Revisiting my predictions for 2008

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At the end of July, I wrote a post of my top ten predictions for the remainder of the year. A third of the way into things, my predictions are looking pretty good…so far. I said:

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  1. Oil prices will dip below $100 before year-end.
  2. Inflation will fall globally.
  3. The Fed will lower rates.
  4. A major financial institution will fail.
  5. 2nd quarter GDP in the U.S. will come in above 1%.
  6. America will need another stimulus package.
  7. The Eurozone will fall into recession.
  8. Britain will enter recession.
  9. A major home builder will bust.
  10. Stock markets will fall.

I’m looking at 6 maybe 7 for 10 right now. Let’s look at each of these predictions in turn.

  1. Oil prices have indeed dipped below $100 with Brent Crude just below that level. WTI is holding just below the $103 level. I can’t say I know where things are headed from here. We have already seen a massive decline. Let’s wait and see. But, put a check here.
  2. Inflation will fall globally. That’ a guarantee given what happened with oil prices. But, will they fall by year’s end? We’ll see. No check.
  3. The Fed will lower rates. Haven’t done so yet. Will they? They will definitely lower rates if things in financial services continue as they have. I anticipate that they will. But, no check.
  4. A major financial institution will fail. Um, yeah: try Fannie and Freddie — otherwise known as the Nightmare on Wall Street. That’s pretty major. Frannie’s implosion was spectacular. However, I can’t say I anticipated it would happen so soon — If I’m honest I’d have to admit I thought it might be a 2009 event. I expected a financial firm to go bust, but I never said it was going to be Frannie first. Even so, this is a still big check for me. And, by the way, don’t count out another big failure.
  5. 2nd quarter GDP in the U.S. will come in above 1%. As it turns out, it was way above 1%. In fact, I would say it was nearly unbelievably so at 3.3%. Regardless, I still get a check for calling this one, but I still question the accuracy of the data.
  6. America will need another stimulus package.
  7. The Eurozone will fall into recession. Apparently, this one is happening as we speak. The European Commission expects Germany, Spain and the UK all to enter recession this year. Ok well, it’s not really a check because no one said that Europe as a whole is in or will be in recession yet. But, I do anticipate that the downturn will be broad enoughto make this a check by year’s end. Let’s compromise and call it a half-check.
  8. Britain will enter recession. According to the EC, this has already happened. Consumer spending in the UK is falling off a cliff right now and the housing sector looks worse than in the US. I anticipate that the UK will have a hard landing as severe as the early 1990s. This is easily a check
  9. A major home builder will bust. WCI Communities declared bankruptcy a while ago. So check. But, what about the remaining big names? I can’t say I have a clue right now. Let’s see how Alt-A defaults go. My thinking is that if Alt-A and prime defaultsrise, home builders may suffer collateral damage and have some liquidity constraints. This could result in another major bankruptcy. I’m not holding my breath though. It may be a 2009 event. But, I do anticipate more major bankruptcies in 2009 in this sector.
  10. Stock markets will fall. Right now, this is true. So I get a check, but just barely. The Dow is up 100 points meaning I am only 20 points away from being wrong. What will happen from here? It all depends on financials. If the financials continue their meltdown, I will be proven right.

So, that’s the story. I still have the outside chance of going ten for ten. For now, my predictions are looking right on the money.

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Ten predictions for 2008

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