The Downturn is Far from Over!

One more time we are hearing that this sharp downturn has reached a bottom and now is the chance to buy - a house, a car, or especially some stocks or mutual funds.

There is some evidence that the economy is not headed for a complete collapse. There are even some monthly indicators that show upward movement.

No one can say for sure when the bottom will be reached in the stock market, but for my money the answer is not yet.

For the economy as a whole -- in terms of employment, consumer spending and GDP, I think the bottom is many months away, or perhaps even a few years away. My guess is that the economic news in the coming months will have far more negative items than real grounds for encouragement.

It is not surprising that governments around the world are trying their best to halt this slide. However, the methods being used in Washington may add fuel to the financial fire. Look out for inflation in the coming years, due to colossal deficits and extreme monetary stimulation. Buy gold or gold stocks to hedge against likely inflation next year.

I still believe we are headed for a small depression, that is a 10% or greater fall in GDP. It might even get worse than that.

The new trade barriers that are rising worldwide will surely dampen any global recovery. Few people realize how much global prosperity in the past fifty years has depended on free movement of people, money and products. If free trade dies, the world will become much poorer.

Fasten your seat belts for a prolonged bumpy ride!