Predictions, predicaments for 2008

Time to shake the lucky eight ball and make some predictions about the Chicago-area business scene and beyond for 2008. You know the rules, if I'm right--then you heard it here first. And if I'm wrong? Please have the decency to forget I said anything. Here goes:

--Elephant in the house: The housing crisis will not ease until 2009.Here's why: There's nearly a year of housing inventory already for sale throughout the Chicago-area, ranging from newly-built McMansions to trusty old brick Bungalows. On top of that, there's a backlog of people who are eager to sell their homes but haven't put them on the block yet. The result? An over-abundance of houses out there (not to mention a vast amount on vacant lots awaiting developments). Traditionally that would translate into a buyers' market. However, it's going be rougher than ever to get an affordable mortgage, so the number of qualified purchasers will be limited. Thank the gang on Wall Street for a credit crunch that just keeps on giving.

--Major merger maker. Got to be United Airlines with either Delta Air Lines or Continental Airlines. Look for the newly-merged airline to be headquartered in Chicago. Look for UAL Corp. CEO Glenn Tilton to cash out. But that's probably where the good news ends. Any merger with United will be driven by cost cuts, which means massive firings and consolidation. Ouch!

--Most likely corporate break-up. Motorola Inc. Even though the present board of directors doesn't want to bust up the company, it may have little choice--especially if the new CEO fails to quickly turn around its flagging cell phone business. Activist investor Carl Icahn wants to carve it up into four units. This may be his year.

--Fastest sinking ship. Sears Holdings Co.. With retail sales down, stores falling apart and the company stock tumbling it's shaping up to be a devastating year for the parent company of Sears Roebuck & Co. and K Mart. Major investor Edward Lampert, whose investment vehicle owns 40 percent of Sears, is running the show and the place is in a free fall. How bad is it? Even Lampert's most fervent Wall Street followers are turning on him because of this fiasco. Eddie may be ready to liquidate. If so, there goes a few thousand jobs!

--Olympic backlash coming. Recently, I saw a bumper sticker that read: "Say 'NO' to the 2016 Olympics". This may not be a fleeting sentiment. As the area's public works and transit problems grow, the local gentry may decide they've had enough. Look for populist politicos, grassroots activists and community leaders to form a coalition opposing the Olympic bid.

--Middle-class screwed. Beware rising costs ahead! Here's a partial list of basic needs expected to run more in 2008 vs. 2007: Health care (8 percent); college tuition (6-to-8 percent); energy (expect oil to hit $100 a barrel this year); area taxes (2-to-3 percent); and food (4-to-5 percent). Looking for a raise? Keep looking, pal. On average, 3.5 percent area raises are on tap for this year--and that's if you're lucky enough to have a steady job.

--Media upheaval. It's shaping up to be a make-or-break year for the Chicago Sun-Times, whose parent company intends to chop at least $40 million from operations. That's a deep, deep cut. As a result, everything is a cost-reduction candidate. Look for significant lay-offs, merging more community newspaper titles, selling some or all of the suburban dailies (perhaps to Shaw, Gatehouse Media or independent investor groups), maybe taking the Sun-Times to six days a week instead of seven. Don't rule out a sale of the entire company, either. At the Tribune Co., which has just gone private in an estimated $8 billion deal, there's also a sense of urgency. By mid-year, new CEO Sam Zell's team will have some idea of what they're up against. From there, look for asset sales that go beyond just dumping the Cubs. This will be a regrouping time for TribCo. but it's only a recess before another round of cuts and deeper reorganization.

--Speaking of the Cubs. Couple of predictions: A group led by John Canning, chairman of Madison Dearborn, will buy the team and Wrigley Field. The ball yard will NOT be acquired by the Illinois Sports Facilities Authority. Not only is it a bad idea but the timing is not right, especially considering the disgust people have for the state's leadership right now. And Lou Piniella will win NL Manager of the Year (why not?)

--Next president: Hillary Clinton.

So, there you have it. As you can tell, I'm bearish on the local economy and business scene for 2008. But on the bright side, we've been through difficult days before and have always come out alright.
Here's to fighting the good fight and Happy New Year.



(Photo courtesy of jakejacobsen's photos on Flickr)