Such an odd time we live in. Never before have I been so impatient, nay, excited for the next economic downturn in the USA (which is imminent).
As some of you know, I sold my paid-off house at a tidy profit last year with the intention of rolling that cash into some international rental real estate properties, ideally in SE Asia.
After putting in some time and research, I quickly realized that purchasing investment real estate in another country, particularly a country you don’t visit very often, is much more complicated than I thought. I would still be able to do it, but the amount of personal time and travel it would take on my part was more than I was willing to spare last year (or this year).
So, with a heavy heart, I reluctantly made the decision to instead look within the United States for this rental property. I’m actually trying to liquidate all of my American assets and get rid of them, so this was a direct violation of that.
Yet, I figured I could purchase a cheap, small apartment building or two, hang onto that for 5-10 years, then sell and roll that over into my international investments. It would be a mid-range investment instead of a long-term one. And I also justified it by the fact that I literally have no American assets anymore with the exception of my businesses (which will be moved to other countries soon under my five flags plan) and a buttload of American Dollars (for reasons I’ll explain in a minute). I have no American stocks, bonds, or equities of any kind, for the first time in my life. The American stock market or bond market could tank tomorrow (and both will, soon), and I wouldn’t give a shit. It’s a pretty good feeling.
Just to be clear, I didn’t say I have no stocks, just no American stocks. I have plenty of stocks in my speculation portfolio; they’re just not American companies.
But I digress. I started looking at apartment properties in several different American cities just as I was seeing signs of a slowdown in the real estate markets all over the US (and Canada too). Properties started staying on the market longer. Properties started drastically dropping their prices in order to get sold.
Uh-oh.
And I was right. Real estate has been slowing way down over the past six months or so. I was fortunate enough to sell my house right at the peak.
Purchasing something that is going down in price is not a good idea. Moreover, and more importantly, buying assets when they are at artificial or temporary lows is one way to make a lot of money very quickly. As Robert Kiyosaki and many others have pointed out, many millionaires and even billionaires are made during massive recessions and depressions. These are the men who, when the economy tanks, have A) lots of cash to spend and B) very little debt (and/or the ability to borrow a lot of debt).
So the economy crashes, everyone freaks out, but these guys jump for joy and buy everything in sight at 80%+ discounts. Two or three years later when the economy rebounds, the assets shoot back up in value, and these guys sell at massive profits. It’s awesome.
This means that during the good times, you need to pay off your debt and horde as much cash as you can, so when the next recession/depression comes around, you’re ready to buy.
I’ve been able to capitalize on this kind of thing indirectly, like when I sold my real estate before the 2008 collapse and instead bought gold. Real estate got murdered and gold took off. I did well.
This time around, I’m in an even better position. Instead of buying real estate now, I’m just sitting on my cash and waiting, waiting, waiting. Waiting for the stock market to crash. Waiting for the bond market to crash. Waiting for real estate to crash. Waiting for anything to crash, really. Never in my life have I been so impatient about the next economic downturn.
Seriously. I glance at the stock market or bond / real estate markets, still see decent (although fake) numbers and I’m all like, “Dammit! Crash, you fucker! C’mon! Crash! Daddy needs to get his dream house in Australia! Hurry up!”
I’ll be honest. It feels very weird to sit on this much cash that is not allocated to a specific savings account purpose or to a specific investment bucket. My entire financial life is very organized and compartmentalized. So, for a while at least, I have this new investment bucket I’ve called “Wait For The Crash.”
I’m now even considering doing this on a regular basis as part of my long-term financial plan. In other words, setting aside an emotionally uncomfortable amount of cash during good economic times so I can buy everything I see during bad times.
What I’ll Buy
Next is the issue of what I’m actually going to buy when the economy takes its next dump.
I’m certainly going to purchase real estate. That means that I need to know what a good deal actually is. This means that I need to pick out two or three areas and pay close attention to real estate prices of small apartment buildings and rents in those areas now, so that if a sudden price reduction comes along, I’ll be able to identify it.
As I stated earlier, I don’t want American assets long-term, since I think owning long-term assets in a civilization on the decline isn’t exactly a smart or good idea. So I’ll pick up some cheap real estate with the objective of selling it and rolling it over into international real estate within 5-10 years afterwards. At that time I’ll be living in Oceania / Asia and will more easily be able to purchase and manage international real estate in SE Asia which will be much closer to where I live.
When the stock market crashes (and it will) I will also buy into the Dow, S&P, and/or Nasdaq indexes as a speculation. Right now, the Dow is over 25,000, S&P is at about 3,000, and the Nasdaq is over 8,000; all three at artificially bloated highs, as I’ve talked about here many times before.
If the Dow suddenly plummets to 11,000 or 15,000, then hell yes, I’m going to buy! That will be a happy day! I won’t keep the stocks very long; likely I’ll sell and take my profits within 6 months when the indexes come back up and return to the mean.
When Will This Happen?
I have to address this because any talk of the next economic crash always brings on the question of when this will all happen. As I’ve said before, I have no idea, nor does anyone else, and if anyone says they know exactly when it will happen, they’re either insane or trying to sell you something.
I just know it will happen, and happen relatively soon. If I were to make a wild guess, I would say it could happen any time between tomorrow and two years from now, but again, that’s purely a guess and I’m not making a prediction, because I don’t know.
I’ve always been bad at guessing when things will happen, but my track record in investing is almost 100% accurate for knowing that certain things are going to happen. For example, for years I predicted a massive and terrible economic downturn in 2012. I was right, and it happened, but it happened four years early in 2008.
So I know it will happen, I just don’t know when.
And that’s okay. Until then, I’ll sit patiently, or perhaps impatiently, so I can profit yet again on the corruption of the American government and big business, and the irrationality of the American voter.
Good times!
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“imminent” not “immanent” on the main page.
Fixed. Thanks!
Caleb, I’m curious where you’re holding your cash in preparation for the “fire sale” to come.
I know you’ve talked about how you don’t trust banks to hold any more of your money than absolutely necessary, so where do you recommend keeping easily accessible cash for such a scenario like this?
I have small yet compared to most my age very decent savings and I have them compartmentilised between gold, cash at an investment broker, cash at several banks (including diff countries and currrencies) and cryptos. I wish I could put some in real estate but I dont have enough to make that meaningful.
While this sucks for most Americans including myself — I can’t think of anything better to do than save money and pay off debt. I don’t want the economy to crash because that means I’d lose a lot of my money in stocks at the moment, plus it might affect my job too — things are already expensive as crap here, plus my salary has NOT gone up. I can work all I want on my Alpha 2.0 business, but if my salary goes out — I’m fucked especially in the short term.
I saw a sale at Best Buy today on iPad Pros being like close to 50% off their sale price, but as dangerously close as I was tempted to check out the ad, your post sobered me the fuck up. Don’t need that shit right now. Get rich, hustle hustle, fuck debt. I’m going to start putting large posters of things I want or want to be like — like a house, Scrooge McDuck jumping in a money bin, Robert Kiyosaki, whatever it takes so I can shake off my poor person habits.
I’ve recently recovered from a huge financial/business set back. So much so, it prompted me to stay with family this past year to rebound. Doing so has allowed me to save about $17,000 in cash. While that may not seem like a large savings to some, when you’re bouncing back from only a couple hundred bucks, it’s a big accomplishment. I’m also completely debt free. That said, I’m at a crossroads of what to do now and have this whole “crash” on my mind. I’m ready to get my own place again, but I’m worried that the moment I do the bottom will drop out on the economy. I don’t want to deplete my funds as a renter when this cash is something I want to continue to build upon, but I’m not in the position to buy, nor do I want to own something if we’re in a decline.
If you were a guy who was in my position financially, and you knew that things were about to get bad (potentially really bad!), what would you do with the cash? Or what would my next move be? I know you say in The Unchained Man that a man should have his own place. But on the cusp of economic fallout as we’re discussing, do the same rules apply? Or is it an opportunity to do something else with what would be your housing money.
Interestingly I’ve got a lot of cash too, because I’ve been hesitant to invest it.
I’m curious how the value of dollar will fare against emerging market currencies in case of a financial crisis.
I’m waiting especially for the real estate to crash so I can jump on some property like I wish I had back in 2008. I bought in 2005 so got pretty fucked. The market here in Chicago seems way too hot right now unless you want to live in an “up and coming” neighborhood which is code for a shit hole.
Money market account with a large investment firm.
Correct, don’t use banks for this kind of thing.
Yep, you nailed it. That’s the problem with life in West right now.
Good! I had to do the same!
Hold on to your cash. Put it into a money market account and save up 6-12 months of living expenses. Then, and only then, should you start to worry about investing.
Hedge it with 30% gold. Read this.
If that confident and just waiting, why not just short the market
especially if it’s going down to 11,000? Better yet, chose an index
that shorts 3x.
Len
I have.
I never said that. I have no idea if it will go down that low.
No thanks. Too risky in my view.
This is my situation exactly. I have boatloads of cash and CD’s. I’m just waiting for the market to take a dump so I can get in cheaper.
I am a 3rd in cash, a third in gold and a third in silver. Silver under $15 and gold under $1300 an ounce, I see nothing else worth buying at this time. I keep just enough in the bank to cover my monthly expenses. A paid off mortgage in a very average neighborhood. A semi auto rifle and a high-capacity side arm and a fair amount of ammo in storage. Go to an outdoor range once a month for a couple hours. Income is over 75,000 a year. The storm is coming, become the gray man.
Since you brought up the topic, If the west is collapsing, is there an argument for staying here, to live like kings, buying up dying businesses and real estate while everyone else sinks into poverty? (I can already see the result of the college loan crisis – women are literally asking me for money in exchange for sex on tinder. Plenty of men wouldn’t mind being a big fish in that little pond.)
I can see the argument for raising your kids in singapore or japan, but for the single man with capital, why leave and start over, instead of just staying here and being top dog? Or do you believe it will be so bad here that the banks could freeze accounts, civil war will ensue, people imprisoned, etc?
You just reminded me of a phenomenon I stumbled upon the other day. More girls are going into “camming” (basically online stripping) and doing fetish videos because they can make anywhere from $200-$500 a day (and over $10k a month if they are really working it).
This is because so many dudes are thirsty and to get these hot girls to themselves for 30 min or more they are incentivized to spend big money. I think girls in this generation don’t even give a fuck if their “reputation” is shot— porn makes way money for them in a lifetime than a wage job at McDonald’s plus they might also strike it rich with some thirsty dude in the end, aka sugar daddy when their looks fade.
I really see this as being the huge downfall for western civilization— the modern family establishment is going the way of the dinosaur, and with rising costs of everything — especially if you are a single mom raising kids— online porn doesn’t look so bad. In the future, girls working porn prob will move to some kinda elite status class while the hard working honest class continues to be screwed over.
If you are employed you need to demanded stronger pay rises. At the minimum you need to demand salary increase with inflation – its just asking for the same money. If they dont they are actually paying you less gradually! So you tell your manager you are not asking for s pay rise you are telling him to do it and refusal will result in you adjusting your working hours accordingly. I got a salary increase twice within a year this way (I said the stuff in a nice and diplomatic way and had some leverage) while everyone else was afraid to ask for a raise and after the third time I asked they fired me which was totally fine for me – I gained money on it again and they lost some as per our contract I negotiated which I foresaw.
Own business is nice but if thats not working yet and you gotta make it work on corporate you gotta be tough and uncompromising with the corporate employer im the meantime. You will be surprised how much you can get / get away with by just asking for stuff / refusing stuff. When everyone is scared to ask or say no the ones who demand in a confident but polite way get all the candy.
Yeah but I dont get the guys who do that whats the diff of these videos from porn which is free?
Thats what I think will happen in some places gradually. But i do think it will be gradual with many warning signs so there will be plenty of chance to get out. For example France is clearly going in that direction right now that may be the first place where you see it on a country wide scale. Other countries already have it but on a local scale.
I am from France, and our country is definitely going in that direction.
The current crisis is still very limited to the popular class, not much of middle and upper class is concerned for now.
However the unemployment rate is rising each year and the “lower-middle class” is starting to feel the effects of the western collapse.
Though it already happened in Cyprus a few years ago
Greece or Italy are also in a worse position, and I personnally try to follow the situation there (as, obviously, French media would not speak about it at all).
Cheers.
You’re in good shape.
Yes, there is an argument to be made for that for more adventurous Alpha 2.0’s, and some have tried to make that argument. It has some merit. I would only suggest it for relatively young men (men under age 40 or so) who don’t mind getting their hands dirty and who don’t have kids. I would also recommend having strong international (non-American) location-independent income.
And you can not do that and just be a hardcore Alpha 2.0 and stay in the US because you have family here and such. That can work too as long as you’re very careful.
Exactly. Sure.
Yes.
No. Read this.
Unlikely.
If you are employed you need to start your Alpha 2.0 business on the side ASAP so you can quit and not rely on that job.
hardcore 2.0 all the way.
BD, what is your advice for someone just entering the workforce? What is the most attractive industry to build capital fast?
There’s a certain school of thought that also thinks the west is coming down. But believes that the US will have a short to medium term rally first. Mainly because Governments are broke, but the Europeans are in way worse shape than anyone else and will go first. Once Euro bonds start to implode, it will spread to US bonds. But the US dollar and US stocks (many of which are not dependent on the US only for their revenue) will be the safe haven for a really big money in the short term. Asia is not safe, stable or big enough just yet to be a proxy safe haven for big money.
They basically think the US dollar and US stocks will be the last to go and provide a temporary boom as the initial demise begins.
Its an interesting theory which I think has some merit. What do you think?
Let it all burn. May the fires cleanse us.
Get a sales or marketing job with a large, growing company. Work there for 2-4 years, learn on the job, then start your Alpha 2.0 business and get rolling with that instead.
Just about anything in health care, though anything having to do with old people is likely best.
They’re not wrong. The US Dollar will certainly rally soon because of exactly what you’re talking about. But that doesn’t mean US stocks will rally. In a worldwide recession, US stocks will take a hit even if the US Dollar gets a bump.
Of course I could be wrong. There’s no way to tell the future.
Let it all burn, then roast some marshmallows in the fire and sell them.
Isn’t healthcare (in the US I assume) one of the biggest bubbles, where the only reason all the biotech startups and other similar businesses do so well is the insane way healthcare itself is financed? Can’t it all easily go down if the government, in the face of a collapse, is forced to switch to a more reasonable model, possibly similarly to what you have recently advocated?
When I say “health care” I’m not just talking about biotech startups, which is a teeny tiny sliver of health care.
Health care will boom mostly because of the massively increasing amount of old people that will appear over the next 20 years.
1. If the government did what I advocated, the boom would be even bigger and entrepreneurial opportunity would increase, not decrease.
2. The odds of government doing what I advocated is frighteningly small. I’d say less than 5%. In a huge recession, they are far more likely to go the socialist route, not my route.
Sounds, to be honest, dubious, but maybe it’s me who’s wrong. My hunch is this: when, like it happened with you, a patient (or an insurance company, doesn’t matter) is charged $4k for services that hardly amounted to $50 in labor costs, certain entities, maybe the hospitals, maybe someone else, get absurdly rich and can afford to waste all that money. That’s what makes it easy to start a healthcare company of some kind and get a part of the action for yourself. But if austerity measures of some kind are implemented out of necessity, then maybe your new and shiny healthcare business is likely to bust. Or maybe not, I’m not sure.
I see what you mean. If you were an intelligent businessman you would not rely 100% on the profits from the current bloat in our fucked-up heath care system and instead focus on something more sustainable.
Plus, those people getting rich that you’re describing are not small time entrepreneurs or Alpha Male 2.0s, but high-end corporatists; doesn’t really apply to my audience.
I saw a quote fly by the other day – “Healthy is the new wealthy”.
With healthcare costs getting out of control (or unavailable in case of a social healthcare system), it does make sense.
Once you secured that $75.000 a year as a minimum, there is a case that you will gain more from focusing on improving your health levels.
What is people’s opinion on alternative medicine? Corporate healthcare’s solution to anything really – from anxiety/PTSD to a out-of-whack heartbeat – is to overdose people with highly expensive prescription drugs. With people looking for affordable or available solutions to their health problems and less regulations, this could be an attractive option for budding entrepreneurs (granted that it is not total woo woo healing with crystals garbage).
There a huge booming market of loads of small businesses in this area who are doing very well for themselves. The competition is really fierce though.
What investor said. Booming market. Anything in health care is (and will be).
Are money markets safe from being taxed or government involvement? I’m just learning about this stuff so I don’t really get how it all works yet. I heard Charles Schwab has a money market with I think a $1000 minimum investment and you get a debit card etc. Which one do you use?
I don’t understand the question. Nothing is “safe from being taxed.” You are required to pay taxes on any interest you make on any investment, regardless of where it is or what it is.
If you’re asking if it’s safe from being confiscated by the government, it is more safe than a money market inside a 401K or IRA, but less safe than something like gold coins.
Yes that’s common.
I don’t answer those questions.
I know this isn’t properly investment, just speculation, but are you back on speculating a bit of money that you don’t mind loosing on cryptocurrencies? If so, which ones?
Proper food is your medicine. And sleep.