Archive for the ‘Economic Issue’ Category
Startups have been encouraged to develop skills and not retrench their workforce to overcome the recession.
According to an international survey of senior business executives launched today by global business performance consultancy, McKinney Rogers, business leaders believe that putting their faith in developing the skills and abilities of their workforce is the best way to reduce an organisation’s exposure to the risk of recession,
With recent media attention focusing on the impact of sub-prime lending and the possibility of the current economic downturn turning into a full-blown recession, the survey, which encompassed Europe, Africa, Asia Pacific and the US, was designed to gauge awareness, perceptions and trends on the issue and what can be done to minimise the risk of a recession’s impact on global business.
Key findings emerged when executives and business leaders were asked about the importance of tactical actions in reducing an organisation’s exposure to the risk of recession.
An overwhelming 78% of respondents cited the development of their workforce as the key tool for this, while 73% agree that moving into emerging markets that are unlikely to be affected by recession is also important.
Diversifying the business offering was classed as significant for 67% of those surveyed.
Conversely, reducing the number of employees (34%) and reducing marketing spend (23%) were classed as the least important tactics to pursue in safeguarding against recession. Other initiatives cited in the research were cutting prices to become more competitive (38%) and consolidating business premises and locations (50%).
Commenting on the research, Richard Watts, Regional Partner for Europe at McKinney Rogers at McKinney Rogers said, “It is interesting to see what business leaders focus on when recession is looming – their workforce and diversification.”
Watts went on to say that at times of economic slowdown getting organisational buy-in as a whole is vital, which is why taking a strong leadership approach is such a key part of thriving during these times. Leaders need to instil the ability to re-energise, re-think and re-focus the business, using realistic targets.
“A company’s workforce is an essential tool in the business armoury when the going gets tough. Making productivity a focal point and rewarding those who rise to the top accordingly, will help reduce an organisation’s exposure to the risk of recession,” says Watts
Minimizing exposure to recession
When asked about the importance for businesses to have plans in place to reduce their exposure to the risk of recession, a staggering nine in 10 business leaders agreed that this is now very important. Despite this high figure, a relatively low number (32%) have advanced or very advanced plans in place, indicating that many companies might be caught short in the event of a recession.
Watts says, “these results clearly highlight a real understanding across the business community of the value of forward planning in limiting the damage of a potential recession, as well as the tactical actions that need to be taken to achieve this. However, it is worrying that such a low number of business leaders and organisations have these advanced plans in place.
“Any time, whether a recession is imminent or not, it is vital that businesses have their house in order by having a clear focus and strategy in place, as well as ensuring resources are suitably allocated to provide the best return on investment. That way, when a recession does strike they will be able to stay lean and emerge stronger.”
RECESSION? OR DEPRESSION?
What’s the difference between a recession and a depression? What’s a recession? How do we know if we’re in one? These are questions we all want answers to during these turbulent economic times. A glib definition is, when your neighbor loses his job it’s a recession. When you lose your job it’s a depression. The standard newspaper definition of a recession is a decline in the Gross Domestic Product GDP for two or more consecutive quarters. However, by using quarterly data this definition makes it difficult to pinpoint when a recession begins or ends. This means that a recession that lasts ten months or less may go undetected. The Business Cycle Dating Committee at the National Bureau of Economic Research NBER provides a better way to find out if there is a recession taking place. They define a recession as the time when business activity has reached its peak and starts to fall until the time when business activity bottoms out. By this definition, the average recession lasts about a year. What goes up must come down.
Periodic recessions are a natural part of any nation’s economic cycle. Most analysts pointed to fears surrounding the United States economy and a possible recession as the reason for the drop. Three days later, news outlets were already reporting a new economic stimulus package designed in part to try to prevent a recession. This isn’t the first recession news in recent memory. The old saying goes that economic forecasters were invented to make meteorologists look accurate. When the weather reporter predicts snow, one can look outside to see if the forecast is correct. But when an economist predicts a recession, the only verification is the opinion of other economists. Unlike snow, no one can be sure when a recession has begun, or when it has ended. Interest rates usually fall in recessionary times to stimulate the economy by offering cheap rates at which to borrow money.
Another indicator of a recession is a sudden rise-at least two percentage points-in the unemployment rate. Example: The general business recession caused high unemployment in the rust belt and low interest rates throughout the country. Whether a recession develops into a severe and prolonged depression depends on a number of factors.
A depression is a severe economic downturn that lasts several years. Fortunately, the U S economy has not experienced a true depression since the market collapse in 1929.
The Depression of the 1930’s was aggravated by poor monetary policy. The “New Deal” created many government programs to end the Depression, but government programs alone could not end it. We probably won’t see a depression like that again, simply because the government has learned how to avoid it. Many laws and government agencies were put in place because of The Great Depression with the express purpose of preventing that type of cataclysmic economic pain. It was the longest and most severe depression ever experienced by the industrialized Western world.
The Great Depression began in the United States but quickly turned into a world wide economic slump owing to the special and intimate relationships that had been forged between the United States and European economies after World War I. The Depression hit hardest those nations that were most deeply indebted to the United States, i e , Germany and Great Britain. The Great Depression had important consequences in the political sphere. In the United States, economic distress led to the election of the Democrat Franklin D. In Europe, the Great Depression strengthened extremist forces and lowered the prestige of liberal democracy. Prior to the Great Depression, governments traditionally took little or no action in times of business downturn, relying instead on impersonal market forces to achieve the necessary economic correction. After the Great Depression, government action, whether in the form of taxation, industrial regulation, public works, social insurance, social-welfare services, or deficit spending, came to assume a principal role in ensuring economic stability in most industrial nations with market economies.
Many factors can cause a recession to slip into a depression. Not the least being greedy CEO’s and inattentive members of congress. Probably the quickest, but least desirable, way out of a depression is war. WW2 is a perfect example. Economists cannot agree on the exact way to end a depression as no democracy has existed this long, so they have no road map to follow and are more or less feeling their way along.
There are two current theories under debate. 1) The unprecedented infusion of resources into the depressed economy will result in accelerated boom-and-bust cycles. This may result in the dissolution of our economic system as we know it. Or: 2) The unprecedented infusion of resources into the depressed economy will result in a long-term, painful recovery of our economic system. In either event, there does not seem to be a painless, “quick” fix that will make everyone happy and prosperous.
We’re hearing a lot about the economy lately. In fact, just this week, Alan Greenspan actually said “the r word” by announcing that the United States is in a recession. Our last recession, from 2001-2003, was due to the collapse of the dot-com bubble, the September 11th attacks, and accounting scandals such as Enron. There were also recessions in the early 1990s and early 1980s.
In fact, for the last 30 years, the U.S. has gone through a recession once every decade. There’s no indication that this will change in the future. Burying your head in the sand will certainly spell disaster for your business. Gritting your teeth to weather the storm will only increase your blood pressure and keep you up at night.
The good news is that a recession is not a depression. It’s unlikely that we will ever go through something like the Great Depression again. However, it’s quite possible that this will not be our last recession. To be successful, you need to become informed about what a recession is and what steps you can take to thrive in the midst of one.
What is a Recession, and What Can You Do about it?
A recession is a period of temporary economic decline during which trade and industrial activity are reduced. It is identified by a decline in a country’s gross domestic product (GDP), or negative economic growth, for two or more successive quarters. In short, a recession means a steady, prolonged decline in sales.
As a small business owner, you’ve experienced a decline in sales before. It’s a normal part of any sales cycle. Question is: When you’ve had a drop in sales in the past, what did you do? Did you just wait, hoping for things to get better? Or, did you take decisive action to nip things in the bud and turn things around? If you are a successful small business owner ‘ someone intent on creating a constant and steadily increasing cash flow ‘ then you know the importance of taking informed, resolute action.
Jack Canfield, too, knows about decisive action. He’s famous for his rags-to-riches story of how he committed to contacting five people a day to promote his book, Chicken Soup for the Soul. The key to his success was his commitment to action. Not just any old action, mind you. Aligned, well-thought-out, purposeful action. Jack knew he had a monumental task in front of him: promoting an unknown book by an unknown author. Each day he took action to increase name recognition, forge connections, and build sales.
Five Simple Steps for Thriving through a Recession, Jack Canfield Style
1. Get back to basics
Recessions are good for all things that begin with “re.” Re-group, re-organize, re-view. Revisit the fundamentals that have already made your business a success. Revise your mission statement to stand for what your business is really all about. Reject rejection. Practice Jack’s “Rule of Five”: Every day, do five things that will move you toward your goal.
2. Clean up your act
Recessions are a great time, Jack advises, to clean up your messes. Now, when sales are slow, finish anything that is incomplete. De-clutter your office and organize your files. Make phone calls to bridge any disconnects that may have occurred between you and your customers. Magnify your success energy by focusing on what you want to happen, not what you are experiencing.
3. Focus on your connections and relationships
Recessions are the perfect time to forge new connections and strengthen long-standing relationships. Practice uncommon appreciation. Review your agreements with clients and confirm your commitment to them. Speak first and with integrity. Be impeccable in your communication. Meet for breakfast instead of over the phone. Supplement emails with handwritten cards and notes.
4. Be smart with your money
Recessions are the natural time for small business owners to review their financials. Take a look at your cash flow. Collect on any outstanding accounts. Don’t fall into lackful thinking by clutching and holding onto your money. Spend wisely. Make sure your bills are paid. Above all else, give more. Keep your energy flowing by finding a way to serve others.
5. Step back
Recessions are the ideal time to practice stepping back in order to keep things in perspective. Instead of energetically aligning with all the fears, doubts, and anxieties associated with a recession, step back and move to higher ground. Don’t get caught up in others’ panic. Soar above it all to a place where clarity can be gained and perspective maintained. While you’re at it, take others with you. As Jack says, “When you lift up others, they will lift up you.”
No one likes feeling uncertain about the future. Yet nothing is ever certain, whether or not we’re in a recession! By taking decisive action now, you can positively influence your future. When this recession ends, don’t let your company be one that just managed to survive. Practice Jack’s Rule of Five and thrive.
Enhanced illumination contributes to a more positive and focused work environment in the office. It helps improve employee morale, and it contributes to increased productivity which can be vital to recession proofing a business. Of course, many businesses may feel that now may not be the best time to invest in a comprehensive overhaul of their interior lighting system. For such companies, commercial recessed electric lights offer an affordable enhancement to the existing general lighting system that represents a safe-bet investment in any market place and also helps to reduce liability and improve general safety.
A certain number of foot-candles are needed for clear visibility and safe mobility within a building. Pockets of shadow and low levels of light represent areas where employees can injure themselves or suffer from eye strain caused by insufficient light. Commercial electric recessed lights are ideal for improving illumination in these areas and increasing visibility so employees can more easily perform tasks and move between stations when necessary. Reducing work related physical stress and minimizing the risk of injury helps decrease the potential liability for an organization with substandard levels of lighting. Something as simple as installing a few commercial recessed electric lights can potentially qualify a company for reduced commercial liability insurance rates, provided the contractor who installs the recessed lights provide the organization with a photometric analysis that details the improved quality of interior lighting and shows where newly installed recessed light fixtures work provide new directional lighting for important tasks in key areas of human traffic and activity.
Recessed electric light fixtures are also an ideal source of accent lighting in commercial interiors. Meeting rooms and foyers are two very important places that every company should spend the money to literally put in the best possible light. Recessed electric fixtures in these rooms can be wired to dimmers and remote control unites that allow for the light to be set to appropriate levels for different events. Speakers, sales presentations, private meetings, and even video conferencing will all benefit from the enhanced and flexible illumination produced by commercial recessed electric light fixtures.
To determine fixture specifics such as housings, trims, and lamp types, it is necessary to quantify floor and vertical cube space, and to learn as much as possible about key activities essential to the client’s operation. This information can then be passed on to us so that we may process this data using sophisticated design software that generates a comprehensive photometric analysis of the client’s interior office space. This photometric assessment details a point by point, room by room breakdown of required levels of lighting and optimal locations for fixture placement.
Once these things have been determined, it is much easier to determine exactly how many recessed electric lighting fixtures are actually needed, and which housings, trims, and lamp types will best meet the requirements of the proposed installation. For ceilings that cannot be cut due to restricted clauses in the client’s commercial lease, retrofit recessed lighting fixtures may be the best way to go. Smaller companies who feel the pain of investing even in a few new ceiling lights can be reassured with the promise of lowering power bills with low voltage fixtures. Unique interior architecture such as sloped ceilings can also be accommodated with special recessed electrical light fixtures made just for such interiors.
There are so many options when it comes to ways to light your home such as fixtures, lamps, task lighting or recessed lighting. Recessed lighting is known for creating a clean, bright and organized look to a room when planned and installed properly. Recessed lighting can be used in any room (not just a den or family room) in your home to create a clean look, such as in a kitchen or study. Recessed lighting is also known for its fantastic energy saving qualities. One way recessed lighting saves energy is that a dimmer can be installed to the recessed light controls, allowing you to dim the lights which will result in less energy use, ultimately resulting in a money savings for you.
Recessed Lighting Benefits:
• An inexpensive way to update a room.
• Will not interfere or take away from the design of the room.
• Can create an open and spacious feeling in a room.
• Recessed lighting trimmings come in numerous sizes, shapes and styles allowing you to personalize the look of your lights.
• Can be used to highlight artwork.
• Can use several light bulb types such an incandescent or halogen.
• Provides a safe way for lighting inside closets (compared to a hanging bulb which is a fire hazard- think about it- a closet, a hanging bulb, something falls off a shelf and knocks the bulb or lands on it- it could be the start of a potential fire).
Recessed Lighting Placement:
When it comes to recessed lighting placement, there are a few important safety considerations that you must first assess such as if the ceiling where you plan to install the recessed lights has insulation. If your ceiling has insulation then you must choose fixtures that are rated for placement near insulation. You will know if it is rated for use near insulation if the fixture says on it “IC Housing Rated”. When you are ready to plan the placement of the lights, make sure you follow these tips:
• If you will be using your recessed lights to highlight artwork, place the light about 12-18 inches from the front of the object you wish to light.
• If you will be using your recessed lights to highlight something with depth (such as a fireplace or sculpture), then you will want to have the recessed lights angled on it from two or three different angles.
• Follow this simple rule: 4-inch fixtures should be placed at least 4 feet apart and 6-inch fixtures about 6 feet apart.
Since history seems to repeat itself, maybe we could learn something about the current possible recession by studying this country’s recession history.
I work with investments, so I’m particularly concerned with recessions because they can have a very negative impact on investment account values. I’m going to look at the recession history with particular focus on how each recession affected the Dow Industrials Stock Index. I have Dow Index data back to 1930, so we will start there.
I have known for some time that the market moves in approximately 15 year cycles. The market goes up for 15 years then seems to go sideways for the next 15 years. This growth and then consolidation pattern happens frequently through out history.
Let’s first consider the Dow Industrials index from 1930 through 1945.
This period started with the great depression. We all know the effect the depression had on stock values. The Dow lost over 88% of its value between 1929 and 1933. It made a nice rebound following the depression. It increased 345% over the next 4 years. We will see there is a theme in the recession / expansion cycle. Recessions are relatively short and can be very violent to investors in the stock market. The expansion period following recessions are much longer and historically quite good.
One thing you need to be extremely aware of. Numbers and percentages can be deceiving. I just mentioned that the index lost 88 percent, but then gained 345%. Sounds like you made up all your losses and then some. Not quite.
The dirty little secret to investment losses is this: if you lose 50% of your portfolio, you need to make 100% just to break even. This is an ugly little fact, but let’s look at it in real life. If you had $100,000 and lost 50%, you would be left with only $50,000. How much do you have to earn on your $50,000 to get back to even? You need to earn another $50,000. This is 100% of what you currently have. You lost 50% and must gain 100% just to break even.
Let’s put this into real life. In 1929 the Dow had a high of around 380 and in 1933 a low of about 48. This is an 88% decrease in value. Over the next 4 years it went from 48 to 187. This is a 345% increase. Sounds like you made up the 88% loss and then some. Unfortunately you have only gained back just over half of what you lost. This also is a recurring theme. When a recession takes huge bites out of portfolio values, it normally takes many years just to break even again. Not to get ahead of myself, but the Nasdaq has only regained about half of what it lost during the last recession. And this is 7 years later! The Dow and S&P 500 took about 6 years to finally break even. The kind of time periods required to recover definitely make the study of the recession history worth while.
Now that some of the back ground work is complete lets look at the next 15 years, from 1945 through 1960. In 1955 the Dow finally got back to where it was before the great depression. This was a very long 25 year wait. Imagine the poor retirees that retired before the depression and never again regained their original portfolio value!
Remember the last 15 years were mostly down then sideways (1930 through 1945). This next 15 year time period (1945 thru 1960) had very mild recessions with the worst only causing a 15% drop in the Dow. Overall, the Dow gained 267% over these 15 years. This is very good reward for a minimum amount of risk. This leads us to the next 15 years, 1960 to 1975.
The 15 year cycle is definitely in effect. The last 15 years were very tame yet had a nice return. These 15 years were not for the feint of heart. Gain was very little over the period, but volatility was killer. The period started out with a wonderful 75% gain, but gave it all back by the end. The recessionary periods were very violent. The reward available in this market was much smaller than the risk. It would have been nearly impossible to be a buy and hold investor and have stayed with the market.
Thus far, we had a 15 year period that was horrible (1930 thru 1945), one that was very nice (1945 thru 1960), then another horrible one (1960 thru 1975). Without looking ahead, we might guess that the next 15 year time period would be another nice one. The market consolidated over the last 15 years and should be ready to move ahead again.
This period began with a 6 years of continued consolidation (going sideways), but when it was done consolidating, it moved up very nicely. It moved from around 800 in ’82 to 2800 by 1990. This represents a 250% increase for the period. The volatility for the period was pretty tame, at least if you look at the volatility caused by recession. The largest pullback in value was the ’81 to ’82 recession which was about 18%. There was a large pullback in August of ’87 of about 30%, but wasn’t caused by recession and didn’t take that long to be regained; all in all a very fruitful 15 years.
This would lead me to believe that the next 15 years (1990 thru 2005) would be tumultuous again as the market needs to digest its gains.
The roll the market had going continued for the first half of this period. It gained 300% in just 8 years. This was more in the first half than the others gained in their entire 15 year period. This didn’t go un-noticed however, and the market promptly took back a healthy 35% through the next recessionary period. It took until mid way through 2006 to finally get back to even from the highs seen in ’99. Once this was achieved, however, the Dow just kept going. It extended its gains through the expansion period, hitting new highs once again.
This brings us to today. There is much talk about the beginning of another recession. We’re at the end of a period that should have shown consolidation, but instead had another large run up. This run up wasn’t without sizeable volatility. We’ve just broken a long term support line. I’ve drawn support lines through the years following recessions and had you sold when the support line was broken, you would have been saved a lot of grief during the next recession.
In summary, I would say that the recession history points to our next recession causing havoc on the Dow. When will the next recession be or are we already in it? I’ve covered this dilemma in another article. Personally, I think we are already in it. I believe the Dow just broke support and has a lot of potential to continue downward.
Is “Recession” really going on in US economy? Is US currently in the state of recession? Are US citizens face-to-face with recession? Are people living under the fear of ending up with loss of their jobs, losing into stack markets, going bankrupt, heading to ever highest inflation in the economy, huge downfall in property rates and a lot more…..
Recession is a state when country’s GDP or Gross Domestic Product descents for two sequential quarters. Recession in an economy focuses on negative growth of GDP over two consecutive quarters. This negative growth during recession is more seeable in people’s income, bank balances, payroll systems, lowering employment opportunities, reducing retail sales, lower investment returns and various others.
As per experts, the normal period of recession in an economy is about 1-2 years. The whole economy slows down during recession which leads to panic in the country. The hard time of downfall causes lot of stress in the economy. People point out the root of recession towards government. On the other hand, it is important to know that recession is somehow deflation. If the government tries to improve on economy’s GDP, it has to invest in a lot more money in order to improve liquidity. But this causes an increase in inflation and ultimately stagflation. Hence, government has to make a choice whether to increase liquidity or reduce increase rate.
The U.S. GDP was down 0.2% in the third quarter of 2008, with U.S. economists forecasting a 0.8% fall in the fourth quarter. International Monetary Fund experts forecast the U.S. economy’s growth at 1.6% for 2008. However, they say, in 2009 the U.S. GDP is expected to increase by only 0.1%. Recession has lead to a reduction in global economic growth in U.S., from this year’s 3.9% to 3% in 2009, according to IMF experts. Each quarterly GDP report gets three releases….. In their Q3 2008 GDP report, the preliminary report showed a slowdown of .5%, slightly more than the advance estimate of .3% while advance report showed a downfall in growth by .3%, the second time in a year.
During the rough sledding of recession, with all the above mentioned consequences, people certainly look for options to successfully deal with the alarming situation and emerge out of it without getting much affected. But since we survive in this economy, we can’t get rid of such a national downfall when every other citizen is suffering. Certainly there are ways to beat the recession in the economy and come out as a more confident one. Lowering down interest rates is one of the major steps that government can take to slightly correct the situation. Everyone in the economy has to be focused towards what they do best. Spend less on luxuries, stick to the necessities, save money are the best steps one can do in their general lives. People should not lose hope and confidence as these are the best remedies to success. After all, this is not the end of the world.
Are you planning on remodeling your home? If so then you will eventually need to replace or add some wall receptacles. There are many different types of wall receptacles to choose from and each type has its own set of unique benefits. In order to determine which wall receptacle to use, you will need to examine your situation.
What is going to be plugged into the wall receptacle if anything at all? This can be a very complicated question to answer when you are create a new home but you should look at the blue prints of your home and act accordingly.
A recessed receptacle is a wall receptacle that is recessed into the wall. That means that your receptacle is actually behind the wall so to speak. A recessed receptacle can come in handy in many different situations. For instance, a recessed receptacle works well when it is used as a power outlet for a flat screen television because it happens to be recessed into the wall. That means that you have more space for the plug. This will prevent having sharp bends on the power cord. As we all know, sharp bends on a power cord can actually ruin the cable.
A clock receptacle is a tad bit different from a recessed receptacle. A clock receptacle is better than a recessed receptacle for certain situations. A clock receptacle, as the name implies, is often used for clocks. A clock receptacle allows the cord to be plugged into the receptacle yet sit back into the wall.
These receptacles are usually equipped with a hook on top which allows a clock to hang from it. You can also use a clock receptacle for many different things. For instance, you could use one for a wall mounted flat screen television since it is recessed into the wall as well.
When used behind a wall mounted flat screen television, a clock receptacle allows more room for the cord. This will also prevent the cord from being bent at any sharp angles. As mentioned before, a power cord that has sharp angles can be potentially ruined. A recessed receptacle can be used for several different things as well. It is common for people to place lights in front of a recessed receptacle. It is also common to place paintings that are equipped with lights in front of them as well.
While clock and recessed receptacles can be used in many types of situations. They are now being used more often with a flat screen television. This is become more and more common because flat screen televisions are becoming much more popular and common in homes all around the world. Clock and recessed receptacles are capable of preventing the television’s power cord from getting all bent out of shape. In the end this will mean that your television’s power cord has a much longer life span. This is extremely important considering the high prices of most flat screen televisions.
When the major stock market averages declined by 10% from their 2007 highs on Monday, we were in official market correction. Sentiment is negative owing to the economic back drop of, at best, tepid growth according to the Fed, or a recession.
Consumers twenty-five credit binge fueled by home equity loans, credit cards arriving in the mail, sub prime and adjustable rate mortgages and automobile leases, appears to be over. Savings rates has plummeted from 14% to 0% (perhaps to a negative number if home values continue to decline). Pile on top of that the banks debt problems, high energy prices, the homebuilding industry’s woes, weak retail sales and declining consumer sentiment, it’s no wonder that many investors believe a recession is in the offing.
Investors face two challenges right now. If the economy is headed into a recession, where do I put my money? And, if the economy avoids a recession will I be in the right investments? The stock market anticipates the future. It will decline prior to the US entering a recession and it will start going up prior to the end of the recession.
Investors who wait for certainty that a recession has begun will be selling stocks at the worst possible time. The same logic holds true if you wait to buy stocks until after the economic recovery, the market will have already moved higher in anticipation. Human psychology is a future complication. We’re most optimistic about the stock market when it’s roaring ahead and most inclined to buy; and most pessimistic and most inclined to sell, when it’s at its bottom. Of course, our investment strategy should be just the opposite. The moral to this story is that you should invest for the long term and not try to time the market.
If a recession is imminent, the stock market will decline by another 10%. How do you make money? To get technical, buy mutual funds, ETFs and stocks with negative betas or high alphas, such as gold, commodities, real estate and foreign stocks.
Gold and commodities already have had good runs, the US commercial real estate market appears to be weakening and foreign economies are increasingly becoming intertwined with ours. Non-investment grade bonds have good yields but are not the place to be given the continuing bank credit problems. High grade bonds and Treasures have relatively unattractive yields, particularly as you go out in maturity.
The best performing stocks in a recession are likely to be industry leaders, companies with strong overseas sales, consumer staples and health care. The technology sector is solid and internationally focused, so we’ll add it to our list. Essentially we’re looking at companies whose sales will be strong during a recession. These stocks may not go up in price during a recession but they will perform relatively better than most other equities and are safe investments. The bottom line is it’s hard to make money during a recession.
If the Fed is right and we’ll see modest economic growth in 2008, the markets are at their lows and could move 20% higher over the next six months. How do you position your investments for this possibility? By staying in the market and buying the same mutual funds, ETFs and stocks as you did for your recession portfolio. The recession portfolio is a conservative portfolio. Although it will miss some of the dramatic gains made by small cap and more violate stocks, it also protects you from the downside of those stocks while enabling you to participate in any stock market rally.
What to do now? Review your long term goals and make sure you’ve got the right asset mix, take losses (up to $3,000 more than your gains, remembering to match short term gains and losses) to minimize your taxes, reposition your equity investments according to our recession scenario, move your bonds into cash and tighten your seatbelt. We’re in for a bumpy ride.