2008: Year of the Bear?
Wednesday, January 9th, 2008
Buckle up kids, 2008 is starting to look like the year of the bear. In the midst of tightening credit markets, rising unemployment, and a housing market that continues to head south, the US economy may put the bulls out to pasture and succumb to the dreaded “R” word. That’s right, after 6 years of economic expansion, many investors believe the US will feel the pinch of a recession in 2008.
No Shortage of Naysayers
Goldman Sachs came out with a notably pessimistic economic report today, announcing that recent softness in the job market indicates a recession could be upon us within 3 months, if not sooner. AT&T also added fuel to the smoldering fire when it revealed it was having to disconnect an increasing number of consumers due to missed payments. Throw rising energy prices, shrinking corporate capital expenditures, and a tepid holiday spending season into the mix and you have all the makings of a bust.
Don’t Despair
For investors who are patient, however, bust cycles can be an opportunity to find good companies that trade at a discount to intrinsic value. In fact, there is an old saying that “smart investors buy when there is blood in the streets”. This is true, as long as you take a long term approach to investing. In the next several weeks, I’ll be taking a look at some of the companies I believe will reward patient investors over the long term. After all, Rome wasn’t built in a day. Neither was Berkshire Hathaway.