Misfit Entrepreneur August 2024 - 417: Thriving in a Shifting Economy, Why Keeping Your Money Active is the Key to Staying Ahead in Uncertain Times

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Jeremy Ryan Slate Interviews Dave Lukas!

417: Thriving in a Shifting Economy, Why Keeping Your Money Active is the Key to Staying Ahead in Uncertain Times

This week’s episode is a special one. As many of you know, I have owned an investing education business for almost 20 years. I was recently interviewed by Jeremy Ryan Slate on the state of the economy, where things are headed, and what to make of the recent market turmoil.

I should it would be great to share it with you as we are entrepreneurs always need to be preparing and working to stay ahead of what is coming so we can succeed and thrive no matter what happens.

If you are interested in learning more about the investing education we provide, go to www.12MinuteTrading.com

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Show Notes

How would you explain what's happening with the economy over the past couple of weeks?

No "Kamala crash" as some have suggested; instead, it’s a typical correction in a bull market trend. There will be one if it looks like she is going to win as the markets have priced in a Trump win.
Corrections of 10%-15% in the S&P 500 are common annually.
External factors exacerbated the correction: political uncertainty, geopolitical tensions (Iran, Israel, Russia, Ukraine), and Japan’s unexpected interest rate increase, which caused a significant impact on global markets.
Japan’s decision to raise interest rates disrupted a $20 trillion carry trade, leading to a sharp appreciation of the yen and subsequent market sell-offs to cover margin calls.

Why Japan? Why are people investing money from Japan into other markets like Nvidia?

Investors were not investing in Japan but borrowing from Japan due to its zero interest rates.
Borrowed funds were used to invest in higher-return assets like stocks (e.g., Nvidia) and treasuries.
The appreciation of the yen due to Japan’s interest rate hike led to margin calls, forcing investors to sell off positions to cover debts, causing market turbulence.

How does this fit in the economic cycle for the rest of the year?

The U.S. is moving towards a potential recession, possibly in Q4 2024 or Q1 2025.
Government spending is negating the Federal Reserve’s efforts to combat inflation by raising interest rates.
Key indicators of economic distress include negative savings rates, record-high credit card debt, and rising car and mortgage delinquencies.
The economy may experience a slowdown or recession, regardless of who wins the 2024 presidential election.

Question: What happens if the red team wins? What happens if the blue team wins?

The next president, regardless of party, will likely inherit a recession.
The response to the recession will determine its depth and duration.
A potential Republican administration might focus on increasing oil production to lower costs and maintaining tax cuts.
A Democratic administration might continue current spending levels, which could exacerbate economic challenges as well as let the current tax cuts expire raising taxes on all citizens.

What does this mean for the future of economics? How does the BRICS factor into the future of the U.S. dollar?

The U.S. dollar’s dominance as the world reserve currency is being challenged by the BRICS nations, which are exploring alternative trading mechanisms.
A multipolar world with multiple reserve currencies may emerge, leading to a decline in the U.S. standard of living.
The U.S. may face a future where the dollar shares global reserve status with other currencies, impacting its economic power.

When is the train ride over? What happens when we get there?

The exact timeline for a shift in global economic power is uncertain, but the U.S. is on the downslope of its superpower status.
A possible outcome is a multipolar world with multiple global powers rather than a single dominant nation.
The standard of living in the U.S. is expected to decline as the dollar's influence wanes.

What should individuals do to prepare for this economic shift?

Focus on accumulating assets that keep up with or outpace inflation.
Avoid letting money sit idle; invest in stocks, real estate, and other hard assets.
Understand that assets like real estate may not be true assets if they constantly drain resources.
Diversify investments to protect against economic downturns.

Connect with Dave Lukas:

Visit 12 Minute Trading for resources on options trading.
Follow the 12 Minute Trading channel on YouTube for weekly live streams discussing market trends.
Check out the Misfit Entrepreneur podcast, where Dave interviews top entrepreneurs about their success strategies.
Follow Dave on Twitter: @DaveLukasTrader.

Best Quote

You have to keep your money moving. If it sits stationary, it's losing its power and capability very quickly. Money is just a tool, and the velocity of your money is key to keeping ahead of inflation.

Keep your money active and invest wisely. Letting money sit idle is a surefire way to lose purchasing power in an inflationary environment. Instead, focus on investing in assets that can grow over time, such as stocks, real estate, or other hard assets. The key is to ensure your money is continually working for you, helping to counteract the effects of inflation and economic instability.

Understand the implications of a shifting global economy. The U.S. dollar's dominance as the global reserve currency is being challenged, particularly by the BRICS nations. This shift could significantly impact the U.S. economy and standard of living. Being aware of these global dynamics and their potential effects on your personal finances can help you make more informed decisions and prepare for future changes.

Prepare for economic downturns by accumulating assets: With a potential recession on the horizon, it's crucial to focus on building and maintaining assets that can provide stability and growth during tough economic times. Whether through investing in businesses, stocks, or other income-generating assets, prioritizing asset accumulation can help you weather economic storms and emerge stronger.

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