What will the near future hold?

[sprinter]

Fox Business: Gerald Celente Predictions

 

 

All I can say is hope for the best but prepare for the worst.

[Trimdingman]

Fox Business: Gerald Celente Predictions

 

 

All I can say is hope for the best but prepare for the worst.

 

If we end up with a 1930's like scenario, it will be much worse. To-day, many people depend on a false economy for their livelihoods. This consists of make-work jobs created by government agencies. Right now, it doesn't seem so bad, but wait until the government checks run out. The auto industry and all of its supporting businesses grind to a halt because nobody is buying new cars. Steel mills shut down. In Canada, Canwest Global Communications which owns a major TV network is on the brink of bankruptcy. TV stations will go off the air. During the Great Depression, my father would go out and shoot some rabbits to eat. That is not an option now. What happens when all of the supermarkets close? Who is going to feed all of the millions in the cities? This is like Y2K for real. I hope not, but maybe it is.

[Roadtrip]

Fox Business: Gerald Celente Predictions

 

 

All I can say is hope for the best but prepare for the worst.

 

The near-term future and immediate-term future will one day be called "The Great Unwinding" - an era when businesses and individuals realized that they were too over-leveraged.

 

For the most part, businesses will be forced to de-leverage and maintain working capital if they want to continue to operate because of a rising cost of capital. Interest rates will rise because of the risk of default, especially for those companies and institutions that get in line for a federal bail-out (which is a de facto admission of faulty business practices).

 

In an effort to maintain working capital (to meet payrolls and operational needs), businesses will be forced to tighten credit terms with, and enforce collections from, their customers. This will have the negative effect of a reduction in orders. At the same time, businesses will do whatever they can to delay payables, which will have a negative effect on their suppliers' cash flows. Businesses will also do whatever they can to operate more efficiently, which, unfortunately, includes workforce reductions, as well as plant and store closings. In a period of declining sales and profits, combined with the multiplier effect of higher capital costs, businesses will not be able to find a positive net present value in expanding.

 

All of which means more job losses in the short-term, and little hope for job gains in the intermediate-term future.

 

As for individuals, there is no need to discuss the absurd rate of consumption fueled by personal debt. Individuals who have not lived within their means and who have too much debt will face a reckoning - especially those individuals who face job disruptions. And this will have a ripple effect throughout the economy. There will be a strong correlation between rising unemployment rates and rising foreclosure rates with newly unemployed people who secured mortgages whose value was three-to-eight times their annual incomes.

 

It will take years for the real-estate market to recover from all the foreclosures. The housing market will be driven down because of a sagging economy, high unemployment, foreclosed (and untended) properties, and high interest rates (driven by poor credit risk).

 

Just as in the Great Depression, individuals will be forced to assess their desires in terms of wants versus needs - and favor their needs. This bodes poorly for all kinds of industries and sectors, but particularly autos, technology, durable goods, airlines, and leisure and hospitality.

 

There's nothing wrong with businesses taking on debt if they are able to determine that the asset(s) they acquire as a result of the debt they assume will result in profit growth. But individuals rarely experience growth by purchasing "personal assets" whether through debt or by paying cash.

 

In the coming months, one can expect to catch a bargain on used plasma TVs offered by individuals (probably out of a job, wondering how they are going to feed their kids) who are hard up for cash.

 

Someday, many of these people and a bunch of companies will be relatively debt-free, while Uncle Sugar defaults under the burden of Social Security and Medicare.

 

Edited November 15, 2008 by Roadtrip

[jpd80]

Sometimes I wonder whether the world is being run by smart people who are putting us on or by imbeciles who really mean it.

 

-Mark Twain

 

I'm betting on imbecilles.

 

The people who were predicing $200/barrell oil by Christmas will have you believe

that society in USA will unravel in late 2009 - what interesting cooks you have there.

Edited November 15, 2008 by jpd80