I recently wrote a post about how to prepare for the possible coming of a recession.  I have also previously written about how middle class America needs a recession to alleviate some pain.

There will be greater short-term pain with a recession, but that is inevitable anyway.  Once the correction happens, it will actually straighten the course for a reallocation of resources that are more in accordance with consumer demand.  If the Fed doesn’t do too much damage in trying to stop the correction, then we might actually see a reduction in consumer prices, which is desperately needed for middle class America.

There is another benefit that could come with a major correction, but it will only be a benefit to a select few.  It will be an opportunity for those who are well positioned and for those who have their eyes open.

In the history of the United States, there are always people who come out looking good after a major economic downturn.  Even during the Great Depression, there were businesses that were started and eventually prospered.  There were people who bought investments for extremely low prices that nobody else wanted to touch.

Warren Buffett said, “Be fearful when others are greedy and greedy when others are fearful.” In other words, the time to buy is when there is blood in the streets.  Buffett is a stock investor, but this doesn’t just apply to stocks.  It can apply to commodities, real estate, certain collectibles, and businesses (other than just owning a few shares).

Most people didn’t want to touch real estate in 2010/ 2011.  Perhaps more accurately, most people couldn’t touch real estate because they didn’t have enough money and couldn’t easily get the credit to buy.  Most of the people who did have the capability to buy real estate were too afraid to do it after what had just happened.  But if you had bought cheap condos or single-family homes in a decent areas back then, you would have done very well.

If you had bought stocks in March 2009 after they had just been hammered, you would have done really well.

If you owned a small business and had ramped up investment around 2010/ 2011, you likely would have done really well if you had made good use of your resources.

This is what you should actually look forward to towards the back end of the next recession. But in order to get any possible benefit, you have to be in the right position.

Preparation for Opportunity

Many of the tips for preparing for a recession are the same tips you should take in preparing to take advantage of opportunities.

You don’t want to be in debt, with the possible exception of a manageable mortgage on your primary residence.

You want to make sure that you maintain your primary source of income.  And if there is a high risk of losing your primary source of income, then you should really be taking steps now for a Plan B.

For the assets you own, you want to make sure that they will not be wiped out by a hard recession. I recommend a permanent portfolio for your financial investments.

There is a reason that people say “cash is king” in a recession.  It really is true.  You will actually benefit, assuming there is price deflation.  The purchasing power of your cash should rise.

(This does not mean you literally have to hold cash.  You can keep your money in a bank.)

And just as it is important to prepare for a recession with a proper mindset, you will also want to have a proper mindset in preparing to take a little risk to take advantage of opportunities.

We probably aren’t going to end up like Venezuela.  There may be some tough times ahead, but the entrepreneurial spirit is alive and well in America.  We aren’t going to turn into a third-world nation.  Even if Bernie Sanders becomes president, we aren’t going to full-fledged socialism.  There will still be something of a market economy.

When things are really bad, you are going to make up excuses on why you shouldn’t invest or seek certain opportunities.  I am not saying that you should be careless with your money.  You shouldn’t just be throwing darts at a dartboard.

However, there will be opportunities that only come about once in a decade or less.  If the recession is bad enough, some of the opportunities may be once in a lifetime.

If you have been meaning to buy investment real estate, then sit tight.  Your opportunity will be coming, but you have to be patient.

If you have been meaning to start a business, then I am not going to say sit tight, unless it is capital intensive.  I would never recommend opening up a restaurant, but if that is your dream, then I would definitely recommend waiting.

But for any kind of online business or something else that doesn’t require a lot of capital investment, then I don’t think you should wait.  I do think you should start out very slowly with the anticipation that a recession will hit soon.  Once we are deep into the recession, then your infrastructure will already be set up.  Hopefully you will already have a good functioning website and you already have a few sales. You will be in a position to pour more time, and possibly money, into your venture at the back end of the recession.  And if you do require the purchase of any major assets, then you will get them on a giant sale.

Prepare for a recession, and prepare to take advantage of the opportunity that comes with a recession.  Be patient. When there is blood in the streets and virtually everybody is bearish on everything, that is the time to strike while the iron is hot.