I've been thinking a lot lately on various investments that would be able to handle the pending recession. There are the obvious answers (gold, basic materials, etc.), but I'm trying to round things out a bit.

It seems to me that when money is tight, people certainly cut back their spending, but the need for entertainment and pleasantry still exists. Cheap entertainment and thrills seem like a decent bet. Movies used to fall into this category I'd think, but that's just not the case anymore. I wonder if Netflix/blockbuster and other rental outlets would fit? Video games actually work out to be cheaper than most forms of entertainment, but they have such a high barrier to entry. Gamestop might be an answer to that, being that they sell a great deal of pre-owned (cheaper) games.

My sister pointed out makeup companies. That might sound a little funny, but truthfully if a $10 thing of lip gloss makes someone feel better, then it might match up perfectly. Never under estimate the feel good powers of vanity. That would suggest who, Proctor & Gamble?

Costco, BJ's, Walmart, Target, Dollar Tree, Big Lots -- big box stores and discount chains are a likely candidate. I started wondering about home depot. Normally, I'd say probably not, but given that much of this is caused by housing, maybe. People aren't going to be able to sell like they used to and will probably be planning on staying around a little longer. There might be a decent amount of home improvement going on, it's just whether or not that amount of home improvement is greater than the home improvement that was taking place during the housing boom. Probably not, but might be worth keeping an eye on.

Vacations are likely to be cut back on as well, but that doesn't mean families still won't try to go places and it doesn't mean that business will stop sending folks to different cities. Cheap destinations, discount travel outlets, discount airlines and discount hotel chains might be worth looking into (I think I'll pass on Spirit, though ;). When Kat and I were visiting family up in Ohio, we went to an indoor water park. I remember it as being a bit more pricey than I would have suspected, but I wouldn't be surprised if there were cheaper alternatives. It wasn't a water park like oh-my-god-a-water-park!, but more of an indoor pool with a bunch of neat slides attached to a hotel/destination type of place.

I've already been researching and following along with the alternative fuels world. I think given our economic situation, national politics and the general pulse of things, alternative energy will become even bigger in all this. A big part of our economic situation is oil. China isn't going to slow down their growth anytime soon, so oil demands aren't going to go down anytime soon. High oil creates higher inflation. The best way for us to reduce this added inflation may very well be alternative energy sources (combined with some clever Fed moves, of course). If the next president of the United States is a Democrat or one of the few Republicans pushing for massive energy reform, this sector will blow up.

Am I missing anything? Is my head in the right place or am I off base? I wasn't quite "investing age" during the last real recession we had, so I'm kinda basing this all off of logic. ;)

When I mentioned that the market could use a little positive news, I didn't mean the nations largest mortgage broker taking an $11.5 billion dollar credit line to stay in business ;)

Wow. It might be time to invest in NetFlix, beer companies and low-end american chinese food manufacturers. I'm really curious to see what the Fed does at their next meeting.

Jason Calacanis asked an interesting question today in regards to the economy.. Interesting times, indeed.

I spent a little time trying to catch up on the economic going-on's in the world on my flights this past week, and things are looking volatile if nothing else. Credit fears and overall consumer confidence levels are a drag, inflation concerns and the price of oil are putting downward pressure on the markets, and real estate is in the dumps.

I've posted before about the movement of money from one investment opportunity to another, and I still think thats the case. It's just.. When the market goes south, along with a hard asset like real estate, that largely leaves things like gold, CD's, t-bills and private equity investments, right? If interest rates are forced up from inflation, that doesn't make CD's all that appealing, but the Fed is looking like they might have to cut rates to spark spending -- I'm just not sure what a rate cut would do to consumer confidence. Wouldn't it be seen as more than an admittance of trouble ahead? I bet the media would at least spin it that way.

The other option is to move money overseas, which could lead to an even more unbalanced trade deficit/weakening dollar. Not necessarily a problem if we didn't have such profound budgetary concerns. Can't cover the overruns unless you can grow the economy faster than the debt. That won't happen if the money is invested elsewhere (the often overlooked exception to trickle down).

On the other hand, a month ago the Dow set a record high, factors like the unemployment index are fairly strong. June 2007's CPI was up 2.7% from June 2006, which seems to be about right (expectation should be 2-3% a year, correct?). The productivity index is up strong for the second quarter (over 2% 2nd quarter, compared to 0.2% for the 1st quarter of 2007). Many aspects of the economy seem to be not just healthy, but growing stronger. (follow along at home over at bls.gov)

I'm inclined to suggest that our overall confidence in handling the potential threats is what's dragging us down, and if there is a signal of good news somewhere, it'll cause a rebound. The threats aren't small ones, to be sure, but we're also surrounded by lots and lots of negativity driving down confidence. I'm not an economist, and I'm still trying to learn as much as I can about the subject, but it would appear that our economy is much stronger than folks want to give it credit for (hah, get it? credit?...ahem). It goes without saying that housing continues to be the biggest risk -- if we can avoid sellers panic, we may just pull through. Thin ice, though.

Thoughts?