I have been following Ray Dalio for quite some time to understand the context of where we are and where we might be headed economically. I found his recent post on LinkedIn to be particularly insightful. Note the footnote at the bottom:
“While Paul Volcker’s bone-crushing tightening was followed by an improvement in conditions in the 1980s, a) it took a rise in real short rates to 8.4% and an economic dive that took the unemployment rate to 10.8% to reduce the spending to lower inflation and b) it led foreign countries’ debtors to be squeezed and to cut spending a lot, putting them into 10-year-long depressions. In other words, inflation was reduced by people and companies being painfully squeezed and reducing spending. That’s always the case and will be the case this time.”
What does this macroeconomic information mean for you? I’m thinking about the following 6 things:
- It’s about to get easier to hire talent. Be ready and use your resources strategically to do so.
- Credit markets are likely to tighten, secure lines of credit you might need now before they do.
- Carrying credit card debt is more expensive. Pay that off as soon as possible.
- Knowing your financial numbers appeared optional in years past. It’s not anymore. You need to get a handle on your profit/profit margin immediately.
- If your year is turning out to be slower than expected, speak with your CPA to adjust your 2022 quarterly payments down accordingly.
- The best opportunities often present themselves in these market cycles. Hunker down and keep your eyes open. You five years from now is excited about what you’re about to create.
