How To Survive A Stock Market Crash
What happens if the stock market crashes? It’s a question any prepper worth his or her weight in canned goods has clearly asked themselves before.
The stock market has been on a surge, to say the least. It really began to climb after President Trump was elected (we aren’t crediting him, just noting the timeline of the trend). This has many investors excited and becoming more and more bullish. The market is also changing as more Artificial Intelligence stocks begin to garner attention. Everyone’s always looking for the next big winner. Buying a stock for pennies and then watching it explode is a wonderful feeling. But what’s not so wonderful? A stock market crash. When it comes to prepper news, we tend to focus on a lot of brick and mortar product and activity. But financial prepping is incredibly important. Knowing how to survive a stock market crash is a prepper skill. What happens if the stock market crashes? Do your really understand all the logistics?
I don’t claim to be a financial expert any more than I claim to be a doctor. However, I can tell you this: The stock market will crash. That’s what stock markets do, they crash.
How To Survive A Stock Market Crash – Introduction
Stock markets are really just glorified Ponzi schemes. Let’s call a spade a spade. It hardly is real money. The stock market is gambling based on guess-work prospectus. Yes, you can assess a business using data and invest accordingly, but stock market shares have ebbs and flows based on a variety of factors beyond the health of the business. For example, a terrible rumor could dump a single stock. Apple could have a bad iPhone launch and shareholders might panic and sell high hoping to avert any financial losses. But that’s guessing, not hard reality. iPhones could sell like hotcakes, but just because an Apple executive didn’t impress during a Powerpoint presentation, Apple shares tanked. Apple isn’t the greatest example, however, that’s a sad reality of the stock market. It is groupthink at its most obvious. If the herd shifts one way, the herd grows.
Understanding this cold, bitter reality helps you to understand how to survive a stock market crash. Because, the reality is, you should always be expecting one. If a single stock can crash over a bad presentation, then certainly there are other factors which could crash a stock market. Predicting the stock market is impossible, no matter what some greaseball financial advisor wants to tell you. They bank on you thinking the entire system is too complicated for you to understand. But it really isn’t.
Historical Stock Market Crashes We Can Learn From
Stock markets crash, as I stated before. For some people, this is a huge financial black eye. If your retirement money is tied up in stocks and the market crashes, you’ve lost everything. On the other hand, if you are young, a stock market crash could serve advantageous purposes for your financial future because you could then buy cheap stocks.
Here’s a list of stock market crashes in the past. Again, history is our teacher.
1929 Stock Market Crash (The Great Depression)
The most famous stock market crash came in 1929 and was known as The Great Depression. It remains the worst stock market crash in American history. it resulted in thousands of displaced Americans and massive food lines. Beginning on October 24th of 1929, the Dow Jones began a slump into futility. A $30 billion market tumbled and withered away. It only took four days for the Dow Jones to tumble 25pc. By July, it was down 90pc. If you were invested in the stock market, you were now poor. The fallout effected the health of the American economy in drastic and startling ways.
Black Monday in 1987
The Dow Jones tumbled 22.6pc in one day. Just like that, $500 billion dollars vanished from the economy.
The Tech Bubble Burst In 2000
You are probably old enough to remember the famous “tech bubble.” The Internet was new, the economy was thriving, but there were some out there that sensed that many of the big-time tech companies were merely propped up by massive debts to venture capitalist. Investors got shaky on what was a thriving stock market in the tech zone.
And then, the bottom fell out.
The NASDAQ lost 78pc.
The 2000 “tech bubble” bust is actually a great example of how the stock market crashes based on speculation. Internet businesses were truly based on speculative appeal. Today, big surges in tech companies like Snapchat provide us with evidence that speculative markets remain an American way and consistently place our economy at risk for a major stock market crash.
Mortgage Crisis Of 2007 and 2008
In the years following the “tech bubble” bursting, many investors moved back to tried and true real estate investing. And so did basic folks. And, well, the banks were firmly aware of a rising market. The banks began giving out tragically bad mortgages, which allowed investors to buy massive amounts of real estate and many common folk the ability to purchase homes they could never have before. The loans were hideously poor.
On September 29, 2008, the Dow Jones crashed almost 778 points. Banks began to go south and collapse. The government negotiated ideas that would fund major banks with financial aid.
What Causes A Stock Market Crash
Being a prepper means having the knowledge to predict the chaos that could place you and your family in harm’s way. To learn how to survive a stock market crash, one needs to learn what causes a stock market to crash.
If the herd panics, the markets could crash. This is similar in the way that if people suspect a dollar crash is on the horizon, they may pull their money from the bank. The massive withdrawal of cash from the banks could result in banks crashing. Again, this is market perception, potentially not a true realized threat. The stock market operates almost 100% on hypotheticals. And because of that, anything that would trigger the herd to sell off stocks en masse could result in a sector of the stock market collapsing, or the whole darn thing.
When investors panic, they sell off stocks hoping to avoid a massive loss. In 1987, this is why the market crashed. Investors got anxiety, so they all sold off their shares in one trading session. The panic could be the result of a true threat, such as a fuel crisis. It could be the result of the fear of war, or fears of an EMP attack. But it could also be the result of a baseless fear. That’s how speculation works. And that’s why we can never trust the stock market.
Artificial Inflation Of Companies
This concept is simply not accounted for enough. And we see it all the time, often, in tech companies. Investors decide a tech idea is great and they buy up the shares and sort of artificially inflate that product or company. And then the herd sees the stocks rising and they start buying the shares, further exasperating the situation. But this is often reckless investing that isn’t “real.” Sometimes investors prop companies up, making them seem like “billion dollar companies” when in fact, their financials look nothing of the sort.
The same prop can be used for the entire market. Investors are more aggressive with President Trump at the helm because they predict he will lower small business taxes. They like his business minded approach. So more and more investors invest. But is it real? The concern here is that Trump could inevitably fail on a tax plan. Or, Trump could cause a war in the Asia-Pacific region. Either of those two scenarios could destroy the stock market.
The events of 9-11 created hysteria in the stock market. A new war could do the same. If the herd fears that the dollar could collapse like other fiat currencies have, then the market could crash. World events are extremely meaningful to the American stock market. As a prepper, you must look out for overseas threats and domestic issues.
Central banks Manipulation
Central banks can inflate interest rates, causing common folks issues when they want to get credit. In America, when credit can’t be lent, homes and TVs can’t be purchased. Therefore, many stocks tumble out of fears that consumers won’t be fueling sales. If central banks around the world decide to create tougher packages or pull stimulus, the big stock market scheme collapses.
What Happens If The Stock Market Crashes?
Now that you understand what happens if the stock market crashes, its time to get your prepper ducks in a row. If you want to survive a stock market crash, you will need to act immediately in the following ways.
Remove your money from the bank if at all possible. The moment you sense the stock market is crashing, get your cash out. The fact is, once the herd catches on that the United States economy is in dire straights, you can expect massive cash withdrawals from the banks. And when that happens, the banks will lock down withdrawals. They may tell you that you can only pull a small, set amount of cash. The banks realize their position of power collapses once they are drained of cash. A massive bank run is the single biggest threats to the big bank systems. When Greece’s financial system collapsed, people who didn’t get their cash out early were subjected to living without financial means for a period of time. For Greece, the warning signs that Greece was unable to become solvent were there all along, weeks before the financial crash.
Fuel. Get fuel. Must have fuel. I can’t stress this enough, if the United States stock market crashes, fuel will go from a luxury to a vital need for survival. Fuel prices might soar as people begin to fear a massive stock market crash.
Food and water. Without food and water, you can’t survive. If the bank freezes your money, you can’t buy food. If food prices inflate, you might not can afford to buy food. If you can’t pay for water, you might not have water. This isn’t conspiracy prepper stuff, you need food and water to survive a stock market crash. I highly recommend that every check out my best survival water filter article, water filters are truly life savers for so many prepper events. Have canned foods on site. If you can’t pay bills, services like water get shut off.
Civil unrest is a distinct possibility. If people can’t withdrawal cash, they may do anything to survive, including an attempt to violently loot your home or business. If merchandise is suddenly unaffordable, civil unrest is an almost certain happening.
The Theory Of Gold And Silver
Many preppers buy gold and silver as a way to hedge their financial bets. When and if the stock market crashes, gold and silver will rise in value. Gold and silver are real, unlike stock market rumors and fears and mania. Buying gold and silver is definitely a good way to help protect your financial future, but you need to really understand the best practices. Many gold resellers don’t send you the gold bars, rather, they tell you it is stored in some London bank. Proceed with caution.
In conclusion, always be aware that the stock market may crash. Knowing how to survive a stock market crash is essential to prepping. You can’t prevent a doom and gloom scenario, but you can prepare for it mentally and physically.
Author: Jim Satney
PrepForThat’s Editor and lead writer for political, survival, and weather categories.