Hey this is tom nash and let's talk about investing during inflation, investing during a bear market investing during a recession, what's the best strategy to go through the cycle and actually keep your pants on and maybe make a little bit of money stay with me. This is about to get interesting and before we move on a quick message from ftx us who sponsored this video. As always, if you want to sign up for ftx us and trade stocks and crypto with the best fees in the business on the u.s regulated crypto exchange, which literally, is the best in the business, the link is going to be below the code. Name is tom nash you're getting a free crypto if you trade about 10, i absolutely love working with these guys.

I got a lot of offers for sponsorships for many many times, hundreds of thousands. The only reason i agreed to work with ftx us is because they're literally the best in the business go check them out, use the code name, tom nash, and let's go back to the video things - are not getting easier. In fact, the market is getting shittier, however, based on historical data, we're still probably in the middle of this pullback. Now the s p 500 is not even officially in bear market territory.

Yet this drawdown of 20 is painful, but if you go back in history, you're looking at at least 50 plus as far as the recession goes as the bear market goes in 2008 in 2000. So the past 25 years, we're probably looking at about 50 plus percent on the s p 500. In order for us to talk about a bear market, a recession, etc, etc. So it doesn't seem we're there yet and of course there might be spikes or downturns.

The market doesn't really behave in a linear manner, so there might be a bull run ahead, but as far as the next year year and a half we're probably looking at a downturn towards the 50 drawdown on the s p 500. Now, knowing that does it mean you have to go all cash and just stay out, because the market is going crazy well, not necessarily and i'll, explain why? Because nobody freaking knows nobody knows how low it's going to go. Nobody knows where the bear trap is, or the bull trap is where the bottom is all these fancy schmancy terms you're hearing on tv on social media. Nobody knows, of course, if you are an extremely risk-averse person and you just want to take the cash hold on to it and absorb the inflationary hit.

That's fine! That's not necessarily a bad strategy as its own, but here's what i think about as a five to ten year term investor. Now, since you don't know where the market is headed up or down, you do know one thing. So the markets tend to have this 10 to 12 to 14 month cycles of a bear market, so whatever happens in the next 10 years, the bear market section of it is about 10 to 20 max, and i'm exaggerating here so 80 of the next 10 years. Will not be a recession, and the important thing here is to understand is that the upcoming recession, that's almost inevitable.

This point will be caused by an inflationary cycle. There's a lot of different causes for recession. The cause is really important to how you handle your investment strategy during the recession, so because we're looking at an inflationary cycle causing a pullback in the market causing a recession, what you want to do is find companies that will be able to absorb this. Now.

Look in inflationary cycles, your cost of goods, cost of services, raw materials, energy. Everything goes up, your margins go to now. What you're looking for is a company that has pricing power, meaning it can roll over some of these costs to its client base, and for that to happen, you need two things. This company must have a product or service that people cannot do without it's completely.

Non-Discretionary number two: it has very little to no competition, meaning in that environment with little to no competition with a completely non-discretionary must have product or service. Your pricing power is going to be maxed out, which means that a lot of these extra costs that just piled up into your margins will be rolled over to your clients and, with that being said, you're also looking for a business with great margins, because you will Never be able to roll over 100 of the extra cost. On top of the clients, it's impossible. You need high margins, a high cushion to absorb some of it yourself.

If you don't have that, if you're operating on low margins you're going to get screwed and in this example, airlines is probably the worst investment during inflation and the recession caused by inflation, because their pricing part is their margins, are low, they're, absolutely the worst. But there's a lot of other companies i can think of which you can fit into this mold and find great pricing power, great margins and derive from it a short list. Now. This short list actually has to go through more tests, for example, how much capital this company has because look at it.

This way money is about to become scarce. Money is about to become more expensive. This is literally what the fed is actually doing right now. So if money is now more scarce and more expensive, you need to see how much money the company has on the balance sheet, how much cash, how much cash equivalents, how much assets, how much liabilities, how much debt so ideally you're! Looking for a company with a lot of money, with a lot of cash, very little to no debt, the other thing you want to look at is operational efficiency.

If this company needs a lot of cash to run this every day operations, this is a company is going to need a lot of capital capital again. Remember it's going to be very expensive, it doesn't matter if you go to the bank and you take a loan or equity markets. Everything will be more expensive when the money is tight, equities become more expensive, meaning you're getting valuation in your business and lending becomes more expensive. So it's not gon na be easy to get capital in time of short supply of money.

So, ideally, you want a company that can operate and scale without a lot of capital investments without a lot of operation, capital requirements. So that's the other thing now. The next thing you want to have a company that can give you cash flow on the consistent basis, because again, access to funding is going to be limited, so you need a company that can generate consistent, positive free cash flow. Probably you want to see 20 to 25 to 30 percent, free cash flow margin, anything below that is going to be risky in this storm of an environment and now we're getting to the last part in case the company does need money does need funding.

It needs to be in the place where funding will be made available, because you know what they say. If you absolutely need a loan, no bank will give you that loan, but if you have so much money that you're richer than god, banks are lining up to give you money, that's the absurdity of it. Now you want to be that kind of company. By doing that, you have to find a company that has low risk profile and the low risk profile can mean a lot of different things.

For example, operational risks. Are we in a dangerous location or industry risk? Is this industry high innovative and you might get obsolete in a second or financial stability, which is operational, risk and financial risk? So the company has to operate in industries which always have demand no operational logistical list. No geopolitical risk, no financial risk, a very stable company that generates always cash flow to allow the bank to basically see that this company is good for it and offer ample funding in case it needs one. At this point, some of you may think.

Well, this is really hard to find. That's the whole point here. My guy, i mean it's not gon na be easy. If investing was easy, then everybody would get rich every single year, even in the buyer market.

Making money in a bear market is not easy and finding a company that fits this profile and not compromising and not settling is going to be one hell of a research work for you guys to do it's not simple. It's not easy and it's beyond the scope of what people are willing to do to make money in this market. That's why? If you do it, if you do the process you're putting yourself in a position to do better than the people next to you not doing the work like everything else in life and, of course, as always, thank you so much for our channel members and patreons. If you want to join our community join the discord join, the zoom calls join everything we do behind the scenes.

It's five dollars per month. The link is below. Thank you. So much i'll see you next video.