I thought your comments on the current conditions on the economy where quite thorough and insight. One point about your 2008 predictions that was pretty interesting was how way of base you were and how you felt that there was going to be an economic recovery, thus staving of a recession. I too was a member of that tribe, and all there was alot of conflicting data and the reality things could have went alot different in 2008 than it did. There was no certain outcome that simply came to fruition for all of us to behold. Chance occured within these pasts few months that really exaberated our economic woes and my opinion. One notable one was the bankruptcy of Lehman Brothers and the systemaic risk that followed. Another, was a complete arrogance and direlection of duty from the SEC to monitor the activies of Hedge Funds and other short sellers who bid down the prices of shares of bewildered companies. Also, the idiocracy of not suspending market to market accounting standards for banks for a temporal period of time. Any one of these events or the combination of all three could have drastically made your predicts alot closer to reality.

In regards to the immigration issue as a potential buttress for the economy and housing situation, I find it interesting to note that immigration rates seem to be down – particularly illegal immigration. I guess our neighbors across the border are finding the sliding U.S. economy to be less than appetizing for job prospects these days. Slim pickings I suppose.

In terms of housing prices…I truly believe there are much more losses to be had. The vast majority of my friends who are home owners have wanted to sell for some time, but are reluctant to do so at current prices. Almost every single one of them are waiting for prices for prices to recover and (believe it or not), return to 2006/2007 levels. That will most certainly not be happening for at least a decade. Their refusal to give in to logical market forces are simply causing a prolonged downturn in the housing market. On the flip side, we have potential home buyers such as myself who are still patiently waiting on the side lines with our wads of down payment money ready to buy a home once prices have dropped another 20%, still convinced that home prices remain grossly inflated. It’s a very interesting stalemate.

I don’t think that oil will stay this low through 2009. With China adding a stimulus package, airlines turning a profit, and SUV’s at low prices, I think that oil will creep up to about $50/barrel in 2009 and stay there for a bit. Then its a slow climb from there.

Inflation is definitely on our side right now.

Politically, a lot of people and businesses are waiting for Obama to take office. If he does invest in education and infrastructure, that will help long-run.

For the not too distant future, the Fed is doing a lot. By targeting long term rates, the Fed has sent tens of thousands of home owners to the re-finance table. And, like yourself, many first time buyers are salivating at the low rates available right now.

In the short run, by propping up the car companies and infusing cash into banks, the markets will slowly gain confidence that the economy is (or has or will soon) hit “bottom” and the billions of dollars sitting on the sidelines and investors will start investing again. Once that happens, net worth’s will immediately rise by a few points and consumers will start to feel better again.

As a direct response to your numbers listed above:

1. I understand why you think this way, but I don’t think that US auto manufacturing is going anywhere.
2. See my thoughts above
3. I agree with some of what you say, but I don’t think it will be as bad. We can lose another million jobs and it will still be O.K., because long term those jobs will come back. Immigration debate?
4. real estate can only go so low. I’m hoping that this spring things will finally have hit bottom and start going flat for a while at least
5. See above
6. this prediction is probably true and very, very sad.

You may indeed be correct on December 31, 2009. Considering how poor and way off base my predictions for 2008 were, I wouldn’t be shocked if my projections for 2009 winded up completely inaccurate as well.

However, I have to take a position one way or another, and somehow my gut instincts tell me that 2009 will be a terrible year financially. There is a dim light at the end of the tunnel, but it likely won’t come until 2010. I just can’t imagine what could possibly suddenly resurrect the housing market and jump start the banks into high gear during a short span of only 12 months.

We are undergoing the perfect storm – the perfect but devastating convergence of numerous factors that has never happened to such an extent before – the collapse of our banking instructions, high unemployment, a very bearish stock market sentiment, reluctant home buyers, even more reluctant home sellers, increasing home foreclosures, freezing credit markets, reduced consumer spending, and the high cost of running several wars overseas. The only thing going for us seems to be relatively low inflation, low gas prices at this point, and the potential Barack Obama messianic pipe dream.

The fact that you are making such statements is an indicator to me that it won’t be as bad as you predict.