The economy is clearly in a slowdown, and investors are wondering which way to go with their exchange traded fund (ETF) investments.

Ben Stein for The New York Times points out that the signs are all there:

  • An immense drop in home construction
  • Lending slowdown
  • Retail sales have dropped
  • The general mood of the nation, influenced by a fear-inducing news media
  • A rise in joblessness (although it’s still strong from a historical standpoint)
  • Foreclosures are way up, although they’re still a tiny fraction of the home market

The major problems we are facing are the signs of inflation, with high inflation in oil prices. Help is on the way, but the U.S. is still "behind the curve." Inflation is rooting from the big drivers who demand the oil, such as China and India. Oil demand is often based upon what time of the year it is. For example, in the winter, people still need warmth regardless of whether a recession looms.

Food prices have also been a source of inflation, especially with the ethanol production as motor oil. Whatever the benefits or problems are stemming from ethanol demand, it is taking up a huge amount of food farmland and a big cause of inflation.

Stein wonders if the Fed’s concern has been in the right place – perhaps they should have been worrying more about credit and growth instead of oil prices.

We’ll get through this, of course, but why make it needlessly painful?

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.