For months, experts have debated whether the U.S. is headed for a recession, already in a recession, or might divert a recession. But that doesn’t mean it’s all bad news.
In the spirit of Winston Churchill, who once reportedly advised people to “never let a good crisis go to waste,” many astute investors are positioning themselves to reap benefits from the country’s underwhelming financial state.
To understand how to turn an economic slump into a sharp bet, we spoke with serial entrepreneur and hedge fund manager Evan Rubinson.
He explained his thinking around the biggest problems that have plagued the markets since the pandemic, the highs and lows of federal policies, and his personal plan to create wealth during the downturn.
Evan Rubinson: ‘Be Prepared’
The most important lesson, Rubinson said, is to abandon the idea of getting rich quick. Just as the U.S. didn’t suddenly fall into economic woes, it won’t suddenly bounce back. If you want to make money, the key is patience.
“We’re kind of waiting for the next six months to play out for what I would call the trough, and then trying to deploy some capital intelligently where we can,” said Rubinson. “I definitely think there’s an opportunity, but I also think people need to be prepared. If you’re an investor right now, you’re not going to recoup any money on your investment, probably, within the next three to five years.”
Before investors can make smart decisions, they need to understand the underlying policy issues that have led to the current state of affairs. Evan Rubinson sees recent federal policies as the unwitting instigator of potential future pitfalls.
“I think the [Federal Reserve] is a bit ahead of the curve at this point. They were behind the curve for a long period of time, and now they’re trying to overcompensate when they woke up and saw inflation at 7%. I understand what the Fed has to do, or wants to do, to try to curb that. But I do think that they’re ahead of that curve in a sense that they need to let the market play out, maybe after the rate raises that they’ve already done take effect. I think they need to let that environment play out for the next six months. I don’t think they will, but I think the biggest risk there is throwing the economy into recession in favor of curbing inflation.”
When the federal government attempted to ease the pain of the pandemic with a cash stimulus, they created a false economy that led to odd consumer behaviors, Evan Rubinson said. Since then, other policies have altered consumer behaviors even further. By taking careful stock of what consumers are doing or not doing, investors can discover undervalued markets. In essence, the game is to understand where the current set of circumstances has artificially affected prices.
“I think the bigger problem that’s the outgrowth of that is the Federal Reserve curbing all of this liquidity after sending stimulus checks out during the pandemic, where people did have some cash, and now trying to kill that economy, well, people aren’t spending money, they’re not investing. They’re certainly not spending money right now in particular, on real estate and on luxury goods, based on mortgage and lending rates being very high.”
Many of those opportunities materialized in the form of property. Rubinson’s plan is to deploy cash in both public and private markets within the next six months, snatching up real estate just as prices bottom out.
“In the next six months, I’m looking to redeploy cash in public and private markets for my hedge fund. I’m also looking to redeploy cash on the real estate side to buy up some key commercial properties. Even if mortgage rates remain high, which I believe they will, property prices are going down 30%, 40% on residential in the last six months. And looking at the commercial side, it’s a little bit more inelastic, but they’re still dropping 20%, 25%.”