Surviving the Storm

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Arthur E. Giron

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A grim picture, yes. But look on the bright side. As in most recessions, inflation is falling because of slack demand for resources and labor. It's a great time to pick up bargains, and not only on Wall Street. Brad Sugars, an Australia-born executive coach and author, says he's building a 20,000-square-foot home in the Las Vegas suburb of Summerlin and "it's insane how cheaply I can build this for today."

Billionaire investor Warren E. Buffett and his Mexican counterpart, Carlos Slim, understand this, which is why they draw from their cash hoards to buy in slumps. Buffett got a sweet deal on Goldman Sachs (GS) shares. On a smaller scale, Sugars says he knows a heating/ventilating/air-conditioning contractor in Connecticut who is snapping up smaller, man-and-a-van competitors simply by offering them jobs. Says Sugars: "When everyone else is in panic mode, those who keep their heads about them are generally going to come out of it best."

If you're an employer, the recession can be a great time to prowl for talent. "People are saying, 'I'm looking to replace my B and C players with A players, and this gives me an opportunity,' " says Mark M. Anderson, president of ExecuNet, an executive networking organization in Norwalk, Conn. If you're an employee, Anderson advises spreading your name around while you still have a job: "You want to rebuild your network as quickly as you can, so people know what you do."

No question, there are real risks in hiring, shopping, or investing aggressively in a recession. If you overextend yourself, you could be wiped out. That's why Richard Bernstein, chief investment strategist at Merrill Lynch (MER), advises people to be realistic about their own risk tolerance. If you're sleepless over losses you've already suffered, you're a poor candidate for raising the bet—because if you do fall further behind, you'll be tempted to sell at the worst moment. Bernstein advises playing it safe in U.S. Treasury debt and developed-market stocks while staying away from emerging markets, though others disagree. Mohamed El-Erian, co-CEO of Pimco, the huge bond investor, recommends any sector that's getting government support. "Bank debt," he says, "is a very good place to invest right now." Steve Leuthold, chief investment officer of Leuthold Group in Minneapolis, advises clients who have gotten out of the market to add steadily to their stock holdings because prices are well below normal compared with long-run earnings.

Recessions are unpredictable, as the wild fluctuations in the stock market show. Since no one knows what will happen next, it pays to be adaptable, says Michael J. Swanson, an economist at Wells Fargo (WFC) Economics. He wrote recently: "Having the right attitude and fortitude trumps any forecast or plan." That's as good a strategy as any.

With Pete Engardio in New York

Coy is BusinessWeek's Economics editor.