Fourth Quarter Saw Biggest GDP Decline in 26 Years
NEW YORK (CNNMoney.com) — The U.S. economy suffered its biggest slowdown in 26 years in the last three months of 2008, according to the government’s first reading about the fourth quarter released Friday. Gross domestic product, the broadest measure of the nation’s economic activity, fell at an annual rate of 3.8% in the fourth quarter,…
Wow, chicken is on the bear side of what. (Anthropologists 1000 years from know are going to have a hard time reconstructing early 21st century English from that little shard of a sentence.)
Anyway, glad to see lots of takers on my challenge.
This will be an interesting thread to look at in a year! Here are my predictions:
-Unemployment: 12% nationally, 9% NYC
-S&P: 1,000
-Dow: 9,600
-Case-Schiller
-Going price of a Carroll Gardens brownstone: $1.4M, about 20-25% down from peak
-Going price of a new Williamsburg high rise 2 BR 1100 sf condo: 500K, 40% off from peak
As always in real estate, prices will be block by block, neighborhood by neighborhood. The super high end in Manhattan (10M +) will be down by 50% or more, condos or bronstones in great neighborhoods will be down 10-20%, overbuilt and God-awful hoods will get spanked ie. Williamsburg and South “slope” condos should be down 40-45%.
– GDP: mmm slow growth, out of recession, but not with a bang.
etc.
Plus specific recommendations as to what investors should do, or even better, what you plan to do: I’m about 50% in, and will be back fully in the market by Spring/Summer 2009. I will sell my condo in Manhattan and buy a brownstone somewhere in Brooklyn, or rent until I find something I like.
northsloper – I am certainly not arguing with your premise or conclusions, but the finance industry is, was and will likely to be one of the highest paid industries in this (and virtually all) societies. [its where the $ literally IS].
Will the changes (business, tax, regulation, etc…) coming have a profound effect on NYC – no doubt; but Whuh seems to be saying that rich bankers are a thing of the past and I am saying that is ridiculous (this time is no different) all we will see (in our lifetimes assuming no revolution, plague, or mass extinction/war/terrorist attack) is a smaller number of less rich bankers, traders etc….
Question for fsrg–
The idea that brownstone/apt pricing moves together in neighborhoods makes sense on the surface, but I do wonder if Brooklyn Brownstone neighborhoods are somewhat different in that there’s been an unprecedented amount of condo construction/conversion in the past five years, much of it sub-par. I can see pricing for say, pre-war apts moving in sync with townhouses, but what about this newer crap? I imagine a huge amount will become rentals sooner rather than later, but what about the rest?
Thanks.
“It doesn’t matter if it stays there or not. You reevaluate your positions all the time. If it looks like it might stay or go higher GIVEN THE ECONOMIC NUMBERS AT THAT POINT, then you stay.
the chicken….what are you going to do in the mean time?? If you’re short now and it does go to 11,000 then YOU are screwed.”
DIBS, it’s not like I’m a permabear. We’re both in the hedge fund industry so you know about exposure caps, sector allocation, etc to limit downside risk.
As Warren Buffet likes to say, shorting stocks is an awfully hard way to make a living. We have had a period of 2 years (and I think a couple of years more) where it has gotten very easy to make a living shorting. When I think it’s all in the price then I’ll start buying again.
“As for this being the last round of bonuses and i-banking being finished – mostly wrong. Will compensation fall dramatically in these down markets – yup, but once deals start happening again, all that is going to happen long-run is that compensation terms will change.”
In the long run I think Lehman Brothers, Bear Sterns, and Merrill Lynch won’t be giving out too much compensation.
Whether or not the actual compensation associated with certain job titles changes is something that is not entirely clear, but I think two things are clear:
1. There will be fewer jobs available in the finance industry.
2. The finance industry will be getting some new government regulations.
The first of those *should* increase competition for jobs, which as all good wall street capitalists know, should push down salaries.
The second will reduce the profitability of the overall industry (by restricting leverage and use of unregulated financial instruments). Less profits = less compensation.
The New York area specifically and the US in general have put way too much money and brain power into the finance industry. It’s time for our money and our brains to go somewhere more productive.
to slopefarm:
“What are your numbers, chicken? If you say 10,999 and 1,099, I would put you on team bull. So what’s your call?”
Dow Jones 5,500
S&P500 550
bearish enough for you?
Very well said, fsrg.
Whuh – no such thing as Stagdeflation; deflation is a natural result of massive economic stagnation – the reason why stagflation gets its own term is because it is a macro-economic annomoly.
and yes of course the number is going higher but it still wont reach ’82 levels this qtr and so when you consider the market/social/political events of the last 6mo – this decline is absolutely GOOD news and far below forecasts. – Which you are correct about – nearly worthless since NO ONE KNOWS.
As for this being the last round of bonuses and i-banking being finished – mostly wrong. Will compensation fall dramatically in these down markets – yup, but once deals start happening again, all that is going to happen long-run is that compensation terms will change. Salaries will go up, bonuses will go down (and be longer term) and for people in sales jobs the term bonus will be changed to “commission.”
Companies are still going to be merging, issuing stock, debt etc, Governments will still be issuing debt (more than ever) and all these securities are still going to be traded in a secondary market. There will be plenty of business in the future – albeit maybe not as lucrative (but still very high). This time is NOT different – it never is…..
Finally your comments calling bankers – “criminally venal” is just stupid….95% of all bankers, traders on Wall St. had no particular say in how they were compensated. If someone offered you millions of dollars to do your job, I’m sure you’d take it as well – and soon tens of thousands of others would be flowing into your industry.