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Eli Broad: Recession is Here, Likely to Last

Friday, 30 May 2008 05:00 PM

The billionaire founder of home builder KB Home, Eli Broad, says the U.S. economy is in a recession — and one that is likely to continue for some time.

In an television interview, Broad predicted another 10 percent drop in home prices. After that price drop, housing prices will then start to recover, as will the U.S. economy.

The latest S&P/Case-Shiller index showed single-family homes falling more than 14 percent in March nationwide compared to a year ago. That was the sharpest drop since the index began two decades ago.

Los Angeles-based KB Home, one of the nation’s largest homebuilders, has operating divisions in nine states from coast to coast.

"The U.S. economy is in a recession no matter how you want to measure it," said Broad.

Broad recommends that investors put their money in the energy industry, multinational companies with the largest stock-market capitalizations, and emerging economies such as Brazil, Russia, India and China.

"The return on U.S. stocks likely will be in low single digits this year," said Broad.

Other economic experts agree that times are tough, but they are not yet calling it a real recession.

"While the U.S. is going through a difficult patch, it's also true that recovery is expected around the bend," Dr. Herb London, an economist, a professor emeritus at New York University, and president of the think tank, The Hudson Institute, tells Moneynews.

Like Broad, Jerry Miccolis, a senior advisor with Brinton Eaton Wealth Advisors, Morristown, N.J., tells Moneynews that he has 15 percent of his client's money in "large-cap equity investments in energy stocks."

"Everyone who's investing for the long-term needs to have a good-sized stake in energy — both stocks and energy-heavy commodity funds," Miccolis tells Moneynews.

The U.S. isn't the only market feeling economic pain. U.K. housing prices took their biggest tumble in May in the 17 years of recorded data, raising the risk that the world's fifth-biggest economy will go into a recession, economists say.

Billionaire George Soros was prompted to warn investors at a conference that the U.K. would feel the hit much harder than the United States.

House prices there fell 2.5 percent in May from the prior month, the largest decline since the Nationwide Building Society's monthly index began in January 1991.

Prices fell 4.4 percent from a year earlier, the biggest drop on this basis since December 1992, the U.K.'s last recession.

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The billionaire founder of home builder KB Home, Eli Broad, says the U.S. economy is in a recession — and one that is likely to continue for some time. In an television interview, Broad predicted another 10 percent drop in home prices. After that price drop, housing prices...
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2008-00-30
Friday, 30 May 2008 05:00 PM
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