About a week ago I posted an article called ‘Could the Dow drop to 6,000?" on my blogsite. Really Scary Predictions. I don't even want to read the article now. Frankly I'm sick of all the doom and gloom predictions. I just really and truly can't take any more of it. In the past few weeks, I have read dozens of articles about how we are facing imminent collapse of the dollar, the fall of the American economy, the ultimate crash of the stock markets, another huge wave of foreclosures, and how a depression is unavoidable. And now there is the Bernard Madoff Ponzi scheme! There isn't one day that the media doesn't load up on negative stories. To tell you the truth, after I get done perusing all of them, I just feel like crying! Enough is enough! I admit that I too have been guilty of piling on the doom train as well. I was angry, and I was amazed at the level of anger that could be seen in reader comments as well.
But hey. Christmas is just days away and here’s my new look for the Holiday season... If you really want to read how bad things are, I can't help you today. I'm now going to detail for you several events that I’ve noticed recently that are in fact positive:
Resiliency in the stock market: Have you noticed lately that, with few exceptions, the market seems to sell off on bad news in the morning, but then turn around by afternoon and rocket higher? This resiliency is a good sign, and very different from what we had previously been seeing. Yes, I know this tends to happen when the market is oversold, and yes I know there are seasonal biases at work, but I'd still rather see green numbers than red on my portfolio spreadsheet! And even if we are only witnessing bull traps in an ongoing bear market, one can still make money in the short term by trading them.
Increasing demand for distressed real estate: Despite a tightening of mortgage standards, I am beginning to see an increased demand by both owner occupants and investors for buying foreclosures and other distressed properties. I personally know someone who purchased two more properties to add to her rental portfolio. The real estate market needs to be purged of the huge inventory of distressed homes before fair market, non- distressed re-sales will improve. We are now seeing the first steps toward that ultimate goal. Granted, it could take several more years, but at least there is a light at the end of the tunnel. Let's hope that light isn't from an oncoming train!
Declining oil and gasoline prices: When it comes to making predictions about oil prices, I have seen everything from a plunge to $10 a barrel, to a jump back up to $100 a barrel or more. Right now, oil is at four-year lows below $40 a barrel. Who knows what will happen? But I do know that lower gasoline prices translate into more money in Joeb and Betty’s wallets, and that means additional revenues to spend on other goods and services. Who knows, there might even be a few bucks left over to save! Remember saving? What a concept. In addition, we should begin to see a tempering of some of the higher supermarket prices that were formerly blamed on high energy costs. Lower gas prices also means that auto and airline travel should increase in 2009 as well, and that will be good for hotel and entertainment stocks. Perhaps even the casino stocks, which have been seriously annihilated, will show some signs of life.
Excesses being rung out of the economic system: We can all agree that recessions are terrible events. People lose their jobs, values on stocks and homes decline considerably, and fear grips the land. Just witness the recent panic flight into treasury notes with zero percent interest being paid! And yet a recession does serve to rid the economic systems of bubbles and excesses. We know that stocks were a bit too expensive last year. Oil near $150 a barrel this summer was absolutely a bubble waiting to burst. Certainly real estate was an overblown bubble in 2006. Several readers have rightfully noted that home prices need to return to former levels near three times area incomes to become affordable again. That is clearly on its way to happening now in many areas of the country. Is there a silver lining to the dark cloud of recession? I think Yes! Assuming you still have a job and some money to spend, it's in the bargains one can find on retail goods and services. During the recession of the early 1990s, I can still remember how I furnished my first house with furniture that the stores were practically giving away. Just the other day, I saw a fellow with a sign on his back, advertising 40-60% for a store that’s closing over 150 stores nationwide.
Retailer's loss is the consumer's gain during a recession: Recessions will come and recessions will go. But above all else, if you have your health and your loved ones around you this holiday season, that's the greatest wealth that one can have.
So let's all take a break from the gloomy despair for at least this next week coming, and try to enjoy the things that we already have, and the people in our lives who mean the most. I want to wish you all a very happy holiday season.
Merry Christmas my friends.