How Fast a Recession Can Happen
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.