Economy is slumping....Now what?

So here is what we have seen in the last week:

The ISM Manufacturing Index hit its lowest level since 1980 (and manufacturing surveys in Europe and China also nosedived).

U.S. consumer confidence fell to a record low in December, as reported Wednesday.

Also Wednesday, the Case-Shiller Index registered a record 18% drop in October vs. year-ago levels, bringing the decline from housing's peak to 25%.



So here are my predictions for 2009:

Continued declines in mortgage rates. Only so many people can refinance and only so many have current values greater than the appraised value that will happen. When many are asked to add equity (ie. invest more $$$ to refinance) many people won't have the cash to do it. I think 4.5% rates on 30 year notes will happen and be quite the norm as the Federal Reserve tries to revive the U.S. Economy

Many people will be looking for work and having a tough time finding it in 2009. I see unemployment going to 10% if the auto companies go belly up. Given that we have now sunk $10-$15 billion into them we'll probably sink another $25 billion into them later, throwing good money after bad.

Will inflation hijack 4.5% interest rates? It is possible that the U.S. dollar could fall more than ever, which could drive inflation through the roof and take interest rates HIGHER vs. lower. We have to borrow $$$ from people to finance our debt and they might charge us (as a country) MORE to get that cash given our slowed growth, higher leverage ratios, etc.

The stock market will continue a downward slide of 15%-20% as EPS estimates for 2009 begin to get ratched downward. I think S&P 670-700 is a very reasonable level for the index. Just my 2 cents. Due your DD there and read/view some of the opinions I've posted here from others over the last few months. Look at other Dan Ross Forecast posts.

Dan Ross
http://DanRoss.info

Gas Tax Coming??? No problem....

This is essentially a user-based tax. Those that travel more and put more wear and tear on the roads pay a higher amount. Now, I think that a bus wears down a road more than a car so the tax needs to be higher on diesel vehicles. I think it is but I am not sure about that.

The bottom line is that every study seems to indicate we have SIGNIFICANTLY underinvested in our countries infrastructure. Our gas taxes are some of the lowest in the industrialized world so why not increase taxes. This is a NO BRAINER tax that people should just suck up and deal with.....and I HATE higher taxes!



Dan Ross
http://www.danross.info/

Severe Market Recession in 2009?

Folks, this guy has been right EVERY step of the way. He screamed "WOLF" 2 years ago and has been right all the way down.

I agree with Roubini re: too much global supply. Demand will fall, which should cause deflationary risks. That is how oil goes from $140 to $44 in 6 months :) Having said that, I think, at some point, that certain commodities will become INFLATIONARY again as supplies get cut off and the U.S. dollar falls. Oil is the most likely to experience a notable REBOUND. It might take until 2010 or 2011 for oil prices to increase at hockey stick prices again (back to $100 +) because all of the oil producing countries need the revenue to finance projects through 2010 at a minimum. Most countries won't cut their spending quick enough so they will need to continue pumping oil at low prices to finance their spending deficits.

Given Middle East deficits, who buys U.S. assets? The asian economies is the answer....which is why I think U.S. stock prices continue to languish for awhile.

"Worst recession in 50 years" per the video below.

Dan Ross