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Recession Proof your Portfolio

Written By Brian Hicks

Posted March 8, 2008

Welcome to Wealth Daily’s new weekend review. Each week we’ll take a look at the week that was and what’s ahead, along with what you may have missed form our free sister sites, Gold World, Energy and Capital, and our free blogs. Enjoy.


When the "Oracle of Omaha" says we’re in a recession, it’s okay to be concerned. Indeed, we’re in a recession. We may have to wait six months for the "experts" to make the official announcement, but truth is we’re already there.

But again, it’s okay to be concerned. It ‘s not time to turn to the "money under the mattress strategy" just yet, though.

Sure, Buffett declared utter disapproval with government moves, and doesn’t see this sell-off as a buying opportunity. Sure, the Fed and stimulus plans to boost the stock market have failed miserably. And yes, Bernanke & Company’s aggressive rate cutting has only destroyed the dollar after five rate cuts in six months. They even have plans to cut more.

Yes, oil is at record highs. Gold is nearing $1,000, and the dollar is still plummeting against the Yen and the Euro. Oh, and inflation is at 26 year highs. Real estate is in the toilet. Credit is tight. Delinquencies and foreclosures are flying. And we may even retest 11,500 lows on the Dow.

But, like I said, it’s okay to be concerned. There is a way to profit in this environment, though.

How To Recession Proof Your Portfolio

You can always play the downside with options, like we’ve been playing in SC Trading Pit.

Take, for example, American Express (AXP:NYSE).

Unlike industry Visa and MasterCard, American Express is a lender. It has to worry about cardholder debt, giving it higher exposure to credit debt. The American Express-like companies have to be concerned that as of November 2007, credit card debt "soared at an 11.3 percent annual rate in November following an 8.5 percent rate of increase in October" and is still on the rise.

They’re the ones where share values are being beaten stilly because of charge-offs, payment delays, and higher delinquencies. Why do you think Discover Financial Services (DFS:NYSE) stock plunged from a $35 IPO price to $15? It’s a card lender, and concerns itself directly with cardholder debt.

And with homeowners struggling to stay above water, Visa, like MasterCard, shouldn’t have a problem. American Express might given higher delinquency issues, as credit card debt balloons to $790 billion, a rate "four times higher than earlier in the decade," says the Center for American Progress.

In this environment, keep your eyes open for downside opportunities… and you’ll be just fine.

As for opportunities on the long side, they exist, too. In fact, SC Trading Pit is putting the finishing touches on six "must own" stocks to put in your portfolio in a recession. Stay tuned, my friends. We’re all in this together.


For the week of March 3, 2008, here’s what we covered in Gold World and elsewhere.

Exploring Today’s Gold Stocks: Week of March 3, 2008
"We’re writing this week’s issue of "The Drill Rig" from the Professional Developers Association of Canada (PDAC) 2008 conference – one of the largest conferences for geologists and mining companies. It’s the second day of the conference and we’re already we’ve met with several companies and gotten some new ideas," says the Gold World staff.

Renewable Energy Tax Credit: Why Tax-Free Income is Hurting You Today… How to Profit Tomorrow
"Companies would get a new production tax credit of 50 cents per gallon of cellulosic ethanol through 2010 and increase tax credits for gas stations that install pumps for dispensing alternative fuels. I can’t reiterate enough how much it behooves us to do this, especially since over 22 billion gallons of the stuff needs to be in the nation’s fuel lines by 2022, per a Bush-imposed mandate," says Nick Hodge.

Gazprom Stock: The Russian Gas Investment Up 57%… and Running
"Post-Soviet Russia’s economic kingmaker is natural gas, and new President-elect Dmitri Medvedev is also the country’s energy czar, helping steer soaring stock prices. In this article, we’ll take a look at Russia’s gas monopoly, Gazprom–in the context of the country’s new leadership."

Japanese Renewable Energy
"Japan is about to throw nearly $2 billion into an international fund that fuels clean energy technology in developing countries. With Japan’s technological advantage in everything from hybrid cars to robots, it’s safe to assume that Japanese companies will be among the world’s leaders in CleanTech within a few years."

"We May be Scratching the Bottom," says Yun.
On February 25, Yun tried to argue that the housing market is "scratching the bottom", a horrible reminder of Hank Paulson’s 2008 "at or near bottom" theory. What Yun fails to understand is that because sales were down 0.4% from December 2007, it doesn’t mean we’re bottoming anywhere. Inventories are now at a 10.3 month supply glut. That’s 50% higher year over year.

Born of Panic: The Crisis that Gave Us the Fed
New to banking panics? Well the truth is that they used to happen all of the time. The big one though was the money panic of 1907. In some ways, it was the last straw. So here’s part 3. It’s about how what happened in 1907 put us where we are today.

U.S. IPO Market: $21.4 Billion Worth of IPOs Shelved
This is the "worst market crisis in 60 years," says George Soros. "We have not seen a nationwide decline in housing like this since the Great Depression," said the President of Wells Fargo & Co. in December 2007. So, how can you be shocked when $21.4 billion worth of IPOs are shelved since the first of the year?

Water Sector Investments: How a Drought Can Make it Rain Money
"The company’s claim to fame, so to speak, is the invention of center pivot technology for crop irrigation equipment–the giant sprinklers you can see in fields across the country."

The VIX Indicator: The Ultimate "Fear Gauge" For Beating the Crowds to Big Profits
"The trouble with this strategy though is that for most retail investors, it is exactly at these extremes in sentiment that they often lose their shirts."

That’s it for this week. For more, visit your free,, and

Have a great weekend,

Ian L. Cooper