Outlook: 2011 Q1 update

So happy new year, and with that comes new graphs, new outlooks, and hopefully better insight.  Last year was the second year for me, and I learned a lot, and hopefully you did to.  One issue I have noticed is that since these posts come so infrequently, not everyone reads them in a timely manner.  I have looked for a widget to build a email list, but ads and silly stuff come with it, sooo... if you wish, email me and I will build an email list that will be pinged when I post.  Best I can do for now.  Email is patrick14384 (at) gmail.com (sorry the cryptic, but lots of robots rummaging around the web). 

Unemployment. So first change is the unemployment chart, this will be the last time you will see this one from me, as it is too unpredictable with people being dropped as per some formula that I just cannot be bothered to figure out.

Now look at our new chart, this one is a much longer time frame, and I cannot get Excel to show all of the years AND the projection, just gotta love it.  Oh well, so we should continue near flat for the rest of the year, there is no recovery coming for jobs.  I think that topic has been beaten to death in the media, companies are not hiring, and this year should be the year that a fair number of government employees hit the unemployment lines.  Local and state levels mostly, Federal level will follow next year.

So on to inflation.  First note, I have left the old predictions on the charts (except for new charts) as red dashed lines.  New predictions are just like the old, should be obvious once you look.  So on to inflation, I did not do so bad last year, pretty much right on target although the peak was not as high as I expected but we ended the year down.  Again, hyper-inflation is no where to be seen.  For the next 2 years as depicted by the green line, I still do not see any inflation.

So looking back I totally gaffed the call on the stock market.  It looked for a bit that I was just a bit early, but then it turned and set a new high.  This rally is unbelievable, however time is running out.  It will not get back to 14,000, but 12,000 seems reasonable, which is hard to say for me as indicators have a little more room to go up before this gets into the insane area, but we are very close. 

And the other big miss for 2010, Gold.  Just a near vertical rise.  Looks like it is stalling, and it is very hard to believe that it can go much higher, just beware, when it drops, it should drop like a rock.  I looked at the Dow Jones chart leading into 2000, and this vertical rise is steeper than that crazed mania.  This should follow the Dow Jones, so when that drops, look for this to go also, but a bit faster. 

I was expecting more government action with regards to the debt, really thought they would kick in some more cash to folks.  The government is I suspect starting to get a tad bit concerned about its own fiscal house, and so I think we see the pace of the debt piling up decrease slightly, but not significantly.  It will be nearly impossible to get to a balanced budget let alone pay down the debt.  We are almost certainly headed for either default or hyper-inflation.  But not within the next 2 years.

 
Europe is all but screwed now.  Greece's bonds are 10% higher then the German bond, Ireland's fate is also sealed, and Portugal is right on time (note my previous post) in finding itself in trouble with the markets.  And the Fed has now added Belgium to the chart.  Spain however is next, still 6-9 months away, but that will be a serious test for the EU and IMF.  This is the story for 2011, watching one EU country after another get into serious trouble, with Italy probably toppling everything over in 2012.

Credit should level a bit, temporary rest while people think that things are really improving.  When in about a year they realize it is not getting any better, the numbers should continue down again.  Consumers can only hold out hope for so long, and then things will get ugly.  

House prices are projected for another 10% fall, and I can agree with that, although it may accelerate faster near year end.  On this one I did not account for how messed up things were with tracking mortgages and the banks ability to foreclose, nor did I give government intervention its due respect.  I do believe however these problems will not occur again (they will sort out the foreclosures). 

Should be an interesting year, that is for sure!  So for the next 3-6 months overall things should be ok, but 2nd half of this year we all should start feeling more gloomy. This likely will really get going in 2012, but for now, status quo. Again, check that your bank is safe, and start considering drastic measures.  I came very close to closing my 401k, but elected not to.  I do suspect taxes will increase drastically at the end of the year, and that has me and my money worried.  I need to find a safe spot to protect it. You should consider the same also.

Patrick