Thursday, August 26, 2010

FinancialEdge: The Best Business To Be In During A Recovery (And Why)

The idea that economies expand and contract over a period of years, through a process known as the business cycle, has been around for a long time. French economist Clement Juglar was arguably the first to discuss this in detail in 1860, and Joseph Schumpeter later assigned the labels that are most familiar to us - expansion, crisis, recession and recovery.


Whether the statistical data fully supports the idea or not, the reality is that politicians, business leaders and the media still speak in terms of a recession/recovery/peak/collapse cycle and many investors manage their money accordingly.

While any one company or stock can stand out and perform well in almost any stage of the business cycle, those are the exceptions and not the rule. The rule, by and large, is that stocks move roughly in tandem with their broader industry group. As a result, it makes sense that investors should want to know which groups tend to perform best during various stages of the cycle. So where do most investors want to be in recovery?

To read the full piece, please go to:
http://financialedge.investopedia.com/financial-edge/0810/The-Best-Business-To-Be-In-During-A-Recovery-And-Why.aspx

2 comments:

Anonymous said...

Ethanol has an inherent advantage over nat gas in a conversion in that much of the existing liquid- handling infrastructure for gasoline could likely be used with the former. Thus Brazil likely had an easier and less costly task going to ethanol than we would going to nat gas. Still, I think I recall there were problems there in the early going - cars were not tuned for the stuff and the fuel was not always the best quality.

The US COULD have gone some distance into a nat gas conversion if a big hunk of that "stimulus" money had been sent in that direction. It might've created thousands of jobs, pointed the way to a brighter energy future and Obama would be a hero. Instead, nat gas remains a "fuel of the future and (perhaps) always will be." Feh.

Stephen Simpson said...

Actually, that is not true.
Most of the existing gasoline infrastructure CANNOT be used for ethanol because ethanol is more corrosive.

Moreover, ethanol is more hygroscopic and that only makes the situation worse.

So, yeah, gasoline infrastructure can be used for a while, but the maintenance and replacement costs will be much higher.