Recession Woes Will Hit Us All

Copyright © Jeremy Sandy
FullThrottleMarketer.com


Who Will Survive This Economic Downturn?

I believe the stock market is going to be a tough place to be for some time. I know, Bear market recoveries can be very powerful, and can even recover 50% of their losses. However, I extremely doubt that this will happen for this particular bear.

My reasoning is simple.

While the stock market is already down 40% from its highs, the economy is just now heading into a recession, one which I believe will be an incredibly painful one for most people.

Historically, the stock market begins to recover from a recession about half way through it. That tells me that we have at least 6 months to a year before that will be possible. Furthermore, this will not be a run of the mill recession. For one, the credit market is dead, and it will continue to be very difficult to get any loans. Since our economy is now a debt based one, this is very bad news, and once layoffs begin to increase, just as they did this past month with 159,000 people losing their jobs, the reality of all this will begin to set in.

People go through 3 definitive phases when dealing with difficult financial times in their life. Phase one is denial, which is where we are currently. Right now most people see this as just a temporary fluctuation in the stock market, and believe that it will soon turn around, but it will not. Phase two is when reality really begins to set in. Layoffs, foreclosures, and bankruptcies, which are only beginning to increase in their intensity, become reality. And then there is phase three, which I refer to as surrender. This is when things are so bad that an individual will sell everything left, with any value at all, just to hold on to some remnants of their prior life.

If this all sounds incredibly bleak, that’s because it is. 80% of the country is upside down financially, and as you have probably noticed, very little of the $3 trillion that is being put back into the economy by the Federal Reserve will actually help individuals directly. Ok, this newly printed flash cash will ensure that the banking system survives, but none of it will be deposited into any of our bank accounts, which is where its needed most.