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.
