No One Knows What the Future Brings

History and current events are a good guide...

New Years Day 2010 was not so long ago and I still remember the collective sigh of relief people shared that the previous decade was over. There was hope for a fresh start, a new beginning, a chance to right the ship and correct the course we just raced through.

At the beginning of March, as businesses were closing every day along the primary streets, road traffic got noticeably lighter and and stores had fewer shoppers, I started researching the underlying core of the Leading Economic Indicators using multiple resources. Looking at the root causes and potential for solutions, none of them looked particularly strong for the short to intermediate term. The phony propped up Stock Market bubble, the Mainstream Media and Political Class's visions of sugar plum Recovery predictions, Stimulus and Quantitative Easing aside, a sea change storm brewing was evident. Efforts for a quick fix to the trouble we were in was not working as predicted and it seemed highly likely that it was going to get worse before it got better.

1. Unemployment: high unemployment and underemployment is a continuing vexing problem and likely to remain that way for a long time. Most importantly, unemployment and underemployment is directly related to people's income. Income is crucial to a recovery.

2. Debt Overhang: Individuals, businesses and governments are deeply in debt and it will take years to deleverage. The amounts on all fronts are staggering and must be reduced because it is subtracting from income.

3. Real Estate: A second wave of defaults in residential real estate is coming for these reasons:

Lenders have allowed borrowers to stay in houses with partial or no payments for longer than the average period of extensions and some borrowers have deliberately stopped paying. This is reaching it's end.
Alt-A mortgage holders are beginning to default and expected to become full blown.
ARM mortgage rates are going to reset in the September - October time frame.

Commercial real estate has declined in value on average a minimum of 50% in the past year but has not crashed yet. When it does, it will be about the time residential real estate hits it's second wave.

4. Retail and Consumer Goods: Most people are not in the position and/or the mood to be buying anything but what they consider the essentials. Maslow's theory comes into real life play: Food, Shelter and Clothing are priorities, everything else is secondary.

5. Production: The rate of producing goods, manufacturing and providing services is way down and not likely to increase until the other factors are resolved. Businesses are hoarding cash.

My prediction then was that May through November would be the period that how this great economic disruption will proceed will become more obvious. We are midway through that period. I also predicted we will be in an economic slowdown for a long haul of 5 to 10 years; I am more convinced of that now.

A few weeks ago I felt this Economic Depression deep in my being, a perception of what it is like to live in such an economic era, that hit me head on as more than intellectual theory. It made me sad and somewhat personally depressed and I had to take a deep figurative breath. I know I'm going to survive this, I've prepared for it as best as one can but that doesn't mean that I won't be taken aback by how it all plays out.

I see it in the faces of other people that they feel it now also. It depends on where you are in life on how good you think your chances of survival are. That also depends on your attitude and your ability to withstand the unexpected. There is a mid-term General Election coming in November and after that, what happens is anyone's guess. It is time to be ready for anything.

We are in a significant economic downturn that is more than the historical economic depressions that occur every 60-80 years (the average person's life span). No...we are in a 150-500 year historical Disruptive Event on the magnitude of  the Gutenberg Printing Revolution, the American Declaration of Independence, the US Civil War and the Industrial Revolution. This is a historically exciting time to be alive in and we may as well embrace it.

The message for me personally has not changed. No matter how good or bad you feel, if you want to make it, no matter how hard it is, you have to keep putting one foot in front of the other and keep going. To stop is to risk never getting started again. Never underestimate the power of helping other people and them helping you. Now is the time, more than ever, that we need to think creatively, be passionate about maintaining our dignity and rising above adversity, to right the ship to sail on to a better day.