Over the past year it's been all about Subprime and the Credit Crunch. I was wondering if any of you have any ideas about what's going to be this year's big story?
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We have, on average, a 0% savings rate which has been negative at times. Consumers have been using credit cards to finance their lifestyle, hoping an increase in the value of their home would offset these expenditures. With the subprime meltdown, this is no longer a possibility. The next year will see a substantial increase in credit card debt and subsequent defaults.
Facebook revalued to junk status with its owners depressed at missing out on selling while it was hot (think MySpace!)
facebook does have 300m in revenue per year...although theyre not cash flow positive. im sure they could get to that though.
i dont think theyll ever be able to deliver on the holy grail of networked advertising with one person imlicitly endorsing another...at the most they might be able to just offer targeted ads a la gmail.
theyre def overvalued like whoa by everybody and msft, but theyre not worth nothing either.
has anyone else seen the latest consumer confidence graph? as one of the better finance blogs i read points out....that is some "pretty impressive cliff diving". given this, and the once accelerating rate of personal bankruptcies that still remains at elevated levels, i think credit card charge-offs and realized losses on HELOCs (home equity lines of credit) are due for some serious headline time.
i agree with the additioanl charge offs in consumer credit. Another big potential problem can be the escalating rates of high yield defaults. They were at historic lows, even into 2007, and so far this year, we've reached last year's nubmer.
I agree with lightsout.
It's hard to say what the buzzword will be in the coming year, but lightsout points out a very probable scenario. The savings rate in the US is just plain nasty and with the recent loss of consumer "wealth", the continual increase in the cost of living and the inability of most Americans to sufficiently plan for financial setbacks and to spend accordingly credit defaults will mostly be the hot topic of the coming year.
I completely agree with the problems regarding the savings rate. I live in the US but always put my money in a savings account in India, where the rate is higher.
Indianbanker, he meant the low propensity of Americans to save, not the rate of interest Americans earn on their savings.
Unless your account is in USD and earning higher interest rates in India (which I highly doubt), then you are not really earning more as the difference in interest rates will be reflected in the currency exchange rates.
Here's my take on what's going to be hot: Energy prices and the move towards clean tech.
counter party risk
Whoever wins the presidency is going to do something retarded before 2009 is over to make the effects of whatever "big story" is underway 10x worse.
Wildly high energy prices, anyone? Surprised no one else has commented on it.
What finace blogs do you read? Anyone else's opinion on what is good is welcome as well.
in this instance I was referring to http://calculatedrisk.blogspot.com/
I also frequent http://www.econbrowser.com/
those two blogs, along w/ the economist online have dedicated tabs in my browser
I rotate most of the other blogs (dealbook, marketbeat, alphaville, etc) and try to stay away from aggregator websites (tho http://bigpicture.typepad.com/ is pretty good i think)
I'd go for commodities/agriculture and emerging markets. The two are linked too, as the commodity speculation is driven by high growth forecasts and unabated demand from china, india, russia etc.
Gas prices skyrocketing towards $7 a gallon and probably, and I hope not, the dollar will no longer be the strongest currency. If that happens, our economy will dip into another depression.
Come on India-Banker, didn't you learn anything in Econ 101?
Interest rate parity doesn't really hold in practice. That's why the carry trade exists.
I think the bigger question is why would you put your savings in a savings account at all? Keep your earnings in 401k/IRA/Roth IRA tax deferred accounts, or at least in a brokerage account. Even if Indian savings accounts have a higher yield, it can't match savings in the markets.
Actually, the carry trade has nothing to do with interest rate parity. Interest rate parity always holds, except in the most capricious of markets where expected domestic established currency returns on foreign currency are questionable. For the past couple of years the Japanese carry trade was widely discussed. Investors weren't putting that low interest money in US risk free assets; there was parity with Japan in most nations’ risk free asset markets. That's the beauty of floating exchange rate regimes. That money was dumped into riskier assets such as equities.
right, don't have any savings. Keep it all in 401k's and other retirement plans, so when you lose your banking job due to a recession and you need to withdraw money until you find your next job, you can get tagged for ordinary income tax + a 10% penalty.
Come on CatMan. Everyone needs some savings. Those retirement plans are for people with cash to invest after they have a cash cushion for rainy days.
CDS meltdowns will be the hot button topic.
the next thing will be and already is Oil..$150/barrel by the end of the summer and $180-200 by the end of the year
deflation. yea, i know...
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