How The Smart Money Gets Rich When Markets Crash
With markets in an uproar lately, I’ve been thinking about the lessons we can learn from those rare individuals who don’t just survive bear markets – they thrive in them.
Today, let's take a look at the extraordinary wealth created by a special breed of investor who sees opportunity where others see only disaster.
Because make no mistake, friends – bull markets are nice, but bear markets are where generational wealth is created.
The greatest transfer of assets in financial history happens not when markets are soaring, but when they’re plummeting and fear grips even the steadiest hands.
Just look at the historical returns from major market bottoms:
1932 (Great Depression): +372% over the next five years
1974 (Oil Crisis): +76% over the next three years
1987 (Black Monday): +62% over the next three years
2002 (Dot-Com Bust): +101% over the next five years
2009 (Financial Crisis): +400% over the next decade
Those aren’t typos, folks. That’s the power of buying quality assets when they’re on fire sale.
THE MASTERS OF DISTRESS: THREE CONTRARIAN LEGENDS
Warren Buffett: America’s Bargain Hunter
When the 2008 financial crisis hit, most investors couldn’t sell fast enough. But Warren Buffett? He was buying – and not just nibbling.
In September 2008, right as Lehman Brothers collapsed, Buffett invested $5 billion in Goldman Sachs preferred stock with warrants that eventually netted Buffett's company Berkshire about $3 billion in profit. He followed this with a $3 billion investment in General Electric on similar terms.
But Buffett wasn’t done. In the fall of 2008, he wrote his now-famous “Buy American. I Am” op-ed, telling the world he was personally buying U.S. stocks for his non-Berkshire portfolio. One specific example? Wells Fargo. Buffett increased Berkshire’s stake dramatically during the crisis, buying shares at prices as low as $8-20 (split-adjusted), compared to pre-crisis prices around $30-35.
Richard Rainwater: The Ultimate Catastrophe Capitalist
The late Richard Rainwater made billions by investing in distressed assets when nobody wanted them.
During the Texas real estate collapse of the early 1990s, Rainwater ...
