Surviving the RecessionThe Expanded Guide

Al Walsh

Walsh Enterprises Business & Financial AdvisorsThe Capitalist’s FriendHuntington Beach, California USAhttp://www.awalsh.us walshal1@aol.com(714) 465-2749

As I did in my prior presentation: (see: http://www.slideshare.net/awalsh8174/surviving-the-recession-1698509) I’ll start with a summary of the mess we’re currently in because you can’t make sensible moves unless you understand the environment you’re working in.

• The government’s bailout failed. The credit crisis is still with us and is deepening because the banks just took the $ bailout billions and sat on them. Without those billions on their balance sheets, the major banks would be insolvent.

• Business and spending continue to shrink.

• Employment continues to decline.

• Real Estate is still in the tank. A recent sign of increased home buying was a positive sign, but foreclosures continue to run strong and we still have a couple more mortgage resets coming over the next year or two - meaning more foreclosures.

• People lost their shirts in the market, and so older employees are realizing that they can’t retire when they want to. That means more people than should be competing for a declining number of jobs.

• Investment has largely dried up as scared investors took the money they didn’t already lose and ran to the sidelines until the situation improves. “We have met the enemy and they are us.”

• The Fed’s pumped out new dollars like crazy, the government’s spent like a drunken sailor, and the country’s taken on massive new debt – with no reasonable benefits to be seen from their actions.

• One eminent economist predicted that factors are shaping up for a possible “Perfect Storm” of new recession problems. See: http://walshal.wordpress.com/2009/07/24/a-perfect-storm-coming/.

All in all, not a rosy picture. While the government purrs about “Green Shoots”, and lies about important topics like unemployment with “creative statistics”, the economy continues to sour.

The situation will improve – it always does – but don’t expect it anytime soon. I don’t expect to see any meaningful signs of recovery for another year or two; and even then we will have problems. Today’s global deflation will likely be replaced by hyperinflation caused by monetary hanky-panky, and I don’t want to even think about all that national debt we have to pay down. Guess who gets the bill? Can you see “Higher Taxes”?

I don’t take pleasure in making this prognosis, but that’s reality as I see it and I’d rather tell you the truth and have you be prepared than to buy into the government’s “rose colored glasses” approach.

All of this begs the question: What do we do to survive? I’ll begin addressing that question in the next section.

Employees:

If you’ve got a job – hang onto it for dear life – even if you hate the SOB you work for – even if the working conditions stink. It’s a job, and a steady paycheck. Lots of people would gladly take your place in a heartbeat. When the economy gets better, and it’s no longer a buyer’s market – then make your move.

If you absolutely can’t stand your job any more, or you’re feeling threatened with impending layoff – be “very, very” carefully with your search. Don’t put out any info that could easily identify you. Your higher-ups are probably cruising the same websites.

If you’re out of work, bone up on your job-hunting skills and bring them to a fever-pitch of perfection. You’ve got a lot of competition.

Take some time to research and hunt down industries & companies that can provide the best opportunities. I recently wrote about Water and Agribusiness as being two growth-industries you might want to take a look at (see: http://walshal.wordpress.com/2009/07/23/career-advice-pick-your-targets-carefully/.

Entrepreneurs:

If you have visions of raising venture capital to start a new business – think again. Investors are running scared, and only the finest business opportunities are going to attract the limited capital available. It’s going to take a killer idea, a superb business plan, lots of perseverance, and a whole lotta luck to attract money. Those who have money of their own to risk will attract the most attention. Investors like it best when your butt is out on the limb too.

You can still start a new business. Many good businesses can be started with little more than a computer and a phone. If you’re working , I suggest you pick something you can start part-time and work up to. You can drop the job when enough revenue comes in to warrant it.

Be careful of all the Get-Rich-Quick schemes out there. There are lots of people who will take your money and/or time and get richer off it while you struggle (see: http://www.slideshare.net/awalsh8174/entrepreneurs-choosing-a-business-beware-of-get-rich-quick-schemes). You’re usually much better off to start your own enterprise. There are legitimate internet schemes, and of course there are many decent franchise opportunities out there; but they’re usually expensive to get into. If you go with someone else’s scheme, pick carefully and ask lots of questions.

Investors:

Most investors are just decent folks who worked and set aside some money for the future. The banks and finance houses love to fleece you. How do you think they make those big bonuses? Be very careful with what you have left. If you think the stock market’s bottomed out and can’t possibly slip lower - think again.

Unless you’re really on top of your game, I wouldn’t advise speculative investing right now. Instead choose for a long-term buy & hold strategy; and don’t be shy about getting out if an opportunity starts to tank. Something is better than nothing. The longer you wait, the less “something” you’re likely to have.

You might want to think about putting some money into hard commodities like Gold or Silver. You could also look at companies that are rich in hard resources like Oil. If we get into hyperinflation, as I think we will, those commodities will take on new luster.

Business People:

If you’ve still got a credit facility, hang onto it for dear life and pray the bank doesn’t yank it away; as they have from so many others.

If you don’t have one, or you’re not happy with your present facility, take a look at the smaller regional banks. Many of them are still lending. It’s the bigger national & international banks that are in the most financial trouble.

Squeeze your cash flow for all it’s worth. Watch your spending, sell what you can, and collect those receivables as rapidly as possible.

Don’t go out on a limb with any big new plans unless you feel very strongly about them. This is not a time to leverage yourself and go into a dangerous risk posture.

Everyone in General:

Learn. Think. Don’t just sit there and let events overrun you. You’ve got a brain; use it. The internet has tons of info available. As I wrote in an article back in January – “Don’t Live in Ignorance” (see: http://walshal.wordpress.com/2009/01/25/dont-live-in-ignorance/. Use the power of the internet to educate and enrich your life. If you found this article, you can find other useful info. All it takes is time. Most of the info is free. Start with the article I posted on US Monetary Policy. Most citizens don’t understand it. (see: http://walshal.wordpress.com/2009/04/11/monetary-policy-a-primer/).

Talk to your government. If you don’t like the way things are, speak up. There’s lots of ways to reach them.

Be kind to your fellow man. We’re all in this mess together. Help out where you can.

Basically, Wall Street created this mess out of abject greed and got a “get out of jail card” from the government and the Fed (Federal Reserve) at the expense of Main Street. We’re on our own to bail ourselves out. It’s going to take time, and the government’s going to bleed us while we’re doing it. The world as we knew it will never be the same again.