Recession fears, recession reality

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by jwiegley

I’ve been an investor through two of the past recessions. I can’t say if another one is looming, near, or not close at all. My ability to predict the market is as bad as anyone’s.

However, hearing all the fear and hype, and seeing the Great Flight to bonds and commodities and other instruments, it causes me to reflect on what I see happening now, vs. what I remember from the past.

So, when real recessions were underway here’s what I remember:

  1. People were not universally warning me to avoid stocks. If anything, bubble hype was so great that I was told I “couldn’t lose” by investing in tech, or real estate, or whatever else was fashionable at the time. I remember one friend actually becoming angry when I suggested that real estate was as susceptible to market uncertainty as anything else.
  2. My company stopped giving out bonuses and raises, for years. People were laid off during successive waves of “restructuring”. Recruiters called less often. Jobs were harder to find. Many of my friends had difficulty finding new work, or were out of jobs for months. There was a feeling of things “drying up”.
  3. During the last recession, Europe became rather expensive to visit (1.47 EUR/USD in Dec 2008). In general, purchasing power felt like it was… less, though this could have just been psychological.

In short, the recession environment made life feel like it was becoming more difficult. Whereas in the current climate, borrowing is still easy, interest rates are low, recruiters are calling, companies pay competitively, my friends are taking trips and vacations and spending their money. The only place I notice “recession” cropping up is in the news, over and over.

I’m hopeful it stays there, but it makes me wonder how much of this is just fear levels reaching a fever pitch. Which could, I imagine, provoke the very thing everyone is afraid of, if the market depreciates assets too severely and everyone begins to panic.

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