How do people make money from recessions?
A recession is a period of decline in economic performance.
And during the last major one,
the 2008 to 2009 financial crisis,
we saw markets fall,
erasing trillions of dollars of wealth around the world.
People looked at their investments in shock
as their houses and stocks plummeted in value,
many scrambling to sell and save some of their money.
And yet many millionaires, including myself,
believe we are a large part
of our fortunes down to recessions.
That's because recessions press the reset button,
leveling the playing field,
and it looks like it's happening again.
However, there are two different types of recessions
and many possible ways to react.
This leaves most people paralyzed by fear,
uncertainty, and doubt.
While history has proven that the people
who are aware of the reset get to work.
So now we know this is the perfect opportunity
to make money.
How do we know when this reset button is about to be hit?
To understand the whole picture,
we need to look at how we got to this stage.
Hi guys, it's Mark.
So we've been living in the golden age of investing,
with the top 500 US companies experiencing
over a decade of continuous growth.
However, just like an Olympic sprinter
who needs a break every now and again in order to recharge,
so does our economy.
People have become soft,
as they haven't experienced overall negative returns
in what seems like forever.
But why is the economy taken a breather now,
not during the pandemic?
Well, quite the opposite happened during the lockdowns.
Everyone was stuck at home, getting free money,
and they were falling in love with the idea of investing.
It became very hard to avoid the topic wherever you went.
As people were seeing the stock market
as a magic money printer.
It was also a lot easier for people to use
their stimulus money to invest,
as they didn't have to work for it,
and therefore the perceived risk was much lower.
This means that all these new investors have been playing
the stock market on easy mode.
However, now the free money is dried up,
and interest rates are increasing.
It's a lot like when you go from the apprentice
to the master difficulty on "Star Wars: Fallen Order".
The game is still worth of playing,
it just might take a little longer to win.
Some people will, of course,
put down their controllers or smash up their monitors,
while others will patiently improve their skills.
Just think about it,
if you can master the game on hard mode,
once things become easy again,
you'll be so far ahead of everyone else.
But the free money drying up is just the beginning.
Due to the excess of money printing,
our dollars are now worth far less.
This is commonly known as inflation,
and it's running rampant.
The consumer price index,
which is the price of an average basket
of everyday goods and services purchased by households,
has found inflation to be at 8.6% in the US.
This is a new 40 year high,
a lot of this being due to food and fuel price increases.
But not to worry, as the fed is here to save us
from this dreaded inflation
by hiking its benchmark interest rate
by 0.75 percentage points, the biggest increase since 1994.
When interest rates rise
the cost of borrowing money becomes more expensive.
The idea is that if someone is spending more
on their mortgage or credit card payments,
they won't have as much disposable income
and must cut back on their spending.
In theory, this lowers demand
and forces businesses to lower their prices,
and in turn lowering inflation.
But wait, doesn't that mean that businesses will be making
less money, and therefore report lower earnings,
and stock prices will fall.
Unfortunately, yes,
the fed aren't concerned about our stock investments,
only inflation, so they might not be our hero after all.
Now, there are two ways this could possibly end,
a soft landing or a hard landing.
I've experienced both of these when flying airplanes,
and that's actually where the term comes from.
On especially stormy days,
it can be very hard to judge your landing,
and I've made more than one or two bumpy touchdowns
in my lifetime.
To say the economy is looking stormy is an understatement,
and the New York fed model seems to agree with me,
stating the probability of a soft landing is only about 10%.
So a reset is most likely coming,
but what does this actually mean, and how can you benefit?
(gloomy music)
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So how do we know if we're facing a reset,
or instead, just the end of everything?
Well, let's take a look at these headlines
from the darkest days of the 2008 financial crisis.
If you'd have read those back in the day,
then you would've thought we were going into the apocalypse.
However, we're still here, right?
Now, I know the age old saying
that past performance is not indicative of future results.
However, this is almost completely false.
Investment advisors aren't allowed to say this,
as it can come across as misleading.
However, past performance is a very strong indicator
of future results, let me explain.
If a particular investment has done poorly
in recent times compared to its history,
then it could be due for a boom in the future.
This is an order for it to catch up
with where it's long term average return is expected to be.
Therefore the same also applies
if an investment has done incredibly well compared
with its average,
increasing the likelihood that it will have a crash
to bring it back to normal levels.
Now, this isn't without exceptions,
and sometimes that period of adjustment happens
when you least expect it, but adjust it will.
This is exactly what a reset is.
The pandemic accelerated the growth of most companies
by at least five years, Apple sold record devices,
Zoom and Netflix had record signups,
and Peloton absolutely boomed.
My online businesses also experienced record sales
during this time.
This unsustainable growth launched companies to the moon,
meaning a reset is inevitable.
In an ideal world,
the economic growth will be steady and consistent.
However, instead it looks like this.
The economy consists of a series of rapid expansions,
and then contractions.
And this current reset could be one of the biggest
we see in our lifetimes.
This is because the issues we are facing
that could push us into the next recession
are very different from the 2008, 2009 financial crisis.
Broadly speaking, economists split the causes
of the recession into two categories.
First is a supply shock,
which is when companies are unwilling
or unable to produce goods at the required rate.
Second is a demand draw down,
which is when households and companies want to spend less.
In recent times, we've experienced both of these factors.
Supply chains are severely disrupted,
and demand has fallen from consumers
due to their uncertainty about the future.
This has caused us to enter a bear market,
which is a downwards trend.
I've seen over inflated markets in my lifetime
with a dot-com bubble, for example.
Things almost always have to pop and reset
in order for continued growth over the long term.
This is the story of the world.
The older generation has to step aside
in order for the younger generation
to bring forth new ideas and innovation.
So if we're in for a major recession of financial reset,
then let me ask you this.
Would you rather invest at the peak
when everything is at its most expensive,
or as prices fall,
so you can ride the wave all the way back up again?
So that's what a reset is.
So what do you need to do in order to prepare?
There are three very distinct trains
of thought when it comes to benefiting.
However, the one thing they all share in common
is having an emergency fund of three to five months
of living expenses that you never touch
unless absolutely necessary.
And no, needn't go for a McFlurry doesn't qualify.
The first is to hold all your money
in cash until the markets start to improve,
and we see a bounce back.
This could, however, leave you open to dead cat bounces.
(dramatic music)
No, I think, you know me better than that.
This is otherwise known as a suckers rally.
Technically speaking,
a dead cat bounce can only be identified after it happens.
The bounce is a short term price increase that is preceded
and followed by decline.
The second is to YOLO all your money into the markets now
while everything is cheaper than it was
in the previous years.
The problem with this is that if the reset
is greater than expected, and the markets keep falling,
then it could take years to recoup your investment.
The third is to slowly invest a little bit each week,
in order to buy it all the way down.
The downside to this is you will feel like
you're just throwing your money away.
As if the bear market continues,
then your last week's investments will be worth less
than it was before.
Even I find it's hard to stomach
when I talk about it on a daily basis.
That's why trying to time
the bottle of the market has such an alure.
I'm not gonna tell you
that any of these strategies are incorrect,
as depending on your individual circumstances,
One could make more sense than the other.
I mean, for example, if you have so much money
you don't need it for up to 10 years,
then throwing it into the markets
and not looking at it could make sense,
as the chances are it'll be worth more
at the end of the timeframe.
Personally, I'm using a dollar cost averaging method
into index funds,
as they have done very well for me during every past reset.
I'm still buying individual stocks
in companies that I believe in long term,
however I'm not messing with far more volatile
small market cap companies.
The reality is we don't need to make risky plays
when safer investments can now give us
much greater future returns.
I'm taking a similar approach with my crypto,
and investing in the blue chip coins,
Bitcoin, and Ethereum on a consistent basis.
Also, you can get up to a hundred dollars of free Bitcoin
by just signing up to the FTX crypto exchange
with the link in the description.
Look, I'm not gonna sugar coat it,
the next couple of years probably aren't gonna be
like the bull market we've been experiencing
for the last decade.
The days of 10Xing our investments in a couple of days
are well and truly behind us, at least for a while.
Now is the time to be focusing
on positioning yourself for the future.
So ask yourself,
am I gonna be a beginner or an expert surfer
when catching the next wave?
So I'm gonna leave the next video right up there,
but don't click on it just yet.
Make sure to subscribe
if you want to grow your wealth, okay.
I'll see you over there.