New York Times Reports the Recession is Here: What a Shock!

It's official. The Wall Street Journal reported this that "most economists say recession has arrived as outlook darkens." I'm in shock...

This after the media widely reported that retail sales took a "nosedive" of, "sunk", and "tumbled" ... -0.6%. Another shocker...

Often the media is just as manic-depressive as the market. For months last fall the media just couldn't believe we were headed into a recession. Now the world is going to you-know-where in a handbasket.

Recessions happen. Recessions are actually good for the economy - they purge the excesses of the previous boom, and then the following boom purges the excesses of the previous recession. Indeed, most recessions occur when the credit markets blow up or are otherwise driven by the financial markets. Banks can't make loans when they don't know how much capital they really have (or they do know and it is not enough), and without loans business activity struggles to expand.

As a long-only investor, owning stocks in this market has not been much fun, especially given my focus on certain economically-sensitive sectors. Buying stocks on the cheap, of course, is fun. Through the end of February, my portfolios are down about -13% over the 5-month market sell-off. This is inline with the Russell 1000 Value index.

My plan is to stay the course. I like my stocks, I think they are cheap and I think that the likelihood of realizing their value is quite good. Despite the market volatility, I sleep well at night, thank you.

For more information on what I like, I plan to publish my buy list in the next day or two. So check out my private blog.

Comments

[cynic69:]

You may like your stocks but you will need to demand the certificates so that you can paper your walls. We have passed peak oil. The world will never be the same and the stock market is shooting down the flusher. If I were you I would sell my stocks and load up on puts. I have cashed in some of my puts and paid off my morgtage. My next goal is a new corvette.

2008 Mar 15 12:14 PM

[dancing diva:]

I agree with you. There are plenty of bargains around that have started to bottom out.

I ascribe to the principles "when they're crying you should be buying" and "selling when they are yelling". I've been buying but plan to sell some call options on the next rally - just in case.

There are lots of tears flowing now. Perhaps someone should come up with a kleenex index as a way to interpret the bottom.

2008 Mar 15 08:20 PM

[nukldrager:]

Something else happens too, besides recessions. It will be interesting to see if the economy behaves as you suggest, and "normal" is still normal. But is a $435 trillion CDO experiment normal? And oil over $100 and rising normal? And what about consumer DTI ratios. Will there be enough viable consumers to drive the economy after it stabilizes? And what about that word "normal". It's not an oxymoron, but it should be.

2008 Mar 15 10:07 PM