Goldman Sachs Sees Recession In 2008
 

I hope everyone takes a little time (no, make that a lot of time) to ensure your finances are in order and that you can weather this recession. I don't think it will last very long, but it could be painful once we are mired into it.

From Reuters:

NEW YORK - Goldman Sachs on Wednesday said it expects the U.S. economy to drop into recession this year, prompting the Federal Reserve to slash benchmark lending rates to 2.5 percent by the third quarter.

In a note to clients, Goldman said real gross domestic product would contract by 1 percent on an annualized basis in both the second and third quarters. For all of 2008, the investment bank said GDP would rise by 0.8 percent.

The unemployment rate will rise to 6.5 percent in 2009 from the current 5 percent, it said.

The weakening economy will force the Fed to lower policy rates by an additional 1.75 percentage points from the current 4.25 percent. Starting in September, the Fed cut rates at the last three meetings of the Federal Open Market Committee, reducing the target rate on loans between banks by 1 percentage point from 5.25 percent.

Goldman strongly advises fund managers to overweight health care, consumer staples, energy and utilities. They are significantly underweight consumer discretionary, financials, industrials, materials and information technology.

The three most significant changes to their sector recommendations are the reduction in the financial sector weighting by 300 basis points to 14 percent, the information technology weighting by 400 basis points to 15 percent, and the increase in their health care weighting by 300 basis points to 17 percent, the firm said.

Their reduced allocation to financials reflects weak fundamentals and their declining weight in the S&P 500. The reduction in information technology reflects that the group has been the second-worst performing sector in both the six months leading up to a recession and during the first phase of a recession, Goldman said.

The health care weighting change reflects strong performance of the group during the six months leading up to and during the first phase of a recession in addition to an attractive valuation, Goldman said.

On Monday, Merrill Lynch economist David Rosenberg said the jump in U.S. unemployment in December confirmed that the economy was entering a recession.

I think it's being over played by the media, I think the economy will just shift to a more export orientated stance over the next few years and reverse the current account deficit thats accumulated

Low interest rate, higher unemployment and a weak USD all point to increased exports and lower imports than previous years

What kool-aid have you been drinking? There is a fire-sale going on in the US right now. Good 'ole US of A is no longer the front runner of manufacturing and emerging economies and markets. It has ALL shifted overseas.

This country had better wake up and smell the coffee...it is time to become "a healthy and well nourished educated labor force...which leads to sustainable economic growth." This country needs to develop ALL of it's human & intellectual capital and stop all the bull####.


atp

Depends who you listen to really

http://edition.cnn.com/video/#/video...s.harrison.cnn

Our money needs to start staying in the US. I for one, search high and low to purchase goods made in the U.S. Even the Eco stimulus package DC. is pushing for, like it's the saving grace, is worthless. Think about it. You give a person $300-800, they buy a product. A good percentage goes to the retail store and a small percentage to the cargo handlers, but the real profit goes to China or India (real profit is taking raw materiel and making the value increase through manufacturing). Thus, any eco stim package will temporarily produce a rise, but the long term benefits go outside this country. WE ALL NEED TO WAKE UP!!!

As for who you listen to? Think for yourself! Gather information and test it against facts you know. So let’s think about the US, 6 Tril in debt, 900B in deficits (which is the short-fall each year, 7% of GDP), wars being financed in both Afghanistan and Iraq and discussions on Iran and Pakistan. To add injury, congress throws 150B in tax gifts. There is no fiscal policy...only politics.

Check out this link for coffee added to our cool aid. As long as our federal budget remaina a game of Su DokU...?

http://www.iie.com/publications/pape...ResearchID=705

I think the worst part of it is everybody and their mother saying we are going to have a recession. However, everyone should do what they can to get out and stay out of debt.

The "worst part" is not "everybody" speculating on recession! The "worst part" is individual, and governmental debt.

Pop quiz...

Is the national debt as a percentage of GDP currently increasing or decreasing?

recession???
 

I have a very difficult time believing were headed for a recession. Many commodities are near all time highs and outside of the housing and financial sectors, the economy is a hot box. The fourth quarter U.S. durable goods order, which was released this morning, was far better than expected. The weak dollar is favorable for U.S. businesses. The fed has shown that it is willing to be aggressive to thwart any major economic stalls. While things may be softening a bit, I don't think we're anywhere close to the r word.

From earlier this morning: Q4 GDP=0.6% (unadjusted). Remember that a recession is two consecutive quarters of negative GDP growth.

I still think that the United States will experience a recession in 2008, but that it won't last a very long time and not quite as bad as Jim Rogers thinks it will be. Either way, all of us should exercise caution and practice good personal fiscal policies. Basic, fundamental tenets such as saving money, eliminating debt, living within your means ought to be lifetime habits and lessons taught to the next generation. Caveat: I am not a CPA or personal advisor, but as my late mother used to say, I have eaten more salt than some of you have eaten rice.

From Fortune:

By Brian O'Keefe, senior editor

NEW YORK (Fortune) -- You might expect Jim Rogers to be gloating a little bit. After all, the famed investor has been predicting a recession in the U.S. economy for months and shorting the shares of now-tanking Wall Street investment banks for even longer. And with fears of a recession sparking both a worldwide market sell-off and emergency action from Federal Reserve chairman Ben Bernanke, Rogers again looks prescient - just as he has over the past few years as the China-driven commodities boom he predicted almost a decade ago began kicked into high gear. But when I reached him by phone in Singapore the other day there was little hint of celebration in his voice. Instead, he took a serious tone.

"I'm extremely worried," he says. "I have been for a while, but I just see things getting much worse this time around than I expected." To Rogers, a longtime Fed critic, Bernanke's decision to ride to the market's rescue with a 75-basis-point cut in the Fed's benchmark rate only a week before its scheduled meeting (at which time they cut it another 50 basis points) is the latest sign that the central bank isn't willing to provide the fiscal discipline that he thinks the economy desperately needs.

"Conceivably we could have just had recession, hard times, sliding dollar, inflation, etc., but I'm afraid it's going to be much worse," he says. "Bernanke is printing huge amounts of money. He's out of control and the Fed is out of control. We are probably going to have one of the worst recessions we've had since the Second World War. It's not a good scene."

Rogers looks at the Fed's willingness to add liquidity to an already inflationary environment and sees the history of the 1970s repeating itself. Does that mean stagflation? "It is a real danger and, in fact, a probability."

Where the opportunities are
The 1970s, of course, was when Rogers first made his reputation - and a lot of money - as George Soros's original partner in the Quantum Fund. And despite his gloomy outlook for the U.S., he still sees opportunities in today's world. In fact, he sees the recent correction as a potential gift for investors who know where to head in global markets: China.

Rogers has been fascinated with China ever since he rode his motorcycle across the country two decades ago, and he's been a full-fledged China bull for several years. In December he published his latest book, an investor-friendly tome titled "A Bull in China: How to Invest Profitably in the World's Greatest Market." And that same month he sold his beloved Manhattan townhouse for $15.75 million to a daughter of oil tycoon H. L. Hunt and moved his family full-time to Singapore - the better to be closer to the action in Beijing and Shanghai. (He bought the New York mansion 30 years ago for just over $100,000; not a bad return on his investment.)

But in a November interview I conducted with Rogers, he admitted that he was rooting for a serious correction in China to cool off an overheating market and bring back prices to a reasonable level. With the bourses in Shanghai and Hong Kong both some 20% off their recent highs as of late January, Rogers says he's starting to consider new investments.

"I'm delighted to see what's happening in Shanghai and Hong Kong," he says. "As I've said, if things hadn't cooled off, the Chinese market was in danger of turning into a bubble. I find this most encouraging. The government's been doing its best to try and cool things off. Mainly they've been trying to deal with real estate but it's having an effect on stocks, too. I would suspect the correction isn't quite over in China. But I'm gearing up. I didn't put in any orders for tomorrow but I'm starting to prepare my list of things to buy in China. Whether I buy this week or this month or this quarter, who knows. But I'm starting to think about buying new shares in China for the first time in a while. And I'm not thinking about buying in America."

Ultimately, Rogers doesn't think that the troubles in the United States will be much of a drag on the prospects for the People's Republic. "Anybody who sells to Sears (SHLD, Fortune 500) or Wal-Mart (WMT, Fortune 500) is going to be affected, without question," he says. "Some parts of the Chinese economy are going to be untouched, however. They won't even know America's in recession. They won't care if America falls off the face of the earth."

What's on his China buying list? Rogers says it will depend in large part on which stocks come down to the right level, but he's keeping his eye on certain high-growth sectors including tourism, agriculture, power generation and airlines.

The pullback in commodity prices on recession fears hasn't dampened his enthusiasm for resources investments, either. More like a cyclical correction in the middle of a long-term bull market. "Certainly some commodities are going to be affected," says Rogers. "But it's not as if the markets haven't figured this out. Remember the old expression: 'Dr. Copper is the best economist in the world.' Well, Dr. Nickel and Dr. Zinc figured out a few months ago what I thought I had figured out, that we were going to have a recession. Nickel is already down 50%. Other commodities may fall more. But I don't see the economics of agriculture being much affected at all. Maybe there will be a few less cotton shirts bought. Maybe there will be a few less tires bought. But the supply is under more duress than the demand."

Once again Rogers draws on the 1970s in his analysis. "Think about the story of gold in the '70s," he says. "Gold went up 600%, and then it started correcting. It went down nearly every month for two years, nearly 50% from the high point. And everybody said, 'Well, that's the end of the gold market. It was just a fluke. It's over.' It scared everybody out. And then gold turned around and went up 850% from that level. This is what happens in markets. But the fundamentals of the secular bull market in commodities are not over any more now than they were for gold in the '70s."

Where he expects the pain to be most intense is on Wall Street. He says he hasn't covered his short positions on the investment banks or Citigroup (C, Fortune 500) and won't for a while. "Those things are going to go way, way, way down," says Rogers. "The investment banks are down now because of the problems in the credit market. Wait until the effects of the bear market come along. If you just go back and look at other bear markets, investment bank stocks have gone down enormously. We haven't gotten to that stage yet. It's going to bring their balance sheets under duress. This is going to get much worse. But that's where there have been excesses for the past decade or so. And whenever you have a bear market come along the great excesses of the previous period are the ones that get cleaned out the most."

He'll be watching - from Singapore.

I'm not going to lose too much sleep over the "R" word. I would agree that the economy is slowing, but I don't believe that we are heading into economic dire straits either.

The housing crisis - or more specifically the mortgage crisis - is having a negative impact on the economy. So did the S&L crisis many years ago, but we weathered that storm and we will weather this one. I think the reason any downturn seems magnified more than it really is is partly due to the fact that the airline industry is more sensitive to economic downturn than most other industries.

Here is another way to look at times like this. When the stock market drops it creates an opportunity to purchase more shares at lower prices. When the market improves and starts an upward trend, so does your investments. In the short-term it may seem like you are losing money. However, one should invest with a long-term outlook and not a short term one.

I don't agree with the current decision to mail some people checks in an effort to give tax relief. I think the best way to give tax relief is through the incorporation of lower taxes. This will spur spending, saving, and economic development. Small businesses will benefit and this will encourage more people to invest in their current businesses and others to start one. More businesses equate to more employees and that equates to more taxpayers. We don't need higher taxes, we need more taxpayers.

Recession
 

Downturn or not the media will scare the nation into a real recession if it keeps up the hype.

The recession of the early 1990's killed a lot of aviation careers. I graduated from college in 1990. Most of my graduating class never even saw their first flying job and ended up pumping gas. Once you loose career momentum it can be very difficult to get it back.

SkyHigh

No Recession
 

Q1 GDP=0.6% (unadjusted) again. I've heard a lot of mixed forecasts going forward. Some say the worst is behind us while others contend we will be bouncing along the bottom for some time to come. Most agree that the last half of the year should be better than the first.

You still see a recession Vagabond?

Well, that all depends on who is talking about the number of shells in the shell game. Some watch more than others. Read the second sentence in the second paragraph carefully.

http://en.wikipedia.org/wiki/United_States_public_debt

If the technical definition of a recession is two straight quarters of negative growth, then no, there is no recession. Yet. However, there is no mistaking a general feeling of doom and gloom, or perhaps I am surrounding myself (again) with unhappy, poor, negative and sad people. The economy is distinctly tepid these days.

Warren Buffett said several months ago that things will be ok, but he recently expressed less than positive sentiments about the nation's economy. Berkshire Hathaway is a company that owns many other businesses, so I would think he, of all people, would have a pulse on the American consumer. Its stock is inexplicably up today, however.

I hope that the economy is merely slowing and that we don't sink into full blown recession. I've lived through several downturns; they are painful and not fun. For those lucky enough to have the wherewithal, this is a good time to look at buying a house, buying stock, paying down debt, and getting your own financial house in order.

I am also curious to see if the stimulus rebate checks that have started to come out will make any appreciable difference. Somehow, I get the feeling that money will be used to buy gas and food and other things to just keep one's head above water.

Two consecutive quarters of negative GDP growth would be the technical definition.

Warren Buffett is a very smart man whose has seen many ups and downs. I put quite a bit of weight in what he says. He is one of folks predicting we will be bouncing around the bottom for sometime to come, I believe.

Agreed.

I'm no economist, but I'm not sure the ideology behind the stimulus checks was to provide the American consumer with the means to purchase, necessarily, discretionary items. As long as it gets spent in a timely manner, whether on gas or lattes, its money flowing into (and hopefully stimulating) our economy. We shall see...

Warren Buffett Says "Think Small"
 

I was unable to make it to the shareholder's meeting, and I am grateful that Zweig of Money Magazine posted this.

Some excerpts:

OMAHA (CNNMoney.com) -- In the Q&A session Saturday morning at Berkshire Hathaway's annual meeting, CEO Warren Buffett and vice chairman Charlie Munger repeatedly warned investors to lower their expectations. When a shareholder asked whether Buffett's recent purchases of publicly traded stocks were likely to generate returns greater than 7% to 10% over time, Buffett promptly said no.

-------------------------
Asked what's in store for the economy, Buffett said he doesn't have a clue and doesn't care.

"I haven't the faintest idea," he said. "We never talk about it, it never comes up in our board meetings or other discussions. We're not in that business [of economic forecasting], we don't know how to be in that business. If we knew where the economy was going, we'd do nothing but play the S&P futures market."

His simple point: As an investor, you don't need to predict the economic cycle (or even pay much attention to it). Instead, you should focus on evaluating individual businesses if you pick your own stocks -- or, simply buy the entire market in the form of an index fund. When a shareholder asked for the single best specific investment idea Buffett could recommend to an individual in his 30s, Buffett said: "I would just have it all in a very low-cost index fund from a reputable firm, maybe Vanguard. Unless I bought during a strong bull market, I would feel confident that I would outperform...and I could just go back and get on with my work."

http://money.cnn.com/2008/05/03/news...ex.htm?cnn=yes