"Things are going to get a lot worse before they get worse." Lily Tomlin
First of all, let me say this is my opinion, based on my experience investing over the past 20 years. I could be very wrong :-) I hope I am wrong, since I own a house, am invested in the stock market, and recently retired early. However, here's why I think I need to plan for a bad year, economically speaking.
Everything looks pretty bleak. It's tough to think of any recent good news. Job growth -none. Oil and gasoline prices - none. GDP - none. Stock market - none. Real estate - none. Municipal bonds - none. Mortgage defaults - none. Bush administration - maybe, yes. Edward Lazear, who is Bush's top economic advisor, recently said, "I'm still not saying that there's a recession," but says economic growth could be negative in the current quarter. Global markets - some, yes, but many are weakening.
More bad news keeps coming. First, there were sub prime mortgages. Next came CDOs, mortgage company failures, financial institution write downs, rogue traders, and bond insurer troubles. Now people who can afford to pay their mortgages are choosing to walk away. Unfortunately, I believe the next few months will bring more bad news.
In December, 2007, I wrote about Protecting Our Savings Against A Recession. We have implemented the first two approaches and part of the third approach. This month I will be putting in place the rest of the third approach by shorting select stocks.
It has been a while since I've shorted stocks. The last time was in 2004, with mixed results. In today's market, many stocks have already declined significantly. The challenge will be to find stocks which still may decline in the upcoming months. However, if I am correct that 2008 will be a negative year for the stock market, I expect I will find a number of stocks appropriate for shorting.
For more on Reflections and Musings, check back every for a new segment.
This is not financial or investment advice. Please consult a professional advisor.
Copyright © 2008 Achievement Catalyst, LLC
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1 comment:
You could also add that returns on "safe" investments such as CDs and money market funds have been declining. Folks who rely on these vehicles for income should expect less interest in 2008 than in previous years.
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