
How to survive and thrive in a down market - allenleein
http://calacanis.com/2018/07/25/this-is-your-captain-speaking-im-turning-on-the-fasten-seat-belt-sign/
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rcarrigan87
Student loan debt usually can't be discharged through bankruptcy so it's
unlikely to cause some kind of panic sell-off even if the loans being made are
low quality. The debt will continue to be a noose around the neck of consumer
spending power. Indentured servitude 2.0.

~~~
jjoonathan
Today's businesses rely, directly or indirectly, on consumer spending power.
If its decline hasn't been correctly worked into the present-value-of-future-
dividends (aka price) and the market corrects, the magnitude would have no
difficulty rivaling or exceeding previous recessions.

~~~
lotsofpulp
As long as the people getting richer keep consuming enough to offset the
reduced consumption of those getting poorer, it could work out. We just have
to ignore the part where 20% of the population enjoys life while 80% go
through the grind to provide for the 20%.

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gatsby
Investors frequently say things like this:

“Am I at, or can I get to, profitability on the money I have?...(If so) Go
raise “opportunistic money” from your existing investors at a good or great
price.”

If you’re profitable and believe that your customers will continue investing
in you, you should think long and hard about raising more capital as “the
answer.”

Raising more capital is _sometimes_ the answer, and it’s an investor’s job to
convince you that raising capital is _always_ the answer.

~~~
VBprogrammer
That statement made me feel uncomfortable. Isn't it exactly this type of
attitude that creates financial bubbles in the first place?

Without a plan, or even a good reason, for that money how does it contribute
to making your business more profitable or resilient to the vagaries of your
market? In the short term it'll keep you afloat but that isn't going to be a
big consolation when the money does run out. Stock piling cash in exchange for
huge amounts of equity seems totally irresponsible.

~~~
weavie
> Bottom line: In almost all of the cases above, my advice is to build a war
> chest of capital so that you can deploy it in the down market.

What I think he is saying is that in a downturn things can get tough if you
don't have enough cash to get through it, and it will be harder to raise more
money if you need it. But, in a down turn everything also gets a lot cheaper
so if you do have the cash then then you can really capitalize on this and
emerge from it as the leader in your sector.

~~~
VBprogrammer
Yeah, I can definitely see the argument for having a war chest. Building it by
exchanging a chunk of your equity for it in the hope that on the other side of
the storm (what is that old fable about economists correctly predicting 11 of
the last 7 down turns?) you can make that back and then some feels a little
too much of a gamble. You'd have to be incredibly lucky to get the timing
right.

Building a war chest by maximising profitability and minimising costs I could
definitely understand.

Perhaps I just don't have the guts for it though.

~~~
weavie
Perhaps you are a programmer and not an investor so you are going to have a
different perspective. (I tend to agree your view btw...)

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syntaxing
This has been always a question I always asks myself on a personal level. I
was still in school during the recession and graduated when the economy was
picking up so I did not experience the impact of the recession first hand. Now
that I am older, I am always worried how I can survive with my family through
the next dep/recession. Is saving up the best way to protect myself? Are there
things I can do now to increase the chances of having income during a
downturn?

~~~
iambateman
I’m asking the exact same question. If we expect to find ourselves in a long
financial winter, what can we do?

Specifically, I’m considering buying a house and renting out my current house
right now...to buy or not to buy. Leveraging up is great until house prices
drop by 30%. Then again, the previous recession was specifically a housing
crunch, so perhaps the next recession won’t create the same housing drop.

No one on this thread knows the future, but it’s hard having lived through a
very long bull market to anticipate the results of what looks to be a pretty
severe bear market.

Hussman Funds is calling for negative total returns on the S&P500 for the next
10 years, which feels like a very long time.

~~~
scarface74
As far as the house you live in, if you don’t plan on moving, why do you care
about the value of your house? For me, getting a house with a fix rate loan
was a no brainer. Rent where I was staying from 2012-2016 went up by $500 and
it’s gone up another $300 since then - and I’m neither on the west coast or
live in NYC.

Owning a house as a primary residence is a great inflation hedge. Besides,
apartments can kick you out within a matter of weeks if you don’t pay. Banks
really don’t want to foreclose on a house - especially during a downturn. You
have a lot more leeway on not paying your mortgage than your rent.

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jnurmine
"In the Black Swan, non-financial event category we could list Russia, North
Korea, China, Pakistan, Iran, domestic political unrest and the Mueller
investigation as market busters."

Instead of Black Swans aren't these more like grey swans? Their shade can be
discussed of course, some might be lighter than others.

~~~
Bjartr
I think blackness here is because they are rare, not because they are bad.

~~~
Yoric
I suspect that jnurmine meant that they are not _that_ unlikely.

~~~
joshgel
Suspect so. The fact that we can name them in advance implies they aren't that
_black_.

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montenegrohugo
I've been hearing about an incoming correction since 2013. As always, no one
has any clue when it is coming and the age old tenet holds true:

Time in the market beats timing the market.

~~~
paidleaf
> I've been hearing about an incoming correction since 2013

We've have 2 corrections the past 5 years. We even had one in the beginning of
this year.

[https://www.investopedia.com/terms/c/correction.asp](https://www.investopedia.com/terms/c/correction.asp)

What you may be referring to is a recession, which is different from a
correction.

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andrew_
I find it interesting that much of this advice can be somewhat applied to
safeguarding personal assets (including skillset and personal skill
marketability) in preparing for a down market.

Many of these safeguards are recommended for individual investors. Diversity
of portfolio is always important, but even more-so when a bull market has been
on a sustained tear. Being at least somewhat invested in the well-funded can
help offset. (YMMV but that's been my experience)

Overall it's prudent for Jason to send this to his folks. At the very least it
makes them _aware_ of the possibility, if they aren't already, of a down
market and puts that thought in the forefront.

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jaxn
The bubble that is going to pop is Ad Tech

~~~
nixpulvis
I hope this is true.

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cs702
Duplicate:
[https://news.ycombinator.com/item?id=17618431](https://news.ycombinator.com/item?id=17618431)

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rwmj
_> After a crash, the stock market tends to recover in a couple of quarters
(think three to six)._

Based on recent crashes yes, but has that always been true?

~~~
awinder
No, the Great Depression lasted 10 years, from 1929 to 1939 officially (and,
for instance, the djia took until the 1950s to recover to the bull market
levels that preceded the Great Depression).

~~~
paidleaf
Or the japanese crash of the early 90s, from which japan still hasn't
recovered.

The nikkei is about 1/3 of what it used to be almost 30 years on.

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RickJWagner
That is NOT the Captain speaking.

It's someone who wants to extract money from your wallet. Run away!

~~~
FartyMcFarter
What part of the article gave you this impression?

------
known
"Buy into a company because you want to own it, not because you want the stock
to go up; Sooner or later the market mirrors the business" \--Buffet

~~~
folli
"The market can remain irrational longer than you can remain solvent."

~~~
bluGill
right, which is why you never short a stock no matter how obviously overpriced
it is.

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dalbasal
Kind of apropos, this struck me.

 _" Venture Capitalists decide not to make capital calls to their Limited
Partners, sometimes as a courtesy, other times the result of a directive. They
know their LPs have been heavily impacted by the market collapse and don’t
want to stress them more."_

It's interesting that when it comes to financing insiders, obligations seem to
be a lot softer and more negotiable. Margin calls and capital calls. Interbank
trading, where long term loans to customers are funded by daily loans to
banks.

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moltar
tl;dr have money ready

~~~
skate22
1.5 years+ of money

