As many of you know, I make all of my economic forecasts using my trusty Magic 8-Ball, which is far more reliable than any economist or Wall Street analyst. Click here to see my previous blog post on how my 2009 predictions panned out.
Now for my predictions for 2010.
Do you really think the mortgage foreclosure crisis – which is the root cause of all of our economic woes – is over?
RealtyTrac, a foreclosure information company, estimates there will be as many as 4 million foreclosures in 2010, up from 3.2 million this year.
About $2.5 trillion worth of adjustable rate mortgages will reset between July 2010 and August 2011 RealtyTrac estimates. Many of those homeowners will not be able to refinance because they’ve lost their jobs, so guess what happens, they default.
The good news is that we will very likely see the peak of the foreclosure crisis in 2010. That’s not to say it’s going away in 2011. But I predict it will reach its zenith and taper off by year end.
Now for unemployment. It hit 10.2% in 2009 and eased down to 10%. Few economists alive today can adequately predict the toll that double-digit unemployment takes on the economy over a prolonged period of time. They just haven’t seen it in their careers before.
And unfortunately, we will see very high unemployment and under-employment for the foreseeable future. Remember, we were shipping jobs overseas when the economy was booming. The only hope on the immediate horizon is for more government jobs. But my 8-Ball predicts unemployment will ease only slightly in 2010, if at all, and that it will not fall below 9%.
Guess what else? Oil is going back over $100 a barrel in 2010. This will be driven more by inflation or weakness in the dollar than demand. Remember the last time this happened and everybody started taking about alternative fuels? Well, that boom will be back on.
Bank failures hits 140 in 2009, the most since 1992. I predict we’ll top that figure in 2010. The FDIC has more than 550 banks on its list of problem banks, and that list keeps growing.
The big problem for small, regional banks, of course, is commercial real estate. These banks will have to absorb billions of dollars in commercial real estate losses in 2010. This will be a further drag on the banking system and the economy.
2009 was a great year for the stock market, bouncing off its lows, but it will suffer some pullbacks in 2010, and it may end the year flat to down. Investors will eventually come to realize the economy isn’t really recovering, but just getting trillions of dollars worth of government life support. The push and pull is likely to be highly volatile, though. On the plus side, the Dow could surpass 11,000. On the negative side, the Dow could retest the low it his in 2009 of nearly 6,500.
Gold will surpass $1,350 an ounce. It was up 24% this year, eclipsing $1,100, and I don’t see why it can’t do it again, given that all the problems of the world really haven’t been solved.
Growth in the nation’s Gross Domestic Product – if there is any – will continue to be largely driven by increased government spending. This will continue to give the National Bureau of Economic Research pause to officially declare the recession over.
Voters will not be happy with continued high unemployment and foreclosures, or our nation’s economic progress as a whole. Democrats will lose big in the November election. Too bad the Republicans, who will replace most of those voted out of office, don’t have the solution, either.