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Shimmy's Top Clients Share Their Perspective on the National Economy
March 24,2009
In the past week, I spoke with my top clients about their intimate and very knowledgable perspectives of the national economy. These are people who are titans in business and politics and have some very informative opinions.

1. Extended period of massive deleveraging by financial institutions (4-5 years).

2. Further GDP contraction

3. Reduced consumer spending

4. Higher (10%+) unemployment through 2010

5. Periodic bear market rallies rolling over to new lows

6. National property market looks ugly. Only really motivated sellers will transact unless place is unique (beauty is in the eye of the beholder/buyer).

7. Every market is different but real estate market will hit bottom in late 2009 (the most optimistic assessment of the people I spoke with)

8. 16 million homes upside down in America. Government stimulus should help 4 million of them.

9. One client just lectured students at MIT and told them that of the various real estate markets he analyzed around the country, the median sales price declined 42% to get the markets going again.

10. The velocity of money, income and spending must increase before the markets hit bottom. All three are still decreasing.

11. Another $1 - $2 trillion in government stimulus needs to be injected then ultimately drained out of the markets.

12. There will be no bounce of a recovery. Instead of a "V" shaped recovery it will be a "U shaped recovery.

13. The stock market is going nowhere for a while. Earnings will be trashed for a year+.

14. Hard assets will not generate a high rate of return. Risk capital will demand very high rates of return. The Obama administration is going to have to deal with risk capital...it is on the sidelines and will eventually have to be dealt with.

15. Smart money is paying down debt and hording cash. There will be an enormous number of buying opportunities for investors, especially in securities and real estate, not equities. Non-performing loans will be bought for 20 cents on the dollar and resold for 60 cents on the dollar.

16. Household income will be flat for the foreseeable future and therefore inflation will not be a problem.

17. Prime will remain at current level into mid/late 2009.

18. US Dollar should show strength based on global problem with money flowing to US Treasury for protection. 5yr curve remains stable and the 30yr may show some increase, but small.

19. Energy is a wild card but since the US has seen $3+ pump prices it won’t shell shock consumers.

20. Current housing inventory is on a rapid decline due to builders not over starting new homes. Fed has jumped in to mortgage back securities and the $8,000 direct tax deduction on 1st time home buyer will give birth to entry level home sales trickling up into the more expensive home priced market.

21. All in all consumers are beginning to realize the sky IS NOT falling in and beginning to take advantage of the purchase opportunities.

22. $1.75 trillion debt for 2008 is a low estimate and it’s sad to see these mammoth corporations continue financial bailout and abuse. The Fed needs to take a hard stance and stop the bailouts.