Ep. 47 - Preparing is better than predicting

Are we sliding into a global recession? Are we going to see severe inflation? Will we witness World War III?

Likely. Yes. And yes, we’re already in it.

First, what’s happening in Ukraine is horrifying and heartbreaking. What Putin is doing is unprecedented. And I feel for anyone being impacted by that atrocity. These recent events have left an already fragile world in pieces.

And what the West did - our response - is also unprecedented.

The West’s SWIFT [read this] sanctions have caused chaos in Russia. Citizen's assets are frozen, they can’t liquidate investments, and lines for ATMs have been long… And so, the bank runs begin:

Oh, and Sberbank’s stock price has lost 96.53% of its value in the last two weeks…

So people can’t get their money out of the banks and their investments are going to zero. Alongside this, their dollar is also going to zero, as it’s lost 30% of its value against the Canadian dollar in two weeks. This all spells a recession and an extremely sad situation for many innocent civilians who don’t support the war or Putin.

Putin knew sanctions would come. This was likely gamed-out in the plan. Which also means he thinks they can withstand any sanctions for a period of time.

People didn’t think Putin would invade Ukraine. But he did. Those same people don’t think he’ll use nuclear weapons. But he most certainly might. That is a real, real possibility.

Another factor often overlooked is the fact that Russia and Ukraine produce 25% of the world's wheat and 20% of the world's corn. This accounts for 12% of calories worldwide. If energy and food prices stay up and keep climbing - many governments will collapse, and famine may reassert itself.

Okay enough of that. Basically, I think the situation is bad. I’m not paranoid about it, but I do think it should be taken seriously. And this is what I’m thinking about most this week - being prepared versus predicting.

Prepared > Predicting

Humans are notoriously terrible at predicting future events. No one knows what the next day or decade will bring - they can have guesses but that’s all they ever are, guesses.

But being prepared means removing the necessity to predict. If you’re prepared, you’re able to withstand any shock. This is antifragility.

This looks different for everyone. But for me it begins with taking care of myself mentally, physically, and financially. Financially speaking, this means diversifying assets through sector and geographic allocation. It also means having the patience and ability to withstand pain for months on end. If a global recession is triggered, it won't be the week of pain here and there we've already been experiencing, it will be 15 months of frustration. It will be different.

Then what? Well, history doesn't repeat itself, but it rhymes. All recessions have been followed by raging bull market runs. Although it can be a period of severe hardship, it can also be a period of immense opportunity.

The goal is to not blow-up. Don't trade on leverage. Don't have high debt balances. Stay in the game, stay invested, and accumulate cheap shares when the time comes. The aim is to decrease blow-up risk and stay in the game.

It's going to be an interesting and volatile month. Hopefully the conflict in Ukraine comes to an end soon. But if it doesn't - be prepared, stay objective, and don't waste your energy attempting to predict.