June is Economic Empowerment Month at United Black America. As we come to the collective realization that the American economy has changed forever, African-Americans find ourselves particularly vulnerable. This month, we will offer strategies and tactics on all things financial and economic. Stay up to date and subscribe to our email list here.
“When your dad advises you to go back to school to get your master’s degree so you can find a better, more secure job, he is talking about security within the chicken coop. Most people think that your dad’s advice is good advice, since most people seek security inside the chicken coop. Most people want a secure job, a steady paycheck, great benefits, and a secure retirement.
That is life inside the chicken coop.
My advice is for life outside the chicken coop. So you need to choose between the two. When I was thirteen years old, I was forced to face life outside of the coop . . . and I have stayed outside all my life. That is the choice you face today. You need to choose between a life inside the coop or a life outside the coop . . . and believe me, they are not the same.” – Robert Kiyosaki; Rich Dad’s Prophecy
In the quote above, Robert Kiyosaki describes the American workforce as “the chicken coop”. He understood at an early age the dangers of relying on a job for financial peace and security. No group of people should know this lesson better than African-Americans, who are often the last to get hired and the first to get fired.
Instead of sitting in the chicken coop waiting to be slaughtered, be proactive and plan ahead. No matter what the state of the economy is today, it will change. There are three types of people: those who prepare, those who react, and those who sit still. If you prepare for changes in the economy (be they good or bad changes), you will sleep well at night and profit. If you fail to anticipate change, you will find yourself constantly struggling to get ahead. And if you sit still, you are dead in the water.
Make the conscious effort to think ahead and prepare so that you can profit from economic recessions, depressions, and recoveries.
Planning and preparation are the keys to victory. – Asad
Profiting in a Recession
While the rest of the world goes into panic mode, you saw the recession coming and prepared for it. You start ramping up your marketing efforts, you cut the fat in your side hustle, and you move your money out of stocks and corporate bonds and into precious metals. African-American business owners and investors that focus on building revenue, profits, and properly managing expenses can survive and even thrive during a recession.
Ramp up Your Marketing Efforts
During recessions, businesses tend to make deep cuts to their marketing budgets. This is a valuable opportunity for you to take your competition’s place in the minds of your potential customers. Once the market begins to improve, businesses that cut back on their marketing will be struggling to catch up to the progress you have made while they took shelter.
Correct inefficiencies in your business
Recessions are an opportunity to re-engineer your enterprise to run leaner and more efficiently. During good economic times, business owners tend to add all kinds of unnecessary expenses (nice offices, new Mac desktop computers, more lazy-ass employees). Use the recession as an opportunity to trim the fat. Outsource as many business processes as possible. Its often cheaper to outsource things like book-keeping, website design and management, and customer service than it is to hire full time staff members for each position.
Invest in precious metals
During recessionary times, precious metals tend to see sharp increases in value. At the beginning of the great American recession in 2007, gold prices hovered around $650 an ounce. Today? Gold is at $1573 an ounce. Had you bought gold at the beginning of the 2007 recession, you would have doubled your money nearly three times. Silver prices started off at $9 an ounce 5 years ago. Today, prices are hovering around $30 and ounce – another three-fold increase in your initial investment. Even now, gold and silver are surging as Europe enters a Euro-depression!
Buying gold, silver, and platinum doesnt mean stacking bars in your basement. You can take advantage of rising prices by purchasing precious metal mutual funds or exchange traded funds.
A mutual fund is where a number of investors pool their investment money and the managers of the fund invest those funds in various investment instruments such as stocks, bonds, etc. If the management is good the investment will realize a profit. If the investment is poor then the investment will record a loss.
An exchange traded fund is like a mutual fund that is fully backed by gold which is both deposited and insured. The difference is that in ETFs, you invest in gold as an individual, not in a pooled activity as in a mutual fund. Whereas the mutual fund might invest in stocks, shares and bonds, the EFT investor is buying an amount of gold which is represented by an account .
The iShares COMEX Gold Trust was launched by iShares on 21 January 2005 and is listed on the New York Stock Exchange (NYSE: IAU). As of January 2007 the fund held 44.45 tons of gold in storage. SPDR Gold ETF (GLD) also actually holds physical gold.
Profiting in a Depression
It finally happened: complete economic collapse. People are starving to death, unemployment sky-rockets, homeless shelters are packed with former white-collar workers, businesses are shutting down by the hundreds, and life gets very ugly, very quickly for everyone – except you.
You stashed your money away, and built a side hustle to replace your job. During a depression, everything is on sale. Prices have fallen for everything from real estate to luxury fabric and jewelry (since no one has money for these items) . You use your money to go on a shopping spree, and if you havent already done so, you start a business and launch an all-out attack on your competition.
If you think that depressions are bad times, you either didn’t prepare, or you are a fool. More people became millionaires during the last Great Depression than in any other time in American history. Many people with small amounts of liquid cash were able to buy bankrupt businesses and real estate at bargain prices. Besides, depressions are periods of mass layoffs, so you may be forced to start a business anyway. Remember, preparation is the key to survival. Heres how you can survive and thrive during a depression.
Buy Depressed Commercial Properties
During a depression, everything is on sale. You should have piled up cash savings during the good times (instead of buying new suits every week), and cash will be king during depressions. While it can be a good idea in some circumstances to buy residential property, it can also be a headache. Collecting rent, making repairs, and dealing with ratchet ass tenants can drive a landlord crazy.
Instead, focus on buying big, well-built, commercial buildings. Since many businesses will be closing their doors or downsizing, demand for commercial properties will fall like a rock. When demand falls, prices also fall. When the economy comes back, businesses will move back in to the buildings you have purchased, and you will own half the city.
Eat your competition
If you have been on your game, you should have a steady stream of income and a nice pile of cash in your company savings. Use your financial strength to buy out your competition and add them to your operation. Depressions are desperate times, and your competition may be willing to sell their entire company for pennies on the dollar to feed their family. When the economy finally moves out of its depression, your company would have grown from a small, one man operation to a massive conglomerate – and since you have eaten up all of your competitors, there wont be anyone near who can challenge your market dominance.
Start a Business
Yes, you read that right. If you didn’t start a business during previous economic cycles, now is the time to do so. DO NOT TRY TO START MUSIC, ENTERTAINMENT, FITNESS, OR LEISURE BUSINESSES! Instead, think about starting repossession companies (requires a tow truck and bank contracts), funeral homes, farmers markets, urban gardens, and home repair operations. More people will choose to fix up what they already have, rather than buying new items. That means home repairs, shoe cleaning and repairs, electronic repairs, etc. Consignment shops also do well during bad times. Job and apartment placement service providers can also do well, although people may be reluctant to pay for something they believe they can do themselves.
Profiting in a Recovery
Hiring is up, stocks are in the green, unemployment is down, and the malls, clubs, and restaurants are full of idiots spending money they think they have. Recoveries and economic booms are actually dangerous times for fools and their money. You might be tempted to spend like there is no tomorrow, but avoid this temptation at all cost! Save as much money as you possibly can, profit from stocks, funds, and corporate bonds, and invest in the infrastructure, research, and development of your side hustle.
Invest in Stocks, Stock Funds, and Corporate Bonds
When a full blown recovery comes, markets move up aggressively. Small cap growth stocks tend to outperform during periods of economic recovery, and corporate bonds also really pick up steam. Corporate bonds are IOUs issued by private and public corporations in multiples of $1,000 and/or $5,000. These IOUs are used to help corporations build new facilities, purchase new equipment, and expand their business – all common activities during economic recoveries.
Investing in stocks and bonds need not be complicated processes. For the basics, check out any of these Amazon books on investing in stocks, bonds, and mutual funds.
Beef up your business infrastructure
Business infrastructure includes everything that it takes to run your business behind the scenes. In Business Lessons From Marcus Garvey, we talked about vertical integration. During economic recoveries, use all your extra income to improve your vertical integration.
Lets say you started selling chicken during the depression. As the economy improves, rather than just buying and frying a chicken to serve in your restaurant, you buy the chicken farm, the seed company that feeds the chicken, the processing plant that cuts the chicken, the land that produces the brick and mortar to build the restaurant, and the construction company that builds the restaurant. If you started a clothing line, you now buy a screen printer, textile machines that assemble the fabric, and processing plants that process cotton and other fabrics.
The difference in strategy from depression expansion strategies is that you are buying the operations that you depend on to make money. During depressions you are buying the companies that compete with you.
Invest in Research and Development
Examples of R&D might include building software that automates your social media marketing, creating new fabrics that dont fade or wrinkle, building applications, creating new ways to accept money or conduct financial transactions (remember m-Pesa?), or building machines to prepare food more efficiently, or recycle waste. No matter what your hustle is, research and development can give you an edge over your competition that they wont see coming.
Research and development can take a lot of money and time – usually takes one to five years – so good economic times are good opportunities to experiment and develop new ways of doing things that will give you a competitive edge when the recovery and boom comes to an end.
The strategies above are ones that I live by. I know they work, and I am confident that you can benefit from my past experience. If there are three pieces of advice that you should take from this article, it’s these:
1. Start a business today. Black folks are the last to get hired and the first to get fired. Instead of being a victim of the job market, create your own job. If you are currently employed, work your day job while you build your side hustle at night. Build your side hustle income until you can finally set yourself free from employment.
2. Planning and preparation are the keys to victory.
3. Dont react, anticipate. If you are tired of struggling to get ahead, shift your mindset from reactionary to anticipatory, and you will place yourself in a position of superiority over market forces.
Black people, Go forth and do likewise.