Recently whenever I read the news I always see scary titles that says recession is coming.
In June 2019 South China Morning
Post warned that a global recession unlike
any other is coming.
And in September
2019 the Guardian reported that a global
recession is a serious danger in 2020.
And in October 2019 CNBC reported that
an awfully high risk of a global
recession is in the next 12 to 18 months
Forbes published on November 2019 the a
probability of recession is now at 50%
And just last month another news article
reported that the global recession could
hit sooner than you think.
And when you turn on YouTube you will see videos like this
Recession will be sometime in
2020
We are having a spreading recession globally
A pretty good chance of a
recession sometime in the next year or so
25 to 30 percent chance of a recession
over say the next four quarter horizon
Frankly with so many scary news articles
out there, no wonder many people are
scared to invest.
But not for me I'm
actually looking forward to the next
upcoming recession let me tell you why.
So let's start my name is Kelvin and
today I'll be talking about what is
causing all these news.
What I think will really happen
And how you can best prepare for the next upcoming 
recession and benefit from it
Last but not least, smashing that Like button to help out with my channel
First of let's talk about why everyone thinks that a recession is coming
First factor is rising interest rates
Over the past few years the interest rate has been rising
What this means is that the cost of borrowing is getting more and more expensive
And when the cost of borrowing
becomes more and more expensive
businesses will have to raise their prices
to get the same profit of margin. And when things start to get more and more
expensive people tend to spend lesser
because their income are unable to keep up
with the price increase. When this
happens the economy will grow at a slower pace
On the other hand if the interest rate goes down
the cost of growing will become
cheaper, people will tend to borrow more
which leads to higher spending, which leads to
faster economic growth and in turn leads to inflation
This is why you see the Feds adjusting
their interest rates every now
and then in order to try to
prevent a recession from happening.
Recently there is
also been talks about a scary term
Inverted Yield Curve
You see historically whenever the yield 
curve inverts a recession will follow soon
A yield curve is just a simple graph
showing what's the expected yield over a
time period
Or in simple terms how much I will be getting by lending someone money.
In this case the yield curve belongs to the US Treasury bond.
Traditionally the longer you invest in a bond the higher interest rate you will be getting
This is to compensate you for tying up your money
in the bond for a longer term, say
10 years versus just 1 year.
This is because the longer you lend your money to the
government the higher risk you'll be getting
And with a higher risk you get will get a
higher interest rate.
However when the yield curve inverts the longer you invest the lower interest rate you will be getting
So why is the yield curve inverting?
Without getting too much into the details
investors are now fearful of the
market in the short term and they now
prefer to invest into a longer-term bond.
This will cause the price of the ten-year bond to increase
because there's a higher demand for it.
And when the price increases the yield will decrease.
All in all the yield curve is just an indicator
of what investors think
the market would happen in the short term
Next, there's an ongoing trade war
between the United States and China
I will explain the whole situation quickly
basically US thinks that China has
unfair trading practices and decides to
impose an import tax on them to level the playing field
And of course in return China says
"You will be taxing us? Then we will be taxing you!"
US responded by saying
"You be taxing us? We will be taxing you even more!"
This whole thing leads to a situation where both countries are increasing taxes on one another
and this will keep going on until
both countries decide to sit down and have a talk
One thing you have to know about
investors is that they dislike uncertainty
When investors are uncertain they will pull out their money from the market
causing the price of the stocks to fall
Next up, our economy is in a slowdown.
You go through the downturns, recover, expand, oversupply and just repeat itself all over again
We are seeing signs of this everywhere
the unemployment rate rises
to a highest level in a decade
GDP growth is slowing down
The earning growths are coming down
Manufacturing growth is also slowing
down
Those are just some of the data that is showing that our economy is slowing down
So what do I think? Is a recession coming?
Let me put on my glasses because I just
realized I forgot to
Tap the LIKE button!
Personally I think that the upcoming recession will not be the same as the previous recessions
in the sense that this recession is not a
bubble unlike the 2008 recession and the
dot-com bubble in the 2000. What it means is that if there is an upcoming recession the
market downturn will not happen suddenly.
It's going to be a long and a slow process
I also think that the current market prices has already affected in all the news
Think about it, if an investor
is fearful that the market price will
drop because a recession is coming then
they would invest lesser into the market
hence causing the price to drop. This is
also known as a self-fulfilling prophecy
Market crash can only happen when no one expects to happen
You always hear those experts saying that a market crash will happen because a recession will happen
every 10 years and that we are in the
longest running bull market
But the truth is no one can predict when the market crash will happen
and since you don't know when a market crash is coming
let's listen to a good advice from our evil talking uncle lion
"Be prepareeeeed"
That's right! Be prepared! Pay off any high
interest debt that you have
For example those expensive credit card debts that
you got when you bought those
expensive clothes and a big TV.
You do not want to be caught having to pay off high-interest debt when the recession hits
Next, save up three to six months worth of emergency funds
Put them in a high interest savings account, optimally it should be around two percent or more
You should do this regardless of any market situations that we are in
The emergency fund will save you in the event you lose your job or if something bad happened
Reduce your spending by eating out lesser and by buying lesser stuff that you do not need
Instead save that money and invest more
Build a war chest a war chest
A war chest is the cash that you can use to deploy when the market drops.
Remember this very important thing
"Riches are made during recession"
Even Warren Buffett himself is doing the same, he has 128 billion worth of cash
waiting to deploy in the case that a
recession hits.
Most importantly invest long-term
Remember that riches are not made overnight
Ideally only invest money that you know you won't be needing in the next 10 to 20 years
If you find yourself panicking whenever the stock
price drops
then you might be over-investing or investing in the wrong stock
There's a famous quote by Warren Buffet
"Only buy something that you would be
perfectly happy the hold if the market shuts down for 10 years"
If you bought a good company stock and if the stock price drops 10 to 20 percent
do not ever panic sell but instead buy more of it
the intrinsic value of the company is still good regardless of the stock market price
Just remember that the stock market price doesn't show the real value of the company
It is just about how you do not see people selling their houses whenever the value of their house drops
What you need to do is just dollar cost
average
Where you systematically buy the stock every period
This will ensure that you
get an average price of the stock
regardless of market up and down.
There are many researches that show that
time in the market will always give better results than timing the market
So as for me, I will be continually investing no matter what the market conditions are
Having an emergency fund to prepare for any unexpected events
And having a war chest to prepare for any market crash
Personally I very much look forward to a market crash
because to me it's just a Black Friday Sale
where I can get all my stuff for a discounted price
if anything just remember this:
Invest consistently over the long term and you will be eventually rewarded
Investing is not a sprint it is a marathon
So that's all for today let me know down in the comments below what you think
and any topic that you want me to talk about.
Like share and subscribe. See you!
