CHALLENGES BRING NEXT INVESTMENT OPPORTUNITIES

Business news has been turbulent recently.

‍

Crypto busts, layoffs, inflation, corporate earnings – it has been a rough year for many families, and a hit for many investors.

‍

In times like these, I find it really helps to keep a long term investment perspective in mind.

‍

Every macro economic cycle has a bottom. To get the kind of growth and dynamism that makes America such a great place to do business and build wealth, we have to accept that it won’t always be smooth sailing. Downturns happen.

‍

And counter-intuitively, downswings help inspire future growth. We’re better off having a smaller correction sooner, rather than a bigger one, later.

‍

The recent pullbacks in tech, crypto, and beyond reflect that prices outran the fundamentals of these assets. It hurts to lose money today, but recalibrating will help steer capital to where it’s most valuable over the longer run.

‍

Forest fires make space for new growth and even healthier forests. The same applies to business. When organizations are right-sized, they’re able to compete more effectively. When asset prices are rationalized, capital is better able to find its most productive uses.

‍

None of this erases the very real pain of people who are losing jobs or savings right now. That’s hard, and I hope you, my readers, are well diversified. But the silver lining is real too. Just like the yin-yang of Taoist philosophy, the business cycle has a polarity to it. Each pole carries the seed of its opposite. The boom leads to a recession, and recessions lay the foundations for the next boom.

‍

Now we’re in a downturn, but this turbulence is preparing the ground for the next boom. From the middle of a down cycle, it pays to keep an eye on the horizon.

‍

It also helps to remember that this longer-term story isn’t the one you’re likely to find in the media. News organizations need to grab your attention, so they favor sensational stories. Things are great, then they’re terrible.

‍

The truth is usually somewhere in the middle. And the long term trend is positive.

‍