patrick.net

Like the cartoon of the little Dutch boy trying to plug too many holes in the dike, Eurozone liquidity and solvency difficulties will get harder for ECB/Germany-France to contain, politically and financially.

As the Voodoo Finance behind our Housing Bubble ignited some of these underlying problems in Europe, deflationary depressionary contagion in Europe in 2011 will mirror effect back to us. This time is different, but there are "some" parallels to what happened in 1931.

Bond market tanks, even treasuries. Interest rates bounce upward quickly after years of being artificially held down. NFL will suck as a major labor dispute causes a strike/lockout. There will be an earthquake in California in 2011. Hold on tight folks.

Housing double dip will cause vertigo in most folks.

Asange commits suicide. (That'll be the "Leaked" report anyway.)
Gas will be taxed in an effort to make Food more affordable.
(Of course the market will respond by doubling the price of anything the human body consumes.)

The Republican majority will get the Democrats and Obama re debate health care and both parties compromise on an even crappier version. (That will be no more affordable, and will give me even less power as to my participation. But somehow make republican politicians and democrats alike beam for photo opps.
It will be touted as bipartisan and loved by everyone but the middle class that has to actually pay for it. )

Housing continues on the same trend it has been on for the last three years. And Bears and Bulls alike will call it a win.

The SBA sees a boom in loans they approve, and by November it is discovered that more than 70% of those loans were fraudulent.

Gas prices peak and crash to under $2.25 by Summer, giving the "Tax gas" movement a Voice.

Portugal and Spain default and get bailed out, largely by China, but with overall better terms than Ireland got screwed with.

No one will pay attention because they'll be too busy obsessing over the Kardashian pregnancy of the month and the silly 300 kilo wedding dress what's her name will be wearing for the latest "wedding of the F'in century'. Prediction #2: the Queen will show up to the spectacle looking like a doughty bag lady, as usual.

General drift to the downside.

More Americans running out of extended unemployment.
More Households getting thrown out of their houses.
More bank failures.

More gridlock in DC, more pressure on state budgets due to the loss of stimulus support they got 2009-2010.

I don't know what the stock market is going to do. Might go up since the tax cuts and stuff will help the general economy -- the 80% of the economy that matters.

I don't know what interest rates are going to do. Might go up towards 5.5% or down towards 4% again.

China's real estate bubble might begin collapsing, or not.

Gas might go over $4.

Not really seeing any sources of hope. Just further conforming to the realities that we avoided 2003-2008.

recession officially ended June 2009 and since Double Dip recessions are pretty rare I do not expect to be different this time.
More slow and steady improvements in 2011. Bears still in denial clinging to the past realization of missed housing bottom wont come in 2012.

People milking unemployment forced back into the workplace. Albeit at lower salaries but as a result average wages will go up.
um. The biggest catalyst to economic recovery will come from lower in unemployment and small business jobs bill that was recently passed.

Stock market should rally much like 2010. Dow 12600 by end of 2011.

Housing will continue to slump, and there are no more significant housing bills on the way. The bill a few weeks ago is probably enough to hold off an outright double dip recession, but 2011 will likely look a lot like 2010.

Also possible in 2011:

1)Eurozone currency crisis that could spill over into a political crisis.
2)Popping of China and Australia property bubbles.
3)Day of reckoning for many states and cities that have been running large deficits.

US bond market collapse? Other than #3 above, no.
US Stock Market? Who knows. It's never been particularly rational.
Commodities higher.
Overall inflation very low.
All sectors but government continue to deleverage.
Interest rates bounce around but remain at historic lows.

Federal and state budgets will be still too difficult to balance. Does that affect the common mass? of course. More services needs to be cut.

education will be privatized

Section 8 and welfare cash handouts will be ended

all invaders will be made to labor on the border fence to repay for their use of American public services, before they go back to their side and wait their turn.

GM will build a 400horse V8 powered, 4,000 lb, RWD, full size family car that will last 20 years and go 100,000 miles before any repairs, and get 25mpg.

ok, I'll be happy with any one of these dreams!

MarkInSF says

Housing will continue to slump, and there are no more significant housing bills on the way. The bill a few weeks ago is probably enough to hold off an outright double dip recession, but 2011 will likely look a lot like 2010.

Looks very likely to me. Especially, since our current Government considers Health insurance it's main tool to create money out of thin air it won't do much to reinflate Housing bubble. Probably just enough to maintain slow decline.

Also possible in 2011:
1)Eurozone currency crisis that could spill over into a political crisis.

2)Popping of China and Australia property bubbles.

3)Day of reckoning for many states and cities that have been running large deficits.

All 3 look very deflationary but may be used as a good pretext to bailouts and printing a lot of money.

US bond market collapse? Other than #3 above, no.

Why not? I think it can unfold much faster than Eurozone crisis. But, of course, may happen much later than in 2011.

US Stock Market? Who knows. It’s never been particularly rational.

Commodities higher.

Overall inflation very low.

All sectors but government continue to deleverage.

Interest rates bounce around but remain at historic lows.

In short, u think printing presses will be slower than natural deflation. Interesting.

toothfairy says

recession officially ended June 2009 and since Double Dip recessions are pretty rare I do not expect to be different this time.

More slow and steady improvements in 2011. Bears still in denial clinging to the past realization of missed housing bottom wont come in 2012.
People milking unemployment forced back into the workplace. Albeit at lower salaries but as a result average wages will go up.

Just explain to me how average can go up as the result of adding more figures on the lower end?

um. The biggest catalyst to economic recovery will come from lower in unemployment and small business jobs bill that was recently passed.
Stock market should rally much like 2010. Dow 12600 by end of 2011.

Yea, right and 2 + 2 will be officially declared 11.

bubblesitter says

Federal and state budgets will be still too difficult to balance. Does that affect the common mass? of course. More services needs to be cut.

Or more money printed. I'm sure our Government won't miss such an opportunity.

E-man says

I think this may come as a surprise to some of the bears, but here are my predictions for 2011.
- Existing home prices in the SF Bay Area as well as nation wide will DECLINE about 3% on an average annual basis in mominal price.
- Unemployment will DROP to 9.3%
- The Dow will END the year at 10,900.
- Gold & Silver will END the year to the downside. I think Gold is currently close to $1,400/oz & Silver is around $30/oz.
Gosh, I hope I’m WRONG about the Dow, but the consumer sentiment is too BULLISH now

Very precise numbers. I see one problem with them. You predict home price decline but by a very low %.
The problem is that in case of such decline keeping it so low will require a lot of new stimuli/bailouts. That means dumping a lot of new money on the economy. Therefore new money supply will exceed natural deflation by a lot. In this case Dow most likely goes up and, for sure, gold and silver will jump.

michaelsch says

toothfairy says

recession officially ended June 2009 and since Double Dip recessions are pretty rare I do not expect to be different this time.
More slow and steady improvements in 2011. Bears still in denial clinging to the past realization of missed housing bottom wont come in 2012.

People milking unemployment forced back into the workplace. Albeit at lower salaries but as a result average wages will go up.

Just explain to me how average can go up as the result of adding more figures on the lower end?

Let's say You have 2 people one making $10 the other unemployed making $0. If person B gets a job making $5. Then the average wage earned by those two people has gone up.

- average housing price will drop 5% from 2010 to 2011
- gold will hit $1500
- mortgage interest rate will hover around 5%
- unemployment will remain the same
- some municipals start to default
- Dow will be flat or a little lower
- Euro to Dollar exchange rate will stay flat
- China to have slower economy growth

michaelsch says

Why not? I think it can unfold much faster than Eurozone crisis. But, of course, may happen much later than in 2011.

The US government is in no danger of default, and won't be for many years. USD does not have the same problems as the Euro at all.

The recent spike in the deficit is due recession related expenses (collapsing revenue, stimulus, etc.), which are a short term problem. Any dollar crisis will be from a failure to deal with long term problems (medicare)

michaelsch says

In short, u think printing presses will be slower than natural deflation. Interesting.

Printing presses are almost meaningless when interest rates are at 0%. A treasury bill, or any other government backed liability, is fungible with the newly printed cash it was exchanged for.

We already had QE1. Japan tried QE several times. What was the effect?

Unless there is a multi-trillion dollar fiscal stimulus at the same time (extremely unlikely with new congress and mood of the public), the actions of the Fed are powerless to stoke inflation.

Holy S**t that was the worst year so far! and OMG it's only getting worse.

or just more of the same slow sucking sound.

"same slow sucking sound" ......... I have a great story that goes along with that line, but I just aint allowed to tell.... dang it!

Bap33 says

“same slow sucking sound” ……… I have a great story that goes along with that line, but I just aint allowed to tell…. dang it!

LOL

Future Cash Buyer says

- average housing price will drop 5% from 2010 to 2011
- gold will hit $1500
- mortgage interest rate will hover around 5%
- unemployment will remain the same
- some municipals start to default
- Dow will be flat or a little lower
- Euro to Dollar exchange rate will stay flat
- China to have slower economy growth

All of the above and higher oil and gas prices.

toothfairy says

michaelsch says

toothfairy says

recession officially ended June 2009 and since Double Dip recessions are pretty rare I do not expect to be different this time.

More slow and steady improvements in 2011. Bears still in denial clinging to the past realization of missed housing bottom wont come in 2012.
People milking unemployment forced back into the workplace. Albeit at lower salaries but as a result average wages will go up.

Just explain to me how average can go up as the result of adding more figures on the lower end?

Let’s say You have 2 people one making $10 the other unemployed making $0. If person B gets a job making $5. Then the average wage earned by those two people has gone up.

0$ of the unemployed does not count as a wage. The average is 10$.
When B gets a job making 5$ it counts and the average now is $7.5.

Nomograph says

Bap33 says

“same slow sucking sound” ……… I have a great story that goes along with that

I hope he treated you well after, maybe bought you dinner or something.
As far as predictions, I’m pretty much in agreement with E-man.

I predict that Nomo will continue to come up with the one-liners and that the world will continue to turn. I also predict that people will continue to blame their problems on whoever occupies the white house.

If I knew the right channels, I would invest $5K in the global leader in design/build projects for desal and reverse osmosis water treatment plants. Someone who is using the methane energy (steam co-gen), as well as the cooling properties (nuke co-gen), as well as the spill-way energy (turbine co-gen) to help off set operating costs.

Storm water run-off will also soon be required to be treated by the Cal State Dept of Water Resources Control Board. This will close the hydro loop completely. And there is a State wide movement to locate and control every "water shed" too. As well as monitor every aquifer used muni, priv, or ag. This is all very smart to monitor, but the obvious end game will be "who really controls the water of "X, Y, Z"... " ... and that will spark a war because whoever controls the water, controls the state, controls the food, controls the people.... maybe .... I think. So, gaining potable municipal supply through desal and full reverse osmosis of waste water will result. I think.

1) desal is an absolute future must in all major metro areas with access to sea water (global and national). The current system of moving surface water to supply major metro's like SF, LA, SD, and even Sac, are going to stop when crops start needing more water because people start needing more food. The aquaduct and those big pipes from Hoover Dam might stop flowing when water gets scarce, or when cities/states go bankrupt.
2) Benificial re-use of treated waste water will someday result in direct use of "sewer - to - consumer" water supply in all major metro areas. This will be a perfect time to combine and use the available energy found in waste water.
3) Methane burns hot and clean and steam makes for clean energy.
4) Nuke energy needs a good cooling supply, and waste water could do that. Doing the cooling before being treated might work really well since it is the solids in water that absord heat. That also may change the state of some of the waste products and aide in treatment(?)
5) Treated water is "lifted" at some point in the process ... that means it will have gravity "energy" available at the exit of the process. Just something as simple as a water wheel could generate the energy for lighting a portion of the plant. Worth doing if the energy is already in place, right?
Treatment plants that are in big metro areas will look like office buildings from the outside. This would be a perfect place to house ALL municipal functions. City hall, Jail, HR, Accounting, whatever else, all inside on big building, where everything takes place.

So, lets find out who the big dog is in this game as a design/build engineer on the global arena and invest. And invest in whoever is the technology supply for such things. Not investment advice .... just a way for me to use you investor guys to find the channels I should look into.

Sorry for the hi-jack. Delete if you wish.

Predictions !

The hype over the Bay Area will continue into 2011 by people (aka vested interest) who bearly lived here over the past 10 years.
They will come up with new and repeat the old one liners and sound bites.

Overall, prices will continue to "recover and correct" to long term mean regardless of the hype. Those who are paying for their inflated home prices/mortgages and not had to worry about being foreclosed will eventually sell at a loss, becuase they have seen similar homes sell for less. No sense continue to overpaying for the mistake they made.

tw, I think you need to adjust that chart with:

if the PTB can keep interest rates artificially low then home prices will be supported above that trend line.

Zlxr says

Notice CA budget shortfall was originally around 20 Billion and now they’re saying something like 28 Billion

Found out yesterday, CA Pension plans are underfunded by some $34B. So tack that on!

thomaswong.1986 says

Zlxr says

Notice CA budget shortfall was originally around 20 Billion and now they’re saying something like 28 Billion

Found out yesterday, CA Pension plans are underfunded by some $34B. So tack that on!

Oh don't worry Thomas. 2011 will be much rosier for CA. We'll be out of the woods. UE rate will drop from 12.4% to just under 6% and those newly employed will pick up the tab for the much needed 6 figure pensions and free health care for life for our govt. servents.

Troy says

tw, I think you need to adjust that chart with:

As your chart correctly indicates interest rates fell from 1990 to mid decade and later to 1997 yet prices continued to decline in CA. And today interest rates fell accordingly from 2009 to today, yet prices had and are still falling.

We will certainly ponder on the relationship of interest rates and prices into 2011.

bubblesitter says

Oh don’t worry Thomas. 2011 will be much rosier for CA. We’ll be out of the woods. UE rate will drop from 12.4% to just under 6% and those newly employed will pick up the tab for the much needed 6 figure pensions and free health care for life for our govt. servents.

As the recent Census indicates, Texas is growing in population as the UE migrate out of CA. UE may fall as you state, but the tax collections in Tx will be higher.

Will see!

Foreclosures to rise from 1.8M in 2010 to 2.1 in 2011.
More inventory headed your way.

Foreclosures rise in Q3 as fewer people get help
Foreclosures spike over summer as fewer people get help lowering mortgage payments

Banks have already sorted through most delinquent borrowers and decided whether to modify their mortgages, federal officials say.

In 2011...

People will stop saying 'two thousand'. It'll be "twenty-eleven".

We will start to see a return to quality goods purchases, with fewer and fewer disposable, cheap things. This is because of rising prices of chinese exports.

Mobile phones will fully displace dedicated music players and consumer-grade GPS units.

DVD and CD sales will more or less end.

A well loved celebrity will die.

A B-list celebrity will die, and everyone will act like they were the best at whatever they did.

A congress member will be involved in a sex scandal.

The notion of 'feature phone' will disappear, and we'll stop using the term 'smartphone'.

A major scientific discovery will be made, and people will widely misinterpret what it means.

Strong anti-chinese sentiments will roll through the country, largely originating from D.C.

Gasoline will return to the $4+ range.

Inflation will pick up, but USD -> Euro and USD -> Yen exchange rates won't change much. USD will decline vs CAD and AUD, and definitely against RMB.

Obama will make an off hand remark that the GOP will latch on to.

Sarah Palin will say something glaringly stupid that the democrats will latch onto.

Sarah Palin, Mitt Romney, and Newt Gingrinch will all announce their candidacy for 2012.

Corporate profits will continue to soar, with Oil companies, tech companies, and banks leading the way.

Facebook, Zynga, and possibly Twitter will IPO, driving silicon valley housing wonks into a tizzy.

Political grandstanding will result in Julian Assange being tried for something, but he'll get off.

Stretch predictions:

Tablet computers and dedicated e-readers will become more widely used for reading than dead trees.

Unemployment will drop a full 2 percentage points.

Kevin I'm going to go out on a limb and agree with your bold prediction of 2pp drop in unemployment.

Actually this article nicely sums up what I feel is in store for 2011
http://www.bloomberg.com/news/2010-12-28/housing-starts-seen-rising-to-three-year-high-with-belated-u-s-jobs-boost.html

toothfairy says

Kevin I’m going to go out on a limb and agree with your bold prediction of 2pp drop in unemployment.
Actually this article nicely sums up what I feel is in store for 2011

http://www.bloomberg.com/news/2010-12-28/housing-starts-seen-rising-to-three-year-high-with-belated-u-s-jobs-boost.html

A lot of mumbling about nothing in that article.

2pp drop in UE? How? Because SOME of 1.4mil unemployed construction workers will maybe find a job? LOL. We have more than 40mil "boomerangs" in USA. Lots of them after some kind of college. They can't get professional jobs, because there are none in this country. (Do you think job will come back from oversees? Hey, it will take several generations of poverty in USA. Or do you think them in BRIC countries will need more managers from USA? Very unlikely.)

"Boomerangs" are constantly off and on some temporary jobs. They supply much of the UE stats. They are moving back to their parents over-sized houses en mass, and are saddled with incredible college loan debt. (11 times higher than it was 12 years ago). Does anyone seriously think these people will start buying new houses any time soon? In meantime millions of boomers will retire and whoever can will try to downsize.

In short, demographics are strongly against housing "recovery". If anything it may create some small niche demands.

you're talking about a long term secular trend which is pretty meaningless when talking about the cyclical economic recovery we're about to have in 2011.

toothfairy says

cyclical economic recovery we’re about to have in 2011

People talking 'cyclical' don't understand what's going on now.

If I may:

This:

http://research.stlouisfed.org/fred2/series/CMDEBT

broke the 'cycle'.

For the past 2 years we've been using this:

http://research.stlouisfed.org/fred2/series/FYGFDPUN

to keep the rubber side down, but it turns out the American people decided last month to see what will happen if we stop gummint spending our children's money now.

cyclical economic recovery my *ss.

toothfairy says

you’re talking about a long term secular trend which is pretty meaningless when talking about the cyclical economic recovery we’re about to have in 2011.

College debt is actually cyclical, of the same nature as housing bubble, and was partially caused by irresponsible policies of Bush.

However you missed my point. It was just about that article that presented tiny factors (tiny even compared with effects of long term secular trends we'll see during 2011) as something that can do a significant fix.

BTW, there is another factor that is likely to increase UE rate especially in CA. That's state and muni crisis. Even now it considerably affects UE rate. The thing is "seasonal" layoffs.

For example, many state and community colleges are reducing classes they offer. Often it works like this: in the past a college had the class offered in all four "semesters" - Fall, Winter, Spring, and Summer. Now they decide to cut on it and to offer it only in Fall and Spring. So, guess what teachers do? They file for unemployment in Winter and Summer.

Expect this kind of seasonal unemployment to spread much more in 2011 as muni financial crisis unfolds.

IMHO there is a good chance of price appreciation of 3-5% in really good school districts. But depends on how much the interest rates rise...

stock market will go through the roof (positive)

housing will crash even further (thats a positive too)

unemployment will grow (negative) - machines can replace many jobs, outsourcing is cheaper.

My biggest worry is government artificially keeping up certain industries afloat. Because once these bubbles burst it won't be fun. Healthcare bubble, education bubble, housing bubble... it will be interesting* times.