How to thrive in a recession
I: Background (Free)
I will now start a series detailing how to survive and thrive, during the approaching economic calamity. My interest in recessions and economic crises started as a teenager, when I saw a TV commercial for SKOP-bank (the central bank of cooperative savings banks of Finland) where two guys were pushing a wheelbarrow full of money from the bank, declaring, “Come get yours!”. Even as a teenager I understood that this cannot end well, and it did not. Around two years later, Finland crashed into the deepest economic contraction any Western nation had experienced since the Great Depression. The financial crash of Finland in 1990–1993 is the likely reason why I became so interested in economic crises.
During the summer of 2006, I read a lot about the “new finance” that had taken over the U.S. housing market and the financial sector. I became convinced that a serious crisis was brewing. I lectured my unsuspecting and virtuous PhD student colleagues about it, but very few believed me.
In January 2008, I shorted the U.S. stock market with every penny I had and was able to borrow. The spring was rather grueling, with the stock market first dropping but then recovering in the summer. I truly started to doubt my vision and fear for my short positions, as well as for my economic survival, as I was just a PhD student. My redemption came after the failure of Lehman Brothers on 15 September 2008. I made a killing in the stock market in October and November, with the only regret that I could not have invested more. I was forced to liquidate my short positions in December, which turned out to be very good timing, albeit it was not by my own choosing.
The Panic of 2008 also turned my academic interest fully into economic crises, which yielded three articles published in esteemed academic journals (see this, this and this). However, none of them were published in the top 20 economics journals, which is why I decided to end my academic career and become a (fully fledged) entrepreneur. In late 2017, GnS Economics was just a “side show” of three academics and one financial market expert, but we had a stellar forecasting track record. So, I decided to jump in 100%! In 2018, we published our first preparation report, entitled Duck and Cover.
In these pieces, I will detail both my personal and academic knowledge and that of GnS Economics on how to survive and thrive during a recession and an economic crisis, which we have accumulated over the past 17 years. The majority of the first pieces will be just rewriting and updating what we at GnS Economics have said before. This is to introduce our new subscribers to the topic and update the information for our older customers. When the crisis truly gets going, this series will turn into a more proactive one. Our plan is to turn to investing when we see the opportunities arising. We plan to present our positions to our subscribers without exact sums invested (naturally).
Note that this series will be merged with the Daily Thoughts (for now at least). In the first entries, I will walk you through our thinking on recessions and crises, how to prepare for them, and (especially) how to turn them into opportunities, like I did in 2008. To note, we have been advocating for our customers to buy gold since June 2018.
I end this first entry by presenting you a quad-chart we constructed in 2018 to help our customers to understand the nature and characteristics of different types of economic contractions. I will continue on this later this week.
Tuomas
Disclaimer:
The information contained herein is current as of the date of this entry. The information presented here is considered reliable, but its accuracy is not guaranteed. Changes may occur in the circumstances after the date of this entry, and the information contained in this post may not hold true in the future.
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