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.
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.
Category: Bonds
