Thursday, January 01, 2009

Looking Forward to 2009

So it is a new year and with each new year there is a new opportunity for change and improvement. I'm actually guilty of being quite optimistic. This past year, the economy was the main story, hands down. But I'd like to say that I think that things will look better in 2009. And even more than many people, I think that we're going to be quite pleased by about 6 months through 2009, sometime in the summer.

I need to be very clear that I have nothing other than a hope and a prediction, no real solid evidence. It's just my feeling. The amount of wealth destruction that has happened as the global economy has deleveraged is staggering. So, I think that as we begin to add leverage again, we're going to realize that it was not quite as bad as we thought it was.

I'm very specific in why I feel this way. I think that most people want things to go well. That is, I think there's more optimists than pessimists overall. And I think that despite the increased unemployment (nearly 8% last time I checked), that still means that 92% of people are employed. And those 90+% are the people who matter when it comes to getting this economy back on track.

The mentality of many people right now, myself included, is that there is too much risk. Risk exists in whole areas that felt rather safe 6-12 months ago, even if they weren't. Health seemed safer. Jobs seemed safer. The ability to get another job felt more certain. And the price of energy seemed more stable along with prices. In some way, the decrease in gasoline prices has helped, but it has contributed to my increased uncertainty. If it can go down so rapidly, why can't it increase in just the same manner? And when might that happen?

So how to react? Save. Then stop, rethink. Wait. Save more. Save even more. Look around, and save more. That is what people are doing. Reconnecting with family, friends, saving more, consuming less, and refocusing on what they think is important in life -- not stuff. However, eventually, things will get somewhat easier again and those people (myself included) will start to spend again. And once that happens, I think that we'll see an increase in consumer confidence. That is what I think will improve.

Besides that, I think that the changes that a new presidency will bring will also help. More than specifics, just the mentality that things are different will help. Again, perhaps it is just blind optimism, but I think that we're near the bottom of consumer confidence. Here is some interesting info from gallup. And if confidence goes up and people spend more, the economy (including job and stock and housing market) will recover over time. I'm not looking for instant gratification...just an end for this long downtrend.

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