No growth or economic flatlining or negative growth isn't supposed to happen for two consecutive quarters - but it is the periodic corrections that fall more into the realm of "supposed to happen".

I'll take the simplistic view and offer that if you've got a steady job and income, can tolerate some ups and downs in your investments, have a backlog of assets or at least a good emergency fund, you can weather a recession. You're not going to be totally untouched because it has a trickle down/ ripple through effect. With less money going through the system, stuff you need and want like food and gasoline and clothing and heat, etc. is simply going to cost you more.

Some of us can tolerate having to pay more - we don't necessarily like it, but it's a far cry from those out there who cannot afford to keep paying more.

I hear you. However, I understand that recessions often include price drops. In fact, I heard someone say that the good thing about recessions is that it demonstrates that inflation is under control! (or something like that)

Gas prices going up seems to have affected everything, though.

I think recessions affect people living "on the margin" most drastically. I'm still working steadily, but I've seen a shift in the sort of work I do day to day over the past year. A year/two ago it was new work or alterations to new garments. Now, it's repairs to things that might've been replaced a couple of year ago. I'm once more receiving inquiries about doing "mending". I'm seeing customers arrive with a bag of repairs... seams here and there, patches, NEW ZIPPERS, new pockets... restyles of serviceable women's suits that are now "dated".

I am not so willing to get in the car and take a drive to the bookstore/fabric store/nursery on a Sunday, waiting instead until I'm over 3/4 the way "there" and going after WORK. I'm more inclined to make sure I get all the errands done "on the way home" than I used to be.

But I'm still saving, I still keep the credit cards at a zero balance, and I still cringe when I see the statements come in with a "loss". And I'm still "brown baggin' it".

But several of my friends are really feelin' the hit... livin' large carries greater risk, I guess.

OK... I guess these comments confirm my suspicions.

The way the news reports it, you'd think we were all going to h*ll in a handbasket. So I thought, "how exactly?".

My co-workers (almost) all seem to be on the financial edge at all times as they frequently make remarks about making it to their next paycheck... or they put off making a minor purchase until that next check.

Man, that would make me a nervous wreck!... in good *or* bad financial times

Hi well-behaved kelton,

My daughter, Comm. degree, flexible, moved to AZ about the time that the tech bubble burst ...

... and Motorola laid off 10,000 at one time.

She was taken on by a large corporation to help some of those folks get their feet back under themselves, get an idea of what they wanted to do, coach them in making resumes, preparing for interviews, etc.

When other tech companies were laying off, right and left, as well.

And many of those folks had training in a limited field.

How does something like 10% unemployment look to you?

Have you ever lived in an area where assessing unemployment numbers was a luxury that a strapped government couldn't afford ... but how do you like estimated something like 35%?

When there were no jobs to be had ... ask as often as you want.

If you owned your home, with no mortgage (??) and had some yard space (or lived on a farm) you could at least grow veggies. No way to even consider tomatoes hauled from CA at whatever price per pound, in winter.

Turnips cheap ... day after day.

Potatoes.

Meat ... what's that?

In today's circumstances, in our area of the world, folks who're three paycheques from being broke are playing with dynamite.

ole joyful

In all honesty? The current economic situation could not have happened at a BETTER time for us. Why? Between the housing slump and general recession, we have the chance of coming out of this in really, really good shape.

You see, DH plans to retire in a couple of years (but could retire any time). Our plan is to buy our retirement home soon--within the next year or so. And maintain 2 homes temporarily--getting the new one fixed up totally, then gradually moving everything in. Once the 'new' house is ready, we can then fix up the old one for sale.

It's very likely that we may get a really good price on the house we buy, because the market is dropping, and houses are sitting, and we're looking for something that would be right for us, but possibly difficult to sell to the general public. And with any luck, by the time we're ready to sell our current home, the market will have picked up and we'll get a better price for it.

That's just one example of how one might come out ahead with the current conditions. My feeling is this--there are always opportunities in ANY economic climate. The people who will be hurt are those who are inflexible, and uncreative. But if you are willing to step outside your little box, to drop your preconceived ideas, and get really creative, you can actually make money during this time. We will--because we follow our own drummer, so to speak.

I was thinking the same thing about the housing market. I have never made a ton of money, but have tried to live well below the standards of my peers (which isn't hard!).

Anyway, I was thinking of renting my current small house while the market slumps.

Then, when the perfect house appears at the right price... I will can buy.

In the mean time, the rental house remains a rental until the housing market improves.

I don't want to be a landlord, but it might be worth the effort given the current economic conditions.

On the other hand, I'm not so sure home prices around here have dropped enough to make it interesting... maybe they have stabilized... but there are certainly more homes on the market.

Azzalea raises an interesting point and one with which I find myself nodding in agreement.

We built our home in the last recession (early '90s). We put a nearly every penny we had "down" to get the place to a point where we could move in. We borrowed very little and risked a lot. We've done all the "finish" work ourselves and paid for it out of wages... by saving, planning, and learning how to do things for ourselves. We substituted our time and curiosity to learn things for the big mortgage and the "finished" home. It was a good choice for us. We now OWN a home that has appreciated beyond our wildest dreams, and even with the present downturn it's still the cheapest place we could live in the area.

Now that another recession looms it is comforting to know that we have a home that is easily affordable to maintain. It's very modest compared to many others in our community, but wonderfully commodious for our needs. We are contemplating taking on a room-mate, too (an old friend who's endured a health crisis recently). We've done it several times before and only once have we had an unpleasant experience. This could be a "win-win" opportunity!

What that could mean is a savings on the basics required to keep a home up an running, thus more money to invest at a time when prices are depressed.

So, YES! I agree that even the lean times present opportunities for those willing to carefully reassess their circumstances and make changes that to many may seem radical.

Well, this is why Warren Buffett was hoarding cash over the last three years - specifically so he could swoop in and do profitable deals with cash-starved companies. He isn't the only big investor doing this, either.

Was it F. Scott Fitzgerald who said, "The rich are different than you and me. They have money."?

jkom, I can't quite tell if your last post was a jab at "the rich. Was it?

Anyway, if Buffett is wanting to swoop in, at least that indicates that he is optimistic that things will improve!

Not at all. "Rich" is always a relative term. My DH and I certainly don't consider ourselves rich, but our Gen X and Y friends who are just starting out, know we are much more prosperous than they are. We're some thirty years older, to be sure - retired (me) or close to it (DH), with a paid-up house.

I was a professional Exec Assistant, working for people who truly are rich - those who are in the $5M+ net worth category. In the SF Bay Area it isn't uncommon to meet working couples who individually each bring home mid- to high six-figure salaries. My DH and I never even came close to those kind of wages, unfortunately.

Recessions often hurt those who are living "on the edge" - a category of people who are often at the low end of the pay scale, yet there are a surprising number of higher-wage people who are also "grasshoppers" rather than the "ants" of Aesop's fable.

And of course, there is the very real issue of medical care and what it costs in the US. The majority of bankruptcies in CA, prior to the subprime mess, cited healthcare debt as the reason for filing, despite the fact most of them had insurance.

I didn't read it that way - people see opportunity and they jump. And with a healthy backlog of cash (like Warren Buffet and those like him would have) they'll wheel and deal in a more rarified atmosphere than you and I - he's not going to be spending his backlog on an $849.9k house that levelled off at $835k. Buying a distressed comany could mean a reorganization or revitalization, different company focus, breaking it up and leveraging off parts, downsizing all the employees adding to the ranks of unemployment... that's business in the world of Warren Buffett. And it's nothing personal if somebody wins and somebody loses.

It's all the same thing despite different levels - bide your time until the asset you're looking at becomes available at the price you want to pay, then go for it. The longer this goes on, though, I'm becoming somewhat less optimistic that prices are going to fall back into the realm of what most/many consider affordable. The cute little Craftsman bungalow in an old established neighborhood that originally cost $5000 to build is still going to sell for "whopping" once this all shakes out. Maybe I'm a minority of one in thinking prices for many goods and services are simply not going to plummet, as people hope they will, and the nostalgically remembered days of gas at $2.00 a gallon are gone forever.

I've always thought there was a distinction between being rich and having wealth. Lots of peole are rich today, big salaries, big expenses, big this and that, and no accumulated assets (wealth) to speak of. The wealthy have managed to aquire and hold onto assets and their money does continue to make money.

My husband and I are both disabled, living on Social Security Disability. We always envied his brother, who has a beautiful home and earns well over $120,000 a year and has a million in the bank. Dear brother recently lost his job but is doing "consulting" work to tide himself over. Turns out brother envies a friend who owns two homes, lives in one and rents out the other, and makes a half million a year. It's all relative.

1. In the immediate as long as your job is secure a recession should have no impact.

2. home prices may fall, but if one is not planning on moving who cares. i would suggest add more to your mortgage principle to offset any "paper" house value decline. you should do this anyway.

3. the real issue is the possibilty of stagflation which i believe is already here due to food and energy costs. this hurts everybody

4. as an investor you have taken some hit on stocks but if you dont need the money now ignore it. always have cash savings for emergencies.

as long as your job is secure

As Hamlet said, "Ay, there's the rub."

What happens in recessions is that lots of people lose their jobs. Citi, for example, having made stupid bets in CDOs which lost them billions, lays off 20,000 (while sending off the incompetent CEO w/ $50 million). Other companies do the same. Employers take advantage of the fear of those who are left to freeze or roll back wages, scale back benefits, etc. "Be thankful you still have a job and be quiet." Meanwhile, companies scale back on purchases or go bankrupt because no one has any money to buy stuff. So more people get laid off. Etc.

Eventually, this ends because the govt throws pots of money at the problem, and the companies that still have money buy up the others and achieve economies of scale that let them make bigger profits, even in the contracted economy. So eventually they start hiring a little, which gives hope to other companies, who start thinking about buying equipment to make more stuff to sell to those new-hires. Etc.

I'm just annoyed that the bear market seems to be world-wide. What's the point of diversifying your investments if everything goes down at the same time?!? Argh.

"Recession is when your neighbor loses their job, depression when you do"

Recession also hurts if you are paid by production and because people are cutting back on spending, you can't produce as much. Anyone who earns a living by commission/production-based pay is hurt, even though the job itself is steady. School systems are hurt because as home values decline, so do tax revenues and therefore money going into the schools. Our local food banks and other charities are hurt because more people need assistance and less people can afford to help. Local governments are hurt through decreased tax revenue from sales and income taxes, so they can provide less services right at the time more people need more services.

I agree, solid job, everything under/somewhat under control, hold steady. My take is to pay off your house ASAP. Which means, prolly stay well beneath your means and focus on enjoying your loved ones and forgetabout the PLASMAS and the GRANITE, FOR GOODNESS SAKE! But, hey this is my thoughts for now.

"...when you neighbor loses his job...", that's a good one! It's probably an old financial cliche, but I'm somewhat new to watching the economy.

Hoosiergal, speaking of old sayings... what is meant by "Plasmas and Granite..."?

There has been a lot of talk in this forum about paying off the house as opposed to saving/investing. I started one or two of those threads myself.

The most convincing argument is to save or invest any extra money and letting the cheap-low interest mortgage ride itself out. This probably makes the best financial sense.

I'm a science guy, so I hate to make my own truth based on intuitions and "feelings", but debt of any kind makes me feel, um, incomplete. Like, there's this unfinished business hanging over my head (I owe someone: debt).

In my case, I will probably pay off the house very soon (I need to build up a decent emergency fund first).

This goes against my logic, though. So I'll be paying off this house... which will probably not appreciate for a while... certainly not enough to pay for all the house repair/maintenance stff.

In the mean time, I would be willing to bet that this is an excellent time to start buying into the market. Buying into a total market index fund over the next two years will probably pay off smartly. If this is done with those same large chunks of money that it would take to pay down a house, this could mean *real* profits in a few more years.

So being debt free... the feeling that comes from it... is driving me to pay it off. Further, investing in the market is a nerve racking experience (but usually profitable). Paying off the house isn't the kind of thing that creates anxiety at all.

If you frequent the "Building a Home" forum, you'll see many references to Plasma TV's and granite countertops. Some folks consider would rather be dead than install laminate countertops, LOL.

Some folks consider would rather be dead than install laminate countertops, LOL.

LOL, I can't imagine a worse fate, unless you do a vinyl floor, also.

If you have a decent mortgage rate, just keep paying it off on time. The US Dollar is dropping; you'll be paying in cheaper and cheaper dollars. (Don't forget to ask for a raise, since THAT dollar is dropping, too!)

I see stagflation in our future. (It's probably closer than it appears in my rear view mirror.) Interest rates fall. Inflation grows. The economy slows to something less than the near-crawl we have right now, where 'new jobs' don't amount to enough to cover deaths and retirements. Best sign of this: the federal government scurrying to inject life into our overly-consumer-driven 'economny'...not by any meaningful moves, but by handing out a few hundred dollars of money for candy.

Suppose you'd bought 100 shares in a solid Canadian company, at $100.00 per share, five or six years ago, when CA$1.00 cost US$0.69 ... cost, US$6,900.00. (plus commission).

Suppose there'd been no appreciation ... the price of those shares is still $100.00. You feel the need to repatriate that money, now, so sold those shares for CA$100.00 each ... after paying commission, you'd have about US$9,500. to put into your pocket.

Many of us feel that the slide in value of the US Dollar relative to other world currencies isn't finished.

It's rather important to think in terms of buying shares in companies in other parts of the world, I think.

Or at least in some U.S. companies that do a lot of business worldwide ... but their bottom line is still calculated in US Dollars.

Call me bitter if you like - I've owned some shares in U.S. companies in recent years, whose price per share has increased ... but not their equivalent value when I calculate it in CDN Dollars.

But I'm only slightly so - that's part of the game in money management.

Farmers are better able to evaluate such issues, for they are used to not knowing what the price levels of crops and animals may be at the end of the year. Or whether this may be a poor year, weather-wise, resulting in a smaller than average number of units to sell. Or some of the cattle die, this year. And fuel prices change ... plus fertilizer costs ... you know in what direction. And a number of their income sources often are seasonal.

Many city folks are used to receiving a paycheque of a given number of dollars, on a given day, so are much less familiar with fluctuating values of income or assets, or periodic income. And many become so dependent on current paycheques that if they don't get a couple, they are in serious financial trouble - sweating blood, so to speak.

Not my idea of a good time.

That's sort of like being in financial handcuffs.

I've never been in real handcuffs ... and have no desire to find out what that may be like!

I knew what financial handcuffs were, years ago - but made it my business to get out of that prison, long ago.

Many regular employees thus find it much more difficult, intellectually, psychologically and emotionally, to get involved with assets where values and/or income are variable and changes in value often take place over a substantial term.

Good wishes for increasingly effective management of both your income and assets.

ole joyful

Chisue,

My interest rate is "ok"... I bought at almost the perfectly wrong time! Near the peak of the market and interest rates...but still it's only 6.1% for a 15 yr mortgage.

So you say that you would suggest paying it off "on time" due to the ever cheapening dollar. Why is that important?
(I don't get the relation... maybe I should)

Again, I do understand that it is typically wiser to keep the mortgage ("it's cheap money") rather than pay it off while putting my savings to work.

The talking heads on TV are all over the place. Some point to the freakish credit & mortgage debts of Americans and predict gloom. Others point to the strong world markets and see great economic strength in our country's world position.

I can tell you that a great majority of my co-workers talk readily (water cooler talk) about their debt... and how they anxiously await their next paycheck to pay bills.

Frankly, I don't exactly feel confident with my current savings (and financial security), but when I hear their stories, I get nervous for *them*! With the amounts of money they are making, they have no excuse.

Not only that, if my co-workers are any representation of the rest of the U.S., it makes me nervous about our entire economy!

Given this, I'm trying to create a life situation that will reduce my cost-of-living. Having no mortgage is a decent start (in my somewhat simplistic view of personal finance).

My goal is to create a circumstance such that I'd be able to work at McDonalds and still make ends meet! You know, if the sh** hits the fan.

Have you run the numbers to see if your would be ahead to refinance? Rates looked pretty low when I looked last week. Still, 6.1% on 15 years sounds pretty good!

The inflation thing: As inflation rises, every dollar is worth that percentage less -- buys three to four percent per year less. But your mortgage is set at X Dollars of Payment per month. You end up paying a non-rising amount with devalued dollars.

Inflation is often forgotten when people sell their home of 30 years for triple what they paid. They think they've hit oil. Once I figured the inflation factor on our home (and RE taxes and maintenance), the real profit in today's dollar came to about 4% per year. Yes, we had a home for those years, but it wasn't the 300% windfall it seemed at first.

Oh, I see what you're saying about devalued dollars. I guess that's just yet another factor to consider.

At the same, though, what will that money being doing otherwise? Sitting in a CD or money market? Those rates are going down. The stock market? Well, I get the feeling that the stock market may actually be a decent choice if I can stomach the current freaky situation.

Your point about your "300%" home value increase is a good point. I have heard family and friends gloat about their home value profits, but often wondered what would have happened if they simply invested that same money in the stock market over the same period of time?

I have owned my current home for about two years now, and it immediately struck me that I am spending far more on upkeep (and the equipment) that people probably realize. In another thread, I mentioned that renting a *modest* home or apartment may be the best option for some of us. Further, their is always the worry and fretting over the value of one's home...and worrying about the behavior of the neighbors! (a renter can just move)

The *expense* of home ownership is both a monetary issue AND a time issue (the time it takes to attend to the house). So it's expensive in more ways than one.

Now, when you want to actually *see* the money from home ownership, you have to sell it (ugh!). That's always fun.

On the other hand, renting an inexpensive place may free up more money for better investing options.

If you own stock, you can sell them on a moments notice. You don't have to fix up their curb appeal, fix stuff, or suck up to buyers. nice.

Because of me, I'm leading this thread in all directions!
Sorry.

Anyway, paying off the house allows me to sacrifice some savings *now*... avoid the interest... and situate myself so that I can begin investing my extra money (once the home is paid) in large chunks, and relieve the emotional issues involved in 'having debt'.

I don't think it's appropriate for me to refinance at a lower interest rate. I don't owe enough money on the house. Loan agents want to loan at least 90 grand or more. After the fees, I don't think it would be worth it.

For me, I'm going to ignore the good advice about *not paying off your house* and do something that just feels good. Having a free & clear house is like having a Ferrari. It's something that not many people have, gives the feeling of accompishment, and is something of a luxury. Actually, even though paying off a house isn't perfect financially...it *is* financially wiser than buying a Ferrari!

>> even though paying off a house isn't perfect financially...it *is* financially wiser than buying a Ferrari!More than that - if a paid-up house costs you less (after prop taxes, maintenance, and the higher utilities percentage) than current rental rates, that's an added plus for your financial health.

Although inflation affects rents less than it does other things (food, for example), rents are indeed rising in many cities. Even in areas with rent control, as where I live, rents have crept upwards over the years because the only new rental buildings that have gone up in the last thirty years are condos. Land is too expensive to build rental apartments in rent-controlled areas. So the beautiful 1 bedroom apartment I rented 20 yrs ago for $465 (and it was $180 when I first got it!) is now marketed at $1100+, along with all the attendant woes of city street parking.

I would agree it's not useful for you to refinance your house at this point. Pay it off, and congratulations to you!

To get back on the original subject, though - I think the hardest part of a recession is the hysteria one has to wade through. To put it in perspective, I was reading the latest Fortune magazine about 91-year-old Walter Schloss, a man Warren Buffett greatly respects and admires. He's a famous money manager who prefers "unloved stocks" with low debt.

What caught my eye is that the article starts out with: "Walter Schloss has lived through 17 recessions, starting with one when Woodrow Wilson was President. This old-school value investors has made money through many of them. What's ahead for the economy? He doesn't worry about it."

Think about that - 17 recessions! A good reminder that these things cycle around, again and again.