Economic Recession: The Transfer of Wealth
A recession brings fear, job losses, and economic contraction. It is also the greatest mechanism for wealth transfer in human history, allowing prepared investors to buy entire portfolios from distressed operators.
When the macro-economy enters a recession, fear paralyzes the general public. Media outlets predict the end of the world, and liquidity dries up as banks tighten their lending criteria.
However, wealth is not destroyed in a recession; it is merely transferred. Over-leveraged landlords and poorly capitalized developers go bankrupt, leaving half-finished sites and distressed portfolios. The investor who spent the 'boom' years building cash reserves and strong relationships with private angel investors can now sweep in and acquire multi-million-pound portfolios for pennies on the pound. You provide liquidity to a desperate market and reap the generational wealth when the cycle turns.
The Mindset Shift
Bull markets make you feel good; Bear markets make you rich. Keep your leverage conservative during the boom so you have the dry powder to buy aggressively during the bust.