The Aftershock Investor: A Crash Course in Staying Afloat in a Sinking Economy (33 page)

There are countless other examples of how the job market has evolved over time, based on the evolution of the economy. In our current recession, unless the economy goes back fully to how it was before, the jobs are not going to come back fully to how they were before. Since economies never go backward, only forward, jobs evolve forward as well.

As discussed earlier in the book, the combination of the falling bubbles and the reality that there is no “natural growth rate,” plus the coming future inflation (due to massive money printing by the Fed) is moving us forward to a new economic reality that we have not experienced before. It certainly will not move us back to the old rising multibubble economy, no matter how badly we may want our bubbles back. Once these jobs are lost, it is hard to bring them back without fundamental changes to the economy.

The answer is most definitely yes! The stimulus of massive borrowing and massive money printing
does
lead to more jobs—as long as you keep pouring in more and more stimulus money to keep those new jobs going. But not long after the stimulus ends, so will the jobs. Why? Because big government stimulus does nothing to change the underlying reasons that jobs have declined in the first place; therefore, when the heat of the stimulus is withdrawn, the positive impacts of the stimulus will cool down quickly. That might not be the case in a normal, healthy economy going through a rough patch. In that case, a big temporary stimulus might help to get things back on track. But that won’t work in a falling bubble economy. As soon as the stimulus is withdrawn, we are soon back where we were before or worse than before.

Remember what we said earlier in the book: Try as we might, a falling bubble cannot be turned into a rising bubble for very long, if at all. We may be able to keep the bubble from falling further temporarily, but not forever. Bubbles eventually pop.

In the short term, the current government stimulus programs (massive borrowing and massive money printing) are helping to slow the rate of job loss, and they may even create new jobs in some areas, but the stimulus alone will not be enough to permanently save us from the deteriorating jobs market. Even additional “incentive” programs, such as tax credits to encourage employers to hire more employees, are likely to have limited impact. Until demand returns because the fundamentals of the economy change, the jobs market will generally continue to experience slow or no growth.

As we said at the start of this chapter,
not all jobs are created equal
; some jobs will do better than others, depending on what sector they are in. So understanding how each job sector will fare in the future (explained below) is key to understanding which jobs will likely hold up best as the bubbles continue to fall.

Although job opportunities in the Aftershock will not be the same as in the recent past, there are similarities to what has happened since the financial crisis and what will happen as we get nearer to the Aftershock. Best job prospects are in the medical industry, while the capital goods industries, such as construction and manufacturing, will be hit very hard.
Figure 9.2
shows what has already occurred.

Figure 9.2
Gains and Losses by Types of Jobs, May 2007 to May 2011

Some job types have made gains, while many have sustained big losses.

Source
: Bureau of Labor Statistics.

While the bubbles are still partially inflated and the government is still pumping in stimulus to keep them afloat, now is a good time to start planning your next move, whether it is a move to a new job in a different sector or the same sector you are already in, or a new way to make yourself more valuable to your current employer or your customers.

But before we get to the details about each job sector, there are two important points to keep in mind, whether you are an employee or a business owner. First, keep your eyes open. Don’t believe everything you see and hear from the economic cheerleaders about the so-called “recovery.” We don’t have one.

Second, please understand that this is not the recession of the late 1970s and early 1980s. What we have now is a falling multibubble economy, not just a typical economic slowdown. Don’t expect big improvements to come quickly.

Some General Considerations for Employees and Job Seekers

• Understand that the overall economy and the job market are both evolving over time. A job that seems secure today may not be around in a few years. There is no need to panic, but now is the time to prepare for the changes ahead (see details about the job sectors below).
  
• Be willing to move from one job to another or from one job sector to another, but do not quit any job without having another one lined up.
  
• Consider your options for getting some extra job training, technical certificates, or academic degrees if they will help you move to a better-paying or more secure job,
  but only if
  this can be accomplished fairly quickly, such as in one to three years. Don’t start a 10-year program and expect to be done with it before the Aftershock hits (for more details, see the section on college, later in this chapter).
  
• If you lose your job, consider taking a lower-paying job or doing temporary work, consulting, or even an internship (see the internship sidebar later in the chapter). Don’t hold out for many months, waiting for the same job that you just lost to magically rematerialize. The further the bubbles fall, the less likely that will happen.
  

Some General Considerations for Business Owners

• Consider selling your business if it is in one of the more dangerous sectors of the economy (see details in the next section).
  
• If you were already planning to sell your business in the future, move up your time frame and sell it sooner, rather than later. It takes a fair amount of lead time to sell a business. Start now, before many of your potential buyers figure out what you already know about the future economy. The longer you wait to sell, the harder it will be to find a buyer and the lower the selling price, if you are able to sell it at all.
  
• Get as much cash as possible. If you must hold the note, make sure it is very short term. Try to keep it to less than five years—two to four years preferred. The more time that goes by, the less likely your buyer will be able to make your payments. Collect as much as you can up front.
  
• If you want to keep your business or start a new one, look for ways to cash in on or at least survive in the falling bubble environment (more details on this later in the chapter).
  

In assessing the impact of the falling bubbles, we find it helps to think of the U.S. economy in terms of three broad sectors:

In a normal economic downturn, we would expect to see the capital goods sector slow significantly, the discretionary spending sector decline somewhat, and the necessities sector to be mostly spared. But this is not a normal economic downturn. The impact of the Aftershock will be felt by all sectors, even the necessities sector. This time, all three sectors will suffer significant job and business losses, with the capital goods and discretionary spending sectors performing worst, and the necessities sector faring better, but not entirely spared. All three sectors will have some safe jobs and profitable businesses, but competition for these will grow as time goes on.

Right now, there are still jobs available but not as many as needed. Even with the creation of some new jobs since the 2008 crash, jobs have not been coming back equally in all sectors, as shown in
Figure 9.2
.

In the Aftershock, high interest rates, coupled with a big economic slowdown, will be very bad news for the capital goods sector. Rising inflation and rising interest rates will make borrowing money very expensive for consumers and businesses. This will have a very negative effect on the capital goods sector, which depends on its customers having access to low-cost capital. High interest rates will also add to the reasons why full economic recovery will take far longer and be far more difficult than in previous recessions.

Jobs in capital goods industries will be the worst hit in the coming Aftershock. If you have one of these jobs now, there probably isn’t a lot you can do to protect yourself other than to gear up to move on to a job in another sector. Your best bet may be to rethink your career now with an eye toward joining an industry that will do better when the bubbles burst. We certainly don’t recommend quitting one job until you have another in hand, but we also don’t recommend waiting too long to make a move, if you want to do so.

If a major career makeover is not your style, you may want to consider making a move to a more stable area within your current industry. For example, if you work in the construction industry—which has already taken a terrible hit and is not coming back any time soon—you may find that moving into repair-oriented work, rather than new construction, will keep you busy while others sit at home. Of course, many construction workers will also get this idea after the bubbles fully pop, so the sooner you begin your transition toward repair work, the better. Most types of maintenance and repair work, such as automobile repair, will be in increasing demand, as people buy far fewer new cars and instead try to hang on to their older cars for as long as possible.

We won’t dress it up for you. The bottom line for business owners in the capital goods sector is not pretty. If you can sell now and get out, you probably should. No one can predict exactly when the Aftershock will hit, but even if it takes another two or three years, the marketplace for your business is unlikely to improve much during that time. The value of capital goods sector companies will not rise much under current conditions and will fall in value later, as unemployment continues to rise and the economy continues on its slow-growth or no-growth track. So if you have a business in the automotive, construction, industrial equipment, or any other capital goods industry, the longer you wait to get out, the more vulnerable you will be to significant losses.

As with selling homes and commercial real estate, your pool of potential buyers will get smaller and smaller as time goes by, so the sooner you go fishing in that pool for a possible buyer, the better. Selling any business takes time. Start now. Don’t wait until the economy gets worse and most of your potential buyers have figured out that they should not own a business in the capital goods sector.

What will you do after you sell? Options include using your proceeds to invest in the kind of Aftershock portfolio discussed in this book. You can also be on the lookout for unexpected business opportunities in the Aftershock (discussed later in this chapter). If you decide to just hold it all in cash while you think about what to do next, be careful where you put it. Banks will be vulnerable leading up to and in the Aftershock and Federal Deposit Insurance Corporation (FDIC) will likely only cover up to $100,000 per bank account. Also, as inflation rises, the buying power of your cash is evaporating.

As the economy continues to fall, Americans are not going to run out to the mall every night after work (if they have work) and squander their very limited cash and even more limited credit on high-priced designer handbags or the latest CDs. Discretionary spending is, well, discretionary. Many items and activities that we may currently still enjoy will simply be left off our shopping lists after the bubbles continue to fall and eventually fully pop. Over time, this will slow many businesses to a crawl and force others completely out of the game, further driving up unemployment.

But discretionary spending will still hold up better than the capital goods sector of the economy because some people will still have money, and they will keep spending their money, but they will spend at a lower level than before. So, instead of discretionary spending disappearing altogether, the people who can still spend will simply buy lower-priced discretionary items. For example, instead of shopping for designer handbags at Saks Fifth Avenue, they may downgrade to Walmart or Target.

The restaurant business will face this trend as well. As the bubbles fall, fewer people and businesses will spend money on eating out. That will certainly affect all restaurants. But some people and businesses will have money to eat out and will be quite happy to go to restaurants, as long as they don’t have to spend as much as they used to. So the restaurant industry will continue to be a huge industry in the United States, but business will begin a long-term shift toward the lower end. For example, Mexican and Chinese restaurants will continue to survive and will gain increased market share, while high-end seafood and steak houses will be much harder hit.