The State of the Market
POSTED MAY 5, 2020
s the founder and CEO of Freedom Founders, I’m often asked for my prediction, my prognostication on the State of the Market.
We’re about 2 months into the coronavirus shutdown of our $22 trillion economy. Where does that leave us?
I believe we are going into a deep recession triggered by the virus. In Freedom Founders, over the last three years, we had predicted a recession reset coming – we just didn’t know what would trigger it. This virus is an outlier, a “black swan” as we call it.
There was too much exuberance in the marketplace, and too much valuation based without true cash flow.
This isn’t abnormal; it happens every cycle. We were due for a reset and it was inevitably coming in some form or fashion.
So where are we, going forward?
There’s going to be a lot of what I call “de-leveraging” of the current marketplace. Now that we’re in this reset, we’re going to see “who’s been swimming naked”, as Warren Buffett says. We’ll see who really did have strong businesses and true valuations – and who didn’t.
This economy was driven so much by debt. And the businesses and investments carrying too much debt are the ones we’ll see taking hits. They have a strong chance of losing their entire position, equity, portfolio, or ownership stake to bankruptcy and liquidation of assets.
It’s going to be a tough time. Tougher, I think, than the 2008 recession and with a relatively long, slow, painful ride back up.
The companies and individuals who prepared in advance and got their debt leverage under control will continue to manage their business and lifestyle overhead so they’re not exceeding their means.
Unfortunately, most people live beyond their means, in business and lifestyle. Why? Simply because they can. This massive correction is going to cause a lot of pain for many. We’ll get through it, but those who positioned themselves well will do much better.
So here’s the opportunity:
If you weren’t already, I hope you’ve gotten really tight with your profit and loss statements. You’re going to have to remain tight with any expenditures you bring back on, including staff and payroll.
It’s going to be a different ballgame. You’ll probably have lower revenues, but at the same time, you can have solid profits – maybe even better profits – by running a leaner, meaner, tighter machine. It’s about getting more from less. Most people run the other way and make it all about quantity.
If you are well-positioned and have cash flow margins, you’re in the best place to be as far as the opportunities coming in on the back side – the assets you can buy.
I personally don’t play the game on Wall Street. I like alternative investments – like businesses and Real Estate, where I have more control and access to unique opportunities through my network.
I think it will be a relatively lengthy U-shaped recovery in the U.S. to get back to a “new normal”, although I don’t think we’ll hit the highs we saw over the last few years again any time soon.
We can thrive in this new normal, but we’ve got to readjust our mindset – and not just go with what we used to do. These changes can actually be good. You can start focusing on the things in life that are most important to you, your non-negotiables.
It’s really getting focused on your core values and living based on real metrics in your personal life, business, and in opportunities. You can still have a great life – it’s just a new game board and you’ve got to learn the new rules.
Who are you connected with? People who have already done this in their lives can provide you with strong insights. There aren’t many people on the road less traveled, but it’s where you want to be. Staying with the majority is a lifestyle that’s mediocre at best.
You’ve got to change your environment, which will change how you think.
Changing how you think will change what you believe in, which will then affect your behaviors and the actions you take. There’s a process to it. But you won’t get there chasing bright, shiny objects. There is a way to get this done, and you’ve got to just settle down and focus.
There’s no “easy” button – but there is a path that will take you where you want to go.
P.S. I’m holding a small virtual workshop this Saturday to discuss the massive opportunities that will become available through this reset – you can save your spot at www.freedomfounders.com/workshop
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