I’ve been talking about a recession for a while and while I don’t want to be the next doomsday predictor, the evidence and signs around us are too obvious not to ignore.
Let’s go to the fundamentals a bit. A recession is when lots of people buy less stuff, companies sell less, and some jobs go away. The economy goes down for a while and then it comes back up. Think of it like seasons: winter is cold, summer is warm — recessions are a tough season for money. They happen because of many reasons: credit problems, too much borrowing, shops losing sales, banks getting sick, or even big events like a virus. The good news is recessions always pass. The tricky part is preparing and acting the right way when they happen.
THE BIG PICTURE: MY SIMPLE RULES
I follow a few big rules that Warren Buffett always does that help me during recessions:
I keep cash ready so I can buy when prices fall.
I don't borrow to invest; leverage is dangerous.
I buy great businesses when they are on sale.
I focus on long-term value, not short-term noise.
I live below my means and save consistently.
THE 15-STEP RECESSION STRATEGY
This is based off Warren Buffett’s past investments. I’ve read a lot of his books and letters, and pretty much based my investment thesis on his experience, and this has led me to build a $400k portfolio in my early 20s. Here is the 15-step recession strategy that helps me see recession as the best opportunity of our lifetime.
1) Cash is king
I like having cash ready. Cash is "dry powder" — money you can use when good things cost less. When everyone is scared, prices drop. If you have money ready, you can buy bargains.
Save at least 6 months of living expenses in cash for safety.
Have a separate "opportunity fund" for investments during bad times.
Keep the funds in safe accounts you can use quickly.
2) Make a shopping list before the storm
Decide now which businesses you want to buy if prices drop. This prevents panicked decisions later.
Pick 10–20 companies you understand and trust.
Write down why you would buy each one and what price looks like a bargain.
3) Study and know what you will buy
Learn the business, its customers, how it makes money, and how strong it is.
Know what revenue and profit mean for each company.
Only buy a business if you can explain it to a friend in one sentence.
4) No borrowed money to invest (no leverage)
Borrowing to buy stocks that can wipe you out in a downturn.
Margin calls and loans can force you to sell at the worst time.
Use only money you can leave invested for 5+ years.
5) Diversify but keep it simple
Don’t own 500 things you don’t understand. Own a smaller set of good businesses across different industries.
Own 8–15 good businesses in different sectors (banks, staples, utilities, tech, insurance).
If one industry is hurt, the others still help.
6) Watch balance sheets like a hawk
Strong companies have little debt and steady cash. Weak ones have big debts and can fail.
Check how much debt a company has compared to its cash.
Ask: “Could this company survive if revenue dropped 30%?”
My own value metrics
7) Think long term
Stocks are pieces of businesses. If the business stays good, sticking with it for years is powerful.
Invest as if you’ll own the business for 10–20 years.
Ignore daily news noise and focus on the company’s long-run earnings.
8) Live below your means
If you spend everything you earn, you can’t save for bad times.
Save more than you spend. Keep lifestyle steady even when income grows. But don’t be a slave to money. Imagine not having any and still being able to be satisfied. The aim is not to treat money like your god.
Avoid big mortgage or spending increases just because income rises.
9) Limit news, focus on fundamentals
News can make you scared. Check facts, but don’t let headlines control you.
Scan headlines once a day, no more.
Focus on company results and the long-term story.
10) Price vs Value
Price is what you pay. Value is what you get. Recessions make prices fall more than value.
Buy when price is much less than value.
Ask: “Will this company still earn money in 5–10 years?”
11) Have an exit plan (a smart one)
Know what you’ll do with gains. Will you hold, rebalance, or save for an expense?
Decide rules: e.g., take profits if a holding doubles, or rebalance annually.
Plan for reinvesting profits into other bargains or safer assets.
12) Don’t try to perfectly time the bottom
Hitting the exact bottom is impossible. Start buying when things look very cheap and fear is high.
Use dollar-cost averaging: buy in pieces as things drop.
Buy more if prices drop further; don’t wait forever.
13) Learn from history
Past recessions teach patterns. Each is different but similar lessons repeat.
Study 1929, 1970s, 2000 dot-com, 2008, and the 2020 pandemic.
Recessions often follow credit excess and bursts of speculation.
Benner’s Cycle is one that has shown all of these
14) Mental practice builds courage
Imagine the market crashing and rehearse sticking to your plan.
Visualize buying while others panic.
Train yourself to execute the plan when everyone else screams.
15) Patience is everything
You plant investments, then wait. Returns rarely spring overnight.
Think of investments like planting a tree — wait years to see the shade.
Expect recovery to take months to years; stay calm.
EXAMPLES THAT MAKE THIS REAL
2008 Financial Crisis
During the 2008 global financial crisis, Warren Buffett used Berkshire Hathaway's massive cash reserves—which totaled over $40 billion entering the year—to invest in high-quality companies whose share prices had been unfairly sold off during the market panic.
Goldman Sachs: Buffett invested $5 billion in preferred shares with a 10% dividend. By the time Goldman redeemed these shares in 2011, Berkshire had earned approximately $3.7 billion in profit from dividends and premiums.
General Electric (GE): He plowed $3 billion into GE in exchange for preferred stock paying a 10% annual dividend. This deal eventually netted a $1.5 billion profit, representing a 50% return.
Bank of America: He later invested $5 billion to help shore up the bank as confidence in the financial system faltered.
Other Deals: Berkshire also took positions in Mars, Swiss Re, Dow Chemical, and bought Burlington Northern Santa Fe Railway for roughly $26 billion in 2009.
Why this matters: If you save cash and know what you will buy, you buy when others are scared.
Value investing is about finding the difference between price and value. Here are simple rules from that idea:
Look for companies with steady profits.
Pay less than what the company is worth long-term.
Read financial statements: profit, cash flow, and debt.
Don’t follow the crowd. Be “fearful when others are greedy, greedy when others are fearful.” (This line is Buffett wisdom.)
Imagine you can buy a lemonade stand. If it sells steady lemonade every year and costs little to run, it’s valuable. If the stand is on sale, that’s a good time to buy. Don’t buy a stand that loses money every year even if it’s cheap — cheap trash stays trash.
WHERE THE 18.6-YEAR CYCLE MATTERS
By now you should know what this cycle is all about. When prices run up for many years, a phase might be ending. Credit expands, people buy more, prices rise. This is the later part of the cycle. When prices fall for a long period, you are in the downturn part of the cycle. This can last several years.
I don’t buy at the peak just because prices keep going up. Peaks often end with trouble. If real estate prices fall a lot and credit becomes tight, the best long-term buys can appear after the market bottoms — but getting loans is harder at that time.
I also don’t buy too close to the top or use too much mortgage leverage near cycle extremes. For long-term real estate holding, buying after the market bottoms often gives the best returns — but wait for stability and a clear recovery signal if you need financing.
How to use this with stocks:
If the real estate cycle is in a late phase, expect higher risk in property and credit-sensitive stocks. Be cautious.
When property cycles show a trough, many beaten-down businesses may be cheap. Keep cash ready to buy.
If you find this article interesting, please let us know your thoughts down below here. We also have have other similar articles on our website too.
Tools I use
Sharing with you the tools I’m using at the moment.
My own 🔎 My Value Cycle Stock System → https://smartxterminal.com/
Coinbase Crypto Platform - Coinbase
📝 $5 When Join to Track investments, all assets and debt - WeMoney
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🧾 Crypto tax reports - Koinly
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📚 Books I read: https://linktr.ee/smartxcapital
🧭 Why I’m Building the Smart X Capital Platform
I’m building something for investors who want to move smarter — not faster.
This isn’t for everyone. It’s for those who want to understand wealth through time, not tactics
A place where we’ll track these cycles together, share real-time insights, and learn how to invest with the cycle — not against it. I’ll be offering workshops, tutorials, and in-depth guides to help you build a timeless investing system that grows through every boom and bust.
📚 The Smart X Capital Platform is coming soon — a place to learn, connect, and stay ahead of every major market cycle using data, history, discipline and our community.
🚀 Be First to Join
If you’ve been following my emails and you want to be ready for 2026, now’s your moment.
Because when every major cycle converges — the prepared don’t panic. They profit.
Talk soon,
Ace — Smart X Capital’s Founder
Disclaimer: The information shared in this newsletter is for educational and informational purposes only. It is not financial advice, investment advice, or a recommendation to buy or sell any security or asset. Always do your own research or consult a licensed financial professional before making investment decisions.