Professional Documents
Culture Documents
OF THE NEXT
RECESSION
www.recessiondays.com
“in the land of the blind, the one-eyed man is king”
Erasmus
Last time it was ugly. The Great Recession came and affected Before we started writing this book we’ve asked ourselves the
billions of people. Millions of people lost their jobs, thousands of question: “What people do need to know about the upcoming
companies went out of business, many people experienced a total recession in order to prepare for its dangers and to take advantage of
wipe out of their savings and investments. the opportunities it will create?”
Now when the next recession is approaching … this could happen The answer was inside the question itself. There are three parts:
again!
• the coming recession;
• dangers;
All this might be avoided if people are prepared for it. That is why
• opportunities.
we wrote this book to raise the awareness, to increase people’s
knowledge in the area and to prepare them for inevitable coming So we’ve decided to divide the book into three main parts which
recession. we call days:
Day II
Focused on what might happen, what danger lies ahead. We’ve covered major economy
areas where the recession might cause a lot of trouble. Also few of the most popular
financial instrument like stocks, gold, fiat & cryptocurrencies and other.
Day III
That is what everybody is looking for – the opportunities and how to benefit from them.
Real opportunities with the explanation of the risks associated with them.
If you are like a chess player looking few moves ahead, if you are not a man/woman
of the extremes and you do believe that to some extent a particular future event might
be forecasted, if are a person who is always looking to be ahead of the others, learning
something new, exploiting different opportunities … then this book is right for you.
Next pages contain selected parts of the book “3 Days of the Next Recession”
Nothing...
This is the future or at least the future most of the people see when they try to look into it. They can’t see anything.
The smallest piece could bring you huge benefit. So if you could get even a glimpse of the future you could make a fortune!
But it is not easy, right? Some actually believe it to be impossible. Others, like some fortune tellers on the carnival will tell you that they
can do it all day long.
Well, none of this is actually true. While it is impossible to know everything that the future holds, some small particles of it can be
foreseen. Like for example a cyclical event that happen from time to time.
You don’t know when a volcano will erupt but if it is active you know that one day eruption will happen. And it will right after you see the
big smoke and frequent earthquakes.
You don’t know exactly when it will start snowing but you know that usually this happens in the winter season and there will be winter
this year, and the year after that, and so on. If it is getting cold, the day becomes shorter than the night, all the leaves have fallen than you
know the snow is soon to come.
So there are some events which can be forecasted. Not 100% - like knowing the it will snow in London at 6:03 PM on 12/22/2018 but more
of a forecasted to some extent. Those events might bring you fortune! So you just need to find them.
To make a really educated forecast of a future event we need it to meet two conditions:
The second one is connected with the actual ability of some events to be forecasted. Lets consider the following example guessing the
next number in the game of casino roulette. What spinning the ball inside the roulette creates is not an aggregate event. It doesn’t depend
on anything. Well maybe depends on force applied on the ball, the cleanness of the roulette and so on but those can’t help you guess the
number. That is why if the roulette is fair (not manipulated) you can’t guess the number and can’t benefit from it (but the casino will). The
same is with the lottery numbers.
It is happening from time to time, it is a cyclical event. It is also a result of many other events. Some of them cause the crisis, some of
them happen in the same time.
What if you can make and educated prediction when will be the next global crisis? Will it be beneficial for you?
Of course it will be – you will avoid all the dangers and take advantage of the opportunities. Do you remember how many markets crushed
last time in 2007-2009, and how some of them made an extraordinary rebound, reaching almost to the sky in the years after 2009?
That makes the next economic crisis the perfect opportunity in our quest for a wealth distribution event which can be educatedly foreseen.
But wait a minute... why not make our lives easier? Global economic crisis depends on too many factors. It can happen from everywhere,
many things can cause it, actually more than we can handle.
To increase the odds in our favour, or in other words, to make our forecast more reliable, we need to find an event which is not that global,
but still very big on its own and is an event which can lead to a global one.
Yes, if it is not the whole world, we go for the biggest economy. There is a plenty of data on it, the US recession itself will bring many
opportunities , have a strong global impact, and potentially even lead to a global crisis.
A recession is a normal part of the business cycle, an unpleasant one characterised by a significant decline in economic activity going on
for more than a few months. It is determinable in industrial production, employment, real income, financial markets and wholesale-retail
trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country’s gross
domestic product (GDP).
Following this a US recession is declared after two consecutive quarters of negative GDP growth.
This is the most common definition of a recession. Just for the record here, we’ll say that a recession can be declared based on other
economic indicators and even before those six months have passed.
Now you know what we are looking for. But can we actually know this, in advance? This is a question for which you’ll have an answer after
you read the whole e-book.
A financial recession is an event that happens time-and-time again. During your lifetime you have probably witnessed such periods of
recession already. The 1987, the Dotcom bubble in 2000, and the Great Recession of 2007-2009. If we go even further back in time we
can’t go without mentioning the Great Depression in 1929.
You can see that those recessions happen quite often and they will continue to happen in the future. But why? Why there has to be a
recession for sure? Well we can describe it in many ways but at the end it will all come to greed, fear and debt, a lot of debt.
Currently (May 2018) the FFR stands at 1.75%. But as we already saw, we need it to be at least above 3%. 5% would be better. When will
we see interest rates rise to these levels?
When divining for the next recession, we simply can’t avoid looking at the stock market market itself. There are many big market players
(like hedge funds and banks) who spend a great deal of their resources to forecast when such a big economic event might happen and
then act accordingly. That is why usually the stock market, represented by Dow Jones or S&P 500 index, acts as a predictor of a coming
recession. On average, these indices peak and then start falling six months before the recession is officially announced. Sounds good
you’ll say, but how a normal person without the resources of a hedge fund could possibly know when there is a market top in place?
It’s really a good question. To answer it we will go back to 1939 when a researcher, Edgar Lawrence Smith, published Tides in the Affairs of
Men. In this book, Smith formulated the so called Decennial Pattern. Smith researched equity prices from 1880 and came to the conclusion
that a 10-year pattern, or cycle, of stock price movements had more or less reproduced itself over the researched 58-year period.
What Smith did was to divide the stock market chart into 10-year segments and place them above each other for comparison. In other
words, he looked at market behavior in all years ending in 0 (1880, 1890,...), ending in 1 like 1881, 1891,..., then all years ending in 2, and
so on till all years ending in 9. What he found was that markets tend to perform in a similar way in years with the same final digit. For
example, the strongest years are those ending in 5 and 8,...
What is even more important is that this phenomena is still in play today, almost 80 years after Smith published and announced his
findings. That means we have 80 years out-of-sample data.
The yield curve is a line plot, at a set point in time, of the Treasury Bonds yields with different maturity dates. Usually it plots the yields of
US Treasury Bonds with the following maturity: 3 months, 6 months, 2 years, 5 years, 7 years, 10 years, 20 years and 30 years. You can see
it in other variations as well; for example 2 years and 10 years, 3 months and 10 years, and so on. The yield curve shows that the yields
increase with longer dated bonds (yield of the 10 yr must be higher than the one of 2 yr for example). If this is true, we have a NORMAL
yield curve which is associated with economic expansion.
In times under special conditions we can have a FLAT yield curve or INVERTED yield curve. Yields are no longer rising with the longer
maturity but they can be even lower. Flat and inverted yield curve is associated with warnings of an upcoming recession
We will not go into detail of why the curve actually inverts. It is because the interest rates rise and push upward the left part of curve. On
the other hand we have a specific group of investors – the smartest ones who are actually buying the 30 year Treasury Bonds (T-Bonds).
The 30 year T-Bonds are widely considered а safe haven because of their longer maturity and that they will outlive the coming recessions
and are, of course guaranteed by US government. If you want more information on why the curve inverts just google it and you’ll find a
lot information on this topic.
What is important for you as a person who is trying to predict the next recession is to monitor the yield curve. If it becomes flat or even
inverted be aware that recession might be coming...
That is the time when you see value in the stock market.
Pick the stock market of the strongest economy (currently it is the economy of U.S.A) or in case of global recession, the stock market of
economy which is not expected to fall into recession.
After that look for big, well-established companies, with years of history ... with lowest levels of debt (no debt is better, but hard to find)...
companies from Dow Jones Industrial Average or S&P 500
use the screeners to find the value … the best combination of low Price to Book, low Price to Sales, good forward P/E and dividend yield
This file contains some parts of the e-book “3 Days of the Next Recession”. The purpose of it is to show you what’s inside the full book.
This file was downloaded from www.recessiondays.com. If you received this file from other location or if it was given to you please
contact us at support@recessiondays.com
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