Now that 2009 has come and gone everyone acts like they have the ability to see a recession when it’s coming. Before I go any further I want to say that the only reason we even know 2009 happened is because we had time to study it for ten years. We are Monday morning quarterbacking.
When the 2009 recession hit nobody saw that coming. Not even the people who saw the many for sale and foreclosure signs in their yard. Nobody knew how hard we would fall, or how long we would be falling, they just lived through it and studied it the over the years like a Monday morning quarterback.
Look, just because we have seen years of recovery that doesn’t mean we are due for a crash. That isn’t how it works. This blog will discuss how to invest and play this market with a recession consciousness but also why I don’t believe there is a recession coming and avoiding investing out of this fear will cause you to pass over opportunities repeatedly.
Play smart offense
I am a huge proponent of playing smart offense. This means that we press forward, responsibly. In our real estate club this means that we buy in cash and we preserve the cash that comes in. We aren’t using cash to distribute to buy stuff. We aren’t using cash to buy more deals, yet. We are getting it and putting it aside. Another thing is we aren’t putting debt on our cash deals we want to maximize cashflow while there is cashflow to be maximized. I believe that when the market does eventually flip to a owner oriented market we can then seller finance out at more than twice what we bought it for. This is the power of ownership. This is the power of playing the game smart.
This should be how you prepare for whatever market comes. Don’t be out there with no shorts on buying deals with credit cards acting like good times are going to roll on forever. I see you credit to cash folks paying 20% interest. As Warren Buffet says “the only time we can tell who is swimming with no shorts is when the tide goes out.” Play smart offense. I am not saying a recession is coming but there is always the possibility that one could come, like I said earlier, nobody saw the recession coming, so you have to invest aggressively but intelligently. You do this by buying smart, using debt smart, and keeping cash on the sidelines to float you.
Just so we are clear though, I don’t think a recession is coming, I don’t think a crash is coming, I think we are going to see more prosperity than we have ever seen under Donald Trump.
You can’t just buy when its cheap
Buy low sell high sounds good in theory, if you can guess when it will be high and low. The only way you can do that is to do nothing and then look at the past. What you have to do is consistently strategize as you buy. There is always a bull market somewhere and there is always a way to make money in any market.
While I don’t buy in Cali, it is still possible to make money in Cali. While people don’t invest in SF or NY there is still money to be made. You have to buy when its high and buy when its low you can’t sit around waiting for lows like Gary V who is liquid hoping for a recession. The people who made money buying the lows are the people who live a lifestyle of frugality. These are the people who don’t make money off deals to spend it, but instead make money off deals and use it to make more deals. The firm I am at now is one of them. We were the ones buying up portfolios of bad loans, we were the ones buying 500 homes from CDOs that went bad. What I learned is that we don’t have the flashy offices, the cars, the clothes, we got them assets though.
So we are able to buy when its high and buy when its low because we are in the asset game not the stuff game. If you are going to win in any market that has to be the play. Wealth not stuff. If you get too focused on investing for stuff or pulling out cash for stuff you will get stuck. You need cash, cashflow and you need debt paydown. If you play the game like that it doesn’t matter where we are in the cycle, you gon be alright!
You aren’t rich yet
Have you ever heard the cliche that if your neighbor loses his job we are in a recession but if you lose your job then we are in a depression? I think that the same is true on the flip side. If you neighbor is wealthy we are doing ok, if you are wealthy then we are booming. If we are booming, a recession is likely.
During the 2006 to 2009 years EVERYONE had money. EVERYONE. People were buying huge homes, new cars, Rolexes, taking trips, wearing True Religion jeans etc etc. EVERYONE was rich. Do you see ANY of that now? I don’t. I don’t see it. The ONLY thing I see is that there are a ton of homes that are massively over valued, a ton of apartments that are over priced and multi family cap rates at dumb low rates.
What this indicates to me is that we will see a roll back in housing which will make housing more affordable and actually stimulate the economy.
Most people bought into this doom and gloom talk around the election. A lot of people thought the economy was going to tank when Trump got elected and the opposite happened. That is why I never follow yall suggestions, I just always do my own thing, now I run the game… (drizzy).
Seriously though, don’t listen to the headlines. If you aren’t rich yet, ain’t no recession coming anytime soon. When you get rich, stash it, don’t buy stuff, then buy the dip and buy it hard.
The last nine years were a recovery not new prosperity or growth
Everyone talks about the last nine years and how things have been booming. These people think that if it goes up it must go down. Blah blah blah. That doesn’t take any actual critical thinking and people have been promoting this since before Trump, a year of stupid growth would indicate that is a lie.
The key here is that the recovery wasn’t growth, it was recovery. What President Trump is implementing, even if people don’t recognize it, is growth. Some of this stuff is zero sum too. In order to grow we might have to be selfish and take from other countries. We might have to protect our borders, we might have to bring companies back, who cares. The number one objective should be America, not being nice to people.
What we will see now is America companies growing. That growth is why the Dow has been booming. That growth is why tech stocks have been booming. You might hate it now but long term you will benefit from the choose yourself agenda Trump is implementing.
The point here is that you can’t point at the last eight years and proclaim we are toppy because the last eight or nine years were not growth years. We are not sitting on growth we are merely back where we started. We got a whole lot of growing to do before we see anything crazy.
If I were to believe a recession is coming I believe it would happen mid second term for Trump. At that time he will see his policies working and get arrogant and we will get ahead of ourselves. We are about to step into true prosperity like we have never seen. I know personally in the club our investments are stunting, our deals are flowing and the money from investors comes in even when I don’t tell the we have deals. People are just sending in money from all over.
We won’t see a recession until we get reckless, until people stop thinking about recession and when people think we are invincible. At that point in time be worried. Right now while everyone is recession conscious I just don’t see it happening. Every time we get hit with a dip we punch back with a rally.
Have faith guys. Trump isn’t the only person out there making decisions. He has a staff of brilliant economists and business men helping him along. Don’t pay attention to the headlines that are meant as click bait. Ain’t no recession coming. Invest hard, invest now and get rich in Trumps America.
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Be great, invest well,