Safecastle | One Shop For All Emergency Essentials: Worst Recession Since the 1930s?

There are two ways to sleep well at night ... be ignorant or be prepared.

Monday, November 12, 2007

Worst Recession Since the 1930s?

We normally try to avoid here the hyperventilating and chest-thumping that often punctuate current economic ups and downs.

But we offer this posting by Dan Dorfman as another heads-up to readers about the increasing urgency to get prepared for tougher times.

Talk of Worst Recession Since the 1930s
by Dan Dorfman
November 12, 2007

... Mr. Melcher, a market bear, had some pretty discouraging words. "What I think is not good for the country, but good for me." he says. His basic advice to the country's roughly 80 million stock players: Run for the hills — the worst is far from over. An investor's stock portfolio now, he believes, should be only about half of what it might normally be.

With the housing market in a state of collapse — and he says he believes it is far from over — Mr. Melcher argues that average homeowners will not be able to withstand the kind of recession he sees, given the added burdens of rising energy and food costs, and continued deterioration in the credit markets.

Noting that consumption is already slowing, Mr. Melcher figures sharply rising unemployment is inevitable. Another of his worries is that central banks around the globe, America's included, are debasing their currencies, which is setting the stage for a new round of higher inflation. Our bear figures the next six to 12 months will be awful for investors as the market goes down "pretty substantially." His frightening outlook calls for an additional 20% to 30% decline from current levels. A drop of that magnitude would put the Dow down in a range of roughly 9,100 to 10,400.

... The average investor, he believes, should seek to protect his assets by raising cash, putting money to work in short-term treasuries, and buying some gold (notably through StreetTRACKS Gold Trust, an ETF that tracks the price of the precious metal and trades on the Big Board under the symbol GLD).

Is the world coming to an end? I asked our bear. "I don't think so," he replied, "but as I mentioned, the ingredients are in place for the worst kind of a recession, which means it's the wrong time to own stocks."

Get Ready ... Seriously -

1 comment:

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