On September 15, 2008, Lehman Brothers went bust. I remember this day clearly because I made a $200 side bet with my friend over the weekend that the US government would bail them out. To my surprise, the US government didn’t rescue Lehman, and the stock cratered that Monday and never recovered. This is my most poignant memory of the financial crisis.

Despite all the economic devastation, I wouldn’t mind rewinding time and going back to 2008. I’d rather be 31 than 42, simply because I love life and want to live as many years as possible.

As we potentially head into another recession due to the coronavirus locking up economic activity and the collapse of oil prices causing tremendous job loss in the oil & gas sector, here are some lessons learned during and since the financial crisis.

To get through the latest bear market, I thought it would be fun to go through an exercise that will surely make you feel better. The exercise is a gratitude journal for money.

Simply write down all the things you spent money on that could have been invested in the stock market instead. That is the amount of money that you spared from getting torn to bits by the big bad bear.

Hopefully everybody has been practicing taking some profits here and there to pay for a better life for the past several years. Money is meant to be spent. Otherwise, there’s no point saving and investing if we’re just going to hoard all our money until we die.

The period to record all your spending includes how far back in time the current bear market has reset to. For example, perhaps the S&P 500 has declined by 30%, bringing it back to a level not seen since three years ago. Therefore, count all your spending from then until now to see how much you’ve not only spared, but also enjoyed.

Ironically, the bigger a spender you’ve been, the better you should feel. Frugal minimalists get the short end of the stick during a bear market. Not only did they not spend their money to pay for a better life, but they also lost a lot of money on their investments.

Warning: If you are experiencing tremendous financial hardship and stress, the examples in this post might piss you off. If you still want to proceed, please focus on your own examples.

During the last downturn, I lost about 35% of my net worth in about six months. I don’t plan on doing that again. I want to share how we can make lots of money during the next downturn, which is happening right now in 2020.

Losing 35% is not as bad as the S&P 500 losing ~60% during its worst period, but it still hurt like hell due to the speed and absolute dollar amount of the loss.

At the end of February 2020, the S&P 500 lost 10% faster than any other 10% correction in history. The the S&P 500 proceeded to collapse by 32% in March as the coronavirus pandemic grew. As a result, if we are equity investors, we must be extremely vigilant in guarding our net worth. 

Realistically, my target net worth growth scenario during a recession is to stay flat – neither make nor lose money. This is the first rule of financial independence. But my blue sky scenario is to actually try and make lots of money as the world collapses all around.

Here’s how I plan to do it and how you might too if you’ve accumulated enough money or are planning to retire within the next five years.

This post was published on March 18, 2020 when the stock market was falling apart. My goal was to help people feel more calm by going through a logical analysis of predicting when the bleeding would stop. I also provide an update on what my views are on stocks at the end of this post.

Are you wondering when the stock market will bottom? So am I!

When there is stock market pandemonium, there tend to be a lot of worst-case scenarios thrown around e.g. zombie apocalypse with no food, electricity, or running water. Because of the hysteria, the stock market tends to both overshoot on the upside and on the downside.

As rational investors, we acknowledge that nobody can with certitude predict a stock market bottom. However, it’s worthwhile to at least think about various entry points to put additional capital to work if you are a long-term investor.

As long as we have excess cash flow, we can either hoard cash or make an investment. I tend to consistently do the latter since my cash allocation is generally at capacity.