Monday, January 2, 2012

These Economic Predictions Will Bowl You Over

Hey my 2011 calendar just ran out of days and the Spud Bowl and Fight Boredom Bowl are over, so it must be the start of a brand new year.  Last year I made my “Economic Bowl Picks” versus the picks of my economic expert panel (the average of my seven favorite economists whose forecasts are presented by the Wall Street Journal).  Here is how I did against the panel (please note that the actual numbers are current estimates, but should not affect the final results):

CPI  (Inflation)
Housing Starts
Crude Oil  Price

Officially I won three to two, but there is no room for bragging when my GDP and Housing Starts forecasts were so bad.  The economy spurted after an early surge and took until the end of the year to get going again.  I erroneously thought the housing market would begin to recover after hitting bottom.  Instead it scraped along the ground for the entire year.

Here are the 2012 Economic Bowl Picks:

The GDP Bowl
Richmond Recovery vs. St. Louis Snails

Line: Snails by 2.3% (The line is the average of the expert panel forecasts)
The economy has some momentum going into 2012. However most economists are predicting slower growth in Q1 and Q2, but I haven’t read a good explanation why.  The Model T (which is based on commercial transportation factors) indicates growth of more than 3%; however the Model T Junior (based on total transportation factors) says that we are entering a recession.  The growth this year will be uneven, but I think we can do better than 2011.  My Pick: Recovery by 3.0%

The CPI Bowl (Consumer Price Index)
Boston Bouncers vs. Louisville Lows

Line: Lows by 1.8%
Most commodity prices have recently moderated, so inflation is expected to be lower than last year.  I agree with the experts.  My pick: Lows by 2.1%.

The Unemployment Bowl
Portland Paychecks vs. Kansas City Cutters

Line: Even at 8.6% (year-end)
This one is very tricky because the unemployment rate actually rises at the beginning of a recovery as thousands of people reenter the workforce.  I expect the unemployment rate to bounce all over the place this year.  However the employment market is better than most economists believe.  One of my colleagues was downsized in late 2008 and was unemployed for 13 months.  Recently he had to reenter the job market and it took him only four weeks to find a job.  Even though the unemployment rate may reach 9% again, there will be enough new jobs by the end of the year to drive the rate down.  My Pick: Paychecks by 8.2%

Housing Starts Bowl
San Diego Starters vs. Denver Dirt Piles

Line: Dirt Piles by 674,000 Starts

The housing market is showing good progress at the end of 2011.  However economists do not think this will continue.  Housing prices are still depressed and this is supposed to restrict housing starts.  Things are still so disjointed that I’m not sure how much prices of existing homes are impacting starts.  I believe the recovery in the housing market may have started in Q4, 2011 and will continue (although slowly) throughout 2012.  My Pick: Starters by 720,000.
Price of Crude Bowl
Fresno Frackers vs. Libya Liberators
Line: Liberators by $94.50 (year-end)

(I love the name Fresno Frackers because they wouldn’t frack in California if it was gold that could be extracted)
This is the most difficult “game” to predict.  World demand, the continuing Arab Spring, an expected stronger dollar, Iranian issues and increased Libya supply will move prices significantly.  I don’t think we can make it through 2012 without someone dropping a few bombs in Iran (Instead of sanctions we should threaten to send them Kim Kardashian). I think Iran will be the most volatile place in 2012.  They are overplaying their hand and I think the “Arab Spring” could reignite there this year.    The barrel price will fluctuate between $80 and $110 during the year.  My Pick: Frackers by $101.

Stock Market Prediction:
In my last post I told you that the Model T (last December) said the stock market would peak around 1400 and it peaked at 1370.  If I knew that I was going to be that close, I would have been more precise in the forecast!

The stock market should be volatile again this year as the European financial crisis get worked out, the Iranians get worked up and Obamacare either gets thrown out (maybe with Obama) or gets cemented.  In addition will the new supreme, fearless, bad haired, commander in Korea spend his time stirring things up or just playing video games? Should we call him the “Supreme Kidmander”?
My Pick:  The Model T says the S&P will reach 1435 in 2012.  This is consistent with several experts’ forecasts which use models way more sophisticated than mine.  The good news is the stock market should peak in Q4 and be able to better hold its gains, unlike 2011.

Buy Low and Sell High everybody.  Hope your 2012 is prosperous!

1 comment:

  1. It doesn't actually mean that when people predicted and has their data prepared, it will definitely happen. They are just basis of what we could expect to happen or not in the housing market, not to totally rely on it. new york real estate ce