#187 How to Take Advantage of This Economic Winter

Hey, everyone. This week we're going to talk about the four seasons of the economy. You know, what they are, but where we are today and how you can take advantage of these times to set yourselves up not only for the short term, but for the long term in the future. So stay tuned. Welcome to the Passive Income MD Podcast, where we talk about creating your ideal life through multiple streams of income. If you enjoy hearing about this stuff, make sure to hit subscribe. Now, let's get on with the show. All right, everyone. I think we all know that life is about patterns. It's about cycles. We know that in our own lives. We see that in ourselves, in our kids. We see things repeating over time. If you've been alive long enough, you've seen economic cycles come and go. You've seen recessions, depressions, great times, boom times. You've heard about it in the past, in the 20s, 30s, 40s, 50s, whatever it is, life seems to repeat itself. And as humans, I know oftentimes we're in the middle of what's going on, and it feels like everything is coming down on us. And why is this happening? But if we look at history, we kind of zoom out, look at the macro view. We realize that it's what's necessary to keep our culture, our community, our economy going is this whole concept of growing, rebuilding. And we're going to talk about the four seasons of the economy today. And if you can learn to recognize where we are today, you can figure out how to take advantage of the moment and not get extremely fearful of where we're at. But keep a level head and figure out, this is what I'm going to do right now. This is how to best set myself, my family, all of us up for the future. So I don't know where you live. I live in Southern California, so it doesn't seem like we get all four seasons, but I used to live on the East Coast. I used to live in Maryland. That's where I grew up. I love that place. And we had all four seasons. We decided what we were going to do during that time, whether it's be outside, what kind of vacations we took, where we would go, we, when we travel, all depending on what the seasons were like. Now, one of my favorite seasons out there was the spring. I think we all know what the spring represents. It's a time of recovery, of planting of seeds. You come out of a winter, things are thawing, beauty is starting to come out again. And when you think about the economic cycle, that's when the Market starts to rebound after you come out of a depression or recession. Tough times where there's a lot of job loss, this is when jobs are being recovered. People are becoming a little bit more optimistic again and again. When it comes to the economy, this is when money supply tends to start to loosen up again. People start lending again, the Fed, whatever they might be doing, a lot of times this is when they start to drop interest rates and that's in the spring. And things start to really grow again or at least you're setting yourselves up for future gains. Then you hit the summer where things get matured, it's warm, the economy starts to heat up. I mean there are some ups and downs, but people start to enjoy themselves a little more. They're still working hard to take what they've really planted in the spring. A lot of times they're watering it, just making sure that they get through this period. Because the next period is where all these things come to fruition, where you actually get to harvest these things. And many of us love the summer. It's hot, but we find ways to enjoy it. And then we get into the next season, we which is the fall or the autumn. And this is kind of the late season of the year where things have aged. You know, you're really starting to reap ultimately the rewards. Maybe you don't have to work as hard, it's not as hot out, but the harvest comes. At this point. People have forgotten the hard times. The profits are there, but they're going to slowly start to slow down. At the end of the cycle. You start to see money tighten up. You start to see perhaps even inflation rise a little bit. You start to hear people talking about the good times can't last. Some people call this time contraction where especially at the end of the cycle things start to slow down a little bit.

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And then you get to the fourth part of the cycle, the winter, when it seems like everything is going wrong. Prices fall in terms of assets. Stocks tend to fall. Housing prices fall, Credit tightens. People can't get lending. People who bought at the peak are having major issues. You're seeing things collapse in terms of businesses and real estate. You hear about job losses, you hear about decreasing profits. There's a ton of fear. People are freaking out. In fact, they're getting angry. This is where you start to hear about recessions, depressions. Now, where do you think we are today in this whole cycle? If you're asking me at the point where I'm recording this podcast, I'd have to say we're in that winter. It's a early part of winter, meaning that things are falling. Prices in terms of asset values, especially in the commercial real estate market, are dropping. There's a ton of volatility. You've seen some stocks drop at this point. Money is definitely tightened up. People are fearful. People don't know what to expect. The naysayers are coming out. The ones who have been talking about the economy, you know, is going to collapse. They're, they're now, their voices tend to get stronger and they seem to know what they're talking about, even though they've been saying it for years and years and years. And I believe that we're not through the winter yet. We've all seen what's happened with inflation. It's gone up and it seems like it's a little bit better under control. But to do that, the Fed has had to tighten up their monetary policy. They've increased interest rates, which is really frozen. Lending out there, which has really halted trading. A lot of, again, apartment buildings, a lot that I see in the office space. All of these properties are having issues on account of the debt. And so they're getting forced to figure out whether they need to sell the property at a loss or set themselves up so they can ride this next period out. And again, people don't know if they're going to survive. They're not sure what's going to happen. They. And if you look at history, which tends to repeat itself again after the Fed tends to halt interest rate rises, and that's where we're at Currently, usually about 11 months after that, there's this lag effect where 11 months later you get this big recession where the economy shows signs of contraction, negative growth over several quarters. People start freaking out, job losses, prices go down for everything. So in my mind, that's still to come. And I see two ways to actually deal with this. Number one, we can live in fear. We can worry that this is going to happen, freak out and decide we're going to go hibernate for the winter until it's all safe and clear. On the other side, there will no doubt feel like there are a few losses, let's say, in terms of maybe your. Your stock portfolio drops, maybe some properties that you have, the prices go down, maybe even some deals that you were in don't do quite as well as you thought they would do, or maybe they don't do well at all. And then we could tell ourselves that investing doesn't work or that we're not good at choosing good investments. Now, that's one way to address it. The other side is to realize that this is all part of a cycle. There will be ups and downs. There are ways to take advantage of every point in this economic cycle, wherever we're at that we realize the best way is to stay in the game. We realize that there are opportunities that are going to get uncovered here, they're getting uncovered now that we won't have in good times, that we educate ourselves, build strong communities of people who are learning, who are growing. And again, we take advantage of the opportunities that come now that only happen at this period in the cycle. We only have one or two of these, I believe, for all of us in our primes, meaning that we're making good money. We're at a point where it would actually make a huge difference, where we're trying to raise our kids, we're trying to grow our financial portfolio, where we're at Social Security when we need this money. This is the prime that we've all been waiting for. There are tons of examples of businesses and huge ones that have gotten actually their start during periods like this where you would think that normally it would be a bad time to get started. Everything's going to fail, everything's going to have issues. But many of the Most resilient Fortune 500 companies were actually built during times of depression. Companies like FedEx, UPS, Walt Disney, Costco, companies that you know a lot about. Again, even companies like Microsoft that they figured out if they could do well in a down period, in a good period, again, they're ready to reap. They're ready to be there when everything else has fallen by the wayside. So how do we not only survive this period that's going to come over the next 12 to 18 months, but then really thrive again? By listening to this podcast, being part of this community. I know you're action takers. I know you're different. I know that you're setting yourselves up to do well. And I think that's the first thing. The first thing is continue to educate yourself, work on that mindset, surround yourself with people who are not just fearful, but know that opportunities are coming, they're looking to grow during this period. Number two, this is where you're going to find the most asymmetric risk reward situations. What does that mean, asymmetric risk reward? I think we're all programmed to think that risk and reward are totally proportional to each other, meaning that to get more reward, you have to take more risk. And I think that's normally the case. If you take less risk, you get less reward. If you put your money in a steady savings account, you don't make as much as if you were in a perhaps riskier deal. But during times of contraction, during times of economic winter, there are so many more situations where you might actually have greater reward for the amount of risk that you need to take. There's a way to protect that downside and then maximize the upside. But if you look at the most successful investors in history, they've learned how to find that asymmetric situation where their risk is really mitigated. The downside is low, but the upside is huge. And I believe that that period is coming. So my challenge to you is find other people who are like minded. Make sure you stay strong during this period. Let's figure this thing out together. And I know on the backside of this, we're all gonna be extremely happy that we were still active during this period and we really made things happen. All right, everyone, hope you have a great week. Thank you. Let's talk again soon. 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