Maybe This Recession Has Short Legs After All

Uncertainty adversely impacts consumer spending, however could pent-up demand bring a quick end to the current recession?

My entire business hinges on how well or poorly the economy is faring. Not so much that my work is dependent on how well Wall Street is performing, rather my writings often reflect the prevailing mood of the consumer and the investor. And, over the past few months that mood has been quite grim.

Honestly, there are times I would prefer to write on lighter topics such as human interest stories or perhaps an enrichingly descriptive nature story where I can go wild with collective nouns such as those describing a sedge of herons or a scourge of mosquitoes, etc. I don’t pretend to have the talents of a Charles Dickens or a C.S. Lewis nor do I have the financial resources to sustain me to bring a book to publication.

I’ll stick with what pays the bills and at this point in my life it is business writing that meets my needs.

The Unfolding Stimulus Package

I’ve made quite a few comments lately regarding the economic stimulus package currently winding its way through Congress and I know that opinions are divided as to its usefulness. While it appears that support for the bill is split among party lines, I believe that there is an undercurrent sweeping through the nation where the average citizen seems to be very uncomfortable with what is going on in Washington, DC.

I’m not going to suggest that there is open revolt pending, but what I am sensing — thanks to what I read and as a result of conversations with friends and neighbors — is that even some of the most diehard liberals are worried what this debt will do to our country. $900 billion added to the $700 billion TARP (Toxic Assets Relief Program) plus whatever else is coming down the pike is something hard to fathom. Moreover, how can it possibly be paid off?

Bequeathing Debt To Future Generations

Worse, is what effect an increased debt level will have on future generations: will our children and grandchildren be forced to pay down what we owe via a heavier tax burden? I don’t think anybody knows how things will play out, but the discomfort remains. And, when people are not comfortable they are also uncertain — the type of consumer who puts off making major purchases as long as possible.

A Ray Of Light

Gloominess aside, I do see some light shining through the darkness which I believe suggests that the current downturn may soon be over.

Call me crazy, but there was a spike in housing sales in December and when auto sales fall to historic low figures, then a rebound can’t be far off.  Housing and car sales are the two biggest consumer ticket items and when one or both begin to pick up, the impact is felt throughout the economy. Right now, automakers are offering the biggest discounts in memory and I believe that consumers who have been putting off buying a new car will get in while the getting in is good.

I also have the benefit of an article which appeared recently in The Wall Street Journal to give me some encouragement. Justin Lahart has been reporting about the recession for the WSJ and in his most recent piece, Pent-Up Demand Could Quickly Pull Economy Out of Its Hole (February 9, 2009; A2), he points to the short-lived recession of 1980 as an example of one downturn that was over quickly.

Pent-Up Demand To End The Recession?

Lahart’s argument is that pent-up demand fueled the end of that recession as consumers who had been putting off their purchases jumped back in when government induced credit controls were abandoned. Today, we have market induced credit controls in place which, when also lifted, could quickly end this current downturn.

As much as I hated the TARP bail out and have a big problem with the current faux stimulus package, there may be enough cash in there to free up credit to get consumers to spend again. Should that happen, we could begin to see visible relief by this summer as housing sales increase and new car sales do the same. In both situations, job loss would stop and hiring would begin anew.

A Brief Recovery Followed By A Deeper Recession

Of course, one of the lessons of the recovery following the 1980 recession is that it, too, was short-lived. According to Lahart, rampant inflation and and overdependence on a declining manufacturing base brought about a longer, more sustained recession by mid-1981. Yes, it was that very same recession I remember all to well, one that erased the gains of the 1980 recovery in short order.

Inasmuch as I believe that we could see daylight within the next few months, our debt burden may keep this recovery short and sweet too. For the person who has excellent credit and wants to buy a home or a new car, a brief window of opportunity is open, one that could come crashing shut when the effects of the multiple trillion dollar spending spree kicks in.

I apologize for a mixed news narrative, but in these challenging times it is best that we remain vigilant, making the right decisions in order to stay afloat. But, don’t put away the anchor just yet — the tide may change fast with this recovery.

Recession Or Not, Keep Your Savings On Track In 2009

For 2009, will you find yourself breaking into your savings or do you have a plan in place to save no matter how bad the economy tumbles?

Some of the talk on cable news lately has been down right gloomy. For sure, the federal government’s $700 billion bail out program has gripped the news these last few months of the year as has the realization that our country, even in the entire world, has slipped into a recession. Quite easily, we can pull back on our plans and think about writing off 2009, hoping that 2010 will bring sunnier days our way.

Life Goes On

I don’t know about you, but I can’t afford to put off some things for a full year, as life goes on. Certainly, as someone who is both a small business operator and a family man I’ve been reviewing expenses, cutting back on unnecessary expenditures, delaying business trips, and putting off a project or two, but there is one area where I won’t cut back on and that is our personal and business savings.

No, I’m not suddenly awash in cash, but I know that if I don’t continue to save, then I’ll end up having to pay more later. Saving money isn’t as painful for us as some people make it sound, but it does take discipline. Please read on for some tips on how you can save more money in 2009 without missing a beat:

Christmas Club — Few banks still offer this nifty savings vehicle, an excellent way to save holiday cash to buy what you need and want for the Christmas season. True, cutting back on gifts is one way to handle the holiday, but chances are you have an amount in mind that you want to have available each year. One terrific way to save is to have funds withdrawn automatically on a weekly or monthly basis from your checking account and depositing that money in a savings account. Save $5 to $20 or more weekly by transferring funds to an online account (easier to keep track of and pays higher interest). When the holiday season rolls around withdraw the full amount and start building up the account again for the next year.

Consolidate Communications — We still have a land telephone line, but it doesn’t cost us nearly as much as it did a few years ago when Bell Atlantic was our provider. Today, our cable company — Time Warner Cable — provides our phone service as well as television cable and internet connection. I need the upgraded plan for my work, but I still save at least $75 monthly which covers the cost of our cell phones.

Shop the Warehouses — In our area we have BJs, Costco, and Sam’s Club to provide warehouse savings for our family of four. Though we still visit the local supermarket for meats, milk, and other smaller items, our bulky paper products, snacks, condiments, juices, pet food, water and the like are all purchased at our local BJs. We allowed our membership to expire for a few months earlier this year, but when we signed up again we paid $45 for the membership which included two extra months free and a ten dollar off rebate on that day’s food purchases. Needless to say, we get our membership money back within two visits and continue to save all throughout the year.

Eating Out — We don’t eat out all that much, maybe two or three times per month, but when we do we eat well. Prix fixe (one price) is a favorite, but quality smorgasbord or cafeteria-style eating can be enjoyable too. In our area restaurants are always competing for diners, so specials are frequent and rarely require a coupon.  On occasion, we eat our big meal during the middle of the day as everyone knows that the lunch menu is priced lower than dinner while offering the same entrees.

Review Insurance — Our insurance policies come due in December and that is the time when I sit down to see if deductibles can be raised or other coverage options changed. Of course, you can save money by combining your homeowners and auto insurance, a move that is usually rewarded by insurance companies who appreciate your patronage. Consider switching providers too if you can get a better deal and better service. Likely, we pay more for our coverage, but we like our insurer so the little gecko won’t get our business any time soon!

Family Freebies — Do you live in a family friendly area? What I mean by that is do businesses, clubs, and local governments clamor to serve you? Where we live, families are big business but they are also the recipients of plenty of free and discounted events all throughout the year. We’ve learned that whenever a family event is being held, you go early. When prizes are being given away, you stand a better chance of winning something of value. BTW, you don’t have to be a “family” to reap the benefits — just learn to hang where families show up!

Vacation Planning — I’m not counting on regular gas being $1.79 next summer when we go ahead with a planned (and delayed) trip to see friends, family members, and to take in tourist spots. But, what I am counting on is big savings on wherever we go and wherever we stay. When I booked my trip to Los Angeles last month, I found hotel savings on Hotel.com and compared their best offers with Priceline, Travelocity and Expedia. All four had the same low rates, giving me the best deals for my three night stay. I’ll use these services again plus whip out my AAA or AARP (yes, I’m that age) to see which plan gives to us the best price. Of course, calling directly to the hotel can yield the best savings, so I’ll do that too.

Other Savings — We routinely save money by taking in the occasional movie matinee (my wife and I go when the kids are in school, therefore no babysitter fees) and we make good use of our local library. Our museums are free and we purchased an annual membership at a nearby children’s museum that our children like to visit. In addition, we bought the annual aquarium/zoo pass for our family which pays for itself in just three visits.

Giving Back to the Lord

Besides personal savings, one thing we won’t be doing this coming year is cutting back on our giving. As Christians, we trust that God will provide and we regularly return what we earn to the Lord via our local church, select Christians ministries and set aside some money to help out select secular non-profit organizations. This year, especially, many charitable groups will find it tough to make ends meet, therefore we want to do our part to help out in whatever way we are able to.

Yes, we’re still setting money aside for our retirement and our childrens’ college education in addition to remembering that the tax man will want his share. With a mind to save, we should be able to reach our goals in 2009 without cutting back to the bone. However, if additional cuts need to be made you can be certain that we’ll examine other areas to save and/or figure out ways to increase income.

Federal Hand Out? No Thanks!

And one more thing our family won’t be doing is waiting for the federal government to figure out how they will “help” us out. Resourceful people find a way to make things work out no matter how tough things are. Better days are ahead and we plan to ride over the speed bumps of life while maintaining our sanity and retaining our dignity. We’ll pray for our government, but mostly that they’d stay out of our way!

Have a happy holiday season to all. I hope these tips give you some ideas on how you can press forward in 2009; feel free to leave your tips or suggestions — I’m looking for fresh ideas!

Photo Credit: Steve Woods