If you look at the data,
every time there's been a drop in GDP
for two quarters in a row,
in other words, a prolonged shrinkage in our economy,
a recession has followed without fail.
A few days ago, our worst fears were confirmed
as the GDP fell a further
0.9% in a second quarter of 2022.
Now conventionally a recession is defined
as two consecutive quarters of negative GDP growth.
So we must already be in a recession right?
Well, technically, no.
As the National Bureau of Economic Research,
who are the big dogs that are responsible
for announcing recessions
are unwilling to confirm our current situation
leaving everyone more than a bit confused.
This is after they called the 2020 COVID crash a recession
which turned out to be the shortest downturn in US history,
lasted only two months.
It's even got to the point where big celebrities
like Cardi B are calling for some clarity
as she recently tweeted,
"When y'all think they're going to announce
"that we are going into a recession?"
Interestingly, treasury secretary, Janet Yellen
actually replied to Cardi stating
there's nothing to suggest a recession is in the works.
Huh? Really?
However, it's not just Cardi B voicing concerns,
more than 80% of Americans believe the US
will fall into a recession by the end of the year.
A 2022 recession is clearly something
we have never encountered before.
And there is so much more going on
than first meets the eye.
To get to the bottom of this,
I'm gonna share what's going on
behind closed doors in my million dollar businesses
as well as showing you all the research
I've conducted as an experienced investor
so that you know the best way to prepare.
We'll be breaking down all the clues hidden in this data.
(gentle upbeat music)
Hi guys, it's Mark.
So I think our first clue lies in this graph.
It shows the unemployment trend.
These shaded sections represent recessions.
So every time unemployment rises
and people lose their jobs,
it seems a recession occurs.
However, at the moment, unemployment is actually falling.
More people are getting jobs than losing them
leading to an uncommonly low unemployment rate of only 3.6%.
This is the key difference between this recession
and the 12 previous ones over the last 70 years.
But why is this?
Well, one answer to this
is that workers are harder to come by.
This is shown by the 11 million job vacancies
currently in the US.
I'm not recruiting in my businesses at the moment,
however, I'm also not willing to let anyone go.
This is definitely because it's so hard
to find good quality employees at the moment.
If someone was to leave, then I would most likely
have to get my existing team to fill their responsibilities.
My friends in business are all saying the same thing.
Most of 'em actually recruiting
and think it's extremely hard to find anyone
that fits the standards required.
This reduction in job seekers could be in part
due to the great resignation.
People seem a lot less willing to travel for a job now,
the pandemic has allowed people to work from home
and many people want to maintain that flexibility,
but it's not possible in all positions.
This is leading to a shortage of workers in manual jobs
such as painters, builders, and electricians.
There's also been a huge generational shift
as many of my fellow boomers have decided
to press that retire button
and exit the workforce for good.
There's a lot of us old people,
so it's had a noticeable impact
on the amount of job seekers.
However, the economy isn't without layoffs across the board
as Elon Musk announce, he wants to cut 10% of Tesla jobs.
Netflix braces itself for more layoffs,
and Peloton is replacing its CEO and cutting 2,800 jobs.
Interestingly, these layoffs are coming from companies
that experienced huge unsustainable growth
during the pandemic.
So it seems they took on an excess amount of employees
to meet the increased demand
and now that things are slowing down,
demand is returning to a more normal level.
It's almost like they had the growth
of five years condensed into one.
So it's no wonder they're having some trouble adapting.
So other than these exceptions
why are we seeing companies either maintain
or actually hire more staff when GDP is decreasing?
It seems to go against all logic.
Well, the answer to that could lay in this graph
which shows corporate profit margins.
As you can see most recessions occur
when profit margins reach a breaking point.
We aren't anywhere near that yet.
However, we are seeing a recent decline.
So companies are more or less maintaining their margins,
therefore they may feel like
they can weather the coming storm
and not need to lay off employees.
This is great news because if jobs start being cut
it could lead us into a downward spiral,
as people have less money
lead into less demand for products and services,
meaning business profits take a hit
and more people lose their jobs.
This cycle would just keep going.
If businesses can hold out long enough
we may start to see the GDP begin to grow again
fueling a positive spiral upwards.
My profit margins are holding strong at the moment
and we're currently up 3% on last year
which considering all the doom and gloom
talks surrounding recession, I'm pretty happy with.
Bear in mind that this is keeping up with the pace
of a record year during COVID when GDP grew by 7.4%.
I've been concentrating on the core selling products
that I know have a strong demand
rather than fluffing up my stock list
with unnecessary extras.
Coming into 2023 I'll be thin in my product range
as I've identified quite a few lines
that aren't selling well.
This will give me extra capital
to deploy into more profitable products
and hopefully drive my business income through the roof.
But why are we seeing profit margins at such high levels?
Well, I've never gone into a recession
when there is a major shortage of products,
it's normally the opposite.
So many products and very little demand.
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So back to the mystery
of these abnormally high profit margins.
This could hold the clue.
It shows the schedule reliability of our supply chains.
As you can see
it's not recovered from the pandemic slump,
it's been attempting to rebound
however, it's just not able to reach
the pre pandemic levels of reliability.
This isn't a small problem.
A recent study found that 75% of companies
felt a negative business impact
due to supply chain disruption.
Since the COVID outbreak in 2020,
things have just been getting worse
for global supply chains.
Russia of course invaded Ukraine,
in addition to this being a humanitarian disaster
it also meant that lots of commodities,
such as wheat, sunflower oil
and barley became harder to acquire as well as 30%
of the globe supply of platinum including palladium,
13% of titanium and 11% of nickel.
Palladium is a critical component
of catalytic converters for cars.
Try saying that 10 times.
This has climbed as much as 80% in price
since the war started.
A new COVID outbreak in Shenzhen
has also forced a hundred manufacturers
into a closed loop system.
Larger manufacturers have the resources
to host their staff in their facilities
to maintain production.
However, smaller factories
that can't do this will be forced to shut.
The problem is larger manufacturers
rely on smaller producers for vital parts,
if those smaller factories shut down
or reduce production, the larger manufacturers
can't run their assembly lines.
Right now in my businesses
I'm experiencing the tail end of all of this,
which is further fueling my expectations
that this recession will be unlike
anything I've ever seen before.
In a normal recession there's an abundance
of stock available that suppliers can't seem to shift
which means I can buy what I want when I want
in whatever quantity I desire, but actually at the moment
I'm having to buy as much as I can when it's available
because I know I can sell it as long as I have it.
This is causing me to have less cash on hand
but if I don't buy what people need,
then I'll be missing out on opportunities
left, right and center.
Not only would this cause me to lose profit
it would also force my customers to buy from my competitors
which isn't good for the long term growth of my businesses.
With that said supply chain issues
combined with increased money printing
during the pandemic has caused this.
As we can see inflation started to grow in 2021
but exploded in 2022 hitting the highest
12 month increase since June, 1981.
Essentially things are getting
much more expensive at a scary rate
causing people's money to not stretch as far.
The Federal Reserve's main purpose is to slow this inflation
and their late response has led to some
of the biggest interest rate increases in US history.
The general idea of increasing interest rates
is to reduce the money supply
as more is being used to pay back debts.
Over time this should cause businesses
to reduce their prices
as they're unable to sell their products
at the previous levels.
I've actually increased the price
of my own product ranges three times
due to the increased raw material costs,
low supply and out-sized demand.
I'm yet to feel the need to reduce my prices
as currently things are selling
before I get them in stock.
Unfortunately this is causing consumer confidence
to be eroded as we can see here.
When people feel more pessimistic about the economy,
a recession usually follows.
And right now they're feeling worse than they were
during the depths of the 2008 financial crisis.
With more than 70% of adults in the US
believing we'll be in a recession by the end of the year.
This is causing people to spend less
on discretionary items such as new clothes.
In any recession people will typically always
buy the thing they really want
as opposed to something that's just been discounted
for the sake of it.
I'm currently seeing far less impulse buying in my stores.
In the golden days, people would come in
and just buy a new car or a plane for the sake of it.
Whereas now people are far more interested
in having one high quality item that will last.
This signals that people are valuing quality over quantity
due to their outlook on the economic future.
This is also linked with escapism.
People know that buying the one thing they really want
will keep them entertained
throughout the economic downturn.
I'm also seeing more pre-owned luxury items on sale
such as super cars, boats, and RVs.
This suggests to me that people are hunkering down
for tough times and increasing their cash reserves.
In addition to this, fewer people are traveling now.
I mean, it's becoming a nightmare
with canceled flights and long queues.
This may mean the recession becomes
a self-fulfilling prophecy as the cutback
on discretionary spending will cause demand
to be sucked from the economy.
Something interesting I keep hearing people whispering
in my shops is, we've got the money
so why not buy it if you really want it?
This is another strong sign
that people are holding cash for hard times.
This may not be the best idea as we can see by this graph.
The top line represents the S&P 500
and the bottom section represents
how much cash people are holding.
As we can see at the point when the stock market
hit its lowest in September, 2002,
people were instead holding cash.
This is known as the point of capitulation.
In financial circles many experts consider this
to be a sign of a bottom in the prices
and therefore a good time to buy stocks.
Since almost everyone who wanted
or felt forced to sell stock has already done so,
only buyers are left
and they're expected to drive the prices up.
As we can see a new Bull Market began in October, 2002,
however, investors kept an above average level
of cash until February, 2004.
Meaning in aggregate investors missed out
on a 30% rise in stocks.
Now I'll be willing to bet this same pattern emerges
every time we hit the point of capitulation
because we are emotional creatures driven by herd mentality.
This causes us to invest more
when everyone is making money.
However, we fail to realize that this is actually
the riskiest time as prices are at their highest.
Whereas when people aren't buying
there are deals to be had,
meaning it's quite often the least risky point.
Now I'm no financial advisor
but I am a businessman and investor,
and personally, I think this is the opportunity
of a lifetime which should be snapped up.
Now I understand that maybe your income might take a hit
but do everything you can to invest consistently
into an index fund like the S&P 500.
Over my many years of investing
I haven't regretted any of my long term plays.
I'm even investing the same amount each month
into Bitcoin and Ethereum,
as I believe there'll be worth a lot more in the future.
With the FTX app I also get free crypto
on every trade over $10.
If you wanna snap that up too,
then just use the code, MARKTILBURY when you sign up.
Whatever you do, don't follow the herd.
This is a marathon, not a sprint.
Yes sometimes it's harder and you may struggle,
but when you look back,
you'll see how far you've come.
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 wanna grow your wealth.
Okay. I'll see over there.