Over the last few weeks, many companies have come out and expressed their fear that the US economy may be heading into recession some time in 2008. These companies include AT&T and UPS. Countrywide CEO has already claimed that the housing market is in its worst recession since the Great Depression. Reviewing the market performance since the start of the new year also shows that wall street is also concerned about possible recession in the US
Will it happen or not is anyone’s guess
The way I see it, the economy is already in recession in pockets. Sure, the housing market is in doldrums, and is already affecting the consumer morale. There are geographies in the country that are already suffering. Michigan is one. The USD has been plummeting for a while making even the cheap imports more expensive, at the time when the consumers have started to pull back on their discretionary expenditure. The malaise seems to be spreading, not receding, so much so that White House, after being in denial for some time, is now talking about possible measures to kick start the economy
What is a long term investor to do?
This are precisely the times when being invested in value stocks with high margin of safety makes sense (it actually makes sense in all economic times). Be patient and look for opportunities outside of US. While the US downturn may affect the foreign markets as well, most of the reasons for the US economic downturn is local. Additionally, if you do want to maintain exposure to the US economy and have a long term horizon, consider investing in companies that have global franchises and are financially strong. Good values among such companies are not hard to find today. Take Bank of America for example
But most of all, keep some cash that can be deployed to scoop up value stocks as the opportunity to do so will arise more and more in rest of 2008. And be patient
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I agree that we are already in a recession in small pockets, though lagging indicators may not reflect this for some time. Enjoyed your site.
Thanks frugal dad for stopping by! Loved your site too. I do hope and expect the US to come out of this rather quickly but let’s see
I think they are suppressing all of the info on the current state of the economy. I was disappointed to find in your poll that not all the candidates are listed. I would not vote for any of them, but instead for Ron Paul. If you add him to your poll, I’ll vote!
Thanks Laura for stopping by! Many readers have requested to add Ron Paul to the poll, but unfortunately since there are already votes in, I am not able to change the poll now. But I do encourage readers to make their wishes known via comments so at the end of the poll when I publish the results, I will take this into account as a write-in vote