How Fast a Recession Can Happen
Monday, November 13th, 2006
By Michael Lombardi, MBA for Profit Confidential
You’ve been reading my articles in PROFIT CONFIDENTIAL over the past few months and have seen how negative I’ve become on the U.S. economy. Particularly, I believe it’s the ramifications of the faltering housing sector which is being underestimated by economists.
A recession does not take much to happen. In fact, the definition of recession is simply two consecutive quarters of declining GDP. Hence, recessions only need six months to happen.
It’s disappointing more hasn’t been written on the popular financial sites and in the newspapers about the real threat of a recession happening in 2007. Once we’re in a recession, consumers get nervous about spending, they tighten their purse strings a little more and the economy contracts further.
We’ve already seen how the weak activity in the housing market is scaring buyers away, or at least they are taking a “will wait and see” attitude. Knowing a recession is upon us just makes consumers that much more nervous about purchasing big ticket items.
I want my readers to be fully aware of my economic opinion: I wouldn’t be surprised to see the U.S. economy in a recession sometime in 2007. In fact, I expect it.
As investors, we need to take a serious look at our investment portfolios and ask, “How will my investments be affected by an American grown recession?” You should take what precautionary steps you can right now to protect yourself from a recession in 2007. Maybe you need to cut your own spending or maybe you need to sell some stocks that will take a beating during a recession. You know what tidying up you need to do. Don’t procrastinate… get to it now.
And please remember three important points: Recession can happen quickly, stock markets don’t go up during recessions, and the longer the boom before the recession, the longer the recession. Just based on my last point, we have plenty to worry about in 2007.
NEWSFLASH–Robert Toll, President of huge Toll Brothers home builders, says, “We continue to look for signs that a recovery is imminent but can’t yet say we see one.” The company reported 37% of contracts entered to purchase Toll homes in its latest fiscal quarter were cancelled by buyers.
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Tags: economic analysis, GDP, U.S. economy
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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
