Billionaires always see a storm before it comes, and it just happens that the biggest storm of all time is coming. CEOs, hedge fund managers, and venture capitalists worldwide are preparing for one of the most serious crises in history. Many actually think that we’re already in a recession, but the world just hasn’t realized it yet. This video will unravel the strategies that are being used by billionaires to hedge themselves against the upcoming downturn and how you can as well.

Most people assume that timing the market is impossible, and that’s true for the most part. Timing the market is extremely difficult, but you don’t need to know the exact timing to prepare. Billionaires frequently implement strategies that hedge themselves against incoming crises. By hedging their wealth, they will succeed in any situation. In the scenario of a crisis happening, those who hedged their wealth will be the only ones with their heads above the water. Take Elon Musk’s strategy as an example of this. Elon believes that we are already in a recession that could last from 12 to 18 months, but he isn’t trying to time the market with his stock holdings. Instead of being 100% certain that a crisis is coming, he looks at the future as a probability. Economic landscapes are fluid, and you should never be binary as to whether a crash will occur or not. Rather than going all-in on his economic prediction that could be wrong, he is simply just hedging for the worst outcome.

Actions speak louder than words and Elon’s actions are no different. He recently decided to lay off 10% of salaried Tesla employees in preparation for a macroeconomic disaster. The reason why Elon is laying off employees is for capital preservation. It might not seem like cash is important during an inflationary period, but cash flow is king during recessions. This not only applies to businesses but also to retail investors like yourself. The Federal Reserve has over-extended its balance sheet by over $5 trillion and plans to reduce the money supply over the next couple of years. This means that the Fed doesn’t have the leeway to hand out free money like before. If the economy crashes in the coming months, money will become scarcer even if inflation remains elevated. Elon already experienced the scarcity of money during the dot-com bubble, and he highly advises businesses to get their hands on cash while they can.

While Elon is one of the leading innovators, he’s not the only one laying off employees. Peloton fired 20% of its workforce, Carvana cut 12% of its total staff, which totals to 2,500 employees, And Coinbase paused the hiring of new employees, withdrew existing job offers, and laid off 18% of its workforce. All of these layoffs have one similarity: macroeconomic concerns. Coinbase cited current market conditions as one of the primary reasons for its layoffs. An article was written by the Chief People Officer of Coinbase, L.J. Brock, explained how “adapting quickly and acting now will help us to successfully navigate this macro environment and emerge even stronger, enabling further healthy growth and innovation”. We talked about how businesses need cash flow to survive, but this also applies to people like yourself. Think about your monetary inflows and outflows like a business. You have income flowing in and expenses flowing out. By subtracting your expenses from your income, you can calculate your operating cash flow. Now take that operating cash flow and subtract your taxes to get your net cash flow. Although your cash flow might be positive right now, it could easily disappear in the coming months. That’s why we have to focus on capital preservation. There are a vast array of methods to hedge your portfolio against market downturns, many of which I have covered on this channel. One of the most well-known methods is to simply short the market. Carl Icahn manages over $21 billion as an activist investor, and lately, he has been shorting the market. Icahn is known for being a corporate raider. This means that he frequently takes over companies and sells them for a profit by stripping the companies of their assets. Even though many dislike Icahn, he is certainly one of the greatest investors of all time. He averaged an annual return of over 26% from 1968 to 2014, which is considerably higher than Warren Buffett’s returns. Icahn went on CNBC earlier in 2022 to describe why he believes there could be a recession or depression coming soon. Ichan uses a volatile strategy, which means that he has to hedge his portfolio against considerable downturns. Carl Icahn has been purchasing credit default swaps on mortgages of corporate offices and shopping malls. Purchasing credit default swaps is equivalent to shorting on steroids. By purchasing credit default swaps on corporate offices and shopping mall mortgages, Icahn is essentially shorting physical stores. This acts as a hedge against his long positions.