Forecast 2010

This has been a trying effort to develop specific predictions for the coming year. For whatever reason, 2009 was much easier to even make predictions, let alone make nearly all good calls:

California indeed delayed its diesel emission standards due to lack of fortitude;
Oil floated at the $60 average for the year; we are today more dependent on foreign oil, not less;
My e-Tran service was cut, and fares were increased;
The announced Chevy Volt price point is above $40,000;
The Big Three are on public life support, too big to fail;
No progress on light rail into Elk Grove; indeed, it's likely farther in the future than before;
EPA granted California its waiver request;
Gold is above $900 an ounce.
We have more troops in Afghanistan, not less, than what we had on Jan 1, 2009.

I did miss the Dow, though. I suppose I'm not as irrationally exuberant as other investors, thinking that slashing costs and payrolls would provide what would have historically been revenue. But, that's what it is. Can't win them all.

This coming year I see as quite chaotic, and as such I don't think I can accurately predict a damn thing, and so I won't try for 2010. I would like to offer much more vague and nebulous predictions. I said that 2009 was to be a year of complacency, and I think overall most people would probably agree with that assessment. My prediction for 2010, however, is one of crisis, not wholly dissimilar to 2008. I believe we are in for a protracted recession that will not clear itself out in 2010. I believe that as we further expose the underlying fundamentals of federal debt, state debt, county debt, municipal debt, and personal debt, as we begin to expire 36-month long unemployment benefits, as we expose a stock market valued not on revenue, and as people begin to realize the extent of the damage, we are in for a long year.

I should say, a long year for many of you.

A debt based consumer growth economy such as ours cannot shake off the financial crisis of the last two years like a bad case of fleas; no, I think they've dug in deep and this will be a long protracted battle to pull them off the dog. We are going to try another round of stimulus sometime in 2010 once we realize that the old efforts weren't at all sufficient in a desperate attempt to get consumers consuming consumables again. They can't. We've got nothing left to pull from except what we're earning, and that's going to go down in 2010. Continued pressures from high unemployment will create a falling wage that isn't conducive to buying shit we don't need with money we don't have. Credit extensions to businesses and individuals will be even tighter in 2010 while we bitch and moan about it -- that's right, we'll bitch and moan that banks are offering credit only to the creditworthy. This will all work to further constrain Our Way Of Life -- to consume more than we should while deferring payment for it.

I see 2010 as the year of the realization that for people like me and all other California public employees:

• Wages are out of line with reality;
• Pensions are out of line with reality;
• Benefits are out of line with reality;
• Retirement age is out of line with reality.

The very first front page headline in the Sacramento Bee for the new year was how state furloughs may be considered illegal based on judicial review...yet another lost opportunity to realize just how deep in the hole we're in, and how unwilling we are to recognize it. I see 2010 as the year this nation can't ignore it any longer and that real and meaningful cuts to state spending will begin. Teachers, police, CALPERS, and public pensions across the nation will be forced into ugly concessions to wiggle out of their half trillion dollars of state and municipal deficits. My benefits will be curtailed for the next year...as they ought to be. My share of medical insurance premiums will rise faster than any wage increase. Health insurance costs will not fall or stay flat for 2010, probably the easiest prediction I'll make for next year.

I will reside in the deflationist camp for 2010, which will lead to a rising dollar and falling commodity prices including equities. Gone are the days of flipping housal units while sitting on a beach, earning twenty percent. I don't see housal unit prices across the nation rising in 2010. I believe that there is so much shadow inventory out there that isn't yet marketed, such that any increase in values will cause more supply to emerge. Foreclosures probably have waned, yes, but the wreckage is still burning. Underwater people can't cash-out re-fi...most of us are up to our eyeballs in debt and can't refinance our way out of it. I see three pages per week in the Elk Grove Citizen with notices of default for the duration of 2010.

Regardless of any published statistics, I see no way out of recession in 2010. While we will likely publish GDP growth, I don't think any of us on Jan 1, 2011 will believe that we've emerged. I don't know how it will shape up -- double-dip, U shaped, whatever -- I see us still mired in recession, trying to dig out from decades of reckless lifestyles, hyperconsumerism, and profligate energy use.

And through it all, through 2010, we will begin to realize just how tenuous our relationships are with one another, just how little most of us Americans relate to each other, how little sense of public good we share, and just how few common values any of us hold. My sister believes that the next generation will have a lowered standard of living. If true, when it rears its head in the form of lower-paying jobs, decreasing social benefits and entitlements and worsening freeways, the sorts of things I predict for 2010 -- will this generation of obsese, over entitled, grand-theft-auto playing thugs really develop the social frameworks necessary to thrive in such a transition?

I don't see it orderly, which is why I predict a coming chaos. It won't be radical, but it will be there in 2010.