25IQ

 The post-Depression record for consecutive months with the unemployment rate above 9% was 19 months in the early ’80s. That record will be broken this month, and it is very possible that the unemployment rate will still be above 9% in December 2011…. The economy probably needs to add around 125 thousand payroll jobs per month just to keep the unemployment rate from rising …  If the participation rate does increases – say to 65% over the next year, from the current 64.5% – then the U.S. economy will need an additional 1 million jobs just to hold the unemployment rate steady (not counting population growth). Add in 125,000 per month more jobs to offset population growth, and the economy would have to add 2.5 million jobs in 2011 to hold the unemployment rate steady (assuming a 0.5 percentage point increase in the participation rate). This suggests any decline in the unemployment rate will be slow.
http://www.calculatedriskblog.com/2010/12/question-6-for-2011-unemployment-rate.html

 … If Congress had credibility, there would be no need to worry about the trade-off between helping the economy escape the recession and reducing the deficit. Congress could do what is needed to help the economy now, and promise—credibly with specific plans—to reduce the deficit once the economy has recovered. That would give us the best of both worlds.But, unfortunately, that’s not the Congress we have,  http://economistsview.typepad.com/economistsview/2010/12/how-fast-will-the-economy-recover.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+EconomistsView+%28Economist%27s+View+%28EconomistsView%29%29

 32 per cent of the $13,400bn in bank assets outstanding in the US, for example, are still loans secured on real estate. Mortgage-backed securities account for $1,252bn of the total. Many banks that are not dead today, then, could die very quickly if the housing market turns down again. http://www.ft.com/cms/s/0/5db725e4-11e8-11e0-92d0-00144feabdc0.html#axzz19SretkCq

China has about 23% of the world’s population but only approximately 7% of the world’s fresh water supply. Moreover, China’s water resources are not distributed proportionately; the 550 million residents in the more industrialized northern area of the country are supported by only one-fifth of the fresh water and the 700 million in the southern region of China have the other 80% of the country’s fresh water supply http://www.ritholtz.com/blog/2010/12/kass-15-surprises-2011/#more-61710

Kass: The sideways market of 2011 will prove to be a good year for opportunistic traders but a poor one for the buy-and-hold crowd as neither the bulls nor the bears will be rejoicing next Christmas.  http://www.ritholtz.com/blog/2010/12/kass-15-surprises-2011/#more-61710

During the holiday season, clothing posted the strongest gain, up 11.2% over the same period last year when apparel sales were roughly flat. Electronics sales rose only 1.2% this year, as a glut of televisions drove prices down and shoppers shied away from innovations such as 3D TVs.  http://www.ritholtz.com/blog/

“There are fundamental constraints on the behavior of terrorist organizations that look very similar to the kinds of constraints that startup companies face — that all social groups in some ways face,” he says. “This limit is manpower.”… [A] power law relationship — called “scale invariance” — the risk of a large attack can be estimated by studying the frequency of small attacks. It’s a calculation that turns the usual thinking about terrorism on its head. “The conventional viewpoint has been there is ‘little terrorism’ and ‘big terrorism,’ and little terrorism doesn’t tell you anything about big terrorism,” Clauset explains. “The power law says that’s not true.”

Massive acts of violence, like 9/11 or the devastating 1995 bombing of the U.S. embassy in Nairobi, obey the same statistical rules as a small-scale IED attack that kills no one, Clauset’s work suggests. “The power law form gives you a very simple extrapolation rule for statistically connecting the two,” he says.  http://www.miller-mccune.com/culture-society/the-physics-of-terror-25955/

I think Goldman is bit too optimistic about the economy so I would take their numbers up .25 on unemployment and down .25 GDP.    

http://www.zerohedge.com/article/goldmans-roadmap-losing-all-credibility-and-propaganda-based-utopia 

The U.S. economy will grow at a 2.7 percent rate next year, up from a previous forecast of 2 percent, and 3.6 percent in 2012 

“… private-sector debt/income ratios are still likely to decline further. But it is the pace of deleveraging——which corresponds to the level of the private-sector balance——that matters for GDP.  As the pace of deleveraging slows, the private-sector balance falls, and this implies a positive impulse to GDP growth. 

Finally, we are not saying that the economy will feel good from a ‘Main Street’ perspective. We only expect a gradual decline in unemployment as growth moves above trend, to 9¼% by the end of 2011 and 8½% by the end of 2012. 

Because there is so much slack, inflation is likely to stay well below the Fed’s ‘mandate-consistent’ level of just under 2%.”

On average, economists surveyed by Bloomberg expect the U.S. economy to grow 2.5 percent next year and 3.1 percent in 2012.   Goldman recommends:

Long basket of crude oil, copper, cotton, soybeans and platinum will gain 28 percent.  For its top trades, Goldman recommended betting on a decline in the value of the U.S. dollar against the Chinese renminbi via two-year non-deliverable forwards for an expected return of 6 percent.

which seems directionally wise but the gains will probably be less than that predicted by Goldman.   I think food and energy are the best of these commodity bets.   Buffett won’t make predictions like this (and neither will I, at least in terms of actually making bets) but Goldman did:   

The S&P 500 will likely end next year at 1,450, up 20 percent from 1,206.07 .

Last year at this time Bill asked me “What is your current thinking on the stock market?”  and I said:

Tying to pick a number for the S&P for December 2010 is a mug’s game in a year’s time frame– but for fun will say that I think 1,300 is too high. It is no longer possible for companies to “cut costs” on their way to higher profits on lower sales. US small business is flat on its back and way worse off than the numbers show.  We will likely see at least some double dip as the stimulus wears off– a lot of the recovery we have seen so far is statistical.  For example, if a US firm books revenue from employees working in India in call centers that increases US GDP, which is a deeply broken approach. A car assembled in the US from Chinese parts is not what we once saw from an assembled car in the US as a contribution to GDP. When hiring starts again people will return to looking for work and that will keep unemployment up.  If someone put a gun to my head and said “pick a number for S&P end of 2010″ I would say 1,100.

But put a gun to my head again re S&P 500 in December 2011 and I would say 1,350.