My “Tent City” Prediction Comes True

Over a year ago, on Feb 10, 2008 I predicted we’d see a number of headlines by the time the meltdown completed in 2011. [My Predictions from Feb 2008]

Here’s another one that’s coming true. I forecasted:
Tent cities” cropped up around the country.
They are filled with formerly middle-class displaced citizens.
Parents tell their kids it’s just a long camping vacation.

Check out what NBC News is featuring today on their front page.


California is suffering thorough a drought so severe the “guvnah” has declared a drought emergency. The Golden State’s unemployment fund is nearly broke. The state itself is on the verge of insolvency and cannot afford to pay residents their 2009 state income tax refunds.

The January median sales price for Southern California homes fell to $250,000, a 40% drop from the same month a year prior, the San Diego real estate research firm MDA DataQuick reported Thursday. The price decline was accelerated by foreclosures, which accounted for 60% of sales last month.

tent-city-sacto-2009-03-05“This tent city in Sacramento, Calif., continues to grow as the worsening economy forces more people out of their homes.”

tent-city-sacto-2009-03-05a“Karen Hersch, an unemployed truck driver, cleans up at a homeless encampment in Sacramento, Calif.”

tent-city-sacto-2009-03-05b“Tammy Day, who recently lost her home, cuts potatoes as she prepares a meal at a tent city in Sacramento.”

tent-city-sacto-2009-03-05c“Tammy Day, seen with her husband Keith, cook over a campfire at a tent city in Sacramento.”

tent-city-sacto-2009-03-05d“Val Jon Farris, center, of charity iCare-America, hands out free supplies to residents at the tent city.”

Please save yourself by possessing physical gold, physical silver.


CFOs Abandon Hope

CFO magazine 3/2009A question is asked of 1,200+ CFOs (Chief Financial Officer) from the US and abroad every quarter by CFO Magazine and Duke University. The latest survey was concluded last week.

“What are your expectations for the economy?”

1) Our earnings will plummet 22%.
2) We will lay off 7.6 million workers in US.
3) Employees that keep their jobs will see wage freezes or even wage cuts.
4) You will see reductions in hours worked.
5) We will have employee morale and productivity problems.
6) Expect drops in capital spending (-13%), tech spending (-6%) and advertising spending (-7%).

Record Corporate Pessimism 
More than two-thirds of U.S. CFOs have grown more pessimistic about the U.S. economy during the last quarter. On a scale of 0 to 100, U.S. CFOs rate the economic outlook at an all-time low of 40


“This is very troubling,” said Kate O’Sullivan, senior writer at CFO Magazine. “Throughout the history of our survey, CFOs have shown a remarkable ability to predict future economic conditions. They anticipated the current recession as far back as September 2007. Given the CFOs’ track record, the historic pessimism CFOs are currently expressing certainly indicates a tough road ahead in 2009.”

Employment, Wages & Earnings
“Even with the stimulus plan, CFOs expect to lay off nearly 6 percent of their workforces. This represents a staggering 7.6 million job losses,” said Fuqua international finance professor Campbell Harvey, founding director of the survey.

“And it gets worse: in addition to the layoffs, many CFOs plan wage freezes and reductions in the number of hours worked for those employees that are retained.”

Nearly 60% of U.S. companies indicate they will institute a hiring freeze for the next year. In addition, 57% will enforce a wage freeze or reduction, with one in five companies expecting to reduce wages over the next year. 39% of companies will reduce employees’ work hours.  

Among the industries surveyed, service and consulting firms anticipate the strongest earnings in 2009, followed by healthcare companies. Public manufacturing firms expect earnings to fall 30 percent.     

Credit Conditions
Credit market turmoil is still buffeting the corporate sector, with the effects much worse on companies with poor credit ratings.

Companies rated B or lower have nearly maxed out credit lines, drawing on average 70 percent of the maximum. AAA and AA rated firms, in contrast, have drawn only 27 percent of the maximum.

Duke Univ“Bank lines of credit are usually a temporary source of funding, or are used as a last resort,” said John Graham, a finance professor at Duke and the director of the survey. “In the current market, many companies have few funding options beyond their credit line.

“In fact, there has been a bank run of sorts on credit lines, with poorly rated companies drawing funds now, just in case their bank decides not to lend to them in the future. This action has crowded out the ability of banks to lend to other firms, exacerbating the lack of credit elsewhere in the system.”

Credit markets remain extremely tight. Among companies that report they have been directly affected by credit market turmoil, nearly 60 percent have had trouble accessing capital, and nearly half report a higher cost of credit (relative to pre-crisis costs).

Interested in European and Asian results of the survey? Read more at:
CFO Magazine Business Outlook Survey: Bottom Dwellers
Duke University Survey Results (yes, it’s free)