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January 02, 2006
What Keeps You Up At Night?
If you haven't made your list et, CNNMoney lends a helping hand:
While most economists aren't forecasting a recession many are predicting a slowdown next year, with growth of about 2.5 to 3.3 percent -- and that was before the signal from the Treasury market. (For more on the yield curve, click here)...
Here's a look at a number of factors to watch to see if the economy stumbles or stays strong in 2006.
What's out there to worry about?
The Federal Reserve pushing interest rates too high, for one thing. Fed policy-makers have raised rates 13 straight times in a bid to keep inflation at bay, but some analysts worry that the central bank might overdo it, crimping economic growth.
Analysts say another distinct possibility is a bankruptcy filing by General Motors (Research), though the automaker denies it. That could have ripple effects far beyond the company's employees and stock and bondholders.
A problem with hedge funds, which have grown dramatically since the collapse of Long Term Capital Management in 1998, is another fear.
And there are concerns that the slowdown in the housing market could mean trouble for the broader economy.
Housing market slowdown
While many experts say fears of a housing market bubble bursting are overblown, nearly all real estate economists say housing is likely to slow in 2006, which could dent economic growth...
UCLA's Anderson Forecast projects that 500,000 construction jobs and 300,000 finance jobs could be lost even if the housing market slows without collapsing, due to a reduction in home building.
But beyond a drop in construction, a leveling off in home price appreciation coupled with higher mortgage rates could shut off an important source of cash for homeowners who have used their homes like ATMs in recent years, said Carl Steidtmann, chief economist with Deloitte Research...
The sting from energy
While gasoline prices have returned to pre-Katrina levels, the impact of higher energy costs isn't over, Steidtmann said, due to home heating bills now starting to arrive in mailboxes. Natural gas, an important fuel for businesses and electric generators, isn't likely to retreat soon because of limited availability of overseas imports...
The article mentions some good news as well -- strengthening in labor markets, manufacturing, and foreign economic growth, for example -- and the list is not exactly innovative. So here is my fearless, and completely useless, prediction: If real trouble arrives, it will come from a place that's not even on the radar at the moment.
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Some worries for 2006
Just when you thought it was safe to go back in the water, oil closed back up above $63 a barrel today. I earlier expressed the opinion that demand pressure would preven... [Read More]
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