How You Can Profit During an Economic Reset

Tatiana Hart/ April 7, 2018/ MONEY/ 0 comments

All things in nature and life are cyclical, including financial markets.

Most people love bull markets because they mistakenly think that the only way to make money is to invest it in rising assets.

Well, it is completely false. the closer you get to the top of the market, the less money you can make with little capital. In fact, the highest profit margin can only be attained when prices are low and you can buy the highest quantity of assets with a minimal investment.

What is an Economic Reset?

We live in a debt-based economy where money is made when more debt is created.

However, a time comes when people experience inflation due to growing debt, lose faith in the power of fiat currency, and  restrict monetary spending. Then the economy takes a real hit.

The primary way of economic stimulation promotes the ease of borrowing money.

The Federal Reserve lowers interest rates to entice citizens and institutions to embark more debt.

This strategy is also known as quantitative easing. Quantitative easing also stimulates inflation rendering fiat currency worthless.

As a result, debt cannot grow indefinitely – it needs to be repaid. The easiest way to “repay” exorbitant amounts of debt is to reset the financial system.

During a financial reset, another monetary datum is selected such as a precious metal.

Historically, it has been gold.

Given a required amount of gold is available to repay the debt, the price of gold per ounce in local fiat currency will increase proportionally to the aggregate amount of debt and will be used to “repay” the accrued debt in full.

The Most Recession Proof Investment

The first and foremost wealth building strategy is to invest in something you can control and predict such as your own business.

Investing in yourself has been proven to be the most profitable strategy that leads to financial independence and wealth.

Only by taking responsibility and reasonable risk,  true wealth can be created.

A Conventional Investment Asset Trap

Speculation of digital assets such as stocks, bonds, derivatives and cryptocurrency, leaves us at the mercy of the whimsical market which can be manipulated irrationally frequently as seen in the past two years.

Furthermore, a lot of tech stocks have lost the main parameter of company valuation – the profit yield.

Take, for instance, the recent initial public offering of Swedish company Spotify.

Spotify enables digital music streaming and sharing online. The initial stock price was set to $160/share and closed at $149 on the opening day, April 3rd. The next day, however,  it plummeted to $132.

The last snapshot recorded a price per share of  $147.92. But what is the basis for Spotify’s stock valuation?

Spotify has never had positive cash flow since its founding in 2006. In fact, its cash flow losses have been increasing exponentially.

According to its prospectus,

Since our inception in April 2006, we have incurred significant operating losses and as of December 31, 2017, had an accumulated deficit of €(2,427) million. For the years ended December 31, 2015, 2016, and 2017, our operating losses were €(235) million, €(349) million, and €(378) million, respectively.

It infers that the price discovery occurred differently when the share price was set based on the debt the company accrued.

Goldman Sachs and Morgan Stanley took part in Spotify’s direct listing and financed the company.

The ambiguous valuation strategy lands an extremely risky investment opportunity. Proceed with caution at your own risk.

Furthermore, many tech stocks have very obscure valuation foundations and may, in fact, contribute to the current market volatility.

Even the speculative blockchain market cannot beat the volatility of the overvalued financial market which is masterfully controlled and manipulated.

You probably heard the saying: “Do not try to time the market”.

It precisely the futility of trying predict events that you cannot control.

Investments in the stock, bond, and derivative markets imply speculation at best (or gambling at worst).

If you are not good at that, quit early or never start. If you want to control your money, start a business.

Wealth Preservation Assets

So, you own a business, control your own time, and have positive cash flow. Or you have amassed a decent amount of money and want to preserve your wealth.

How do you ensure the effort you invested along the way does not go to waste when the system collapses?

Traditional financial assets such as stocks, bonds, annuities, and retirement plans such as IRAs, 401ks will not preserve or grow your wealth because they are directly connected to the volatility of the financial market.

The best way to find out what preserve wealth best is to learn from the wealthy.

The wealthy 1% does not have retirement plans, nor do they put a significant amount of their wealth into paper and digital assets.

The 1% does prefer tangible assets such as land, real estate, precious metals, collectibles, and natural resources.

Debt has been used to accumulate wealth during economic growth.

However, tangible assets create a hedge for the accumulated wealth and provide purchasing power to those who own them, especially during the economic reset.

We’ll discuss how tangible assets can give leverage during the rest to those who own them.

Wealth Transfer During an Economic Reset

Stock market crash and economic collapse are two side effects that may become tragic to the many and profitable to the few as a result of an economic collapse.

That is why it is crucial to understand abnormal financial market tendencies – precursors of an economic crash, so you can wisely choose when to speculate traditional financial assets and when to retreat.

This understanding will give you an opportunity to secure your profits in tangible assets.

During an economic collapse, gold and other precious metals will become the reference datum for value transfer from hyper inflating fiat currencies to true tangible assets such as gold and silver.

Prices on many overpriced categories will plummet including a lot of real estate.

Furthermore, if you have debt and a good hedge of gold and silver, you can “erase” the debt the same way the faulty financial system is getting rid of its own debt during the reset.

An economic collapse is not a pleasant event but it does not have to be another depression.

If we understand the financial system and the mechanism of wealth transfer, and create a favorable environment, we can not only survive but profit and prosper as a result of it.

 

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