Wednesday, August 29, 2007

My Forecasts are Looking Good

Last year in October I posted some forecasts for my investment assumptions (see my post from that date). So far they are nearly all happening. The significant exception is the price of oil. I still think it will decline significantly, but the timing will likely be later than I thought last year.

Otherwise, I was right. Inflation has subsided, the economy did slow to about a 2% growth rate, unemployment looks poised to rise, yields on the 10 year treasury are nearing my target, commodities have peaked and are declining, and residential real estate prices are declining by about as much as I predicted.

Many people have incorrectly called the bottom for residential real estate, and many thought we would see a soft landing. At various times over the last 12 months housing bulls have said it was a buying opportunity in the homebuilder stocks and that home prices would recover this year. They have been very wrong. The homebuilder stocks are much cheaper now, and home prices continue down. In addition, the mortgage companies have also suffered significantly in the recent tumoil. As I posted a year ago, there are no soft landings in real estate.


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