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Recovery, Recovery, Where art thou? August 5, 2009

Posted by shaferfinancial in Finance.
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The stock market is moving up on better than expected earnings.  Unemployment is still rising; only not as fast as the first half of the year.  The financial system is improving, but still not loaning money like it should for fear of coming commercial loan foreclosures and a second wave of residential foreclosures.  GNP is down nominally over the last quarter.  So are we on the verge of a recovery?  Or are we still months or years away?

Here is the truth.  Recovery is on the way, but no one can predict the actual pace.  The public [as well as it should] only cares about jobs.  Not until unemployment starts a downward trend will we be able to breath a sigh of relief.  But the important part is that you have long term strategies that can function in both bear and bull markets.  If you have cash on the sidelines waiting to invest, you missed a huge buying opportunity, but you are in a much stronger position with the liquidity.  If you have made it through with your job intact so far, it is time to prepare for what happens the next time [and there will be a next time].

My neighbor got laid off last week.  The partners in his design firm haven’t taken any money in a year.  If business doesn’t improve for them soon, the business will be gone.  If the banks start to lend for projects soon, he will be OK and be rehired.  If not, then he must move to find a job.  He has lost the ability to access most of his wealth which is in his house.  I hope for the best for him.  But, would he be better off with a larger mortgage payment and a couple of hundred thousand dollars available to him?  Yep.

Plan for the unthinkable.  Access or liquidity is important.  Don’t put your assets in a lockbox.

Simple strategies can be employed to plan for the bad times as well as the good times.

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