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Value Creation Blog

Are We In Another Recession - Wealth Management

Posted by Josh Patrick

consumer sentimentConsumer sentiment is low and GDP growth is anemic.  This leads me to wonder whether we are in or on our way to another recession.

The real question I have is whether the public once again is out in front of both the politicians and the economic “experts”.  Both of these groups have a lot to lose if we are in fact heading towards a recession and both seem to be doing everything they can to talk the public out of the “silly” notion that are headed towards a recession.

First, I don’t know whether we are headed towards a recession.  I can only say that it feels that way to me.  The people I’ve talked with are acting in a manner consistent with a national “malaise”.   There seems to be very little if no optimism and this, in my experience often means that we are headed towards poor economic times.

When I add the reading that I do to the mix, it appears that a recession is if not likely, than a pretty good possibility.  I see intractable problems in this country when it comes to dealing with obvious issues, entitlements, defense and tax policy.  In the Eruozone it appears that there is no way for many of their member countries to come out of debt without having to default.

If the US was downgraded by S&P, then France, Spain, Italy, Portugal and Ireland can’t be far behind.  If this happens, then we’re likely to see some sort of credit crisis that could trigger another 2008 scenario.  This is why I personally have been relatively pessimistic about the world economy and more specifically, the investment environment.

One of my favorite writers is Ed Easterling at Crestmont Research.  He recently has said that he believes corporate profits are at an unsustainable high.  I agree with this statement and don’t see where increased profits are going to come from.  There is little growth in the consumer and business isn’t investing because they don’t see a good use for their capital.

The bottom line with all of this is that I think we’re in for another negative economic storm.  Whether it’s going to be mild or serious I don’t know.  I do know that when government starts to deleverage in the way their likely to do so we are going to likely slip back into recession.   It’s pretty obvious to me that when government reduces spending, people are affected and jobs are reduced.  This will only add to the unemployment problem that we have.

I guess this all means that I’m not very optimistic about the near future.  I am optimistic about long-term solutions, but just not the next year or two or three.  What are you thoughts?  You can either write me at Jpatrick@stage2planning.com or set up a time to speak with me by clicking on this link.

Josh Patrick

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Topics: value creation, financial planning, wealth management

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