Cheer up! A recession is coming and you are going to fail, that is if you are not prepared.
Why do I say cheer up? Because you can tell today if you are not prepared, and you can get out now and save yourself a lot of pain when the recession hits. You can also try to get your financial house in order, but if your money is a mess today, there will not be time.
On August 31, top-level economic policy makers attended a symposium in Jackson Hole, Wyoming. I have been reading the full texts of speeches given there. They leave me with no doubt that a recession is coming, and it could be severe.
No one knows when it will come or how severe it will be. My own best guess (and it is nothing more than that, one man's best guess), is the recession will begin in late 2007 or early 2008. To prepare for it, I suggest that you be ready to run your expediting business for six months to a year with 50% of the gross revenue you are earning now. Preparing to do that may be overkill, but it is better to be safe than sorry.
I was especially impressed with Martin Feldstein's comments offered at the symposium.
He said, "The housing sector is now at the root of three distinct but related problems:
"First, a sharp decline in house prices and the related fall in home building that could lead to an economy-wide recession;
"Second, a subprime mortgage problem that has triggered a substantial widening of all credit spreads and the freezing of much of the credit markets;
"And, third, a decline in home equity loans and mortgage refinancing that could cause greater declines in consumer spending."
While the recent panic in the credit and stock markets subsided in response to Federal Reserve action, that action was akin to treating the symptoms and not the underlying cause. It made market movers more comfortable but they are still seriously ill. Some have already died (gone out of business).
There is nothing the Fed or anyone else can do about the cause. Too many people borrowed too much money to buy houses and consumer goods they could not afford; and too many people lent them the money to do it. The only cure for that is to let the speculators, wreckless lenders, misguided investors and irresponsible spenders die on the vine. A governemnt bailout of some will not be comprehensive enough to prevent a recession. Economic cycles are more powerful than the government.
Recessions wring out economic excesses and set the stage for the next expansion. If you are over-extended with debt now, you should prepare for the worst. The economy is going to slow down and so is the freight. In slow times, your truck resale value will decline. If you are already thinking about getting out of the expediting business, I suggest you get now, while the getting is good. Find an optimist to buy your truck and run away while you still can.
If you are thinking about getting into the expediting business, it is OK to jump in if (and this is a huge if), you are prepared to weather an extended period of reduced revenue and slow freight. I suggest that you haul as much freight as you possibly can (minimize home time) while the freight is there to haul. Minimize your spending, eliminate debt, and build your financial reserves to carry you through the slow times.
Why do I say cheer up? Because you can tell today if you are not prepared, and you can get out now and save yourself a lot of pain when the recession hits. You can also try to get your financial house in order, but if your money is a mess today, there will not be time.
On August 31, top-level economic policy makers attended a symposium in Jackson Hole, Wyoming. I have been reading the full texts of speeches given there. They leave me with no doubt that a recession is coming, and it could be severe.
No one knows when it will come or how severe it will be. My own best guess (and it is nothing more than that, one man's best guess), is the recession will begin in late 2007 or early 2008. To prepare for it, I suggest that you be ready to run your expediting business for six months to a year with 50% of the gross revenue you are earning now. Preparing to do that may be overkill, but it is better to be safe than sorry.
I was especially impressed with Martin Feldstein's comments offered at the symposium.
He said, "The housing sector is now at the root of three distinct but related problems:
"First, a sharp decline in house prices and the related fall in home building that could lead to an economy-wide recession;
"Second, a subprime mortgage problem that has triggered a substantial widening of all credit spreads and the freezing of much of the credit markets;
"And, third, a decline in home equity loans and mortgage refinancing that could cause greater declines in consumer spending."
While the recent panic in the credit and stock markets subsided in response to Federal Reserve action, that action was akin to treating the symptoms and not the underlying cause. It made market movers more comfortable but they are still seriously ill. Some have already died (gone out of business).
There is nothing the Fed or anyone else can do about the cause. Too many people borrowed too much money to buy houses and consumer goods they could not afford; and too many people lent them the money to do it. The only cure for that is to let the speculators, wreckless lenders, misguided investors and irresponsible spenders die on the vine. A governemnt bailout of some will not be comprehensive enough to prevent a recession. Economic cycles are more powerful than the government.
Recessions wring out economic excesses and set the stage for the next expansion. If you are over-extended with debt now, you should prepare for the worst. The economy is going to slow down and so is the freight. In slow times, your truck resale value will decline. If you are already thinking about getting out of the expediting business, I suggest you get now, while the getting is good. Find an optimist to buy your truck and run away while you still can.
If you are thinking about getting into the expediting business, it is OK to jump in if (and this is a huge if), you are prepared to weather an extended period of reduced revenue and slow freight. I suggest that you haul as much freight as you possibly can (minimize home time) while the freight is there to haul. Minimize your spending, eliminate debt, and build your financial reserves to carry you through the slow times.
