You know what keeps me up at night these days? It's not the stock market gyrations. It's not inflation numbers or Fed announcements. What bothers me is watching regular folks making the same mistakes I saw people make in 1973, in 2000, in 2008. They panic. They sell everything at the worst possible time. Or they keep buying trash because someone on TV told them to.

I'm 95 years old. I've lived through 14 recessions. And I'm going to tell you something that might save your financial life. The time to prepare for a recession isn't when it arrives. It's right now. Before the warning signs turn into sirens.

Right now, we're sitting at what I call the knife's edge. GDP growth is slowing. Consumer debt just hit $18.1 trillion. Corporate bankruptcies are climbing at the fastest pace since 2020. The yield curve inverted for months, and history tells us that's predicted every recession for the past 50 years. We're not in a recession yet. But the odds are higher than most people want to admit.

So what do I do? What's my number one strategy when I smell trouble coming? It's not what you think. It's not buying gold. It's not selling everything and hiding under a rock. And it's definitely not trying to time the exact market top. My strategy is simpler than that. And infinitely more powerful.

The Strategy Nobody Talks About
Here's what I do before every recession. I get greedy about one thing. Quality.

Not just any stocks. Not whatever's hot on social media. I hunt for the highest quality businesses I can find, companies with bulletproof balance sheets, and I wait for the moment when Mr. Market offers them to me at reasonable prices. Then I back up the truck.

That's it. That's the whole strategy. Sounds simple, right? But let me tell you why this works and why 95% of investors do the exact opposite.

Most people think preparing for a recession means selling everything. Going to cash. Waiting for the bottom. That sounds logical. But it's wrong for one simple reason. You'll never know when the bottom hits until it's already passed.

In March 2009, when stocks were in free fall, I was buying. People thought I'd lost my mind. The financial system looked like it was collapsing. Banks were failing every week. But I wasn't looking at the news. I was looking at the businesses. And some of America's finest companies were trading for 40 cents on the dollar.

The same thing happened in 2020 during COVID. Panic everywhere. People selling anything that moved. Meanwhile, I'm looking at companies with fortress balance sheets, dominant market positions, and temporary problems. Temporary problems create permanent opportunities if you know what to look for.

What Makes a Quality Business?
Let me break this down. When I say quality business, I'm talking about something very specific. I'm talking about companies that have what I call an economic moat. A competitive advantage so strong that competitors can't touch them even if they try.

Take Coca-Cola. I bought that stock in 1988. People said I overpaid. The stock promptly fell 30%. But I knew something. Coca-Cola has a brand that's recognized in every country on Earth. They have a distribution network that took a century to build. You can't just start a soda company tomorrow and compete with that. That's a moat.

Or look at American Express. I've owned that stock for decades. Credit cards are a commodity business, right? Wrong. American Express has a brand that signals status. Their customers are wealthier and more loyal. Merchants pay higher fees to accept Amex because they want those customers. That's a moat.

These businesses have pricing power. When costs rise, they can raise prices without losing customers. That's the single most important characteristic you can find in a business. Because inflation or recession, companies with pricing power survive and thrive.

Here's what I look for specifically. First, the business needs to have dominant market share in its industry. Number one or number two. If you're number five, you're in trouble when recession hits.

Second, high returns on invested capital. I want to see a company generating 15% or 20% returns on the money they reinvest. That tells me management knows how to allocate capital efficiently.

Third, low debt levels. This is crucial. When recession hits, companies with tons of debt get crushed. The banks call in loans. Refinancing becomes impossible. Cash flow dries up. Game over. But companies with little or no debt? They're fine. Better than fine. They can actually grow while competitors are drowning.

Fourth, consistent cash flow. I don't care about accounting earnings. I care about cash. Real money coming in the door that can't be manipulated by creative accountants. If a business generates strong free cash flow year after year, it can weather any storm.

You know what keeps Warren up at night these days? It's not the stock market gyrations. It's not inflation numbers or Fed announcements. What bothers him is watching regular folks making the same mistakes he saw people make in 1973, in 2000, in 2008. They panic. They sell everything at the worst possible time. Or they keep buying trash because someone on TV told them to.


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