3 recession-proof ideas to do now in preparing for a recession.
Here are my takeaways from a private watch party. I’ve had the privilege to have a sneak peek at Tony Robbins’ discussion of the stock market crash.
Negative news sentiments are everywhere. Financial news and social media are having discussions about a possible recession. It’s obvious that it creates fear and anxiety about a possible March 2020 Deja Vu all over again. Except that it could be a longer downtrend economy. On the flip side, it could be the next opportunity to take advantage of.
Learn from individuals that have gone through many recessions and inflationary periods. And still thrive.
So, here are the top 6 lessons I’ve learned about Tony Robbins and Warren Buffett’s opinion of the economy. And what recession-proof ideas you can do to thrive in a recession.
Lesson #1: Anticipate instead of reacting.
Tony and Warren expect that prices and interest rates will continue increasing. The cost of building houses has increased. Coupled with a wave of 60 million Z generation and early Millenials looking to buy homes, there is a lack of supply. As demand increases with limited supply due to supply chain issues, inflation is inevitable.
In economics, there’s one thing always to remember. You can never do one thing. You have to always have to say, “And then what?” — Warren Buffett.
Lesson #2: Have some courage.
All the people around you are going to shrink out of fear.
Sir John Templeton was the first billionaire in history. He earned his fortune by investing $10,000 in the stock market in 1939. He bought every stock on the NY stock exchange during Hitler’s invasion. It looked like the world was going to end. But it made him a billion dollars after the war.
To do: Think long-term instead of short-term. Whenever it’s bad, people are going to think that it’ll last forever. No war has lasted forever. No pandemic has lasted forever. In the end, what follows winter is spring.
Most people overestimate what they can do in a year but underestimate what they can do in a decade — Tony Robbins.
Lesson #3: The best protection against inflation is your own earning power.
If you’re the best teacher, lawyer, surgeon, or whatever it is you’re good at, you’ll be able to get your share of the economy. You’ll be able to command a part of other people’s production of goods and services no matter what the currency is. You can control your economy by being one of the best and still being able to charge a premium.
The best protection against a rapid currency decline is to become more useful in your activities and profession.
To do: Maximise your talents. Increase it.
Because they can’t tax it while you’re doing it. So, invest in yourself. Make yourself more valuable by leveling up your skillsets. Learn a recession-proof skill. Build up your talents. For example, trading, marketing, teaching, sales, coding, etc.
Then, find a way to add more value than anybody else.
Find a way to do more for other people than anybody else. Focus and give what your customers or employers want and deliver what they need as well.
Comparing income from a McDonald’s employee with a billion-dollar hedge fund manager. It makes sense for a Mcdonald’s employee to have a lesser income because the skill to become one is easy! But a hedge fund manager that helps his clients to earn a 40% return, requires a high skill level and creates value for more people. Hence, a higher income.
We were all equal as souls, but we’re not equal in the marketplace — Jim Rohn.
Lesson #4: The second best protection against inflation is a wonderful business.
No matter how good you are in your business or talents you better become an investor. You need to leverage on people that are more talented than you are.
If you own the Coca-cola trademark company, you’ll be able to get part of the people’s labor 20 to 50 years from now. You’ll be able to have the earning power of other people’s labor. A percentage of what you own can go to assets that help you compound and grow.
The young man should become a brain surgeon and invest in coca-cola instead of government bonds — Charlie Munger
Lesson #5: Companies that have low capital expenditures (CapEx) are wonderful businesses.
CapEx is the company’s funds used to buy and maintain physical assets to run the business. Businesses that have large CapEx spend more every year.
Let’s say it cost United Rentals $1 million to buy 5 tractors. They rent it out and made 20% over a 5-year period. But guess what? They would have to replace it every 4–5 years to buy a new one. That’s capital intensive.
But, Google and Microsoft do not need a lot of capital but are able to generate high earnings. These businesses do not have a lot of cash capital requirements. So, their businesses are unlikely to be affected by fluctuations in interest rates.
Lesson #6: Companies that have a brand as a competitive edge have pricing power.
Businesses that have pricing power means that they can adjust their business. For example, if Coca-cola were to raise their prices by $0.10 or a dollar, people will still pay for it! A brand has a clear sign of the company being the strongest in the industry.
If you think of the best search engine, the first that comes to most people’s minds is Google! If you think of the best software for documents, the first that pops into our minds is Microsoft.
With pricing power as an advantage, branded companies are unlikely to be affected by inflation.
To do: Get started in investing.
i) Invest in companies that create more value for more people. See what the companies are doing. Are they shrinking their business? Or are they adding more features and innovations for their customers?
ii) Invest in companies that still have demand over the long term.
iii) Invest in companies that have pricing power with a brand and low CapEx.
No matter where the economy is heading, remember that the stock market is 6–9 months ahead of the economy. So, with high anticipation of a recession, the market has been on a downtrend. But it does not mean all hope is gone. Anticipating what’s coming and preparing for it sets you up on the winning end. So I hope that these recession-proof ideas can help you prepare for and anticipate a possible recession.
Disclaimer: This advice is never to be considered as a professional financial advisor resource or a provider of financial advice for investment or planning purposes.
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