I’m curious, would anyone be able to help me understand what my best options would be during a time of recession? How about a depression? Do you know what to do? I guess we wouldn’t really know we’re in a situation until after the fact…but still, it’s good to know right?
Let me try to explain my understanding, a depression is a severe or long recession. I never knew this until I found it on Wikipedia, but apparently a recession can be due to inflation (value of money goes down, costs of goods go up) or deflation (value of money increases, costs of goods go down).
So during:
a) Inflationary recession, the value of cash is decreasing, thus the best investments would be non-cash investments, stocks?
b) Deflationary recession, the value of cash is increasing, so cash is king.
Would you agree with that? Since we’re in a period of inflation right now, the biggest threat is too much inflation…thus we need to find the best investment vehicle that can beat inflation. Right? Am I completely confused? :/ Hopefully I didn’t overly simplify everything…But just trying to understand the basics first…
LAMoneyGuy
April 25, 2006 at 8:36 am
inflation would not be considered a cause of recession, rather could coincide with recession (such as in the 70s stagflation). Traditionally recessionary periods are believed to be periods of little if any price appreciation.
Are you asking what your best options are in terms of investment? Career?
If the latter, think bartender, mortician, psychologist.
If the former, think non-discretionary, non-cyclical companies. Recessionary periods are also frequently accompanied by declining rates, so consider bonds. Of course, this is not specific advice, do your own research. (wow, a disclaimer in a comment. Seemed warranted)
freedumb
April 25, 2006 at 8:39 am
Hehe…love the career options…but I was thinking along the lines of investments…
Maybe I misunderstood the Wikipedia article on recession…I’ve gotta do more research on this topic…but it’s actually difficult to find any solid answers…I guess maybe because the topic itself is a little gray?
freedumb
April 25, 2006 at 8:42 am
Article on difference between recession and depression. Just found this…kind of interesting…
easy e
April 25, 2006 at 8:54 am
I’d say buy gold to hedge against inflation or pretty much anything that has an intrinsic value, but gold is small enough so that you won’t need a warehouse. Stocks are OK because they should appreciate with an inflating dollar, but if the depression hits the company hard too, your SOL.
freedumb
April 25, 2006 at 9:11 am
But gold at today’s value?!?! Yikes…Makes sense though…stocks might get hit pretty hard…
empty spaces
August 25, 2006 at 9:10 pm
Its not just a simple question of whats going to happen during a recession.
The bigger question is what is going to happen and why.
The US is going to go through a severe inflationary period. This is the only way we can repay our debt to the foreign countries. Unless we do that, they will OWN us. This is the only way out. To inflate the value out of the dollar.
The good side to this is that the dollar will become so cheap against south east asian economies that in seven to ten years, manufacturing jobs might start coming back to the states!
Until then, buy foreign currencies – specially australian, new zealand and canadian dollars – since they have a lot of natural resources and in the end natural resources will win.
buy gold and silver coins
invest in oil and gas projects. because of demand and the dollar devaluing, it is very likely that oil might reach $150/barrel in 5-10 years.
If you position yourself to profit from these things, you will be set for the rest of your life!
freedumb
August 26, 2006 at 7:27 am
empty spaces, It’s scary that I’ve been hearing more and more about a US meltdown…the “buzz” is getting louder…and that’s generally an indication of it’s relevance…You think it’s going to happen soon? Severe inflation…