Depression: Here It Comes

As days go by, I’m more convinced that the current economic slowdown will turn into an economic depression (but don’t sell your stocks before April, until the intermediate rally runs out of steam).

This depression will be less severe than the last Great Depression at the lowest depth, but it will last much longer, possibly until 2014 to 2018 (no, that’s not a typo). The shape of the recovery will be like a W, with the two low points at the end of 2011/mid-2012, and another point probably at 2016/2017. And we simply haven’t seen the depth of depression yet for sure. I think S&P500 would go to 600 at the minimum, and possibly lower.

Like always, in every depression, the most difficult thing that happens to a family is unemployment. In Great Depression of 1929-1932, the unemployment rate hit 25%. I think we may be looking at 12% to 15% for this current depression. Let’s hope that it doesn’t get worse than that. At 15%, about one for every eight adults is unemployed. If you don’t have any rainy day funds built up, it is probably too late to build up something sufficient to carry over you through the downturn. Make sure you don’t lose your job.

Anything that you could do now to help yourself through?
1. Imagine that your company cut employees by 30%. Will you be the one that remains? If not, you should make every effort to become one of the people that may remain.
2. Apply and get all the credit cards that you can possibly get. Only spend like $10 on the card to just keep them active. You should only use these credit cards until you cannot even afford food.
3. Cut everything to barebone. Review your budget.
4. Sell anything that you don’t need or use now by garage sale, or Ebay. (It’s a little late, but better late than never). Don’t bother to pick up more discretionary junks at the bankrupt Circuit City or similar stores.
5. Keep a positive attitude. Hope for the best, but always plan for the worst. Do something, and do something out of your ordinary routines. That is the only way to create different possibilities for yourself.

At last, if you are able, please help people around you through charity. It may be very hard to give, but every dollar that you give out, means a lot more than in the heydays, by at least a factor of 3X. Charity organizations are experiencing a drought of donation. It is unfortunate, but that’s just how everything goes.