The 3 Types of Recession and How to See Them Coming

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The thing with recessions is that we go from The Great Gatesby to The Big Short in a very short space of time.

So quickly that most business owners are caught by surprise, one moment they’re king of the world and the next … well, enough movie metaphors, we all know what happened to Leo at the end of Titanic.

Here’s an interesting fact for my Australian viewers – unless you’ve been in business almost 30 years, you haven’t been a CEO during a recession. And if your accountant, lawyer, or business coach has only ever worked in Australia, then they need to be older than 50 to have helped clients like you to deal with this sudden turn of events.

I lived and worked coaching businesses in the UK during the Global Financial Crisis, so I speak from experience – and most of that experience is about the importance of looking ahead in the economic cycle, just like your business lifecycle [LINK to http://businessdepot.com.au/insights/speed-bumps-hurdles-and-brick-walls-part-1]

Right now – we’re almost certainly NOT in the midst of a recession. We do know, however, that another one is inevitable.

If you want to look ahead, rather than behind, this week’s episode is a must. By the end you will:

  • Understand the 3 different types of recession
  • Have an immediate and direct answer for “Will we have another GFC soon?”
  • Begin to take control of your own economic forecasting, to help see the iceberg on the horizon or the gunman by the pool.

Wow, Leo dies a lot doesn’t he? Watch the video here to make sure your business doesn’t do the same.

And if you want more information, the ebook I referenced can be downloaded here. [LINK TO http://static1.1.sqspcdn.com/static/f/726565/14580906/1320258798293/Shirlaws+Business+Book+-+Navigate+a+W-shaped+Double+Dip+Recession.pdf]

Who is Jacob Aldridge, Business Coach?

“The smart and quirky advisor who gets sh!t done in business.” Back independent since 2019.

Since April 2006, I’ve been an international business advisor providing bespoke solutions for privately-owned businesses with 12-96 employees.

At this stage you have proven your business model, but you’re struggling to turn aspirations into day-to-day reality. You are still responsible for all 28 areas of your business, but you don’t have the time or budget to hire 28 different experts.

You need 1 person you can trust who can show you how everything in your business is connected, and which areas to prioritise first.

That’s me.

Learn more here. Or Let’s chat.

Transcript

by a measure of average individualwealth Australians are the richestpeople in the world partly caused by along history of economic growth you haveto be older than 47 to have been a CEOor a business owner going through anAustralian recession indeed if youraccountant your lawyer your businesscoach is under the age of 50 and hasonly ever worked in Australia then theyhave never helped their clients gothrough a recession and respondappropriately it’s part of the reasonwhy I moved my business coaching companyto the UK during the global financialcrisis to better understand and applywhat I have learned to business is inthat specific situation and indeed my UKclients average 20 percent revenuegrowth going through the second of thedouble-dip recessionI’m not saying a recession is imminentas Yogi Berra taught us predicting isvery difficult especially when it comesto the future however you as a businessleader have a responsibility to beprepared and to be aware of theinevitable because inevitably there willbe another recession in this video I’mgoing to talk about the three mostcommon types of recession and give youan indicator of the lead indicators thenyou can keep an eye out for it so thatyou can prepare and be ready to respondthe three most common types ofrecessions are known by these letterswhich reflect the shape of the economyor if you prefer you can look at theshare market the way that it progressesinto and out of the recessionaryenvironment the most common type ofrecession is a v-shape this is a gradualdecline a bottoming that leads to agradual uplift this is the most commontype of recession and what it generallyrequires for you as a business leader isto be prepared for the investment thatyou need to keep going to keep rollingand we will discuss some of theappropriate strategies in a futureepisode less common and somewhat morescary is an l-shaped recession this is asharp decline that is therefore marriedwith a longer slower period of growthone way to look at this is the 1987stock market crash which predicated therecessionary environment of the early90s and if you look at Japan and what -known as the lost score the lost 20years that was a steep l-shapedrecession followed by a very very slowperiod of minimal growth the rarest kindof recession is a w-shaped recessionthis is actually a double-dip recessionwhere we have not one but two recessionsvery very close together now this alsoforms part of a macro economic cycleindeed Western world we see a w-shapedrecession about every 40 years the 1890sthe 1930s which of course we know is theGreat Depression the 1970s and theglobal financial crisis of the latenoughts and the early teens this is oneof the reasons why I don’t buy into anyof the scare mongering about another GFCbecause the global financial crisis andthe severity of that was built on thefact that we had a w-shaped recessionwhich tend to only happen once if you’revery unlucky twice in your entirebusiness career it’s far more likelythat the next recession will be a Vpossibly an l-shape so how do youforesee a recession coming well there’sa few lead indicators but you need toalso be aware that every recession isdifferent and so what causes the nextrecession and what triggers you may seecoming could vary from what has happenedin recessions in the past but some ofthe the most common lead indicators thefirst of course is that a bust willnormally follow a boomso a boom in the stock market in housingprices in other asset classes whichoften leads to a response to raiseinterest rates to tighten monetarypolicy and this signifies the top of theboom it’s going to be interesting overthe next fewbecause interest rates are still athistoric record lows as a result of thew-shaped recession how quickly FederalReserve’s move to raise those interestrates and whether that will even happenbefore the next downturn is somethingthat I’m interested to see from apsychological perspective but it’s notthat the number one indicator that I’mlooking at one that is often put outthere as a really good indicator ishousing sales and there’s a great sayingthat when America sneezes the worldcatches our cold so it’s important tounderstand whether you’re in AustraliaSouth Africa other countries aroundasia-pacific that your local marketwhile relevant may ultimately getswamped by what happens in the UnitedStates of America so keep an eye onfigures there things like how long it’staking for housing sales to take placeas that elongates as it takes longer tosell a house in the US that’s apredicator of a looming economicdownturn and one of the best indicatorsthat will give you a few months noticeis the stock market so the stock marketwill generally decline about six monthsahead of the economy in general thiskind of makes sense when you think aboutit those people that make key decisionsabout investing and where to invest inthe stock markets are buying today basedon what they feel will happen in thefuture they are making a bet with theirmoney on what is going to happen in thefuture so if the stock market declinesthat means that investors are feelingthat the larger companies which arerepresented on the stock market aregoing to start doing worse in the futureand what happens in larger companiesoften trickles down because they spendtheir money with mid-tier organizationswho then spend their money with SMEs andof course all of those employees throughthat chain who may experience lowerwages or job losses that also impact theSME so when the stock market goes downthat can be an indicator that thegeneral economy is about six months awayfrom experiencing a similar pain we willtalk in a future video about howsome of these indicators are notUniversal and how your business responseneeds to be different one of the keythings about lead indicators and typesof recession is that they’re oftenself-fulfilling if there’s a largeenough belief that when us days onmarket gets to nine months thatautomatically means a recession theneverybody starts pulling their money outof the markets and causes a recession Itry not to get too involved in exactlywhy and how these things happen I’m much

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