038 - How To Protect Your Property Investments During The UK Recession

Could history's economic playbook reveal the secrets to surviving a recession? Prepare to unlock the mysteries of financial downturns and arm yourself with the knowledge of how past events can shape our future responses. This episode takes you on a journey through the patterns and warning signs of economic slumps, from the bond market's prognostic prowess to the chain reactions of government decisions during times of crisis. Through a detailed analysis of events like the 1973 oil embargo and the 2008 subprime mortgage crisis, we expose the lessons that could steer us clear of repeating history's costly mistakes.

As we navigate the intricate dance of cause and effect in economic policy, we dissect the UK's early 90s recession and the more recent global financial collapse. Understand how initial missteps by governments can amplify a downturn, triggering job losses and a downward spiral in consumer spending. Hear firsthand how businesses adapt in these turbulent times, the impact on asset prices, and why keeping a vigilant eye on economic indicators can mean the difference between weathering the storm and capsizing. Our discussion isn't just theory; it's an investor's reflection on the tangible impacts these events have on market dynamics and how to emerge more resilient.

Finally, brace yourself as we scrutinize the responses to the 'Too Big to Fail' dilemma and the domino effect of government bailouts. We'll analyze how the COVID-19 pandemic has shaped our current economic landscape, inflating asset prices and speculation through unprecedented stimulus spending and historically low interest rates. Looking ahead, we explore what this could mean for inflation and the potential tightening of monetary policy, urging listeners to embrace the insights from past recessions to fortify against future economic tribulations. For those with an eye on property investment, our conversation extends an invitation to join a community of like-minded individuals, poised to navigate the crests and troughs of the property market.

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Transcript

Speaker 1: 0:00

Well, we're here now. The time of recording is 21st of February 2024 and, as predicted, the UK has entered recession. So I cover this off in the previous episodes number 30, 32, and even way back in episode eight. How did I know that this was going to happen? Because if you listen to policymakers, governments they say that it was out with their control and they could have never foreseen this. Is that true? And to determine if that's true, what we need to really do is objectively look at how the events played out, and one of the best ways to do that is to look back in time. So if you take a look back in time, what you'll be able to see is is there any similarities? Is there any warning signs? Why was I able to work out that it was going to happen? What you tend to find is, when you look back through time, as we're going to do in this episode today, is you will spot that there is warning signs that a recession will happen, and also sometimes those same mistakes are made. And is that a coincidence? Surely we should learn from these.

Speaker 1: 1:13

There's lots and lots of economists around the world who say that it's almost impossible to predict a recession, but yet traders and investors all around the world accurately have predicted a recession. In fact, there is a metric that is used in the bond market that has a 100% accuracy of determining if a recession will happen between six and nine months time. So I thought what we would do to start with is, first of all, we need to find out where recession is and in our recession. There's some arguments about what a recession is classified as, but it's a quarter of falling GDP. So a GDP is gross domestic product and it's effectively a country's income or earnings. And what happens in a recession is you have two negative quarters. That's generally the rule of thumb that considers if there's a recession, if that real number has reduced down and it's negative for two consecutive quarters, that means it's a recession.

Speaker 1: 2:13

Now, if you look back at time and you think to yourself, well, how often do they come around? An answer is they're quite frequent. I mean, the business cycle is usually 8.2 years and within those 8.2 years, a recession to some degree will happen. Now you have varying levels of recession. You can get into a technical recession, which is a reduction it doesn't have a huge impact and you have these huge recessions, like the Great Depression in the 30s, which had a massive worldwide impact, and if you look at even the technical recessions and all the way through to the Great Depression, there's some things that seem to happen all the time, and economists are at a loss to explain why the same decisions that are made by policymakers happen to keep causing these recessions.

Speaker 1: 3:04

It's a bit like you know, if you stuck your finger in a plug and you got an electric shock, you surely wouldn't be doing it every eight years. Surely you would pick up the lesson that hey look, maybe we should stop doing this. But, as we're about to find out, in this episode, we're going to have a look at what they are. So what I'm going to do is I'm going to cover off some of the recessions that I've dug up some information about in the past what happened leading up to it, how the recession unfolded and what was the government's response and we're going to check on what is the common themes and we're going to overlay that over what's happening today. And all these talking heads are on TV that claim that they know what's going on. None of them go through this to this level. None of them are going to go into details. So let's do a little history lesson and find out what we can spot. Why would we do this? Well, let's get ahead of the curve, let's get ahead of the game and find out what's going to happen next, so that you out there can be aware of what's likely to come, based on all the little signals that we can see here, so that you can make the right decisions and you can change your tactics to suit what's coming up ahead. So let's dive right in.

Speaker 1: 4:19

So the first one that affected the United Kingdom and globally was the 1973 oil crisis, and it was around manipulation of OPEC, so the OPEC countries that have the predominant supply of oil. They control the production of oil and how much the market gets. There was some pressure where the UK economy was heavily dependent on oil. The prices rose sharply because the OPEC countries basically cut production. So the cut production and that meant that they weren't happy that they were getting bullied around for lower and lower prices and what they wanted was to get a fair price and the other countries were putting pressure on them. So they cut production to raise prices up. That then sparked off a chain of events which then show, if you look back at some of the footage there's cars, you know, queued for miles trying to get fuel. Petrol stations had ran out of fuel and industry came to a standstill because the fuel that they're using to operate their day-to-day businesses was in scarce supply, driving the prices up and causing huge financial pressure.

Speaker 1: 5:30

So, given that there was a huge, sharp price increase in the cost of oil, that then represented an inflationary pressure because the cost of that fuel had soared through the roof, the government's response again typically with these policy makers, they always make the wrong decision, and that wrong decision manifested in this the UK government initially attempted to control inflation through wage and price controls. Now, remember that Wage and price controls. There has never been a price control that's ever worked, and still today we're seeing that. And even back in the 70s this same method was applied and never worked. So that goes on. These measures provided to be ineffective. Well, no surprises there.

Speaker 1: 6:17

Later the government pursued expansionary fiscal policies, increasing public spending to stimulate demand. So that meant that the government was printing money. They were increasing the country's debt to them, put that money out to the economy to get the thing the economy moving. And that shows that the first thing that happened there was that they made an initial response, which was to control prices, which just doesn't work in the supply demand economy that we have. So the free market has always been known to dictate the supply and demand economics and when you go in and you try and manipulate those by controlling the price, it upsets that dynamic and you get these irregularities that just cause havoc because you're distorting the equilibrium and the government goes in there to try and control prices and its chaos.

Speaker 1: 7:09

We'll come back to that, because this is in play today. So what happened after this? With the recession lasted from 1973 to 1975, unemployment rose sharply, reaching over 1 million for the first time since 1930s. So think about that In 50 years, the unemployment had never been this high. Even during World War II, the economy struggled to recover and the government faced criticism over its handling of the crisis. Now remember that people were shocked that the government handled it in this way because the initial decisions that they'd made and even over history has told them that these decisions are the wrong ones they still made them again and when they made them again, this caused massive pressure to the people in the country. So we'll come back to that, to how that plays out today. So the recession in the early 1980s. This is a cracker. So we're going to go and do a bit of digging in here. I'll read through what we've got and then I'm going to explain where all the chaos had happened here.

Speaker 1: 8:09

So the events leading up to this recession were driven by a combination of factors, including high inflation, tight monetary policy and a structure change in the economy. Prime Minister Margaret Thatcher's government pursued monetarist policies emphasizing controlling the money supply to combat inflation. This led to high interest rates, which contributed to the downturn. So there's another policy decision let's do this, let's make these policies and it had the opposite effect. It caused even more pain in the economy. So there we are again, same in the 70s, and something has happened. A policy has been pursued by the government, it's backfired and then they've brought in another policy which has exasperated the problem. That's two for two that we have in that section. The government's response was to implement austerity measures. So that means cut spending, tighten effort, then increase the prices, reduce the services and deregulation policies aiming to reduce inflation and increase economic efficiency. Now you don't need to be an economist to know that this is chaos.

Speaker 1: 9:19

An economy operates by productivity. So there's three things that happen in an economy, three types of spending that happen in an economy. You've got speculative, which is investing, purchasing things, hoping that they'll go up. There is consumption, which is people are buying things holidays, cars, items that they spend on that's for entertainment. And then you've got productivity Now the productivity spent on things like businesses people starting up a business, a company, expanding or developing a site maybe they're purchasing vehicles to expand. That then creates jobs, when that creates jobs, that creates a higher productivity and that higher productivity is the key to growth.

Speaker 1: 10:07

So in the midst of a recession, the worst thing to do is cut costs and cut funding and tighten monetary policy, because it stifles and contracts and kills the productivity part of the economy, which is the part that makes the economy work. If you look at over 80% of people that are employed, they're employed by small and medium-sized enterprises and you're taking that section, you're crushing it. It's a chaotic policy decision and this, again, we've seen in the early 80s. This was how the government decided to handle it and surely you would think that they've learned by now, but it appears not. So these policies led to significant job losses, particularly in the traditional manufacturing industries. As I said, there we go. We've just went on to say that these sections that have productivity, industry, jobs, small and medium-sized businesses that are helping to contribute to the GDP of the country, if you contract and tighten monetary policy, you're going to crush that part. And there we go. You've seen huge job losses and business failures in that section and after math of this, the recession lasted from 1980 to 1981. Unemployment reached over 3 million and the industrial output fell sharply. Remember, the productive part of the economy has plummeted.

Speaker 1: 11:29

While the economy eventually recovered, the social impact of the recession was profound, with many communities experiencing long-term economic decline. And this is the thing that happens is that the recession doesn't affect each part of the country equally. There's some areas that are somewhat unscathed and there's other parts that are disproportionately bombarded. And in the 80s that was particularly around the mining sector, industrial sector, steelworks. All these parts of the economy were totally routed out, particularly in northern parts of the country. Margaret Thatcher's policy decisions literally crushed entire livelihoods and communities that had built their whole community and town and families working in this sector and it was crushed in that short period of time.

Speaker 1: 12:25

So what have we seen there? Just the recap In the 80s really bad policy decision in terms of tightening money, monetary policy, structural changes in terms of how Margaret Thatcher was trying to shape the economy, and that then caused havoc, and then leading to the second chaotic decision, which was austerity measures and deregulation, which then just added fuel to the fire. So that's two for two We've got policy blunders initially that's caused the recession, and then we've got further policy blunders that have exasperated the recession and we've got now people that are being disproportionately hurt by these policy decisions. And you wonder why the government gets a bad rap, because you surely would think somebody sensible in here should look back through history and think about what we could have done. But it appears that this thing is frequent and happens often.

Speaker 1: 13:22

So the next recession that we have is in the early 90s, now leading up to this recession. This was triggered by a combination of factors, including the aftermath of the loss in boom, a period of economic growth in the late 1980s. High interest rates in a housing market crash, speculative lending and overvalued property prices contributed to the downturn. Now, as a guy who started his investment career in property, I know this like the back of my hand because I've looked at all the particular parts, because it was where I started out and one of the things that we can see here is that when things are left to run too hot, it can be chaotic, but there is also a situation where you can have something called the hard landing, which is you make an impact and it causes a sharp decline, or you can have a soft landing where you can return back to normal. I'll let you guess which one the government tends to go for. They tend to go for the hard landing, and some would say that is that intentional, and you would think that if it's happening over and over again, either someone's missing he keeps putting their finger in the plug, which you would think that they would learn from and some people are in the camp where they believe that that might have some intent to cause this crash. Now, what happened here? What was the government's response? So the government's pursued expansionary fiscal policies, including interest rate cuts and increased public spending, in an attempt to stimulate the economy. However, the recession persisted due to global economic conditions, including a downturn in the European economy. So one of the things that happened here I don't know if it covers off here, I'm just quickly check One of the things that was going on in the 90s was that they had an exchange rate mechanism.

Speaker 1: 15:16

So the European Union or the European Economic Area. They were using different currencies before the euro was introduced. So the UK government had a peg to other currencies within the European Union and the government had tried to hold that peg. So a currency peg is where you will not let the free market decide, you will not let the exchange rate fluctuate, you peg it to a particular number. And some of you might have heard of George Soros and George Soros was the guy who was known as the man who broke the Bank of England because he put a huge trade on to, I think, started around a billion pounds and he built that trade up to a 10 billion pound position back in the 90s because he knew that that exchange rate mechanism was going to break and he put a huge bet that the British pound would need to fall and he made a billion pounds in a day on that trade and he was known as the guy who broke the Bank of England. But a huge, huge trade and he seen exactly what was going on. And again it points to all these people around the world knowing that the government seemed to keep making these mistakes. So you would make you wonder well, why would the government keep persisting in making these mistakes? Seems to be a common occurrence. So let's see what happened leading up to that. I saw it in the aftermath.

Speaker 1: 16:46

The recession lasted from 1990 to 1992. Unemployment again rose to over 2.5 million and many homeowners faced negative equity as property prices plummeted. The recovery was slow, with the economy experiencing sluggish growth and persistent unemployment. So here's some common themes that have happened with the three of these. What tends to happen is a poor decision made initially before the recession that triggers the recession. Then after the recession is baked in so it's unfolded.

Speaker 1: 17:20

Then the government makes a further decision that causes exasperation to the recession and then unemployment raises up through the roof. And this is what happens. Businesses need to tighten their belt. They're not doing as much business because there's not as much money. People aren't spending the same amount of money and in these three cases what's happened is there's been an increase in interest rates, which are curbed at available amount that people have to spend. If people aren't spending money, then that money isn't going into businesses. If businesses aren't doing the same amount of business, then they need to cut costs. One of the first costs that they can reduce that is the biggest amount is staff. That then leads to unemployment, then further exasperates the spending part, because if people aren't in jobs, they aren't then spending in the businesses, then the business needs to cut, and so on, and it's like a doom loop it just gets worse until it bottoms out. And that's why you've seen a few of these cases.

Speaker 1: 18:14

The government, when they're a day late in a dollar short, try to increase, stimulate the economy with fiscal spending. So the idea is they're trying to push money into the economy now to hope that it starts to circulate. So it ignites it back up. But time and time again, what we've seen is they make the wrong choice before they then inject the money in via fiscal spending, and it's a classic case of the same mistake over and over again. But the upshot of that is the first thing that we see after a recession is a reduction in spending, and that reduction in spending will cause things like car loans being not being repaid, so you'll see defaults and car loans because people can't afford their vehicle. People will start to lose their jobs, there'll be wage cuts, these things of this nature. So this is what happens when you get a situation when a recession unfolds. Asset prices typically will come down, dependent on the type of recession. That can vary. People will be forced into selling things, so they'll be selling things like their houses and cars. Some people might not be able to afford them and those will show up in defaults.

Speaker 1: 19:25

And this is the sort of data that I'm looking for when I'm monitoring the amount of data that I can see so I can understand what's going on. There's much more advanced things like house builders how many plots are they starting on, how many housing planning permission applications are they putting in? And you can watch how if that's increasing or decreasing sharply, and it will tell you what the sentiment is of the players. That are the actors within the economy. They are playing their part and you can see how they feel based on all these data factors. But, to keep it simple, what happens is generally, when a recession hits, they need to reduce, and you can see things that are before the recession if you keep an eye on them and they will give you an indicator the recession is going to happen. That was how I was able to predict it. And then, when that recession happens, what's likely to happen next and you can monitor where that's been affected and, as I mentioned earlier on, the effect isn't equal over all parts of the economy, so there's parts of the economy that get relatively unscathed and some of them have a real pain. So the next one. That's in recent memory. Now here's the thing as an investor that's invested through this time period, I know what's happened here because I was investing before it. I had seen the information beforehand, I watched the whole thing unfold in slow motion and I watched how that changed the dynamic of the market and I remember what it was like in the aftermath of it and I remember what it was like on the way out. So let's take a look.

Speaker 1: 21:00

Yeah, so 2008,. The subprime mortgage collapse. Now, what was going on up to this point in time was that the investment world was packaging up some rather dodgy mortgage products and people that should have never been able to get mortgages were being offered mortgages that they've never been able to repay. But these big banks were all being paid handsomely fees to get these mortgages and sell them into the market, and that then created this huge, massive boom that was going to go pop, because what they were doing was they were being paid huge fees to get these mortgage backed securities, which were considered triply rated. They were the best of the best of the best. It was secured on a house. They were traditionally safe and that entire reputation of them being safe was used and abused by the big banks. So they were just throwing money out the door and that then fueled a huge housing boom because people were buying houses at any price. There was people that had never been able to access funding for these houses. They were given mortgage handover fist and what happened at this point was that they that dynamic was completely knocked out of kilter as house prices were elevating all the time. There were some months where house prices were going up 10% a month and you were seeing, literally you could buy a house, sell it again a month later and it would be 10% higher.

Speaker 1: 22:43

And it was when something like that is going on, even though it's unsustainable. It's like a you know, a building Jenga blocks. At some point it's going to topple over. But people want to be in the game and if you get out before the thing topples over, then you know have you played the game right? Well, it's up to you to consider the morality of that. If you do, if you're aware that it's likely to end in disaster, but most people don't think that far ahead. You see something good and they jump into it.

Speaker 1: 23:14

At the time that I was investing in this period of time, I seen that there was something up, because I thought this thing isn't sustainable. Like, how is it? People can keep paying more and more and more and more and more and more. The simple mathematics were this is that right? If people, if a mortgage is worked out on your earnings, then there needs to become a point where the average earnings can't sustain, or the average earnings must sustain, a maximum mortgage availability. So there comes a point where there's a maximum ceiling that it should be and that ceiling was getting blown right past. And that was fueled by the big banks offering loans to anyone.

Speaker 1: 24:02

Just, things weren't considered. They weren't interested on scrutinising if people could afford it. They weren't interested in double checking if they you know they were a good pair. What their history was like? It was get as many of these in so that we can put them into these you know products and we can sell them. And that was the banks game. They're making billions and billions and billions of dollars and pounds because, predominantly, this all ended up in the US subprime market. This is where it all ended up ended up in the bigger economy, and the idea would be that these institutional funds would purchase these products, thinking that they were a great you know great long-term investment.

Speaker 1: 24:46

What they didn't realise is that the top layer and the bottom layer looked good, but what was signage in the middle was just garbage and because the banks were getting paid so much money, they were just like let's ride this gravy train here in the UK, one of the things that started to unfold was the run on the bank Northern Rock. So the Northern Rock had said that it was needing bailed out and that they were going to be running out of liquidity, which most people would know is money. They needed a hand and that they were going to be stuck if they didn't get their hands on some short-term liquidity. That news got out. That caused people queuing outside Northern Rock and people you've literally seen the media like Sean People going into the bank to see like we want to take our money out of the branches. Now, that's not entirely how the banking system works, but it shows a great representation on how people think and that they believe. Look, there's a risk here. I want my money out of the bank, because later on you see what happened in Greece. In Greece they had austerity measures and the bank just took the money that was in customers' accounts and bailed it in and exchanged it for bank stock. So people naturally had the right inclination and that look. I'm more concerned about the bank, and rightfully so. But that was in 2007 and, as we've seen here in the data, the market actually crashed in 2008,. But the writing was on the wall but people just went on like nothing had happened and this bubble was getting blown bigger and bigger and bigger and bigger. So eventually it all unraveled.

Speaker 1: 26:19

There was a movie called the Big Short. Big Short covers the Christian Bale plays the trader, michael Burry, who made a huge bet that this thing was going to go pop. It was laughed out of the offices from some of the big investment banks when he was asking for a product to take a position against this mortgage product. People thought he was nuts and he ended up 471% up after it was all said and done because he knew this market was going to implode.

Speaker 1: 26:48

Back to what happened here in the UK. So the huge banks sometimes called Too Big to Fail and the reason that they're too big to fail is that they're so large and people have so much of the population has accounts with them. If that bank collapsed, it would be an even bigger problem for the country and the government to deal with than to bail them out. So, even though they've made the mistakes, even though they've known what they were doing, even though they've made all this money, the government had to step in with a rescue package that was agreed with the central bank to cover this situation, to provide up to 500 billion quids worth of liquidity so that they can see it through. That ended up in the partial nationalisation of the Royal Bank of Scotland and the Lloyds Group. And then there was some reshuffling. Some of the banks bought the other banks and they tapped into this liquidity pool.

Speaker 1: 27:43

Now let me put that in plain terms for you If you can't afford your mortgage or you can't afford your loan or you've made a bad financial choice, well, you get these things taken away from you. You don't get a chance. But if you're a big bank that's too big to fail, you can make all these billions and you can make all this money and you can blow up a huge property bubble. And what do you get? You get a half a trillion pound credit line. So you get a credit line to see you through until you get it fixed. And this is what happened. And again, what happened in the United Kingdom was a really deep, sharp decline. So lots of people ended up in negative equity, lots of people had to have their houses repossessed, car loans again were in default and unemployment rose to over 2.5 million people again.

Speaker 1: 28:38

And the government then again making the same policy. Wonders where they're saying look, we're just going to keep making these decisions, we're not going to intervene until it's too late, and when it's too late, we're going to come in again and we're going to make the same mistakes that they've made over and over again. So what can we make of that? Well, what we've been able to look at is, in the short history of the recessions is that the governments do. They would do well to look through their past history of their actions, and if they looked through their actions, they would see some telltale signs, and those telltale signs are in different forms. They make a policy decision or a decision that is going to impact the economy. When that impacts the economy, that then leads to the recession. When the recession happens, that then leads into them making another decision austerity, tightening of the monetary policy, price controls that are a complete disaster and they just don't work. But time and time again, they keep doing the same thing and that exasperates that recession and they get lots of unemployment. And then that then further exasperates again as people stop spending. Businesses need to keep tightening up and tightening up. They've got a lot of business failures, a lot of defaults, a lot of repossessions.

Speaker 1: 30:01

This is all doom and gloom. Well, is it With your position? Properly? This is where you can either get caught up with the wave that wipes people out, or you can move to higher ground and you can ride out this particular storm. And the smart way to do that is to first of all, understand what happens with these recessions. So, as we pointed out, you're going to get an increase in unemployment, you're going to get a tightening of lending, so banks aren't going to be willing to lend as freely as they have been, and you're probably going to see asset prices falling. What does that look like in 2023? Going into 2024?

Speaker 1: 30:42

Well, as I said, here was the policy decisions that were made. So it's looking back through COVID and that period of time. Lots of people believe that the government were making the right decision, and now even people that were in government have said look, we didn't make the right call. That policy decision set off the motion that caused the problem that we're seeing here today, and what they've done is they've put massive amounts of money that they've printed out of thin air to then put into the economy, and that they've shut down the productivity part of the economy. Every minute they lock down and they just threw lots of money out into the economy. So if people can't use it for productive means, there's only two other means that are left. Remember, there's three there's productivity, which is one, the second one is consumption and the third one is speculation, and what we've seen is that if you shut down the productivity part, it only leaves consumption and speculation, and what we've seen was a huge run up in crypto.

Speaker 1: 31:41

We've seen a huge run up in the stock market as people are starting to play around. They've got this money that has been handed to them and they go out and just start speculating. Some people will move it to consumption. They will have spent it on various things and you can see there's rise up in prices, and what we've seen that is a rise in the second hand car market. We've seen prices in the new car market, we've seen rises in the property market, we've seen a rise in the stock market. But, as I said, what goes up must come down to find its natural equilibrium.

Speaker 1: 32:11

But with all this money going out, it was done at an extremely cheap rate. So people felt euphoric and with that euphoria, what they did was let's move to a bigger house and a bigger house, and a bigger house. But they buy the cars and everything seems great and we've got more money than we normally have. So then, if that's a tiny interest rate, that interest rate at the central bank at that period of time, during COVID, was 0.1%. And remember what happened in the two recessions that we read about? What was the first mistake the government had made? Tightening of monetary policy, which normally means the increased interest rates.

Speaker 1: 32:50

And what have we seen that they've done here? They created the inflationary pressure not by interest rates being low, because the interest rates have been low since 2010. What the inflationary pressure has came from is that you've cut the supply by going into lockdown and you've increased the demand, because if the supply is shut down and there's fewer of these things going about, the prices go up. And if people have got no money to spend on productivity, they're spending on consumption. So if everybody's out chasing the same products at these new higher prices, that causes inflation. But the inflation was driven by the lack of supply and you shutting down the productive part of the economy. It's not been made because there's an interest rate problem, because the interest rates have been that low for nearly a decade. So you get everyone on this cheap lending. You get everyone on the cheap lending cars, mortgages, various other loan types and all the prices rise up because they feel that you can afford it. And if you raise interest rates, they've raised interest rates over 500%. It's moved from 0.1 to over 5% interest rate. That's a huge jump and we've seen what happened when they doubled it. So to go up five times is a huge shock. And then you wonder why the UK is now in a recession, and this is what we can see here.

Speaker 1: 34:16

So my top tips for how to handle this recession would be not to go spending excessively on consumption. So if you're doing that, cut what you can. So if you've got anything that you're paying for that you don't use, if you've got an exuberant car and you're paying for it, then consider getting rid of it. If you can look at maybe getting yourself a new mortgage rate that you can reduce your cost down or at least lock in something that's sensible, consider doing that. Tighten the spending in, because if your mortgage rate comes to an end, from this 1% interest rate and you're now going on a five or a 6% interest rate, you might not be able to afford your house. So make the cuts where you can plan ahead and make sure that you can figure out how to do it.

Speaker 1: 35:06

But cut consumption and start to look for things that work in an environment where a recession plays out. So things that always work in a recession is capital will find productivity. So if you can find a productive business venture that can help in the economy, then capital will come and find you. So, particularly if you're not even ready to start a business, if you're looking for additional income, the way to go and find another avenue to get another income stream is not a bad play at this point in time, because if you're going to be under some constraints in terms of financially with the amount of money you have monthly and these bills are going up, then you maybe want to consider increasing your income as well as reducing your costs. So a very, very savvy way. Another thing is that, before this crash really unfolds, if you've bought an exuberant house and went absolutely all out, then possibly consider maybe shifting that on before the market unravels.

Speaker 1: 36:08

Because people often ask me do I think interest rates are going back to what they were? I don't think they are. Do I see them going and turning up 500% and then reducing it back down to 0.1? No, there's not a chance. So I think that these higher interest rates are here to stay. They may come down a little bit, they may go up a little bit, but it's certainly not going to go back to what it was. So we need to plan ahead with what they are.

Speaker 1: 36:35

Some of the other strategies if you are a property investor, they start to look for investments that generate high cash flow. So look for the things that are going to maximise your returns, because capital appreciation isn't going to be in the cards right now. If you're going into a market where asset prices are falling, looking to back purchase properties that have an appreciating profile is not in the game plan. So you can pivot and switch to properties that have a higher cash flow component, that generate a higher yield. They are the places to aim for, and, whether you are a seasoned investor or you're looking at the tightening of your belt to ride out the storm, there are some top tips on what you can do. Precious metals is always a savvy play and in times of economic uncertainty, precious metals do very, very well. So if you've got some cash around sitting that you want to place somewhere, consider maybe putting some of that into the precious metals. Gold's a good old favourite. They're a good place to park your money and keep it for a rainy day. So there's my top tips. Hope you've enjoyed this. I hope it's been a little journey into the history of recessions what's coming up next, what you can do and how you can ride the storm.

Speaker 1: 37:49

If you like this kind of content, visit my website at geomagnetcom. I'm running a mindset community where I'm helping people fine tune their mindset. As I've said to you, if 100 people come to me and ask for advice, 99 out of 100 have a problem with their mindset. They have a problem with their mindset and their expectations. So this is a place where you can fine tune and hone your skills on your mindset to make sure that you're getting that potential out of yourself and that you're in the right frame of mind to do so. I've also got starting a property community. So if you are involved in property and you want the cutting edge information, you want forecasting, you want to know how to do it there's lots of great information in there, so send me a message, dm me on social media. If you want to follow the property market and you want the cutting edge information, contact me on social media and I'll be sure to give you the link that is coming extremely soon.

Speaker 1: 38:45

Also, developing a property investment course it's an all season, all weller strategy that shows you that this thing moves in cycles. And, just like I've alluded to there, there's a strategy that did work a few months ago and now we're pivoting into a new strategy and the way to understand how to do that is all within this property course and it's a no nonsense, no BS, no false promises, none of this guru you know make you a millionaire in seven days garbage. This is real hard proven ways to be successful if you want to be a property investor, and it's from property pros that have been there, done it and got the t-shirt myself. I've invested through three recessions between 2005 and now. So I understand what it's like to go through a recession, understand how it changes and what's coming up next.

Speaker 1: 39:38

So if you are serious about your property investment future, then I would highly recommend giving that course a look to make sure that you're up to speed. And if you are already there with your knowledge, come and check out the property community where you can keep abreast of up to date information to let you know what's coming next. Because this forecasting bit takes time, it's difficult, it's not for everyone. So if you want my tip bits and what to look out for, I'll be posting them in there For me this week. That's a wrap.