Is a Downturn Coming? Prepare, Don’t Panic

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Some interesting, even troubling, things have occurred in the past few weeks. If you’re concerned about your financial future, read this blog!

Let’s start with the most complicated, the yield curve. At the end of this blog, I’ll have a link to a YouTube video that I didn’t do and that I receive no income from. It’s simply there because I think it’s one of the best explanations I’ve seen about what a yield curve is and why you should care. And more importantly, what this means for the next few years.

The yield curve shows the rates offered for 3 mo., 2-year, 3 year and 20-year government bonds. There used to be a 30-year government bond as well, but they don’t exist anymore.

Generally, if everything seems safe, the feds don’t need to offer higher rates to attract investors. Long term bonds have more risk and so the rates are higher. In the short term, rates typically don’t need to be as high because it’s easier for people to get out of bad markets.

An inversion happens when the investor pool starts to dry up and the feds need to offer higher interest rates for shorter term bonds. When the shorter-term bonds have higher interest rates than longer term bonds, it’s an inversion. There are many economists and sophisticated investors who watch the yield curve as a first signal that there could be changes coming.

An inversion signals a coming recession or depression,

And we just had an inversion. First of all, don’t panic. Before the Great Recession hit in late 2008, the first inversion signal was in mid-2016.

So this probably isn’t going to happen overnight. But pay attention

The next thing investors are watching is the real estate markets. We’ve seen property values decline in San Diego, New York City and Dallas. Las Vegas and Phoenix markets are slowing down according to the Wall Street Journal. Again, not a signal to dump real estate, but it is something to watch.

The better question is what do you do about this news that a recession may be coming? Some people turn to social media and talk about it, a lot. Some people talk to their friends. A lot of people worry. Some think it won’t happen and go on their way, not giving it a second thought.

A select few do something else. They prepare.

If there is a theme to this blog, it’s “Prepare, don’t panic.”

Here are some ways to get ready:

Pay off unnecessary debt. Get ready to run lean for awhile.

Develop independent sources of income.

Take a hard look at real estate you own. If you have investment property is it providing cash flow TO you every month? If it’s costing you cash flow, it’s not an investment. Or at least not a sustainable one

Check your ROI (return on investment) on everything you do.

If you’re stuck with property you can’t sell because it’s already upside down, don’t panic. Look for strategies to create better cash flow

In January 2019, I’m releasing a book, “Three Secret Ways to Pay Off Your Debt FAST”. It’s so cheap it’s almost free. This is your guidebook to finally being able to meet one of your New Year Resolutions. Reduce your debt and increase your net worth.

Keep watch for the announcement of this new book.

One more thing, here is the link to the video that I talked about regarding the yield curve. It’s about 12 minutes and very informative!

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