I've been thinking about 2010 ... about 2009, predictions, meddling, muddling, Real Estate, and Yemen. Happy New Year! I don't know about you, but I am really happy that 2009 is behind US. When Queen Elizabeth II discussed 1992 as her "annus horribilis" (horrible year) -- because of two sons' divorces and a major fire at her home at Windsor Castle -- she captured my feeling about 2009.
What a year that was for not only me, but practically everybody I know.
You see not everyone had two open heart surgeries compounded by a near fatal MRSA infection, but virtually no American household (excepting maybe those of some Wall Street Bankers and defense contractors) got thru the year unscathed. Granted some enjoyed a recapture of their earlier stock holding losses but I fear such gains are illusory and more losses will accrue in 2010 --- but more about that later.
Every prior economic downturn was "fixed" by the FED cutting interest rates and printing money to encourage the populace to borrow and spend money they didn't have, on things they didn't need. This recession/depression was actually caused by such ill sighted policies. So" what did Chairman Bernanke (Time's man of the year) and Treasury Secretary Timmy Geithner do? They kept interest rates at practically zero for the banks, agreed to buy (and warehouse) worthless banking paper investments, and encouraged the populace to borrow more and spend still more on foreign made "stuff." It was a policy of meddling and muddling at best. If this BIG CON actually worked, it would buy more time until the invisible hand of free markets or wartime spending actually fixed things. Despite my doubts and reservations, this lame policy of spin, more debt and perpetual warfare seemed to work.
To stimulate car sales and home sales Uncle $ugar upped the poker ante by escalating the inert value of used cars, and Uncle gave an $8,000 tax credit to first time home buyers. This worked, but the sales began to slow as soon as the incentives expired. Will these and other "freebies from the Potomac" be reactivated, or extended? Time will tell. (I suspect some of both will occur.)
Keep a close eye out for significant developments in the real estate markets in 2010. We shall see a significant increase in "available" properties of both residential and commercial types. "Available" is the politically correct way of saying vacant and for sale (or lease). In the coming weeks we shall learn which retailers made enough cash in the past Christmas season to keep them going in 2010. Significant numbers of alternative A and interest only/negative amortization home loans will be due to reset. Unless the highly favorable initial loan terms are renewed, walk-a-ways and foreclosures can only increase.
I must confess I do not have a clue why the equity stock markets rose 14% to 19 % in 2009. Continued strength will only come from foreign held bucks and those who "believe" we are at the threshold of another BULL market. I can see the Dow trading in a 14,000 to 3,800 range in 2010!
Two certainties for 2010 will be:
(1). an increased US presence in Yemen in the gulf because of the "panty bomber" and the newly discovered energy reserves in this gulf nation, and
(2). economic deterioration in state treasuries will force at least one of the 50 states to seek bankruptcy protection.