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"May you live in interesting times."
Traditional Chinese curse
It's certainly hard to deny that we've been living in
interesting times of late. From the collapse in real estate
prices to the ensuing credit crunch and onward to a near
record fall in stock prices, the times are interesting
indeed. And as we look forward to 2009, we can find yet more
cause for gloom on the horizon. Mortgage delinquencies,
foreclosures, bankruptcies, and unemployment are all
projected to rise in the coming year as the current
recession continues to play itself out.
Fortunately, we can also find a few bright spots.
First, most of those dire economic statistics tell us more
about where we've been than where we're going.
Measures like the unemployment rate, for example, tend to
lag the general direction of the economy, rising only after
the economy has been shrinking for some time and not falling
until long after renewed growth has taken hold. Just as
starlight reaches us only after a long delay -- so that the
twinkling star you observe may well have burned out
centuries ago -- so most economic statistics, arriving as
they do with a great sense of freshness, of nowness, on the
front page of your newspaper, are really telling a story
about where we were many months ago. The bottom line
is this: things will be getting better long before
government statisticians will have anything to say about it.
And sometimes there are little surprises that slip past us
as we avert our eyes from the daily barrage of negative
news. Little things like the fact that the major stock
indexes have risen by more than 20% since November 20. Or
that the fall in oil prices, while triggered by shrinking
demand from a world in recession, nonetheless carries with
it the seeds of renewal. Mortgage rates too are
hitting record lows, with the 30-year fixed rate hitting
5.01%, the lowest since Freddie Mac started surveying
lenders in 1971.
Many economists and market analysts have also started to
brighten their forecasts. Bloomberg and Barron's
surveyed Wall Street's major analysts and found that the
average prediction for the S&P 500 stock index in 2009 was a
23% rise. And the December survey of 50 professional
forecasters by Blue Chip Economic Indicators found the
economists predicting that the economy should bottom out and
begin growing again by July. While it has always been
our position that short-term economic predictions are
problematic at best, these forecasts are based on plausible
scenarios. Of course, most of the optimists are
assuming that the Obama Administration's economic stimulus
plans are going to have a positive impact, something we'll
only know with certainty after the fact.
And speaking of the Obama stimulus package, I was reading
the New York Times this morning and found an interesting
juxtaposition between columnists David Brooks and Paul
Krugman. Brooks opined that the size and (dare I say
it?) audacity of the Obama program was "daring and
impressive stuff" and then went on to say "The conventional
advice for presidents is: focus your energies on a few big
things. Obama just blew the doors off that one." Paul
Krugman, by contrast, worries that there is a crucial gap
between what President-elect Obama is proposing and what the
economy actually needs. He declares that "Mr. Obama's
prescription doesn't live up to his diagnosis." We'll all
have the chance to judge whose was the better assessment as
the year unfolds.
One thing is certain, the coming year will continue to offer
planning opportunities and we'll work hard to manage those
as they arise. These are likely to encompass
everything from ongoing portfolio rebalancing in the face of
rapidly moving markets, to refinancing mortgages and
exploiting tax-planning opportunities that will flow from
new federal legislation. In all of this, we draw inspiration
from the Chinese once more, for whom the symbol for "crisis"
combines both "danger" and "opportunity." Here's to
finding opportunities in the midst of interesting times.
Dave
David B. Yeske, CFP®
YESKE BUIE . . .
Live BigSM
220 Montgomery Street, Suite 900
San Francisco,
CA
94104
(Phone) 415-956-9686
(Toll Free) 800-772-1887
(Fax) 866-549-4990
www.YeBu.com
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