Daily Archives: January 1, 2011

Pete the Banker: Predictions for 2011. Hint: You’ll Need a Cup.

Pete the Banker Sends along these predictions from the Business Insider Here. 
Despite the dire predictions, however, I believe that in the Residential Real Estate and Real Estate Lending markets are within a few months of the bottom although the correction will likely be at least another ~10%+ on prices, obviously varying by local market. See some of the predictions after the jump.

My suspicion is that the Residential markets will begin to improve next Spring or early/mid Summer which likely won’t save the 2011 volume numbers on either Real Estate sales or mortgage financing volume for the year, but probably suggests a recovery in either late 2011 or 2012. 

Most of the big moves will be down moves. Bonds will not be spared the volatility.

The US will have a full year deficit of 1.4 trillion dollars. This depressing reality will hang on the US economy/markets. Congress will talk about the problem endlessly, but little will be accomplished. By the end of the year the problem will be so acute that belt tightening is put in place for 2013-15. But it will be too late by then.

-QE2 will be the last QE we see. The program will end (on schedule) on 6/30. Perversely, long-term interest rates will rise as long as QE continues. When the program is finished rates will begin a rapid decline. This will not go unnoticed by academia. The result will be that QE will be a disgraced policy that will not be used again for at least five years.

-Brazil will continue to shine as a resource rich country that runs a trade surplus and has low budget deficits. The surprise of the year will be Argentina. Food will be the reason. Argentina’s fortunes will improve with rising wheat and soy prices.

-Obama’s popularity will continue to fall. The legislative “successes” at the end of 2010 will convert to a series of failures. There will be no new stimulus. Portions of the health care legislation will be dialed back. The mandatory participation feature will be found unconstitutional.

-Obama will propose a means test for Social Security in his State of the Union Address. Retirees who are living the high-life (Warren Buffet types) are going to have their SS checks cut to the bone. Any senior with income of $200k will be impacted. The great socialization of Social Security will have begun. The popularity of this program will fall of a cliff.

-Unemployment will not go down. The average for the year will be above 10%. The number of workers who leave the system will rise to 20mm. These workers will find part-time jobs that pay cash. The new day-workers will compete will illegals for employment. Social tensions will be the result.

-Mortgage Gate will die as a headline story. In fact it will go the other way during the year. Increasingly, the problems in real estate will be focused on the fact that there has been too few foreclosures. Contrary to expectation, residential real estate for average priced homes will not decline much further. However, prices for high-end homes will continue to fall. Anything with a price tag of greater than $1mm will be worth 20% less by the end of the year.

-Social unrest will become visible in America in 2011. There will be demonstrations in many major cities. Some will turn violent. Economics will be at the heart of the anger. The frustration that was evident in France in recent years will come to the US.

Tell ’em where you saw it. Http://www.victoriataft.com