The US and world economy in 2008 and 2009

I hate to say my guess...(mainly because it's irrelevant to the real world economic situation). The overall US economy might be in a mild recession for more than a year. Apparently the credit/financial market is now in a rebound for about the next 30 or so days.

Another possible influence is that if the Dems win the White House (AND the majority of the Senate is Dems)...historically the market takes a bit of a nosedive..(perhaps extends the possibilities of recession). I think I am correct there about the historic trend, aren't I folks?

I'll have to ask this very question at work...(Goldman Sachs division)

Wow, Ragman, that's a mouthful. I agree with Mark Anderson that the actual inflation rate is 5 to 6 percent (maybe even higher). We're already inching towards $100 for oil, and foodstuffs are increasing at double-digit rates. Ever look at milk prices lately? Look at all the people using their credit cards at 20 percent interst rates. If that isn't inflation, I don't know anything about the topic.

As for our economy, I don't see much positives in it. China is in bigger trouble than most people realize; they're killing their factory workers with toxins, most of their rivers are polluted, their water supply is shrinking, and their demand for fuel is creating shortages all over the country.

When I look back when the Thai baht got into trouble, the whole world reacted with more than a few coughs. You can bet that when the US coughs, many countries are going to catch a cold - with fever.

I see the housing trouble to last beyond 2009; it not only hurt liquidity, but millions of people losing their homes and ending up paying higher rents, because of supply and demand issues. Millions more families who took out equity during the boom years are now paying on homes worth a lot less. That's inflation. Double-digit increases in premium for health insurance is inflation. More familes are now without savings. Government revenues are going to drop like a lead sinker, and many state and local governments will be laying off by the thousands. They can't operate on a deficit like the feds.

I see more gloom than potential out there for the US economy. We're going to be dragging down some countries already struggling to survive.

I'm looking at a minimum of five years before our country begins to see some daylight; and that'll depend on what our government does about a) taxation, b) their reckless spending, c) the war in Iraq that's costing us some 2.7 billion every week, and d) what they do about health care.

Doesn't look too promising.

Oh yeah, the stock market is going to tank real bad next year.

I'm in agreement with most things that you wrote about EXCEPT..the Stock Market tanking badly.

FWIW...my prediction, as a rank amateur stock-picker, is: after the stock market settles down from the high volatility scenario it's been yanked around by the crisis in the financial/credit markets... say around late January to early March, it will go sideways ..not much diff than now ... say around 13,500-14,000 on DJIA for the next calendar year.

I'll ask at work tomorrow and see what the real experts think.

I like your optimism. Let us know what the "experts" tell you tomorrow.

I believe housing accounts for a big chunk of our economy, and the following news only shows the problems looming in 2008.


New-home sales plunge by 9 percent
By JEANNINE AVERSA, AP Economics Writer
1 hour, 37 minutes ago



WASHINGTON - Sales of new homes plunged last month to their lowest level in more than 12 years, a grim testament to the problems plaguing the housing sector.

Let me expand on my last post. The housing industry includes, but not limited to, realty, financing, all the raw materials to build a home (wood), appliance makers, rugs/carpeting, lighting (wires, globes, plugs, switches), cabinets, bricks, sidewalls, plywood, nails, roofing, paints, stucco, cement, and all the transportation systems that is required to deliver them to the site.

From the AP article above:

Over the last 12 months, new-home sales nationwide have tumbled by 34.4 percent, the biggest annual slide since early 1991, and stark evidence of the painful collapse in the once high-flying housing market.

Bush continues he tired rhetoric about helping our economy; all while he's able to identify the problems for the middle-class and the poor.

Is this a joke, or what?

Mortgage defaults in our area has hit over 50 percent since the same time last year. DANGER AHEAD! We live in one of the very few ZIP codes in our area that's still showing price increases. Amazing!

To what do you attribute this, CI? Is it the ridiculously high prices of the homes? Is this a coincidence that your ZIP Code has such a very high percentage of hi-tech jobs about which we know so well in Silicon Valley? How do you explain an over-heated R.E. market and one that is impervious to bubble bursting? There's always a fool that will pay the price to be near the ocean?

How come there aren't more new industries that are springing up in an area known for creative out-of-the-box thinkers? Is this about jobs...or some other factor?

It's really a big secret that we don't discuss in open company. We want to keep our area from growing like other attractive places in the US.

The San Jose Mercury News publishes a Real Estate Section every Saturday, and shows a chart with ZIP codes; median home prices and sales. Our ZIP code this week shows 0% to 20% price increase, with a 19.4% sales increase. In other parts of Sunnyvale, ZIP code 94086 shows a 52.2% decrease in sales with a median price decrease of 16.4%. In the whole of Santa Clara County, some places have shown 87.8% price increases this week with sales increases of 23.5%. Some places in San Jose have shown price decrases of 29.6% and sales decreases of 50%. We had eight ZIP codes in our area that sold homes over one million (median).

I couldn't begin to figure out why, but if I had to give it a guess, I would say that our area is one of the most attractive close to many of the high tech companies, close to several major hospitals including Stanford, not far to San Francisco, the Pacific Ocean, or the Sierra Nevada Mountains, and with a climate (boring in many ways) to kill for. Never too hot or too cold for long. The biggest disadvantage is the cost of living here is very high. We can survive here, because we don't have any fixed payments on our home or cars.

My wife loves it here.

Ragman, There's an interesting article in today's San Jose Mercury News about Silicon Valley's economy. It seems that the "experts" of higher learnning are saying that our economy will hold its own during the national "recession." The reasoning they gave is that high tech products are still demanded across the globe, and our area's unemployment is the lowest in California. High tech companies continue to add jobs, even as the stock value have dropped over 13 percent.

Also, our area is still looking for high tech workers.

Thanks for your input and opinions!

Yes thanks, CI...that is kind of what I expected, between those great colleges AND those high-tech companies. Software and hardware, are still in high demand, not just here domestically, but worldwide. Cisco, HP, and all those software companies and not to be forgotten -- the video gaming industry. When you add that to the pleasing climate and that pretty Pacific ocean. I used to think it was those Cali- forny beach bunnies that made it irresistible.

wow that matches my top 10 almost exactly. good call once again OG.

ogion, Welcome to a2k. High tech stocks are the future of all economies, so don't let the daily ups and downs upset your goal. In the long term, they'll outperform almost everything else - except, maybe, biotech.

im puttin everything on solar energy, aerogels/solar water vapo, family food production using home based methods, or local communes to provide food for everyone

yeah, phone/laptop mergers, global wi fi, news and global networks/social networking creating a massive re arranging of social concerns, education using global databases, robotics and a.i. (including nanotech)

genetic mastery, healthcare etc..

flat tax in the future for the us i hope.

not to mention games taking off even more, there is an entire generation of gamers out there, outside is just too much trouble for todays youth, especially in poverty stricken areas.

pretty soon kids will live their entires lives online. if my pc didnt break id be a wow-aholic.

i might sound cyncial but my real hopes for the united states and the world are high.

when all people are connected to a global web, and every pc too, there will be an unprecedented consolidation of processing and data capabilities.

a network grows exponentially with every new connection it makes or whatever that quote was. i can picture a dip in human success, due to war famine and disease but it will be overcome easily once robotics make massive labor projects possible. this will happen when robots began to obtain resources and build new robots on their own at which point labor will be made free along with the coming "freeness" of information.

all just guesses though. dont take my word for it lol..

I thought I'd bring this thread back to life to see how our prognostications about our economy stands up to reality.

More economic pain will be suffered by not only Americans, but many around the globe with higher cost of fuel and food.

These higher costs are stretching the best financially managed households, and I'm afraid will exacerbate what's been ailing us for the past year. More defaults on home mortgages, less sales of used and new homes constricted by tighter credit, more banks and lending institutions going bankrupt, and that spiraling into a domino effect onto most businesses. We already see reduced numbers of customers in restaurants and shopping centers even while retailers come out with more sales and special discounts. Even the travel industry is coming out with more special sales on tours, hotels and cruises. Everybody is hurting for business.

More layoffs in the offing, and reduced tax revenues for all government agencies means difficult times ahead for everyone.

I see the stock market losing another 15-20% in equity value over the next couple of years; that hurts most middle-income workers and retirees with 401ks living on fixed income. Many have already borrowed from their retirement funds just to keep their shelter and keep food on the table. More people are looking at working longer before they consider retirement, and that's only if they can hang onto their jobs.

Things are going to get real messy before we see any improvement.

I think Buffet agrees with your forecast, cicerone imposter.



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August 22, 2008
Buffett says economy's troubles will continue
By THE ASSOCIATED PRESS
Filed at 8:20 a.m. ET

OMAHA, Neb. (AP) -- Billionaire investor Warren Buffett said Friday the economy continues to be in a recession, by his definition, and will continue to be for at least several more months.

During a live appearance on CNBC, Buffett said ripples of the credit crunch are continuing to cause problems in financial businesses and the economy.

Earlier this year he said a financial crisis reveals which players have been ''swimming naked,'' because the tide goes out. That picture has worsened along with the crisis.

''We found out that Wall Street has been king of a nudist beach,'' said Buffett, who is chairman and chief executive of Berkshire Hathaway Inc., which is based in Omaha.

Buffett said activity at businesses Berkshire owns, especially ones related to housing construction such as Shaw carpet and Acme Brick, continued to slow during the summer.

He's confident the nation will be doing better five years from now, Buffett said, but the economy could be worse five months from now.

Buffett said the economy is in a recession because most Americans aren't doing as well today as they used to be. The technical definition of a recession most economists use is two consecutive quarters of negative growth in the nation's gross domestic product.

Regarding the nation's credit crunch, Buffett said he believes mortgage giants Fannie Mae and Freddie Mac are too big to fail, but that doesn't mean that all the shareholder equity in those companies can't be wiped out.

''They're looking for help, obviously. And the scale of help is such that I don't think it can come from the private sector,'' Buffett said.

So the Oracle of Omaha predicted that the federal government eventually will have to step in to help because the troubles of Fannie Mae and Freddie Mac seem to be growing and feeding on themselves.

Together the companies hold about half of U.S. mortgage debt and are the largest source of funding for home mortgages. But they are seeing too many defaults. Losses between April and June for the two companies totaled $3.1 billion, and investors fear they will continue to grow.

Buffett and another billionaire investor, Pete Peterson, appeared at a special screening of a new documentary on the nation's debts Thursday in Omaha. The two Nebraska natives were part of a panel discussion after the premiere of ''I.O.U.S.A.'' The film was shown in 358 theaters nationwide.

The film's message is that an economic disaster will befall the nation if the federal government's $53 trillion in debt continue to grow.

Buffett said he doesn't think the situation is as dire as the film portrays.

''I admire the fact they tackled the subject,'' Buffett said. ''I don't agree with many of the conclusions in the movie.''

Berkshire subsidiaries include insurance, clothing, furniture, candy companies, restaurants, natural gas and corporate jet firms. Berkshire also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.

Buffett said Friday he sold nearly two-thirds of Berkshire's 35.6 million shares of Anheuser-Busch Cos. stock because he hadn't been sure Belgian brewer InBev SA's takeover bid of $65 a share would succeed.

''In retrospect, I was wrong to partially sell the holdings,'' Buffett said.

Anheuser agreed in July to a $52 billion takeover bid from InBev.

Berkshire sold Anheuser stock for about $61 or $62 a share, he said. But at the end of June Berkshire still held 13.8 million shares of Anheuser.

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