Will recession occur in 2016? What will you do?
In my personal opinion, the recession has started, but the authorities from all over the world will not declare it until end Mar or end June 2016. As the recession is defined as negative growth over the past two consecutive quarters.
4th Jan and 7th Jan 2016 being the 1st day and 4th day of the year suffered 7% drop in Hong Kong index and almost 10% in Shanghai index and the trades were halt twice given the intervention by the Chinese authorities. What happens next was the world wide spread of stock index collapsed throughout the world. What does it mean for you and me as individuals? It will mean less likely to borrow money from the banks as the central banks were told to tighten their credit borrowing given the incident happened on 4th and 7th Jan 2016.
Next, it will also likely indicate that asset prices of properties will face huge headwind in the coming year as there will be less credit to borrow given the tightening policy from central banks. Also, FedChairman, Janet Yellen may increase another few rounds of interest rates which will put additional pressure onto property prices.
If the economy confirmed to be shrinking and partly due to consumer’s lowering their spend. Likely corporate companies will suffer another year of poor performance. Obviously, the top management will start to layoff people once the quarterly results are out and we have to prepare for the worst.
Should you consider to continue as employee?
If 2016 confirms to be a impetus of recessionary years to come then one has to consider the various options:
- Hang on to the job.
- Look for brand new thing to do.
- Rely on your partner or spouse to support the family.
- Consider entrepreneur? There is no better time than this.
Typically, every major recession will encounter massive job losses and usually government jobs will likely to be secured during bad times. If you know you are suitable to be an employee, and you happen to be in government job then chances for you to survive this economic storm should be alright. While the rest of us who are either entrepreneur or working for non-government jobs then it will be survival fittest. There is no right or wrong answer to this but one should assess the situation and determine what’s best during that moment. I do know that entrepreneurs create jobs and boost the economy.
Will property continue to be safe haven?
It is interesting when I hear people talking about property prices is the place for investment. There is no doubt that property prices between 2010 – 2014/5 especially in Asia has boom since the economic crisis in 2008 and across Asia, the property prices have risen around 50% to 100% as compared to 2008! In view of this, most Asians believe that property prices should restore, recover and even rise much higher after this potential 2016 crisis! We are too naive to think that property prices will recover immediately just the experience we went during 2008 – 2009. Thus Asians especially those who benefitted from the property boom during the last few years thought they found the magic formula and continue to believe properties will be able to withstand economic crisis. By this I mean, they know that property prices will drop for the potential crisis but they also believe that property prices will recover within the next 2 years and they gave the example of 2008. In my heart, I hope they will read more information outside of their comfort zone as they clearly not aware that next quantitative easing will not be as effective as before.
Many Asians failed to realise that recovery was mainly due to quantitive easing or put it bluntly print money. Had it not been helicopter Ben then the recovery will not be that quick and in fact, we almost went to the new depression. Right now, given the low-interest rate, I truly doubt printing money can have a positive effect for the economy.
I am referring in particular to Singapore and Hong Kong market and clearly many people had forgotten the experience from 1996-1997 where bankers were chasing after the mortgagors when the property values gone into negative territory. Will this happen again in 2016-2018? Maybe not but one should not ignore the fact that it did happen previously.
Over in USA, I believe the US property will soften as well but the situation will not be as bad as some of the asian countries where the property prices in Asia have escalated to a level that is beyond reach to average salary income earner.
What should we do to prepare ourselves for the coming crisis?
In fact, I have been busy watching the price movements of rental flats and shops. I want to have a feel on the ground to inform me how bad the situation can go. Also I believe this coming crisis will be unlike 2008 where it will not recover so soon, as quantitive easing is no longer as effective as before. Below are some of the things I plan to do to prepare for the coming crisis.
- Take stock in what you have and ensure that you are able to survive throughout the crisis so expenses must be controlled.
- Be active on the lookout for desperate deals as there will be opportunities. Don’t jump into the first opportunity, wait and see how it develops. Be patient and also get ready to strike once you have studied the situation. I plan to expand my business during downturn as I am able to get much lower rental retail shops in good location. During good times, my business will not be able to afford but bad times will allow me to put foothold in strategic location and possibly expand my market share.
- Always stay vigilant in what the government plans to do. Will the government plan to do more free trade with other countries or will they do the opposite and set some trade barriers with certain countries. Different actions taken by the government will yield different results as some businesses will thrive when their currencies are strengthened – import based while other businesses will thrive when their currencies are weakened – export based industries.
- Buy physical gold and silver if you don’t have other plans as physical (not paper) gold and silver were used for transactions for thousands of years.
Don’t stay status quo and wait for the things to come! It won’t happen, you have to grab your opportunity.
As for me, I am an advocate of entrepreneurship versus employment. I believe taking control of your own life not let others controlling your life. Don’t live under someone else’s life!
In conclusion, don’t think that previous method works well for you, and you will automatically deduce that it will work again for this round. Every situation is different and one should not take things for granted and assume buying property will always be the safe haven against economic crisis.
I planned to invest my time into online business as I believe some of the online business will be affected during economic crisis but not all of them as some of them may be a boom time. During bad times, I believe there will be more people losing their jobs and they will be looking into ways of how to earn money and certainly one should not miss online arena.
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