Some Bold Economy Predictions Hold True

I have a friend, Dody Bush, who made 20 bold predictions about the economy at the beginning of 2009. I thought I would go ahead review her assessment of the economy. I answer Dody's hypotheses using social media trends, statistics and supportive news stories.

Here is what she wrote. I list an answer below each prediction.

Hypothesis 1. More jobs will continue to be lost until mid-May. By May things will either get better or much worse.

Finding 1. Unemployment has been rising throughout 2009.

Hypothesis 2. Gold will be high. I am not expecting 1600 or 2k like some commenters, but the highs of 2008 are likely to occur again.

Finding 2. Gold topped $1,000 again since February.

Hypothesis 3. Food stamps will become a staple for getting food for more than 40% of American families, and consequentially will be a budget problem eventually.

Answer 3. US population 304,059,724 million. Number of people using food stamps is 34 million. Given those numbers, only 10% of the US population uses food stamps.

Hypothesis 4. Luxuries will remain “not desirable”. So if you are in the luxury business, add another line.

Answer 4. I think this depends on the product type. Starbucks made a profit in its recent fiscal 3rd quarter. Starbucks made a profit through cost cutting efforts primarily though.

5. Foreclosures will suddenly increase at the end of 2009 unless government intervention occurs.

Answer 5. This just came out today on Bloomberg. Home sales are up 0.7%. The government has intervened though by offering tax rebates for new home buyers.

6. Sewing will become “IN” again. That is “remaking” clothes.

Answer 6. Google trends suggests otherwise.

7. Beans and Rice in bulk will be seen as staples for America’s diet. Steak is so yesterday, except for rare treats like an Anniversary. Also expect potatoes, macaroni, tomato sauce, and PB and J’s to sell well.

Answer 7. More people might be buying beans and rice, but less people are talking about them.

8. Back to school shopping, will start to involve second hand stores for clothes. For the poor it will be patching up hand me downs.

Answer 8. I'll answer this question after I see Walmart's next quarterly figures.

9. Children will learn to be thankful for the awesome stuff you give on holidays…at least a little more.

Answer 9. This answer depends on how you define "awesome stuff." I love the optimism though.

10. Every teen having their own cell phone with text messages, will be drastically cut back. Expect prepaid for Emergencies only to be the thing parents do.

Answer 10. Teen cell phone ownership nearing adult numbers doesn't sound like cutting back to me.

11. Shoe cobblers will find their business increase

Answer 11. Shoe cobbler buzz is trending down.

12. Parents will start to pressure schools to remain open during holidays and possible weekends so kids can have free school lunch. (urban areas)

Answer 12. Schools should go year around in my opinion anyway.

13. Libraries will cut back hours or raise late fee fines just as more patrons come in due to budget cut backs.

Answer 13. This is sad but true.

14. Food staples will rise in price.

Answer 14. Inflation is trending down.

15. Treasuries will be sold off by other countries, causing our dollar’s value to dip. How much is anyone’s guess.

Answer 15. China isn't selling US and other treasuries. China's just not buying as much.

16. Gas prices will rise again. As this happens, more inflationary pressures will occur.

Answer 16. Gasbuddy.com says otherwise.

17. Towns and states will start laying off even more workers. The problems in California will hit Georgia, New York, Rhode Island, and various other states. At least 10 states will have to lay off drastically.

Answer 17. The state of Rhode Island just laid off 1,000 workers.

18. Court houses may shut down for longer furloughs on holidays, or not open for weeks at a time.

Answer 18. Budget cuts are affecting law enforcement everywhere.

19. Crime is headed up, but not way up.

Answer 19. Crime rates have fallen in some areas.

20. Gardening will become a new passion as people looking into new “Victory Gardens”.

Answer 20. Online buzz for gardening is trending down.

A quick review shows that Dody may have not been too far off with her predictions. At least half of her predictions are correct. I'm impressed that she took some initiative to make these predictions, despite not having a background in Economics. I certainly didn't make any bold predictions like these.

Feel free to reach out to me if you have any questions or comments regarding my responses. You can find out more about Dody by reading her profile on Examiner.com.

Laid-Off Yahoo Employees Tweet on the Way Out

About 1,500 workers at Yahoo! lost their jobs as part of cost-cutting moves designed to save the portal about $400 million in annual operating expenses. Some laid-off and remaining Yahoo! workers blogged about the experience via Twitter or left comments on industry site Silicon Alley Insider.

Source: BusinessWeek

Online Consumers Speak Negatively about the Economy

I've been monitoring online buzz about the economy over the past few months and I've found some interesting results. I will start of by showing a trend of economy discussion online from October 1, 2007 through March 31, 2008.

Economy Discussion Trend














Discussion about the economy is trending upwards. Recent spikes in buzz are largely caused by consumers discussing bank mergers and their opinions of the economy. Below is a key highlighting several call-outs on the trend line.

Key Events Creating Buzz:
A. 10/29/07 - Merrill Lynch reports $7.9 billion write-down.
Merrill Lynch’s CEO, Stan O’Neal and Citi’s CEO, Charles Prince resign.
B. 12/6/07 – Consumers discuss President Bush’s mortgage plan.
C. 1/7/08: Bears Stearns’ CEO James Cayne resigns
D. 1/13/2008 – Consumers discuss the BoA Countrywide merger.
E. 1/21/2008 - 1/22/08: U.S. Federal Reserve announces surprise 0.75% rate cut; DJIA loses 400 points as global markets name the day, “Black Monday.”
F. JP Morgan buys Bear Stearns for $2 a share

Additionally, I have been tracking sentiment among consumers talking about the economy online in two month intervals since October 2007. More consumers have a mixed / negative outlook on the economy from December 1 – March 31, 2008 compared to the October 1 – November 30, 2007. An increase in negative buzz results from consumers expressing their concerns about the U.S. economy potentially going into a recession from December 1 through January 31, 2008. However, negative buzz February 1 through March 31, 2008 emanates from consumers discussing potential fraud and ethics violations associated with the subprime debacle.














Listed below are a few sample verbatim to support my most recent findings. Consumers speculating about whether fraud played a role in the subprime meltdown express their discontent online.

“[Big News: Subprime Lenders Get Big Accounting Break At Sec]… I thinks that's important news, or exists there another thread on it. FFS, they will just be allowed to hide it all. “
Housepricecrash.co.uk, 2008-02-01


“Blaming all this on the gov is a good start, Grizz. But it seems all the congress wants to do his slap down the lenders, even though they were the ones who encouraged this practice. The left wanted low income folks; ie people who can't afford a house to have a really really big one. They caused the problem, now all they want to to is fleece the mortgage companies and responsible borrowers for doing want was expected from them. Blaming all this on Bush is inaccurate, but typical. I do not blame it ALL on the government, because crooks and con men will always find a way. Your weak attempt to whitewash this administration in particular and the general anti-regulation enforcement tilt of Republicans in general just doesn't wash. Government regulations exist because of those who would take advantage of people in just about any situation, whether it be the food on your table, drugs in your medicine cabinet, or a virtually incomprehensive mortgage instrument. Point of fact, the regulators, if they existed at all, were asleep at the switch on the sub-prime mess and the bankers were no less culpable with their bottomless greed”
Democracyforums.com, 2008-02-27


“I'm would never vote for McCain, I would rather write-in a vote for Minny Mouse (which is what I am leaning towards at this point). But I still have a hard time accepting that me, the tax payer, has to be part of the solution that was the sub-prime mortgage scandal. The companies that profited off of these actions should be the ones to bail the people out. Why do I have to be the one to fix others financial mistakes ? Next thing you know we will have to bail out folks who take super high interest credit cards because they did not read the small print. People should have some sort of responsibility for their actions and should not be bailed out by the rest of us who are able to make smarter decisions when it comes to our finances.”
Forums.nasioc.com, 2008-03-10


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Notes:
1. Buzz volume is depicted as a percentage of 433,173,653 total messages by day occurring between October 1, 2007 and March 31, 2008
2. Information about “Black Monday” 2008 can be found at http://en.wikipedia.org/wiki/Black_Monday_(January_2008)
3. Given time constraints (e.g. work, life in general), I was only able to sample a 100 random messages about the economy per time frame. Therefore, I would not consider these findings to be statistically significant, but more directional.