Investing within different economic cycles

JC Project Freedom Economic-Clock
Economic clock

At 12:00 which is the height of the economic season of summer. This is economic boom time and consumer sentiment is buoyant. The economy has lots of hot money. The interest rate is increasing, this is the peak of the economy. This is known as an economic boom.

At 3:00, it is autumn, marking the transition from summer into winter. In economic terms, we experience falling share prices, commodity prices and monetary policy is tightening, and money becomes less liquid in the economy.

At 6:00, the economy is in winter. There is no confidence in the economy and investors are on the sideline. Businesses’ bankruptcies are at their peak and people lose their jobs.

At 9:00, the economy is in spring. There is an overall recovery in the economy. There is a budding rise in consumer confidence and monetary easing starts, liquidity starts to enter the economy.

The broad trends are as follows:

12:00 – 3:00 Real estate values are declining. There is a slowdown in the economy
5:00 Small business bankruptcies increase and job losses rise.
3:00 – 6:00 Unemployment, contraction of world economies, and recession.
4:00 – 6:00 Stocks enter a bear market
6:00 Deep recession
6:00 – 9:00 Recovery
7:00 Banks increase liquidity.
10:00 Increased building, development, and buying of lands
11:00 Easy money
9:00 – 12:00 Economy boom

Greed

Between 8:00 and 1:00 of the economic clock, the emotion is greed. With banking sector is lending money to businesses. Borrowers took on debt and hit their highest around 12:00. Buyers are paying high prices for real estate. At 3:00 they owe more because of the high-interest rate and there will be fire sales and bank auctions on properties.

Fear

There is fear in the market and recession is on the horizon. Large companies are failing. Share prices fall. Property is always lagging behind the stock market. Banks tighten the money supply around 5:00, there is no more liquidity. There are high unemployment, fear, and bankruptcies at 6:00.

Indecision

As investors, we need to wait for 7:00. Banks start to release their wallet and release liquidity. While other investors are hesitant, we need to enter.

How to invest – Economic Summer

As a business owner, you need to reduce your fat for the upcoming autumn. Reduce cost and control your credit cards. You need to buffer and build up your cash reserves. As a property investor, you should not be buying properties but you should be selling as it is a seller’s market. There is insanity in the property market. Demand is more than supply. When everyone becomes property agents and when everyone is talking about properties – RUN.

How to invest – Economic Winter

This is the transfer of wealth from financially uneducated to financially savvy.

As a business owner, you need to capture market shares between 3:00 to 6:00. You need to capture their customers. Companies that do not have sufficient cash will not survive the winter. This is when you can buy other businesses or take over their businesses.

For the property investor, you need to buy as much as you can during the winter. The cash reserves during the summer will allow you to buy properties at a bargain. It is a buyer’s market. Those with cash can take opportunities at these best deals.

6:30 Increase stock share ownership
9:00 Increase property ownership and reduce bonds
12:00 Reduce stock share ownership, increase cash reserves
3:30 Increase property ownership
3:00 – 6:00 Acquire businesses. Increase profits and exit at 11:00. Use the money at 3:00 to buy businesses that fail due to poor management
9:00 – 11:00 Fix your bank interest rate. Between 12:00 – 1:00, interest rate increases, refinance and fix interest rate.
11:00 Revalue your property and draw down credit (if needed). Use the credit at a favorable interest rate to fund purchases at a later time during distress.

Where are we now?

At the point of writing this, we are between 1:00 – 2:00. We are seeing rising interest rates with falling share prices. Property prices are lagging and will drop at 6:00. Hence, this is the time to prepare funds to buy or start a business. Then at 6:00, we will be shopping for more properties.

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