By understanding the thermostat of economic seasons, we can anticipate what will happen next and take advantage of it with our investing. Here’s what to do in each season:
In summer you need to become cash flow rich for the next expected cycle of fall. The economy is lubricated with cash and credit borrowings and companies tend to become fat and overweight. Spending is at an all-time high and most of it is indiscriminate. Just like the actions of a seasonal farmer, you must have hay in the shed to last you through the winter. Economic behavior is no different.
As a Business Owner
In economic summer, trim the fat from your business for the expected fall. Tighten expenditure and reign in the credit cards. Ensure you have ample cash flow reserves to act as a buffer for the business. Don’t wait for the winter during the depth of the recession to resuscitate your business. It will be too late.
As a Property Investor
You should not be acquiring properties in economic summer. If you plan to sell, now is the opportune time; it’s a seller’s market. The economic party is nearing its inevitable end. There is widespread speculation and insanity in the property marketplace. Auction clearance rates of properties are at record levels and there is an overwhelming sense that things are getting out of control. Demand is far outstripping supply. Banks are nervous and in order to take the heat out of the market, increase interest rates. With a speculative environment, 100% mortgages or no money down property deals are all the buzz and rage.
When you start attending weddings and parties and everyone is talking about investing—RUN. You know the party has ended and we have just arrived at 1:00 in the economy. When the taxi driver at the airport is picking you up and providing investment advice, then you know its 2:00. Beware of friends high on advice but low on financial results at this point. Some criticize others to conceal their own fear and justify their lack of accomplishment.
The economy is barren and many world economies are hemorrhaging. Banks have very little confidence in consumers’ ability to service the debt they absorbed in the speculative season of summer. Consumer spending is at an all-time low and high unemployment prevails. The great transfer of wealth from the uneducated to the educated is highly evident. There is an epidemic of market oversupply. Savvy individuals exploit this economic opportunity. Bargain hunters make a killing.
As a Business Owner
You plan for the summer in winter. You buy out your competitors between the fall (3:00) and winter (6:00). It’s not their products you seek, but access and ownership to their customers and database. Companies you buy out in this economic season did not save enough cash flow in the summer, thus could not ride out the economic winter.
The health of your business is determined in winter. Your customers think differently in winter, as their purchases are based upon their low cash reserves. They are reluctant to spend. Change what you sell and offer your best deals in winter.
As a Property Investor
You should be acquiring as many properties as you can in winter. The cash flow surplus you saved in summer will allow you to purchase properties at fantastic deals.
Auction clearance rates of properties are at very low levels and there is an overwhelming sense of economic hardship. There is overwhelmingly more supply than demand of property stock. It’s the depth of the recession, the market bottom, and a buyer’s market. Property developers are desperate to offload apartments and houses. Property foreclosures are at record heights once again with owners not able to meet mortgage obligations or pay their property taxes.
Only those that are cashed up will reap this epic harvest of offerings at pennies in the dollar. Where there is crisis, there is always opportunity.
Here are specific actions to take at each time on the economic clock:
- 6:30: Increase stock share ownership.
- 9:00: Increase property ownership and reduce bonds.
- 12:00: Reduce share ownership, increase and secure cash reserves.
- 3:30: Increase Property ownership and increase bonds.
- 3:00-6:00: Acquire and valufacture businesses. Increase profits with a pre-determined exit window at 11:00 in economic summer. Sell businesses during the speculative window of summer. At 11:00, the economy is flush with cash and buyers tend to overpay when acquiring businesses. Exit, generate quick profits, and plan to use this money at 3:00 when businesses start to fail due to poor management.
- 9:00-11:00: With bank loans, fix your interest rate for a minimum of five years. Between 12:00 and 1:00, interest rates generally increase. Refinance and fix your interest rate prior, then profit with lower repayments.
- 11:00: Have your properties re-valued and access a line of credit with the bank. The property market at 11:00 is speculative and running hot. Property valuations are approaching record heights. Use the high valuation of your property portfolio in economic summer to your advantage. Exploit the weakness between the fall and winter seasons of bar- gain-priced properties that come on the market. Have pre-approved access to the banks money at favorable interest rates.
In my next post, I look at how with your 5 Day Weekend income, you can begin to enjoy a lifestyle of freedom.
In the meantime, I’d love to hear from you. What are your thoughts about investing or capitalizing on these economic seasons? Thank you for sharing!
Secure your copy of the “5 Day Weekend” book. 5 Day Weekend: Freedom to Make Your Life and Work Rich with Purpose [Nik Halik & Garrett Gunderson]
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