appears to have been caused by lenders being much more cautious when filing foreclosure documentation.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-01 14:20:55

I predict efforts to save the euro will fail to prevent a eurozone recession.

Euro Leaders Aim to Buy Time to Save Currency
By Patrick Donahue - Jan 1, 2012 10:08 AM PT

A Euro sign sculpture stands in front of the European Central Bank’s (ECB) headquarters in Frankfurt on Dec. 29, 2011. Photographer: Simon Dawson/Bloomberg

European leaders return to work this week seeking to buy time for the Spanish and Italian governments to wrest control over their debt and rescue the single currency from fragmentation as the region’s crisis enters a new year.

Some 157 billion euros ($203 billion) in debt will mature in the 17-member euro area in the first three months of 2012, according to UBS AG. By the end of that period, leaders have pledged to draft a stricter rulebook on reining in debt. German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet in Berlin Jan. 9 to flesh out the details.

“The path to overcoming this won’t be without setbacks, but at the end of this path, Europe will emerge stronger from the crisis than before,” Merkel said in a New Year’s television speech that aired yesterday. She said that her government will do “everything” to bring the euro out of the slump.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-01 17:07:43

OWS demonstrators to naysayers:

Rumors of my untimely demise are greatly exaggerated.

68 Occupy demonstrators arrested in New York
From Susan Candiotti, CNN National Correspondent
updated 6:52 PM EST, Sun January 1, 2012

(CNN) — New York police arrested 68 Occupy Wall Street demonstrators on New Year’s Eve after a flare-up at and march from their longtime base, a police official said.

The arrests came after a protest at Zuccotti Park and a subsequent march, said New York Police Department Deputy Commissioner Paul Browne.

A 28-year-old male demonstrator is charged with assault on a police officer after stabbing a police officer who had been trying to arrest him, according to Browne.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-01 17:35:53

I expect an uptick in senseless acts of violence, many of them tied to the economically destabilizing effects of the Great Recession.

4 Killed In New Year’s Day Shooting In Coronado

SWAT, Sheriff’s Dept, Coronado Police, NCIS Responded To Condo Complex In 1000 Block Of Park Place
POSTED: 8:58 am PST January 1, 2012
UPDATED: 4:01 pm PST January 1, 2012

CORONADO, Calif. — Four people were found dead on Sunday at a Coronado condominium, where gunfire broke out just over two hours into the New Year, officials said.

Coronado police were called to a three-condo structure at 1020 Park Place at about 2:20 a.m. to investigate a report of shots fired at the residence, according to sheriff’s Lt. Larry Nesbit.

Officers arrived to find an adult male victim, with an apparent gunshot wound, lying in the doorway of the building, he said.

“Officers confirmed he had no signs of life,” Nesbit said.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-01 18:26:39

Man kills self in front of 4S Ranch bystanders
Written by
Pauline Repard
9:08 p.m., Dec. 18, 2010
Updated 9:58 p.m.

SAN DIEGO — A 22-year-old man committed suicide by cutting his throat in front of his girlfriend and customers at a 4S Ranch shopping center Saturday afternoon, sheriff’s officials said.

Also see »
4 dead in Coronado shooting

A Coronado police sergeant stands near the condominium on Park Place where four people were found dead at about 2:30 a. m. Sunday morning. It is not known the circumstances of the deaths, however, the Naval Criminal Investigative Service were at the crime scene, as is the procedure when Navy or Marine Corps service members are involved.

Also of interest

San Diego County woman jumps in front of train
LA man convicted of killing girlfriend, fetus
Man found guilty of murdering La Costa woman

Comment by rms
2012-01-02 20:03:04

“A 22-year-old man committed suicide by cutting his throat in front of his girlfriend and customers…”

That’ll teach ‘em!

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-01 20:15:53

I predict Asian Megabanks will lose boatloads of money on eurozone loans.

Megabanks have 2 trillion yen invested in debt-hit Europe nations
November 15, 2011

Three Japanese megabanks have investments worth 2.053 trillion yen ($26.63 billion) in five debt-ridden European nations–Italy, Spain, Ireland, Portugal and Greece–raising fears of huge losses if the European debt crisis deteriorates, the banks said Nov. 14.

Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. own a combined 315.9 billion yen in government bonds of Italy and Spain as of the end of September. The financial institutions have also provided loans worth 1.738 trillion yen to local companies in the five nations, according to the banks.

Of the three banks, Mitsubishi UFJ has invested the most, at 1.324 trillion yen, followed by Sumitomo Mitsui with 409.7 billion yen and Mizuho with 319.3 billion yen.

The combined investment balance of the three banks in the European nations has fallen 253.7 billion yen, or 13 percent, since the end of June.

All three megabanks will refrain from making further investments or lending to businesses in the region.

“We will not offer new loans (to European companies), given the current debt crisis in Europe,” said Katsunori Nagayasu, president and CEO of Mitsubishi UFJ.

The three banks’ loans to companies in the five nations account for less than 5 percent of their total overseas lending.

However, Yasuhiro Sato, president and CEO of Mizuho, said the banks cannot rule out the possibility of unexpected damage from the situation in Europe.

When U.S. Lehman Brothers Holdings Inc. collapsed in 2008, we did not initially expect much of an impact, and Japan turned out to be the one most severely affected by the company’s fall,” Sato said.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-01 20:18:21

I predict a post-holiday debt hangover will create a larger-than-expected drag on the U.S. economy in 2012.

Jan. 1, 2012, 9:00 a.m. EST
U.S. jobs data likely to confirm momentum
Yet even as 2011 ends on strong note, doubts persist about 2012
By Jeffry Bartash, MarketWatch

WASHINGTON (MarketWatch) — The first week of the new year will reveal a lot about U.S. economy in the final month of the old year.

A string of economic reports this week is likely to reveal that manufacturing and service-oriented companies continue to expand and that businesses are adding jobs at a faster clip. The capstone is Friday’s monthly report on job creation in December.

Yet what the data cannot reveal is whether the recent momentum is sustainable in the early months of 2012. Afterall, the economy entered 2011 with a head of steam only to falter later on.
MarketWatch consensus
See economic calendar
date report Consensus previous
Jan. 3 ISM 53.0% 52.7%
Jan. 3 Construction spending 0.2% 0.8%
Jan. 4 Factory orders 1.8% -0.4%
Jan. 4 Motor vehicle sales 13.6 mln 13.6 mln
Jan. 5 Jobless claims 375,000 381,000
Jan. 5 ISM services 53.5% 52.0%
Jan. 6 Nonfarm payrolls 155,000 120,000
Jan. 6 Unemployment rate 8.7% 8.6%
Jan. 6 Average hourly earnings 0.1% -0.1%

The biggest potential drags, economists say, are slower government spending at all levels and the fragile financial health of U.S. households.

Stronger growth in the final three months of 2011, economists point out, was largely underpinned by consumers dipping into their savings to pay for holiday-season purchases. Some expect consumers to retrench over the next few months to pay down their debt and rebuild their savings.

If that happens, the U.S. economy is likely to slow again and repeat a recent stop-and-go pattern.

I think we will see a slower growth in spending,” said economist Ryan Sweet of Moody’s Analytics. “Consumers are going to see that their wages are not going up. They are going to grow a little more cautious.”

Comment by Neuromance
2012-01-01 21:08:27

New Year’s predication: One thing I can say for sure is that it will be another year spent trying to find out how much debt governments can rack up without causing economic collapse.

Another year spent trying to protect flawed debt markets which make so much money for politicians via their big donors.

Will this be the year of the Black Swan? Stay tuned.

Comment by Neuromance
2012-01-01 21:18:18

Predication? Yeesh. Prediction.

Comment by WT Economist
2012-01-02 10:52:35

“One thing I can say for sure is that it will be another year spent trying to find out how much debt governments can rack up without causing economic collapse.”

Governments going deep into debt is the only thing that stopped the collapse of the private financial/consumer debt-based economy. Governments didn’t cause the collapse.

The question now is, can governments stop going into debt before they themselves collapse, without causing the private economy to collapse?

If the answer is no, then governments should have allowed the private economy to collapse the first time and saved themselves, as in Iceland.

That’s the perfect test: Iceland vs. Ireland. Same situation, radically different choices.

2012-01-02 09:05:18

A long time ago (maybe 2007-ish) I predicted that when the bottom comes (assuming it does) nobody will give a flying f_ck about housing any more.

As I recall, the only high-fives were from Oly and txchick.

I stand by that prediction.

Nobody is gonna care about actually getting a house. All the hysteria was basically just a side show of the fact that people felt they were “getting left out”.

Now that it’s crashed, and continues to crash, it’s like a bad dream that’s over. You stop caring when, in this case, everyone else wakes up.


I’m headed with my camera and lens bag to India for a month in a few days!

Oh, and I predict a lot of travel in 2012 for me. :P

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-02 11:52:18

“Now that it’s crashed, and continues to crash, it’s like a bad dream that’s over.”

It’s more like a bad dream that hasn’t ended yet. But I agree with you that when we collectively wake up (and we will), everyone will generally scratch their heads over society’s craven collective desire to own multiple houses. It will seem as odd once it really is finally over as the Dutch desire to own tulip bulbs in the 1630s seems today.

The fact that MSM writers have not yet reflected this paradigm shift in their stories indicates the bad dream may continue for a few more years before we all wake up and ask ourselves what we were thinking.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-02 11:57:06

I predict Chinese property price declines will continue in 2012, and will prove larger than expected. And Chinese monetary authorities will discover a similar problem faced by the Fed, when they realized they were unable to control the U.S. housing bubble collapse once they had precipitated it.

DECEMBER 18, 2011, 5:53 P.M. ET

China Property Prices Decline

BEIJING—Average property prices in Chinese cities saw a second consecutive monthly drop in November, according to government data released Sunday, in a further sign that Beijing’s two-year tightening campaign to cool the red-hot property market is having an impact.

Property prices in China are likely to fall further following a series of government tightening measures. Richard Price, Asia-Pacific CEO of CBRE Investments, tells Asia Today why there is still value if you are an investor.

Data on 70 Chinese cities released by the National Bureau of Statistics and analyzed by The Wall Street Journal show average home prices declined by 0.17% in November compared with October, compared with a 0.13% decrease in October and a 0.01% increase in both September and August. Prices rose 2.3% on average in November from a year earlier, moderating from a 3% increase in October.

Prices of newly built homes in 49 of the 70 large and medium-sized Chinese cities that the bureau surveyed fell in November on a sequential basis, up from 34 cities in October.

The survey also showed that prices of newly built homes in five of the 70 cities rose month-to-month in November, lower than the 16 cities in October.

On a year-to-year basis, prices of newly built homes fell in four of the 70 cities in November, higher than the two cities in October.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-02 19:06:02

Is “low-cost” the Chinese weasel word equivalent for what American policy makers refer to as “affordable” housing?

China’s Low-Cost Housing Boom
Dec. 30, 2011

Building low-cost housing projects is part of the Chinese government’s plan to restructure its housing sector. But some say it’s a risky strategy for the already shaky real estate industry.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-02 19:12:26

Mayan calendar superstition goes all the way to China:

Jan. 2, 2012, 7:15 p.m. EST
Mayan property risk looms for China
Commentary: Analysts hoping worst will not happen
By Craig Stephen

HONG KONG (MarketWatch) — Investors in mainland Chinese equities, particularly new offerings, had a year to forget in 2011. As we start the new year, a fresh perspective and resolutions are needed

But realistically can we expect 2012 to be any better?

You can tell sentiment has reached a pretty low ebb when the message from brokers hoping to fortify some risk appetite in clients is simply “your worst fears might not be realized.”

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-02 12:10:54

The bad news: A recession is on the way for the U.S. in 2012.

The (supposed) good news: It won’t be a Great Recession. And (according to the article’s writer), unlike most other recessions, this one will not be deliberately triggered by the Fed raising interest rates.

Given the fragility of the global financial system, and the recently-heightened expectations for U.S. economic recovery entering a presidential election year, I can see many ways this prediction could go awry.

A question of interest for HBBers: Would a renewed U.S. recession lead to higher or to lower housing prices going forward?

The New Economy
Forecast for 2012: recession, but not a Great Recession
Recession will last the year, but it will be shorter and much shallower than the Great Recession.
By A. Gary Shilling, Contributor / January 2, 2012

This photo taken last month shows a home for sale in Hialeah Gardens, Fla. Typically, recessions begin when the Fed hikes interest rates. But this time, the trigger could be another sizable drop in housing prices, a fall in consumer spending, or the European financial crisis.
Alan Diaz/AP/File

Comment by Carl Morris
2012-01-02 13:34:01

Everywhere we turn we see big trees, but the forest is nowhere to be seen. Maybe it’s behind all those trees.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-02 12:17:33

I predict Newt’s GSE consulting gig will haunt him all the way until election day in 2012. I note that REIC ties have been very, very bad for political careers in recent years: For instance, does anyone remember that Chris Dodd once had presidential aspirations? Whatever became of them?

Gingrich considers paid Freddie Mac ad
December 30th, 2011
10:04 AM ET
Gingrich considers paid Freddie Mac ad
Posted by CNN Political Producer Shawna Shepherd

Carroll, Iowa (CNN) - The barrage of negative ads about Newt Gingrich’s ties to Freddie Mac has proven so effective that Gingrich himself is considering fighting back with airtime.

Gingrich told a group of 100 or so people gathered at the Santa Maria Vineyard and Winery Thursday evening he is thinking about putting out an ad to address the claim he lobbied on behalf of Freddie Mac at the time of his lucrative multi-year consulting contract.

Comment by rms
2012-01-02 14:18:55

I predict that I will still be in the moderator’s queue for 2012.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-02 15:31:06

Although mortgage loans and credit cards are harder to obtain since the subprime lending industry and the labor market went up in smoke, I predict that student loan lending standards will remain sufficiently loose in 2012 and subsequent years to provide many students with an early-adult-life opportunity to weigh themselves down with a crushing debt repayment burden.

This is one of many issues forestalling a near-term U.S. housing market bottom which the porcine beauticians and serial bottom callers conveniently choose to ignore.

I owe, I owe,
Though out of work I go…

Student loan debt key issue
December 30, 2011|Mary Umberger | On Real Estate

The amount of debt that’s being carried by certain consumers in this country is growing by about $2,800 a second.

It’s not mortgage debt, and it’s not credit card debt. Those are two financial time bombs we’ve (kind of) gotten a handle on, by some analysts’ reckoning. No, this credit menace is student loan debt, which is pushing $1 trillion, according to FinAid.org, a site dedicated to college financial aid information that has created a “Student Loan Debt Clock” where, if you like to be uncomfortable, you can watch this debt as it piles up, at a rate FinAid pegs at around $2,800 a second.

Potential ripple effects are numerous, including whether a generation will be able to buy homes, said Rick Palacios Jr., senior research analyst for John Burns Real Estate Consulting, an Irvine, Calif., company that analyzes social and economic trends for the housing industry. He talked about how the burden of student loan debt is likely to put homeownership out of reach for many grads.

Q: How much student loan debt is out there these days?

A: The Federal Reserve Bank of New York recently revised a lot of its data, and it announced it had been understating student loan debt by a couple hundred billion dollars. Where the Fed thought in the second quarter of 2011 that student loan balances were $550 billion, it now estimates that the number in the second quarter was $845 billion. That’s greater than all of our outstanding credit card debt and other types of household debt, except for mortgages. And it’s growing at a ridiculously high level. College students who graduate with loan debts carry an average balance of $25,000.

One thing that caught my eye (in the New York Fed data) is the way that student loan debt is categorized. It doesn’t capture anything that would be put on credit cards or on home equity loans that we know parents take out to pay for education. So the amount of school-related debt is probably bigger.

Comment by Carl Morris
2012-01-02 17:54:05

He talked about how the burden of student loan debt is likely to put homeownership out of reach for many grads.

Hmmm…so who will buy those homes that need to be sold? People who didn’t go to college? People who already have homes? Or perhaps prices will fall until some combination of all of them absorbs the inventory.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-02 15:42:00

I predict that “radical gold bugs” will continue in 2012 entertaining foolish theories about why gold is a superior investment to all other asset classes, and that they will get repeatedly burned by smarter but less vocal investors who figure out how to arbitrage their foolishness.

Jan. 2, 2012, 12:01 a.m. EST
Gold bugs’ unmerry Christmas
Commentary: But radical bugs say they know why
By Peter Brimelow, MarketWatch

NEW YORK (MarketWatch) — Santa brought the gold bugs quite a present last week. It was very big and extremely nasty. But maybe they can send it back.

From the previous Friday’s close to the low on Thursday, the CME February gold contract (GC2G +1.69%) plunged $82.10 or 5.1%. The gold shares, as tracked by the NYSE Arca Gold Bugs Index (XX:HUI +0.59%), were down 6.6% at their worst.

Recoveries into the week’s end enabled gold to finish down only 2.44% and the HUI down 2.54%. But by then, no doubt, most gold bulls were disgustedly drowning their sorrows.

This was the reverse of what was supposed to happen. Thus, on the Friday before Christmas, the Japanese bullion dealer Mitsui remarked: “The gold price has gone up during the period between Christmas and New Year in 8 of the last 9 years (2004 being the exception), by just over 2% on average. If this trend continues, gold would stand around $1,650 by the year’s end.”

Gold had in fact staged a nice $70 rally from the beating it took earlier in the month — a possibility that veteran gold bugs anticipated. (See Dec. 19, 2011, column.)

What happened? The group I like to call the “radical gold bugs” (because they make not merely the traditional inflation argument, but also claim gold’s price has long been artificially repressed by public and private interests) cried foul, of course.

For example, Thursday’s remarks at the website Jesse’s Café Americain referring to “…this obvious bear raid on the paper precious-metals market over past four weeks. … One has to be a bit naive or disingenuous to ignore the blatant bombing of the market with large numbers of contracts for sale during thinly traded markets. This is the not the sort of trading that a profit-seeking trader would do.”

Comment by Cantankerous Intellectual Bomb Thrower©
2012-01-02 15:51:35

I predict many more attempts of various stripes to bring zombie debt back to life in 2012. Any time now, look for similar measures to requalify debt beats for subprime mortage loans.

DECEMBER 31, 2011
Bringing Expired Debt Back to Life

No one was more surprised than Thomas Carpenito with the credit-card invitation that landed in his mailbox earlier this year.

The 27-year-old deli owner from White Plains, N.Y., had about $10,000 in old debts and a credit rating 200 points below “good.” He recalled thinking the post office had delivered the letter to the wrong house.

Far from a mistake, the offer was part of a controversial and growing partnership between debt collectors and banks that profits both. To get the new credit card, Mr. Carpenito agreed to repay $400 on a seven-year-old debt that had expired under New York’s statute of limitations.

“It was totally worth it,” he said. Having no credit cards made Mr. Carpenito feel “like dirt,” he said, especially when out on dates. His new credit card, stamped with the MasterCard Inc. logo, was offered by Jefferson Capital Systems LLC, the debt-collection arm of CompuCredit Holdings Corp., in Atlanta.

Comment by rms
2012-01-02 19:51:40

“Having no credit cards made Mr. Carpenito feel “like dirt,” he said, especially when out on dates.”

Sir, with a FICO score 200 points below “good” you are dirt!

Comment by Prime_Is_Contained
2012-01-03 09:04:40

“It was totally worth it,”

This guy is an idiot. He thinks that he agreed to pay $400 on this old debt, but really I think he just acknowledged the debt legally, and thus reset the clock on collections of the ENTIRE sum of $10K that he owed.

Worth it? Really?? Who would pay $10K to get a CC??

Not to mention if the debt had expired, it would have aged off his credit-report as well, so all he had to do was keep his other obligations current to get a CC without bringing old debt back to life.


Comment by Professor Bear
2012-01-02 19:19:47

I predict the economic picture will remain consistent with the economics profession’s nickname in 2012, which is “the dismal science.” This should play well into the hand of anyone with a fundamentally bearish outlook.

Jan. 2, 2012, 5:39 a.m. EST
PMI data underline euro-zone recession fears
Dec. manufacturing gauge shows fifth month of contraction
By William L. Watts, MarketWatch

FRANKFURT (MarketWatch) — Manufacturing activity across the 17-nation euro zone shrank for a fifth month in December, according to survey-based data released Monday, underlining worries that the sector may have fallen back into recession as the debt crisis deepened.

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