|Recession: How to ride above it|
Tuesday, 14 February 2012 00:00Written by Michael Totten
In difficult economic times, you might be tempted to crawl back into bed and pull the covers over your head. It would block out all the doom and gloom out there. However, it would also block out the new opportunities which are opening up.
Don't wait for opportunity to knock! Now is the time to plan how to ride above this recession and invite opportunity in.
Do you feel as if your current employment has reached a plateau? Maybe now is the time to map out a new career direction. Even if your job is secure, consider creating a contingency career. Look around for new opportunities. Try a little moonlighting in areas that interest you. Talk to people around the world for insight into your dream career.
Take a few minutes to review your company retirement fund. Many companies allow you to choose your own investment strategy. Some investments are worth hanging onto for the long term. Others should be retooled.
Now is not the time to tie your savings to a generic stock market vehicle. Even if the stock market has already bottomed out, which is not at all certain, it probably won't get back to pre-recession levels for years to come. In the meantime, the swings which follow every bit of new economic news make the market much too volatile for stable investment.
On the other hand, surprisingly few companies have cut back on paying dividends. Look for mid-range dividends from companies that have paid out reliably over the past year. Fuel, tech, and medical tech sectors are likely to keep performing strongly. Canadian bank dividends have remained rock solid throughout the recession and are likely to continue. Utility funds may also be good performers.
No matter how good your rate of return, it can be wiped out by an unexpected currency drop. Your savings will be most resilient to ongoing currency swings by diversifying over several different currencies. The US dollar, euro, and yen cannot be expected to strengthen much over the short term, but should not be ruled out for long term investments. Canadian and Australian dollar investments continue to remain strong. Because the Canadian dollar is a petrocurrency, Canadian dollar investments can also serve as a hedge against declines in other currencies.
For now, the Chinese renminbi is still undervalued. Business investment in Shanghai and other parts of China continues to be a good bet, but now it also has the potential for an extra currency bump. If you are ready to take your career to the next level, moving to China could be a good way of doing it.
Avoid committing to large-scale metals speculation. Even the price of gold may not increase too much more before correcting. While a baseline 5-10% investment in metals will give stability to your portfolio, more opens you to unnecessary risk.
One final note of warning. The growth and ease of Internet access during this recession means that identity theft will continue to rise. As someone who has chosen to ride above the recession, you are a target. However, most identity theft is preventable.
When managing your portfolio or currencies online, only use websites you know and trust. If in doubt about a retailer's security, pay cash. Retain all credit card and debit card receipts, and destroy them after you have reconciled them with your statements. Report any discrepancies immediately. Keep your wallet and passport in an inside pocket, but have up-to-date copies of your identification and credit cards in a safe place, just in case. Ask if your hotel has a safe, and use it. In preventing identity theft, a little common sense will go a long way.