THE ENTERPRISE
This is the first 2006 edition, which will be sent after New Year's Day. I hope everyone had a wonderful holiday season.
First, from Kiplinger Forecasts, a few predictions and my reaction to them:
1) US Troops will start coming home.
--- I agree, and predicted that certainly before the mid-term elections, the pressure to withdraw troops will be almost untenable. If the Iraqi are ever going to take control of their country, the time is now, following the clear indication (by great election turnouts) that the people want their emerging democracy to work.
2) The housing market will cool.
---This was also a prediction, not only of mine, but of nearly everyone else, too. I only hope it slows gradually and doesn't sink too far. A huge portion of the US economy's growth has been fueled by both jobs and capital availability created by housing, mortgage refinancing, etc. Winter heating costs will consume more of consumer's dollars, even if gasoline prices don't spike up again. Oil seems to have settled down a bit, which is good for all market sectors.
3) Consumer spending will slow.
---After a fairly strong Christmas, this too is pretty much a given. Inflation is lurking out there and new Fed Director Ben Bernanke is a vigilant inflation fighter. And don't expect interest rates to slow or reverse anytime soon, at least until reaching the 5% level. There is more turmoil in China than has been publicly reported here, and China is facing pricing pressures of its own. A little upward pricing on Chinese goods will also ripple through the US economy, hitting corporate profits worse than consumer spending
4) Forecasts are for stocks to climb.
---I'm not so confident on this one. There is money looking for places to go and the inversion of the long and short term bond rates have scared bond investors. The expected housing slowdown dampened real estate investment, so perhaps stocks ARE the only place to go, but they are far from a sure thing. Corporate profits will be good, but not great, as pricing catches up partially with commodity cost increases. Upsets will occur that shake the market's confidence, not the least of which are the travails of the US auto and airline companies.
5) Aging boomers have a lot of money to spend as the first of them turn 60.
---I suspect that while this is absolutely true, the concerns about retirement planning, health care, the looming Federal deficit and so forth will keep the lid on some of the conspicuous consumption. Congress can't figure out how to agree on the simplest of things, so don't expect them to tackle the toughies--entitlement programs, Social Security, Medicare. If only they'd get real (and President Bush would ever find and then wield his veto pen), they could rein in some of the irresponsible spending of the past few years.
Last, my "risky prediction" of 2006: Don't be surprised if VP Dick Cheney's health problems flare up and he resigns. The pressure on him has been enormous and he has been working a pretty demanding stump speech schedule lately. That takes its toll on a not-so-good ticker. Who will be named to succeed him? That is the big question, since whoever it is, steps into the 2008 Presidential front-runner spot automatically. Who it won't be is Rudy Guiliani or John McCain, two of the most popular, but politically dicey picks. Doin't bet against Condoleeza Rice? Maybe, even if she doesn't want the job. Then again, maybe Cheney's health will hang in there and it will be up to the GOP to pick a candidate.
Two notes to close on: Kiplinger predicts (as did my 2002 novel, THE SILENCE, that computer security problems will worsen in 2006. The networks that make computers, Wi-Fi and cell phones so interactive are also playgrounds for hackers, viruses, phishers, and thieves. Change your passwords, use something a bit mroe complex (no birthdays and initials please), and watch carefully. Report any attempts to the legitimate keepers of those sites. I get a phishing try on a bogus PayPal hit every week or two, and an eBay try at least once a month or more. DON"T CLICK ON THEM! THAT'S WHAT THEY WANT YOU TO DO. Forward them to either spoof@--------- or fraud@-------- using the known URL of the legitimate originator.
Since it is winter time in much of the US, the following article from a Dec. edition of the WSJ made me grin--I hope it makes you smile too. Perhaps this resonates with me because I grew up in snowy IL, lived in TN for 11 years (where the slightest hint of snow triggered school closings and a run on the grocery stores) and I am now back in cold, snowy OH. What's it like where you live? Snow days were FUN, sometimes, weren't they?
Happy New Year
John
------You Call This a Snow Day?
By SUSAN M. CASS
©The Wall Street Journal, December 13, 2005; Page A12
GREAT FALLS, Va. -- What's the deal with snow days in the South? As a fairly new Virginian, moving here last year from Boston, I have been amazed at the locals' reaction to small amounts of snow.
On Friday, our 8-year-old daughter Daniella came bounding into our room at 6:30 a.m., announcing that it was snowing and asking if school was canceled. A quick look out the window revealed about two inches of snow on the ground, with light flurries in the air, so I quickly dashed her hopes. Nice try, I said, but you're going to school. Silly me! When I checked the Web site, I was shocked. The county had closed all the schools for the day. I wondered if maybe they knew something I didn't about a looming blizzard, but as the sun rose on a glorious, cool day, and the snow started melting, I was left with the question: This is a snow day?
A few days earlier, the county had delayed school for two hours because it was too cold for the kids to stand at the bus stop. It was around 30 degrees. Above zero. In December. Please don't get me wrong: I think it's admirable that the county "really cares about kids' safety," as our daughter -- grinning and reaching for her DVD remote -- put it. But with these standards, kids in the Northeast would all be home schooled!
I recall a week in early February 1978, when I was a young girl growing up in Rhode Island, when we were blessed with 48 inches of snow over a three-day period. As a child of 52 inches, quickly sinking up to my eyeballs in snow was quite a memorable experience.
The whole state shut down for two weeks. There were no cars on the road -- just neighbors walking in the streets, pulling their children on sleds behind them, or hauling prized staples of milk, bread, toilet paper and batteries. Neighbors pitched in to help shovel out driveways and sidewalks for the elderly. Others opened their homes to total strangers who were stranded by the blizzard.
Two weeks with no school -- but also no electricity for television. There were no Gameboys then or portable CD players, or iPods, for that matter. No cell phones or Internet. Kids had the choice of reading, playing out in the snow, or spending time with their families.
Now that was a snow day!
Mrs. Cass is executive vice president of Cass & Associates, a legal consultancy in Great Falls, Va.
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