Friday, May 29, 2009

In the crystal ball ... by gimleteye

Bloomberg this morning reports, "Buffett Aide Sokol Says Housing, Economy Aren’t Near Recovery" that supports the points I made in my post yesterday:

Peter Thiel, the co-founder of PayPal who now heads the $2 billion San Francisco-based hedge fund Clarium Capital Management LLC, told the conference the stock market’s recent gains will fade and the price of “long assets” such as houses will continue to fall, while Federal Reserve pump-priming will mean “inflation in all the wrong places.” The administration’s economic policy is aimed at solving “the wrong problems” by trying to raise short-term growth instead of creating conditions to improve long-term productivity. “We’ve had phenomenal growth but median incomes have barely gone up since 1971,” said Thiel, 41. That’s because a drop in support for research and development means “there is far less happening than meets the eye” in science and technology. “Innovation is barely enough to keep up,” Thiel said. “There can’t be a V-shaped recovery until we fix the science problem.”

Whatever comes next, now that the days of Happy Motoring are over, will either turn the United States into a larger version of Argentina or is going to be based on a whole new suite of technologies and infrastructure: nothing like fraudulent versions of financial engineering as a national economic model.

Based on the horrendous news of rising foreclosures among prime borrowers, I agree that 2010 will unfold a lot like 2009. In the longer term, I'm guessing government monetary policies will tolerate inflation catching up to fallen housing values until homes are "affordable" and very little else is.

1 comment:

Suzan said...

I agree.

Except that I think 2011 is being optimistic.

Many people who want or need to sell their homes haven’t put them on the market yet because the outlook for sales has been poor, he said. “It will be mid-2011 before we see the market in balance,” with no more than a six-month backlog, he said.Thanks for following this for us!