Back in January, I made some predictions for 2009 and now that we’re 6 months into the year (where did those 6 months go?), I thought it would be fun to check up on the predictions and see how I did:
Unemployment tops 10% with real unemployment over 15%
According to the BLS June Report official unemployment is at 9.5% and real unemployment is at 16.5%. In reality, these numbers are probably much higher; after all, the model for new jobs seems completely wrong. The current numbers claim that since February nearly 900,000 jobs have been created. This is very unlikely.
Since we’re not yet over 10% on the headline number, I’ll grade this prediction as “On track”.
Over 30% drop in the major US stock indices
We saw about 25% down and then it bounced back up. I’m convinced it’s a “dead cat bounce” and we’ll see some new lows in equities by the end of the year. When you get down to it, the only way to get out of a recession is to undo the circumstances that caused it. In this case, massive excess credit caused the problem and so far all the government action is increasing the debt load.
Instead we need to see the debt unwinding. The assets need to be marked to market and a bunch of companies and banks need to go into bankruptcy. Propping up failed companies is just delaying the inevitable.
I’ll grade this as “Jury’s still out.”
Deflation, No Hyperinflation
Both the CPI and PPI are trending downwards. The BLS tells us, “Over the last 12 months the index has fallen 1.3 percent.” While the recent numbers have been slightly positive (e.g. 0.1%), the BLS uses a “owner’s equivalent rent” model, which instead of using house prices, it uses the cost to rent the same house. As a result, inflation was understated during the bubble and now deflation is being understated.
Let’s say “On track” for this one as well.
House prices drop over 25%
According to Case Shiller the Top-20 cities are down 18% overall year over year. The graph just recently showed a slight uptick, but we’re still far above home prices that would allow us to issue healthy 36% DTI, 80% LTVÂ loans. I expect to see more drops in house pricing, especially with unemployment rising and down payments becoming necessary again.
I think this prediction is “On track”.
Consumer savings rises to 3%
One year ago the rate was 0% and now it’s 6.9%. This is primarily paying off debt, which, of course, is a form of savings.
Let’s score this “Yup”.
Global unrest rises
Of course, this one is tough to quantify. Six months ago, I said “I expect to see China have significant unrest”. While we haven’t seen “significant” events, we’ve been seeing “small” stuff from time to time including the recent ethnic rioting that has killed over 150 people already.
We’ve also seen some unrest in Honduras and Iran, but I think at best I can say “The jury’s still out” on this one.
Obama’s halo wears off by the end of the summer
Again, this one is tough to quanify. I’ve seen a lot of liberal commentators, who told us that Obama was “The One”, who are now very upset with him for everything from his flip-flops on torture, torture photos, habeas corpus, wiretapping, and indefinite detention, to troop withdrawal from Iraq, bailouts, and his disregard for contract law. Covering this really needs it’s own post, I think. :-)
In general though, I think people who voted for him and are watching what he’s been doing aren’t that happy. Let’s say “Jury’s still out” on this one as well.
Overall, not too bad: 4 predictions are “Yup” or “On Track”, 3 are “Jury’s still out”, and none were wrong so far.
As I said before, these are grim predictions, and it doesn’t really make me that happy to be right. And of course, more than ever, it’s important to be very prudent with money now. Build up savings, get out of debt, and don’t buy things you don’t need.
