2010 Year End Review Part 1

On December 31, 2009 I posted the following New Year's predictions for 2010. I broke the post into two parts with the prediction (Real Effect) followed by the review (Evidence) Let's review -

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 -

U-3 comes in at 9.8%, U-6 is more notable at 17% and SGS-alt is at roughly 23%
Oooo, a swing and a huge miss. Not a good way to start things off but there is good reason as to why the prediction was inaccurate. People are hiding the facts. The Bureau of Labor Statistics has managed to downplay the severity of  numbers through various methods:

1. Releasing low initial estimates, then quietly revising the numbers upwards the next week. (To instill confidence in the market.)
2. Emphasizing the U-3 data and ignoring the historical U-6 data. Which coincidentally is officially approaching Depression levels.
3. They are totally ignoring the Labor Participation Rate which has individuals becoming not only unemployed, but off of unemployment as well. (No longer being reported in the statistics because they have given up searching)

The stimulus and positive "animal spirits" have plateaued unemployment. For now.

Points awarded (0 of 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 -
October witnessed and explosion in the gold and silver markets with massive gains. Silver is holding at $30 an ounce and gold at $1400. One year ago they were at $18 and $1100 respectively for a massive gain of 67% and 27% YOY. Anyone that had invested in silver would have made some amazing profits for the year.

I would think returns upwards of 25% are an "explosion", especially when all the nay-sayers at the time were talking of precious metals as being in a bubble and actually going down. 
Points awarded (1 of 1)

Real Effect -

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

Evidence -
Prediction achieved in Review I

Points awarded (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 -
Achieved in Review I

On a side note, inflation in commodities is a difficult thing to account for at the moment and definitely affected oil on the back half of 2010 with crude coming in around $90. It appears that it depends on when you catch it as overall, the black gold bounced back and forth between 80 and 90 for most of the year. (Gains AND losses of roughly 13%)

Points awarded (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 -
Achieved in Review I

Points awarded (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 -
One of THE stories of 2010 is the foreclosure mess involving MERS. 6.3 million vacant homes, this one is a slam dunk.

Points awarded (1 of 1)


Total points awarded for Part 1:  (5 of 6) 83% on the first half. Pretty outstanding with the only black eye being a result of shenanigans on behalf of the Obama administration and the Federal Reserve. It's ok, you can't prop it up indefinitely.