Recently, I was sharing with a large room of investors my thoughts on the Global Credit Crisis and Recession and what I believe will happen.

I’ve been saying for over a year now, that the world is heading into a serious recession and there’s a 50/50 chance of a depression and a financial crisis on par with the Great Depression, particularly in America.

A year ago, people thought I was overly pessimistic.

However, those who know me know I’m very much an optimistic person.

I believe optimists are closer to being realists then pessimists.

I mean, I don’t want to see that things are better than they are, like overly optimistic people, nor worse than they are, like pessimists. I just want to see what is, is and then devise a game plan around that.

And what I saw a year ago was that the Credit Crisis is a much bigger problem than Governments and the media acknowledged or realised.

And from late last year after Lehman Brothers collapsed and the entire US Financial system was on the verge of collapsing, people started to reconsider that maybe it is much worse than first thought.

And as each month dragged on, we saw Governments around the world realise this and commence a massive stimulus campaign to attempt to kick start dying economies around the world.

And even the Australian Government admitted eventually some six months after everyone knew that we were in a recession, despite the technicalities of whether we were or not.

Then many economists and share market so-called experts have been, since March, trying to talk up a recovery and looking for any little green shoot, while ignoring the reality of the negative news.

This is a clear case of dangerous optimism.

Actually it’s closer to delusion.

However, the US Government and Wall Street has been hoping if they can fool enough people everything is fine and the recovery is well on the way, just maybe enough people will fall for it, or others knowing it’s not based on fundamentals, but go along for the ride hoping just maybe the worst is over.

These are the same people that believe we will have a V or U shaped recession.

I.e: A fast recovery.

Somehow I haven’t fallen for this, nor am I going to be dangerously optimistic or in delusion and build a game plan around a V or U shaped recession.

If it does happen it would be considered a nice bonus, but unlikely, or if it did happen we’d just be delaying it to another crash in the near future.

For mine, we are going to suffer an L shaped recession, or possibly with what’s happened with the share market recovery since March 9th, a W shaped recession.

Meaning an upturn before another downturn before any real recovery occurs.

And by the way, what triggered the March 9th share market recovery was Citibank announcing it made a profit in February.

It didn’t come out until later, that as they were recipients of Government money paid to insurance companies such as AIG, the paper profits were simply Government money being recycled to them and the change in accounting laws reducing losses they had to disclose, so they weren’t real, but the market had already rebounded by the time the truth came out.

Anyway, the market recovered and has since continued a solid climb enabling many investors to make some good money.

What’s going to happen next?

Who knows?

Australia is different from the rest of the world and since May, when we found out the Jan to March Quarter, we avoided a technical recession. Australians became more confident and started to relax and spend a bit.

And maybe because they’d heard all the negative news of the Global Financial Crisis, but most Australians, unless they had lost their jobs, were actually better off thanks to lower interest rates and lower prices, yet most had the same salary.

So the Australian economy has certainly improved in May/June and should continue until September Trade figures come out and we see we then are in for a hard long recovery.

So is the worst of the Global Credit Crisis over?

I’d say no.

I’d rather base my plans not on hope, but on let’s assume it’s not and if it is, then that’s a bonus.

Plus fundamentally the US and world economies have a long way to go before this problem is solved.

And thinking that China is going to bail the world out is a dangerous assumption, as remember their so called recovery is all stimulus driven and there is no guarantee it will work long term yet.

I think China is in some bother personally.

Also Western societies might want to revisit Japan’s history since 1990.

Why?

Well the peak spending period of baby boomers is 48 years of age, just before their kids leave home.

Thereafter, baby boomers need a smaller house and have no kids to look after, thus they spend less.

This will reduce growth in our Western economies.

The peak spending of baby boomers has helped drive the boom for the last 17 years in Australia, along with commodities and last decade, for most Western countries, it’s been the main determinant.

Yet in Japan the majority of their adult population which is a more ageing society, hit their peak spending late 1980s, thus why 1990 they went into a decade long recession, then a short recovery and then another one.

Could we face the same?

I feel Western countries have similar problems and the next 3 to 5 years we could see lower growth and possibly for an entire decade.

So what is a good game plan to survive and thrive in the Global Credit Crisis rather than just hoping the markets and economies will miraculously recover?

The first Rule is to survive.

To win the game of investing you must stay in the game.

Just surviving means when there is an upturn you are in the game still and can prosper.

This means a hard review of expenses and overheads and major cut backs.

And do it early and hard.

I had to do this with my companies 9 months ago, slashing 50% of staff and overheads and as a result of the hard, difficult decisions being made early, I’m now able to move onto the next step.

Step No 2.

Now that you are able to survive because of lower expenses and overheads, you should shift the focus from fear of the doom and gloom to becoming creative and figuring out how to thrive in the recession.

This requires coming up with new ideas, as what worked in the past may not work in the future.

Also focusing on what industries or strategies work best in a recession.

See my previous article regarding this at: www.jamiemcintyre.com

So one of the new rules is to accept what may have worked in the past may no longer work in today’s world.

I.e: In investing, so many people were taught by Financial Planners to buy into managed funds invested into the share market and buy and hold, or similar, with their Super.

And I’d add and pray.

This strategy was taught for the benefit of the Financial Planning Industry, as they get paid large commissions when you invest and when you keep your money there, so it is a very good investment strategy if you’re a Financial Planner.

Because even when they lose 50% of your Super or managed fund portfolio and you get told by the Government to go back to work until age 67 and forget early retirement the Financial Planners are still getting paid trail commissions for selling you dud investments.

I’d like to be a fly on the wall when clients’ next yearly reviews come up with their Financial Planner.

I’m sure the FPA is already sending out scripts and propaganda of why you should still stick with your Financial Planner.

I’d being asking why?

Why should I stick with a Financial Planner and why should I ever go to one in the first place?

Seriously, if you’re serious about becoming wealthy, a typical Financial Planner is the last person you want to visit.

I mean, are they self-made millionaires from investing?

Are they even investors?

Accept the reality you need a financial education and get one and don’t take short cuts.

Relying on Financial Planners will give you certainty, but the certainty is you’ll lose and they’ll win.

A financial education doesn’t guarantee you success either, as in life there are no guarantees, but it does guarantee the average Aussie would be better off with a quality financial education than without one.

So why does such a small % of society invest into a financial education?

That’s another article, but it’s mainly because people value school or a university education which can cost tens of thousands, sometimes hundreds of thousands, yet somehow they think a financial education that might cost $5000 is expensive.

I mean really?

Despite Australians living in one of the richest countries on the planet, they are somehow sceptical about the fact that an average person can become rich in this country despite evidence of it every day.

And some are outright cynics, not just sceptics.

I mean if most Australians are cynical about becoming wealthy in a rich country, have they not somehow lost the plot, or at least lost perspective on reality?

Let’s move on.

Other Rules.

One should no longer expect the share market and property markets in Western Societies will always rise.

Right now I’d be focused on cash flow from Real Estate and Shares, not capital gains.

I.e: Renting shares has never been more profitable and makes money whether or not the share market goes up.

Real Estate.

With low interest rates and affordable housing, now more than ever, good rental returns can be had, whether you get any capital gains or not doesn’t matter as you are still profiting.

Your rule should be…

Capital gains in shares and Real Estate are a bonus.

I want to make money regardless and if they rise in value as well, then great. If not, I’m still going to use strategies that make me money in a flat market or depressed market, so I can profit regardless.

And I also bet your Financial Planner didn’t recommend you to buy property, nor will they now.

So ask them another question.

Why on earth didn’t they?

The real answer is because it wasn’t in the sales script from the FPA, nor do they earn large upfront or trailing commissions on property if you go and buy them yourself.

Because Australian Real Estate through the worst financial crisis since the Great Depression, didn’t crash 50% like shares or Super.

Actually according to the Financial Review this week, Australian Property has risen back to its highs before the credit crash.

So no losses if you sit tight.

Meaning unless you bought top end property, you would be sitting on your portfolio and wealth intact and enjoying record low interest rates and high rentals. And now climbing prices and if financially educated, using some spare equity to rent out shares to replace your work income so if you lose your job, you already have plan B in place.

Plus I’d suggest developing your internet skills and building a 2nd or 3rd income online to diversify your income, so you’ll soon be asking others… What recession?

As if you can make money in a recession, then when we do get a rebound you’ll make an absolute fortune.

Back to Real Estate.

Ignore people such as Professor Keen who thinks property is going to crash.

I mean, no offense to professors, but if he was a clued on property investor he wouldn’t be working at a University for low professor wages.

Nor listen to so called Real Estate commentators, such as Neil Jenman types, who really have little idea about Real Estate.

I mean Jenman, for those who don’t know him (check out www.consumer-warning.com) has been trying to scare poor consumers for years to not buy Real Estate as it’s going to collapse and the whole property and property spruiking industry is dodgy, so only ever deal with a non dodgy Real Estate Agent.

By the way, that would be a Jenman Agent who he has conned to pay him up to $3000 a month to guarantee they won’t be defamed as an unethical, dodgy Real Estate spruiker but rather be labelled a Jenman Agent.

I mean, is Jenman part of the Mafia or underbelly or what?

The Mafia used these tactics for years to scam a living.

Jenman’s alleged little scam has reportedly generated him nearly $12 million dollars so far, according to Consumer Warning and others.

Anyway, my point is most people claiming to be share market or Real Estate commentators have their own agendas, or simply know theory well, like Professor Keen, and are not experts in real life application.

I’d personally stick to Albert Einstein’s way of thinking.

The sign of intelligence is the ability to action an idea.

That’s what makes ordinary people become millionaires.

They learn to action ideas, despite fear and learn to model those who have taken action before them and not rely on sales people, or theory, or opinions.

I mean I haven’t stopped investing just because of the Global Credit Crisis.

I haven’t stopped starting companies either.

Actually, I was talking to one of my business mentors recently, Richard Branson regarding how the cynics were criticising him for starting ‘V Australia’ during a Global Credit Crisis.

And he rightly said…

“If I waited for a perfect time to start a new company, then Virgin would not exist today, as it would never have started”.

I’ve accepted the challenge of the Global Credit Crisis for what it is.

I focused on how to first survive the crisis and now how to thrive in the Global Crisis.

So take on board the new rules of the investing game and not just survive this Global Credit Crisis, but THRIVE and prove the cynic naysayers wrong.

It’s not about who is right or wrong.

As one of my millionaire mentors used to say…

“The truth is in the results”.

Nothing else matters.

Jamie McIntyre is the CEO of 21st Century Education and author of 7 books including the Best Selling Book “What I Didn’t Learn At School But Wish I Had”.

For a free copy visit www.21stcenturyacademy.com

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