Time is flying. The S&P is down yet again at roughly 2,200 (yes we realize the exact number is 2,237.40). Putting this in perspective, ten years ago it was at approximately 1,100. No we’re not going to use exact figures since that’s not the right way to invest over long periods of time. You want to use long-term growth rates, long term returns and think critically about what the market is “pricing in”. In short, the market is a lot more attractive in just 4 days. Why? well if you went from 2,529 to 2,237.40 in just 4 trading days? It means you’re down 11% in just four days. Think about that. It means you lost 1.5 years of normal gains in just 4 days. So with that we’l explain what is going on and what we’re doing now.
Thinking Like a Rational Investor: At current levels (yes in just 4 days), now the market is what we would consider fairly valued. The market goes up about 7% per year over the long-term and over the last decade we’re up around 7-8%. Depending on what day you use, if you include dividends etc. The problem? Markets usually undershoot to the downside meaning that when people start to panic (like now we’re starting to see it), the CAGR will usually break down into the 5% range (sometimes less and in extreme cases go to 0% which is a clear buy sign).
Start looking for distressed assets in about a week or two. It really is that simple, we were asked in the last Q&A why we have 3-5 years of income sitting in cash and the answer is clear, commercial real estate. Those apartment complexes will likely be decimated. The renters are out of work, the property is levered up to the gills and fire sales will begin. If someone reading this has been in the real estate market for a long time they know that distressed assets are already popping up. That’s how fast the market fell apart. We cannot possibly comprehend how anyone was recommending real estate and stocks back in 2019 but that’s a topic for another day.
Readers Who Listened: For the readers who listened to our advice the last 3 years, first of all congrats on your massive gains in gambling and other such ventures we have highlighted. Second of all, you’re now in a position of power but you need to act intelligently. If you want to buy stocks remember that we’re at EQUAL risk. This means the only people buying now should be people with 20-30 year time frames or longer. If you press us on it, we think it still goes lower but at least we’re no longer begging you to avoid buying it (this should make sense to people who have followed our blog for a long time). Instead of pleading for avoidance if you have a long time frame it’s not insane to buy small amounts and do the dollar cost averaging strategy.
Now what do we officially recommend? Instead what you want to do is create asset protection. This means we already know that there will be price inflation again. You cannot buy corporate bonds, mortgage backed securities and even ETFs <— the world has gone mad with that last one… and expect prices to remain the same. The liquidity crunch and massive printing is going to eventually weaken the dollar. For those that don’t like these finance words (we don’t either) below is an explanation in plain english as to why stuff like gold, bitcoin, stocks and bonds are all going down.
First: Sudden demand shock with zero revenues. Second: suddenly everyone needs cash to pay for everything – bills, employee costs etc. Third: to pay for all of this they have to sell everything this means stocks, bonds, gold, crypto, art work, cars, their pets etc. Fourth: after selling everything the dollar should strengthen because everyone wants US dollars to pay for stuff so you see this in DXY increasing rapidly in value. Fifth: the government quite literally floods the system by printing US dollars over and over and over again. Sixth (where we are now): the US dollar begins to stabilize and all of that printed money is now floating around. Seventh: now you should see the value of “store of value assets” like gold, crypto, and perhaps even some stocks begin to rise and then.. Eight: after we get through that stage assets begin to slowly go up in value. That last one is why people are now joking that their Lattes will cost $20 and iPhones will cost $20,000 by the end of this decade.
So if we’re correct (as usual we may be wrong), we think we’re somewhere around point six and seven. So this means you should do what? You should begin slowly spending your cash on store of value assets (gold, crypto etc.) and save a large chunk to pray for a distressed asset sale in about a month. If you followed the blog you probably have 4 years in cash, 4 years in crypto currencies. Everyone is different but years are easier to express the balancing. Over the next few days you want to have 2.5 years in cash, 5.0 years in crypto/gold, 0.5 years in equities. If this is confusing we’ll use $100 bill. That $100 bill was in 50/50 crypto cash. Now those specific dollars (the $100 that’s likely up 15% or so) needs to be split as follows $31.25 cash, $62.5 crypto/add some gold, $6.25 extremely small addition to just the S&P 500. Notice, we’re not going to bother telling people how much crypto vs. gold to have because the risk tolerance level is incredibly high.
In summary, we are now at “fair value” in our opinion. We do think the market goes down a bit so you can imagine that we’re taking the $6.25 example and just chucking it into gold… But the downside is now limited and…. Now you know why all asset prices were falling like a rock. Panic selling to pay bills. Remember. Due to money printing this should reverse which is why we would begin *slowly* reducing total cash balance if you have large reserves.
For Brand New Readers: For those that are entirely new. There is practically no chance our advice will be taken but we’ll try anyway. Go ahead and check our 8 years of predictions from trump winning the election (we put real $$ on it not just talking about it), S&P advice to dollar cost through 2018 and taking it out in 2019 etc… After that, since we know no one will listen to all of the stuff we highlighted our basic recommendation is take 5-10% of net worth and inflation hedge. Period. No exceptions. This means the following three products: Gold, Crypto and TIPS (Treasury Inflation Protected Securities). You want to have some exposure to all of this stuff because it allows you to avoid hyperinflation potential. When prices begin to move they could move quick so at minimum avoid having all that cash destroyed. If your cash position was 20% (our initial guess) taking it down to 10% and buying inflation hedges can help you avoid a catastrophe.
Long-term Issues: Here is the fun part. Life is not about predicting the first derivative (say people go back to work), the game is predicting the third derivative. Most people can think about first and second level problems but the money is made in the third level. This is because it is not priced into the market.
First derivative is people will be shaky. You’re not going to suddenly hit the clubs, fly around and stay in crowded areas. This is pretty obvious. So the people who have the means to do this are the wealthy. The wealthy will likely fly less, lock down employees more and avoid being the first one to go back and move around.
The second derivative? This will naturally flow into the real estate market. Those massive commercial properties will have defaults. There is just no way to avoid it. Some areas are going to have big outbreaks and there is almost no way you can suddenly go back to “normal” world wide. Similar to what happened in Italy and China. Maybe we’re wrong but that’s the way it seems
Therefore we reach the third derivative. If we know that there will be financial distress for at least a period of time. IE. Parts of the economy will clamp up, its means asset sales will occur. During this entire fiasco we have to remember that Oil has also dropped to an incredible $20 a barrel (yes it moved around but it was even below this level for a second). So what does it mean? It means that Nevada and Texas are good places to look for a distressed real estate asset. Remember, this is the “good scenario”. We know that this whole pandemic will have real impacts. It is absolutely insane to believe that tomorrow the government can announce “open for business” and everyone operates the exact same way. People with 401Ks cut in half are not going to hit the casinos and clubs. People who saw 40 year olds die are going to reduce business travel if they can. So on and so forth. So you should take the time and look into Texas and Nevada for potential properties in a distressed sale if you have a long-term investment plan.
More Technical Overview: Now you have our recommendations revised. What a wild month. For those that are not interested in financial markets and how to predict these cycles feel free to close the browser. For those that are interested in the thought process go ahead and read below. As a final note, please don’t say we’re “whip sawing opinions”, when you lose 1.5 years of gains in four trading days that is a DRASTIC change in valuation. So in times of turbulence you have to keep your emotions in check and be ready to take out the machete (commercial property soon in our opinion).
First if you’ve frozen the economy (which we essentially have), the businesses now need to try and make up for that pain. If you had a month of pain, that’s more like a quarter of pain since you cannot reduce your fixed costs. A Company making $1M in revenue with $800K in costs will have a month of $0 in revenue and say $400K in fixed costs. At minimum he just lost 2 months of income (and has to find a way to close the gap). This usually means he’s going to run leaner (not hire as quickly) and he will also be a bit more fiscally responsible likely holding more cash.
If that is the case, it means that Companies will likely be less focused on stock buybacks (take the micro example we gave apply it to huge companies). Instead they will take the money and they will start to reduce debt on the balance sheet. Many of these companies had to draw down on lines of credit. This means they had agreements for the ability to borrow $1B, $2B or more. These companies already announced that they are drawing down these credit lines. This means their books now have more debt on them. Therefore, the next quarter (perhaps 2-3 quarters), they will want to pay off excess debt from a rational perspective.
Now that those two steps are understood, apply it to the stock market. Stocks explained for dummies is as follows: some guy is on one computer pressing a green button that says buy. On another computer some guy is pressing a red button that says sell. If we know that companies will at least avoid purchasing shares (the guy with a green button), for at least 3 months or so… It means that the number of people pressing the red button is higher. Some people forget that this is what a market is (just a bunch of people clicking buy and sell). Remember. Up to 50% of buy orders (people clicking the green button) is really just the CEO of the Company slamming that button. If that goes away for 3 months, buyside pressure is certainly depressed for now. This is exactly why we’re not yet ready to buy a bunch of stocks and if you want to take 5-10% of monthly cash flow, it’s “okay” but not that exciting in our opinion.
Now enter the Fed. We’ve gone full blown jungle juice retarded when in comes to fiscal policy. Unlimited QE is something that’s beyond incomprehensible. <— please take the time to watch the full video
Dollars are flooding the market everywhere at all times. Flooding. So eventually this is going to catch up. See the game here? We know the dollars are going to go into assets at some point and as long as the economy is shut we know dollars will continue to be in massively high demand. In simple terms, the Fed is taking a machine and printing trillions of George Washington paper that you use to pay for food and throwing it out there for free (practically for free). This means those dollars are eventually going to buy stocks, bonds, gold, real estate etc.
Now when this begins to happen (prices go up), you’ll see the standard goods and services being to rise. The coffee will no longer be $2.50 from starbucks and move up to $3.00. In an insanely complicated situation, now starbucks has to find a way to pay its employees slightly more so they don’t starve while maintaining profitability. Hence, our belief… the unemployment rate will go up no matter what (you can’t just pause the economy).
For those that didn’t enjoy the above (wasn’t a fun read we know)… What is happening is quite simple. The Fed is printing trillions of dollars and trying to give it to people who are losing trillions of dollars. They are losing trillions because the economy is at a standstill and fixed costs like rent, utilities and salaries must be paid.
Focus on the Micro: Now for some more basic non-investing stuff. What you can do now to help everything in your neighborhood is as follows: 1) you want to spend wit your local restaurants still… They will be in severe pain, 2) spend locally for anything else you can afford – small grocery shops, chiropractors, all services – they didn’t get the fast revolver loans at 0%, 3) do not surround yourself with older people, you may get infected and we have no idea how anyone can live with themselves if they cause their own mother/father to die, 4) have a very serious conversation with anyone over the age of 55 about remaining as quarantined as possible, walking outside when no one is around in a month isn’t going to be a big deal, but going to a MLB game would be incredibly irresponsible and 5) if you are successful please try to keep your employees even though it is a easy reason to lean out. You will have a work force that is much more motivated and they will remember this gesture for the rest of their lives.
Final Predictions: Our simple prediction is we need 7 days of data. We still think it’s worse than people think based on the information we’re getting from hospitals etc. That said, we’re not foolish. Many people live paycheck to paycheck and if we have 40%+ unemployment or something like that, we’re better off just living with the virus (mathematically). Our original idea of shutting everything down back in February is no longer possible (virus spread too quickly), so we should look at the death rate and come up with the best solution after that.
Best of luck to everyone and be sure to wear face masks when you go outside (at minimum wrap yourself with cloth).
“Putting this in perspective, a year ago it was at approximately 1,100.”
Typo? Ten years ago? First paragraph.
Fixed thx!
For gold – do you recommend buying it via an ETF? Thx
Physical, always
I always buy physical but if I ever want to sell it will take a pretty solid haircut for transaction costs I think. Is it better to bifurcate between physical and ETFs?
What are your thoughts on Silver? Gold silver ratio is insane right now. Just as good or better buy as gold?
Silver certainly seems like the more attractive deal right now.
Check its historical performance, it’s more volatile than gold (smaller supply) but can outperform both to the upside and downside.
I’d recommend throwing a few bucks at it.
WSPs, I think you guys have singlehandedly crashed the CBS News site.
Hyperinflation is a very real risk.
““The united States can pay any debt it has because we can always print money to do that.” –Alan Greenspan, Chair of the Federal Reserve
Yes, he actually said that!
So they inject money. Small amounts spent on necessities/coffee but most ends up going into asset prices. So asset prices get inflated again. Economy slows down but only due to decreased demand (which will rebound in 12 months), not a systemic problem with the underlying flow of value (financial system).
Don’t see how prices get higher unless demand is less elastic and they up prices to make up for less aggregate demand.
I think they just want to keep demand as high as possible through the 12 months so that leveraged businesses don’t go under. They should just do a partial loan freeze. All renter activity should slow down if everything else slows down.
Anyway, I figured BTC will be looking good from a purely inflationary standpoint if they pump in too much funny money.
Re-read it, why would demand be the same when everyone slashed their 401K in half, can’t go to big events, oil prices crashed and debt needs to be paid back so forces companies to save more and not increase expenses
So it goes
Great article as usual.
Long-time reader.
The timing on your point about inflation is not made unclear- are you implying we will see stagflation/inflation after this blows all over in a couple of years? CPI inflation is either driven by upwards pressure in input costs (70’s stagflation) or demand. With oil this low, it certainly won’t be cost anytime soon. So is it demand? I don’t see how demand will be large enough even if we come out of this relatively unscathed.
Re-read the last 2 posts both are answered.
Would you consider Rolexes/luxury watches to be a safe inflation hedge? Prices are down as you explained by a selloff. Will they hold/increase in value against a weakening dollar?
Been following for about a year. Your insights have been invaluable! Appreciate what you guys do!
Hell No. Only a Super high end watch. 10k rolex will be tossed around for 1-2K in a few months/years.
LOL you’re hallucinating
Why are u guys buying commercial real estate over residential?
From a pure yield standpoint, CRE always provides higher yields (7% retail, 9% industrial, 8% hotel, etc.) than residential (which range between 4-5% in a ‘sane’ market), plus its usually more stable (longer contract durations).
The US dollar being a worldwide standard, will these effects be mirrored in say Europe and the Euro?
No, no, no thank YOU for all these years and making us money directly and indirectly!
Stay healthy stay safe
I’ll have to reread this since I’m sleep deprived but this is coming from periodically browsing your site as well as reconfirming lessons I’ve known for years:
* Opportunity to purchase distressed assets. Third derivative. CHECK (have $ to pull this off).
* Dollar is losing value due to the Fed bailing out the ultra wealthy. Rather than be ignorant or complain about government acting stupid I already have countermeasures installed. CHECK.
* Stores of value like gold and crypto. Been doing this for years. CHECK.
* Health scare is life changing and is impacting the world. I’ll admit I’m guilty of this and I need to start wearing a mask and gloves when going out. CHECK.
Not mentioned in article:
* Staying sharp/learning useful skills like sales.
* Sticking to 30 minute daily limit on reading about CV.
* Staying fit in these times. My nearby gym I frequent shut down. I do weighted exercises like pullups at home.
* Be self aware. Revealing more information would reveal myself.
* Not attracting the wrong kind of attention. I’m on the fence about changing my style.
* Taking advantage of the dating market. Hint: I’m selling security. Working customer service and reading books like late 2000s PUA material years ago gives me an edge. Young 20s don’t have life experience while late 30s+ crowd is spooked from all this and sheltering off. Timing is everything….
* My business plan at the moment is still in the works everybody…rather than look like a liar or a goof I need to follow through.
God I’m dressing down like crazy. 3.3 million unemployed. We are looking at 5-10 million in the coming months. Mabey More. This is depression era BUST.
Fantastic post.
Long time Reader. How would you all propose buying gold? Something I have never done before.
Thanks as always boys.
You guys should consider a paywall for certain kinds of actionable content.
For those who want an edge.
I’d pay.
How should impending inflation/hyperinflation affect the decision to pay off a large student loan balance (interest rates 6%-8%)? Assume you had enough cash to make a large dent or payoff entirely. Trump has stopped interest from accruing on student loans indefinitely, so balance is not growing at the moment.
Would you payoff the loans now or buy some assets “on sale” and let inflation chip away at the loan balance?
Thanks for these posts, I’ve learned a lot (and the books are excellent, I wish they were around when I was a young man).
Not a Q&A and we have answered 100s of these in the past, use the search bar
“Many people live paycheck to paycheck and if we have 40%+ unemployment or something like that, we’re better off just living with the virus (mathematically)”
Can you further explain this?
– What do you mean by “living with the virus?”
– What makes this scenario *mathematically* better?
– Do you know where to find the most updated unemployment stats?
Thank you for writing and the radical candor. Love the fact a blogged called “Wall Street Playboys” is long cryptocurrencies.
“we’re better off just living with the virus (mathematically).” I was referred to as “low IQ” for saying this the whole time.
Good writeup on the inflation. Though I do wish I had found this website earlier than 2 years ago! I started taking my savings seriously in about 2016, way too late.
Guys do you have anything for the non US guys? We’ve done everything you have said and are cash/crypto heavy. I live in the UK, London and commercial property is a different ballgame to the US. Shall I look for distressed assets here? Cheers!
next Q&A? barely missed the last one
Once a month usually
Best area to look in Texas? Loved Austin and my company has huge office campus there.
Canadian looking at distressed asset opportunities.
Where are you guys looking?
I’m glued to your twitter and site. Huge influence
Any of the big 3 cities, Austin, Dallas or Houston. Downtown Dallas is finally revitalizing. Houston is feast or famine depending on crude oil, so may be a good time to swoop up some distressed properties. Austin might be the most overheated out of the bunch, but people keep moving here.
Tbh a great business out here are the luxury indoor gun ranges, like The Range at Austin. Buy an old warehouse and fix it up. Sell ammo at a big markup, and you basically don’t do anything. You just have your safety guys watch other people shoot, and collect the check. Always a demand, because Texas and freedom.
So I’ve thought about the printing press for the last few weeks since it was obvious they would do this and I mostly agree with you. The area that I’m still contemplating is if everyone else prints too then our Dollar probably holds it’s value similar to it’s current value in relation to other currencies. China likely won’t print to the same extent since they have Trillions in reserves from the years of trade surplus AND they have trillions of USD and EUR… they will potentially adjust their positions to ensure their Renminbi stays weak relative to our currencies to keep their export game strong as they have done for years (they have not fully completed their goals of a consumer driven economy that they are trying to implement after The Great Recession to limit their risk exposure so they will still play the Globalization based on their export economy).
Now, if the USD does have inflation, it does worry me because you typically fight inflation with increasing interest rates -> reference the Philips curve as to why. With the massive debts of the US, corporations etc. then I’m unsure we will have this tool at our disposal this time. I imagine we will be picking our poison soon… so I guess people should start theorizing how to capitalize in that environment as it may be coming.
This all leads to supporting the idea of YES, offload cash if you can into assets that can appreciate with the currency. Even better, you get some purchases at distressed price levels for higher returns as well.
NOTE: This is a great lesson to not over-extend and always hedge to manage your downside, not just your upside because you never know when a black swan event screws your world up and potentially causes you to lose everything!
What is the number 1 crypto to invest in?
I enjoy your direct, to the point, actually knowledgeable blog so much. I been on PE for 5 years and currently starting my own business and I only wish, I hadn’t been a fucking retard in my 20s and also that I had this post. Thanks guys and continue the great work. All those young kids, the post is pretty spot on, listen to the advice.
I don’t want to be a wet blanket here, but as far as “distressed RE” goes (in the oil patch or elsewhere), I’m guessing it’s going to be a little while before those deals really start popping up. At least as far as physical buildings go (not talking about REITs, LPs etc).
Full disclosure: Never bought a building in TX, and after doing some quick research, the foreclosure process is quicker there than in my territory (60 days vs 6+ months).
Fun fact: I hear you can also take someone’s TV (or other “valuable” piece of personal property) there if they’re late on rent as part of “landlord lien.” Worth it? Who knows. But I’m sure it leads to a lot of entertaining stories. Either way it seems like a low risk way to do business as no one packs heat in the Lone Star state…
Anyway… As a guy who made his bones buying “Distressed RE” during the last downturn. It wasn’t like there was a ton of it at rock bottom prices in 07-08 (at least not in my area). It took time. Even the first couple months after the stock market crash, nothing changed price-wise (sellers in denial/too leveraged up to maneuver), then once people started defaulting, auctions had to be held (in a lot of cases no one bid), then banks had to take back properties etc. Anyway, by the time that sh*t hit the market at actual discounts it was months or years later and it didn’t look quite so appetizing given the overall economic picture…
Yeah, I was one of the crazies who bought. Too young/dumb to know any better.
Also, gonna hold my tongue here, but if you think your local RE agent with the 5 series and the boob job will be able to get you on the inside track for the best deals you should stay in BTC…
All that aside, lets go back to the last meltdown: It wasn’t like every knucklehead who missed a payment had his property put up for auction. Banks had learned during previous crashes (a big one being the S&L crisis in the 80s/90s, ask any old ten-gallon hat wearing Texas RE Tycoon to fill you in) that maybe taking buildings back wasn’t the best thing for their bottom line. In 80s & 90s banks foreclosed en-masse causing prices to drop through the floor and the banks realizing big losses selling these properties for pennies on the dollar as after foreclosing, they had no other choice. In order to prevent that with the bigger owners (who often had the choice properties) banks started the whole “amend and pretend” thing. So as great as the prices looked a decade ago when compared to recent valuations, the truth is: in 2009-12 we got the scraps (in my market at least).
Not saying 2020 will follow the same trajectory as different parts of the economy are melting down, just saying all the bitcoin bros on here who have $50k in crypto and want to be land barons should keep their pants on. Hang in there though as I’m sure there will be some scraps for ya’ll… and for some of us, that’s all it takes.
Great Response and yes, the scraps is really all you need though. Avoiding this last 40% decline is where the real money is made as buying something 20% less instead of 30% isn’t that huge of a deal. Missing the massive decline was the win.
Example: $100K goes to $60K = Most people. So they can only buy a $300K place
Smart Person: $100K goes to $100K = now you can buy that $300K place for $240K… good enough
For sure. And thanks to you guys for continuing to hammer it home that the drop was coming, I’m one of the lucky ones sitting on some cash.
I wonder how many financial advisers charging 100bps+ on their clients’ assets made the same call…
Anyway, now I’m just keeping my fingers crossed that at least some people pay rent the next few months…
Stay safe out there!
They charged money to underperform “You’re in this for the long haul now!” As usual, this means they lost them a ton of money
Hope they do pay so you’re good to go! Gonna be a rough April for sure
I know WSPB is going for the commercial real estate, but do you think that there is chance we can see significant declines in residential RE as well? Commercial is little out of my price range for now, but a small multi family is not.
I guess i am one of those bitcoin bros with 50k in my pocket lol.
Thanks for weighing in on this. As someone looking to get into real estate mid term, do you see potential of residential RE going down like 2008. I know WSPB are long on commercial RE but since i have less money to play with, i thought a nice multi family will be a good start.
Thanks for the comments here throughout the years.
Jay
There will likely be opportunities in both areas. A lot of small apartment buildings are owner-occupied, if the owner loses their job and is overleveraged, there’s a good chance some of them will have to give back the keys.
Back in the last downturn, all the stuff I remember selling for real cheap was smaller stuff (much of it 2-4 units). Part of this is probably due to my budget and experience level at the time, I wasn’t looking at large apartment buildings or commercial property. That said, I’ve got a decent memory and can remember a lot of buildings in my area changing hands, there were some bigger deals done back then for prices that look pretty damn good now, but it wasn’t rock bottom pricing like some small buildings. Just owners who wanted to sell and were in touch with market (still great opportunities though).
This probably had to do with a few things:
-Owner occupants are generally willing to pay more, therefore have tighter margins. One of the reasons they pay more is due to the fact they often can get lower rates than investors, but I’d say the bigger driver is their inexperience leading to overly rosy income/expense pictures and the fact that since they are moving into the place they are more likely to “fall in love” with a building and ignore the reality of their and the building’s finances. I remember a lot of half finished (and half-assed) renovation projects being for sale.
-Owner occupants usually have a 30 year residential loan that is resold 500 times among different banks 1000 miles away. Not only that, but they only have one loan. So there is no personal relationship and minimal leverage with their lenders.
-On the other hand the “big dogs” often work with bankers who are closer to home and after building a relationship will finance multiple deals with them. Due to the relationship size it’s often in the banks best interest to work with the building owner rather than foreclose (smaller bank + bigger loan balance means the bank risks taking a significant hit). Banks don’t want to own investment real estate if they can help it.
The rents have started to trickle in and we’ve even taken deposits on apartments since this craziness kicked off. No illusions though, the next 3-6 months is likely going to be a rough ride. It’s times like these when all of us businesspeople/investors/human beings really earn our stripes. Good luck boys!
*Wish me luck as well “ForeclosedMyHood” doesn’t have quite the same ring to it…
I just realized that we really are in the platinum age for getting rich. Because nowhere else in the history of mankind have you been able to build true wealth (ie by owning a successful company) relatively risk-free, by working a day-job and then working on a side business in your free time.
Before fast accessible internet (so pre 2005 or so) you had to choose – either go the entrepreneur route or go the day job route. Entrepreneur route, if limited capital, meant high chance of failing (chance of getting it right the first few times = low), but also chance of making it big. Day job route was safe but never going to get rich.
Now, you can do both. Insane opportunity. Day job, and then keep trying and failing at entrepreneur (relatively risk free as you still have day job income) until you get it right and find what you’re good at. Only risk is opportunity cost of time/energy, but as you pointed out – we all have tons of free time.
“Last night in Sweden” -Trump 2017.
I am Swedish and we are an European and international outlier in the Corona Pandemic. No lockdown – the country is open with adoptions. Kids are in school. International media doesn’t cover this in a fair way yet so I’ll post here to share a contrarian strategy and perspective. Post has 4 parts.
1. Context of Swedish decision making – can we trust it?
2. Decision making process – one major difference from other European countries.
3. Examples of Corona adjustments.
4. Analysis
1. To provide a context for the chooosen Corona strategy I post “googleable” rankings. They show that the output of the accumulated decision making in Sweden on average is well above world average decision making.
– Most innovative countries – world rank 5.
– Most equal countries – world rank 4.
– Most healthy countries – world rank 6.
– Most dollar billionaires per capita – world rank 8.
– Most dollar millionaires per capita – world rank 10.
– Human development index – world rank 7.
– Least corrupted countries – world rank 3.
– Country with lowest number of smokers in the European union.
2. Decision making process – one major difference from other countries.
The government has a several hundred year long tradition to put faith in independent experts, in this case the Public Health Agency. In neighbouring countries like Denmark, politicians has put sanctions into place against the will of their Public Health Agency. Closed borders are one example Denmark implemented against their will.
3. Corona adjustments in Sweden are very different from other countries.
– Public gatherings first capped at 500 people and now capped at 50 people. You can be outdoors as usual.
– Restaurants are still allowed to serve buffets, but guest are not allowed to queue. “Solve it if you want to sell buffets”. (this was very clear, the goverment released a statement that more details regarding buffets would follow during the day).
– People eating at restaurants must sit at the table, restaurant are not allowed to have people eating in a standing position.
– You don’t order directly from the kitchen in open kitchen restaurants if you eat take away, restaurant personell communicate the order, and restaurant personell guide you to a table if you eat at site (service has improved).
– To encourage sick people to stay home you get sick pay from day 1. Normally sick pay kicks in from day 2. This will be exploited.
– Campaigns about washing hands and sanity in different languages on online platforms as well as in public spaces.
– People are encouraged to stay away from risk groups and information is clearly communicated about who is a risk group.
– People are adviced to keep distance and encouraged to work at home if your job allows you.
– Instead of mass testing, test will be made on groups that make up for a statistical representation of the community.
4. Analysis.
– When politicians makes the calls, people who has thought about pandemics for 30 days draw up the action plan. Since our decision making process puths faith in advice from independent experts, people with a large network of experts who has thought about pandemics for decades has a large impact. This means datadriven decision making instead of emotional decision making. Everyone in sales know emotional decision making is what works 9 times out of 10. Hence, the Swedish Corona Strategy receives a lot of criticism since most people are emotional.
– Simplicity. The virus is complex by itself. Adding soldiers on the streets, mass un-employment, lockdown of cities, broken international relations and detoriating health caused by lockdown just adds complexity to a tense situation. This is avoided with simple solutions like “wash your hands and stay home if sick”. People are encouraged to “enjoy a walk in the sun”.
– Future markets will be smaller. Companies in many countries built a large capacity to, for example, produce medical equipment which was sold to international customers. In the moment of truth, the sales ended and the large production capacity, made possible by international customers, is used to supply domestic demand. Hence, international sales will be associated with more risk in the future as trust is gone.
– Covid 19 will speed up automation implementation a lot in fast food restaurants.
– Local businesses still takes a massive beating despite the country not beeing locked down.
Typos: “Remember. U to 50%”, “bayside pressure is”.
Question: Buying at the bottom (soon) before hyperinflation (later) = receiving 0% rent payments from new tenants (housing restrictions to prevent kicking people out for nonpayment during hyperinflation/depression likely). Value of property with 0 CF = 0. What is the benefit of buying now vs. during hyperinflation (peak fear) if you have hard assets auto-adjusting for hyperinflation? What am I missing? Thnx
Not a Q&A
When you say invest in corporate real estate I assume you’re talking about REITs? Are there specific funds you look at and how do you decide which ones to buy into?
No and not a Q&A