There are known knowns. These are things we know that we know. There are known unknowns. That is . . . → Read More: The double dip recession is certainly here]]> A few weeks back, United States Federal Reserve Chairman Ben Bernanke stated that the economy is “unusually uncertain”.  This unusually explicit statement from the Chairman is alarming.  And reminiscent of the fascinating Secretary Donald Rumsfeld’s statement:

There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don’t know. But there are also unknown unknowns. These are things we do not know we don’t know.

A few days ago, John Chambers, CEO of Cisco Systems, a bellwether for technology companies, echoed Bernanke and stated that,

“We are seeing a large number of mixed signals in both the market and from our customers’ expectations, and we think the words ‘unusual uncertainty’ are an accurate description of what is occurring.”

Recently, RealtyTrac reported that foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 325,229 properties in July, a nearly 4 percent increase from the previous month.  One in every 397 U.S. housing units received a foreclosure filing during the month.  For July, Ohio ranked sixth with 13, 500.  Ohio is a recourse state unlike California and Arizona which took the top foreclosure filings honors.

How will the double dip recession look:

• Home prices and home mortgage activity are both likely to return back to the rational level in the mid or late 1990′s.
• Mortgage originators might be held accountable for the quality of the mortgage they originate.  The Mortgage Church Lady would say, “How inconvenient”?
• For home buyers who are able to put 20% down payment and have steady employment, the best of times is yet to home.   Condos in Florida are selling for less than the price of a Toyota Corolla and buying this condo may not be the better buy.
• For home sellers, the worst of times is yet to come.  For some, their home will become their ball and chain.
• American companies will continue to outsource jobs overseas and this will increase non-governmental  unemployment numbers.  Outsourcing will seep down to the mid-size and small companies.
• Christmas 2010 will reflect ground zero conditions in retail.  Walmart (WMT) might overtake Amazon (AMZN) as the most popular online store.  So sell AMZN before Dow reaches 8500.
• Municipalities will start cutting services.  As an example, Colorado Springs is planning to save money by turning off a third of its streetlights.
• Taxes will increase after the November 2010 elections.
• Layoff in schools will occur and this will further contribute to return to normalcy of home prices.
• We might learn to save for the rainy day.  The era of America as the consumer engine of the world might thankfully end, for now.  We might realize that home ownership as a reflection of the American dream is a translucent sales pitch.
• The Chinese economy might stumble.  Or not.
• Nouriel Roubini will be officially prohibited from appearing on television programs.
• Banks will keep their fangs sharp.
• GM will be the only company operating its plants to capacity!

How to invest in a double dip recession

Warren Buffett was on CNBC with Becky Quick and he said, “Our country will do fine even if we screw up”.  I wish we screwed up less by not embracing concepts that work only for the short term.

He also felt that President Obama is right for our current economy and . . . → Read More: Warren Buffet and Wells Fargo Company]]>

Warren Buffett

Warren Buffett was on CNBC with Becky Quick and he said, “Our country will do fine even if we screw up”.  I wish we screwed up less by not embracing concepts that work only for the short term.

He also felt that President Obama is right for our current economy and I agree with him.

I figured from what he said that Wells Fargo Company would be a bank to consider investing in over the long term.  Its stock price is about $9 today.  I think it will fall more and I intend to buy, just because Warren Buffet said so.

I don’t like listening to the financial analysts that come on CNBC anymore.  But I will listen to Warren Buffet, any day, any time,  even on CNBC.

The only function of economic forecasting is to make astrology look respectable -John Kenneth Galbraith

Here is an excerpt from an interview of Carlos Slim Helu, Mexican billionaire, that appeared on CNBC approximately in February 2008 as the stock market was going down.

Michelle Caruso Cabrera: In 1982, when Mexico was falling apart, people were fleeing the country. You were buying assets that . . . → Read More: Carlos Slim Helu on Stock Investments]]>

Carlos Slim Helu-Photo: Agencia Brasil

Here is an excerpt from an interview of Carlos Slim Helu, Mexican billionaire, that appeared on CNBC approximately in February 2008 as the stock market was going down.

Michelle Caruso Cabrera: In 1982, when Mexico was falling apart, people were fleeing the country. You were buying assets that nobody else wanted, and at very good prices, that turned out to be very good investments over the long-term. Do you have the same opportunity right now?

Carlos Slim:  What we do, most of our investments are in our own companies. The companies we manage are in a healthy situation, but we also manage some investment funds, mostly Mexican paper, now they are more open to invest outside, and these investment funds have a policy that when the markets are very low, they are heavy in equities.  And when the markets are very high, doesn’t matter that it goes higher, the position of equities is very low. Let’s say 35 or 40 percent in equities and when the market is very low, they go 70 or 80 percent in equities, that’s why they have moved in these parameters in some ways.

Carlos Slim versus Warren Buffet:  I think Warren Buffet invests, buys and holds for a long time, in simple businesses.    Carlos Slim does the same, buys and holds for a long time but he also believes in market timing a bit more than Warren Buffet.

So far, Carlos Slim has invested in Bronco Drilling, Saks Inc. and New York Times.  I think he figures that the market will go down more and I expect to see more investments in equities from him.  I think when Carlos Slim makes his next stock purchase, that will probably be close to the market bottom.

Warren had made an investment in Pier 1 Imports several years back, its stock price is 15 cents now.  Recently Warren Buffet took a loss for buying Conoco Phillips when its share price was too high, he did not anticipate the severity of the recession!!.   Recently he has indicated that the market is going to be in shambles.  We live in interesting times.