Ryan has been tracking the economy and has started to see warning signs and red flags that he wants to share with you. In this episode of Freedom Fast Lane, Ryan Daniel Moran discuss what you should do if the economy crashes.
There are always opportunities whether the economy is soaring, crashing, or flat. However, none of it is important unless you are doing something with it. Most people wait until peaks to ‘get in’ and valleys to ‘get out,’ which means they are selling when you should be buying and buying when you should be selling.
The Current Market
The Dow Jones is at 18,000, real estate prices have climbed significantly in the last few years, the unemployment rate is below 6%, and the economy looks and feels fairly stable. However, the underlying pieces of data make the economy look unhealthier than people see on the surface. There are underlying economic points that make it much weaker, which is mostly a trend. Historically, the market goes up in the first half of the year and goes down in the second half, but over the last six months the market has remained flat.
The market is probably going to go down significantly as more pieces of data are being released that suggests the overall economy is slowing. Growth is slowing in the market, incomes are flat, and corporate profits are down.
The red flag is that the Federal Reserve is determining the economy. When you see things like the stock market going up in spite of bad data because of what the policy makers might do about it, then we are in speculative territory, which is essentially gambling. This means that the health we appear to see on the surface is due to the ideas that people are making up about what the Federal Reserve will do. Rates will be raised slowly, and it won’t have an immediate and significant impact on the economy.
Ryan believes that the economy will flatten then float down. If a collapse is coming, it will be in a year or two. The last time we were in a situation like this was in 2007, which was the beginning of an election cycle where theories about change start to flourish.
Ryan’s Personal Finance Recommendations
- Own a business. This allows you to be in control of your own income and have tax write offs.
- Invest 10% of your salary into dividend growth.
- Put the profits of your business into cash flow investments that have high yield and low risk.
You will notice that the wealth triad strategy stays the same in a growing economy or a shrinking economy. What changes are the opportunities that we pursue. Buy in times of opportunity, and either hold or sell when things look really good. In terms of the stock market, there is not a whole lot in the way of opportunity, because things on the surface look good. In the event that something collapses, and if there is a big falling of stock prices, then that it the time to get excited. That is when the dividends and potential for returns go way up. The best thing you can do is wait and look at what opportunities are about to come.
At the moment Ryan is buying income stocks, real estate investment trusts, and is involved in opportunistic investing. If we are at the point when a major crash is coming, don’t look at it as bad news, rather look at is as everything you want to be in the long-term is about to be on sale.
When people talk about market collapses what they are talking about is paper value going up or down, but what you should be concerned about is the ‘golden eggs’ the investments are giving you. Ryan is hedging the market decline by protecting the position he has and is getting ready to invest into the next opportunities, particularly cash flowing real estate. The best decision you can make in any economy is, ‘what do you feel good holding regardless of what the market is doing.’
We are in for some changes with the economy over the next few years, and the best thing you can do is to take advantage of the opportunities. This is a good time to reassess your strategies and get ready to pursue the next opportunity so you are in a position to go after them when they become opportunistic.
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Links to Resources Mentioned
How to make and keep $1 million dollars in 2 years (previous podcast)
How to invest cash flow and wealth (previous podcast)