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Gabriela is the founder of the Latino Wall Street movement, which teaches the Latino population about money.
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People are frequently trained to fear the word “recession” as they grow up. This is especially true for millennials who applied for college and entry-level jobs during the Great Recession. We are often frightened of the term, fearful that it would imply rising college tuition, unaffordable property prices, and everything else we had to deal with while learning how to be successful adults.
The dreaded “R” word has reappeared, despite many analysts’ best efforts to avoid recognizing that another devastating recession is on the way. The US government is doing everything it can to print more money and “delay the inevitable,” but as a financial educator, I believe the true status of the economy will be revealed.
I recall attending a finance conference in Whistler in early 2019 to learn more about this topic. The stock market had recently reached new highs, and I had invested 80% of my cash, and I feared what many investors thought at the time: that it was too good to be true, and that it would end soon and brutally. Given that the country was overdue for a recession, I assumed a crash was just around the corner.
I met Harry Dent, a controversial Harvard Business School alumnus, economist, and popular author who uses demographics to foresee big economic trends and events, at this conference. In the 1990s, he foresaw Japan’s economic collapse, the dot-com bust, and the global financial catastrophe. He cautioned us about a possible market decline during his presentation, even suggested that we buy “put option” contracts as insurance for our stock market investment portfolios. He even mentioned March 2020 as the expiration date for these contracts, which I will never forget.
If you’re unfamiliar with options trading, you buy a put option contract when you believe a stock, index, or market will decline. If it does, you profit. It’s as if you paid for insurance but never used it if it doesn’t. When it doesn’t work, I don’t consider it a loss in the same way that I don’t consider my monthly medical insurance fee a loss if I don’t use it during the month.
I just spoke with Harry, and it’s no surprise that, despite the greatest boom in history, he remains more pessimistic about the economy than the majority of people. Our three conclusions on the subject are as follows:
1. Recessions should be welcomed rather than feared.
To us, an economy is a living, breathing creature that must grow, fail, succeed, consume, and repeat the process. Long-term booms are followed by recessions. Avoiding a recession means there will be no growth: It simply refers to a stagnating economy sheltered by created money, a bubble inflated by the Federal Reserve that is about to explode.
2. The Country Must Face Up To Its Reality
Whatever officials try to depict, the United States has over $28 trillion in debt, according to the website usdebtclock.org. The way to resurrect the economy is the same as any other: it must regain its health. The economy must “slim down,” restructure, and pay down debt.
3. There Should Be More Recession Awareness And Education
This leads me to one of my favorite topics: the value of financial education. In school, the majority of Americans were only taught basic economic ideas and the tools or indicators to seek for in a healthy economy.
Most people were never taught the significance of a recession or how vital it is to go through one in order to emerge stronger on the other side. Students must comprehend economic cycles, and educational programs should incorporate that information so that people do not have to rely on Harry and me for that information.
Recessions With A Positive Twist
Everyday Americans may benefit from recessions by seizing the opportunities that come with them. According to MarketWatch’s Caroline Baum, some of the strongest companies were founded during difficult times, which may seem contradictory. As Baum pointed out, a downturn reduces competition and lowers borrowing prices. You might also take advantage of the stock market’s drop by boosting your portfolio contributions.
Consider that for a moment. When a recession strikes, it affects everyone. However, if you can forecast the recession ahead of your competition, your company will be able to pivot in a way that allows it to recover far more swiftly than its competitors. Then you’ll be one step ahead of your competitors, with a competitive advantage for when the economy improves. The same is true for your investments.
You can reframe a recession by recognizing that it is followed by a recovery that includes a stock market bounce. Although no one can predict when the economy will rebound, you can get a sense of what to expect by looking at previous economic cycles. So, for millennials who are concerned about the negative effects of recessions, I advocate researching economic cycles, history, demography, and trends in order to make an educated guess about when the next recession will come and how to prepare for it.
Recognizing and embracing recessions can assist you in rebuilding, innovating, and planning for the future.
This website does not provide investment, tax, or financial advice. For counsel on your individual circumstance, you should seek the opinion of a licensed professional.
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