It's been a bang-up couple of years for the people of planet Earth. First the world got rocked by
a global pandemic. This caused a three month economic recession as global industry came to
a screeching halt. With people in quarantine all around the world and Covid's death toll piling up,
a bit of good news came our way when in September 2020 it
was announced that Keeping Up With The Kardashians was finally being canceled.
However, just as Covid started to wind down and the world could once more breathe a sigh
of maskless relief, Russia decided to become the turd in the punch bowl by invading Ukraine and
sending global markets reeling once again. And if that wasn't bad enough, three weeks after Russia's
invasion of Ukraine, the Kardashian family returned with a brand new Hulu reality series.
But things would only get worse from there, as the world began to reap what it had sown during the
Covid pandemic in the form of inflation. Globally inflation is at highs not seen in nearly half a
century, with inflation in the United States reaching 8.58% as of the making of this video-
a high previously reached in 1981. This staggering rise in inflation is driven largely by increasing
costs of food and energy due to the slowdown of both industries during the Covid pandemic.
Food prices increased by 12.6% just between February and March of this year, the highest level
of inflation since 1990. Wheat and other grains were hit specially hard thanks to the war in
Ukraine, with costs rising by 17.9% thanks to the direct effects of the war and a Russian embargo
on Ukrainian shipping. As both Russia and Ukraine grow much of the world's wheat and other grains,
the war has had devastating effects on commodity prices. Ukrainians have had their fields destroyed
or mined by Russian troops, and what wheat has been able to be harvested has either been stolen
by Russian troops or blockaded by Russian ships in the Black Sea. The situation is growing so dire,
especially for poorer African nations who face a pending famine, that there has
been a growing call in the West for Ukrainian trade convoys to be escorted by NATO warships
to break through Russian blockades. The Russians would face a choice with significant consequences-
take on the superior NATO fleets and broaden the war exponentially, or allow Ukrainian grain
to be shipped abroad ending the threat to African nations and lowering food prices around the world.
The world's ravenous appetite for goods has also fueled this historical inflation.
Coming out of lockdowns and quarantines, starting in late 2021, billions of people flooded stores
all over the world with money they had saved up during the quarantine. People everywhere
were hungry for life, and the resulting surge in demand has caused a sympathetic surge in prices.
Lastly, energy prices have skyrocketed in recent months thanks to Russia's invasion of Ukraine.
Like a perfect storm, all of these factors have come together at exactly the worst time-
when people were ready to pick up where they left off before the pandemic. Sanctions against Russia
and disruption in Russian oil supplies has led to a sharp jump in the price of oil. Worsening
the situation was the refusal by OPEC nations to increase production to offset Russia's disruption.
For OPEC nations such as Saudi Arabia, the ever-increasing oil prices are an economic
windfall- they are making money hand over fist as the world suffers. Thankfully,
and likely because nations such as Saudi Arabia were reminded who really provides for
their national defense against enemies like Iran, American President Joe Biden was able to negotiate
an increase in oil production by OPEC, which should lower prices in the coming summer months.
So how do you survive the coming recession? First, calm down. Recessions aren't permanent.
Even the Great Depression only lasted several years before an economic uptick
leading to the most prosperous era in US history. While World War II helped,
an end to the depression was inevitable, and so is an end to this recession.
With the average recession lasting 11 months, you should try and keep a perspective and
not fall prey to what investors call FUD- or Fear, Uncertainty, and Doubt.
Governments around the world are hiking up interest rates in order
to help combat rising inflation. What this means is that loans for
big ticket items such as houses and cars will now come with greater interest rates,
so you end up paying more. This is how central banks primarily fight inflation,
as higher interest rates means consumers are less likely to spend money which can in turn
reduce demand for goods and bring prices back down again. So for the time being, don't plan on buying
a car or a brand new house, this is the time to save and wait for the end of the recession,
during which historically, economic growth booms and interest rates come back down again.
If you're an investor, this is probably a time of great fear. Traditional stocks
have taken a severe beating with the S&P 500 officially entering a bear market,
or a 20 percent drop from the most recent high. This has wiped out
billions in value across the entire stock market, causing some portfolios to crash.
If you invest in cryptocurrency, you've no doubt felt this pain as crypto has lost over
one trillion in value since March of 2022. The bottom seems to be nowhere in sight,
as even Bitcoin- the largest cryptocurrency- has lost over $60 billion in market capitalization
in the last few months. The collapse of some alt coins, most famously Luna, has led many to
fear the crypto market, only worsening the situation as new investors are scared away.
But bear markets aren't necessarily bad for investors if you can stick
it out for the long run. Remember, you don't lock in any losses until you sell,
and unless you have a solid reason to believe your investment is headed to the single digits,
you should fight the urge to sell and 'cut losses'. Instead, it may be time to refocus
priorities and shift investments into different assets. Consumer goods, healthcare, and energy
are always solid investments during bear markets as these are things that are vital to the average
joe, and will likely see the least loss. In fact, you might even get a small return in the midst
of a bear market- people need critical consumer goods no matter what their financial situation is.
If you're a crypto investor, you may be better off simply throwing your money directly into a
dumpster. Just kidding- it's time to reevaluate what projects you're backing financially
and refocus from less risky assets to more 'tried' and proven assets. Major coins such as bitcoin,
etherium, and solana are unlikely to go under given their widespread adoption.
People want to use these coins, and while still very risky, there is inherently less risk in
a well established cryptocurrency than in your cousin's altcoin he airdropped to you last week
at Starbucks. A good way to determine what coins are likely to survive this crypto-crash is to
look at total market capitalization, as this will tell you what coins people are using or holding.
Whether you invest in traditional investments such as stocks or in risker options such as crypto,
the key during a bear market is to avoid trying to 'time' the market. Stop looking
for the bottom believing you can get in at a dirt cheap price and make a killing on the bounce back.
It's time to stop chasing moons and lambos (animator note: lamborghini), and invest
like a grown-up by using the tried and true strategy of dollar cost averaging.
What this means is that you invest a set amount, no matter the price, at a set time. If you get
paid on the 1st and 15th, then you invest on the 1st and 15th no matter what the price is.
In the long run, this is far more successful than hoarding capital and trying to time a market.
The next way to survive a recession is to pay off your credit card debt as fast as possible. This
may be difficult, but it's critically important as interest rates are increasing. This means that
what you end up owing is only going to increase every month. If you're making low payments over
the long term, you might end up paying hundreds or even thousands more in interest with just a
few percentage point increase! So put a taper on spending and get that credit card debt down fast.
Next, you're going to want to make sure that you save money.
Recessions can have knock-on effects across a wide variety of industries,
and the last thing you want is to be out of a job with no savings. It's time to tighten your belt
and cut expenses to make sure that you've got a nice cushion should things go south in a hurry.
If you're fortunate enough to have significant amounts of capital, then this is the time to be
looking for assets that can store your wealth while not depreciating. Gold and real estate
are traditionally good inflation and recession shelters, though hoarding property at the moment
may be its own risk due to fears of a housing bubble collapse. With home and rent prices across
the US and even the world reaching record highs, don't be surprised if social unrest and demand for
government action leads to a severe drop in the value of your real estate, so perhaps read the
room and park your money elsewhere. Plus by buying real estate simply to store your money all you're
doing is making the problem worse for everyone else by lowering supply and increasing price.
During a recession, stocks take a beating, but bonds are traditionally very solid investments
even during economic turmoil- though bond prices have also been hurt by the recession.
If you're wondering what the difference is between the two, stocks represent partial
ownership of a company. So if you buy stocks in Apple, you now own a percentage of that company.
Unless your percentage is sizable though don't expect to be invited to the next board meeting.
Bonds however are loans from you to the company or government you purchase a bond from. When
you buy a bond from an entity, that company or government is now indebted to you for the amount
that you bought, and you'll receive interest paid on that loan for a set period of time,
after which the bond will be paid back in full. Bonds are excellent investments for
those looking for a set income, as every year you are guaranteed a set interest on the bond. If you
buy a ten year bond for $2500 at an interest rate of 2%, then every year you'll get back $50
until the 10 year mark when you'll get back the original $2500 as well, giving you a $500 profit.
Both stocks and bonds come with their own risk/reward ratio. Stocks can often yield
significantly better results, as your return increases as the company's own value increases.
However, the opposite is also true- as the company's value decreases, so does the value
of your stock. A bond on the other hand offers an extremely safe return on your investment, even if
that return is often much smaller. The only real risk with a bond is if the entity you bought the
bond from goes completely under for some reason- such as the collapse of a company or government.
During a recession, switching your investments from stocks to bonds can be a smart move, and
could continue to provide a small but appreciative return to help you weather the economic storm.
Whatever your survival strategy, the most important part is to remember not to give in
to panic- recessions end, the sun will come out and shine again. Unless you invested in Luna.
Now you need to watch “Funeral Home Secrets They Don't Want You To Know.”
Or, have a look at “What Happens When You Die?”