For the past year I’ve been telling folks we’re in for a nasty correction–or even a recession–in 2006 and 2007. Why?
1. Housing bubble
2. Consumer debt at all time high
3. Consumer savings at an all time low
4. Much of consumer spending is based on paper wealth from their homes (sound familiar?)
5. The technology industry is based largely on consumers (think: iPod, Google, etc), or companies which enable companies that service consumers (i.e. Microsoft, Oracle, SAP, etc. selling into companies like McDonalds).
6. Cost of the war
7. Global terrorism
8. China’s never-ending need for oil will keep oil prices high–don’t think $100 a barrel won’t happen, it will.
Today I think we had one of those days when things start to come apart. Reminds me of the day right before the bubble burst, that my friend Jeff Dachis of Razorfish was edited down by 60 Minutes to look like a complete fool who couldn’t explain what his company did. The dotcom bubble bursted shortly after that.
Now, this isn’t as bad as back then (I mean, we don’t have accounting scandles going on right now–right?!).
Why do I think today was the day? The day that things could start coming apart?
First, I read Om’s insane $38 for a pair of eyeballs article, but more importantly some folks actually defended those numbers!
Second, there were not one, not two, but THREE, three articles in the WSJ today about the housing market slowing down. They all danced around the crash issue, but clearly that’s what’s on people’s minds.
Third, I looked up at the TV while having a diet Coke at LAX to see Bush defending the war in Iraq and how we couldn’t leave without winning. The look on his face was very disturbing, clearly the guy is torn and he’s feeling the heat. Someone like that might not make the best decisions. Sometimes he looks like he’s ready to say “we’re outta here!” other times it looks like we might stay there for five more years. I get the sense he’s not going to leave, which means a lot more national debt and a lot more terrorism in the short term.
Fourth, I’m on a layover right now and the top news story is Goog is down ~$20/5%. When investors–perhaps even insiders–start selling Google you know the parties over.
What do you guys think?
2006: banner year, bust, or average?