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How to Prepare for Recession 2013

U.S. President Barack Obama recently met with congressional leaders in attempts to carve out a way to avoid falling off the quickly approaching fiscal cliff.

If no deal is reached, President Obama and scores of economists warn, the U.S. is destined to plummet into a recession in 2013.

Money Morning Global Investing Strategist Martin Hutchinson cautions that even if lawmakers avoid the fiscal cliff by the most likely scenario of raising taxes on wealthy Americans while leaving the majority of the budget deficit status quo, the short-term outlook for the health of the U.S. economy is far from rosy.

"U.S. economic growth has been held back in the last few years by the blizzard of regulations coming out of Washington, and there's reason to believe there is an especially heavy storm of them in the next few months, having been held up before the election," said Hutchinson.

And despite the easy monetary policies of Fed Chief Ben Bernanke, and the latest round of QE3 (dubbed QE Forever), "the U.S. economy is not going back to robust growth in 2013," Hutchinson added. Creating more money, he said, will just increase inflation.

"In the long run, a recession is coming," Hutchinson warns.

Investors: Here's why Peter Schiff thinks we need the fiscal cliff – do you agree?

Five Ways to Prepare for Recession 2013

As Americans get ready for recession 2013, along with the largest tax increases ever imposed on U.S. taxpayers, here are five ways to prepare.

  • Take Advantage of Special Dividends

In anticipation of the dividend tax hike in 2013, several companies are paying "special dividends" in December or moving up their dividend pay date.

A few who are presenting shareholders with an end-of-the-year bonus are Wal-Mart Stores Inc. (NYSE: WMT), Wynn Resorts Ltd. (Nasdaq: WYNN), Tyson Foods Inc. (NYSE: TSN), Carnival Corp. (NYSE: CCL), Franklin Resources Inc. (NYSE: BEN), and Sturm Ruger & Co (NYSE: RGR).

  • Buy Gold and Silver

With loose worldwide fiscal policies devaluing paper currency, and the threat of inflation heating up, gold and silver (money alternatives) offer not only a safe haven, but both metals stand to provide more bang for the buck with the potential for some shiny capital appreciation.

Pure plays include precious metal exchange traded funds (ETFs) like the SPDR Gold Trust (NYSE: GLD) and iShares Silver Trust (NYSE: SLV). Mining ETFs such as the Market Vectors Gold Miners ETF (NYSE: GDX) and Market Vector Junior Gold Minors (NYSE: GDXJ) are other options.

  • Bargain Hunt

Hunt for beaten down, oversold equities that have suffered at the hands of the current economic woes both here and abroad

Money Morning Chief Investment Strategist Keith Fitz-Geraldexplains, "Because history's rearview mirrors show that fear, panic, crisis and stress are all classic signs associated with opportunity — and profits."

He advises looking at stocks in the energy, resource and select technology sectors, "all of which the world needs, as opposed to wants, and all of which are backed by billions of dollars flowing their way whether we go over the fiscal cliff or not."

Two stocks to consider are Duke Energy Corp. (NYSE: DUK) and Freeport McMoRan Copper and Gold Inc. (NYSE: FCX).

Check out more of Fitz-Gerald's fiscal cliff opportunities here.

  • Save More

Americans should save 6%-10% of their income after taxes to build wealth, provide a cushion and prepare for retirement. However, the current savings rate stands at a measly 3.4%.

Pay yourself first and stay liquid before you succumb to the urge to splurge.

  • Ditch the Dependency

The White House rode in like a knight on a white horse during the Great Recession handing out copious amounts of federal and taxpayer dollars in bailouts and subsides. But federal reserves have reached their limit, and state and local governments are slashing services while increasing taxes.

As lawmakers attempt to reduce the swollen U.S. deficit, Americans can't assume the government will help. It's time to be more self-sufficient.

That's why it's the perfect time to make an affordable investment in education. Check out this presentation on how you can learn the best ways to handle your money ahead of recession 2013.

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Join the conversation. Click here to jump to comments…

  1. H. Craig Bradley | November 27, 2012


    "In the long run, we are headed for recession". To put it in trader's perspective: "long run" is months to years, usually less than 1 year. Trader's trade today's immediate market conditions, not tomorrows. So, when will the next recession really strike? It could be right now and guess what? You would NOT know it. Nobody is going to proclaim we are now in a recession. So, there are no real "experts" (gurus) out there. This forces you to become independent and rely on your own best info.

    Famed investor Peter Lynch said he "got his best investment ideas in his back yard". Well, the next best thing is to talk to small business people in your vicinity. The information I get from them is things have plateaued and there is little real revenue growth. You have your existing customer base if you are a service business, but getting new clients is another story. Just raising prices is not real growth because of competion and inflation.

  2. Stephen | November 27, 2012

    "It's the perfect time to make an affordable investment in education." Would you recommend saving for a college education or taking out loans?

  3. Joe America | January 6, 2013

    The ficiscal cliff is like Y2K, nothing is going to happen. Unlike Y2K the underling problems are not being dealt with but are being swept under the carpet. Hope, mass media entertainment and EBT cards keep the mind and stomach happy for now.

    A VIX of 13.8 shows no real fear in the market.

    We never left recession. If you look at workforce participation numbers they are still going down. The good news is default and bankruptcy, this is the chief driver of any improvement seen in economic activity. More are shopping because they have unshackled themselves from debt they could never pay off. But it is still nothing like pre 2008. Lots of people are way under employed or just gave up looking.

    Here is the other thing imports are getting more expensive. This is a real shift, its not inflation from local wages, it comes from outside the US. This is very big because we import so much. We have record low interest rates yet significant inflation from outside the USA. Savers are severely penalized in this environment, after years of a debt binge a whole lot of Americans are born again savers.

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