Two major Wall Street firms [Merrill and Goldman] have finally thrown in the towel and are now calling for a recession. For a variety of reasons, Wall Street is usually late to call downturns, so this probably means that 1) we’re already beginning to come out of the recession, or 2) this recession is going to be a doozy (the more likely explanation, in our opinion).
There’s still a number of perkies around – my name for them – saying things are really fine fine just fine and these little economic speedbumps should be seen as buying opportunities. But more and more it’s becoming apparent that millions of coming foreclosures, trillions of dollar of financial toxic waste on the books, rising commodity prices, and a falling dollar do not portend well for financial stability in 2008.
I agree– but I also expect there will be buying opportunities over the next year for assets of value: real estate, blue chips, etc. Keep your cash handy. (But can one trust one’s money market account these days?) For those who can hold on– and discern which items will survive the crisis and appreciate more rapidly as it passes– there will indeed be plenty of opportunity.
Buffett and Soros are already nibbling at beaten-down bonds, buying them for pennies on the dollar. However, they do have very deep pockets and can and will hold for years.
If you think Buffett will do well, look at his Berkshire-B stock. $4500 a share. But it just keeps going up. (Berkshire A is at, I think $130,000 a share.)
I think the economy is far worse than most understand and its collapse will be brutal.