Economy Predictions - what are yours?

I personally would put my investable funds into non-U.S. economies. Or funds that invest in 'growing' economies. Oil futures would also be a place to put some funds. Go long enough so that you don't get stung by any short term price movement.

 

My only prediction: Whatever happens will probably be something that nobody anticipated. Unfortunately, this prediction provides no guidance for investment. So I try to stay diversified and invest for the long term, rather than try to use predictions to exploit short-term ups and downs.

Of course, if you regularly predict that the market will go up, or that the market will go down, you'll be right some of the time. But that's not very helpful.

 

I predict it will get very much worse over the next few years, the overall economy will limp along, but with government on the verge of bankruptcy, it literally is, most people don't realize it, baby boomers coming on line, expecting their government promises, the country is going to be in bad shape.

I find it amazing that people aren't up in arms at the government, these last eight years, there has been so much debt added to the already high debt, and the new foreign and domestic spending programs added to that, that our government is real close to spending as much on interest payments, as it does on domestic programs, something has to give.

And I might add, nothing has been taken into account for any kind of future disaster either, we haven't invested in our infrastructure, healthcare, disaster planning, nothing, just spent a LOT of money.

 

This debt has been building up for much longer than 8 years. Unless we can get congress (BOTH parties, not just the Republicans) to reduce spending and quit adding new silly projects, it will just get worse.

Today's favorite pet project is to help the people who are losing their homes. We can conveniently forget that they took loans that don't make sense. And why we need to bail out the companies that bought these loans?

As for the economy, we ought to do OK until 2010. I'm worried that when the tax cuts expire that will hit the economy big time.

 

No it got very bad in 8 years, the government spent 232 years worth of debt in just 8 years, and tacked on a 10 to 20 year war on top of that, spending currently a TRILLION DOLLAR on that alone, and predicted another 2 to 3 TRILLION more. No domestic spending program comes close to that.

We could drop all domestic programs, that would please a lot of Republicans, and use that money for their world conquests, just like the Romans did, how is the Roman Empire doing, haven't heard about them in a long time.

The current bailout is not designed to help anyone except the CEO's of lending institutions, but they are talking about adding even more to "help" out borrowers now.

 

I think about a year from now the economy will begin a brief recovery(by historical standards).

 

There you are Malorn, you might not want to be in the prediction area too much, so far your predictions haven't turned out well. :attention:

 

My predictions on gasoline are much closer than the folks who have been predicting $5 and $10/gallon on here for years.

 

I predict the very rich will get richer, and everyone else will get a little poorer.

Tom

 

Regarding the Boomers-Social Security would have a huge surplus if our elected thieves hadn't been allowed to STEAL funds out of it since Reagan's days. They saw all that xtra money in the SS fund & couldn't bear to keep their criminal hands off of it. I am 57 and I fully expect to get what's coming to me when I hit 62.

If our so called leaders are smart they'll leave the SS fund alone. That's a laugh.

 

That's just business as usual in this country. Rich people are never satisfied.

 

Something that nobody has mentioned yet, that is now and will in the near future have a HUGE effect on our financial system. DERIVATIVES.

Look them up on Wikipedia and you will find that they are private contracts between two counterparties, more specifically, Derivatives are financial instruments whose value changes in response to the changes in underlying variables. The main types of derivatives are futures, forwards, options, and swaps.

This is really boring, right? WATCH OUT. Go to Bank for International Settlements , the web-site for the Bank of International Settlements, look under "statistics" and find derivatives. The known notional value of derivatives in our financial system is shown as of June 2007 to be $516 TRILLION, yes $516 thousand billion. In comparison the total US budget is about $3 trillion.

The problem with these instruments is that the LOSER has to pay, and if they cannot pay the whole house of cards collapses.

The reason all the banks are on the edge of bankruptcy is because they all have large amounts of derivatives, not to mention insurance companies, pension funds and hedge funds. They are being forced to "mark to market" and at the moment it looks like there is no market.

Except now the US Fed has announced that they will accept this garbage as collateral at their book values to save the financial system. Another way to look at this is that they are monetizing bankruptcy with taxpayers' money (debt). It is easy, all they need to do is create money electronically and "lend" it to the troubled banks.

These hundreds of billions of new money they hope will save the financial system. With a huge increase in the supply of $US their value is dropping rapidly. The USDX measures the value of the $US relative to several other currencies. In the mid 1980s it was over 1.5 and now has slipped to below 0.72 and will continue to fall as long as the US debt increases and the amount of $US continues to increase by leaps and bounds.

We can see why huge inflation is already cast into our system. Food and oil prices are surging and will continue to increase with alarming rapidity.

Fifteen years ago there were almost no derivatives. Now the value of these instruments dwarfs our money supply. We are in the middle of a financial experiment for which there is no recovery and no historic precedent.
The only tools the Fed has are interest rates and money "creation". Those tools are hopeless to be effective to solve the problems in our worldwide financial system.

All any of us can do is to reduce or eliminate debt and invest not in paper but in things of lasting value. We will all be witness to some financial earthquakes that none of us has ever seen before.

 

Maybe that's why they are rich.

 

The United States treasury had a surplus when Bill Clinton left office, roughly 7 years and 2 months ago. The moron in the White House has managed to squander the biggest surplus in United States history and build the largest national debt in United States history in very much less than eight years! He has accomplished this unheard-of feat by cutting the taxes on the super-rich, giving obscene amounts of money to his cronies through corrupt contracting practices, and waging an illegal and unwinable war that has made the United States very much less secure than it was before the war and destabilized the entire Middle east.

 

My view is the housing problems are near the bottom already, and the banks have seen the worst already. I think house prices will continue to fall for 18 months then stabilize. Average house prices in the U.S. could drop 15% or more overall before picking up again.

Quarterly results won't be good this quarter and that will pull the market down some (good buying opportunity), then things should begin to pick up in the third quarter. I expect we will end the year about flat with where we were on January 1. The next couple of years should be good for investment returns.

The press loves bad news and that bad news has crimped consumer confidence. Things aren't as bad as the press has indicated, but the impact of bad press is actually making things worse. The drop in the dollar vs other currencies is beneficial to the U.S. and that will begin to show up in quarterly reports by the end of 3rd quarter.

I do expect the price of oil will drop for a while then pick up again. I don't have a crystal ball for how far it will fall. Gas prices may ease a bit but I don't think $4 a gallon average is too far off, nor is $5 a gallon.

$5 a gallon will be a tipping point for the economy as it will have inflationary effects on all goods due to shipping costs. This will cool the economy. So I see some economic challenges 3-4 years out which is where I think we will see $5 a gallon average. The FEDs will have a real challenge on their hands when this happens because they like to reduce interest rates to stimulate the economy. However that is a stimulant for inflation, which is what will cause the economy to droop in the first place. No matter what the FEDs do it won't work. We are seeing a mini version of this now as the FEDs are lowering interest rates to stimulate the economy but they are risking inflation. This effect will be worse when fuel is $5 a gallon.

Baby boomers retiring (like me) will have a negative impact on the market, but that could be offset by younger people investing for their own retirement - if they get the message loud and clear and DO begin to invest. This is critical for the economy. Younger people can't count on social security, Medicare, or pensions. They will be on their own so they must begin to get serious about investing.

The U.S. should have begun to make aggressive moves to become oil independent 10 years ago. Its not too late but it will take 10 years to do something worthwhile. In the meantime we will be strapped to the price of a barrel of oil until we can pull out of that dependency.

Long term outlook for the U.S. in my opinion is we will all have to learn to live with less but it won't be a bad life. We've been living high on the hog for a while and the discrepancies between countries will have to balance out across the developed world - and that means the U.S. population will have to live with some downward adjustment as others like China and India rise.

I'm retiring August 8 at 61 years old. I have been investing for 20 years and have been watching the economy very closely so I could accomplish this early retirement. These are my personal views from my vantage point. I'm investing my hard earned cash with these perspectives in mind. I hope I'm right!

Good question. Thanks.
jd

 

You have neglected to mention the increase in the value of the oil reserves that are owned by his 'benefactors'.... Oil was at something like $35 (I can't bear to get the exact price point; I get too angry) in January, 2001. Depending on where oil closes each day, the value of Mr. mentally below average's benefactors oil holdings has basically tripled. That is called looking out for his friends. When he leaves office, he will be well-cared for.

 

All of the effects you are describing are presently happening with $4.00/gallon gas. It only gets worse when gas is at $5.00/gallon.

 

I agree but an interesting thing happens when gas gets to $5 a gallon. The fixed cost part of a gallon of gas (processing / additives / refining ) is now greater than 50% of the cost of producing the gallon. When the price gets to $5 a gallon the portion of the actual oil begins to be over 50%. So at that point the price of a barrel of oil will be more directly reflected in the price of a gallon of gas. I know it seems like the price of a barrel of oil is now directly reflected at the pump but it isn't. The oil companies are using that common misconception to pull more profit out of their product.

So when we hit $5 a gallon we will have reached an interesting tip point. From that point forward as the price of a barrel increases the inflationary effect on the economy will be more direct than it is at $4.

jd

 

They stole money from Social Security to call it a surplus. In my mind, that is NOT a surplus.

But I agree, the budget has grown too much. I'm amazed how much those people in DC have spent. Too bad the Democrats weren't on board when the balanced budget amendment was being proposed during those fabled Clinton years.