Year End Predictions Review - Part 1

On December 31, 2009 I posted the following -

Unemployment
Real Effect -

U3 will hit 11.5 % and could go as high as 15%, the U6 as high as 30%, but the rates will certainly not go down very far, if they go down at all. 

Evidence -
California's at 12.6%, national rate is down to 9.7%. However, the second half promises to be worse than the first because the Census employment workers that were hired will be released and additional layoffs will commence as the Depression deepens. The only possible issue I see with this is workers being excluded because they have become officially discouraged and no longer count towards the statistic.

Points (0 of 1 - Pending 1)

Commodities
Real Effect -

According to economists John Williams and Bob Chapman gold is going to explode, perhaps as high as $7,000 and ounce. This temporary dip down is nothing more than a small technical correction.

Evidence -
Gold has rallied to $1261 and ounce recently. Although an overall rally of 15% is not a bad return on investment thus far it has yet to step into its major potential as the flight to safe capitol has started but not taken full hold yet. Silver has lagged and struggled sideways but has come close to record levels as well.

Points (0 of 1 - Pending 1)


Real Effect -

Food will probably be up 6% and we could possibly hit a scenario where we could physically run out.

Evidence -
Rising demand and reduced supply drove supermarket prices for 16 basic foods up 6.2% in the first quarter of 2010. Nailed in one quarter.

Points (1 of 1)

Real Effect -

Oil is currently at $78.97 and it could go somewhat higher, although I do not believe it will be as volatile as it was in years past. (Unless the Straits of Hormuz gets blocked)

Evidence -
Oil is currently at $77.04 and has fluctuated between $72 - $79 for most of the year so far.
Definitely not the volatility that we are used to over the past decade.

Points (1 of 1)

Commercial Real Estate Collapse
Real Effect -

Is already in progress and gathering steam with the bankruptcy of CIT Group which is tied at the hip with CITI Group. In fact it has already fallen 37 percent in value in the last year and defaults are reaching 16 year highs.

Evidence -

Spending on U.S. nonresidential construction is likely to fall more than 20 percent this year before recovering slightly in 2011, according to a semiannual survey by an architects' trade group.
...
Construction spending on hotels will drop more than 43 percent this year, construction of office buildings will decline almost 30 percent, and retail and industrial categories will be down more than 20 percent, the [American Institute of Architects] said.

I'll go one step further and predict that this "recovering slightly" in 2011 isn't going to happen either.

Points (1 of 1)

Real Estate Collapse
Real Effect -

The second wave of the housing market collapse hits (The less risky ARM-A loans continue to default) and banks have yet to start unloading their “shadow inventory” in an attempt to stay solvent. I believe this is already underway as we see-

Evidence -

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending July 9, 2010.

On an unadjusted basis, the Index decreased 12.6 percent compared with the previous week.

The Refinance Index decreased 2.9 percent from the previous week and the seasonally adjusted Purchase Index decreased 3.1 percent from one week earlier. This was the lowest Purchase Index observed in the survey since December 1996.

We have had a nice little plateau for the last few months in housing prices, however now the plunge starts again in earnest as the tax incentives end.

Points (1 of 1)


Total Points for Part 1:  ( 4 of 6 with 2 outstanding)