How to Profit and Survive During Recession

– I’m going to tell you what
to expect from the upcoming recession, as well as the
possible stock market crash. I’m going to tell you what to
avoid, what to move towards, some techniques you can use
to survive, land on your feet, profit, and prevail. (upbeat electronic music) Some of the early indicators
you’re going to see, there’s a few warning signs
where you’re going to know that the recession is upon us. You’re going to see a decline
in real estate prices. High end real estate first,
which we’ve already seen in places like Miami,
Aspen, Colorado, Vancouver, but you’re also going to
start to see a decline in real estate prices
in the mid-range stuff in places all over America. Depending how bad the
recession gets as well, that’s going to put a lot
of pressure on oil prices, so you’re going to start to
see oil prices declining, and of course, invariably,
you’re going to also experience a stock market decline. Shares of stocks will decline
in price as a recession gets into full swing. And recession or not, I believe
that there’s going to be a big decline in the US
dollar in terms of its purchasing power. The reason that the stock
market, or, excuse me, the reason that the US dollar
is doing so well lately is because there’s so
many currencies worldwide right now, which are doing terribly badly. Look at South Africa’s rand,
look at some of the stuff going on in South America. Their currencies are collapsing
and that’s going to make the US dollar look stronger temporarily, but this is smoke and mirrors. This dollar is not worth
what it’s trading at based on the underlying structure. Think of a house that’s been
having the support beams eaten by termites. You’re not going to notice it
when you go to buy the house, but this is the situation
that we find ourselves in. More importantly, is that
there’s such a slow velocity of money right now. Velocity of money is how many
times a dollar gets spent as it cycles through the
economy over the years. So, for example, if I pay
you a dollar for a haircut and then you’re the barber
and you take that dollar and you go buy a meal with it and that restaurant owner
goes home and buys some stuff for his kid, that’s a cycle of three. That dollar has been used again and again. And that’s the velocity
of money and it peaked at about 12 or 11, about 10 years ago, and it’s done nothing
except decline since then. It’s at five and a half. The average dollar gets
spent five and a half times as it cycles through the economy. The more money goes through the economy, the more velocity, the
healthier the economy, and the problem is not the
level of the velocity of money. Right now it’s at five and a half. That’s okay. We can survive five and
a half velocity of money. What we will have a hard time surviving or doing as well with is
the speed of that decline. It’s actually the speed
which becomes the problem. If you think about it as a business owner, maybe you are deciding that
business is going well, so you hire people. You buy a bunch of inventory. You launch a bunch of
advertising campaigns for the next year and then what happens? What if the velocity of
money suddenly falls quickly? You were making a certain amount of money. You banked everything on
how much money you were going to be making. All of the sudden now,
there’s fewer people coming into your store
and when they buy things they spend less money
total than they used to, and now you’re sitting there
with all these new employees, all this inventory that
you can’t get rid of that then maybe you
decide, okay, we’ll start selling that on sale, or
perhaps now you’re just not able to pay for the advertising
campaign that you thought was going to be so great
and even if it does launch it’s not as effective
as it would have been a few years earlier when
you started thinking about buying it in the first place. That’s the problem. The speed of the decline
of the velocity of money and the speed of the decline right now, to where we’re at right now has never been even close to as fast, ever. So, there’s going to be a lot of pressure and surprises on businesses in the economy because the velocity slowed so quickly that it’s going to be a problem. The speed of the decline
of the velocity of money is important. The actual level is sort of important, but not even close to
the fact of the speed of how fast it’s been falling. And of course this is all
leading to a vicious cycle with the recession where
you make less money, or you have to lay people off, and then those people spend less money, and so, therefore, the
businesses that they would have spent money at have to lay
people off and spend less money, and so those people spend less
money, et cetera, et cetera. It’s a vicious cycle. A recession gets started and
it will just grow from there. It doesn’t get started a
little bit and then reverse and start getting better. Recession needs to take its time. It has to cycle through the economy and really shake out all
the weak ends basically, and that’s exactly what
we’re in for right now. So, first of all, I’ll
tell you some of the things that you should avoid. This is the easy stuff. Avoiding stuff doesn’t cost you a penny, but you should be careful with high end and luxury services and products because those will be
some of the first things to start feeling the damage. When people start spending less money you’re less likely to
buy an expensive car, expensive watch, expensive dinner. That’s the first, some of the first stuff that gets hit hardest, and I’ve been telling you too
about retail for years now. Get out of retail. It’s terrible. It can’t do anything expect
decline at this point and we haven’t even gotten
into the recession just yet. When we do retail we’ll take another hit harder than its already been (scratching)
taking over the last year. You definitely want to look
out for high end real estate. Mid-range real estate too,
but the high end stuff’s going to take a big hit. There’s some houses in the
Hamptons that were asking 20 million dollars that are
now asking 10 million dollars. Just 10 million dollars of potential value just evaporated. That’s what the market is like right now, and the two things which will get hurt, the worst and first if a
recession really kicks in are going to be high end restaurants and mid-range restaurants
and then, secondarily, the second thing will be charities. So, if you’re involved with a charity or if you know anyone else who is or if you’re reliant on a charity the first thing people do
when the times get tough is they stop charitable donations. I can attest to this. This is what happens every time. So, between the restaurants
and the charities keep an eye on that not
only an early indicator, but a concurrent indicator, when people stop donating
to charities less, when they stop going to restaurants less, then that’s how you know
that you are actually in the recession, and
as I said, oil prices will probably decline, but there’s also the fact
that a lot of the oil has to become processed. So, there’s a processing plant
that it turns it into fuel and sometimes there’s a log jam there, which is why you’ll see oil
prices decline sometimes, but the price of gasoline will increase. It’s because of the
backlog and the refineries, but either way I do believe oil prices will decline, and therefore,
gasoline prices will decline because there will be
less demand and less use, but the real impact of the recession, and when it really gets
to you psychologically is going to be times when you
do want to pay more for gas or when you do get your credit card bill and the carrying costs are so much more because interest rates increased or your mortgage on your house
cost more than it used to, and it’s not the actual amount. You might have to pay an
extra $100 on your credit card for the month. That’s not going to kill you. You can afford it and it
will work out just fine. You will be annoyed but you’ll notice it, but it won’t kill you, but the real factor that’s
going to put the recession into high gear is not
the actual dollar amount that you have to pay more,
just that you notice it. When you go to pay your bills you say, oh, I can afford that,
but, wow, I am paying more, and you start to notice it
and it starts to wear away on your psychology and the
stock market we’re in right now is simply being driven by the psychology, the mania of people, and
it’s going to reverse slowly over time, but it
will be like a drip torture. Every time you get your credit card bill it’s going to be a bit more. When you check your line
of credit it’s a bit more. Any kind of interest on
any kind of loan you have, if there’s a carrying
cost it will increase and you’re going to start to notice that and it’s going to wear away at you. That’s when you’ll stop
spending money so much. Even if you could get away
with spending the money you’re going to slow things down and that’s just going
to be a vicious circle. It’s going to make the recession roll like a snowball down a mountain, and a lot of people are
talking about hyper inflation. We will not see hyper inflation, okay? There’s not going to be a debt jubilee also they talk about that. There’s not going to be hyper inflation. There will be inflation,
but it will be more marginal and it will slowly build over time. It will slowly grow. More likely there will be stagnant growth and once the inflation
kicks in during the time of stagnant growth because I doubt that we’re
going to grow any faster than we have been up to this point, then you’ve got stag-flation. Stag-flation is not good
for just about anybody. So, I’ll tell you some ways
you can get ready to prepare to profit and land on your feet. I also think that people
should avoid the paper metals, like the ETFs, like GLD. Avoid all derivatives. So, all kinds of options are derivatives. A derivative is something
which derives its value from another asset. So, it’s not the actual asset. It’s something that’s a legal contract pointing at something else that changes the value
based on that loosely, based on that underlying asset loosely. That’s why GLD is not gold. You’re not buying gold when you buy GLD. You’re buying a legal piece of paper, which you probably, almost
certainly, will never read or look at or see or own,
and it’s not going to put gold in your hand. That’s why people are
misinformed that they think they’re investing in gold
or doing what’s right for the future and I’m
going to buy some gold. They buy GLD. They haven’t really bought
any gold, though, have they? And when the decline in premium
and luxury brands begins, and I say begins even
though it’s already started, but it will get much, much
worse to the point where then you’ll start to notice it. Walk into a really
expensive whatever store and there’s going to be stuff on sale and that will only increase
and the sales will only get bigger from here on out, but anything premium, luxury, or high end is at massive risk, and the stocks of the companies which sell those kinds of things are
at massive, massive risk, whether you’re talking about
automobiles and alcohol, or restaurants and real estate, all the high end stuff is
going to be taking a beating. So, I’ll tell you some of
the stuff I think that maybe some people might want
to own in my opinion. And also I’ll tell you some
of the stuff that I own, but also I’m going to tell
you some things you can do. Some of he companies,
which are going to do (scratching)
the best are the ones which help other companies,
other businesses, and people to save money, or to spend
money more efficiently so that they don’t have to spend so much to get the same amount of result. So, anything that’s going to
help another company save money will be in more demand during
recession, not less demand. So, even at first you’re going
to see retail get killed, but you’re going to see
companies like Walmart do better. You’re going to see McDonald’s do better. You’re going to see dollar
stores and Dollarama do better. Low priced retail is going
to do much better at first if things start to get really
bad during the recession. So, if you have shares
of stock in Alfa Romeo or Lamborghini, and you sell that, and you put it into
McDonald’s and Walmart, you’ll probably do better
than you otherwise would have, in my opinion. And keep in mind that regardless
of what the economy does people will always get the
health care that they need. So, medical, health care
companies should be able to withstand a recession a lot better than some of these high end
stocks, like the Faang stocks, Facebook, Amazon, yappa yappa. Companies which are involved
with the medical industry, not the ones that are blowing through cash and they’ve got horrible balance sheets. I’m talking about good quality companies that are actually making
money doing heart surgeries or kinds of things that
help people survive longer, or the medicines that
they need to help lower their pain levels or whatever,
they buy that regardless of how the economy’s doing. That’s why companies like
medical and pharmaceutical companies usually hold up pretty well during difficult times. At the same time there’s
a lot of sin stocks, such as alcohol, tobacco, and
now recreational cannabis, which will do much better
at first when the recession really starts getting into high gear. People want to turn to
these kinds of things because they’re having
a bad time financially with other stuff, so they
might want to get drunk one night or have a few drinks because they’re not
going out to the movies or out to a fancy dinner anymore. We’ll stay home and drink a six pack. I also believe that US
dollar, in my opinion, is going to decline significantly
in purchasing power. This will mean that
everything, commodities, which are bought in US dollars
will increase in price. Coffee, cotton, gold,
silver, anything like that, oil, will increase in price. Oil prices will likely
decline because there will be so much less demand and
the economy will slow. So, even though the US dollar declines oil prices may proportionally
decline even more than that. But things like gold and
precious metals, I believe, are as low as they’re
going to get right now and this is going to be
one of the best trades from the next five years is
buy silver today, for example, and just sit on it for a few years. You’re going to be glad that you did, but I like the miners, the
precious metals miners. You want to get involved
with precious metals mining companies, which are operating in politically in
militarily friendly regions. This means that you don’t
have to worry so much about any kind of issues with nationalizations from the underlying country or if there’s any kind
of military conflict or bribery getting out of
control, anything like that, you want the to be
operating in politically and militarily friendly regions. You also want to make sure
that their Reserve Life Index, our ally is double digits. It’s basically telling you how many years at the current extraction
rate can they keep on going until their resource runs empty. It runs dry. So, if the Reserve Life
Index only has two years left that means in a couple of
years they’re going to be out of resource. That’s why you’ll see stocks
that have a price earns ratio of five or something crazy like that, and you look at the books,
and you’re like, wow, this company’s got
everything going for it. That’s probably because that
they will get a good value because the Reserve Life
Index is under concern that they only have a few years left. You want to make sure that
the company you’re looking at has at least 10 years
of Reserve Life Index and also you want to make
sure that they’re looking to increase their Reserve Life Index. Some companies will expand
their exploration territory or they’ll look into
where they’ve already got land claims on and they’ll
try to explore it even more to find that there’s
even more gold or silver in that resource than they thought, and these are the ones
that are going to increase the Reserve Life Index over time. That’s what you want to look for, and that’s how you find
a really good resource mining company, and also you want to
make sure that they have a really low cost of production. Find out the industry average. How much does it cost to
take and ounce of gold out of the ground and sell it. If one company, it costs them $1000, and the other company
it cost them only $800, that company will do better because they’re going
to be making more profit per ounce of gold or silver
or whatever they find, or bare olive oil. If their extraction costs
are lower that’s better because their profit
margins will be greater. And I’ve told you before that
when the price of gold goes up 10% you sometimes will see the
prices of the mining stocks that mine for that gold, as an example. It could be silver. It could be oil. Could be whatever. It will increase by a lot more than 10%. Why is that? Because if the price of gold goes up 10% and the company is producing,
extracting, finding gold, and they’re selling it at a set price and then the price of gold goes up 10%. That’s all profit. So, their profits might
increase by more like 40 or 50% or 100% depending. So, a small move in the
price of the commodity will actually increase or translate into a much bigger move
in the profit margins of the underlying company. That’s why swings are
bigger in mining companies than in the actual
physical metals themselves. And speaking of which, I
think that everyone should own some actual physical metals
that you have in your hand. Three nines pure, 99.999%
pure silver, gold, whatever. Everyone should own some of that. This is part of the reason
that everyone did so well in the Great Depression. A lot of people became millionaires. It wasn’t primarily
because of precious metals, but some people did really
well because they owned precious metals through the hard times, but everyone’s saying that they
want to get physical metals and they’ll wait til the crash happens and they’re going to do it. I would suggest that it’s
going to be almost impossible by that point to get any precious metals. The physical metals will
be in so much demand soon enough that there
won’t be any to be found. And that’s when the prices
are really going to shoot up, and when you are really are ready to buy the physical metals, so is everybody else. It’s going to be a stampede
and there’s not going to be enough supply, not even close. So, what are some things
that you can do to try and land on your feet? One of them is to go to
cash as much as possible, in my opinion. For example, what I did was I
sold all my blue chips, docs. I sold tons of stocks. Got rid of all of them. I moved a lot into cash and a
lot into gold mining companies and a lot into physical
gold and also this brought investment physical silver trusts, brought physical gold trust. Look into that. It trades like a stock. They keep it for you on a
one-to-one ratio, no leverage. I’m not affiliated with them, but they keep it all in the vault and it’s a great way for
people to get involved with gold without actually
having to pay the storage fees and the insurance costs. And I’ve never met him in person, but I can vouch for the reputation and the honesty of Eric Sprott, who started the Sprott
Physical Asset Trust of which I’m an investor, and I do believe that
anyone who buys that, if they want to own precious metals that is so superior to buying
something such as the GLD or any other kind of derivative product. You should also be thinking
about cutting expenses. You always should be
thinking about that anyways, and I’m sorry to be like your grandfather or a wet blanket here or something, but cut expenses as much as you can now, not later, you’ll be glad that you did, and I do suggest also in my opinion that some people could put
off big ticket purchases or big ticket items. For example, vacations, and
a Winnebago and a nice boat and whatever. I do believe that almost all of it will be much cheaper as soon as
the recession kicks in than it is right now. So, buy it later at a lower price. I’m not saying that you
should put off having a child or put off getting engaged and married or anything like that. That’s shouldn’t have
anything to do with money, but you don’t need another TV. You don’t need a
convertible, not right now. Maybe two years from now
you can buy the same vehicle or television for half the price. And some other people,
I’m not saying this, some other people will tell
you some things you can do to be ready for a negative
time for the economy. And this is them. This is not me, but to
make this a complete video, I’m just add a few quick points here. I’m not suggesting this,
but some people say, think about getting a roommate or ask your boss for a
raise or take a second job, or sell some stuff that
you don’t need anymore to get the cash for it, or work overtime, or even cancel recurring
billing on certain things. Perhaps you have storage
locker that you get billed for every month, take the stuff
out of the storage locker, cancel the contract,
keep it in your garage. I’m not saying this. Do what you want. I’m mean, I’m not going
to tell you what you should be doing. I’m just telling you my opinions of things and also some of the
stuff that I have done. I’ve bought physical metals. I got rid of a lot of my stocks. The stocks I own are all
companies that either help other businesses save money or they are businesses
which should do well because of precious metals increasing and the US dollar declining. And some people will even
buy the ETF for the Vix, VXX, that kind of thing. I don’t suggest doing that
because you get ripped off a little bit when you do that. If the Fear Index, which
cannot invest in directly, if the Fear Index goes
up 10% that’s the Vix. If it goes up 10% the XX,
the ETF that’s supposed to track and represent the Vix, it might go up 8% and it
will do that every time. They readjust it everyday
and at the end of the day, whatever the Vix did,
even if you were right, the returns from the VXX or
some of these other derivative investments will be
less than was presented by the actual Fear Index iteslf. (car horns)
– I imagine that for some of you this is
your first time here. My name is Peter Leeds and
along with my whole team we show you ways to turn
small amounts of money into something much more significant, and when you subscribe to the channel make sure you click on the alert bell so that you get all of
these actionable videos right when they come out.

43 thoughts on “How to Profit and Survive During Recession

  1. Someone just opened a Wendy's in my city so I went to try it out. The chicken sandwich was about half the size since the last time I went to a Wendy's a few years ago and costs more. The dollar has lost a lot of value already.

  2. velocity of money brings in more sales taxes for a state most are hoarding not spending , i eat out at wendys 4 for 4 bucks add a frosty for 50 cents . im living like im already in a recession picked up a pair of dockers slacks like new at good will 3.99 got a Izod shirt 3 bucks . lowes building supply is dumping everything there ceo came from jc penny after he saw it was un-saveable . silver is good i bought 6 bucks an ounce in early 90,s sold at 48 bucks i think dollar general /ace hardware/and medical care will be good will be buying some more silver tonite

  3. At 9.25 you said stay away from paper gold. Then you talk positively about buying miners ( paper stocks). What did I miss? My only stocks now are penny gold miners.

  4. Thank you for your advice again – so, do you think there is an opportunity to keep shorting the CFD’s in PM’s ?? I’m happy to switch from CFD’s to Sprott, but I’m down at the moment, so wondering the best way to recover before doing so.

  5. Hi Peter! From my understanding of velocity it is a bit misleading as a metric. In my view there’s two economies going on in America; the ultra wealthy, and everyone else. The velocity is calculated by amount spent divided by total currency supply. The problem with the metric being the currency supply has massively increased since 2008, but the new currency has almost entirely gone to places that inflate the 1%’s net-worth. Whether Jeff Bezo’s is worth 80 or 160 billion it likely won’t change his spending habits that much. Where as the average joe hasn’t realized much increase in total currency. I think the “average” people still have higher velocity of money than the metric would make you believe, but the real problem being the spending is debt fueled.

  6. Bought WMT at value after they invested in Flipkart and price declined. Made some profit and riding the rest.
    Other than that, silver miners are looking better and better (well, they get slaughtered by the market).
    Planing on accumulating silver Maple Leafs now, while it's super cheap. Would be nice to see a rally past 50 USD. It's almost a no-brainer if you plan on holding for years/decades.

  7. Some clarification on sprott at 17:56. Hope you don’t mind Peter…
    GLD and SLV are etf’s owned by state street, and black rock. Look at there valuations decline in 2008. That’s STT and BLK. They tanked horribly, like all investment firms. Could they have become insolvent? Maybe, if the market got even worse. remember as well Lehman brothers and Bernie Madoff left investors broke when the shares became valueless. So your investment in GLD and SLV are at risk in times of severe resection. And there’s nothing that says either firm actually owns real metal to insure the fund. So why is sprott different? Yes they are an investment firm. And they could feasibly bankrupt. The difference is this. Sprott owns the trust, it’s managed by a reputable independent bank, and the gold is stored, and inventoried by the Canadian royal mint. Real metal in a real vault. You can even take position of the metal, albeit a royal pita to do it. But it can be done
    Sprott tickers are phys, pslv, and CEF or SPPP are some options too. I own no sprott corporate stock

  8. Jim Puplava (Financial Sense Newshour) is expecting a sizable (20 %) correction in the markets, but with more tax cuts coming and infrastructure spending in the pipeline , he doesn't see the official recession until late 2019 or 2020. Do you agree?

  9. Thanks. Very useful advice though you seem more optimistic than many I have heard lately. I would imagine I see the dollar mirroring the bolivar sooner that you. Yes, get physical silver now.

  10. Excellent video, Peter. I always value and appreciate your opinion. I hope to catch up with your other videos soon. I have had a very rough time trying to recover from an ms flare up and now have a lesion on my brain that is affecting short term memory. One thing I admire about you is that you don't often talk about your book Penny stocks for Dummies so I will. All of you who watch these videos, the best investment you can make is buy Peter's book. It is very well written and packed with valuable information that will make you much better at finding good penny stocks to invest in. I highly recommend it

  11. How do you know that there won't be Hyper Inflation? If the restart QE (and THEY WILL) then that will just re-inflate this bubble and it will drive up Inflation. Inflation benefits Rich people. All their assets go UP. No one cares about the Poor people.

  12. Recession?  This is going to be a full on DEPRESSION.. bigger than the Great one of the 1930s that lasted nearly a decade.. This one will last about double that time

  13. If you want to buy gold just get DGX.. it's a crypto that is backed by and tethered to the price of gold.. and not only can you sell/buy it on the exchange like any other crypto, but you can actually show up at their storage facility vault and cash it out to real gold bars they physically hand you in exchange for your tokens.  Conversely you can bring 99.99 grade bars to them and they give you Tokens that represent that exact value for the amount of gold you brought them. 
    They only charge a small transaction fee, which is just an extra 1-10 tokens per bar, depending on which size bar you opt for. 
    They are audited every quarter and every bar is graded and stamped with a unique signature and on their website you can see a list of every bar's identity in their inventory  and even request a specific bar by name simply by telling them the signature and they will pull it for you when you show up.
    And, another awesome thing is TenX, which has a visa-type debit card has a partnership with DGX to link up to your tokens of DGX in your wallet and you can spend your gold anywhere you swipe that card.  So why even have a bank account, right?  And this answers the problem of liquidity gold has historically had. 
    This is one token i am seriously dealing with.  i wont have any fiat when this market busts

  14. Peter can you explain why in your opinion we will not see hyperinflation given the fact that other countries are slowing moving away from USD transactions, therefore all those dollars should be coming back to USA? There is an opinion that those dollars will be moved into inflation of cryptocurrencies… How do you see things unfolding during next 2-3 years? I think we should see dollar getting stronger against other fiat currencies and developing countries will see their currencies crashing to the point where most of those countries will start creating their own cryptocurrencies (if Venezuela and Iran succeed with their crypto money). Also should a person sell his condo while prices are high or may be if hyperinflation kicks in then it will be a good opportunity to pay off mortgage with saved silver/gold and cryptos? What would be your play?

  15. Facts. Land, timber, hard assets. Moving to expensive area because those top 10% areas will continue to be relatively safe, thriving

  16. Hi Peter. Thanks for the very informative vids. Other than precious metals and saving cash through various means. What would be the best way if possible to respond, for persons in the UK / Europe to invest their capital. Many thanks

  17. Here's a question. My son just turned 19. I've been on him about starting to invest. A Roth IRA at a minimum. In your opinion should he hold off and start picking up silver instead till this pans out. My wife and I are debt free but don't have a ton saved. I want him to learn from our mistakes. Of course we became debt free a few years ago and my wife just found out the school she work at is closing in 6 months. She got her masters degree while she worked so hopefully that works out.

  18. consumer credit went from 16 billion to 20 billion at a US dollar interest rate of 2.25%. I guess you know where it goes from there….

  19. Awesome talk Peter thanks! At do you advise many Canadian stocks?
    Also, love your responses to the know it all comments you get from certain viewers haha

  20. People lose jobs they get foreclosed … so just off the top of my head … Public Storage and RV sales look good as people are tossed into the streets need a place to put household goods and a place to sleep. Some precious Metals maybe depending on currency and interest rates. Dollar Stores and Walmart do better than higher end retailers. Medical REITs as people always need medical care and retirees on Medicare are consistent consumers of medical care and devices. Funeral services as people still die. Utilities and phone services like AT&T and Verizon as people need communication devices.

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