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Knowledge is Recession Proof

In the past few months we have heard nothing but bad news from the radio and new channels. We tend to wonder:

“When will this get better?”

We are facing a national recession and a global recession with no signs of recovery. We are faced with the greatest housing depression ever and are now about to break records for unemployment. Can it get worst?

Many believe that the small jump we recently experienced in home sales of 6% is an indication that the market had hit rock bottom and recovery is well underway. Unfortunately, that is not the case, the home market is directly linked to the employment rate coupled with the accessibility of credit. As long as the credit markets remain frozen and the unemployment rate keeps rising, the tragedy will continue. There has however been great indications that the stock market is near bottom and that consumer confidence might be near that bottom as well.

So where will go now…

Well, Obama’s recovery plan has now been passed and should start feeding cash in the economy very soon, but details of this plan have not been released in full (as they should have been). The plan promises tax cuts for the middle class and proposes the funding of many state projects that can create jobs locally. The bill for this plan is not cheap and is expected to run close to a trillion by the time it is done, but the President remains confident that it will work and is necessary. The problem that remains with this bill is the lack of information provided around its intent to help main street with its main home foreclosure issues. So far the bill simple speaks to the $15000 tax credit available to those who purchase a home now. How will the government stop the foreclosures and help normal people stay in their homes? How much will this bill cost us as taxpayers? Why should reasonable and smart people help those that have been greedy, or uneducated about their purchases? These are all questions left unanswered.

Lets look at some budget cuts in brief that the President hopes to make in order to cut the deficit in half within 4 years.

The Famous IRAQ war and the Defense Budget.

In most cases the President never cuts the defense budget as it is vital to continue to grow our military force and to hold more weight around the world (even if we don’t police the world, like the past). The budget cut is expected to reduce military funding by 10%, which is enormous considering this is the first cut in 10 years. In my opinion, this can easily be fixed to please both sides of the coin if the agreement remains to be around budget cuts in war spending, not innovations and technology.

So where does the rest of the money go?

A portion of the money is geared towards banks and unfreezing the credit markets by driving up consumer confidence and another to help the auto industry by providing great tax credits to those that buy a new car. A portion will also be dedicated to the various states that accept the money. Many have suffered serious losses from excessive unemployment payouts. This is all we know for now, which is part of the problem. Consumer confidence will remain down until they start laying a clear path to a brighter economy which has not been done yet.

When do we hit rock bottom?

Well prediction by many economists state that late in 09 we will see the end, and wil continue to grow modestly in 2010.

Opportunities in this market…

Opportunities exist everywhere, all around us. The two biggest opportunities happen to be the most risky ones.

Foreclosures are still a great investment, but as we cannot estimate the home market turnaround, this still remains a 3-5 year investment but can be very rewarding if selected correctly and you must understand that your money may not be recovered for some time.

Stock Market: We have all heard investors say “buy low, sell high” and you guessed it, this is the lowest and best time to buy. Perhaps the question remains more around “what to buy.” The majority of brokers will tell you that large cap stocks are the safest bet at this point and staying conservative is key. I, however, believe in taking risks. Take 70% conservative, 30% very aggressive.

“The biggest risk is to not take a risk”

Where does knowledge become recession proof?

This is the simplest question yet left to answer, knowledge become power when you choose to analyze treats and understand opportunities. You win only when you remain flexible and take the correct risk based on your knowledge. You cannot be impacted by the economy if you are two steps ahead of it, you cannot get laid off if you have found employment two months before lay offs start at your current employer and you cannot loose if you invest in yourself by starting a business in this terrible economic cycle, because a recession simply buys you time to try and fail without impact until you win. So go out there and WIN.