The health of a nation's economy is mainly measured by its GDP (Gross Domestic Product). The GDP measures the total value of all the goods and services in a country.
Every time you go buy groceries, get a coffee; buy a car or house you cannot afford. All of those purchases contribute to a country's overall GDP. A growing GDP is good; a declining GDP is obviously bad. It is a nation's health indicator, essentially.
If a country's GDP has been declining for six months or more, then it is considered, technically, that country has slipped into the dreaded R-word.
No, not 'retarded': Recession.
" The time to buy is when there's blood running in the streets. "
- Baron Rothschild
People will stop spending their money, or at least curb their spending drastically. Businesses and companies large and small will see steep profit declines; they too will curb their Capex (Capital expenditures), cut jobs, downsize and retool their product lines.
People who, during the good times, didn't save their money or spent it like a crack addict, will not be able to pay their mortgages, rent or pay-off debts due to being out of a job.
Essentially, recessions for most of the population can lead to a downward spiral and cause significant pain and misery for the average normie, who was too stupid not assume that the good times will always roll.
What Is The Catalyst For A Recession?
That is the thing: You never really know for sure what will specifically bring down the economy.
There are so many factors and variables that can spark an economic correction.
This leads us to our first rule.
Rule 1: Nobody Can Predict The Market
It doesn't matter if you are Warren Buffett or Jimmy Buffett, nobody knows when the shit is going to hit-the-fan. Nobody knows for sure what stock is going to go up, down, sideways, parabolic, or turn into a falling knife overnight.
If you are going to profit from a recession, there is only one thing to know.
No matter how bad the market looks, there is one thing that people like Warren Buffett know for sure.
Which, is our next rule.
Rule 2: The Market Will Always Bounce Back
It's all fun and games when the economy is in boom-times (boomer!), but when the inevitable crash happens, guess what people (normies) do: They panic.
They start to sell.
They take shelter;pack-up their ball-sacks; quiver in fear like Karen.
The homes that they own, and probably couldn't afford in the first place, start to decrease in value. They sell the stocks that they have because they are decreasing in value day after day.
Notice how I mentioned the words inevitable crash. Why inevitable? I thought you said that nobody can predict the market?
Well, perhaps the better way to put it is that you cannot accurately time the market.
Panicking when the market sells off is not understanding that markets will eventually bounce back.
However, you can be certain about one thing.
Rule 3: The Market Will Always Eventually Correct/Crash
In knowing this third rule, a smart individual will be prepared for when that time comes. You will have cash-on-hand and on the sidelines in order to scoop-up assets at fire sale prices. Along the way, during the boom times, a smart man will have taken profits and sold down some of his positions.
Taking some cheddar off the table.
This is how you build wealth. This is how you build a fortune.
Fortune favors the bold.
Buying when everyone else is selling is a bold move.
Get in when everyone is out. You will have the pool to yourself.
Then, get out when everyone is back in.
Dry off, enjoy your drink and the view.
Enjoy watching those who didn't listen to you panic and drown in the pool with everyone else!