See the 13-page report below for my predictions for 2010 and more:
Related Post: 2009 Year in Review
Before I share with you my 2010 predictions, we should first take a look back at the prior year’s predictions and the actual results. The main thing I keep in mind is humility. It is extremely difficult to predict the future in regard to specific targets and time ranges. Instead it is much easier to make general predictions based upon the fundamentals.
This reminds of one of Warren Buffett’s well known quotes:
“In the short term the market is a popularity contest; in the long term it is a weighing machine.”
Essentially the US and the world have avoided Financial Armageddon so far. The government, the Fed, and the Treasury deserve credit for the short term fix. However the main problem is still there: there is more debt than can be serviced. Many of the debts just got moved from the private sector to the public sector (i.e. Privatize the profits and socialize the losses).
“There will be a surplus of government intervention to combat mass unemployment. I expect we get close to 10% unemployment (U3) by year end.”
Right on, December’s unemployment was 10.0% (U3)
“Defaults grow beyond comprehension and models for these debts” (mortgages, credit cards, other loans)
Look at the charts and you’ll see defaults are beyond any models considered accurate just 2 years ago.
“Debt monetization and bail out of the FDIC (which wouldn’t be allowed to fail).”
Had you ever heard of “debt monetization” prior to last year? The Fed has monetized the debt through quantitative easing plus the FDIC was given an unlimited lifeline to additional funds.
“The markets have been in an uptrend since the market low in November around 748 on the S&P. This appears to be a bounce/retrace of the October market crash. A standard 50% rebound would have the S&P peak between 1000-1100. Naturally I expect this rebound to be short lived and for new lows in 2009 as companies report very low earnings.”
Well, much of this was correct, the market did retrace over 50% to the 1100 range but essentially I predicted a fall back to the market lows which never occurred. Thus, this is definitely a miss.
“Economic growth in China turning negative.”
Totally missed this one. Even if we don’t trust the numbers from the Communist government, the growth rate didn’t go negative.
“Unemployment will peak at 8.5%” under the Obama rescue plan
OK, this wasn’t my prediction (it was President Obama’s), but it just shows how clueless politicians are in general about the economy and perhaps that they are willing to say anything to be politically popular.
“The ego has landed.”
“I had to hold my nose and stop those firms from failing.”
Also check out: Favorite Videos of 2009.
Purchasing homes at the trustee sale auction has become increasingly popular throughout 2009 as the real estate markets have firmed.
When there is a big enough discount in the purchase price of a home at the auction vs. its full retail price on MLS, real estate investors will buy the home to either flip (resale) or hold for greater appreciation down the road.
Jim Klinge (aka “Jim the Realtor”) of San Diego interviews Adam Rappoport (aka “SD Realtor”), a realtor and active flipper of trustee sale homes. This is a very frank and honest discussion about the risks and process of investing in trustee sale homes.
Adam Rappoport Interview – Part 1 of 3
Adam Rappoport Interview – Part 2 of 3
Adam Rappoport Interview – Part 3 of 3
There is a lot of mystery and uncertainty about buying a home at the trustee sale: there’s no inspection period, deep pocketed buyers pay all cash to buy the property “as is” and “where is”.
The interview really gets into some insightful and insider details in parts 2 and 3 so make sure to watch all of the videos.
What surprised me the most was how the margins have shrunk this year. Notice Adam mentioned that his target margin was 20% per deal but now it’s down to 15% and the current deal was at 9%.
Another interesting thing is that every property he’s resold this year has had multiple offers because his group priced the home right.
What do you think about this interview? Please comment below.
During our last visit in Scottsdale, Amber and I toured 3 houses purchased at the Maricopa County trustee sale auction in October 2009.
You can watch all 3 videos below.
Related Posts:
Is it possible that the great equity bubble of 2007 could fool the person best positioned to detect it?
Calculated Risk states in his post “A Comment on Fed Chairman Ben Bernanke” that Ben Bernanke misread the real estate bubble as Fed Governor, then as Chairman of the Presidential Council of Economic Advisers, and later as Federal Reserve Chairman.
How can Fed Chairman Ben Bernanke miss the biggest bubble in history? Not only did he have the best education at Harvard, MIT, and Yale, but he also had access to all the data, experience, and team members that came with his powerful positions and titles.
In July 2005 Bernanke said:
“We’ve never had a decline in housing prices on a nationwide basis. What I think is more likely is that house prices will slow, maybe stabilize … I don’t think it’s going to drive the economy too far from its full-employment path, though.”
From this one quote, made at the peak of the boom, we can see two things. First, Ben did not believe that housing prices would fall much if any and that it was not conceivable that prices would fall across the country in all markets. Secondly, any decline in housing prices would not slow the economy much to cause a significant increase in unemployment.
Now, just 4 years later we can see that we had the biggest housing boom (and bust) in history AND that the crash caused us to experience the unemployment unparalleled since the Great Depression.
In this case, a big trend (in asset prices and leverage) caused even the most well trained and experienced economic thinker, who has access to the best data, to get swept up and lose track of the fundamentals.
Why did this happen? Share your opinion by commenting below.
David’s Tweets Mish’s Global Economic Trend Analysis