From the October 2006 issue of Boomer Market Advisor • Subscribe!

Flirting with disaster

By this time next year, the story posited, the U.S. economy will face some trouble. The author quoted Tucker Hart Adams, chief economist at U.S. Bank, also known as the Duchess of Doom after she correctly predicted the last recession. Adams placed the chances of a new recession at three-in-four, predicated on slower job growth and a stalled housing market.

Just one week earlier, we had Lincoln Anderson, chief economist with Linsco/Private Ledger, visit our offices (see Forward Motion, page 14). Despite the cooling housing sector, Anderson explained, advances in technology and strong corporate earnings, among other factors, will carry the U.S. economy for some time. And although he didn't completely discount a slowing economy, he felt we're nowhere near anything that could be considered a recession.

So who's right?

Who knows?

The recession/no-recession debate is starting to look as heated as the coming election. But either way, one thing is for sure; with boomer retirement officially underway your clients do not have the time - nor can they afford - the type of hit they took five years ago.

Hopefully, by now, you've explained the perils of performance chasing and the importance of a disciplined and diversified allocation strategy - one that performs when the economy is up and protects when it's down. But we've recently heard of too many instances, admittedly anecdotal, that suggest the exact opposite; over-investment in supposedly hot real estate and international emerging markets. Knowing what we now know about behavioral economics and the emotional responses to market events has us concerned.

So as far as predictions, we're expecting Anderson, but preparing for Adams. We suggest you do the same.

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