Economists want us to believe that we are either in a slowdown, midway through a recession, not really in a recession at all or that we won’t be in one. Last week I heard a legendary Baltimore fund manager remark he hasn’t seen things this bad since–the depression! And you thought Yogi Berra didn’t make sense.

My view is that we are in a recession and we aren’t out of the woods yet because the current economic downturn is based on bigger and more complex issues than we have ever encountered.

First: The financial world is in a mess. With the downfall of Bear Sterns the market most likely hit bottom but it’s going to be a long climb up from here from there.

Second: Much of the wealth accumulated in the last 15 years came from real estate, which was a very easy game for awhile. Everyone, it seemed, became a speculator. People bought houses and sold them for a tidy profit, sometimes before they were even built.  Because of low borrowing rates and easy money, young married couples were able to trade up houses within a few years  of buying homes. Today the picture is very different. It is much more difficult for the average person or couple to buy a home. Banks, faced with failing subprime loans and falling stock prices, don’t want to lend money, which will keep an meaningful rally in home prices at bay. And subprime mortages can’t be blamed for all the trouble. Last week it was reported that we were starting to see foreclosures on traditional mortage loans as well. I live in a a suburban area in Maryland and for years there was never a home for sale. Now I see ” For Sale” signs growing like spring flowers and no one is picking them. There are too many houses and too few buyers. Experts are forecasting  there is 1 1/2 years  of inventory  to be worked through., but I wonder. With mortgages tough to get and gas prices heading  to 5 bucks a gallon, I see little incentive for potential buyers to drive around shopping for a new home.

Third: Retail sales are turning down. At the end of April I walked through a large, high-end  department store in New York and saw most of the spring/summer clothing was already marked down 40%. As a rule clothing at that store doesn’t go on sale until just before Memorial Day and then the discounts were never that high. CONSUMERS ARE PUTTING ON THE BRAKES!! Add to that weak job number’s and the price of oil hitting new highs–well, you are starting to see the picture, and it isn’t a pretty one. In the past I might suggested heading abroad til everything blows over. Unfortunately, the dollar is taking such a pounding it costs a bundle to travel overseas. My daughter Liza, who’s spending her spring semester in Australia called last week to request I send here a pair of sunglasses that cost $90 here. The same pair would cost her $250 across the pond.

So what can you do?

The markets have had a couple of nice rallies sine the subprime problems came to light. Give your portfolio a good looking over. If any stock or fund you are holding didn’t more with those rallies ask why and make sure you get the right answer from your planner or broker. Remember : A cheap stock can get cheaper. Just as my Mother. In the 60’s she had bought Litton Industries and had a huge profit when the stock moved to over $100. Still, when the price started to turn down she would sell because her broker told her the stock would go higher. He said the same thing when the stock price wa $75, $50 and $25. She finally sold the stock at $15. There are many reasons why the price of a stock goes down and many times it isn’t a falling stock market. Nontheless, hope isn’t an investment strategy. It won’t push a bad stock higher. Neither will prayer.(I have tried. It doesn’t work.)  The past reminds us to hold only your highest confidence investments in questionable market’s.

Even if you see your investments decline, don’t panic. Meet with you broker and discuss a strategy. If he or she doesn’t have time or puts you off, fire him or her. This is not  the time to be dealing with a prima donna, especially if you are a boomer nearing  retirement  or you are already retired.

There is still a lot of uncertainty  as we work through the economic issues, deal with a lame duck president and face a new administration this fall. Plus less not forget there is an on-going war. As a rule, markets don’t like “what if”s” or uncertain times. So for the near term I will play it safe. What about you??