I’m not looking forward to the recession

51 thoughts on “I’m not looking forward to the recession”

  1. This is something that bugs me a lot reading FI blogs. I think it is one thing to use a recession as an opportunity to buy stock or to rebalance your portfolio. It is another thing entirely to celebrate and root for a recession. As you noted, a lot of livelihoods are ruined by recession. People literally kill themselves. We shouldn’t be rooting for that just so that we can get cheaper stock.

    1. Thank you for your sensible reply. It’s one thing to put yourself in the best position for your life goals and it’s another to root for something that is harmful to others. The economy can’t have everyone retired by 35 so to root for lost livelihood for people less fortunate or people who have responsibilities that differ from your own is gross.

      1. “Capitalism is the unequal sharing of prosperity, socialism is the equal sharing of misery” unfortunately, recessions are a necessary part of the business cycle. Similar to the storm that’s knocks dead branches of the trees so new growth can occur, recessions allow the economy to shake off bad businesses and business pratices. Unfortunately, most politicians don’t want to deal with the unpleasantness of a reccesion and often act foolishly to prevent them, ultimately delaying the enevitable and making the severity of the recession much greater.

        Take for example the loan guarantees extended to Crystler in 1980. They were making poor products and should of failed in a market that was being crowded, instead the government provided 1.5 billion dollar loan guarantee. Not quite 30 years later all U.S manufactures needed to be bailed out as a result of artificially keeping Crystler alive. Had Crystler been allowed to fail, Ford and GM would of picked up the market share and would of been more viable.

    2. This is why I like this blog over some others. He takes into account the realities of things like a recession that affect people’s lives in awful ways. My mother lost her job in 2008, she was 68 and living on nothing as it was. It was a scary time. Empathy is missing in some of these FI blogs around the web but I’m glad it’s here as well as in the comments.

  2. I was affected more so by economic upheavals in 2000 than in 2008. I learned to prepare for the 2008 recession, which allowed me to buy stocks cheap in 2009 through 2011. What I did was diversify into savings bonds in the early 2000s, and even more so, municipal bonds and gold. I have sold gold around 2010 to buy stocks and convert a traditional IRA to a Roth IRA. I recently got into Bitcoin and I think it will be a safe haven against a stock drop. Doing very well in Bitcoin. Most of my net worth is in stock funds though. I figure a good tumble in that asset class would be an opportunity to revise my asset allocation strategy to be more favorable to stocks and less to Bitcoin and gold.

    1. One of the nice things about recessions is they keep us honest. When everything is on the up-and-up, we can sometimes lose focus. Even bad decisions turn out okay. We get lazy. Recessions slap us across the face and make sure we’re actually paying attention to what we’re doing! 🙂

  3. I’m not looking forward to a recession. Life will be more stressful and I don’t need that. It would be a good opportunity to buy stock, but that’s stressful too. My timing stinks and I’ll be stressed out trying to time the bottom. Life is good now and I hope the economy stays good for a while.

  4. I am not looking forward to a recession. I willingly/knowingly bought a house that is a little too big for my britches. I want to see it go up, up, up in value and sell it for a gain. Selfish, yes. But during the economic gains the unemployment rates keep going down and fuel prices are low so it is a win win for everyone.

    Seriously though, it sure feels like a market correction is coming. I doubt it will be a full blown recession but at least a dip. It is not changing what I do as far as investing as I am still at least 7 to 10 years from retirement, but it does make me take notice.

    1. I don’t think it’s selfish to want your home value to go up. That’s just natural – hopefully it’ll work out in your favor. It certainly didn’t for me, which is why I am in no hurry to rejoin the home ownership club! 🙂

  5. I’d like a correction for sure – if nothing else, it’ll stop me from feeling like the recent portfolio growth is not all hot air. That has me a wee bit scared.
    I definitely wouldn’t like a full-blown recession. Ideally, I’d like a correction in real estate – so that I can finally get in.
    I think I’m trying to have my cake and eat it too, aren’t I?

  6. I’m mixed on a recession. The optimistic side of me says “hey- sale on stocks”, but the more human and concerned side says “what about jobs… both mine and others?” and “what about all the heartache and financial distress this will cause”. Plus, I’m on the young end of the spectrum. I was a senior in high school in 2008 so I have no idea how I will stomach seeing our portfolio drop. So, I guess while I know there is opportunity in a downturn, I am not thrilled about it either.

    1. I think you’d make out great if a recession were to hit. You still have time to make up the losses that you’d suffer, plus some. It seems like the younger you are when recessions hit, the better. Lots of time to recover! 🙂

  7. I definitely can’t be gleeful about it even though I know that we will probably weather – or even come out ahead – because of it. I remember the stress in my city in 2011 when the largest employer laid off a huge chunk of the work force. Everyone was tweaked and concerned that they would be next. Two-income families with that same employer didn’t know if they both would lose their jobs – and what then? I know that I have a tendency to be a little smug at times (“You are the one who spent all that money on lavish vacations and eating out when you had no emergency fund!”) but I really try and temper that with the reality that people are suffering and their families are suffering. I would want compassion if I were in their shoes. Compassion costs nothing.

  8. Oh yeah, I’m not looking forward to the inevitable recession. Even if you’re making positive financial decisions and getting out of debt, it’s a little scary knowing you might lose your job because of the economy. I remember all too well the recession and, yeah, it friggin’ sucked. But now, as an adult pursuing FIRE, it’s not quite as scary. So many people judge our decision to pursue FIRE, as if we’re depriving ourselves. I do wonder if these same people will feel the burn of the recession while we let it roll off our back. Hmmmm.

  9. I’m on your side of the fence on this Steve. Actively rooting for a recession feels unkind, and has a very “Let them eat cake” flavour to it that makes me uncomfortable.

    I am curious to see how I weather the next one though. At the time of the 2008 recession I was yet financially, shall we say….blind – I had very few investments and what I did have I monitored NEVER. This actually worked to my advantage – because if you don’t check, you can’t panic, and you don’t sell. This time, being financially woke as I now am, I am interested to see if I can actually weather the storm.

  10. Recessions are to the economy what fires are to the forest. Both are necessary for the continued long-term health of their respective systems. We can intellectually understand the things we should do to best prepare for the next, inevitable, recession. The principles of FIRE discussed on this blog, and the others most of us frequent, will go a long way to making sure we are as ready as we can be. Of course, “knowing” and “doing” are two different things. Most of life is less about knowledge than it is about execution. And because of “Wizard’s First Rule” (the rule that makes all magic work – namely, that people are stupid – and I regret how often I fall into that population), many will not adequately prepare. That is as inevitable as the coming recession. Here’s hoping we all execute on what we know and avoid falling into the aforementioned group of “people” who make the magic work.

  11. I would never ‘root’ for a recession, after all I am in Michigan and in the automotive industry so I saw a lot of people lose their jobs. I also don’t think most PF Bloggers are ‘rooting’ for a recession. I do believe they may be hoping for a market correction to pick up stocks cheap, but I find it hard to believe they are wanting people to lose their jobs as others have alluded to. Maybe I’m still too naive…but do people really think that’s what a PF Blogger wants, people to lose their jobs, their homes, or commit suicide? I don’t believe so.

    1. Certainly not me! Like I said in my article, PF bloggers aren’t rooting for the collateral damage that recessions bring. It’s just tough for me to get behind the “bring it on!” attitude.

  12. I’m hoping a massive recession hits in mid-2018, forcing my company to offer “Voluntary Separation Packages” with a nice severance package. Since I’ll be leaving then anyway, might as well plan on a nice “Out The Door Bounce”. Selfish. Heck Yeah. Once I retire, a massive downturn would be scary, since “Sequence Of Return Risk” is one of the biggest risks early retirees face. I’ll have 3-5 years of cash in hand, just in case.

    On a serious note, I tell all of the “Younger” folks at work that the best thing that can happen for them is a recession (assuming they keep their job), best chance they’ll have to “Buy Low”. Worst case for them is what’s happening now, they’re “Buying High”.

  13. Good article. I’m about 90% of the way to FI so a recession scares me a lot more than it did a few years ago.

    I’d just like to point out that gas prices may not necessarily spike in a recession. The 2008 oil spike occurred because of fears of “peak oil.” But the oil price plummeted in late 2008 as demand fell off a cliff. The current oil price is low because of over supply issues (peak oil turned out to be false because of shale). If demand drops off again like it does during any recession I suspect that oil will drop, even though it’s already low.

  14. You’re right, of course, about the good and the bad of a recession. Many people die during recessions: poor health, poor options, and so on. It’s especially hard on the poor and heavily indebted. I know people personally who will suffer – a lot – in the next recession if it’s big. But I also know many who will probably weather it unfazed (as long as it’s not a depression).

    Like you, I hope it will call people to wake up with regard to finances. And 2008 did that, briefly, for some. But we’re only a few years down the road now and America is more indebted than ever (citizens as well as the government)… So overall, no I’m not looking forward to a recession, even though I know one is necessary at some point. I’d rather have one sooner – and softer – than later – and longer. But the world doesn’t consult me before it falls apart, so we’ll just take it as it comes.

    It might be selfish if you wanted one purely for personal profit – say you were short a lot of things that will plummet in a recession. But your reasons are great for wanting one: exposing corruption, exposing poor financial decisions, and allowing the wise to move forward. Those are good reasons for wanting one. It’ll involve suffering, too…although hopefully some of the suffering will lead people and institutions to better lives eventually. Hopefully.

  15. The good thing about a recession is that stocks go on sale. The bad thing is that people lose their job. I got laid off in 2001 and 2010. Both of those situations were stressful, but allowed me to explore new educational and employment options.

  16. Not looking forward to a recession. Dividends cut, smaller bonuses and people panicking. No thanks. We know some down turn will come, just hoping it’s not like the last time. Although we found some fabulous deals on stocks in 2008/2009. Could that have been a once in a “investing lifetime” clearance event?

  17. I am not looking forward to the recession either. However, it would be a good opportunity to add to the portfolio at lower prices, assuming I am employed 😉 It would be easier for me to time my exit once a recession has started, and we are on the rebound, than to exit when everything is going great.

    On a side note, since you hold so much in cash. Are you aware of Insight Visa, that allows you to earn 5% APY on balances up to $5K? You and your wife can together have something like $10K.. More info – click on my blog link 😉

    1. If you’ve been dollar cost averaging for many years, your cost basis is already low in stock funds. 2009 was a very deep crash but it was a blip for me. I kept investing in stocks and stock funds during that time and I turned 50 in 2009. The bottom was around March 1 of 2009. Another 50% crash would be no deal for me as I have diversified into assets outside real estate and the stock market. And even in those asset classes, I dollar cost averaged. So I guess I would take a few hundred thousand out of my municipal bonds and throw them in a broad stock index fund with low expense if we get another 50% crash.

  18. Love this, Steve! I share your sentiment. Yes, of course, a recession would offer better buying opportunities in the market, but as you pointed out, there are so many additional variables at play. Many lives are negatively affected.

    I am definitely not rooting for a recession, or even looking forward to one for that matter; however, I am doing my best to appropriately prepare for it and position myself to take advantage of potential buying opportunities.

  19. TSR –

    Very thought provoking post. Thinking of a recession, I was 19-20 when it started and was entering the full-time work-force in the heat of it all. It was quite interesting, thought I didn’t get a chance to endure, fight and claw through it. I have no idea what to expect when it comes, just know that the companies I am heavy into have some of the greatest track records of dividends and dividend growth. Looking forward to building the strength to the dividend walls, and really see if it can withstand another one, as history shows – it has in the past.

    -Lanny

  20. As someone who was laid off in each of the last two recessions, I can relate to being collateral damage in a recession. Getting laid off sucks.

    But here’s the thing — Even though things got pressured financially it was a net positive in my life. Why? The recessions forced me to be a stronger person and less reliant on job income. Recessions made me frugal. I also paid off all my debts and started investing heavily.

    Recessions made me a stronger person with rock solid finances.

    While I acknowledge the pain recessions can create, I can’t help but feel that a little creative destruction ends-up being positive for the world.

  21. I totally agree that recessions suck (I wish we were like Australia and could go two decades without one) at the same time macroeconomically speaking they are healthy. On a more personal level they are terrible. My dad lost his job during a recession (and subsequently retired b/c he didn’t need to work anymore). The good thing for me is that more people go back to school during a recession so my university can stop freaking out about us dropping 2% in enrollment over the past 3 years (which is normal when the economy is good). I almost want a recession just to say it is over.

    There is one more advantage/disadvantage to a recession depending on your political persuasion. The president who oversees a recession is often blamed and voted out of office. That is good or bad depending on what you think of the current occupant of 1600 Pennsylvania Avenue.

    1. Thanks Jason – interesting about the enrollment drop during periods of positive economic activity. Never considered that before, but it definitely makes sense!

  22. Hello Steve,
    Great post! Congratulations on being retired at 35. I plan to be FI by that age myself. Recessions are certainly bad. The effects of the 2008 housing crash were felt all the way in my home country of India too. At this point if the market were to take a dip, even though stocks would be on sale; the effects would be very unwelcome. One would need nerves of steel to ride it out. I am not sure I have those yet, but hopefully soon!

  23. Having just kicked off my mini-retirement, I’m having mixed feelings about a recession. I certainly don’t wish for the collateral damage, but I can acknowledge that it’s a part of the natural cycle. Similar to how a forest fire clears out the clutter and brush to allow for new growth, a recession can bring new things but wreaks a whole lot of destruction when it happens.

    At this point, I’m in a cash-locked, zero income state and will likely be looking for a full-time job this time next year. If a recession kicks off during that time, I won’t be able to take much advantage of the “stocks on sale” situation in the market and will have a tougher time finding a job.

    That said, we’re relying on our frugality and flexibility if anything happens. I’m sure we can figure it out. We’re lucky enough to have a pretty good safety net and financial foundation to get us through.

    1. Amen to that, Chris. We have three years of cash that will help if it gets bad. You never know. The more prepared you are, the better you’ll fare through it all. Most of us FIRE’ers probably won’t feel a thing.

  24. Your post title reminds me of the news reporter who on live tv said ‘i look forward to another market crash’ and caused a huge uproar. Can’t remember his name though 🙂
    Your post on the contrary has a moral approach to making money – which is applaudable!

Leave a Reply