2008, the year of economic disaster ... (bankruptcy, student loan, insurance, 2010)

[Zanman]

We are headed into an economic disaster of unprecedented proportions because a lot of stupid and greedy people borrowed money from stupid and greedy people (who are now flipping burgers) without having the ability to pay it back.

In the first quarter of 2008 the sub-prime re-sets will kick in. At least a million idiots will have to foreclose because they won’t be able to either refinance or meet their new monthly mortgage payment. No doubt crying and weeping politicians will want to spend even more worthless dollars to bail them out, but at some point sanity raises its ugly head.

There may be as many as two million idiots who will lose “their homes” in 2008, according to Moody’s, but nobody knows for sure.

MOD CUT , and while we will be watching around the clock CNN coverage of tearful morons being chucked out of ”their” homes next year you should be shorting the home-builders big-time. Also short Home Depot to a penny-stock; it’s one of the worst managed companies on the planet anyway.

I couldn’t care less if these people have to sleep in their cars or on the street, or if the average house price drops by 50% - which is possible in some markets in Florida, Arizona and California. I also don't care if they or their kids starve. Eventually it's just fewer mouths to feed ...

It gets worse. Europe is already reeling from the fallout of sub-prime. Watch Ireland and England in 2008 especially.

[NewToCA]

It might be a bit of a difficult year, but I think the pain will be substantially less than you anticipate. Overall, it appears a recession may be probable, with a minor uptick in unemployment, but I don't think you'll see anything close to the displacement mentioned in your posting.

[Zanman]

Originally Posted by NewToCA

It might be a bit of a difficult year, but I think the pain will be substantially less than you anticipate. Overall, it appears a recession may be probable, with a minor uptick in unemployment, but I don't think you'll see anything close to the displacement mentioned in your posting.

I would be interested in your definition of "substantially".

We're headed into uncharted waters pal, and the Fed has its hands tied, although they have to ease a point ... and would I be correct in thinking you are long on mid-caps?

[tallrick]

I am known as a "doom and gloom" guy myself, but 2008 has a lot of variables. I for one think that the current mess will be propped up till election time, then the bottom will drop out. A natural disaster or two, or a worldwide panic could change everything though. Just the fact that the Federal Reserve has so much power over this shows the shortsightedness of those who came before us.

[Zanman]

Originally Posted by tallrick

I am known as a "doom and gloom" guy myself, but 2008 has a lot of variables. I for one think that the current mess will be propped up till election time, then the bottom will drop out. A natural disaster or two, or a worldwide panic could change everything though. Just the fact that the Federal Reserve has so much power over this shows the shortsightedness of those who came before us.

I agree it's a difficult play.

Frankly I'm mostly in cash and I don't even trust even the major banks, so I spread around my serious money. The FDIC has about $50 billion but the SIV exposure in the US is already $60 billion ... its an issue since no major US bank has yet collapsed, yet. (I don't know if you've been following the Northern Rock issue in England, but it's sure getting very scary. Watch also AIB in Ireland).

The problem we all face is well what do you do if you are a sensible and intelligent person, for next year?

Wish I knew pal. Even guys like Cramer, who's smart but not that smart, but funny and often wrong. No one knows what's going to happen because there is so much uncertaintly internationally. Nigeria, Venezuala, Iran, Iraq yeah nice stable countries all ... maybe the oil drillers are a bet because lets face it the politicians are mostly talking crap about the future of energy.

So you have to be defensive. Invest in toothpaste and beer.

But I think we're all in for a massive rollor-coaster ride in 2008 ...

[KevK]

I predict that 2008 will be a "slow year" but we will grow none the less. No recession this year BUT we will see inflation begin to creep into the economy and that will worsen as the year goes on possibly resulting in a nasty recession in 2009 or 2010. Gas prices will moderate to about $2.50 a gallon until the summer driving season where they could be about $3.25 to $3.50 a gallon. Because the Saudis favour Republicans, you could see gas prices dip to new lows in the fall of the year just prior to the elections. Maybe even $1.25 a gallon again! But only until the election.

[alleycat]

Predicting the economy is as difficult as predicting the weather next year, maybe more so. I've seen a lot of predictions of doom-and-gloom in my life; most of which fell flat on their face ("Buy gold!", "Real estate prices will drop by 50%."--this in the late 1980;s, "The Japanese will take over the US economy."). Of course, if someone predicts something year-after-year, they may eventually be right. I mean, even the Red Sox eventually won the World Series.

Bookmark this prediction and see how close it was my the end of next year.

[Zanman]

Originally Posted by alleycat

Predicting the economy is as difficult as predicting the weather next year, maybe more so. I've seen a lot of predictions of doom-and-gloom in my life; most of which fell flat on their face ("Buy gold!", "Real estate prices will drop by 50%."--this in the late 1980;s, "The Japanese will take over the US economy."). Of course, if someone predicts something year-after-year, they may eventually be right. I mean, even the Red Sox eventually won the World Series.

Bookmark this prediction and see how close it was my the end of next year.

You make a good point - even a broken clock is right twice a day.

I have almost always been bullish on the US economy, and still am in the long term, but we seem to be headed for an economic "perfect storm" and I think this happens in 2008.

The problem is not just sub-prime. Actually sub-prime is just the "tip of the iceberg" I think, although in 2008 we are going to see lots of teary CNN stories on how Brad and Mildred are getting booted out of "their" home by the big bad bank. There's not much the Fed can do but keep cutting, even though that is problematic down the road.

The real problem is that the average household is in unsustainable debt, especially credit-card debt at outrageous interest rates. Depending on your source the average household credit-card debt is somewhere around $8,000 - $9,000. This may not seem to be a lot of money to you, but for most people it is a fortune. And it is no longer easy to declare bankruptcy since your credit-card debt is no longer automatically wiped out - you still owe.

The economy depends on people continuing to buy stuff, mostly made elsewhere, but at some point, and I think we're nearly there, people look around and say to themselves, "do I really need all this junk?"

As soon as people en masse stop buying junk, on credit, it's time to head for the exit, and you'll see me there.

And by the way friend, I sincerely hope I am completely wrong ...

[FarNorthDallas]

It sure seems like a perfect storm...

The Mortgage Mess (sub-prime, option ARM, cash out refinancing, etc.)
Depreciating home values
Credit card debt, pay day loans, title loans
The price of gas heading up
High student loans folks can't pay back
Inability to file bankruptcy due to tightening rules
The Credit Crunch that started in August
The increased price of groceries
Longer commutes as folks bought homes far away from jobs
The health insurance problem (too expensive, lack of)

Seems like a house of cards.

[Zanman]

Originally Posted by FarNorthDallas

It sure seems like a perfect storm...

The Mortgage Mess (sub-prime, option ARM, cash out refinancing, etc.)
Depreciating home values
Credit card debt, pay day loans, title loans
The price of gas heading up
High student loans folks can't pay back
Inability to file bankruptcy due to tightening rules
The Credit Crunch that started in August
The increased price of groceries
Longer commutes as folks bought homes far away from jobs
The health insurance problem (too expensive, lack of)

Seems like a house of cards.

Well you have made the point entirely. There are some macro issues also ...

We are spending over a billion dollars a day just servicing the debt, while criminals like Bush, Pelosi and Reid squander money at alarming rates (the recent Defense bill had 2049 earmarks!) Add to that the Fed is printing money 24/7, as fast as possible, but they no longer disclose just how much they are printing ...

Some wonder that foreigners are a bit suspicious about the real value of the dollar right?

Of course with an idiot for a president and two corrupt dolts running congress what can you expect. The cretin Bush has added $3.4 TRILLION to the national debt during his disastrous presidency, from $5.7 Trillion to $9.1 Trillion in SEVEN YEARS!

Well I have some money in collectables and some property ... I am considering getting out of the dollar entirely but I don't like to panic, or maybe it's too late to panic. LOL

Maybe I'll just invest in a bottle of decent scotch and a hooker.