Another crash in 2012? Any thoughts?

User Forum Topic
Submitted by masayako on January 8, 2012 - 11:44pm

For Stock market, do you guys think there will be another crash in 2012 like the one we had in 2008?

The public is crazy about Dec 21, 12 Mayan Calendar etc... Any thoughts?

Submitted by flu on January 9, 2012 - 12:36am.

Are you serious about superstition?

1) Obama cant afford one during election year.

2) Banks are going to need a way to make money. They are going to be underwriting like crazy and pushing those crazy ipos.

3) The "fad" in 2012 will be social media...All these social media will go nuts, as soon a facebook ipo's.

Don't believe me? Just follow the dotted line.
LinkedIn, Angie's List, Groupon (the next WebVan imho), Zygna, Pandora, even here in SD: ActiveNetwork

4) Follow the hiring trends: hiring has picked up quite a bit in bay area.

I do have one prediction. We are going to see defense budgets shrink...And that's going to end up spoiling the economic recovery in Southern California...The Northern CA economy will probably do better than us SoCal for the next few years.

Submitted by CA renter on January 9, 2012 - 4:46am.

Though things on the ground appear to be picking up or at least not getting much worse, the debt issues around the world will not go away on their own.

Whether the downturn/recession/depression happens in one swift movement or if it happens as a slow, grinding, painful process over many years is anybody's guess. Nobody knows, but either way, it will be painful. Personally, I hope we finally get some common sense leadership that will allow us to get through this more quickly.

Submitted by scaredyclassic on January 9, 2012 - 8:46am.

Agree that election year is not the year for maelstrom. 2013 makes more sense... 13... Unlucky... 2013....get it?

Submitted by Huckleberry on January 9, 2012 - 10:24am.

flu wrote:
I do have one prediction. We are going to see defense budgets shrink...And that's going to end up spoiling the economic recovery in Southern California...The Northern CA economy will probably do better than us SoCal for the next few years.

I have been giving this serious thought over the past six months and wondering what the impact will be on home prices in coastal SD (west of 5 in PB, OB, Solana Beach, Del Mar).

I do know when the defense budget was significantly scaled back here (in the early 90's I think), it had a profoundly negative impact on house prices, even in the coastal neighborhoods.

Is the defense budget going to have a direct and negative impact on employment here and what percentage (in unemployment terms) would this look like?

Any predictions what's going to happen to house valuations this time around? Down another 10%, 20% 30%, or nominal impact?

Submitted by sdrealtor on January 9, 2012 - 10:47am.

Nominal. In the early 90's this was still mostly a navy and tourist destination. Far more diverse economy now with telecom, biotech and tech industries strongly entrenched here

Submitted by AN on January 9, 2012 - 10:52am.

This is anecdotal, but my friend's parents are selling their 4 houses in the bay and retiring in SD. I ask him why and he said because of the weather and there are a lot more things to do here if you're an outdoor type of people. I don't know how many of those people are out there, but I think the timing is ripe for these people to start retiring with their riches in SD. There must be more than a few who are approaching retirement in the bay who seeks more temperate weather and have the $ to move here.

Submitted by poorgradstudent on January 9, 2012 - 11:05am.

Short answer: No, there will not be another crash like 2008 in 2012.

Longer answer: I don't think many intelligent people, those who actually have or manage real amounts of assets, believe in any of that Mayan Calendar hocus-pocus.

Asset values simply aren't as inflated as they were in 2008. It's entirely plausible we'll see a 5% correction in the stock market at some point in 2012, and the major indexes could end the year down or flat. But the odds of another major crash are quite slim. Obviously there's always a chance of some major, unexpected event like the Japan Tsunamis or worse, but you can't plan for those.

Submitted by harvey on January 9, 2012 - 11:09am.

If Y2K didn't spook the market, there's no way the Mayan Calendar is going to spook the market.

And why bother selling if the world is going to end anyway?

Submitted by SD Realtor on January 9, 2012 - 11:18am.

As I have posted before, I believe this will be a fairly phenomenal year with respect to the programs we will see implemented in order to stimulate the housing market. For better or worse it is a bit ironic that they will be implemented in an election year. We have already seen rumblings about them. Among them, and not limited to them I think they will include:

- A principal reduction program. This is not new and has already been in place. I believe we will see it ramp up.

- An investor incentive program for purchase of REO inventory for investment property. This could include a reduction in cap gains tax (cap gains from rental income for cash flowing properties?) as well as a shorter depreciation period (from the current one which is 27 years?)

- 100% financing offered by Fannie for new purchases (non recourse).

- Allowable Fannie refinancing for pretty much any and all properties at current market rates, (4.2%) REGARDLESS of what your property is worth and REGARDLESS of whether you are underwater or not. If you have a home worth 450k and you have a balance of 625k then you get a full 625k refi at current rates as long as you are current on your loan.

*****************************************************

I think these factors in conjunction with rock bottom rates will produce a fairly robust market overall with variances in cities nationally but mostly to the upside. These measures will also serve to keep inventory low and stimulate buyers who were on the fence as well as tenants. Additionally it will serve to slow down rent increases.

From the business side this will also continue the process of the public taking on more risk and reducing privatized loss of institutions and large investors holding assets that are underwater. The underwater homeowner refinances, the underwater assets are paid off at the full loan balance, and the taxpayers... I mean the gse takes on another turd.

What will be interesting is that I believe that no legislation will be needed for any of this. If there is any legislation needed and it becomes problematic then there will be executive directives and appointments that will push this through and do it fast.

How does this affect San Diego RE? I believe it will affect it in a positive way. I do think FLU has a very valid point about white collar employment and I do agree that sdr has a valid point about the diversity of the economy. I think that there will be fairly significant downsizing over the next decade at plenty of places... SAIC, HUGHES, TITAN and plenty of others. The commercial sector is strong though... not strong enough to soak all of the people up but strong.

The main point is the realization that it all hinges on housing. Pure and simple. The election doesn't hinge on 1000 engineers losing jobs but does hinge of 3000 other people getting work in the construction sector, finance sector, and lower level sectors that thrive when housing heats up.

So to me.... any thoughts of housing going down for anything except high end homes are incorrect. The opportunity came and went quite awhile back. Next opportunity for that will not be until we see interest rates run and that is not gonna happen for awhile. That can has been and will continue to be kicked down a long long road.

Submitted by The-Shoveler on January 9, 2012 - 2:02pm.

Mostly what “sdr” and “SD R” said.

But I will add this caveat, I think the upside for Stocks is somewhat limited (maybe 10 -15%)

I say this because companies are operating at maximum efficiency with regards to personal.
(kind of like “coffin corner” if you are familiar with air plane terms)
If they try to grow (add employees) it will be very hard to do so without losing some initial EPS (efficiency). So the upside will be limited I think for a few quarters to a year even as the economy grows.

But while I think the upside is somewhat limited, there is a lot of potential market killers out there,
1) Europe
2) Slow down in China.
3) Iran.

So there is the possibility for a real crash (greater than 40% correction) IMO.
But they are going to try like heck not to let that occur…

Bottom line, limited upside with the real possibility of a market crash.
Me I am on the side lines for now.

Submitted by SD Realtor on January 9, 2012 - 3:17pm.

Agree with you bigtime on the stock market NOR...

Submitted by scaredyclassic on January 9, 2012 - 3:33pm.

Wait don't puffs traditionally predict year end numbers?

Submitted by treehugger on January 9, 2012 - 6:16pm.

Iran has WMD and they are directed at Israel, we must invade and shut them down....there, problem solved (and shows how wrong Ron Paul and his isolationist ideas are) now no more "shrink the force". We can go back to spending billions on defense and all the folks it employs and the contractors who use it as a cash cow.

I need a raise.

Submitted by paramount on January 9, 2012 - 10:14pm.

CA renter wrote:
I hope we finally get some common sense leadership that will allow us to get through this more quickly.

Unfortunately were not off to a good start with Gov. Brown, who now needs to raise taxes for the favors (think big $$$$) he owed to various California public employee unions.

Submitted by CA renter on January 10, 2012 - 1:00am.

paramount wrote:
CA renter wrote:
I hope we finally get some common sense leadership that will allow us to get through this more quickly.

Unfortunately were not off to a good start with Gov. Brown, who now needs to raise taxes for the favors (think big $$$$) he owed to various California public employee unions.

Taxes are being raised to support the poor who have lost their jobs -- thanks to tax and trade policies created by and for mega-corporations. Taxes are being rased to support illegal immigrants and their children. Taxes are being raised to make up for the losses created by Wall Street. Taxes are being raised because revenues are down -- thanks to the bubble markets created by Wall Street and the Federal Reserve, yet again.

You spend so much time being angry about rather minor things that are consequences of the above circumstances, and this prevents you from gaining a greater understanding of the real threats to our economy and society.

Submitted by harvey on January 10, 2012 - 6:02am.

CA renter wrote:
Taxes are being raised because revenues are down [...]

http://www.mercurynews.com/elections/ci_...

While revenues have risen 20 percent in a decade, staffing has plummeted to cover rising employee costs. San Jose earlier this year laid off 66 police officers -- the first such layoffs in its history, while a new police substation and several branch libraries sit empty for lack of staffing.

Minor things? One of the biggest cities in CA is slashing its police force. That's a minor thing?

Total pension shortfalls for the state of CA and its cities amount to hundreds of billions of dollars. That's a minor thing?

I have mild constipation this morning. That is an example of a "minor" thing. It's probably because of what I ate last night, but I'll blame it on "Wall Street," because apparently every problem is caused by "them."

Submitted by CA renter on January 10, 2012 - 10:21am.

pri_dk wrote:
CA renter wrote:
Taxes are being raised because revenues are down [...]

http://www.mercurynews.com/elections/ci_...

While revenues have risen 20 percent in a decade, staffing has plummeted to cover rising employee costs. San Jose earlier this year laid off 66 police officers -- the first such layoffs in its history, while a new police substation and several branch libraries sit empty for lack of staffing.

Minor things? One of the biggest cities in CA is slashing its police force. That's a minor thing?

Total pension shortfalls for the state of CA and its cities amount to hundreds of billions of dollars. That's a minor thing?

I have mild constipation this morning. That is an example of a "minor" thing. It's probably because of what I ate last night, but I'll blame it on "Wall Street," because apparently every problem is caused by "them."

The economic recovery continues in the Golden State, and is even accelerating past the U.S. in many areas. Still, the failure of the additional $4 billion in revenues to materialize means that mid-year cuts may occur. That would affect K-12, community colleges, and the university systems in the state along with several other social services. Revenues continue to improve, but California is not out of the woods. There is still an imbalance between what’s being received and what we are spending. Ultimately, revenues will not be back to their pre-recession peaks for some time, which means that there are still many tough decisions ahead.

http://sco.ca.gov/Files-EO/12-11summary.pdf

The pension shortfalls are 100% directly tied to the boom-bust cycles created by the Fed and Wall Street.

I'll post more info on that when I get some more time.

Submitted by FormerSanDiegan on January 10, 2012 - 11:01am.

CA renter wrote:

The pension shortfalls are 100% directly tied to the boom-bust cycles created by the Fed and Wall Street.

Not exactly ... but the cycle did play a role

The pension shortfalls are caused by Governments that used unrealistic projections based on the boom to overpromise unsustainable levels of benefits to government employees.

Submitted by SD Realtor on January 10, 2012 - 11:35am.

No way man. It is all Wall Streets fault.

Governments never make faulty projections nor do they ever overspend. Furthermore they are responsible for making sure that everyone has everything they need regardless of citizenship status or individual effort.

You guys better get with the program man!

Submitted by FormerSanDiegan on January 10, 2012 - 4:35pm.

SD Realtor wrote:
No way man. It is all Wall Streets fault.

Governments never make faulty projections nor do they ever overspend. Furthermore they are responsible for making sure that everyone has everything they need regardless of citizenship status or individual effort.

You guys better get with the program man!

You're right... my bad. I want my cake now.

Submitted by briansd1 on January 10, 2012 - 6:26pm.

CA renter wrote:

The pension shortfalls are 100% directly tied to the boom-bust cycles created by the Fed and Wall Street.

You can't have it both ways, CA renter.

The local and state governments relied on unrealistic Wall-Street forecasts for the contributions.

But they didn't have to rely on those forecasts and they could have made larger contributions instead of spending money or promising generous benefits. Now it the time to cut benefits based on realistic estimates.

Submitted by briansd1 on January 10, 2012 - 6:34pm.

poorgradstudent wrote:
Short answer: No, there will not be another crash like 2008 in 2012.

Longer answer: I don't think many intelligent people, those who actually have or manage real amounts of assets, believe in any of that Mayan Calendar hocus-pocus.

Asset values simply aren't as inflated as they were in 2008. It's entirely plausible we'll see a 5% correction in the stock market at some point in 2012, and the major indexes could end the year down or flat. But the odds of another major crash are quite slim. Obviously there's always a chance of some major, unexpected event like the Japan Tsunamis or worse, but you can't plan for those.

I go with that.

Submitted by sdrealtor on January 10, 2012 - 9:49pm.

CA renter][quote=pri_dk wrote:
CA renter wrote:
Taxes are being raised because revenues are down [...]

http://www.mercurynews.com/elections/ci_...

While revenues have risen 20 percent in a decade, staffing has plummeted to cover rising employee costs. San Jose earlier this year laid off 66 police officers -- the first such layoffs in its history, while a new police substation and several branch libraries sit empty for lack of staffing.

Minor things? One of the biggest cities in CA is slashing its police force. That's a minor thing?

Total pension shortfalls for the state of CA and its cities amount to hundreds of billions of dollars. That's a minor thing?

I have mild constipation this morning. That is an example of a "minor" thing. It's probably because of what I ate last night, but I'll blame it on "Wall Street," because apparently every problem is caused by "them."[/quo

The economic recovery continues in the Golden State, and is even accelerating past the U.S. in many areas. Still, the failure of the additional $4 billion in revenues to materialize means that mid-year cuts may occur. That would affect K-12, community colleges, and the university systems in the state along with several other social services. Revenues continue to improve, but California is not out of the woods. There is still an imbalance between what’s being received and what we are spending. Ultimately, revenues will not be back to their pre-recession peaks for some time, which means that there are still many tough decisions ahead.

http://sco.ca.gov/Files-EO/12-11summary.pdf

The pension shortfalls are 100% directly tied to the boom-bust cycles created by the Fed and Wall Street.

I'll post more info on that when I get some more time.

IMHO This post defines the saying "where you stand depends upon where you sit"

Submitted by CA renter on January 11, 2012 - 12:59am.

briansd1 wrote:
CA renter wrote:

The pension shortfalls are 100% directly tied to the boom-bust cycles created by the Fed and Wall Street.

You can't have it both ways, CA renter.

The local and state governments relied on unrealistic Wall-Street forecasts for the contributions.

But they didn't have to rely on those forecasts and they could have made larger contributions instead of spending money or promising generous benefits. Now it the time to cut benefits based on realistic estimates.

It's much more complicated than that.

It's not just the contribution amounts, but the benefit amounts that are affected by the investment returns. The return assumptions used by most public pension plans are actually very conservative relative to historical return rates and when compared to assumptions used by other large investment entities.

Public pension plans do not tend to rely on "Wall Street forecasts," but rely instead on historical return rates and assumptions about events that would likely transpire under various conditions -- like some fiscal/financial interventions (or lack of interventions) that might occur under different circumstances. As you probably know, Federal Reserve/govt intervention in the markets has been pretty universally acknowledged, and everyone played by the rules that had been established over many years and/or decades. The fund managers have to walk a fine line between taking on too much risk (possibly putting taxpayers at risk) or taking on too little risk (putting public employees at risk WRT inflation, contribution rates, etc.). Risk has been -- and still is -- grossly mispriced because of toxic "financial innovations" and inflationary Federal Reserve tactics. THAT is the cause of our "financial crisis," not public employee unions.

They did and do have to rely on historical returns, as do all investment managers. They use historical return rates and follow current events in order to forecast future returns which they use to determine compensation and benefit amounts. Which other strategies and methods would you suggest they use?

You have to remember that there are real fund managers who work directly and indirectly for the pension funds, as well as private equity and hedge fund managers with whom the pension funds contract. If they promise 2% returns in a world of 9% returns, what do you think will happen to them? If you think they'd be kept on, you're dreaming. Just like the banks during the bubble years, those who didn't compete in the high-risk world suffered as everyone migrated to the high-risk investments/managers.

It's a systemic problem that ties into how credit is used and how investments are managed on a macro level.

Additionally, if the pension funds were collecting 25% of an employee's paycheck while keeping future benefits low, how do you think that would affect public employment? I've tried to explain before that high turnover rates would kill public employers even faster than a "pension crisis." Hiring and training new employees in the public sector is very costly, and they cannot afford the turnover rates seen in the private sector. The process is very bureaucratic, and for good reason. Public employers and employees have more liability than most private sector workers because of the perception of "deep pockets." If a private sector worker screws up, they might lose their jobs; but if a public sector employee screws up, they could end up in jail and/or face stiff legal penalties.

Public employers cannot just file for bankruptcy and walk away when they screw up. They have to last far, far longer than the vast majority of private companies, so they have to follow different rules.

These are jobs where experience, character, and integrity are often more highly valued than a new college degree. Public employers actively seek to recruit the most stable, dependable, security-minded job applicants, and the benefits packages offered by many public employers is their most powerful hiring tool. They have to hire a certain type of employee because public employees/employers are scrutinized far more than most private employees/employers. Contrary to popular myth, standards for public employment tend to be higher than those for private employment, both in terms of experience and education.

It's a much more complex issue than you'd like to believe.

Submitted by CA renter on January 11, 2012 - 1:12am.

sdrealtor][quote=CA renter wrote:
pri_dk wrote:
CA renter wrote:
Taxes are being raised because revenues are down [...]

http://www.mercurynews.com/elections/ci_...

While revenues have risen 20 percent in a decade, staffing has plummeted to cover rising employee costs. San Jose earlier this year laid off 66 police officers -- the first such layoffs in its history, while a new police substation and several branch libraries sit empty for lack of staffing.

Minor things? One of the biggest cities in CA is slashing its police force. That's a minor thing?

Total pension shortfalls for the state of CA and its cities amount to hundreds of billions of dollars. That's a minor thing?

I have mild constipation this morning. That is an example of a "minor" thing. It's probably because of what I ate last night, but I'll blame it on "Wall Street," because apparently every problem is caused by "them."[/quo

The economic recovery continues in the Golden State, and is even accelerating past the U.S. in many areas. Still, the failure of the additional $4 billion in revenues to materialize means that mid-year cuts may occur. That would affect K-12, community colleges, and the university systems in the state along with several other social services. Revenues continue to improve, but California is not out of the woods. There is still an imbalance between what’s being received and what we are spending. Ultimately, revenues will not be back to their pre-recession peaks for some time, which means that there are still many tough decisions ahead.

http://sco.ca.gov/Files-EO/12-11summary.pdf

The pension shortfalls are 100% directly tied to the boom-bust cycles created by the Fed and Wall Street.

I'll post more info on that when I get some more time.

IMHO This post defines the saying "where you stand depends upon where you sit"

Are you trying to say that tax receipts didn't go down, and that those declining receipts didn't affect public entities?

Are you trying to say that the investment losses incurred as a result of the Fed's/Wall Streets speculative gambles didn't affect the financial health of public entities and cause the "pension crisis"?

Are you trying to say that the greater burden placed on govt entities during recessions (unemployment, "stimulus" spending, etc.) didn't negatively affect the financial health of public entities?

Put down that wine glass, sdr, and look at the facts.

Submitted by SD Realtor on January 11, 2012 - 6:52am.

Are you saying that there were no budget problems in California before the real estate bubble? That declines in the quality of our public schools, state services, and other taxpayer supported programs only began with the bubble? Are you saying that the state has only within the past few years been fiscally unable to provide all these services for all these people didn't fit in the budget?

Submitted by harvey on January 11, 2012 - 7:27am.

CA renter wrote:
It's much more complicated than that.

No, it isn't.

The only thing that is complicated are your desperate - borderline delusional - rationalizations.

Quote:
Are you trying to say [...]

Are you trying to say that public employees should be exempt from reality?

Are you trying to say that they should be compensated only based upon their demands and not based upon the economic situation?

Are you trying to say that only the private sector (the majority of Americans and the people that pay the salaries of the public sector) are the only ones that should be impacted by economic downturns?

Yes, you are.

Submitted by SD Realtor on January 11, 2012 - 9:22am.

You mean I don't get a pension with my private sector job?

darn....

I am in the wrong sector!

Submitted by FormerSanDiegan on January 11, 2012 - 9:53am.

CA renter wrote:

It's a much more complex issue than you'd like to believe.

Agreed, so it's not just the wall street guys fault then, correct ?

Submitted by sdrealtor on January 11, 2012 - 9:59am.

NO wine glass was involved. Your perspectives are based upon residing in the public sector and rationalizing it all. Sure high standards apply to public safety workers but how big are those liabilities for all the rest of the public sector. When a toll collector on the Golden Gate Bridge gives you the wrong change do they go to jail for theft?

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.