8 really, really scary predictions (CNN/money)

[katty]

more: http://money.cnn.com/galleries/2008/fortune/0812/gallery.market_gurus.fortune/index.html

8 really, really scary predictions

Dow 4,000. Food shortages. A bubble in Treasury notes. Fortune spoke to eight of the market's sharpest thinkers and what they had to say about the future is frightening.

Nouriel Roubini Known as Dr. Doom, the NYU economics professor saw the mortgage-related meltdown coming.

We are in the middle of a very severe recession that's going to continue through all of 2009 -the worst U.S. recession in the past 50 years. It's the bursting of a huge leveraged-up credit bubble. There's no going back, and there is no bottom to it. It was excessive in everything from subprime to prime, from credit cards to student loans, from corporate bonds to muni bonds. You name it. And it's all reversing right now in a very, very massive way. At this point it's not just a U.S. recession. All of the advanced economies are at the beginning of a hard landing. And emerging markets, beginning with China, are in a severe slowdown. So we're having a global recession and it's becoming worse.

Things are going to be awful for everyday people. U.S. GDP growth is going to be negative through the end of 2009. And the recovery in 2010 and 2011, if there is one, is going to be so weak - with a growth rate of 1% to 1.5% - that it's going to feel like a recession. I see the unemployment rate peaking at around 9% by 2010. The value of homes has already fallen 25%. In my view, home prices are going to fall by another 15% before bottoming out in 2010.

[Juneboarder]

1. People should be listening to this guy...

[DavidDvorkin]

2. Will I still be able to afford alcohol?

If so, I can make it through this.

[htuttle]

5. You can make it out of potato scraps

Perhaps we need to start thinking like Russians...

[specialed]

6. as long as we...

don't try to print our way out of it with the money presses which would create hyper inflation the current price of a good bottle of whatever will not go up too much. :)

[abq e streeter]

8. and in the immortal words of the Fabulous Furry Freak Brothers:

Dope will get you through times of no money better than money will get you through times of no dope....

[pipi_k]

9. It may get so bad

you'll have to make your own booze.


Get busy building a backyard still/brewery

[Cleita]

3. To tell the truth I think real estate prices need to come down to a reasonable

level so that the average family home is not out of reach of the average working class family. Our way of doing mortgages has to change to back to how they did it in the fifties with lower fixed interest rates. Also, there was the GI bill that allowed returning veterans of war to be able to purchase a home. Right now there is a 2 1/2 acre plot of land behind our property that is going for $500,000. It has no access to water and you can't grow anything on it because the soil is so poor. If they lowered it to $50,000 (all it's worth) my family would probably buy it and keep it undeveloped as part of their land because it has no use otherwise. In the far future perhaps there would be access to water making it more valuable with the possibility of building on it, but not now. The only reason it's priced so high is that it has a view of the ocean way in the distance maybe once a week, when there is no fog bank. This is why there are so many working homeless and renters. They can't own the American dream anymore.

[specialed]

7. House prices should be around

but not over 12 - 14 x the avg wage in any given region and when it goes above that we get what were seeing now. We were seeing 24 to 25 x the avg wage in most regions where the bubbles have popped. These are just basic rules of thumb that can vary some but your right prices have to come down further since the avg is still well above the max thresholds.

[Ikonoklast]

4. Roubini was predicting this mortgage mess for close to five years

before it finally happened, but no one was willing to listen.

I think he was the one that said some of the derivatives were written on the image of a actual mortgage held up to a mirror; there was never an underlying security to leverage.

The pain is just beginning. I see the start of a deflationary spiral that will be extremely difficult to stop.