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December 4, 2008 The Economy and Negative VibesNot long ago investors had few qualms about paying 30 times earnings for almost any company; the dot-com frenzy was in full swing, and prevailing sentiment suggested that the new technology boom would allow companies to enjoy endless years of strong earnings growth. Time has passed, but once again we’re finding that investors don’t care about fundamentals. This time around, though, no one is willing to pay anything for strong companies at discounted prices because all are certain that this recession will prove to be like no other. It’s well known that we all have a natural tendency to emphasize and exaggerate the primacy of our current circumstances; the present almost always seems more powerful and more significant than anything that occurred in the past. Yet investors who lived through the 1974 or 1982 recessions will tell you things were as scary then as they are now, even without the added wrinkle of complex structured finance products. And we also had similar problems in 1991. The S&L crisis loomed large over the financial services landscape, pumped up by the commercial real estate disaster and the weakness in home prices. Add in the huge banking losses from Latin America loans, mass layoffs on Wall Street, unemployment in the manufacturing sector as well as an overleveraged consumer and government and suddenly it’s back to the future. Bulletproof Yourself From the Financial Crisis This sector is rock solid and producing winners every month. Take a look at what’s happening so far in 2008: There are 22 stocks in my Income Portfolio. 13 are producing double-digit gains and four are red hot and producing triple digits! And for the record –– only one is negative. Go here and see why this sector has produced steady safe average returns of 14% over 19 years! Looking ahead, I maintain the view that the global economy won’t lapse into depression. But as I’ve noted here before, the consequences of the current turmoil--particularly the loss of confidence in the system’s purported invincibility and superiority--will be long-lasting. Click here to continue reading |
| Growth Engines is a bi-weekly e-zine written by Yiannis G. Mostrous and published by KCI Communications, Inc. Mr. Mostrous is also the author of The Silk Road To Riches: How You Can Profit By Investing In Asia's Newfound Prosperity. |
Growth Engines - The Economy and Negative Vibes
