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Friday, March 14, 2008

Is the stock market projecting a recession?

With the terrible jobs report last weekend and poor retail sales report this week, I would have thought the market would be projecting a recession.

But, the Dow Jones Industrial Average is down only 16.3%, the S&P 500 is down only 18.3%, and the Russell 2000 (the most grossly over-valued of the three) is down only 22.6% from their most recent highs.

These may sound like significant falls, but it's normal for the stock market to be down 30-40% during a recession.

In other words, the stock market still seems to be projecting a mid-cycle slowdown despite a lot of data suggesting otherwise.

How should one react to such a situation? This is a great time to be buying!

I can't forecast the top or bottom of the market. And, I'll let you in on a little secret: no one else can, either.

When there's blood running in the streets, you should be buying. That doesn't mean things won't go down further--they almost certainly will. But, knowing that you can't pick the bottom of the market means you should be greedy when others are fearful and fearful when others are greedy. I'm feeling pretty greedy right now.

This is the time to buy cheaply priced businesses with good economics and management. If you take this path, either yourself or with the help of an advisor, your results will be quite satisfactory over the next several years.

I'm finding value in specific companies whose industries are feeling a lot of pain now. Think retail, real estate, building construction and airlines. I still think it's too early for financial services (except some select insurance companies), but that time will come in the not-too-distant future, too.

I think this is a great time to invest, so if you're looking for someone to manage your money and are curious about my services, contact me soon.

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.

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