A Brave New World of Investing

On October 3, 2008, I stated in my personal blog that the recession was going to long and deep. I see nothing to change that assessment. Let me give you 5 Signs that we are still in deep trouble and then some TIPS.

Signs that we are still in trouble.

1. STILL LOSING JOBS. Last month we still lost 539K jobs....the gov offset some of the losses by adding 66K jobs at an average of $75K per year. Without gov jobs, we would have still been over 600K lost jobs. How come the gov doesn't have to sacrifice?

2. U.S. HOUSING STARTS are down 77.6% compared to the boom of the mid 2000's.

3. AUTO SALES DOWN 44% from peak of Feb 2007.

4. CONSUMER CREDIT DECLINE. Now I believe this is a good thing. Credit card companies are the new loan sharks of our time. The Bible says, "the borrower is always a slave to the lender". But when your economy is 70% consumer spending, then less credit spending does not bode well for the economy. The last 2 quarters have been the biggest collapse in consumer credit ever! The good news is that consumers are saving at a rate of 4%. (Today that savings rate is up over 5%.)

5. THE BANKS AREN'T FIXED. They are still holding on to their cash trying to build cash as they await the next round of losses. Lending that drives the economy is affected.

INVESTING TIPS:

1. The current market rally is going to be short lived. This is a classic Bear market rally. You need to be a trader right now, not a long term investor.

2. Beware of INFLATION..... many are predicting this is not going to be a problem, but I can't see how it won't be a problem. With coming inflation and the current devaluation of the dollar...do need to be ready with a plan? Do you have a plan?

3. An investor can find a lot of ways in this economic climate to make money. No, it's not gold. Gold can be a play....but I describe it as "fool's gold" because people are promoting it by using fear. The best strategy is one that has guaranteed no loss positions, inflation hedged positions, and contrarian trading positions and a willingness to move in and out of the market!