Wednesday, October 22, 2008

Debt is deadly.

My main goal for the time being is not to incur any debt. Any money spent on credit cards has to be counter-weighted by the same amount in savings.

We have friends who still go out to dinner, who haven't seemed to cut back on their life-style, even though they're unemployed. Eating into savings, I guess.

I have to wonder how many people in Bend are "temporarily" dipping into equity, or borrowing. Trouble with temporary and debt is that they are usually mutually exclusive.

Our life-style is pretty modest, and I have to just hope we don't have any car break-downs, or house repairs, or health issues come up. I built up a huge cushion in my break-even point at my store, never expecting to need it.

It came a lot closer in September than I would've thought possible.

This month is actually coming in at expectations, not even at 'worst-case' expectations. Since last month was 10% below worst-case, that would average us out so far at worst case. But, the 'trend is my friend,' and suspect that Sept., like January, will turn out to be a bit of an anomaly.

As I keep saying, it's a game of expectation. September was so bad because I didn't expect it to be so bad. January could be just as bad, but because I'm expecting it, it won't be so bad....if that makes any sense.

More of the mainstream economists are now beginning to say that the 'recession' may have started as early as November of last year, with a two month swing of before or after.

Since I saw a downturn starting on the very same week in mid-August that the 'credit-crisis' was first mentioned, I believe my own personal, Pegasus recession started then.

We're at that moment when I have to go my own way; not pay the slightest attention to the activity around me. Because there is always a lot of activity past the point where there should be activity; because of denial, and lack of experience.

This is where experience counts.


RDC said...

Think 70's or 80-82 type recision, not the quick blips we have had since then.

We still have not resolved all of the issues from housing. They will be made even worse by the impact of the rest of the economy going into recession (remember housing drops are usually a lagging indicator to an economic recession, not a leading indicator).

I would consider September to be the shot across the bow of what to expect.

Note: Think what happens when those that have not modified their life style run out of savings and credit card room.

Anonymous said...

I get inspired by Duncan, who says that it's good to save and be careful with money.

On the other hand, if we all cut back (even if we don't have to), then isn't it going to be that much harder for the economy? (e.g., that many more people will lose their job)

It is interesting to read of people who keep spending -- like going out to eat -- even when unemployed, or their business is about to take a nosedive. There are a lot of irresponsible people out there.

Unknown said...

I am in agreement with Jeff that the more we cut back the harder the fall. I also think it's necessary and we are undergoing a permanent shift away from indiscriminate spending.(read as now purchasing needs over wants) The social implications are tremendous but I do believe that when people switch to having to pay cash they will expect quality and longevity from their investment.

Consumer spending is the engine of our economy but as the Baltic Dry index is showing in conjunction with west coast port traffic data we are purchasing/importing significantly less. I've read analyst reports that predict 8-10,000 retail store closures after Christmas. I'm judging the BDI fall on the reduced need for inventory and the ordering of less inventory in expecting a significant drop in x-mas retail sales.

Hard times and uncertainty are to be expected. Belief in America and its people's ability to adapt, sacrifice and persevere are helping me in expecting a better post consumerist society.

Of course I still expect a depression and severe devaluation of the dollar...more necessary steps in our shift back to a production based economy.