Enterprising Investor Forum

Following the Rate Cut… Tuesday, September 25, 2007

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.