Wait a second, didn't we have the third-largest bank failure in
the history of the country just a few weeks ago?
It's not just banks that are failing.
Here's how 2023 started.
It all sounds catastrophic, but let me remind you how we started last year.
Cryptocurrencies crashed one by one, tech companies witnessed their stocks plummet.
The stock market was on the brink of catastrophe, and investors were panicking and massively
selling their stocks.
On top of that, house prices are coming down.
The housing bubble seems like it's about to burst.
And now, in 2023, banks are crashing one by one.
First, it was SVB, and they told us that it's just one bank and the financial system is
stable.
We can trust the banks.
But Here is another bank failure.
No one wants to admit that we are on the brink of catastrophe.
It might easily turn into a depression.
The coming recession isn't just another recession, it's not just another crisis.
It might be the biggest financial crush of our generation.
We might witness the largest wealth transfer of our lives.
Trillions of dollars will change hands.
So, how do you take advantage out of this crisis?
How do you profit from the next recession?
Here is your step-by-step guide to get rich using the next recession.
Until January 2022, everything was fine.
Even though the stock market stopped growing, things were relatively stable.
However, the big guys at the top who understand how the market works knew that the storm was
coming, so they started massively selling stocks.
In 2020, while everyone was buying Amazon stock, Jeff Bezos was cashing out.
He sold more than $10 billion worth of Amazon shares.
The next year, in 2021, he sold another $10 billion worth of Amazon stocks.
How about Elon Musk?
While people like Cathie Woods were screaming on the internet that it was time to buy Tesla
shares when it was at its peak, guess what Elon Musk was doing?
He was selling.
He has sold almost $40 billion worth of Tesla shares in 2020 and 2021.
Now everyone is left with tons of Tesla shares that are down by more than 50 percent since
their peak, but Elon is sitting on $40 billion of cash.
But how did these people know that a recession was on the way and the stock market would
crash?
Money has time value.
The sooner you get it, the more valuable it is.
$100 million is worth a lot more today than 10 years from now because you can invest it
and get a 5 or 10 percent interest.
But how do you determine how valuable the money you receive today is?
There is a simple formula known as discounted cash flow.
We have discussed it in previous videos, but the point is when the Fed lowers the rates,
the future cash flow becomes more valuable.
Lower rates mean high inflation, which decreases the value of your cash today.
However, when the Fed raises the rates, the cash you have today will become more valuable
than the cash you earn in the future.
So, when Elon Musk claims that Tesla will make 100 billion dollars ten years from now,
that 100 billion dollars becomes less valuable the higher the Fed raises the rates.
That's why tech stocks crashed last year when the Fed began hiking the rates.
Anyone with a simple understanding of economics knew that zero rates for two straight years
and the use of the printing press would create massive inflation that the Fed would have
to solve by radically raising the rates.
It won’t just crash the stock market but also creates massive layoffs, bank failures,
and potentially a housing crash.
Recessions seem
like the worst time to start a business; however, facts on the ground prove the absolute opposite.
When the economy is growing, competing with top players is difficult, if not impossible.
However, during crises, when huge corporations are distracted by huge bureaucracy, startups
have the opportunity to strike.
WhatsApp, for example, was founded in 2009 when the economy was crippled by the crisis.
A few years later, Facebook acquired WhatsApp for 19 billion dollars.
And today, with over 2 billion users, it is worth a lot more.
Uber is another example.
It was founded back in 2009 during the great recession and today it is worth dozens of
billion dollars.
There are plenty of other examples.
But it's not just about starting a business.
A recession is a period to boost your career.
Taking responsibility during turmoil will give you an upper hand over your colleagues,
and you can climb the career ladder much faster in a relatively short period.
Just take a look at how many CEOs lost their jobs to their junior managers during the last
crisis.
1.
Don't cash out.
It's easy to be patient when everything is growing.
The challenge is to be patient when everything is crashing, when you have to wait until the
storm passes.
A lot of people don’t get patient and sell off, thinking that the world is about to end.
If it's a great company, if it's a great asset, it's going to lose some of its value since
investors are scared to throw their money into the stock market, but sooner or later,
its price is going to come back to its true value.
2022 was the year when everything crashed since investors didn't know how much of an
impact hiking rates would have on the market.
That's why even great stocks dropped significantly in value, but fast forward to 2023, some of
them are already back to how much they used to be worth in 2021.
1.
Build a cash cushion.
This is by far the best way to get rich during a recession.
An economic crisis is a period of turmoil; it is the time when cash on the table matters
the most.
When business is growing, not many care about cash because the economy is filled with it.
People invest in risky assets without being concerned about the consequences.
Cashless businesses were thriving when interest rates were down, like crypto or tech companies,
but the moment the Fed raised the rates, they collapsed.
This is the time to jump in and buy these businesses at a fraction of their cost.
Of course, not every one of them is worth your money, but even the good businesses with
bright futures will see their value plummet since the storm hits everyone.
These are just some of the ways to get yourself ready for the next crisis.
But at the end of the day, you have to consider your own needs and circumstances.
Some people have a huge cash flow coming in, so saving that cash and patiently waiting
for that opportunity might be the way to go.
For others, it might be some other way.
I hope you enjoyed this video and, most importantly, found it helpful.
Give it a thumbs up, and I will see you in the next one.