Brace yourselves for a gloomier 2009

Now that the holidays are over, businesses are back to work and the children will soon be back to school. If you managed to survive and keep you job in 2008, will you be fortunate enough to have the same employer by the end of 2009? The magnitutde of the financial crisis on consumer behavior will soon be reported within the next few weeks. Many firms are cutting back hours for now, rather than immediately cutting employees. But as more industries, other than banking, automotive and steel request bailouts from the government, expect massive layoffs in 2009 as corporate CFOs try to improve the bottom line in the new year.
Consumers can forget tapping money previously earned from rising housing prices over the 91-06 period, know as "the wealth effect." In the most recently reported month of October 2008, the Case Schiller Index for Atlanta and the composite 20 major cities shows housing prices continuing to fall 10.5% and 10.8%, respectively from a year ago. Since January 2000, Atlanta housing prices have now risen only 20%, while the national average has risen 58%. As prices continue to fall further in 2009, the extra home equity that consumers tapped for home improvements, cars and other major expenses will continue to shrink considerably, just like their IRAs and 529 savings for their children's college funds did in 2008. As the fear of more ponzi schemes and untrustworthy financial advisors grips Americans and global investors alike, large amounts of extra income from previously higher return on investments may take years to be recaptured.

So consumers, take charge and help your country out by spending our way to recovery. But remember to spend it wisely!