Recession for Real

I was out the other night at a posh-ish bar with friends and I overheard someone say something to the effect that we should stop using the word “recession” because just saying the word gives it power.

Of course I couldn’t help myself and opened my big mouth.

I said that, in my understanding, we were in a technical recession but got shot down before I could explain what a technical recession actually meant. (For those who care, a technical recession is defined by two consecutive quarters of negative growth.)

Words do have power- because we give them power. People can get very worked up by what they see and read in the media and I can’t argue that some of the reporting can be provocative. In fairness, they have a job to do but the reporting isn’t always balanced. 

Everything is cyclical and this will end- we just don’t know when.

The point that I was hoping to get across was that we have to look at this as an opportunity. If you were looking at real estate, today would be a better time to buy than a year ago. If you had your eye on some stocks, chances are good that they are a better value now than even three months ago- what could be better if you were planning to build up equity in your TFSA (and almost without exception, you should be).

I don’t deny there are a lot of things that cannot be understood empirically. Is there such a thing as a collective conscious? Maybe. I like science fiction- I know what The Borg is. In all seriousness, we tend to feed on the emotions of others. Just last week it was reported that happiness was contagious and to varying degrees depending on the closeness of the relationship. That made sense.

My first thought was whether anyone had studied whether negative thoughts or unhappiness was also contagious- if one could put hard numbers to this effect if any. Common sense says that of course unhappiness would also be contagious but I have a sneaking suspicion that negative emotion has an even greater effect.

No one wants to be a party to mob mentality but sometimes it is hard not to get sucked in! You see it all the time. When it comes to the economy, the market, there are cycles. There is ebb and flow…Things will likely go down further before they go up again but they will go up.

The best thing to do is absorb as much information (from varied sources) as you can handle then take a breather from the media. Eliminate the chatter so you can digest what you have gathered and to think clearly about what your options are and what you need to be focusing on.

If it looks like you will be directly affected (if you work for the auto sector or an industry related to the auto sector), taking a hard look at your finances, if you haven’t already done so, would be a prudent first move. Hopefully there is an emergency fund to deal with these unexpected hiccups in life. Will there be a package of any sort- talk to HR and or your union rep. Is there a second income that your family could live on? Can you get a job doing something else- anything? Even at the bleakest, there are ALWAYS options.

You may find that you won’t be affected in a meaningful way and that is fantastic news. Keep your head while everyone around you is loosing theirs and take advantage of the opportunities that present themselves- because there are ALWAYS opportunities.

Some would argue that there are more opportunities on a downturn because people are ruled by fear and not by reason- I would subscribe to this belief. It is not easy to go against the crowd but taking that calculated risk may be immensely beneficial in the short and medium term before the market and economy bounce back. When that bounce happens and you are on the sidelines, you have missed out! But, keep in mind that you should not be “playing” with money you will need in the next five years- because it can be risky and there are no guarantees.

The options and opportunities may not seem as apparent in a downturn as opposed to a bull market but acknowledge it for what it is, ride out the storm comfortable in the knowledge that you have done everything in your power to prepare for it and in a couple years time it will be but a memory to be filed for future reference because (and this is something you can stake your life on) it will happen again.

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~ by angryegg on December 8, 2008.

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