Is this the Bottom?

Well with the largest bank failure in history now in the books, as Wamu is seized and sold by the FDIC, we may now have a bottom in the financials. By all measures and calculations this is the largest financial meltdown in history and could only reach a bottom after having the largest bank failure in history. Another sign we may be at the bottom is the greatest investor in our lifetimes, Warren Buffett, investing $5 billion in Goldman Sachs. Also if they pass the 700 billion dollar bailout as currently proposed, it would ensure the rest of the big banks will be on the road to profitability once again.

So what does this bottom mean and how can this help us make some money? Let's take a cue from Buffett and begin investing in good dividend paying financial stocks. Be sure to look at preferred shares of the major banks to invest in such as Wells Fargo, Bank of America, JP Morgan, US Bank, and Goldman Sachs. Sticking to preferred shares will decrease the chance your dividend will be cut and should be a lot less volatile than the regular shares. Staying with the big boys should ensure that your shares will benefit most if the bailout goes through.


Do you think this is a bottom in the financials?
Do you know how to find preferred share information?

Recession or Depression?

What Recession?

If you follow the financial news stations such as CNBC or Bloomberg you may believe what the so called experts and Federal Reserve board members tell us, that we are not in a recession yet. Their problem recognizing the trouble we are in may not be entirely due to ignorance but may be due to the standard definition of a recession that has been accepted by most everyone. Their "official" definition is a decline in the Gross Domestic Product (GDP) for two or more consecutive quarters. This definition is flawed to me and it should be for you as well for two main reasons. First, this definition does not take into consideration changes in other variables such as the housing market collapse or the banking catastrophe. It also ignores any changes in the unemployment rate or consumer confidence. Second, by using quarterly data this definition makes it difficult to pinpoint when a recession begins, when we are in a recession, and when it ends. Just think, we will be at least six to eight months into a recession before any of the "experts" admit we are in trouble.

Depression

One side effect of this inaccurate way of accounting for recessions is that by the time we admit the recession we are in it could be too late and cause a depression. I know most people think that the "great depression" happened long ago and things have changed so much since then that it won't or can't happen again; Well they are wrong. Much of the data out there says we are in a recession and headed for a depression. The housing slump we are in currently is the worst since the great depression and will only continue to get worse before it gets better. June's market decline was the biggest one month decline since 1930, we all know what was going on at that time! The market isn't done going down either, with growth slowing and no new money being used to finance risky ventures there is nothing to drive the market higher.

Recession or Depression?

So what do you think about the economy here in the U.S.? Do you believe the experts or can you read the writing on the wall? Is your portfolio setup to make money in this recession, is it prepared to grow in a depression? Most people think that a recession or even depression means you have to just "weather the storm" or just minimize your losses, but in fact you need to be more agressive as you can create even more wealth during tough times if you can read the situation ahead of everyone else and position your portfolio to take advantage of it. Just think, as the market fell over 3% last week commodities gained over 4%, some saw it as a bloodbath while Other, myself included, had a great week.