Crisis Predictions

This is the Momentum Podcast. Right now the world is waiting to get back to normal, but the reality is that we are building a new normal on a daily basis right now. Entrepreneurs around the world are working together to make a difference, to drive the world into the future, to create a new reality, come back into the present and demand that it becomes real. And in this episode of the Momentum Podcast, Alex is going to show you exactly what you need to know as a business owner and the adjustments you should start making right now to help drive the world to a brighter future. It starts right now.

I'm Alex Charfen and this is the Momentum Podcast made for empire builders, game changers, trailblazers, shot takers, record breakers, world makers and creators of all kinds, those among us who can't turn it off and don't know why anyone would want to. We challenge complacency, destroy apathy, and we are obsessed with creating momentum so we can roll over bureaucracy and make our greatest contribution. Sure we pay attention to their rules, but only so that we can bend them, break them, then rewrite them around our own will. We don't accept our destiny, we define it. We don't understand defeat because you only lose if you stop and we don't know how. While the rest of the world strives for average and clings desperately to the status quo, we are the minority, the few who are willing to hallucinate. There could be a better future and instead of just daydreaming of what could be, we endure the vulnerability and exposure it takes to make it real.

We are the evolutionary hunters, clearly the most important people in the world because entrepreneurs are the only source of consistent, positive human evolution and we always will be. What's up everybody? So I spent this weekend looking at numbers and trying to understand what's going on in this crisis and trying to understand what we as business owners should be prepared for. Let me give you some perspective of where the information I'm about to share with you comes from. Hey everybody, thanks for being here, appreciate you being here. So I'm going to share my notes and my summary of what's going to happen in this crisis because as business owners, we need to understand what we need to prepare for and we need to understand reality. We need to know what's really going to happen here. And so here's where this information comes from, I want you to know how I assembled it, how I put it together, and really let me give you some background on who I am.

So in 2007 Katie and I went bankrupt. We were completely wiped out and I started seeing some habitual or some process issues in the market, some challenges in the market with foreclosures, with short sales, with how things were being handled. I started doing some research, I started sharing that research and here's what I shared in 2007 and 2008. They got me called crazy, I was literally called crazy. Hey everyone, thanks for being here, appreciate it everybody signing in here live. And here's what I got called crazy for in 2007 and 2008, I was saying that we were in a 10 year foreclosure recovery, seven to 10 years, that it was going to take a long time to recover, that there was no government stimulus that was going to fix it. And I went out and said, these are the issues we're going to have and we're going to have to sell this through this inventory.

It's going to take years. These are the processes we're going to have to use. And here's what happened during that time I was called crazy in 2007, I was called questionable in 2008 and in 2009 the companies that said those things were lining up behind us to get our advice. And here's what I mean by the companies who said those things. Every major lenders, so Citibank, Chase, Bank of America, Wells Fargo, they all said we were nuts. And then they all became... we advised all of them. And not only that, we ended up advising some of the largest brokerages in the world. RE/MAX, Century 21, Prudential, we worked with a ton of the Keller Williams offices. There was so many different offices and so many different organizations we worked with. And I want you to know also, so that you know where these numbers come from. So you know where I'm sharing this with you from is that I was invited not once but multiple times to Washington to sit at round tables as to how we were going to solve the foreclosure crisis.

At one point I sat two chairs away from director Lockhart, the director of the US treasury at a u-shaped table with about 40 people. So not only have I seen the numbers of how these crises work, but I've also been on the inside of how they're resolved and what types of decisions are made and honestly the challenges with the repair efforts that are made and what's going to happen moving forward. And so I want to share with you some of the predictions that I came up with this weekend and I spent hours online and I have a summary here of what's already happening. So let me share this summary with you. So last week we had the single highest week of unemployment claims in the history of the United States, 3.28 million people claimed unemployment last week and it was expected to be between one and two.

I think the highest estimate was someone, I think City Group was really pessimistic they said 4 million, it came in at 3.28. Here's what I think about that number. That number is going to grow like crazy this month. It was a very confusing week because secretary Mnuchin, or however you say his name, the guy who runs the US treasury said that we shouldn't pay attention to the unemployment numbers. They're immaterial, they're not relevant because the government hadn't released assistance for homeowners, assistance for businesses yet that things would get better. I absolutely 100% disagree. Here's some statistics we need to understand when we see 3.28 million people are unemployed. Here's what we need to know, banks are going to experience record late payments this month, probably bigger than they experienced in the foreclosure crisis. Even though the government's sending out stimulus money, even though there's other stuff happening, we're going to have record late mortgages and record late rents.

And here's what's happening in a lot of areas, areas like Austin. So let's look at the economic cascade. 3.8 million people lose their jobs, a whole bunch of mortgages don't get paid, a whole bunch of rental payments don't get paid. City step in and say we're going to have a moratorium on foreclosure and evictions, you can't evict for the next two months. Well, the translation to the average person of that is, I don't have to pay my mortgage or my rent for the next two months. So we have individuals in this country, over 3 million of them who just lost their job. And a lot of them, not all of them, but a lot of them, those who are less financially sophisticated, are going to believe they don't need to pay their mortgage bill and their rental.

So here's what we're going to have in the next few weeks in the United States. Massive late payments to lenders, massive late payments to landlords like me and Katie. And so we have tons of landlords and aren't going to get the payments that they need. We have tons of mortgage services that are not going to get the payments they need, and so here's what we need to understand is a long with this, we also have record consumer debt in the United States. So if you look at where we are as a population, we have record consumer debt, more debt than we've ever had. It actually happened in February. Just last month we hit $4 trillion in consumer debt. And what we're going to see immediately based on 3.28 million people going unemployed is overnight we are going to see banks tightening lending standards.

We're going to see credit markets dry up and tighten up, we're going to see immediately if you have a home equity line of credit or a credit card, it's very possible you're going to see your available balances on those go down radically fast. And in businesses, credit lines, if you have factoring of any kind, short term financing of any kind, that is going to become more and more difficult to get. And we're going to see major purchases fall off of a cliff here. And here's what I mean by major purchases since the beginning of this crisis, housing, cars, retail, furniture, all of those goods are falling off a cliff right now. And do me a favor, there's a lot of you watching this here, let's get more people to see this so more people understand what's really going on and entrepreneurs can prepare.

If you would share this for me, I would really appreciate this. Share this to your page, share this on Facebook, let's get some more attention to this because these are the numbers no one's talking about. So here's what will happen, not maybe it's already happening. I've already talked to lenders and bankers around the country, credit standards are already tightening up. We're going to see mortgages being more difficult, auto loans being more difficult. It's going to be harder for people to buy things. So on top of 3 million people losing their jobs, and just so that we have perspective on this, the previous record of unemployment claims in a week was almost 700,000, it was just shy of 700,000 in the 1980s. So that was a while ago, the unemployment record during the foreclosure crisis was like 600 and something thousand.

So last week we had seven times the record unemployment we've ever had and this morning I'm seeing articles like hotel chains are going to be firing people, restaurant chains are firing people. There's so many more coming. It's interesting that last week Mnuchin, the director of the US treasury said that it's immaterial. Here's my prediction is this next week on Thursday at 8:00 AM Eastern time, when they release the unemployment numbers, we're going to see an even higher number, a more dramatic number. And so here's what we need to understand about that 3.28 million person number of unemployment. When you have over 3 million people go unemployed, here's what you also have. You have businesses that were employing those 3 million people that are not making the money that they used to make on those people, because we don't employ people just to have them, we employed people so that we can make money.

And if you look at different industries, and especially in larger companies, I'm not talking small business out, a lot of the terminations last week were from larger businesses. A lot of smaller businesses were just trying to figure out what was going on. We're going to see those terminations in the weeks to come. And so if you look at how much a larger corporation makes on average per team members, so per employee, if you're an industrial manufacturing, it's about $320,000 a year per employee. If you're in consumer discretionary manufacturing, it's about $420,000 a year per employee. If you're in telecom, it's $610,000 a year per employee. If you're in the energy sector, they make $1.7 million a year per employee. So I'm not saying that all the revenue they were making on those team members is going to go away immediately, but it is starting to degrade like crazy.

So if we do some of the math, 3.2 million at the median income a year, I'm using the lowest number I can $31,000 a year. So if we multiply $31,000 a year, times 3.28 million, that's $8 billion in salaries that just got pulled out of the market. I'm going to just say it again. It's $8 billion in salaries. And that's if we take, here's what I multiplied, how many people lost their job times the median income in the United States, which is lower than the average because a lot of people at the low end lost their jobs, I feel like median income is a better number to use. And if we look at that, that's 8 billion in salaries gone per month, it's over $100 billion in money out of the economy. So when we look at this, here's what I want everyone who follows me to understand is that we are going to have massive distress in this market.

The Cares Plan and the Family First Coronavirus Protection Plan that the government just passed, they will have an effect, but they are not going to stop what's going on in this market, they're not going to slow down the massive, massive distress we are going to see. So here's some of my predictions. Luxury goods are going to go down like crazy, if you're in a luxury good market, you've got to be really careful. If you need a healthy market, if you need a prosperous market to survive, start adjusting now, you must adjust now. You're going to see a huge... In social media and stuff like that, showing off money, showing off fancy cars, any of that stuff moving forward, it's going to be crazy frowned on. We're going to have to change the culture of how we communicate with people, which isn't it about time that we did that?

Here are some things that we need to know about this market that's going to happen in the greater market. Entertainment right now, when we look at entertainment plays, concerts, sports, movies, amusement parks, all of the sports, all of it together, that is again, billions of dollars pulled out of the economy. Then we add on top of it what's not being spent right now, not just on entertainment but on hospitality, airlines, hotels, travel. Every company in that sector is severely challenged right now unless there's an extraordinary situation they're dealing with. So when you look at this math behind the crisis, you just take that 3.28 million number and extrapolate it out. We can see that there has been hundreds of billions of dollars pulled out of the market already. So the $2 trillion stimulus package that has just been released, here's what's going to happen.

We had 3.28 million people lose their jobs and if you make $75,000 a year or less, the government's going to send you $1,200 plus $500 for each dependent that you have. Now, here's why that is such a major issue. When you think of people who are making $30,000, $40,000, $50,000 a year, $1,200 doesn't cover much, and the government's expecting them to do things like pay their mortgage, pay their rent, stay in a place to live. Well, here's what the reality is when you send somebody money and they're in the middle of a crisis like this, they are going to keep it, they're going to pay their bills, they're going to buy food. So what we are going to see is a cascade of massive distress in market after market. And here's my prediction on where we're going to see those.

First we're going to see this massive issue with unemployment. Then we're going to see a cascade where there's massive distress in banking and in finance, they're going to pull credit lines. It's going to get harder to buy a house, harder buy a car, harder to buy anything, which is going to compress the market even further. That lack of available cash that people have, we're going to see a massive decline in retail. I haven't mentioned retail yet, but retail... I don't mean to laugh, I grew up in retail and my dad just sold a retail store I'm so glad. When I was a consultant, I worked with every major retailer in the US, retailers are going to have a really hard time.

The only one that has seen an increase right now that I know of is Amazon. The rest are going to be challenged, we're going to see brands go away and never come back because so much money has been pulled out of the market. If you think three weeks ago we had billions of dollars more at consumer's discretion to go out and buy things. Now those billions of dollars are literally gone from the market, so it's going to be a long time before people can start spending like they've spent before. And here's what I want you to really understand is that this crisis isn't a two week or three week crisis, I feel like it's the foreclosure crisis all over again because in 2007 and 2008 I would walk into rooms and say, we're going to be dealing with this for years, and I would have people argue with me. You're wrong, you're looking at the wrong information, it's not real news, you're looking at the wrong numbers.

It's all a hoax and a scam and they're trying to control us and trying to do this. Did I hear about they and them all the time in 2007, 2008. You know what? I didn't hear about they and them 2009, 2010, 2011 when everybody started seeing the reality. And here's what we need to understand about the crisis that we're in, optimism is a healthy thing, but realism is an actually much healthier thing. And so am I optimistic that me and my family are going to be okay through this? Absolutely. But I want you to understand, I'm optimistic that me and my family get through every cold and flu season without getting sick. And that takes a combination of two things, that takes hyper vigilance on our health and hyper vigilance on sanitation and staying clean and not touching doorknobs and not touching our face and all of those things.

And so here's what we need to understand as business owners is that for the foreseeable future, human beings are going to be scared of each other. For the foreseeable future, people are not going to feel safe. For the foreseeable future, people are going to have this distance between them created by this massive threat of death. Let's get real. The coronavirus is a threat of death, and we keep hearing more and more information about how it's killing more people, killing younger people. Doctors are now starting to pass away, nurses are starting to pass away, viral load and getting... Here's what we need to understand about having a virus, if you're around somebody with a cold and flu and you don't get it, your body was fighting off the flu, it was fighting off that pathogen. And so as entrepreneurs, we need to keep ourselves healthy and we need to keep ourselves safe.

So going out into the world and charging out boldly and saying, "I'm not scared of this virus," I just don't even understand it, I don't get it. Because maybe you're like me where you're saying I'm not scared because I'm going to be vigilant and I'm going to be hyper careful. But what I'm also seeing is people saying, "It's no big deal, it's just another flu." Nothing could be further from the truth. And when you look at what's happening in our market, just the first month effects, they're going to have global ramifications that come for years.

So here's what I want you to understand as a business owner. As a business owner, people are going to adjust like crazy. So as a business owner, I want you to start asking yourself questions. How do I make people feel safe moving forward in my business? Because these movement restrictions, the quarantine is going to be lifted, but people are still going to be paranoid and scared. And they want to know that you have answered the question, how are you making them safe? And if you're a business owner and you're in an industry that's about to get torpedoed, here's what I want you to understand.

I know this is hard, but you're going to have to let go of what was, you're going to have to let go of the future you had. You're going to have to let go of all of the relationship you had with the future you were creating so that you can create the one that's going to exist right now and is going to get you through this. And here's what I mean by that, the faster you let go of what you've lost and you start looking forward, the faster you will create a momentum and get into a place where you can actually move forward and make things happen. I know because Katie and I were there at the beginning of the foreclosure crisis, we lost everything and we were on our way to retirement, we had eight figures in cash and equity and well over seven figures in cash. Combine them together, eight figures in cash and equity and it was gone.

It was so hard to let go of, but here's what I know today. The only reason Katie and I were able to rebuild, to get back to liquid millionaire status within a year of our bankruptcy getting discharged, the 21st fastest growing company in the United States and create financial independence and complete wealth independence again. Here's how we were able to do that, we let go of what we lost and we started looking forward. So if you're in an industry that looks like it's not going to recover for a while, you have to do one or two things. You either have to figure out how you're going to adjust your business model so that you can go out and do business or you need to look at new industries. And so the question just came in, what industries do you think you're going to survive or thrive during this area?

Well guys, I'm only a few days into this research, let me share what I believe 100% of be true right now. I believe that when you look at, I'm reading off of my board over here, things that are in people's homes, telemedicine, homeschool, home based services, service businesses where you go to somebody's house and conduct the service there. People are going to want people to come to them more than they ever have. We talked about this a ton in the 1980s and 1990s and the early 2000s this is going to be a major transition now. There's going to be a mass migration online. You're going to see companies go online. You're going to see organizations go online. You're going to see tons of different online creativity and understanding of how we're going to do business and how we're going to connect online.

There's already been a massive migration, so commuting and working virtually. If you're in a company where you don't allow people to work virtually or if you're in a company where you don't have the skills to do that, well, you already know how much of a liability that is because you've felt it in the past couple of weeks. Moving forward, the ability to work virtually is going to be something that people expect that there's going to be people who take the job only because it's virtual. And so when you look at all of this, what this crisis has brought us, here's what we need to understand. We are a few weeks in and the government just wrote the biggest check for stimulus in the history of the world, $2 trillion. When you look at that stimulus, it is barely a bandaid for what's already happened in the market.

And if anybody wants to argue with me and tell me I'm wrong, that's totally cool, I put up with it throughout the first couple of years of the foreclosure crisis, right up until I was the one giving the keynotes at financial conferences and I'm not even involved in finance. So tell me I'm wrong all you want, but when you look at the numbers behind this, they are very clear, they are very troubling. And here's what I want us all to know, we have to pivot hard, we have to pivot now we have to make sure that we understand that this is going to be here for a while. And so as a business owner, start asking yourself, how am I going to continue to do business even in an environment where people are afraid to be around each other? People don't want to leave their homes, people don't want to be in public spaces with a lot of people around them.

People are going to want to make certain, then on the other side of a transaction, the person who is taking care and cleaning and being sanitary and all those things. So those are the adjustments we need to make so far and I'm going to be continuing to look at the numbers, understand what's going on, seeing what's going to happen and sharing the information with you on a weekly and monthly basis. And do me a favor, if this was valuable to you, if you feel like I'm saying stuff that other people aren't saying, share this or tag a friend of yours below and I have a suggestion for you. Join our Facebook group community, it's called Billionaire Code Community and that's what I'm doing, tactical lives on exactly what you need to do to get through this crisis.

I'm answering questions there, we are supporting our community there. I'm going to put the link in the comments right now and for any of you who would like to click on that link, it's at the very bottom of the comment. Jump into the Billionaire Code Community group, answer three questions from my team and we will make sure you get approved because here's what is completely necessary for every business owner in this crisis. You need to understand the numbers and start predicting what is going to happen so that you can adjust. You need to know what the next step should be and how to take care of yourself in a crisis.

And here's the most important part. I know the numbers, I'm a realist. I'm not an optimist or a pessimist, I'm a realist and so I know the numbers and here's what I want every one of you to know, every adversity carries with it the seed of an equal or greater opportunity. When Katie and I went to the attorney and declared bankruptcy, it was about two weeks, 10 days before we even really talked to each other. We were just walking around our house in days having gone and we're paying tens of thousands of dollars to prove we are absolute financial failures. It was hard to get over, it was hard to reconcile. And one day when I was standing in my office, I walked over to my shelf and I picked up a copy of Think and Grow Rich and it wasn't a normal copy, it was a copy that I'd read for years. Think and Grow Rich by Napoleon Hill, it had tons of posted notes on the top, half the pages were falling out in sections.

I picked it up, shuffled it together, opened it up, and I opened directly to the page that said, every adversity carries with it the seed of an equal or greater opportunity. And I'm getting chills right now as I tell you, I remember getting chills that day where I felt like here's Napoleon Hill communicating to me from somewhere sending me a message that no matter what's going on, this is an opportunity. And here's what I want everyone who's just listened to this, I want you to understand is that regardless of everything that's going on, this may be the single largest opportunity in the history of modern man. There's going to be more industries consolidated and shifted, there's going to be reorganizations around the globe. This is when market leaders might go away and new up and coming people who have great ideas are going to move in. There is a reason why there are so many multiple billionaires made during depressions. During the great depression there was tons of multinational, multibillion dollar companies launched and during the recession exact same thing.

So don't think for a second that just because this is challenging and the numbers are challenging, and we are going to be experiencing crisis for a long time, don't think for a second that you need to internalize that crisis and become part of it. Because regardless of what's going on in the world, if you have clear outcomes in your life and you know what you're aiming for, if you have an understanding of what your responsibilities are and the responsibilities of the people around you and you have scoreboards that measure your success, here's what I want you to know definitively. You can be in momentum and living in a crisis market. I've done it. We built our momentum bubble during the crisis market and we literally had team members tell us it was hard to work with us when they talked to their families because everybody else was having such a hard time and they were talking about bonuses and raises and people building their careers.

So this is going to be a really interesting crisis for a while, and as entrepreneurs it is our moral obligation to build a momentum bubble, block out all the noise, identify opportunity, rise above, make that opportunity happen, get into momentum and take the world with us. That is the only thing that is going to help us recover from this crisis, and you are a massive part of it. So take a minute right now, join the Billionaire Code Community group on Facebook, I'm looking forward to seeing you in there. And then do me a favor, give me any questions or comments that you have. If you disagree with me, I totally respect and love you. Let's look at two weeks or three weeks from now and then we can talk about all the opinions and for right now, I'm going to rely on the math. So I appreciate you all and I look forward to seeing you again soon.