Recession, recession, recession
Today’s word is recession. Everybody is talking about it.
Recession is the natural next step to be expected on the financial ride this country is on. It would take a miraculous combination of insightful moves by our government and big businesses, coupled with a huge in-flux of foreign money, to make anything different happen.
Our President campaigned against a tax-and-spend economy, but in two terms what did he give us? A spend economy, without the taxation to generate the money. Add to that the bursting of the housing bubble — which he helped to create — and you’re facing a US economy that looks pretty poor. Suddenly the US isn’t the superpower we like to think we are. What a fantastic condition in which to leave the country for your successor!
Well, the realities of recession are this: we’re looking forward to face lower interest rates, lower mortgage rates, lower property values, and a bear market… all after Americans have run up sky-high personal debt with unrealistic mortgages on overpriced homes, and maxed-out credit cards. Oh, but Bush saw that coming too, so he changed the bankruptcy laws. You can’t get out of it. You’re stuck.
So what to do? What to do?
First things first. Stop wasting money. (Gee, I’ll bet you wish you hadn’t bought that Hummer H2 now, eh?) No more going to Starbucks every day. No more buying $80 designer Jeans for your ‘tween-ager to grow out of in a year. Use public transportation instead of burning gas at ever-climbing prices. Save, save, save.
Next, use the money you save wisely. Interest rates will go down on your savings and investments, but they’re going to stay high on your debt. Get it paid off. You don’t want to carry huge debt into a recession. Pay off the debt with the highest interest first, then the next, and so on. Call your creditors and try to negotiate lower interest rates. And while you’re paying down, don’t create more debt!
Once the debt is gone, create an emergency fund. Salaries stop increasing, companies stop hiring, and job security isn’t so glorious in a recession. You need a backup fund. Be smart. Save, save, save. You should accumulate the equivalent of 3-6 months salary into a money market (savings accounts are for idiots) as an emergency fund.
Okay, now what?
Well, here’s the good news. Once you’re in a solid position to weather a recession, you can leverage it to your advantage. Housing prices are going to drop dramatically in most areas. Stock prices are going to fall. This is a blue-light special for anyone with some money to invest!
I, for one, plan on buying houses at bargain-basement prices. Not only will there be plenty of people who are anxious to sell for whatever they can get, but there will be no shortage of foreclosures, too. While the nationwide frenzy was on, and coworkers busted my chops about not owning a home, I was banking money instead of buying overpriced homes and accumulating more debt. But soon it will be my turn. I’ll buy properties at half their asking price, and own them mortgage-free.
Stocks will be another excellent opportunity. As stock prices fall, there will be tremendous opportunities to get high dividends on low-priced shares. Reinvesting the dividend payments into more shares will only give you more vehicles to earn money when the recession ends. It’s long-term investing, but it’s smart. Stocks are going on sale soon, and you’ll be able to sell them down the road for huge money. Manufacturing and luxury is coming to a close… time to buy utilities!
If you’re smart, you can not only survive a recession, but profit from it.
February 28th, 2008 at 7:01 am
Why not drop the price of all products in the US that is over two dollars by one dollar to boost the economy? Do it and see how much more buying power consumers have.