This is a summary of the reasons expressed by economists and the press.
1. Economist do not expect a recession. They are typically wrong. So, do not listen to them.
2. The economy seems to be stalling in the fourth quarter. Consumer confidence is slumping and unemployment claims jumped.
3. The housing market is imploding. I predicted it will remain weak until 2009-2010. Prices will continue to erode, inflicting serious damage to consumers' willingness to spend.
4. Credit conditions are and will remain tight because of the subprime/derivatives/Greenspan fiasco.
5. The increase in oil prices further dents the spending power of consumers. The big ticket items such as autos are the first victims of this retrenchment.
6. Weak productivity growth cannot absorb rising wages. The outcome is higher unit labor costs and downward pressure on profits.
7. The weak dollar and lower profits will hinder business investment in the US and overseas.
8. There seem almost uniform consensus of the waning power of the US in the global.
What to do from an investment viewpoint? I always believed that one of the best approaches is to listen very carefully to the message of the markets.
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
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