2012 Economic Outlook  Lighthouse Growth Resources  June, 2012  By Bill Bayer
2012- The Paradox Economy• For four months, it seemed like the  European crisis was solved, the US  economy was recovering...
Two Conflicting Scenarios• An end to the recovery caused by  failure to resolve European crisis • Interest rates continue ...
If New Recession• Unemployment rises• Interest rates drop• Housing market stalls and possibly  declines again• Gold, energ...
If Continued UN-Recovery• Unemployment drops slowly• Interest rates stabilize and then move  upward as European crisis is ...
Agenda For Today•   Interest Rates•   Europe (by country)•   Inflation / Deflation•   Employment•   Housing•   Gold, Oil a...
Interest Rates• Bond market has focused on European  crisis and potential for global recession• Record low LT US Bond Inte...
Interest Rates - f(x)• Perceived Credit Risk• Economic Growth Outlook• Inflation (Or Deflation)  Expectations• Confidence ...
GDP Growth by Country – 2012/2011•   Euro Area – (-0.10) / 2.40•   Switzerland – 2.00 / 2.50•   Germany – 1.70 / 4.70•   F...
Inflation by Country – 2012 / 2011•   Europe Area – 2.60 / 2.70•   Switzerland – (-1.00) / (-0.70)•   Germany – 1.90 / 2.1...
Interest Rates by Country –           Govt. 10 YR Bonds•   Switzerland - 0.54 / 1.63•   Germany – 1.31 / 2.96•   France – ...
Other Large Nations – 2012/2011                                                         Interest   Country       GDP Growt...
Unemployment Around the World –2012/2011 (1)                         2012                          2011        Country    ...
Unemployment Around the World –2012/2011 (2)                       2012                          2011    Country        Un...
Inflation or Deflation?• Data from 2011 to 2012 indicates: • Lower economic growth • Lower Inflation • Interest rates high...
Slowest US Employment   Recovery in 65 Years      Copyright William W Bayer 2012
Lowest Employment Population       Ratio Since 1975         Copyright William W Bayer 2012
Construction Employment Down        29% from Peak         Copyright William W Bayer 2012
Employment is Still Only at 96%       of Previous Peak          Copyright William W Bayer 2012
Small Business Hiring Plans       are Improving        Copyright William W Bayer 2012
Missouri Unemployment is at   7.2% versus 9.8% Peak        Copyright William W Bayer 2012
New Home Sales Remain Below      Previous LOWS!         Copyright William W Bayer 2012
Divergence of New Home Sales    and Existing Home Sales         Copyright William W Bayer 2012
Home Prices Flutter Around +/-  5% Year Over Year Change          Copyright William W Bayer 2012
Home Price Index Still Off Over       30% From Peak          Copyright William W Bayer 2012
Real Housing Prices Have   Declined Over 40%       Copyright William W Bayer 2012
And Look Like a Good Deal  Versus Renting - BUT       Copyright William W Bayer 2012
Housing Market Conclusions• Houses look like a good deal, BUT• Have attitudes about housing changed? • Many people no long...
The Markets• In 2012, Markets have been volatile• Up moves have been followed by sharp  and quick reactions• Difficult mar...
Treasury Bonds – Prices Rise /    Safety Haven Purchases         Copyright William W Bayer 2012
CRB Index (Inflation) has dropped  sharply (24%) Since early 2011           Copyright William W Bayer 2012
Corn and Other Crop Prices have    Moderated Or Are Falling          Copyright William W Bayer 2012
Slowing World-Wide Economic Growth      has Caused Oil Price Decline           Copyright William W Bayer 2012
US Dollar has Rallied as Alternative  to Euro and Due to T-Bond Rally            Copyright William W Bayer 2012
Euro is Near 4 Year Low – What if       The Lows Are Broken?          Copyright William W Bayer 2012
Gold Remains in Long Term Uptrend, But  has Reacted to Support at 1525-1550            Copyright William W Bayer 2012
SP 500 has Dropped Sharply From April    Highs – Topping? Or Rally Again?            Copyright William W Bayer 2012
The Election - Obama• When the economy is poor, incumbent  Presidents seldom win• Obama’s handling of the economy has  bee...
The Election - Romney• Republicans, except for Reagan,  generally run poor campaigns• Romney’s communication skills are  p...
Election Forecast• Obama needs 50 of remaining 147  Electoral Votes to Win; Romney needs  100• Midwest, Colorado, Arizona,...
Small Business – What to Do • Get ready to survive in slowing economy • Avoid risky investments • Round sales forecasts do...
If Economic Crisis Occurs• Sell all stock market holdings• Buy treasury bonds• Identify key employees and cut staff  where...
Closing Thoughts• I still expect 2012 to be a good year.(I do  not expect a Crisis.)• If you made money in 2011, you shoul...
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Midyear Economic Outlook

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Bill Bayer, financial expert and small business coach, walks through the current economic state, projecting two possible outcomes: re-enter a recession, or continue in a slow recovery.

What does the contrast between first and second quarter indicate? Will the housing market continue to rise? What happens if the European crisis continues? How does the economy affect the upcoming presidential election? What should I do with my investments and savings? How should I run my business in light of the economy? What are current unemployment rates? Does the future of our economy look better or worse?

Bill addresses questions such as these in his presentation. For more on these topics, visit his blog. www.uncommonwisdomblog.com

Published in: Economy & Finance, Business
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  • Copyright William W Bayer 2012
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  • Midyear Economic Outlook

    1. 1. 2012 Economic Outlook Lighthouse Growth Resources June, 2012 By Bill Bayer
    2. 2. 2012- The Paradox Economy• For four months, it seemed like the European crisis was solved, the US economy was recovering, and housing and employment were improving.• But reality returned in second quarter• The UN-Recovery persists • And threatens Obama’s re-election Copyright William W Bayer 2012
    3. 3. Two Conflicting Scenarios• An end to the recovery caused by failure to resolve European crisis • Interest rates continue to fall • Europe and then rest of the world start a new recession• Or the UN-recovery continues with gradual improvements in the economy over the next 2-3 years. Copyright William W Bayer 2012
    4. 4. If New Recession• Unemployment rises• Interest rates drop• Housing market stalls and possibly declines again• Gold, energy and other commodity prices drop further• The stock market declines sharply Copyright William W Bayer 2012
    5. 5. If Continued UN-Recovery• Unemployment drops slowly• Interest rates stabilize and then move upward as European crisis is resolved• Housing market continues slow recovery• Gold, energy, commodity markets and the stock market will move upward slowly but be volatile. Copyright William W Bayer 2012
    6. 6. Agenda For Today• Interest Rates• Europe (by country)• Inflation / Deflation• Employment• Housing• Gold, Oil and commodities• The Stock Market• The Election• Outlook for Small Business & What to Do Now Copyright William W Bayer 2012
    7. 7. Interest Rates• Bond market has focused on European crisis and potential for global recession• Record low LT US Bond Interest Rates • Under 1.50% for 10 YR Treasury• Markets are ignoring LT inflation threat• Markets are saying that solution to European debt crisis and eventual US Debt crisis will be very poor economic growth• Possibility of Deflation Copyright William W Bayer 2012
    8. 8. Interest Rates - f(x)• Perceived Credit Risk• Economic Growth Outlook• Inflation (Or Deflation) Expectations• Confidence in Government/ Country’s Economy Copyright William W Bayer 2012
    9. 9. GDP Growth by Country – 2012/2011• Euro Area – (-0.10) / 2.40• Switzerland – 2.00 / 2.50• Germany – 1.70 / 4.70• France – 0.33 / 2.10• Greece – (-6.50) / (-8.00)• Ireland – 0.70 /(-0.20) (4th quarters)• Italy – (-1.40) / 0.80• Spain – (-0.40) / 0.80 Copyright William W Bayer 2012
    10. 10. Inflation by Country – 2012 / 2011• Europe Area – 2.60 / 2.70• Switzerland – (-1.00) / (-0.70)• Germany – 1.90 / 2.10• France – 2.10 / 2.50• Greece – 1.40 / 2.40• Portugal – 2.90 / 2.70• Italy – 3.20 / 3.30• Spain – 2.10 / 2.40 Copyright William W Bayer 2012
    11. 11. Interest Rates by Country – Govt. 10 YR Bonds• Switzerland - 0.54 / 1.63• Germany – 1.31 / 2.96• France – 2.56 / 3.33• Greece – 28.91 / 16.73• Ireland – 8.21 / 11.24• Italy – 6.04 / 4.79• Spain – 6.51 / 5.47• Portugal – 10.67 / 10.43 Copyright William W Bayer 2012
    12. 12. Other Large Nations – 2012/2011 Interest Country GDP Growth Inflation RatesUnited States 2.00 / 1.60 2.30 / 3.00 1.60 / 2.99United Kingdom 0.00 / 0.50 3.00 / 4.20 1.65 / 3.25China 8.10 / 9.10 3.00 / 4.10 3.34 / 3.89India 5.30 / 6.10 7.23 / 7.50 8.33 / 8.24Japan 2.70 / (-0.50) 0.40 / (-0.20) 0.87 / 1.15Australia 4.30 / 2.30 1.60 / 1.80 3.07 / 5.17Canada 1.80 / 2.20 2.00 / 2.30 1.78 / 3.00 Copyright William W Bayer 2012
    13. 13. Unemployment Around the World –2012/2011 (1) 2012 2011 Country Unemployment Unemployment Rate RateSpain 24.44 22.85Greece 21.90 20.70Portugal 14.90 14.00Ireland 14.30 14.30Italy 10.20 8.90France 9.80 9.80United Kingdom 8.20 8.40 Copyright William W Bayer 2012
    14. 14. Unemployment Around the World –2012/2011 (2) 2012 2011 Country Unemployment Unemployment Rate RateUnited States 8.20 8.50Germany 7.40 6.60Canada 7.30 7.50Brazil 6.00 4.70Australia 5.10 5.20Japan 4.60 4.50China 4.10 4.10 Copyright William W Bayer 2012
    15. 15. Inflation or Deflation?• Data from 2011 to 2012 indicates: • Lower economic growth • Lower Inflation • Interest rates higher for RISKY countries and rates have gone very low for “Safe” Countries.• Risk of world-wide recession and potential deflation is significant.• Deflation is brutal economic environment! Copyright William W Bayer 2012
    16. 16. Slowest US Employment Recovery in 65 Years Copyright William W Bayer 2012
    17. 17. Lowest Employment Population Ratio Since 1975 Copyright William W Bayer 2012
    18. 18. Construction Employment Down 29% from Peak Copyright William W Bayer 2012
    19. 19. Employment is Still Only at 96% of Previous Peak Copyright William W Bayer 2012
    20. 20. Small Business Hiring Plans are Improving Copyright William W Bayer 2012
    21. 21. Missouri Unemployment is at 7.2% versus 9.8% Peak Copyright William W Bayer 2012
    22. 22. New Home Sales Remain Below Previous LOWS! Copyright William W Bayer 2012
    23. 23. Divergence of New Home Sales and Existing Home Sales Copyright William W Bayer 2012
    24. 24. Home Prices Flutter Around +/- 5% Year Over Year Change Copyright William W Bayer 2012
    25. 25. Home Price Index Still Off Over 30% From Peak Copyright William W Bayer 2012
    26. 26. Real Housing Prices Have Declined Over 40% Copyright William W Bayer 2012
    27. 27. And Look Like a Good Deal Versus Renting - BUT Copyright William W Bayer 2012
    28. 28. Housing Market Conclusions• Houses look like a good deal, BUT• Have attitudes about housing changed? • Many people no longer see rising housing prices as an excellent investment. • Lack of price appreciation makes it easy for people to postpone purchases• Mortgage availability is still tight and paperwork is punitive.• Housing grows AFTER employment! Copyright William W Bayer 2012
    29. 29. The Markets• In 2012, Markets have been volatile• Up moves have been followed by sharp and quick reactions• Difficult market for investors due to lack of sustained trends• Tricky market for traders• Professionals and large institutions have lost huge $ - Example JP Morgan• Overall returns are disappointing Copyright William W Bayer 2012
    30. 30. Treasury Bonds – Prices Rise / Safety Haven Purchases Copyright William W Bayer 2012
    31. 31. CRB Index (Inflation) has dropped sharply (24%) Since early 2011 Copyright William W Bayer 2012
    32. 32. Corn and Other Crop Prices have Moderated Or Are Falling Copyright William W Bayer 2012
    33. 33. Slowing World-Wide Economic Growth has Caused Oil Price Decline Copyright William W Bayer 2012
    34. 34. US Dollar has Rallied as Alternative to Euro and Due to T-Bond Rally Copyright William W Bayer 2012
    35. 35. Euro is Near 4 Year Low – What if The Lows Are Broken? Copyright William W Bayer 2012
    36. 36. Gold Remains in Long Term Uptrend, But has Reacted to Support at 1525-1550 Copyright William W Bayer 2012
    37. 37. SP 500 has Dropped Sharply From April Highs – Topping? Or Rally Again? Copyright William W Bayer 2012
    38. 38. The Election - Obama• When the economy is poor, incumbent Presidents seldom win• Obama’s handling of the economy has been weak.• ObamaCare is unpopular• Favorable Press coverage and large (and growing) Democratic(Entitlement) base favors Obama• Obama states - 221 Electoral Votes Copyright William W Bayer 2012
    39. 39. The Election - Romney• Republicans, except for Reagan, generally run poor campaigns• Romney’s communication skills are poor compared to Obama• Romney needs to focus on key issues – economy, size of government, tax policy – And avoid emotional social issues (which are losers.)• Romney states - 170 Electoral Votes Copyright William W Bayer 2012
    40. 40. Election Forecast• Obama needs 50 of remaining 147 Electoral Votes to Win; Romney needs 100• Midwest, Colorado, Arizona, Florida, North Carolina are key to Romney• Economic slowdown will tilt the election to Romney• Romney wins a close one! Copyright William W Bayer 2012
    41. 41. Small Business – What to Do • Get ready to survive in slowing economy • Avoid risky investments • Round sales forecasts down, not up • Delay all non-sales hiring • Increase spending on effective marketing and sales activities • Cut poor performers • Build liquidity – in Business and Personally Copyright William W Bayer 2012
    42. 42. If Economic Crisis Occurs• Sell all stock market holdings• Buy treasury bonds• Identify key employees and cut staff where-ever possible• Preserve cash • Cash is king in a crisis• Reduce life style expenditures• Act quickly and act quickly again to reverse positions if crisis passes. Copyright William W Bayer 2012
    43. 43. Closing Thoughts• I still expect 2012 to be a good year.(I do not expect a Crisis.)• If you made money in 2011, you should make about the same in 2012.• Actively manage your business. Be alert.• Focus on improving your sales & marketing functions• Refinance if possible (last chance?)• Cut marginal people – make this an ongoing discipline Copyright William W Bayer 2012
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