CHESSNOID

It’s official, Warren Buffett says our economy is essentially in a recession. He is one of the richest men in the world and made his money with investments so it is hard to dispute what this gentleman has to say. According to CNN.Money:

The chairman and CEO of Omaha-based Berkshire Hathaway Inc. (BRKA, Fortune 500) said millions of people have also lost equity in their homes because home prices have dropped.

The technical definition of a recession most economists use is two consecutive quarters of negative growth in the nation’s gross domestic product.

“I would say, by any commonsense definition, we are in a recession,” Buffett said on CNBC.

But Buffett said it’s not clear how far the recession will go because that is difficult to predict.

The technical definition of a recession most economists use is two consecutive quarters of negative growth in the nation’s gross domestic product.

….

Buffett’s appearance on television came on the heels of his annual letter to shareholders, which he released Friday along with Berkshire’s 2007 financial report.

In the letter, Buffett predicted that the insurance industry will see lower underwriting profit margins in 2008 because premium prices are down, and the industry’s luck will certainly change.

“It’s a certainty that insurance-industry profit margins, including ours, will fall significantly in 2008,” he said. “Prices are down, and exposures inexorably rise. Even if the U.S. has its third consecutive catastrophe-light year, industry profit margins will probably shrink by 4 percentage points or so.

“If the winds roar or the earth trembles, results could be far worse.”

Buffett said Berkshire’s insurance group, which includes GEICO, reinsurance giant General Re and several other firms, generated $2.2 billion net income from insurance underwriting in 2007. That’s down from the previous year when it posted a $2.5 billion underwriting profit.

Berkshire owns more than 60 subsidiaries including insurance, clothing, furniture, natural gas, corporate jet and candy companies. Berkshire also has major investments in such companies as Coca-Cola Co. (KO, Fortune 500) and Wells Fargo & Co. (WFC, Fortune 500)

It’s interesting when he says it could get worse depending on the economy. Right now crude oil is at an all time high of about $104. It’s kind of funny to hear all the analysts and economists try to put a spin on the price of oil.. such as after you adjust it for inflation it should be where it should be. Yeah, right! When people are at the pump and filling up their gas tanks, they notice that it is an extra $10-$20 more to fill up. Consumers don’t care what it is compared to old prices. We just care about how much is leaving our wallets.

Most working families are definitely feeling the pinch. Gas is one of those things we are just too dependent on so when it goes up, we stop spending in many other areas. According to Yahoo AP news:

Oil Prices Hit Yet Another Record, Socking Everyone Who Drives, Heats, Eats, Buys or Sells

WASHINGTON (AP) — The price of oil gushed to a record high Monday, spreading dangerously to factories, groceries, gas stations and every citizen’s pocketbook.

Builders are building less, the government reported. Manufacturers are cutting back, another report said. General Motors Corp. and Ford Motor Co. said they would cut second-quarter production.

The galloping energy prices are doubly painful as the nation teeters on the edge of recession: High energy costs push companies to charge shoppers higher prices, then those consumers and businesses cut back in turn, dumping more cold water on the economy.

“It’s like throwing sands in the wheels of the economy,” said Brian Bethune, economist at Global Insight. “Things slow down. There is more friction and there is more complaining.”

Oil prices marched past $103 a barrel on Monday, the latest in a recent string of record-high oil prices, before settling at $102.45.

The steep run-up in oil and other energy prices “hits deeper and deeper into the consumers’ ability to spend. With a lot of households stretched by high food prices as well, it creates real problems,” said Joel Naroff, president of Naroff Economic Advisors.

The stock market continues that pattern of either extreme buying or selling at the last hour of trading. I have no idea why and just point out that observation. I think investors or institutions are buying on either the overbought or oversold conditions of the market to make a quick profitable trade. The market closed down just a bit, but throughout the day it was deep in the negative zone and the final numbers definitely reflect that activity.

Now a month ago I told you about a stock picking contest of sorts where you learn how to play the stock market through a social network called UpDown.com. They give you an imaginary million dollars and you invest it however you want to. My portfolio ended February barely on a positive note and compared to the S&P 500 looked OK.

Portfolio Value: $1,002,573
Return Since Start: 0.26%
Annualized Return: 3.35%
Portfolio Start Date 02/04/08

I was actually down $40,000

They paid me 36 cents for that, but I really don’t know how they calculate that. My user name is CHESSNOID on there and has the same Snoopy face icon it you want to add me as a friend. There are some people who have done dramatically well and are over $3-5 million in a short period of time. I don’t know exactly how they do it. On the first day of March, I was down almost 4% and barely broke even today. My portfolio today is valued at:

Stock Last Price Day’s Change Day’s Gain Shares Price Paid Total Gain Market Value
DOG $64.03 $0.43 0.68% $1,357.08 3,156 $64.17 -$541.84 -0.27% $202,078.68
DXD $57.82 $0.17 0.29% $591.94 3,482 $58.58 -$2,746.32 -1.35% $201,329.24
QID $53.80 $1.14 2.16% $4,229.40 3,710 $54.33 -$2,066.30 -1.03% $199,598.00
SDS $64.41 -$0.06 -0.09% -$188.64 3,144 $64.75 -$1,168.96 -0.57% $202,505.04
Market Value $805,510.96
Cash $203,051.71
Portfolio Value 0.60% $5,989.78 $1,008,562.67
Total Positions $805,510.96
Buying Power $203,051.71

All the stocks I am invested in are actually ETFs which is the first time I have experimented with them. I may try to post my daily results if I can remember to add it in. I expect the market to bounce so I will probably sell all these imaginary stocks ETFs and rebuy after the bounce. We will see if my strategy works.