Thursday, September 4, 2008

Slightly Sunnier Outlook

There is a popular joke economists use to break the ice at the beginning of forecasting conferences.....

Q: Why did God create economists?
A: In order to make weather forecasters look good.

Just today I was making light of the recent IATA (International Air Transport Association) 2008 forecast. Which, just 9 months ago was 10.2 billion higher.

This got me to thinking about my own predictions over the last year.

Economy - Last year around this time, I was feeling increasingly queasy about the U.S. economy. I thought we would be in a full blown recession by now, as consumer spending slowed due to less and less HELOC $$ sloshing around. But banks and financials have been slow to respond to the new realities. Of course some will argue that we are in a recession, especially after today's unemployment numbers, but so far the economy has limped along.

Stock Market - I was rather shocked by the new high we hit back in October of last year. Why stocks were riding high (since they are supposed to be forward looking) mystified me. I was thinking we were in store for a 20% "correction" from the peak, which is not too far off from the current situation.

Interest Rates - I figured by fall, with high oil and commodity prices, inflation fears would prod the fed to increase rates. I guestimated that conforming mortgage rates would be around %6.75 by now, which was why I felt a bit pressured to purchase this spring. For a time they were close, but I am delighted to be wrong on this one.

Housing - I predicted that the bottom would hit for the lower end before it did for the higher end, and this seems to be playing out. I also predicted that the high end wouldn't fall as much as the low end, but it is still way too early to tell on that front.

So perhaps I have been overly bearish. Reading housing bubble blogs as a hobby can do that.

I leave you with another classic economist joke....

Three economists were on a hunting trip, and came across a large deer. The first economist fired, but missed, by a yard to the left. The second economist fired, but also missed, by a yard to the right. The third economist didn't fire, but instead shouted in triumph, "We got it! We got it!"

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