As an economics major from Stanford, the fist lesson learned is that markets move in cycles. But even an Uber driver summed up the main lesson in a recent cab ride:
“Bad times create great leaders. Great leaders create good times. Good times create weak leaders. Weak leaders create bad times – and it starts all over again.”
From a non-political, strictly mathematical perspective we have clearly entered into the “bad times” portion of the cycle. And the average American will suffer greatly, from stock portfolios and home prices collapsing to unemployment and stagflation – it’s going to be a total mess that’s not been seen in the U.S. since the Great Depression from 1929 through 1941.
So what can you do to prepare for and profit from this inevitable cycle?
Get the heck out of stocks, bonds and single-family housing investments
If a couple 1,000-point collapses in the past few weeks have not convinced you, maybe you should take a look at historical stock charts to get a glimpse of what is about to occur. And for that matter, look at home prices circa 2006 through 2009. It’s going to a be a near total wipeout. The problem is that once the crowd has figured it out, it’s too late to sell. So take advantage of these few remaining moments to reflect seriously on what your true thoughts are on your traditional investments. It’s a personal decision but one that should be a high priority for you.
Cut your living expenses as low as you can
The famous corporate raider “Chainsaw” Al Dunlap had a simple mantra for when times get tough: “sell, sell, sell and cut, cut, cut”. The lower your overall living expenses the greater happiness and security you will feel. The top areas that all Americans can always reduce are out-of-home dining and travel. Make a list of all your essential expenses and think through each of these as to any creative ways to make cuts. But the real challenge should be how to reduce cost but retain your existing “quality of life” – anyone can simply live on a bowl of ramen a day, but that’s not really “living”, right?
Put some serious cash in your mattress (or better yet your safe)
Banking instability was a huge part of the Great Depression in 1929 but nobody thinks it could happen again today. Think again. Those FDIC limits on your account safety at $250,000 may come into play at some lending institutions – and even then there may be a long period of time before those accounts are restored. Just ask anyone who lived in Texas in 1987 that question. On top of that, one hit to the national power grid and you’ve got zero access to what you thought were your savings. Instead, withdraw some serious cash and put it in a secure place, like your safe. Having 6-months of essential cash to pay all of your fixed costs gives you an extra feeling of security. You can always pay those bills with money orders from your cash horde. And, for those who have withdrawn a significant sum from a bank in cash can attest, the bank virtually fights you from getting cash out of their institution. They claim it’s for your own safety, but the truth is more ominous and may be that banks are trying to limit a “run” by putting in protocols that make getting your hands on physical currency nearly impossible without a bunch of time and hoops to jump through.
Invest in “lower cost” industries – the contrarian investments that gains from the turmoil
So if stocks, bonds –anything sold by an investment broker – and single-family homes are a death sentence, what can you invest in that will actually profit from the New Great Depression? The answer are “lower-cost” industries, which are those businesses that cater to clientele that is looking for less expensive options. Dollar stores and payday lenders fall into this category. But so do mobile home parks and all other forms of affordable housing. When times get tough, the demand for affordable housing escalates, and that results in higher mobile home park occupancy and rents. All mobile home parks owners saw this concept in action during the 2007-2008 Great Recession. Many consider that event the greatest boon to American mobile home park values in history.
Don’t listen to or take heed from the “pack”
A “herd mentality” is one of the most dangerous ways to live your life. Thinking for yourself – making your own independent judgement – is key. One of the great mistakes is thinking that others know more than you do and if you just follow them you will be safe, just like sitting next to who you think are the smartest kids when taking a multiple-choice exam. It is this American “herd mentality” that is what causes market bubbles like the ones we are seeing now. On top of that, many of the “experts” that give you advice are simply trying to hawk their own items to get out of town before things plunge. I’m sure that Enron folks were peddling their shares while at the same time telling their neighbors that the stock was safe and a great investment.
The U.S. economy is entering a new destructive cycle. Plan accordingly and take proactive steps to position yourself to profit from this disaster, not ride it down. If mobile home park investing interests you, then visit out website at www.MHU.com. But at least do something.