Business Predictions for 2009
Home prices are dropping faster than a coin dropped from the Empire State building, while oil prices are going stratospheric.
Does it take a genius to realise that this trend is going to last for quite a while ( at least till the beginning of 2009 ? )
Basis - Home prices are dropping because finance companies were charging exorbitant interest rates, and homeowners who are unable to keep up with these exorbitant interest rates are forced to sell.
When will the property market bottom out ?
The prices of property will bottom out once the banks and finance companies are able to come clean on their losses due to bad debts, declare those losses and make the appropriate corrections. Once that happens, the chain of events will see the property market stabilise and that would be an appropriate time for any home-buyer to maybe take a look at some properties he may be interested in. When will this happen ? Probably sometime in the fourth quarter of 2008.
As for oil prices, oil producers blame the market situation, claiming demand and supply has driven the prices up. Supply and demand HAS driven prices up because oil producers have severely limited their production numbers, to intentionally drive oil prices up. How is this affecting you ? Check out how much the price of gasoline has risen at your local pump over the last 12 months. Will it go higher ? You bet. Alternative energy sources are nowhere in sight, and nowhere near to replacing coal and oil. This will mean that everything that utilises oil products, eg. gasoline, energy for heating, transport, all that is going to cost a whole lot more. How much more ? Project your household costs to rise at least twofold over the next two years.
And the big question, is the US economy going to collapse ?
It will not, not if the Fed play their cards right. The US is the biggest consumer market in the world. The US also potentially has the largest agricultural output in the world. Contrast that to the Middle East, which is rich in oil, but has little arable land and little agriculture to speak of, compared to producers like US and China.
Given that the world potentially faces a food shortage over the next few decades, food prices will rise, and net exporters like the US, which produce wheat and potatoes by the millions of tonnes, will do well.