Just a few short days ago, the Congressional Budget Office (CBO) became the first official D.C. source to open its bomb bay doors and let loose on all of us. The CBO's projections: Instead of falling substantially from $1.4 trillion in 2009 (9.9 percent of GDP), the 2010 deficit would essentially hold steady at $1.35 trillion (9.2 percent of GDP).
The massive 2010 deficit would be followed by another $980 billion deficit in 2011 ... $650 billion in 2012 ... and $539 billion in 2013. Total red ink through 2020: $7,400,000,000,000!
As stunning as those figures are, long-term projections usually UNDERESTIMATE the deficit. Roughly 80 percent of the four-year deficit forecasts issued in the past three decades ultimately proved too optimistic, according to The New York Times.
Politicians love spending what isn't theirs. Why? Those forecasts rely on growth, revenue, and spending projections that don't pass the test of time. Politicians just can't help themselves — pandering, over-borrowing, and overspending is in their nature.
Just consider this: Two years ago, the CBO forecast the 2010 deficit would be $241 billion. Now the CBO is throwing that projection out the window and saying it'll be more than FIVE AND A HALF TIMES AS BIG!
Obama Unleashes Carpet-Bombing Campaign of Red Ink ...
But if you thought the CBO numbers were bad, you should read through the Obama administration's latest budget. It forecasts a whopping $1.6 trillion deficit this year — more than $200 billion above and beyond the CBO's numbers. That would come to 10.6 percent of GDP, the worst in modern time.
What about 2011? Another $1.3 trillion. And the years after that? More of the same. The White House Office of Management and Budget (OMB) is now expecting $8.5 trillion in red ink over the next decade, with the annual deficit NEVER falling below the 3 percent-of-GDP threshold considered fiscally responsible.
It gets worse ... Those projections assume relatively rosy growth — 3.8 percent next year, and more than 4 percent over the following three years. We've only seen a string of 4 percent+ growth readings twice in the past three decades. The projections also include assumptions about taxes and spending discipline that won't pass the test of time. One example: The OMB projects $250 billion in savings from a proposed three-year freeze on a significant chunk of domestic spending. Increases thereafter would be limited to the inflation rate.
I don't know about you, but I think the chance of that happening is somewhere between slim and none! Neither the Democrats nor the Republicans have shown any real spending discipline. There's no reason to assume they'll have a "Eureka!" moment in the middle of the decade. And I'm not even getting into the Social Security- and Medicare-related problems. We've promised trillions in benefits over the coming years that also threaten to blow our nation's balance sheet to smithereens.
Debt, Debt, Debt. And Did I Mention Debt?
U.S. public debt is expected to double in 10 years. Bottom line: A never-ending wave of budget bombs is headed our way in the coming years. That will drive the total U.S. public debt load inexorably higher — from about $9.3 trillion in 2010 to $18.6 trillion by 2020. And the cost of servicing all that debt? It's projected to more than QUADRUPLE from $188 billion to $840 billion!
I'm at a loss for words, folks. These figures are horrendous ... outrageous ... infuriating ... and terrifying all in one.
==================================================================================
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.
Showing posts with label unemployment rises. Show all posts
Showing posts with label unemployment rises. Show all posts
Friday, February 5, 2010
Tuesday, January 5, 2010
The Price of Construction Materials Is About to Soar
Here is a great article I came across by Tom Dyson
If you want to know what's going on in the economy, you need to watch the price of lumber...
Housing is the most important asset class in America. When house prices fall, banks fail, consumers cut back, unemployment rises, and the economy collapses. But when house prices are strong, the economy rebounds.
In other words, the U.S. real estate market is the main pivot in the whole economic mess we're in right now. If you can figure out what's happening in real estate, you can figure out everything else.
Lumber and building materials are the best leading indicators of real estate.
Take the timeline of the current crisis as an example... The lumber price reacted before any other market: Lumber prices peaked in May 2004. The Bloomberg Homebuilders Index peaked in July 2005. The Case-Shiller U.S. Home Price Index peaked in July 2006. The credit crunch started in February 2007, when New Century Financial collapsed. And finally, the S&P 500 peaked in October 2007.
When the recovery comes, I expect it'll show up first in building materials, too...
So what's happening right now in the building materials markets?
Ro-Mac is a $100 million lumberyard near Orlando, Florida. Ro-Mac supplies central Florida's homebuilders and contractors with building materials like 2x4s, rebar concrete, and gypsum wallboards.
I received an e-mail from Ro-Mac's general manager, Don Magruder, last week. Don says several suppliers announced price hikes in December and he expects "a caravan" of further price increases in January.
"My feeling is that the month of December is the calm before the price storm of 2010," he writes. Don advises contractors and builders to be "wary" of entering long-term contracts.
He says supply is the reason prices are going to rise. Manufacturers of building materials have closed plants, fired workers, and sold their inventories. Many have gone out of business altogether. Don calls it "supply destruction." He says the moment demand picks up, there's going to be an instant shortage of materials.
My wife and I are taking advantage of the situation by doing extensive renovations to our home. We don't need new kitchen cabinets, but my wife and I have found such a good deal, we're thinking about having our entire kitchen remodeled. We're also considering a new roof and an upgrade for our air conditioning system. Last month, we had our yard landscaped front and back.
It's hard to say exactly how much we're saving. But given the low price of labor and materials, I bet we're getting at least a 30% discount.
If you're looking to get some work done on your house, now's a great time. But the easiest way to take advantage of this situation is to buy stock in forest-products companies like Weyerhaeuser and Rayonier. They benefit when building material prices rise.
Good investing,
Tom
If you want to know what's going on in the economy, you need to watch the price of lumber...
Housing is the most important asset class in America. When house prices fall, banks fail, consumers cut back, unemployment rises, and the economy collapses. But when house prices are strong, the economy rebounds.
In other words, the U.S. real estate market is the main pivot in the whole economic mess we're in right now. If you can figure out what's happening in real estate, you can figure out everything else.
Lumber and building materials are the best leading indicators of real estate.
Take the timeline of the current crisis as an example... The lumber price reacted before any other market: Lumber prices peaked in May 2004. The Bloomberg Homebuilders Index peaked in July 2005. The Case-Shiller U.S. Home Price Index peaked in July 2006. The credit crunch started in February 2007, when New Century Financial collapsed. And finally, the S&P 500 peaked in October 2007.
When the recovery comes, I expect it'll show up first in building materials, too...
So what's happening right now in the building materials markets?
Ro-Mac is a $100 million lumberyard near Orlando, Florida. Ro-Mac supplies central Florida's homebuilders and contractors with building materials like 2x4s, rebar concrete, and gypsum wallboards.
I received an e-mail from Ro-Mac's general manager, Don Magruder, last week. Don says several suppliers announced price hikes in December and he expects "a caravan" of further price increases in January.
"My feeling is that the month of December is the calm before the price storm of 2010," he writes. Don advises contractors and builders to be "wary" of entering long-term contracts.
He says supply is the reason prices are going to rise. Manufacturers of building materials have closed plants, fired workers, and sold their inventories. Many have gone out of business altogether. Don calls it "supply destruction." He says the moment demand picks up, there's going to be an instant shortage of materials.
My wife and I are taking advantage of the situation by doing extensive renovations to our home. We don't need new kitchen cabinets, but my wife and I have found such a good deal, we're thinking about having our entire kitchen remodeled. We're also considering a new roof and an upgrade for our air conditioning system. Last month, we had our yard landscaped front and back.
It's hard to say exactly how much we're saving. But given the low price of labor and materials, I bet we're getting at least a 30% discount.
If you're looking to get some work done on your house, now's a great time. But the easiest way to take advantage of this situation is to buy stock in forest-products companies like Weyerhaeuser and Rayonier. They benefit when building material prices rise.
Good investing,
Tom
Subscribe to:
Posts (Atom)