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The Coronavirus has brought the world closer to a devastating global economic downturn. But even prior to this pandemic there were other factors marching us all towards a collapse.
In the United Kingdom, Brexit could lead to economic misery, chaos at ports, grounded flights and food shortages according to analysts.
In the United States, an ego-driven trade war with China and another unsustainable economic bubble is setting the nation up for a downturn.
And when the white economy catches a cold, the Black economy catches the flu.
In fact, the last Great Recession in the United States smashed 33% of Black wealth – and none of it has come back since”
“The relative (and absolute) losses suffered by black households from 2007 to 2010 are to a large extent ascribable to the fact that blacks had a higher share of homes in their portfolio than did whites and a much higher debt-net worth ratio (0.55 versus 0.15). Between 2010 and 2016 there was no change in the racial wealth gap.” – Source
I have lived through economic highs and lows and here is what I can promise you will happen: when (not if) the economy collapses, Black folk will be online and in the streets complaining louder than everyone else.
Black businesses will fail. Black wealth will continue its decline at an accelerated pace. Credit scores will fall like old ladies catching the Holy Ghost in an AME church. All because zero preparations were made.
Planning and preparation are the keys to victory. – Asad
Economic downturns are not a probability – they are inevitable. So if you ignore the advice in this article, you have no one to blame but yourself. Make the conscious effort to think ahead and prepare so that you can profit from economic recessions, depressions, and recoveries.
How to Profit In A Recession
A recession is an economic downturn. During this period of time, trade is reduced (thanks to say a trade war), industrial activity starts to slow, and businesses arent able to produce as much. As a result, profits are squeezed and business owners go into cost cutting mode – usually by firing their workforce.
Things go on sale, but since the average person has no money to buy those things, an economic phenomenon called deflation – a decrease in the general price level of goods and services that makes currency more valuable – kicks in.
People start to get very nervous as their source of income dries up, and businesses get nervous as their inventory sits around and shoppers disappear. Homelessness increases, kids go hungry, and people get desperate.
While the rest of the world goes into panic mode, you saw the recession coming and prepared for it. You start ramping up your marketing efforts, you cut the fat in your side hustle, and you move your money out of stocks and corporate bonds and into precious metals. African-American business owners and investors that focus on building revenue, profits, and properly managing expenses can survive and even thrive during a recession.
1. Ramp up Your Marketing Efforts
During recessions, businesses tend to make deep cuts to their marketing budgets. This is a valuable opportunity for you to take your competition’s place in the minds of your potential customers. Once the market begins to improve, businesses that cut back on their marketing will be struggling to catch up to the progress you have made while they took shelter.
2. Correct inefficiencies in your business
During good economic times, business owners tend to add all kinds of unnecessary expenses to their operation. Nice offices, new Mac desktop computers, more lazy-ass employees. These expensive bloats take money away from marketing and process improvement.
Recessions are an opportunity to re-engineer your enterprise to run leaner and more efficiently, so use these downturns to trim the fat. Outsource as many business processes as possible. Its often cheaper to outsource things like book-keeping, website design and management, and customer service than it is to hire full time staff members for each position.
Learn to run your business with a small but elite team of the best employees you can find. Chances are there will be many of them running around after a few rounds of layoffs.
3. Invest in precious metals and Cryptocurrencies
During recessionary times, precious metals tend to see sharp increases in value. At the beginning of the great American recession in 2007, gold prices hovered around $650 an ounce. Today? Gold is at $1520 an ounce.
Had you bought gold at the beginning of the 2007 recession, you would have doubled your money nearly three times. Silver prices started off at $9 an ounce 5 years ago. Today, prices are hovering around $17 and ounce – another three-fold increase in your initial investment.
Buying gold, silver, and platinum doesn’t mean stacking bars in your basement. You can take advantage of rising prices by purchasing precious metal mutual funds or exchange traded funds.
A mutual fund is where a number of investors pool their investment money and the managers of the fund invest those funds in various investment instruments such as stocks, bonds, etc. If the management is good the investment will realize a profit. If the investment is poor then the investment will record a loss.
An exchange traded fund is like a mutual fund that is fully backed by gold which is both deposited and insured. The difference is that in ETFs, you invest in gold as an individual, not in a pooled activity as in a mutual fund. Whereas the mutual fund might invest in stocks, shares and bonds, the EFT investor is buying an amount of gold which is represented by an account .
The iShares COMEX Gold Trust was launched by iShares on 21 January 2005 and is listed on the New York Stock Exchange (NYSE: IAU). As of January 2007 the fund held 44.45 tons of gold in storage. SPDR Gold ETF (GLD) also actually holds physical gold.
Use Robinhood, Acorns, or whatever other investing service you use to take advantage of the spike in precious metals during recessions and depressions.
Profiting in a Depression
It finally happened: complete economic collapse. People are starving to death, unemployment sky-rockets, homeless shelters are packed with former white-collar workers, businesses are shutting down by the hundreds, and life gets very ugly, very quickly for everyone – except you.
You stashed your money away, and built a side hustle to replace your job. During a depression, everything is on sale. Prices have fallen for everything from real estate to luxury fabric and jewelry (since no one has money for these items).
You use your money to go on a shopping spree, and if you havent already done so, you start a business and launch an all-out attack on your competition.
If you think that depressions are bad times, you either didn’t prepare, or you are a fool. More people became millionaires during the last Great Depression than in any other time in American history. Many people with small amounts of liquid cash were able to buy bankrupt businesses and real estate at bargain prices.
Besides, depressions are periods of mass layoffs, so you may be forced to start a business anyway. Remember, preparation is the key to survival. Heres how you can survive and thrive during a depression.
1. Buy, Fix, And Rent Out Distressed Properties
This is good advice in any economy, but during depressions people will be selling their houses left and right at a deep discount.
You should have piled up cash savings during the good times (instead of buying new suits every week), and cash will be king during depressions. Use your stockpile to buy deeply discounted properties and then rent them out on a month-to-month basis. This will earn you a steady stream of income and equity in a property you can sell when (if) the economy rebounds.
Making repairs, and dealing with ratchet ass tenants can drive you crazy, so hire a landlord and in exchange for free rent have him or her manage your property.
Since many businesses will be closing their doors or downsizing, demand for commercial properties will also fall like a rock. When demand falls, prices also fall. When the economy comes back, businesses will move back in to the buildings you have purchased. By then, you can charge what you want and you will own half the city.
2. Start a Trade-Based Business
While it is always a good time to start a business, depressions are particularly good times to start.
Yes, you read that right – start a business during a depression. If you didn’t start a business during previous economic cycles, now is the time to do so. Dozens of small businesses that started during the United States Great Depression became multi-billion dollar conglomerates. This was not by accident.
HOWEVER AVOID MUSIC, ENTERTAINMENT, FITNESS, OR LEISURE BUSINESSES!
Instead, think about starting repossession companies (requires a tow truck and bank contracts), funeral homes, farmers markets, urban gardens, and home repair operations.
Other Depression and Recession-Proof Industries include:
– Food and Beverage. No matter the state of the economy, people must eat. However, stick to the basics. No one wants imported Geneva truffles during a depression.
– Retail Consignment. When cash flow is weak, people typically don’t buy new. They fix up what they have.
– Information Technology
– Repair and Property Restoration (learn how in this podcast)
– Health and Senior Service Industries
– Cleaning Services
More people will choose to fix up what they already have, rather than buying new items. That means home repairs, shoe cleaning and repairs, electronic repairs, etc. Consignment shops also do well during bad times. Job and apartment placement service providers can also do well, although people may be reluctant to pay for something they believe they can do themselves.
3. Eat your competition
If you have been on your game, you should have a steady stream of income and a nice pile of cash in your company savings. Use your financial strength to buy out your competition and add them to your operation.
Depressions are desperate times, and your competition may be willing to sell their entire company for pennies on the dollar to feed their family. When the economy finally moves out of its depression, your company would have grown from a small, one man operation to a massive conglomerate – and since you have eaten up all of your competitors, there wont be anyone near who can challenge your market dominance.
Profiting in a Recovery
Hiring is up, stocks are in the green, unemployment is down, and the malls, clubs, and restaurants are full of idiots spending money they think they have.
Recoveries and economic booms are actually dangerous times for fools and their money. They spend more than they have on things they dont need. They start stupid businesses that they keep afloat with their own money and turn down high paying opportunities.
Dont fall into the trap of thinking the good times give you permission to get loose with your money.
You might be tempted to spend like there is no tomorrow, but avoid this temptation at all cost! Save as much money as you possibly can, profit from stocks, funds, and corporate bonds, and invest in the infrastructure, research, and development of your side hustle.
1. Invest in Stocks, Stock Funds, and Corporate Bonds
When a full blown recovery comes, markets move up aggressively. Small cap growth stocks tend to outperform during periods of economic recovery, and corporate bonds also really pick up steam.
Corporate bonds are IOUs issued by private and public corporations in multiples of $1,000 and/or $5,000. These IOUs are used to help corporations build new facilities, purchase new equipment, and expand their business – all common activities during economic recoveries.
Investing in stocks and bonds need not be complicated processes, but you do need to educate yourself.
2. Expand Business Infrastructure Vertically
Business infrastructure includes everything that it takes to run your business behind the scenes. In Business Lessons From Marcus Garvey, we talked about vertical integration. During economic recoveries, use all your extra income to improve your vertical integration.
Lets say you started selling chicken during the depression. As the economy improves, rather than just buying and frying a chicken to serve in your restaurant, you buy the chicken farm, the seed company that feeds the chicken, the processing plant that cuts the chicken, the land that produces the brick and mortar to build the restaurant, and the construction company that builds the restaurant.
If you started a clothing line, you now buy a screen printer, textile machines that assemble the fabric, and processing plants that process cotton and other fabrics.
The difference in strategy from depression expansion strategies is that you are buying the operations that you depend on to make money. During depressions you are buying the companies that compete with you.
You should also actively invest in research and development.
Examples of R&D might include building software that automates your social media marketing, creating new fabrics that dont fade or wrinkle, building applications, creating new ways to accept money or conduct financial transactions (remember m-Pesa?), or building machines to prepare food more efficiently, or recycle waste.
No matter what your hustle is, research and development can give you an edge over your competition that they wont see coming.
Research and development can take a lot of money and time – usually takes one to five years – so good economic times are good opportunities to experiment and develop new ways of doing things that will give you a competitive edge when the recovery and boom comes to an end.
3. Save Aggressively
During good economic times, everyone is spending money. Retailers are raising prices. And everything is more expensive.
Resist the urge to blow money with everyone else. Instead, follow this commandment:
Save during good times. Spend during bad times.
Save your money aggressively. When the bad times come and prices fall, you will be able to take advantage.
I struggled with saving money for a long time until a member of the organization introduced me to Digit.
If you’re curious to try it out, you will get paid for it. Click here to use my link and you’ll get $5.00 in free money, so start saving today while you still can.
Above All Else…
If there is one thing you should do in any economy it is this: quit your job and/or build a second stream of income.
If you love your job, more power to you. Stay there as long as they let you.
But you should never put your financial well-being in someone else’s hands. The least you can do is add a second stream of passive income to your life. A job is the least secure way to take care of yourself and your family.
“When your dad advises you to go back to school to get your master’s degree so you can find a better, more secure job, he is talking about security within the chicken coop. Most people think that your dad’s advice is good advice, since most people seek security inside the chicken coop. Most people want a secure job, a steady paycheck, great benefits, and a secure retirement.
That is life inside the chicken coop.
My advice is for life outside the chicken coop. So you need to choose between the two. When I was thirteen years old, I was forced to face life outside of the coop . . . and I have stayed outside all my life. That is the choice you face today. You need to choose between a life inside the coop or a life outside the coop . . . and believe me, they are not the same.” – Robert Kiyosaki; Rich Dad’s Prophecy
In the quote above, Robert Kiyosaki describes the workforce as “the chicken coop”. He understood at an early age the dangers of relying on a job for financial peace and security. No group of people should know this lesson better than African-Americans, who are often the last to get hired and the first to get fired.
Instead of sitting in the chicken coop waiting to be slaughtered, be proactive and plan ahead. No matter what the state of the economy is today, it will change.
There are three types of people: those who prepare, those who react, and those who sit still. If you prepare for changes in the economy (be they good or bad changes), you will sleep well at night and profit. If you fail to anticipate change, you will find yourself constantly struggling to get ahead.
And if you sit still, you are dead in the water.
The strategies above are ones that I live by. I know they work, and I am confident that you can benefit from my past experience. If there are three pieces of advice that you should take from this article, it’s these:
1. Start a business today. Black folks are the last to get hired and the first to get fired. Instead of being a victim of the job market, create your own job. If you are currently employed, work your day job while you build your side hustle at night. Build your side hustle income until you can finally set yourself free from employment.
2. Planning and preparation are the keys to victory.
3. Dont react, anticipate. If you are tired of struggling to get ahead, shift your mindset from reactionary to anticipatory, and you will place yourself in a position of superiority over market forces.
Your ancestors warned you not to wait until you are thirsty to dig a well. Not to wait until you are starving to plant a field. Not to wait until it starts raining before you pitch a roof.
And while everyone else blindly stumbles around thinking the economy is fine, you should be preparing to profit NOW!