Often in the media we hear of the current economic situation compared to several points in history.  Whether it’s the 1987 stock market crash, the 1992 housing bubble, 1970s stagflation and the infamous great depression there needs to be some clarification on the terms used by analysts and pundits alike on the current state of the economy.

First of all, because an analyst says it does not make it true, though a culmination of analysts generally do.  There is a problem with the majority of people in the media who make comments about the market, they’re all pumping their own funds and what they perceive as the general market performance going forward.  When analysts were screaming $200 oil and $5000 gold it is likely that their own positions were set to take profits at $140 a barrel and $1000 per ounce.  Analysts always overshoot, because even when the market goes up they’re right and they like to bring attention to their cause.

Analysts have a vested interest in what the rest of the market does with their money.  When Goldman Sachs comes out with a price target of $45 on a particular stock, they’re shooting for $40.  Its just the general rule of thumb that analysts are pumping up a stock and taking profits far before their targets.  Its how the market works, otherwise there would be thousands of funds out there that have bought stock that they will never ever sell, or at least not within even a 4-5 year horizon.  Though analysts may be uppity and calling a buy on a stock with a high price target, just keep in mind that they’re in business too and happy to make the extra buck.

Worst since, and worst ever is a huge difference.  The worst housing market since the great depression sounds awful, but it means that the housing market is performing its worse SINCE the great depression, not during and not before.  Surely there have been plenty of localized housing booms and busts that have been forgotten by history never to be touched again.  Its becoming common to hear that the housing market is the worst since the depression and that might be so, but the fact remains that these are “shock tactics.”  Throwing the phrase great depression in any analysts opinion immediately makes it more catchy.

Look past the rhetoric and what we’re hearing on TV and pick up quality names.  Holding a few commodity stocks to balance out the inflation game and getting rid of low profit margin stocks will shore up your portfolio against even the largest of recessions.