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Post by unlawflcombatnt on Nov 26, 2006 20:07:49 GMT -6
According to Richard Arvedlund, Founder, Cypress Capital Management, in an article from "Big Picture," the state is not only set for a major Housing Slump, but a major recession as well. He points out that a housing slump, which began in late 2005, is of a magnitude that has always been followed by a recession. He not only believes the housing slump will bring the economy down, but that its effects will last much longer than anyone expects. He also points out that auto manufacturers are also expecting double digit declines in production next year. If the auto industry slows down, and the housing bubble bursts, how could we possibly not have a recession?
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Post by lc on Nov 26, 2006 21:59:23 GMT -6
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Post by beachbumbob on Nov 27, 2006 11:42:46 GMT -6
way the housing market goes, so goes US economy as the most of the "wealth" and asset "growth" and GDP "growth" was centered on the housing bubble, the run up of RE valuations and the home equity cashouts......
I believe the number of negative savings quarters by US households have set now...
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Post by tatuma on Nov 28, 2006 5:54:53 GMT -6
Just when I was trying to figure out how to invest in a Stagflation environment, it seems the question should be how to invest in a major recession.
The Fed has been touting that inflation is no longer a problem and thinks its job is done, and there are rumors of decreasing or at least not increasing the prime.
Oil prices are dropping and every thing is just fine!
Move along nothing to see here...
TAT
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Post by unlawflcombatnt on Dec 23, 2006 16:06:34 GMT -6
Tatuma, I think you've got the right idea. Now the issue is what to invest in during a recession. I don't have any good suggestions at present. If I recall correctly, economist Nouriel Roubini said investing in the dollar was a good bet during a recession. That makes sense to me if people stop spending and start hoarding the dollar, like they did during periods of the Great Depression. But that would also depend on foreign countries not converting their dollars into another currency, and causing demand for the dollar to drop as a result. Roubini knows his stuff, but I'd still be leery of investing in the dollar. The Fed will no doubt drop the interest rate when it realizes the economy is falling off a cliff. No doubt the Fed will try to engineer a massive increase in M2 if the economy goes south. I still think precious metals, especially gold, are the way to go. Many believe the price of gold has been manipulated to suppress the price. There is some big picture evidence that this has happened, when looking at long-term price changes. This is especially noteworthy in the late 90's, when the price of gold dropped significantly. The chart below shows a comparison of gold, silver, and platinum prices. It appears gold prices declined more than silver and platinum during the period shown by the yellow highlighting. As the Central Banks in Europe sell off their gold supplies, it will become progressively more difficult to suppress prices, simply because there isn't any more gold to sell to increase the supply and suppress prices as a result. Currently much of the gold "supply" is coming from an increase in the "virtual" supply. This pseudo-supply increase is coming from ETF sales of gold that has been loaned to the ETF companies from bullion banks. Much of the gold purchased this way is not even in the possession of the ETF fund management. Some of it is, but it is still reported as actual gold supply by the bullion bank that loaned the gold out. Thus the same 1 oz. of gold is reported to be owned by 2 separate parties, while only 1 oz. of gold actually exists. Thus 1 ounce of gold can be used to increase the virtual supply to 2 ounces. As more public realization of this duplicity occurs, this virtual supply increase will slow. More buyers will request actual delivery of the gold they've purchased, rather than letting the ETF (or other broker) store this "virtual" gold for them. Also, gold prices continued to rise during the 2001 recession. I suspect the same will be true with the upcoming recession.
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