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Positioning for the Next Recession, Do it Now!

Since Trump got into office in November of 2016, the economy has been on an uphill trend overall, especially in terms of the stock market and real estate market.

Unemployment has gone down, and companies are expanding.

The tax reform act has given more money to profits, which is being given out to employees.

 

 

Consumer confidence right now is high, people are buying things and using credit.

In fact, people are using too much credit.

In many ways, we are now where we were in the pre-2008 financial downturn.

The problem is that consumer credit expansion is going up, and people are expanding into more debt.

There is a big disparity between affluent people at the top, and middle America.

Middle America is getting squeezed.

The rate of net income over the past 20 years has been going down for the average American, relative to overall buying power.

These days, most Americans don’t have a lot of net worth.

As long as the economy is running well, things will keep moving forward.

But good things don’t last forever.

We have been on a long streak of good.

There is an underlying economic fragility in this country, with rising interest rates and debt.

Anything in the global system can be enough to trigger a devastating recession.

The key is to have access to liquidity.

As long as you have access to cash and the banks are lending, then you will be okay.

But when the banks and credit institutions have to clamp down, they have to pull back and cut lines of credit.

When everyone is scrambling for the same thing, such as credit, then everyone will be affected.

I would strongly suggest that you look at your liquidity.

What are the cash flow margins in your business right now?

Who are the primary buyers of your products and services?

If you are primarily supplying for middle America, I would be very careful.

Middle America can be squashed in a second.  

It is advisable that you move to a more affluent market.

You have to be intentional about it, and make some important decisions here.

You cannot keep doing what you are doing and hope for the best.

As middle America gets squeezed, their inability to continue to buy things will affect everybody.

Anything can happen to negatively affect this strong economy we have today.

You need to position yourself well, and have liquidity.

Look at your debt lines right now … what do those look like?

Are you using lines of credit? Are you using commercial loans?

In a downturn economy, even if you are making your payments on time, the banks can still come after you.

And, if everyone is scrambling for access to credit, then you are in a no-win situation.

So, you have to ask yourself … who is your primary customer?

Are you dependent too much on middle America today?

What does your liquidity look like? Do you have reserves?

Do you have access to private capital?

If you are not working those areas right now, you are putting yourself in a very dangerous situation.But, if you do position yourself correctly, you will thrive.

Do it now, and you will thank me later.

Things will turn, and the cycles will drop down again.

You can choose to be an opportunist who will do very well, or you can choose to be a victim.

The choice is up to you.

 

To your freedom,

David

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