Investing in 2009: The economic hide out!

The Economy is looking more like a battered battle ship then anything that is fast and racy. As it makes it way back from international markets, you can see the engine smoking, holes in its hull and a very tired looking crew. The economy simply needs to make its way through 2009 and into a brighter 2010. The economy leaves investors wondering what they should be doing and where they should be putting their money.

The Overview of the Economy and Potential Recession

Unemployment rose to 5 % this year, which further sparks government fear, along with the credit crunch and slow housing, that the economy is going into a recession. This recession appears to be nation wide and may indicate a more grim future for the nation and the people seeking jobs as low-wage workers, specialized professionals and new college graduates.

“The economy is on the edge of recession, if we’re not already engulfed in one” said Mark Zandi the Chief Economics at Economy.com. Most analysts are unsure if we are either in a recession or heading quickly towards one. They do know that the economic outlook for the nation isn’t positive for 2008 and people may soon begin to experience changes.

The Bush Administration countered that the government will try and be more diligent when it comes to the economy and he warned in subtle tones that a Democrat government would further damage the economy by raising taxes. These taxes would reduce consumer spending even more even though nearly 73% of the GNP is based on American’s spending power.

Consumers have been hard hit by rising fuel prices, higher heating costs, lost jobs, a credit crunch, declining home values and raising taxes would just about eat up the rest of their disposable income. Once the disposable income is lost retailers and services have nowhere to get their revenue and this would further cause job loss. It appears that the government is quickly finding itself in a catch 22 where there really is no quick answer.

Even though the situation is becoming direr it is expected that the government may decide to reduce interest rates substantially another .5% in order to help speed up the nation. It is believed that once the interest rates are cut companies will have more money to invest in themselves and consumer will have more access to credit. However, the credit game has already been played out and many people may be running into credit worthiness issues no matter what the rates are.

Consumer Portfolios and Investment Strategies

With the economic outlook appearing so grim many people may be wondering what they need to do in order to weather out the economic downturn in their 401Ks, investments and other places that they have been stashing money. The changes to the economy bring about new and interesting challenges to people who desire to not only maintain their wealth but also increase it.

Bonds, Gold and Gas:

In traditional downturns people have invested in bonds that produce a lower rate of return then stocks but also don’t carry with them as much risk. Now people may actually consider investing in Gold and Gas as well. Gold is a finite product that the world cannot product anymore of. Therefore it will continue to rise in value. Gas is already at $100 a barrel and the international affairs have indicated that it will become even scarcer.

Finance and Mortgages:

Financial institutions and Mortgages should start recovering by the end of the year because much of the sub-prime credit crunch is expected to reverse itself by fixing its problems. The housing crisis may not actually start turning for the better in 2010 but that fact that these stocks and investments have been downgraded means that they are a good buy and a rise is expected.

Long-Term Investing Tactics:

Since the short-term market is very shaky and most people are unsure of what to do it makes good sense for investors to look past this year and into 2010 to get their returns. 2009 is the year of preparation whereby the credit crunch works its way out of the economy, the lower dollar helps exports and the mass of defaulted houses are finally sold. The big gains will be from buying suppressed stocks and waiting out the crisis until they return.

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