KeNo's Housing and Economic Portal: Tuesday April 19 Housing and Economic stories

Monday, April 18, 2011

Tuesday April 19 Housing and Economic stories

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Government Contractors Brace for Shutdown - (online.wsj.com) U.S. businesses are bracing for layoffs and disruptions along their supply chains if the federal government shuts down later this week because of an impasse over the federal budget. Several Democratic and Republican lawmakers said Sunday they expect a budget deal to emerge by the current April 8 deadline. Businesses and lobbying groups in Washington say the uncertainty alone is causing problems. Especially hard hit are small and midsized businesses that rely on steady flows of revenue from federal contracts to provide a wide array of products and services such as information technology consulting, building construction and maintenance, or food service at national parks. "Because the budget's not known, agencies won't release the awards [and] the new work isn't coming in," says Libby Kavoulakis, who owns Metis Group LLC, which contracts with federal civil and defense agencies to dispose of unused government real estate.

Harry Dent: 'Major Crash' Coming for Stocks - (finance.yahoo.com) Expect "substantial" further gains for stocks before a "major top" occurs in late summer, says noted forecaster Harry Dent, founder of HS Dent and The Dent Method. The good news, for those long, is Dent predicts the Dow will trade as high as 13,200 by mid-summer and the S&P 500 as high as 1430, or more-than 7% above current levels. The bad news is "then we could see another major crash," Dent says, forecasting the Dow could trade as low as 3300 in a worst-case scenario. "Bubbles go back to where they started or a little lower," he says. "The stock market bubble started at (Dow) 3800 in late 1994." While Dent predicts the Dow's crash will play out over several years, he sees clear and present danger in gold, silver, oil and other commodities. "All investors should lighten up on or sell oil, silver, and gold as the U.S. dollar looks like it has bottomed and should rise ahead," he writes in the March issue of HS Dent Forecast.

Bank of England warns of rise in loan defaults - (www.telegraph.co.uk) The number of home owners unable to keep up with their loan repayments is expected to rise, the Bank of England has warned. It follows an “unexpected” rise in numbers since the beginning of the year, it reported on Thursday. The Bank predicts the total number of mortgage defaults will rise during the next three months as fears intensify that the cost of living will remain high and interest rates will rise. In its Credit Conditions Survey, it suggested that lenders were concerned about “the potential impact of increases in interest rates on default rates”. Britain’s biggest mortgage lender, Halifax, yesterday took steps to guard against people defaulting on their home loans by announcing a clamp down on interest-only mortgages.

Where is 'Sign Board Guy' now? Still for hire - (money.cnn.com) But the economy continued to sputter, and Persky was laid off after only five months. "It's been a struggle of generational proportion," Persky says. "I had a nice run of 25-30 years of work until 2007." Of course Persky was not alone; 8.7 million jobs were lost between 2008 and 2009, 543,000 of which were in financial services. The unemployment rate more than doubled from 4.7% the month before the start of the recession to a high of 10.1% in October of 2009 and has only recently nudged down to 8.8%. Persky is one of the 13.5 million people still out of work in the U.S. Aside from the short stint in an accounting firm, he also tried to start his own consulting business and even launched an iPhone app, but nothing has stuck. Persky downsized substantially, even staying with his sister temporarily before moving to a smaller apartment in New York. He collects unemployment, picks up consulting projects when he can and keeps his expenses low, while working on his newest business idea.

Debt, Deleveraging and Demographics Mean Great Depression Ahead - (finance.yahoo.com) In The Great Depression Ahead, author and economic forecaster Harry Dent makes the case for why the worst isn't behind us, despite the economy's recovery and the stock market's revival. In a nutshell, Dent's grim forecast comes down to the "deadly Ds": Debt, Deleveraging and Demographics. "We have to go through the detox process of deleveraging debt," he says in the accompanying clip. "The government simply hasn't allowed it [but] it will come because the government can't stop this much debt from deleveraging." How much debt? By Dent's estimate, there is $120 trillion of debt outstanding, including $66 trillion in unfunded mandates. That's roughly 10 times U.S. GDP and five times the levels during the Roaring 20s. "The slowdown of Baby Boomers will continue to force deleveraging," Dent says, citing the demographic force behind his gloomy outlook. "92 million Baby Boomers will work less and save more no matter what [the government does]."