For most of us, a recession means a painful decrease in wages and work hours, and, consequently, a cutback in spending. But what if we’re doing it wrong?
It’s no secret that while many of us experience a decrease in wealth, there are a few who are able to use it to their advantage, amassing fortunes in the midst of a poor economic landscape. People like Grant Cardone, Warren Buffet, and Jamie Dimon were able to turn a poor economy to their advantage through strategic investments and the courage to go against the grain. Their quick action and rare insight resulted in billions of dollars in profits. But how exactly did they do it? Below is a summary of how each of these exceptional businessmen profited while the rest of the world retreated.
“A recession is a terrible thing to waste so make the most of it”
Grant Cardone is a multi-millioniare from a combination of building businesses and investing in multi-family real estate.
How he did it:
When the recession hit and the housing market collapsed, investors were fleeing from any ties to the plunging market. But where most saw little hope, Grant saw the opportunity of a lifetime. With his company, Cardone Acquisitions, he began buying up B and C properties and apartment complexes in tertiary and secondary markets. He had the insight to see that the properties, purchased for a fraction of their recent value, could yield incredible returns in the future.
He also credits his “10X” rule as a major factor in his success. For instance, instead of setting a goal to purchase 10 apartment units, he “10X” ‘d it and went for 1,000 units instead.
Today, he presides over a real estate portfolio worth a reported $200 million dollars– how’s that for 10X-ing it?
“The ability to sell your company’s products, services and ideas will guarantee you not just a job but your survival regardless of the economic scene. People that can sell become even more valuable in contracting economies. No matter how well you manage your business or how superior your product and services, if you can’t sell them to the public you will not survive at anytime much less a recession.”
‘Be fearful when others are greedy, and be greedy when others are fearful.’
Warren Buffett is a highly respected billionaire investor from Omaha, Nebraska, who’s consistently ranked among the most wealthy and influential people on the planet.
How he did it:
In October 2008, during the equity downfall caused by the credit crisis, Buffett published an article in the New York Times Op-Ed section declaring that he was buying American stocks. Especially skilled during the credit debacle, he had the foresight to purchase preferred shares in Goldman Sachs and General Electric that paid him a 10% interest rate, along with other advantages. He also purchased billions in convertible preferred in Swiss Re and Dow Chemical, all of which required liquidity to get them through the turbulent credit crisis.
These strategic moves not only allowed him to make an astonishing $10 billion dollars from the financial crisis, but helped steer these and other American firms through an exceptionally complex period.
“It has been far safer to invest in a diversified collection of American businesses than to invest in securities — Treasuries, for example — whose values have been tied to American currency. That was also true in the preceding half-century, a period including the Great Depression and two world wars. Investors should heed this history. To one degree or another it is almost certain to be repeated during the next century.”
3. JAMIE DIMON
“The term ‘too big to fail’ must be excised from our vocabulary.”
James “Jamie” Dimon is the president and chief executive officer of JPMorgan Chase, with an estimated net worth of $400 million. Since taking over in 2005, Dimon has led the company through the financial crisis and on to fiscal 2012 profits of $21.3 billion.
How he did it:
During the credit crisis, Dimon used fear to his advantage, resulting in huge gains for JP Morgan. During the height of the financial crisis, he used the might of his bank’s balance sheet to obtain Bear Stearns and Washington Mutual, two institutions brought to to their knees by large bets on U.S. housing. JPMorgan acquired Bear Stearns for just 15% of its estimated value from early March, 2008. It also acquired WaMu for a fraction of it’s value earlier in the year.
Today, shares of JP Morgan have almost tripled and have made shareholders and its CEO incredibly wealthy.
“Companies that grow for the sake of growth or that expand into areas outside their core business strategy often stumble. On the other hand, companies that build scale for the benefit of their customers and shareholders more often succeed over time.”
Having lived by the words of Baron Rothschild: “The time to buy is when there’s blood in the streets”, each of these men have proven that they will not be brought down by a recession– in fact– it may be where they perform their best. By diving in to specific investments at precisely the time when everyone else is too fearful and uncertain, they have been able to prosper while others pull back. So the next time you see the masses running for the hills, be careful in running with them– you’re biggest opportunity may be in the other direction.
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