#3-What is the Economy
I’m going to presume that anybody reading this was working in the USA when 2020 started acting like….2020. So, it was early March, the country was on edge, and then the economy crashed what, 30%? Who cares, right? That’s just the stock market, it only impacts the rich. Or something.
Well, a lot of us found out that’s not exactly true, because shortly after that a lot of states completely shut down, businesses that stayed open were forcibly boarded up by the police in Cincinnati, licenses revoked….a lot of us were caught with our pants down trying to figure out how to pay the bills, the rent, get food, and for some reason toilet paper. One of my co-workers at a side job was homeless at that point, and none of us knew. It should make us take a good look in the mirror and count our blessings.
Then 2020 really started to kick off. And boy, did guns and ammo go flying up in price, and get harder to find what we were really after. Couple that with a reduced or eliminated income stream, and it got a lot harder to be a shooter for 2020. Every time we thought we caught a break, the supply got tighter and the prices went up again I know, just when you thought I was crazy for shooting 22LR instead of 9x19, you were rushing out to find a Ruger Mk4 and had to settle for a NAA…..thing.
By the way, let’s never make that TP mistake as a society ever again - without food you don’t poop. Order of operations matter.
So, the economy - what is it really? The economy is simply the creation, distribution, and consumption of goods and services. it feeds us, lets us earn a living, cloth ourselves, provide a roof over our head, medicine - everything around us. Unless you truly live 100% off the grid (in which case you aren’t capable of reading this) you make your living in the economy. When the economy drops 30% in a couple days, that means 30% of our neighbors are suddenly without jobs. There are ways to use this to our advantage, which we’ll discuss later.
For now though, a great correlation for investing is the housing market. If you own a home (or have been trying to buy) you’re probably very aware of the insanely inflated prices on homes for the last year or so. If you own a home, that means your home is “worth” more. It doesn’t change your budget or spending habits at all, does it? There’s a direct correlation to investing too with this analogy as well. That increase value, the paper value - doesn’t mean anything to the cash in your bank account unless you sell it, right? In investing, this is the UNREALIZED gain, and it fluctuates along with the market high and lows. If you sold your house for more than what you paid for it, that would suddenly be a REALIZED gain, as you got cash.
Note that you had to completely give up your house to get that cash - not very helpful, as now you need to find a new place to live, and you’ll spend that cash and then some to do so in most cases. There are ways to invest and get actual REALIZED gains monthly, quarterly, and annually, without selling your initial investment.