Recession 2008

Here’s a tip for you S-P-E-C-T-A-T-O-R-S

recession08 — Fri, 16 Jan 2009 11:59:15 +0000

Stock	3-Digit Price	CAPS Rating	Return on Capital, TTM
PetroChina (NYSE: PTR)	$101.25	****	13.4%^
CNOOC (NYSE: CEO)	$105.93	****	21.9%
Martin Marietta Materials (NYSE: MLM)	$102.00	**	9.5%

These are tough times. There’s no sugarcoating it. The economy is suffering a serious recession — one I believe was overdue, given the massive bubble that preceded it. There’s been way too much greed, incompetence, and lack of personal responsibility from folks who were supposed to be intelligent “leaders.” Our government policymakers are bungling “fixes,” as far as I’m concerned. Dare I go on? Yeah, it’s ugly.

Yet, as disappointed as I am in much of what’s transpired, and as concerned as I am about the current state of the economy and what might happen going forward, I believe in long-term, buy-and-hold investing.

Could our current times prove to be even more of a “black swan event” than they’ve already been, and prove wrong the conventional wisdom that the best time to buy stocks is during savage bear markets? Sure, this could happen. But if it doesn’t, I guarantee many would-be investors will kick themselves for not picking up dirt cheap stocks at the current levels.
We’ve all heard the quotable quotes in the investing world. “Buy when there’s blood in the streets,” for example, Warren Buffett talking about being fearful when others are greedy, and greedy when others are fearful? Investors tend to get cocky when times are good, quite certain that we’re willing to invest like Buffett and other sage masters, but when things really are scary — which is the best time to find overly punished stocks — many simply rush for the exits.

Survive and Thrive: Life During the Economic Downturn in Australia

recession08 — Sat, 10 Jan 2009 23:00:49 +0000

At present, according to the SMH Newspaper, the employment rate in Australia is 95.5 per cent. However with this being said, economists predict that this number will fall by a couple of percentage points over the course of 2009.

With the horror stories of 2008 of plummeting share prices, declining property markets and the possible bankruptcy of many of the worlds leading companies such as GM, Ford, Chrysler and the Leeman Brothers, the loss of another 2% of people from the Australian workforce doesn’t seem too bad. Put into perspective, however, this number presents a very different view to the problem. This seemingly small 2% would be the equivalent of more people loosing their jobs in 2009 than live in the whole of the northern territory. If this 2% prediction is correct, the official percentage of unemployment will rise to 6.4% which would account for 768,000 people. This would be the equivalent to closing down Hobart, Canberra and Darwin. When re-evaluating the effect of loosing an extra 2% of the Australian workforce it is in-fact a much larger issue than originally expected.

On the flip side of this grim news, however, are opportunities that present themselves to those individuals who manage to keep their jobs (survive). According to the SMH paper, managerial promotions are fast becoming open in the workforce leading to high chances of promotion for those able to survive in the workforce though 2009. This brings to mind the expression – ‘Survive and Thrive’.

Posted By Michael Campbell

Madoff oh Madoff

recession08 — Thu, 08 Jan 2009 11:12:52 +0000

Accused pyramid-scheme creator Bernard Madoff will probably remain free on bail, despite a push by U.S. prosecutors to jail him for mailing watches, diamond brooches and other valuables to his family and friends, legal experts say. U.S. prosecutors are asking a judge to incarcerate Mr. Madoff, saying he broke the conditions of his bail that barred him from shedding off any of his assets.

U.S. prosecutors said that mailing the valuables — which included more than a dozen watches, diamond brooches, a jade necklace, cufflinks and other jewellery totalling more than US$1-million — show Mr. Madoff is an increased flight risk.

Prosecutors said Mr. Madoff, charged with running a “Ponzi” scheme that defrauded his investors out of as much as US$50-billion, might further rob investors by shedding other valuables.

Legal experts said that sending the valuable trinkets was a definite violation, but probably not enough to prompt the judge to revoke Mr. Madoff’s bail.

No More Us Debt for China!

recession08 — Thu, 08 Jan 2009 11:07:07 +0000

We all know that China is the country bearing the debt of the US. However because of the intensity of the economic downturn, China is keeping more of their money at home. This causes problems for those wanting to borrow in US.

On Tuesday, President-elect for the coming year Obama predicted the possibility of trillion-dollar deficits “for years to come,” even after an $800 billion stimulus package. Normally, China would be the country most keen on taking the foreign debt required to pay for those deficits, mainly short-term Treasuries, which are government i.o.u.’s. However, China, whom in the last five years have spent about 1/7 of their money on collecting foreign debt, but now Beijing is seeking to pay for its own $600 billion stimulus

The Economic Club of Toronto held its annual outlook conference Wednesday with top economists of Canada’s big five banks. Here are some of the highlights:

Don Drummond, chief economist Toronto-Dominion Bank, on Canada

Forecast: Sees 1.5% real GDP drop for 2009; a $12-billion to $14-billion federal fiscal stimulus package

Warren Jestin, chief economist Bank of Nova Scotia, on the international outlook

Forecast: Sees all major economies declining in 2009 and emerging economies and asset markets weakening in a “remarkable synchronicity.”

Sherry Cooper, chief economist, BMO Capital Markets, on the United States

Forecast: Sees 3% peak-to-trough GDP decline overall for the U.S. and the worst recession in the post-WWII period; four-million jobs lost; first decline in annual CPI since 1955; sub-1% core rate.

I know this is about how Canada’s doing, but I want to focus on the world not just one country.

The Lost Generation Revisited?

recession08 — Wed, 07 Jan 2009 01:30:20 +0000

In the 1970’s the world was in difficult financial times much like the situation of today. Unemployment levels were exceptionally high and the youth of the world were not undertaking tertiary education. With job offers at an all time low and unemployment levels through the roof, many people would be competing for the same job. The ones who got chosen were the most highly qualified ones. The rest, all those without high enough qualifications, were left unemployed and were known as ‘the lost generation’. In Australia for example, only 23% of the population have tertiary education degrees at current. If the youth of today decide not to undertake tertiary education then they may find themselves as part of a modern day lost generation if the economic situation continues to worsen.

Posted By Michael Campbell

The Worlds Financial Spiral

recession08 — Wed, 07 Jan 2009 01:26:34 +0000

As almost everyone is aware of, the world is in huge financial trouble. However this phenomenon is very rarely explained to people. This post will try to paint the picture a little clearer for you. The bringing about of the current global financial crisis is due to what is known as the credit crunch. Around the world, banks have been lending money to people so that they can buy things they want such as expensive cars or houses or other commodities such as clothes. This lending has gotten so large that banks are now in-search of their borrowed money. The problem, however, is that the people who borrowed from the banks have spent the money on houses or cars or other items and are unable to payback the banks for the borrowed money. The banks, however, still require their money back so they reposes the items that the money was borrowed to purchase and the bank tries to sell them off, keeping the money for themselves. This leaves the borrowers of the money in tight financial positions and their personal expenditure on commodities or rather, the ‘extras’ of life decreases dramatically. Now, because people are no longer spending money on these extras, such as children’s toys, expensive dinners and outings, entertainment systems and cars, the companies who produce such items witness large drops in their sales percentages and are forced to lower their prices in order to remain in competition with other companies. The prices of these companies continue to fall until they can no longer afford to produce their sales items anymore. This ends up with the closing down of large sections of companies which in turn means the loosing of jobs of the employees of the companies. These losses of jobs add to the percentage of the population who are unemployed. Increased unemployment leads to people being even more frugal with their spending patterns which lead to the further deterioration of the cycle and this is how the cookie crumbles.

Posted By Michael Campbell

The Money Cycle: For Richer or For Poorer

recession08 — Wed, 07 Jan 2009 01:18:19 +0000

This post will talk about the money cycles of the world and will aim to help readers figure out how to create wealth for themselves as simply as possible.

There are two main cycles of money, the ‘Least’ cycle and the ‘Wealthy’ cycle. Both cycles involve a source of income, liabilities, taxes and expenses. What separates the two is the added structure in the cycle of the wealthy that aids in the building and sustainability of wealth. This structure involves paying yourself first which means putting aside 10% or more of your income before it gets taxed from you and investing it into assets that provide cash-flow and capital. This initial investment starts to create passive income for itself which then gets reinvested into assets that ultimately create more wealth. For those of you living in the ‘Least’ money cycle, the way to your riches is by moving into the ‘Wealthy’ money cycle.

Here are two diagrams of the cycles:

Posted By Michael Campbell

Bricks, Cement, House, Home: the World’s Property Situation

recession08 — Wed, 07 Jan 2009 01:12:58 +0000

Property has always been considered a safe and unquestionable pathway to personal wealth. It was seen as an ever booming industry around the world. In light of the current global financial meltdown however, these views are beginning to change. With property prices plunging down 8.7% in 2008, bringing average house prices down to 159,000 pounds in England, it seems that property is no longer a safe, recession proof industry/investment. The continuation of the recession and the prediction of increasing unemployment across the globe in 2009 make the property sector a rapidly slowing one. With falls in consumer confidence and demand, property prices are likely to continue dropping throughout 2009.

In April 2007 the time it took to sell a property was approximately 6 weeks. In December 2008, however, the average time it took to sell a house was 12 weeks, double what it was in the economic boom of 2007.

Another indicator of the downfall of the property sector is the proportion of the asking price being achieved. In December 2008 and continuing through to January 2009, only 88.6% of the time was the asking price of a property achieved. In April 2007, however, this figure was at a high of 95.7% showing us that property is on thin ice. Future outcomes predict a grim future for those caught up in property but a bright future of opportunity awaits those who are yet to buy in.

Posted By Michael Campbell

Merry Christmas! Spend, Spend, And Spend!

recession08 — Wed, 07 Jan 2009 01:08:40 +0000

The Christmas season is a time of giving and receiving. Most families in the world have however had to cut down on Christmas spending due to the turn out of the 2008 financial year. This being said however, Australians have spent a record 38 billion dollars on Christmas shopping. This extra expenditure, for whatever reason, will surely see the economy move in a positive direction in 2009. Another 1 billion dollars is expected to be spent on Boxing Day by Australians leading to more much needed money being pumped into its economy. If spending patterns continue to follow this trend then we are sure to see a relatively rapid recovery of the world’s economy.

Posted By Michael Campbell

A Bounce-Back as Stocks Rise

recession08 — Wed, 07 Jan 2009 00:58:10 +0000

After a scary, rapid and difficult downfall in the value of stocks and shares around the world, things are starting to look up. Today (06/01/09) the stock market rose across most sectors with average gains of 3%. Following the recent 2008 financial crisis this comes as relief to many of those whose money is caught up in stocks and shares. So…where to from here? It is still early days in regards to a full financial recovery for the world however countries such as Germany are implementing economic recovery packages of approximately 50 billion euros over the next to years in hopes of boosting the recovery of the global economy. As of now it is critical for investors and people in general to hold on tightly to their money and slowly start feeling their way back into the share market keeping in mind, however, that the long hard road to a once again booming economy is only just beginning.

Posted by Michael Campbell