Recession: Is It Such A Bad Thing?

1 February 2016


The inspiration for this piece came from my hairdresser visit over the weekend. Our female readers would know what a Saturday at the hairdresser is like…yep, an all-day outing, engaged in conversation and dryer sharing. To be out of there by midday you’d have to be one of the first to arrive.

Anyhoot, the thing is; this Saturday was much different. I arrived, equipped with my own reading material and everything, but was pleasantly surprised to find an idling wash attendant and just three other ladies, all part-way through their service. Needless to say, I quickly gave salutations and hopped across to the sink.

“Oh yes, I can definitely get used to this recession thing!” exclaimed one lady who was paying for her service. Only 10 am and she was already on her way out.

Her statement kept me thinking throughout my wash and dry: can you really benefit from a recession? Can a citizen truly be okay while the country on the whole is hurting?  Isn’t belt tightening supposed to be uncomfortable?

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When our politicians advise us to tighten our belts, they’re asking us to reduce our spending. This may mean eradicating or diminishing the funds we spend on our wants and focusing on seeing primarily to our needs. Individual success in this endeavour depends on that part of your brain where creativity derives.

Family dining may become the new way to eat, movie nights can be held at home, home gardens might switch from bearing bougainvillea to actual food…sounds like the “good ole days” doesn’t it? In other words you have the opportunity, to experience life differently. To me that doesn’t sound like such a bad thing.

 

Question of the Week:

What are the positives to a recession?

Sound off at our Money Matters blog!

 

That said, what happens to the investors out there or those of us who have cash and want to preserve its value in a recession?

Warren Buffett’s famous quote gives one suggestion: “Be fearful when others are greedy, and be greedy when others are fearful”. For Mr. Buffett, recessions represent the best time for wealth accumulation.

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So investors, you may want to take a paragraph or two out of The Buffet’s Investor Book and benefit from the bear market. Perhaps you’ve already turned your mind down that path; and you’re focused on which stocks you think have taken a beating on the market but retain their good fundamentals. Or which business sectors perform at their best when things are tumbling all round them. Though this level of detail is good, don’t forget to spread your risk by investing in different asset classes (equities, commodities, bonds, structured products, real estate and cash).

I know, I know. Easier said than done Ihsan! So yes, I expect even if you already know what you should be doing, you’re still caught in the “hemming and hawing” stage. This is where Firstline’s expertise comes in. After consultation, we create portfolios to suit each of our client’s specific risk appetites, incorporating different asset classes tailored to perform at different levels and in varying tenors, to achieve financial objectives.

If you currently hold an investment portfolio, you should evaluate it to ensure it remains balanced and continues to serve your investment objectives based on where both the international and local economy is at present. If you need help in this regard, or wish to set up a new portfolio (carpe diem!) contact us!

In the meantime, enjoy your trip to the hairdresser this weekend.

Also please do not hesitate to take a look at the indicative prices here as of today, February 1st, 2016.

Ihsan Slater, Trader | ihsan.slater@nullfirstlinesecurities.com

Kristal Williams, Portfolio & Trading Manager | kristal.williams@nullfirstlinesecurities.com

 

3 Responses to “Recession: Is It Such A Bad Thing?”

  1. Salicia says:

    My hairdresser was packed this weekend and people waylay waylaying all over the place whole week. Trinis by and large don’t seem to care that much just yet – at least from my experience.

    You make it sound easy but how exactly am I to invest in real estate, or commodities or bonds?

    Sali

  2. Ihsan says:

    Thank you for commenting, Sali!

    How you invest in real estate, commodities or bonds is your choice. For real estate, for example, you may directly purchase land or property and improve it for rental income or for resale; or you may indirectly invest in local real estate by investing in a property mutual fund on the local stock exchange. You may even seek real estate in a country outside your own.

    Speak with a broker to learn about commodities investments and bonds that are available to you. In my opinion, most important is understanding how each of your investments affects the overall risk level of your combined investment portfolio.

    Last, as an individual investor, you may choose some combination among making your own decisions (through a broker), using mutual funds that are overseen by portfolio managers, or hiring your own portfolio manager.

    Don’t hesitate to call us when you’re ready.

    Have a safe and happy Carnival !

    Ihsan

  3. Shack says:

    Hi Ihsan,

    I agree with Sali. I don’t think Trinidadians have a clue of care about any recession, until it affects them or someone close to them (possible job loss due to downsizing or otherwise). We will continue to have 5 starches and 3 meats on a Sunday if that is what we have grown accustomed to.

    Do you think the recession can benefit the country’s economy?