Former Wall Street trader turned TikTok star says this is the financial advice you need right now

There are many reasons to worry about the economy, but here's one you don't often hear about: the growing gap between Treasury yields and other types of credit. That gap has been widening for about a year, and that's a cause for concern, says Nicholas Crown, a former Wall Street trader and vice chairman of Barclays Investment Bank. Crown is now an entrepreneur and he created and stars in the hugely popular TikTok series "Rich vs Really Rich".

Since he is no longer employed by Wall Street, Crown is free to say what he really thinks about the current state of the economy and its near-term direction. Here is his candid advice for entrepreneurs and investors.

1. Face reality.

The growing spread between Treasury yields and other forms of credit (credit cards, mortgages, etc.) indicates two things, says Crown. First, financial markets believe that retail lending is riskier than it used to be, i.e. more people are expected to default on these obligations. And second, people are eager to borrow. "We're in this crazy scenario where we have crazy inflation and people still want to spend, spend, spend," he says.

And if they want to keep spending, they can. Crown notes that new and different financial products are constantly being introduced to allow consumers to borrow more and more. “Our lifestyle, in my opinion, has not adapted to what is happening in the market,” he says. With interest rates rising, this can be bad news for borrowers. “The average person is going to feel the pain more than large asset-holding investors, simply because if they start racking up credit card debt, that 14% interest rate will jump to 25% pretty soon.”

Meanwhile, rising interest rates have done little to depress property prices. They won't for the foreseeable future, Crown says, as big investors have taken their money out of stock markets and invested it in real estate, especially short-term rental properties. At the same time, higher interest rates mean that many consumers cannot afford homes, so they are forced to look to rental markets where rents are rising.

The combination of rising inflation and rising rents creates what Crown calls a "poverty wedge" that affects many people. “That trickles down to the wealth of the average consumer,” he says. "You are getting poorer and poorer because of inflation and the cost of your rent." He thinks the corner is reaching a dangerous level.

You may not be able to do much to prevent the poverty wedge from affecting the economy, but you can at least mitigate its effects on your own home and business. If you have credit card debt or other debt that may have interest rates rising, prioritize paying off or eliminating that debt. Make the lifestyle changes you need to be debt free. In your business, look for ways to reduce expenses. You'll be in good company: Many organizations, including Microsoft and Google, have announced cost-cutting measures.

2. Invest in yourself.

There aren't many good investment opportunities right now, says Crown. "We have this complete pandemonium and confusion in the market. Cryptocurrency - the regulatory environment is scary, in my opinion. We have no idea what's going to happen there. So why don't we start not to reinvest in ourselves?"

The classic example, he says, is of a dentist who invests $100,000 in the stock market when he could better invest that money in hiring another dentist or improving the practice to make it more appealing to patients.

Another great way to invest in yourself is to learn new skills. “A lot of people said during Covid that they were going to go back to school and do all these projects,” Crown says. "If you haven't, now is the time because you are not going to find a return on your investments. But you might find a return by improving your skills. Continuing education is becoming cheaper and cheaper. It there's no excuse not to invest in yourself."

3. Double down on entrepreneurship.

Crown thinks that, despite economic headwinds, it's one of the best...