Yet to happen

The Dow dropped a deuce today, despite Bukkake saying something earlier that the “danger of downturn appears to have faded.”

Heh. Mish takes issue with that and makes a list of things have yet to happen:

  • Bigger U.S. bank failures may be coming (FDIC)
  • Monoline Fallout – Citi, Merrill, UBS Facing up to the Monoline (Ambac, MBIA) Losses (Read Karl’s take)
  • $500 Billion Option ARM Crisis Coming Up in ’09
  • A rising unemployment rate. Expect 6% by the end of the year and 7% or higher in 2009-2010
  • Implosion of commercial real estate
  • Rising junk bond defaults
  • Rising numbers of foreclosures and bankruptcies
  • Rising credit card defaults
  • General Worsening of Economic Picture

So much to look forward to!

I would add:

Hedge funds – maybe as much as half of these heavily leveraged leviathans could fail? (Even Buffett’s betting SPX outperforms them over the next 10 years.)

Devaluation of homes may reach 4 Trillion Dollars – perhaps even more. Ever-increasing defaults, lowering prices, building industry doldrums (contractors and suppliers), lower employment, to name just a few affected areas of the economy.

Corn has long been a political football, and is representative of some of this countries worst traits: bad policy, poor stewardship by elected officials. The fuel subsidy for corn is not only wrong, it’s dangerous. By encouraging farmers to supplant other crops (soybeans, barley, hops, et al) in favor of corn, costs rise and the food supply of humans and cattle is compromised. Not to mention as a fuel ‘cornohol’ is crap- it makes a gallon of ‘gas’ more expensive because it actually costs more than petrol to produce and decreases fuel mileage, so more is needed to go the same distance as a gallon of petrol.

The Federal Energy Dept. predicts oil prices will not subside for at least a year – and that means businesses will soon be forced to take drastic measures. Costs and prices of nearly everything purchased by consumers will spike. So the one-two punch of inflation and higher fuel prices means the next decade will look a lot like the 70’s all over again. Invest in bell-bottom futures IIWY.

“To be stupid, and selfish, and to have good health are the three requirements for happiness; though if stupidity is lacking, the others are useless.” -Gustav Flaubert, looking at Ben Bukkake


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