The Biggest Market Crash Of Our Generation Is Coming

What's up, guys? It's Graham here. So, I have to make a comment on probably one of the most impactful videos that I have seen in a long time from Patrick Bet-David on Valuetainment, with a warning that the biggest market crash of our generation is here. This was a 50-minute long presentation about the cause of the next downturn that operates like clockwork on a 10-year cycle. Why some of the world's most powerful people are all cautioning of the exact same outcome, how this could actually be the opportunity of a lifetime for a few select people, and eight ways that you could begin preparing today based on the market crashes of the past.

So, let's talk about what this is, what this means for you, how you could use this information to take advantage of a generational opportunity of a lifetime, and then my own thoughts about what he says is coming. Right after, of course, you crash the greatest like button of our generation by giving it a gentle tap and subscribing if you haven't done that already. I'm also going to link to Valuetainment's full video down below in the description for anyone who wants to watch that as well. I would highly recommend it, and also a big thank you to Public.com for sponsoring this video, but more on that later.

Alright, so to start, it's important to understand what's going to cause the next market downturn because the economy has a history of repeating itself over and over and over again on a repeatable cycle of boom and busts. And right now, it's pointing in the direction that the latest cycle is ending, and to be prepared. That's because, one, we have low interest rates that are coming to an end. This was used initially in March of 2020 as a way to stimulate lending and incentivize people to spend money during a time where the economy was shut down. But excess borrowing combined with broken supply chains and rising energy costs caused inflation to increase to a point not last seen since the 1980s. And so, high interest rates act as a way to slow the economy down and hopefully lower prices.

Two, unprofitable zombie companies will be going out of business. These refer to companies that were only able to exist and operate based on ongoing financial assistance, and that's become a problem. According to Bloomberg, they estimate that one-fifth of the largest 3,000 publicly traded companies are zombies, and that the end result could be a prolonged stretch of bankruptcies unlike any recent memory.

Three, because companies will scale back, unemployment will increase. Truth is, these last few years have been a complete anomaly. Throughout the pandemic, workers were paid to stay home, but as the economy began to reopen, businesses faced a shortage of workers. That meant that in order to retain talent, businesses had to pay more, with wages increasing at the fastest pace in more than 20 years. But now that many of those companies can no longer afford the top talent on declining demand, they're scaling back, with even companies like JP Morgan, Tesla, Netflix, and hundreds of others cutting costs in an effort to stay afloat.

Four, the U.S. personal savings rate is quickly declining as it is right now. Americans are spending a higher portion of their income on necessities like food, energy, and housing, and as a result, the U.S. personal savings rate has fallen to 2013 levels. The savings rate is the lowest it's been since 2008, and credit card debt is approaching a record amount. It's estimated that at the current pace, the average American could run on savings between September and December of this year before they'll have to resort to borrowing to stay afloat. This points to a bleak outlook that the average person has less money to spend, less money to save, and the majority of their income is being swallowed up by higher costs, leading to lower earnings, less profits, and a falling economy.

So, in terms of how bad things could potentially get, it's important to understand past market crashes, and that way you begin to see exactly what's possible. First, let's start with the bear market, which is defined as a 20% drop from the peak. Since 1928, this has happened 26 times, although in terms of the larger, more disastrous times throughout history, these are the few that you should be made aware of.

In 1929, the Dow Jones declined almost 90% over three years in the worst stock market drop of all time. Now, even though on the surface it appears as though it would have taken you a full 25 years just to break even, when you account for deflation and dividends, as long as you stayed the course and didn't panic sell, you would actually break even in just four and a half years after that.

From 1937 to 1941, we saw another stock market drop of almost 50%. The aftermath was a 10% decline in GDP along with a 20% unemployment rate, but the markets eventually recovered. We saw one of the longest-running bull markets in history after the end of World War II, and then the 1960s happens when the market declines 36% along with the subsequent 48% drop through 1974.

There's also the 2001 dot-com crash where the market declined 36%, while tech stocks lost 78% of their value and took over a decade to recover if they were lucky. We also have the one that I distinctly remember: the 2008 Great Financial Crisis, where the market lost 50% after the collapse of the housing market. It took nearly six years for the market to return to its previous high, and besides a quick interruption with COVID, we've largely continued on the same trajectory of one of the longest-running bull markets of all time.

Of course, on top of that, we also have the risk of a recession, which is defined as two consecutive quarters of declining GDP, which we already have one. However, it's important to mention that a recession does not always equal a market crash, and a market crash doesn't always equal a recession. But, when they occur together, it's usually not a good sign. Just consider this: from 1869 to 2018, there have been a total of 16 recessions which had positive stock market returns. In fact, of those positive recessions, the market went up an average of 9.8% during a time the GDP declined by 3%. Or basically, in other words, out of 30 recessions, only half had any correlation to the stock market whatsoever.

According to A Wealth of Common Sense blog, throughout every single recession since 1945, the stock market has at some point seen a sell-off, with the average drawdown coming in at a whopping 29.2%. Even worse, the unemployment rate has always gone up without fail right as a recession starts to make banners even more convincing. Besides a 50% to 60% chance of a mild recession next year, Bloomberg notes that a bear market tends to be a better indicator of a recession than a recession does of a bear market. And, uh, we already entered a bear market just recently.

So, in terms of what we're seeing today and how you could prepare to make the most of a negative situation, here's what you should be made aware of. First of all, studies show that time in the market beats timing the market. And because of that, it's more important than ever to use a brokerage that does not route or sell your order flow, of which just happens to be the sponsor of today's video: Public.com. They're an investing platform that helps people be better investors.

What's even more helpful is that they give you real-time information about your portfolio and the markets to help you invest with context. For example, their news alerts give you timely updates on why certain assets are going up or down, and their live audio feature allows you to hear from experts, analysts, and journalists about the important news of the day. It's just an all-around really good app. It's very simple to navigate, it's easy to use, they put their investors first by not routing and selling their order flow. Plus, you can follow me on there because I'm posting my own updates on the market every single week, and best of all, it's a way to give back. They want to invest in you by giving you a free stock slice worth all the way up to a thousand dollars just by signing up and making a deposit with the link in the description and using the code "GRAM."

That's it! So again, feel free to use the link down below in the description to get started today. And now with that said, let's get back to the video. First, as Patrick mentions, it's really important to reframe your beliefs about a recession in a way that it's actually a good thing to look forward to. In fact, he makes a fantastic comparison that the peak of a market cycle acts the same way as a forest. This means that only the largest, most established trees or companies get access to all the resources, or in this case, sunlight. Everything at the bottom has a very difficult time growing, and it's hard to compete.

But just like natural forest fires, our economy has a way of repeatedly clearing out and bankrupting the companies who can no longer sustain themselves, giving opportunities to newer, smaller people and companies to grow and take their place. This is extremely important now with, as he calls, all of the fake success that's plagued our economy throughout the duration of the last bull market. But when the market has its forest fire moment, those able to weather the storm will give way to the people and the businesses who are able to fundamentally grow faster than at any other point in history.

Not to mention, anecdotally, I've just so happened to have experienced the exact same thing. I started my career in real estate in the beginning of 2008, right as the market entered a recession. In half my office left. From the outside looking in, I probably started at the worst possible time. But that meant that I was able to start my career at a time where there's very little competition, and when the market was constantly falling. That taught me that if I could survive that market, everything else that comes after would be easy, and it was.

So, in terms of what you could do right now and how to prepare, here's what he recommends. Now, by the way, I want to make it clear: full credit goes out to Valuetainment for providing this list because he was able to give out some fantastic wisdom that I wholeheartedly agree with. So, it's absolutely worth it to watch his full video that I'll link to down below in the description. But in terms of where you could start:

One, anticipation. This just means that at all times, you should be aware that prices, business demand, and the economy do not just go up continually forever. Because of that, if you want to get ahead throughout these next few years, you'll have to put in the work and make sacrifices during a time where most people refuse to adapt to a new economy.

Two, risk tolerance. With this, you must have a plan ahead of time with regards to what you are and are not comfortable risking in regards to your age, income, savings, and goals. For example, if you're a few years away from retirement, it's probably not a good idea to throw it all in cryptocurrency. Likewise, if you're young with a stable career, you probably shouldn't be all cash while you could actually afford to take the risks. So, keep that in mind.

Three, carry cash. I'm a firm believer that even though your money is statistically best off being invested as soon as possible, there is a benefit to the peace of mind of having cash on the sidelines to take advantage of an opportunity if it comes up. For me, cash usually makes up anywhere from 15% to 20% of my portfolio depending on the time of year. But generally, this has allowed me so much flexibility to jump on good deals when I find them and let me sleep at night knowing that no matter what happens, I have something to fall back on.

Four, avoid major real estate deals. Now, this is something I'm a bit mixed on, because on the one hand, you should absolutely not be speculating on short-term real estate values in a market like this. But on the other hand, if you find a property that you intend on keeping for at least seven to ten years with positive cash flow in an area where you're able to negotiate a good price, then potentially it could make sense.

Five, have a serious business plan in place. To me, this means that you track your income and expenses, cut back unnecessary spending, and operate lean while you continue investing on a regular basis.

Six, precious metals. Now, he recommends five percent of your portfolio be allocated towards this or a mixture of cryptocurrency, and everyone tends to be extremely opinionated on this. But I will say, historically, gold has been a rather poor investment when you compare it to holding equities or almost any other strong asset. Now, with cryptocurrency, however, even though Bitcoin has been the top-performing asset of the last decade, it doesn't have a long enough history to suggest it will continue to do well during a down market. So, I personally think take a small risk with cryptocurrency if that's something you're comfortable with, and if you're looking for portfolio stability, gold doesn't hurt, although there are probably some better options.

And finally, seven, protect your career. This, at the end of the day, is going to be your best hedge against everything. After all, the worst-case scenario financially is not the market going down; it's the market going down at the same time that you lose your job and have to sell off your investments at the market bottom to stay afloat. So, now is the time to improve yourself, learn new skills, double down on everything you're doing, and use that to your advantage.

Lastly, in terms of making millions from this next market cycle, Patrick has 10 steps that he believes you should follow. Although instead of listing them off one by one, since you should probably just watch his video for that, I thought it would be better to cherry-pick my favorite examples and add in a few extras that have worked really well for me.

So, one, as he explains, monetize fear. Like throughout the last two years, every single asset was going up in price, and it was impossible to do wrong. But now that people are panicking and afraid for the worst, this is your time to capitalize by picking up on the pieces that others have dropped. And he also makes a great point that people only listen and learn the most when they're afraid. So monetize that fear and turn it into a lesson that you could take with you forever.

Two, only invest long-term. Generally, it's not a good idea to invest the money you'll need throughout the next five years and preferably longer. The best course of action is usually just to continue on as usual and continue investing like nothing ever happened.

Three, you should diversify your investments. Like, if you can't handle a 20% drop in price, then most likely you've invested more than you're comfortable with and have perhaps invested too aggressively. The more legs your portfolio has to stand on, the less likely it's going to collapse should a few of those decline in price.

Four, start learning new skills. But Graham, this takes time, and I gotta start making money right now. If you have an extra hour or two a day in the evening to advance yourself or learn a new skill or put yourself ahead, absolutely do it. These skills are not only going to help set you apart, but they're also going to give you more mobility and something to fall back on should something happen in the economy.

Five, take on a side hustle. In fact, from the very beginning, I've always advocated to create as many income sources as possible and never place all of your eggs in one basket. This means that maybe you take on more hours during the work week, or you work on weekends as well, or you cut out the time wasters like TikTok, Netflix, and everything except for YouTube, because at least YouTube is helpful—it's educational, it's good.

And finally, six, keep learning. The fact is the drive to keep educating yourself and improving is going to pay off tremendously in the future. Plus, everything you need is already for free online. Just take what you learn and then immediately put it into action, so that that way you could form a concrete habit.

By doing these six steps, as well as preparing ahead of time, there's no reason you shouldn't do incredibly well throughout whatever happens. Plus, in relation to the stock market, the good news is that even though there can be an abrupt sell-off, by the time a recession is over, the market actually recovers and has posted an average profit of 1.7%, with an average gain of 15.3% in the following one year. That means that investing during a recession is one of the most profitable times to invest. Not to mention, in the three years following every single recession we have ever had, the market was 100% in the green.

In terms of Valuetainment's overall 50-minute video, honestly, it's one of the few videos I would recommend watching twice. It really goes to show you that times like this don't have to be something to dread, and for so many people, the best opportunities came into time where no one else was prepared for it. Riches are very much made in recession, so take that to heart. Get really good at what you do, and no matter what, subscribe and hit the like button if you haven't done that already. Plus, watch Patrick's full video down below in the description because he says it way better than I do.

So, with that said, you guys, thank you so much for watching. Also, feel free to add me on Instagram. Thank you so much again, and until next time!