How To Get Rich During This Recession?
Its 1918, the world is in the middle of a catastrophe. For the last four years, Europe was a ground zone for war. The allies on one side and central powers on the other. Tenths of millions of people have already lost their lives. However, that’s nothing compared to what was coming. The world was about to face one of the deadliest diseases in history. No one really knows where exactly it started, some say it began in Kansas, others point fingers at China, but during the war, no one really cared because a more severe crisis was in front of them. And the flue was just one of the consequences of war as people imagined at that time, however, when it reached Spain, the Spanish media did not stay silent since Spain was neutral during the war, and that’s when the world started paying attention.
Even then, it wasn’t the top priority since allies were about to win the war, and they wouldn’t let some kind of a flue to waste all their efforts that they have been putting for the last four years. They were ready to do everything to end the war finally. It is estimated that 500 million people were infected, it might not be much by today’s standards because the population has soared in recent decades, but back then, it was one-third of the world population. And the death toll reached up to 100 million people to some estimates or 6 to 8 percent of the global population. That is even higher than what the greatest conflict in human history caused (ww2). Crises are, of course, bad, regardless if it is a virus that’s spreading around the world or a military conflict or even an economic crash.
However, despite all of that, every crisis presents opportunities. It might seem disgusting to cash out on the misery of others. But that’s how humanity has been progressing in the entire of its existence. And the crises we are experiencing now is no different. Of course, it’s unfair to compare the consequences of each crisis. However, they all follow similar traits and patterns.
Crises by their natures seem bad. I mean, who wants a slowing economy, and high unemployment, especially when you are so dependent on that monthly paycheck. However, a crisis is nothing but merely a transfer of wealth from one group to another. To some, it’s actually a disaster that would make them poor; to others, it’s an opportunity to make a few more millions. Looking at the markets now, it seems like everything is down, the SP500 has been down by a thousand points. Still, it had recovered a little bit.
Anyway, it’s difficult to predict the future, maybe almost impossible, but what we can assure ourselves is that humanity went through many many crises, and one way or another, we have figured out a solution and somehow solved the problem. And while we are discussing the crises, people on the other side are earning millions if not billions out of it.
No matter how long this crisis is going to last, sooner or later, a vaccine will be created, and the world gets back to normal. Borders will be opened again; offices will get back to work, restaurants, cafes, and malls will welcome everyone as they did before the crises, which means the panic is going to vanish.
Which means that the SP500 will rise again or at least get back to where it was. Smartest investors understand that perfectly, so although the market is still plummeting, they are slowly but significantly investing. From December 2007 to the summer of 2008, the S&P 500 went down by 50 percent. That is a significant drop because the real estate market collapsed and dragged down with it the entire economy. Millions of people lost their jobs, businesses were closing down one by one, and even some of the largest corporation declared bankruptcy. It seemed like the world would never recover from such a catastrophe, however, few years down the road, the economy didn’t just recover, but the S&P 500 hit the record high of 3400 points before the panic of the current virus.
And whoever understood the nature of such crises emerged victories after it. Of course, those who made the wrong bet lost lots of money. That’s why it’s important to understand how the crisis is impacting the world. Which industries it is boosting and which ones it is destroying. And even those industries that are suffering, which companies would survive the storm and which ones wouldn’t.
In March, the US has banned the entry of all foreign nationals who have traveled to China, Iran, Austria, Belgium, and many other nations 14 days before their arrival. US citizens or permanent residents who have visited a high-risk area had to fly into one of the 13 international airports with enhanced entry screening capabilities.
On March 18, President of the United States announced that the US would close its northern border with Canada, and on March 20, the US and Mexico agreed to restrict non-essential travel over their shared border for 30 days. That was a big hit for the aviation industry. In fact, before that, multiple other countries, especially European countries, completely closed their borders like France and Bulgaria. With so many restrictions, revenues began to fall down significantly as everyone was asking for a refund and began canceling their flights, but that is not the fault of these airliners, many of them are still strong companies with a huge fleet of planes. That caused a panic in the market which damaged the industry even further.
Take an example of the American Airlines, the stock price literally fell from over 30 dollars to just 10, that looks like a company is about to go broke, which might really happen. But they aren’t alone; every other airliner got the hit. The stock price might even go further. But the fact is, we live in such a globalized world, that flying is not going to stop. Our economies are so interconnected that the dice will keep rolling. So once the flight restrictions will be unbanned, airlines will restore their schedules, as usual, and the stock price will get back to where it was. Which means now is the best time to invest.
The challenge is to invest in the right airline. I mean, you have to be confident that it has enough resources to survive the crises. That’s why things like balance sheets and income states exist, especially if it’s a publicly-traded company. The problem with crises is that they are causing uncertainty. And that is bad for businesses; it scares off the investors and pushes them to sell their investments. Investors are afraid to lose their fortunes, so they are massively selling their shares and cash out before it gets worst, or they simply want to sell the shares that would go down anyway and invest in companies that would rise in the middle of this crises. But regardless, it is going to reduce the demand of certain companies which would lead their stock prices to plummet anyways.
Let’s take another example, how else the virus is impacting society. Entire nations are declaring quarantine and advising their citizens not to leave their homes, including the United States. Which led to fewer people to move around, so companies like Uber and Lyft, whose business model depends on moving people, have suffered dramatically. In under a month, the stock price went from over 40 to under 15, but it’s slightly recovering.
Uber was already doing pretty bad before the virus, so it suffered enormously. Even if you take the most valuable company in the world – Apple. The stock price is falling like a rocket; it’s down by a hundred backs to 229 dollars. On one side, their supply-side has stopped. Due to the virus, the factories are shut down in China, and on the other, the panic is causing uncertainty, so people would rather save than spend their last thousand dollars. On top of that, Apple closed all of its stores. But despite the crises, Apple hasn’t lost its brand name, nor its manufacturing sides or stores. Once everything is back, the stock price would get back to where it is.
But the question is, WHEN!?
Probably, when a vaccine is ready, vaccines aren’t easy to develop, they take years of research and work and hundreds of millions of dollars if not billions just to develop a vaccine against one disease. However, without a vaccine, it’s a matter of time before everyone will get infected. Entire nations are on the line to get the vaccine so that they can get back to business. Dozens of companies and public labs around the world are working on it to prevent the spread of the virus. The most notable of them are BioNTech, CureVac, and Moderna. The stock price of BioNTech literally surged once the panic took over the world.
So whoever is going to create the vaccine first will profit enormously. As we have mentioned before that, a crisis is a crisis for some but an opportunity for others. It’s slowing down economies, taking companies out of business, rising unemployment rate, but at the same time making others enormously rich. It doesn’t matter what the nature of the crises is. They are one way or another impacting the economy, whether it’s a real estate, a dot com bubble, a bitcoin bubble, or virus.
Source: Proactive Thinker