Quora Answer: What are Some Ways to Thrive during a Recession?

The following is my answer to a Quora question: “With a recession coming closer, what are some methods to thrive during a recession?”

Market crashes tend to come in 20-year cycles.  The last crash was in 2008 subprime crisis, and the one before that was Black Monday in 1987.  The Asian economic crisis of 1998 was regional.  Accordingly, we should expect a major crash around 2028.  This is not to say that there will not be major market shocks.

I expect that Brexit would lead to a contraction of the British economy.  There is also the possible contagion of a pending European debt crisis, from the over-leveraged economies in the EU South: Portugal, Spain, France, Italy and Greece.  We have to consider that China’s total borrowing on GDP, both direct and through state-owned actors, is over 300%.  They need the OBOR to export all that excess production somewhere because they cannot afford their economy to slow down.  They have millions of young people entering the market every year.  The Communist Party promised them a better life, and it has to deliver.  The US economy is unbalanced, and they are not going to bring manufacturing back anytime soon.  There is a wealth disparity between the wealthy coast and the extreme poverty of the South and Midwest.  Small town America is dying.  Their political divide is not in a position to address this.

Economies heavily reliant on commodities are suffering because they budgeted or borrowed on the assumption of higher prices, and most of them cannot sustain the deficit.  This includes countries as diverse as Saudi Arabia, Russia and Australia.  None of this is necessarily bad. These are all wonderful opportunities to make money, especially if you have the funds, and understand the market.  There is no general advice on thriving, since there are specific opportunities in specific nations.

One common method is to hedge gold and gold certificates.  Gold is the safe haven when the market crashes, and people rush to it for emotional support.  This is a self-fulfilling prophecy, and gold always rises.  Another safe haven is investment-grade sovereign bonds and corporate papers.  These are unlikely to default.  If you have the appetite and the means to leverage your funds, this is a good time to go bargain hunting.  When the market is down, central banks practice quantitative easing to put liquidity back in the market.  This is an excellent opportunity to dump non-performing assets on a desperate market and switch out your funds.

If you know what you are doing, market crashes and recessions are wonderful things.  They allow you to acquire good assets on the cheap and strangle weaker governments in developing countries.  That is precisely why it is engineered.