These are the times that try men's souls, wrote Thomas Paine in 1776, referring to the North American colonists' revolt from British rule. And now, referring to the U.S. economy, we can equally say that these are the economic times that try the national soul. Whereas last year and in years earlier, we here at Elliott Wave International warned about the tough times to come in the economy, today's news stories are full of woe:
- Home prices down 11.4% in January, the steepest drop since the Standard & Poor's Case-Shiller index began tracking home prices. (Reuters)
- Retail sales grew at their slowest pace since 2003 last week at a 1% growth rate, according to the International Council of Shopping Centers and UBS Securities LLC. (Bloomberg)
- The Consumer Confidence Index, which has been falling since July, dropped to a five-year low in March. The Conference Board reports that consumers are worried about tight credit, fewer jobs and higher prices. (Reuters)
These are indeed the times that try the souls of men and women who must cut back on their spending in order to pay their bills. Thanks to the credit crunch and lower home prices, people can no longer cover the difference between their income and their outgo by re-financing their home or taking out more equity as a line of credit.
Some of Paine's famous words from The Crisis, a series of essays he wrote after the Declaration of Independence was signed, can even apply to the difficulties now being faced by U.S. consumers. Here is the beginning of the essay he published on December 23, 1776. General George Washington thought so highly of it that he ordered it to be read to his troops huddling at Valley Forge.
THESE are the times that try men's souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands by it now, deserves the love and thanks of man and woman. Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph. What we obtain too cheap, we esteem too lightly: it is dearness only that gives every thing its value….
So many more people who bought a home in the past few years may read those last words in a new context, knowing that they obtained their new homes too cheap with subprime loans and esteemed them too lightly. In fact, as pocketbook issues now begin to hit everyone's pocketbook, the recession out there in the U.S. economy becomes my recession or your recession when someone we know loses their home or their job.
So, we come to a question for those who want to preserve the wealth they have: Where do you put your money during a recession? In gold? That's the most common response. In stocks? Seems iffy right now. In T-notes? So boring.
Bob Prechter and one of our analysts did the research to see which of these three investments have fared the best in economic expansions and recessions since World War II. The stock market was the winner during expansions, with gold coming in second. No surprise that T-notes came in last, since they are designed to provide low risk and therefore provide lower returns.
But there is a surprise when it comes to which is the best investment historically during recessions. That's what Bob writes about in his latest
Elliott Wave Theorist – and he provides two tables that compare investments in gold, the Dow, and T-notes. To get the benefit of this excellent information, the best thing to do is to order your own copy of the March issue of
The Elliott Wave Theorist.