Economic Forecast 2008

One of my correspondents, a Laguna Beach-based private banker, recently attended a luncheon for high net worth investors featuring a talk given by Dr. Abidi, an economic forecaster based at a local university. There were several dozen people in attendance, including a few celebrities, while the majority consisted of investors, private bankers, investment professionals, and real estate developers.

As expected, Dr. Abidi presented a fairly bleak picture, though nothing he said should surprise us. With job growth and consumer spending down, and unemployment up, the next 2-5 years will be critical. Dr. Abidi's brief talk focused on the housing market, a subject on everyone's mind at the moment, especially here in Southern California. Home prices will continue to fall throughout 2008. He is predicting a a drop in local housing prices next year of almost 7%. The non-residential real estate market is still strong, he pointed out, but it will soon cool as well.

When asked where does he see investment opportunity, Dr. Abidi discussed international investments, particularly emerging markets. A weaker dollar currently makes foreign equities and currencies very attractve. Plus, foreign economies are enjoying higher growth than the US economy, which, he emphasised, was poised for lower growth in the next few years. I happen to agree with this assessment. Most of the investors of my acquaintance are moving their money into international funds, ADRs, or non-correlated alternative investments, including hedge funds and commodities.

The sartorial choices on display at the luncheon were varied. For the most part, local investors wore variations on a theme of navy blazer or tweed sport jacket, khakis, and loafers. A few youngsters sported striped shirts and square-toed shoes. The private banking contingent were mostly kitted out in ill-fitting navy suits. Tassel loafers from Cole Haan, Sperry, and Bass were in abundance, and most were worn with suits. One older gentleman was spotted wearing a pink OCBD, navy surcingle belt with a Bahamian crest motif, flat-front khakis, and brown-and-white saddle shoes. His companion was wearing a Vineyard Vines checked shirt.