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The Recession is Coming, The Recession in Coming – NOW is the Time to Divest/Invest

The recent Yahoo Finance article entitled ‘Second Recession in U.S. Could Be Worse Than First’goes into some pretty deep territory.  It does not go so far as to predict this outcome directly but should this scenario occur, it looks at what would be the fallout from a 2nd recession that quickly follows a previous recession.  The simple answer?  Way more… way, way more of the same… bad stuff.

The article states, “…the economy is much weaker than it was at the outset of the last recession in December 2007, with most major measures of economic health — including jobs, incomes, output and industrial production — worse today than they were back then.”  It goes on to say that that the doubled-up recession that followed a first back in 1937 was much worse, that unemployment will reach much greater levels than the last recession, that there is very little buffer currently available with the exception of some short-term corporate profits and that there is little the government can do about all of this given the nonexistent interest rates (they’re already at 0%) and that their other long-standing tactics are proving more and more futile.

“Of all the major economic indicators, industrial production — as tracked by the Federal Reserve — is by far the worst off. The Fed’s index of this activity is nearly 8 percent below its level in December 2007.”

An 8% decrease in industrial production is already both alarming and enormous and that is BEFORE the next recession.  Asset Impact works directly with factories and distribution centers that are shutting down.  It almost goes without mention that we have noted more shutdowns in the last year than almost any time in memory.  If a second recession does hit, how would production not worsen significantly?  So the question behooves itself, what can you do now to better be prepared for a recession contingency.

Pre-Recession Checklist

  • Retire older assets now – immediately!!! Seek to recover some value now on weak assets ””before”” the secondary market is flooded with many other companies dumping dated assets and trying to make a desperation score. Hey, even scrap value will return far higher prices now than in a deep recession.
  • It may surely be unpopular but older assets are also generally the ones that consume the higher amounts of personnel resources – so consider streamlining and eliminating your least profitable production/distribution lines.
  • Invest – We know this may sound counter intuitive but interest rates are so damn low (0%) and government investment and tax incentives are right now still available. As the impending recession dries up available funds and higher recovery values, it will be too late to make that type of business defining change.

Investing your funds earned through the divestment of your bad production/distribution operations now and by making capital investment into producing and selling products that will show strong levels of resistance to bad economic cycles, could prove to be highly profitable. When others will be cutting employees and cutting lines to survive, you””ll be running with low overhead and high yields. The competition will not be able to challenge your new efficiencies.

Asset Impact - Recession

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