The economy rotates through cycles of booms and busts. Within these cycles, you have times of prosperity and times of recessions. Recessions recur in patterns within these cycles, which allows the studied to time when they will occur. I’ve studied these cycles, and I want you to know that the world is not ending, but the recession is on the way. Are you ready?
A recession is when the economy, as measured by its (GDP) Gross Domestic Product, is shrinking, meaning that less is being bought and sold in that economy. Speaking of the economy, who’s really in charge of it anyway? Great question! Although the public is under the illusion that presidents are responsible for the economy, in reality, it’s the FED.
By the time you hear about the recession, we’ll be knee-deep in it, and it’ll be too late for you to prepare. Admitting a recession is coming would mean that the geniuses in charge of the economy (The FED) are admitting that they messed up, AGAIN! A fair warning would exacerbate the current slowdown causing the masses to horde money by refraining from spending and taking money out of banks. They cannot allow that to happen. Additionally, they never warn the public of a recession because quite frankly, they create them. Their job is to keep us in euphoria so that we keep on blowing money fast.
The growth of our economy in the US is dependent on businesses and people like you and me spending money. The more we spend, the more the economy grows. The more we save, the more the economy slows down. We all collectively move the economy. The FED INFLUENCES our decisions with money, but the masses have no idea how.
When the Feds want to expand the economy, they cut interest rates, and when they need to slow the economy, they raise interest rates.
The Fed controls the interest rates to influence the banks to lend more credit or to cut off credit, thus creating bubbles and then bursting the bubbles.
The reason why we have recessions is because of credit. Credit spends like cash, but it’s not real money. Credit is just a fancy word for debt. As long as people use that plastic, take out loans, and mortgages, we’ll always have cycles of prosperity and recessions. When “money” is borrowed to buy things one can’t afford today, the debt must be repaid in the future. To do so, one must slow down spending and save money at some point in the future. In addition to the debt, you must also pay off the interest that is compounding, which will deliver death by a thousand cuts to your future earnings.
In an economic slowdown, we can expect wages to fall, and unemployment begins to rise. As more people are out of work or earning less than they previously were, they have less money to spend. They begin to save their money, and this behavior reduces the overall capital in the system.
What am I seeing that has bought me to the conclusion that a recession is around the corner?
The entire world economy is at its slowest rate since the 2008 Great Recession. The trade war and Brexit will continue to make the slowdown worst. Keep in mind, that we’re all tied to one another through trade, and so those factors overseas are bleeding over into our economy.
Consumer debt have surpassed 2008 Great Recession levels in the US. The IMF has also warned that US corporate debt is at unsustainable levels and needs immediate attention.
Currently, manufacturing is in a recession as we see companies cutting cost, production, and investing to cope with the slowdown in demand.
The jobs report shows people are working more than one job, involuntarily, to survive. Although reports state max employment numbers, those numbers cannot get better, have ceased increasing and are expected to reverse at any time now.
Store closures are at record highs and the year isn’t even over yet.
The inverted yield curve is the #1 indicator to predict a recession, and it first inverted in March 2019 signaling the recession to come within two years, as did all the the previous recessions throughout our history.
FEDS have begun cutting interest rates and began quantitative easing attempting to right the ship.
Recently, banks experienced liquidity shocks as the FEDS lost control of their overnight fund rate, which means the banks ran out of money and are being bailed out as we speak. The FEDS are injecting $75 billion per day to attempt to keep the bubble afloat.
Recessions usually cycle around every 5-7 years. We are in the longest bull market in history with 11 years in; what more could you ask for, right?
If you didn’t own stocks or real estate, then you didn’t benefit from this expansion. Massive indicators and empirical data show that the raging bull cycle is now over. Here is my plan to navigate through the recession that is unfolding slowly.
- Save like it’s the end of the world to build up an emergency account of up to 6 months of living expenses.
- Invest extra cash into education to build high in-demand skills for business or corporate.
- Cut unnecessary subscription services to free up extra cash.
- Buy physical silver and gold; as the stock market goes down these metals go up.
- Increase IRA holdings weighting more into consumer staples, healthcare, utility stocks, bonds, gold, and silver. These sectors are the best performers during recessions.
During a downturn in the economy, I expect consumers to pawn many items to raise cash in an attempt to pay off debts. Those companies Should easily thrive during a recession. For that reason, I created a recession watchlist for our traders and investors:
- AAN: Aaron’s
- EZPW: EZ Corp
- FCFS: First Cash
- RCII: Rent-A-Center
- CRMT: America’s Car-mart
- CACC: Credit Acceptance
Every recession is a bit different and so we don’t know what kind of recession we are entering as of now. But there is strong evidence to support a recession on the level of 1929 Great Depression that is on the way.
No, it is not the end of the world just think of the recession as a cleansing. There will be casualties, but there will also be opportunities. Although I don’t want a recession to occur, because of the use of credit, it’s inevitable. The cycle doesn’t care who the president is it must run its course.
I’d rather be on the right side of this thing when it unravels than to be a casualty. Hope you guys find value in these writing and clear guidelines so that you can navigate your way. Happy trading Wallstreet Jackboyz and Girlz!
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