Warning of 'Serious' US Economic Correction

George Soros Forecast
NEW YORK (Reuters) - Billionaire investor George Soros forecast on Monday (2 Nov 07) that the U.S. economy is "on the verge of a very serious economic correction" after decades of overspending. "We have borrowed an awful lot of money and now the bill is coming to us," he said during a lecture at the New York University, also adding that the war on terror "has thrown America out of the rails." Asked whether a recession was inevitable, Soros said: "I think we are definitely in for a slowdown that I think will be a bigger slowdown than (Fed Chairman Ben) Bernanke is seeing."Soros said that, for now, China is the "absolute winner" in economic terms, and will continue to see its economy soaring during the next few years. "Now it is going through this fantastic transformation but in 10 years time I think you may well have a financial crisis in China," he said.

(Soros was famous for his speculative attack on the Bank of England that made him >US$1billion, and his organization was linked to speculation on Asian currencies during Asian Crisis in 1997)
(http://biz.yahoo.com/rb/071105/soros_economy_slowdown.html?.v=1&.pf=banking-budgeting)

2 Million Empty Homes in America
NEW YORK (CNNMoney.com) -- The number of vacant homes for sale rose in the third quarter, according to the latest government reading that casts new harsh light on the weakness of the housing market. The Census Bureau report puts the number of vacant homes for sale at 2.07 million in the period, up about 2 percent from the second quarter, and 7 percent above year ago levels.

"It's really striking how high that is compared to historic levels," said Dean Baker, co-founder of the Center for Economic and Policy Research. "It's a lot of homes sitting there vacant. It's very hard to see how we're near a bottom, when you have that much excess supply."

There are estimates that about 2.8 million homeowners could see the payments on their subprime mortgages reset higher in the next two years. If they can't afford the new payments or be able to refinance due to the significantly tighter mortgage market, that could cause an additional flood of empty homes onto the market.

"It's very hard to see how this doesn't get worse," Baker said. "It's certainly possible we could see 3 million, maybe 4 million (vacant homes on the market.)"
(http://money.cnn.com/2007/10/26/news/economy/vacant_homes/index.htm)

The Business Times (Singapore)
It is said the current US credit problem will take "a long time to work its way out. You don't cure a (credit market) bubble in five or six months, it takes five or six years", quoted by Mr Jim Rogers, of co-founder of Quantum Fund with Mr Soros. (7 Nov 07)

Further comment by Mr Sakakibara, former Japan's vice-minister for finance and international affairs, now professor at Tokyo's Waseda University, warned that global financial markets are likely to face further bouts of volatility. "what we have seen thus far "is only the tip of the iceberg" and the problem will probably linger for 6-18mths. The world economy is highly integrated now, and is highly possible that the US will slow down sharply or even go into recession. In such an event, Asia cannot be unaffected. (2 Nov 07)

Economic Correction, Sub-prime and Credit Woes
With data shared in my recent post, there are reasons to be cautious in our investments. Are we installed for a huge correction that may last for a long time? If the reports above are true, wouldn't that lead the way into 2010 when the first baby boomers retires? I should avoid being overly pessimistic over the economy, but facts are keeping me worried. Signs will show hints of a correction, but it takes observation and careful actions (plus conservative thinking) to avoid falling into it.