Enterprising Investor Forum

As we wrote in our post following the rate cut (link),things are probably going to get worse before they get better. But where does this leave us today; is the US heading towards a recession? We are not sure that a recession is around the corner quite yet but there are some alarming signs that we are definitely going to see the economy slowing down:

• fear of increasing unemployment rate
• decrease in new home constructions
• decrease of new car sales
• consumer confidence decreasing

Having said this, we would like to remind readers that recessions are part of normal economic cycles and that it would be naive to think that they will not happen. Looking back, we have had roughly the same number of recessions than periods of economic growth, even though recession are shorter in span.What is important, is to make sure that investors are aware of the economic climate and that they invest accordingly. As we already said, do not mistake last week’s strength in the markets as a sign that the Bulls are back for good! Be prudent and focus on capital preservation instead of speculating.

We recently came across the webcast of Middleby’s (MIDD) presentation at the Roth Conference – you’ll need to register, it’s free and well worth it.

CEO Selim Bassoul’s presentation is a breath of fresh air in today’s ‘politically correct’ corporate world… despite being the CEO, Bassoul keeps on sounding like an enlightened and energetic young manager of a newly born start-up. He is open, honest, blunt and inspiring. We strongly encourage you to find the time to listen to this presentation.

Link to MIDD Roth Capital Presentation: here.

We have all followed Mr. Bernanke’s stance and the fact that both the funds rate AND the discount rate were slashed by a half point should raise some questions; especially why has the Fed accommodated the demands of mortgage lenders, brokerages and home builders?

These cuts are extremely unusual and seeing that – in general – the Fed hesitates to side with requests, as they are usually already factored into financial markets, this decision should highlight that we are indeed facing a severe crisis and that things are probably going to get worse before they get better.

US markets responded extremely well and Europe has followed but are we sure that with this cut, the Fed has managed to put everything right? We would love for this to be the case but unfortunately, we fail to see how the rate cut will address the underlying liquidity crisis, credit crunch, mortgage defaults and so on…

Again, we encourage investors to remain focused on their investment strategy and long-term goals… do not try and participate or guess this volatility which does not discriminate between well run and poorly manage companies. Furthermore, a closer look at the rally both in US and Europe shows that the bulk of the rise has been pushed by shorts scrambling to covering their positions.

Stay tuned for more….

We came across this useful service and thought that our readers would find this interesting. Most of us are always ready to learn from the ‘master’ and try to keep up with him … thanks to this link – and courtesy of CNBC – we have one more way of keeping track of America’s Billionaire next door… please click: here.