It's mid-year!
Time for a quick check on the many and varied "
Predictions for 2009" made some six months ago before anyone began talking about "green shoots" and the price of oil was still around $35 a barrel.
My, how things have changed from the despair of last New Years Day...
Or maybe that was just a hangover...
In any event, now half-way through the year, it appears that Armageddon - Part I in 2008 may not necessarily be followed by Part II this year. It looked like Part II there for a while in February and March, but then the skies cleared and people started buying stocks again.
Off we go...
1. Another Bad Year for Housing
Once again, more pain in housing seems inevitable with liar loans and option ARM products reaching their critical years. If it already hasn't, that second home/investment property that seemed like such a good idea back in 2004 will turn into a nightmare in 2009.
As was the case last year, only real estate sales types will be predicting a rebound for home prices in 2009 though home sales will probably make a lasting bottom. Late-2009 and 2010 will be the time to start looking to buy property again, but there will be no need to hurry - contrary to what real estate sales types tell you, prices are not headed back up anytime soon. They may not go too much lower in 2010, but, except for places like Washington D.C. where the bailout business is booming, prices will be mostly flat through 2011 or 2012.
Next year, housing prices will fall another 10 percent nationally, based on the year-over-year change to the 20-city S&P Case Shiller Home Price Index for October 2009 (this report gets released at the end of December and showed an 18 percent decline last week.) It seems that home price declines have to ease up. For example, based on their current trajectory, by the end of next year the median home price in Los Angeles would be below $200,000, down from a high of $550,000 in 2007.
As has been the case for a few years now, saying that home prices will go down is an easy call, however, we've just begun to see how more sales of high-end homes can make median prices rise while actual home prices continue to fall - look for more of that later this year.
The S&P Case Shiller Home Price Index (to be updated tomorrow) has yet to show any signs of slowing down, however, that will likely change by the end of the year. The most recent
report had the 20-city index down 18.7 percent on a year-over-year basis.
2. The Dollar Will Go Down
The trade weighted U.S. dollar rose in 2008, but that was an anomaly. There are many bad currencies in the world (most of them are bad, actually, the pound now probably the worst) but the greenback will have a hard time looking good on a relative basis after big negative GDP numbers are reported along with even bigger job losses.
The source of most of the world's financial market troubles over the last year or so will finally be appreciated by those who've been buying U.S. Treasuries and, despite the best efforts of the big players at the Comex, many of these people will buy gold instead.
By year-end, the U.S. Dollar Index will be at 70, after dipping into the 60s briefly, and economists will again marvel at how the trade deficit is shrinking due to higher U.S. exports, helping the U.S. economy to recover.
They had some even bigger negative numbers for GDP in Europe recently but the dollar has still trended lower during the first half of the year and lots more people were buying gold in the first quarter, though demand has ebbed lately.
The U.S. Dollar Index approached the 90 level in December and then again in March before moving back down, spending the last few weeks at around 80. Tumbling to 70 by the end of the year is a distinct possibility as the greenback almost always falls in the fall.
3. Broad Equity Markets will Rise
The Dow and the S&P 500 Index will gain 10 percent and most investors will be happy about this, not realizing that it would have to repeat this performance for the next four or five years to make up for the losses seen in 2008. It won't.
Foreign stocks will do much better than U.S. stocks - up about 20 percent on average by year end - and stocks in China will rise 30 percent.
