We are on our way toward the next big recession.
We are at the top of the bubble. It’s both a bad news and a good news.
It’s a good news if you know how to take advantage of it and you see it coming, it’s a bad news if you close your eyes and pretend like it’s not happening.
What are the sign of the bubble?
This is the Nasdaq screenshot taken this morning, February 23rd, of Google.
Go on Google.com and type in “Nasdaq Chart” You’ll get the exact same chart updated for the day you visit. You can clearly see the .com bubble in 2000. The nasdaq went from 5000 to around 1000. So if you had $100K in stock you were left with $2oK. You can also see the bubble in 2008, look how small the bubble was but remember how much damage it cause(some say it was the biggest financial crisis since 1930). Now look where we are today February 23. Right at the top of the bubble! It started dipping about 45 days ago.
Is that an isolate case?
Here is the S&P500, same thing, you can see both bubble, but this time you can see how BIG the current bubble we are in. Now, take your guess, how low is that bubble will take us this time? Let’s have a deeper look…
Can the Federal Reserve save us this time?
The Federal reserve is the reason why we are in another bubble right now. They have been manipulating the interest rate to grow the economy for the past 20 years.
Below is the Federal reserve Interest rate chart. (The FED decide the interest rate that other bank must follow)
You can see it has been steadily going down for the past 20 years.
In 2000, to get us out of the recession after the .com bubble, the FED lower interest rate to a level never seen before.
People could not believe how low interest rate were back then! They never had seen that! By lowering interest rate, they set the stage for the next bubble.
In 2008, the bubble burst again, (What cause the bubble was the artificially low interest rate in the first place.)
They lower the interest rate to zero percent. We have been at zero percent for the past 8 years… Crazy!
What does this mean? It means that our current economy is only thriving because of this artificially low rate. It means that the whole economy is built on borrowed money… And whats gonna happen when people(and our governement) cannot pay what they borrowed?
Can you see the little blip at the end of the above chart. The FED raise the interest rate 0.5% and the economy is started tanking. When the bubble burst, what does the FED can do? Negative interest rate?
Is there any opportunity for someone that sees it ahead of time?
How to take advantage of economic Bubble
In 2008, I was 21 years old, I remember hearing people saying that the 2008 bubble was one of the greatest opportunity to make money. If you could have seen the bubble coming, you were able to place your bet ahead of time and buy everything cheap!
So how do you get ready this time?
Is gold the Answer?
When people lose confidence in the market or their currency, they invest their money in something that hold value, like gold, which hold is value for the past centuries.
Gold has been a store of value for a very very long time. China knows it and has been stacking up gold for the past years.
You can see below that Gold is at a 10 years low right now. What will happen when the media start talking everywhere of the biggest economic collapse our generation have seen? When the dollars start loosing value? Everybody will go straight to Gold. (remember this time the FED cannot “fix” it.)
What eles than gold?
If you are at ease with some risk, I think that bitcoin will react just the same then Gold, but in an exponential manner. If gold shoot up, I believe that Bitcoins will shoot up even more. Bitcoin is muhc newer on the scene, but it has in my opinion much more advantage then gold, and if gold goes to 5000$/ounce, I think that Bitcoins will go even higher.
So Gold is where to go right now and if you are at ease with bitcoins, Id say buy Bitcoins instead:
What happen after?
Well, if you bought the above assets, right after the recession, your net worth will be 10x-100x bigger. Real Estate prices will have shattered because everybody will have defaulted on their mortgage. (remember 2008) So you can use your new wealth to build a portfolio of real estate. (Buy cashflowing property)
Stock =>Bitcoins/gold => Real Estate
One thing before finishing, Im not a financial advisor.
This is only my opinion and should not be seen as financial advises. If you are going to invest your money, you should spend 100 hours researching where you are going to invest it.
Don’t spend weeks researching the best price for a new flat screen TV but only spend a few minutes picking where you will invest all your retirement money.
Don’t be like the herd. Be prepared. It’s coming…
Let me know what you think in the comment below!
Why silver will under perform and gold shoot up – http://unqualified-reservations.blogspot.ca/2011/04/on-monetary-restandardization.html
Gold price – http://goldprice.org/gold-price-chart.html
Thank you for the blog! It was really helpfull.
I’m still young, but I have €1000 in the bank doing nothing. Interest rates in the Netherlands are 0,5%, which is very poor.
I know €1000 isn’t that much, but should I invest it in Bitcoin? I’m done a lot of research for the last couple of days. I think this is the right time since the price just dropped by 23%.
What do you think?