Tuesday, October 28, 2008

Ten Ways To Survive The Coming Recession

We can’t prevent a recession from happening, but there are a number of things to do so that we survive it with a minimum of pain.

1. Have the proper attitude – you have to have faith that you can do something positive if you are going to survive the coming recession.
2. Have faith in yourself – you have to believe in your own abilities if you want to be successful at surviving a recession.
3. Don’t panic – this is not the time to start selling the investments in your 401K. We are probably closer to the bottom than the top and you don’t want to create a tax liability for yourself.
4. Think long term – You are probably going to recover most of what you have lost if not all when the recession is over. Historically things get better over time.
5. Reduce Your Expenses – Sit down and make a budget. Try and decide what expenses you can reduce if you lose your job and you need to make limited resources do.
6. Decide what’s Important – Do you know what is really important to you? Is it your home, your car, your medicines, or your life style? Something is going to have to be cut.
7. Alternate Income source – If you want to survive this recession you may need an extra source of income. Examine your talents. What kind of part time work are you good at? A second income is better than none.
8. Marshall your assets – Are you sitting around holding onto antiques or jewelry or other unused assets that you don’t like or need? Sell them and build a nest egg to give you more security in these trying times.
9. Your family – If you are really experiencing trying times it is okay to ask relatives for a loan to help get you through them as long as you intend to pay it back. Worst case you can move in with your relatives or if you are doing okay have them move in with you.
10. Debt Control – Talk to your lenders, your mortgage holders, your credit card company. They can help you spread out or defer your payments so that you both recover from these trying times.

It’s really up to you. You can survive this recession if you believe that you can. This is not the end of the world. It is only a stage in your life that you are going through. So are the rest of us. We all have to learn to cope.

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Monday, October 20, 2008

The Economy – Did We Get In This Mess Because We Don’t Read?

I was thinking about the mess our economy is in and my thoughts drifted back to some things that happened to me when I was a young man, and the similarities some of these events have to what is happening to us now.

By way of background I think it is pertinent to mention that in high school I took a remedial reading course and learned to speed read with 95% comprehension. I wish it were so for everybody.

My first job, gained by lying on my application to the effect that I was looking to make the Domestics Department of a major Department Store my life’s work, was taking inventory of the sheets we stocked. After taking inventory for 2 days I summoned all my courage and asked the manger of the department what the difference was between Pepperell and Lady Pepperell sheets. He looked at me with a straight face and told me that one had a daisy and the other an orchid on the wrapper and this accounted for the $5 per sheet price difference.

That’s how I learned that a large part of consumer buying patterns were dictated by perception. I compare that experience to buying Credit Default Swaps, which are backed by nothing to guarantee us against losing money on a stock or bond purchase. It isn’t so, but it makes us feel better until we discover that it is really a mirage and we aren’t protected.

Then I think back to my following job as a trainee in a Wall Street brokerage firm. I ran errands for one of the big producers who had big movie stars for customers and a cigar constantly dangling from his mouth. He was buying his people as he liked to call them a ton of RCA stock years ago when I worked for him. One day opening the mail I saw a big thick report on RCA. I ran over to this big producer and excitedly showed him the report on RCA. His mouth dropped open and I was afraid his cigar was going to fall out as he said to me, “Sonny do you want me to buy it or read it.”

Looking back on that moment I think I get the bigger picture. Do we really expect people to read complicated 90 page sub prime mortgage bond papers or 400 page Congressional relief legislation, or do we expect them to buy the bonds and the Congressional remedies on faith? It’s a no brainer. Who has the time to read? We have to take action or make profits, or in our ignorance generate a fiscal crisis. That’s what is happening to us now.

It doesn’t have to be this way.

I think the solution to all of this is to pass a law that no one can buy anything, invest in anything, and or vote for any one or thing until they have taken and passed a remedial speed reading course with 95% comprehension and swear that they will read everything on the subject at hand before they buy or vote for it.

The devil is in the fine print my friends. Let’s not let the devil have his way with our economy and our future. We have to read and make informed decisions if we want to pass on to our grandchildren something more than debt and financial crisis and a loss of the democracy we cherish.