All this recession talk has not convinced me that we are destined to have one, and I see plenty of signs that 2008 might surprise to the upside. There are plenty of problems within the US economy, and I could make a case that there is a possibility that the economy might catch cold but remedies also exist. I see the cup as half full for the stock market. This is not to say that individuals will not have to deal with hard times, they will - but the market might shine. This can happen because the market is global.
Many widely followed investment icons have a different perspective, including renowned international investor Jim Rogers in the December issue of Fortune who said, "In my view, the U.S. economy is in recession. I know the government says we're not. But as I look around, we know that automobiles are in worse than recession. The same thing is true for home-builders. Much of the financial sector is in worse than recession. So many parts of America are in worse than recession, and yet the government says we're not in a recession. I don't know what's so strong that it's offsetting these major weaknesses in the American economy. I just assume that the government is lying."
I can agree that the government is lying, but I can't agree that the economy is void of positives. There is plenty that is going strong in the economy. The defense sector is going strong as I reported on recently Defense sector rolls over S&P 500 for 8th straight year and there is every indication this will continue.
Another sector that has been on fire the last few years and looks to continue marching forward is food production and everything related to it: for more on that angle, see Serious Money: ADM, Bunge, Potash Corp. -- it's a hungry world.
The energy companies, medical device companies, software companies, utilities, mining, precious metals, water treatment, and many other industries have been doing very well. I look for the first half of the year to be very tepid while we all wait for the other shoe to drop as the financial institutions come clean on more losses and write-downs. After that, investors will be pouring back into the sector for bargains and some have already despite the risk
The Federal Reserve has been pushing interest rates down and is likely to continue to do so. This will also have an impact in the latter half of the year. Our lowered rates are forcing other nations to follow. It is also an election year and the Beijing Olympics are coming up too. There will also be a lot of major real estate transactions this year as some choose to take capital gains before Washington changes hands next year.
In any event, look to invest based on the fundamentals in specific opportunities and you will improve your chances of staying out of harms way.
To find potential opportunities and verify my track record read Chasing Value or Serious Money.
Sheldon Liber is the CEO of a small private investment company and the design and research principal for an architecture & planning firm.
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Reader Comments (Page 1 of 1)
1-02-2008 @ 11:17AM
william lindblad said...
Everyone is entitled to an opinion, but I don't believe in the tooth fairy. There are sectors of the economy that presently still have strength, however the consumer does not appear to one of them. In the past 5 years 2/3 of economic growth has been supported by consumer spending. The consumer is being hard pressed by credit problems resulting from a personal deficit spending program. The price of fuel and food are continuing to rise and it is quite obvious that the consumer is running out of money. We DO have a recession and quite possibly a depression in the works.
1-02-2008 @ 11:56AM
Sheldon L said...
WL -- I always appreciate your comments, keep them coming, and Happy New Year.
Consumers may reduce spending but little will change in roaring global demand and that is the story not consumer spending. If not for the global consumer (spending) us American consumers might very well be in a very deep recession for the last two years.
The man in the street might suffer and Wall Street might still shine, another symbol of the administrations focus on the "haves" and more separation from the "have nots".
Look how hard the Fed is proping up Wall Street while letting the dollar slide.
1-02-2008 @ 1:39PM
David Huston said...
Serious recession; no money. That's my read. The consumer can't spend what it doesn't have, particularly with credit collapsing on the housing front. The next dropping shoe will probably be runaway credit card defaults and further tightening by credit issuers to prevent further losses. Only rich Republicans do well in this kind of economy.
1-02-2008 @ 1:58PM
Gary E. Sattler said...
Sheldon, what you seem to bypass is that the WORLD economy was built upon the backs of the American work force and consumers. Now, in light of the declining financial power of the American consumer we have a world manufacturing base which could be left twiddling it's thumbs. Just wait for the numbers to trickle out of China this year as they become increasingly hard pressed to sell us their whimsy and flash.
This debt bubble had to burst and we have seriously difficult times ahead as paper equity realigns with real value.
The upside is that for those people who don't get badly burned as the markets continue to ratchet ever downward and real estate values decline, their net worth shall remain relatively unaffected. True assets of value will recover and grow quickly once everything settles into the new economy which shall require a significantly increased level of responsibility from banks and consumers world wide. In the mean time, you're throwing the dice every time you call your broker.
It's my opinion that The Bear shall hang tough until the DJIA rests between 12,200 and 12,500. At that time, the rush of investment capital back into the markets will be like nothing you've ever seen.
It could happen in 2008, but it probably won't. There's too much change which needs to take place first.
1-02-2008 @ 2:56PM
Sheldon L said...
Gary,
I agree with a good deal of your comments. However, I think China is less dependent on the the US than ever before and more dependent on foreign oil.
I think it is unthinkable that there will be anything but full bloom in China for the Olympics even if they have to do economic acrobatics to accomplish this. The Bush Adminstration will do the same not to allow falling markets in an election year.
Do not ignore the power of 3% interest rates which we will see for sure if the market becomes unsettled.