Is The Recession Now A Depression?
The Dynamic Wealth Report
February 4, 2009
Is The Recession Now A Depression?
You may have noticed something a little different about The Dynamic
Wealth Report over the last few issues. No, the content didn’t change
(if anything it got better). My colleagues, Robert and Corey were kind
enough to author the last few issues. I thought they did a great job…
don’t you?
While they were working hard, I took a mini vacation. Skiing in Aspen.
Long time readers know every year I take a ski trip to some exotic
location. My skiing buddies are a group of guys in the Investment
Banking, Money Management, and Venture Capital industries. The ideas
bouncing around are nothing short of amazing (but more on that in
another issue).
Aspen.
The name alone conjures up thoughts of the Colorado Mountains, and more
than anything else… wealth. In this area most of the homes sell for a
few million. One home was advertised as a “reduced price sale”… a steal
at $25 million. (Just a bit outside my range!)
On Thursday I found myself wandering around the town. I was stopping at
a few shops, checking out the restaurants, and most of all - people
watching. The rest of the weekend would be filled with skiing.
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In my first hour wandering the town I made a shocking discovery.
I probably should have expected it. But it still took me by surprise. Even this ultra wealthy town is feeling the pinch of a recession. Remember, this is where celebrities like Antonio Banderas, Seal, and Don
Johnson call home. Your entry to this elite society starts with the
purchase of a home. A home that will set you back millions and millions
of dollars.
The recession’s so bad, stores and restaurants are closing left and
right.
I arrived in the town around lunch time. I gathered up a free guide and
a local newspaper. Plotting my lunch attack I walked to a nearby place.
The first restaurant on my list, closed. Ok, not to worry, I had a few
back-ups. The second restaurant was closed as well… and it looked like
it had been shut down for some time. My third try was open and doing business (but
in hindsight getting a table was way too easy right at the peak of the
lunch rush).
After lunch I started touring the town of Aspen.
That’s when the recession really hit me. Every store I walked into had
bright red “Sales” tags everywhere. Apparently the most successful
business is the guy making all the “50% off” sale signs.
It was worse in the art galleries.
One of the galleries posted signs everywhere (in case you missed the 5
outside and the 10 as you walked in the door). Some of the signs read
“going out of business.” And sadly, I overheard a gallery owner arguing
with the landlord over his late rent. Apparently he didn’t care who
overheard him.
From store to store, everywhere I went sales people were willing to cut a
deal.
“I’ll sell it to you at cost.”
“We’re just trying to survive.”
“Let me know what you like and I’ll GIVE it to you.”
I know times are tough. Unemployment numbers are going up. The economy
keeps shrinking. And a falling stock market and real estate market don’t
help.
What took me by surprise was the impact on even the wealthy areas.
I noticed it all weekend long… from the lack of people on the slopes, to
the ease of booking high end restaurants for last minute dinner plans.
This is what makes me think “maybe, this time it’s different.”
Now, I’m not alone. Just today the British Prime Minister, Gordon Brown,
said “the world is in a depression.” It’s the first time a major
political figure has used the dreaded “D” word.
The more I see, the more I think this recession could last for a while. And that makes me think we need to continue hedging the market… and be
very selective about where we invest. If you remember more than a year
ago we were calling for everyone to hedge their portfolio.
I suggest everyone re-read that article, and not be afraid to protect
themselves from a market that may continue falling. That article can be
found here: “Why You Need To Hedge This Market Now!”
In future articles I’ll address specific ideas about where to put your
money… and how to profit from this type of economy.
• Oil ($40 per barrel)
Back in July oil was approaching $150 a barrel. Now because of the
worldwide recession (or depression if you’re Gordon Brown) prices are
hovering around $40 a barrel. OPEC and other major producers are cutting
supply in the hopes of driving prices back up over $70 a barrel. Those
cutbacks may take a few months, but I have no doubt the impact will be
felt.
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