United States Heading towards a Depression?

Have you heard of Warren Buffett?

 

Yes I can, I do it all the time. Can you?

 

Consumer prices rose by 4.1 percent for all of 2007.

The Federal Reserve said that output at the nation's factories, mines and utilities showed no growth in December

http://news.yahoo.com/s/ap/20080116/ap_on_bi_go_ec_fi/economy

 

Shhhh don't tell this to Gtech, he might start calling you anti-American. You are only supposed to spread optimistic, good news around here don't you know that by now! Prepare yourself for bashing!

 

It's all part of the natural business cycle. Actually for some people business can increase before a recession. I just got $9000 of work that will take me 2.5 weeks to do. One of the jobs is for a subprime company. You must be doing real well in Miami as I can't afford a $400 bottle of greygoose.

 

Thank you for making my point. Buffet is not a speculator. He's an investor, and values compounded returns on his investments.

 

The business cycle is natural. When it is artificially manipulated (subsidies, bailouts, etc.) then it becomes an unnatural cycle, with exponentially larger rises and falls for prolonged periods of time.

If you believe in capitalism and free markets, then you have to believe that the market is self-correcting, both from booms and busts.

 

Free markets are great for economic activity.

However, capitalism has a lot of flaws. The natural outcome of capitalism is exploitation of workers and monoply.

 

Interestingly, that is also the natural outcome of socialism, monarchy etc.

Maybe that is simply the natural outcome of human hierarchy structures.

 

The system of Capitalism was reformed by Teddy Rosevelt and trust busting.

 

That was a very uneducated statement. Playing the market will bring you bigger returns than buying a company for the long term.

Being someone who enjoys the free market you should know that the value of something is only what someone will pay, thus studying fundamentals (earnings, growth) as opposed to technicals (how and when people buy and sell) would be ridiculous, or so says a free market ideology.

And while I'm on it, the first sentence of your last paragraph entirely contradicts what you said in the first paragraph.

 

I don't agree. Not if you are getting dividends and re-investing them.

So you are saying that the free market places no value on quality?

I don't understand the contradiction. Please explain.

 

Buying an entire company privately is generally a far superior investment if you pick a good one. You can easily buy a private company at 2 to 3 times earnings where as in the share market you often will purchase shares at 10 - 50+ times earnings.

IN the early days Warren Buffet and Berkshire Hathaway bought many private companies outright. As Berkshire Hathaway got bigger he was forced to buy more from the share market due to the increasing difficulty in finding private companies that were big enough to buy.

He also used his insurance businesses as a kind of giant margin account allowing him to leverage the purchasing of companies.

For this reason many of Warren Buffets key investment strategies cannot be replicated by the average investor.

 

At this stage many government inflationary and consumer price figures are outright lies.

 

Maybe, but many of these are also overpriced. There has been a global boom and bubble. Almost no country has been left out except places like Zimbabwe.

When there is a boom or bubble in a market, there is also inevitably a bust no matter how much reserve banks try to manipulate their economies.

Since this boom has been happening world wide its conceivable that there could be a global bust.

In this situation its best to have little debt, own commodities, and own farm land.

 

Real estate is on thin ice with the inflation numbers. The FED rate is lower than the inflation rate and if the numbers continue the FED will need to tighten 2 or 3 percentage points.

 

Economics 101

Definitions:

Recession: When you lose your job

Depression: When I lose my job

Recovery: When Bush loses his job

 

Photo of Ben Bernanke talking about the economy today: Photo Ben Bernanke.

 

He looks constipated.

 

The economy is heading to recession. 20% of sub-prime mortgages are delinquent and housing starts fell to their lowest level in 16 years

Futures markets have priced in a half-point FED rate cut to 3.75% at the end of January, a move that would make the Fed rate lower than the inflation rate of 4.1%