future forecast recession

[m3racer]

I'm thoroughly convinced that our economy will be in the doldrums this year. All the financial analysts seem to think that this is going to be a bad year. How does one invest during a financial recession? What are your plans?

[sweeps]

A recession may have already begun. Wholesale Prices Up; Retail Sales Fall

Also I'm not sure if anyone has been following, but the stock market has been in a tail spin.

Is this the time to go all in? Or should we be running for the bunker? I don't know.

[Broken Arrow]

Yes, we may be in a recession already and not even know it. I've read a lot of conflicting reports about that, but even if we are, we most likely won't know its intensity and duration until it's over. Could be a short, soft one. Could be a long, painful one. Could be none at all....

If you're planning to be invest actively, I think it would be foolish not to take recession into account. There are 2 basic investment tactics we can take: Sheltering from recession and Betting on recession.

For the former, big pharmaceuticals, big insurance, staples producers and suppliers, and internationals are examples of where recession may not have much impact. For the latter, basic commodities such as gold, maybe oil, as well as bonds are examples where prices will spike up during economic turmoil.

But because we are already in economic turmoil (regardless of whether it qualifies as a recession or not), the prices on many of these items are already selling at a fairly high price. Whether you still wish to buy is something you'll have to decide for yourself.

As for me, I'm largely a contrarian, buy-and-hold type investor, so I'm leaning towards going all in. It's a great time to buy... if you're thinking long.

[jIM_Ohio]

If you have a job, times are tough, but it's not a recession

Stay employed and stay out of debt. Then you can say "what recession"?

I am staying 98% equities and have not moved anything since Jan 2 (I closed out a fund then). Next time I look at balanced will be in June (when I rebalance). Don't look at balances, it might make you change your course.

[FrugalFish]

If you have a job, times are tough, but it's not a recession

The other day DH's boss told him that a recession is when your neighbor loses his job, and a depression is when you lose yours .

I agree that if you are investing for the long term, keep on doing so. Ben Stein has a nice article somewhere over at Yahoo finances about buying in when the market is low- you get that much more for your money. If the market doesn't eventually turn back in your favor, well then we've got a whole lot of problems in this country.

[bjl584]

I am not changing anything for now. I believe that we are in a slowdown, but not a recession (not yet anyway.) I am continuing to save, invest, and pay down my debts.

[Ima saver]

I am hanging onto a lot of cash and not building anymore spec houses for a while.

[Scanner]

Start buying and maybe get out of International and move into a REIT or a financial ETF.

I didn't contribute to my ROth at all in 2007. I am going to try to buy a lot in the next 6 months (2007 + 2008). In fact, I just bought some more Janus Overseas today until I figure out where I am changing my diversification to.

You shouldn't try to time but you can buy on the way down. Bulls will usually only rally 20-45 days/year.

Hopefully the bear market will only be 1-2 years.

Luckily I have seemed to achieve what you want a portfolio to do: when one sector is up, the other is down. Silver has proven to be a good hedge so far.

I wouldn't get into an oil ETF until it hits $65/barrel, which is possible if the American economy recedes but there's your other possible hedge.

Watch USO, DBO, or OIL for when oil hits $65/barrel. I could see oil dropping as low as $55/barrel in April, May but that would only be for a few days and that would be "on sale" prices. I think $65 is a fair price for a barrel of oil at this point.

[mom-from-missouri]

I am hanging onto a lot of cash and not building anymore spec houses for a while.

We are also hanging onto cash. I also plan to increase the size of the garden this year. (I only used about 1/3 of the canning jars last summer)

I just got a funny feeling its going to get worse before it gets better....

[yellow heel]

I'm not changing a thing. I just have may automatic deduction do its thing.

[Scanner]

My Janus Overseas is tanking as of late. . .maybe I'll send in another $500 tommorrow.

My silver actually was up a bit today, as the Dow tanked.

[buzz]

Until recently, the main thing keeping the American economy healthy was a strong housing market. I think we are teetering on the edge right now. I'm afraid we may be on the brink of the worst recession we have had in decades.

I have fled to cash and bonds, and may retreat further to TIPS. If the American economy weakens considerably, many of the Asian markets will crash. I would look for gold to start experiencing the volatility we have seen in the stock market lately. With crisis comes opportunity.

I see this as an opportunity to conserve for now, and buy at a huge discount a year or two down the line. But I think "stay the course" is a very bad strategy right now.

[m3racer]

I see this as an opportunity to conserve for now, and buy at a huge discount a year or two down the line. But I think "stay the course" is a very bad strategy right now.

That's what I was thinking as well. My portfolio has been performing poorly lately.

[Broken Arrow]

Well.... It's true the housing market is one large part of the economic equation, but so is business growth and international affairs. For example, oil prices and the weak dollar isn't directly connected to the subprime mess, but all three together does spell quite a bit of trouble for our current economy. I guess I harp on subprime the most as well, but only because I feel that we average citizens have brought it upon ourselves. Blame the financials if you want, but in the end, we signed the dotted line. I did too.

As for recession concerns... well, behavioral investing would suggest that people tend to be more afraid of the downs than they are more excited about the ups, despite the same beta. My personal opinion on that is, as active investors, we should be excited that it's a buyer's market out there. Believe me, I am rubbing my grubby little paws together like the Grinch, itching to buy when I am finally able to. For passive investors, it won't even matter. Just keep on doing what you do, and DCA your way through the ups and downs.

Also, I can't emphasize enough that no investor I know of can predict the future. I have great faith in mankind, but really, it's a futile effort to do so. So, are we in a recession yet? Is it going to be bad? I don't know, but pragmatically speaking, it shouldn't matter. Not really.... Not unless you're planning to retire in the next few years. The only thing I see is that Tis the Season to Buy Buy Buy!

Really, the same goes for our portfolio performance. I know it's really tempting to look at the bottom line, but if you're going long (like my 401k), the gains and losses are on paper only. For now. But your NAVs (shares) haven't changed. In fact, if you've been contributing on a regular basis, the number of shares that you add should have increased slightly, because now they are cheaper than ever to buy. If you have to "watch the pot", I say count your NAVs instead. Great way to help you sleep at night.

I admit it. I think actively as well. I look at my portfolio and the market pretty frequently too. But when we do this, we should never forget our fundamental basics: Don't time the market. Don't sweat the short-term ups and downs. Stick with the asset allocation that makes the most sense to you. Make sure it is properly diversified. Oh, and mind the expenses and fees.

Consider it the foundation of investing that which we build our financial house on, even if you are an active trader. Just because our investment strategies change and evolve, that doesn't mean it has to stray from the overall basics of growing our money and managing risk.

[m3racer]

What's everyone's thought on playing a specialty sector like health care funds? I always thought that they performed relatively well during these times.