Did_We_Get_It_Wrong_Reflecting_on_the_Unexpected__Recovery_of_the_Stock

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00:00:29.960 | Welcome to Radical Personal Finance, a show dedicated to providing you with the knowledge,

00:00:35.520 | skills, insight, and encouragement you need to live a rich and meaningful life now while

00:00:39.920 | building a plan for financial freedom in 10 years or less.

00:00:43.320 | My name is Joshua.

00:00:44.320 | I am your host.

00:00:45.320 | Today, we're going to talk about how stocks always go up.

00:00:51.040 | Radical Personal Finance listener Benjamin writes in the Radical Personal Finance Facebook

00:00:54.960 | group.

00:00:55.960 | A few months back, Joshua stated something along the lines of, quote, "If the Fed and

00:00:59.840 | Congress can dump an insane amount of money and save this sinking ship one last time,

00:01:05.480 | that would be awesome.

00:01:07.080 | It would also mean I would triple down on my bet against the future of XYZ."

00:01:12.560 | That seemed to have happened.

00:01:13.840 | I don't see how it's at all sustainable and actually reflects the real economic state

00:01:17.320 | the United States is in, but the market is indeed at an all-time high, again, despite

00:01:22.600 | the apparent dismal economic future that looms.

00:01:27.200 | I took a strong cash position in late March.

00:01:29.680 | It seemed wise at the time.

00:01:31.320 | Six months later, I personally know many people who are out of work, whose companies in the

00:01:34.920 | corporate event space have completely collapsed, yet the market carries onward and upward,

00:01:40.080 | as if the realities of many of my colleagues have absolutely no bearing on the economic

00:01:44.360 | state.

00:01:45.360 | No regrets, no grudges.

00:01:46.560 | My family's social wealth and mental health are higher than ever.

00:01:49.680 | This post is a small challenge to Radical Personal Finance to address this fact.

00:01:54.560 | The bet on the U.S. stock market feels like it is an almost guaranteed bet at this point,

00:01:59.400 | based on what the Fed has done.

00:02:01.200 | What do you do with this information, knowing that it is not sustainable?

00:02:04.520 | As for me, I will continue to bet on me.

00:02:07.200 | I'll continue to increase my flows of income, double down on my time investments in Toastmasters,

00:02:11.080 | et cetera.

00:02:12.080 | I thought this was a very, let's dust off a $10 word, perspicacious question that was

00:02:19.960 | worth addressing, and I want to do so in today's show.

00:02:24.160 | I think that Benjamin is exactly right.

00:02:29.680 | I don't remember exactly what the quote was that I said.

00:02:32.120 | I didn't go back and look for it.

00:02:33.640 | I'll assume that Benjamin is right, that I said, "If the Fed and Congress can dump an

00:02:37.640 | insane amount of money and save this sinking ship one last time, that would be awesome.

00:02:41.320 | It would also mean I would triple down on my bet against the future of XYZ."

00:02:46.120 | And so I'm just going to assume that that's what I said.

00:02:48.840 | It sounds like something that I would say, and I believe that he probably quoted me accurately

00:02:53.360 | there.

00:02:54.400 | But what I want to point out is that Benjamin's planning worked.

00:03:02.600 | And my ambition is not to make the world's most accurate prognostications on the future

00:03:09.880 | direction of stocks.

00:03:11.800 | My ambition is to see to the security, the financial security, the comfort, the loving,

00:03:19.080 | safe environment of my family through all circumstances and through all situations.

00:03:24.120 | And I think that it'll help if I talk about this reality that seems like stocks always

00:03:29.320 | go up, that seems like stocks have gone up quickly, massive recoveries very, very quickly.

00:03:35.080 | We'll talk briefly about that, but I want to emphasize that that conversation is not

00:03:43.160 | the center of focus for most of us.

00:03:47.680 | I have tried during my career here at Radical Personal Finance to communicate in a thoughtful

00:03:54.240 | way, but to be willing to articulate nuance.

00:04:00.400 | What I've learned is that nuance doesn't translate particularly well to public commentary.

00:04:06.480 | I've learned that no matter how hard I try to be precise with my words, thoughtful in

00:04:11.440 | my delivery, no matter that I try to be broad in my discussion of various scenarios and

00:04:18.360 | the factors that could go into them, I'm continually confronted by the fact that many people don't

00:04:24.720 | hear nuance well.

00:04:26.520 | And I find that a little frustrating, but it's just a fact of life, right?

00:04:30.880 | There are many people who don't hear humor well.

00:04:32.600 | There are many people who don't do many things well.

00:04:35.200 | And sometimes I hear my words repeated back to me as though this is what Joshua believes,

00:04:39.080 | and I think, "But I don't believe that."

00:04:41.120 | And I've learned this throughout my life.

00:04:43.560 | And I've tried to compensate it by explaining things more clearly, but ironically, that

00:04:47.760 | ends up backfiring.

00:04:48.960 | You take more time to say something clearly, and then fewer people tune in for the entirety

00:04:53.040 | of it, and then it just doesn't work.

00:04:55.560 | A while ago, I was reading a discussion about me in an online personal finance forum, and

00:05:03.640 | somebody was asking the question, "Has anybody listened to Joshua Sheets and Radical Personal

00:05:06.400 | Finance?"

00:05:07.400 | I noticed it, of course, and I poked my head in.

00:05:12.000 | And some people said, "Yes," some people said, "No."

00:05:14.960 | They've gone back and forth about what they like, what they don't like, blah, blah, blah.

00:05:17.640 | But one guy popped in and he said, "Is that the guy who's always talking about buying

00:05:20.680 | gold and moving to a no-income tax state?"

00:05:24.360 | And I chuckled to myself because I thought, "Well, I guess I'm probably more friendly

00:05:31.480 | towards the ownership of gold than what I would say the majority of mainstream financial

00:05:36.600 | advisors are, but I don't think of myself as a gold bug, and I'm trying to think of

00:05:42.040 | any...

00:05:43.040 | I don't know that I've ever actually done an entire show on buying gold, but I guess

00:05:46.440 | this is the reputation that this guy has of me or that I have with this guy."

00:05:50.600 | And then moving to a no-income tax state, yeah, I've advocated for that and did a whole

00:05:54.160 | show on it, but I don't hammer everyone.

00:05:58.120 | And I thought, "This is what comes through?"

00:06:00.720 | Now, it's totally fine, right?

00:06:02.800 | We all have freedom to absorb our own perspectives and it's my job to try to be a good communicator.

00:06:08.200 | But what I've learned is that nuance often doesn't come through.

00:06:13.920 | And I want to focus on what I think does work for financial planning because as concerned

00:06:21.360 | as I get at times about many things and as clearly as I try to warn about things that

00:06:26.240 | I think are real legitimate threats to your lifestyle, to your wealth, et cetera, I don't

00:06:31.000 | think of myself as much of an extremist.

00:06:33.200 | And I don't actually think that the extremist viewpoint is the best viewpoint.

00:06:38.360 | You know, as an example, right about the time that I would have said that quote, I was asked

00:06:49.320 | by one of my relatives, an elderly lady who's one of my relatives, who reached out to me

00:06:55.160 | for some financial advice right in the middle.

00:06:57.240 | And this was when everything was uncertain, the stock market was dumping off massive numbers

00:07:03.280 | very, very quickly, the world was just shutting down.

00:07:07.100 | This would have been a back and about, I guess, March, and everything looked black on every

00:07:11.560 | side.

00:07:12.960 | And my relative, my aunt, one of my aunts, my aunt reached out to me and said, "Joshua,

00:07:17.680 | I'd like to talk to you about what I should do with my money."

00:07:21.160 | And I said, "Sure, I'd be happy to."

00:07:23.980 | And through the context of that conversation, she was considering whether or not she should

00:07:29.800 | get out of the market, whether she should sell her mutual funds and get out, and she

00:07:34.000 | has a financial advisor.

00:07:35.760 | And I walked through it with her.

00:07:37.280 | And my end result, end advice, after reviewing her situation, my advice to her was, "No,

00:07:43.280 | you shouldn't sell anything, you should just sit tight."

00:07:46.120 | Now I'll explain in a minute why I got there, but I didn't say to her that she's just got

00:07:53.200 | to get out, everything's going to fall apart and the market's going down and you got to

00:07:55.800 | get out, you got to get out, you got to get out.

00:07:57.320 | I didn't do that.

00:07:59.620 | And the reason I didn't do it is what I'm going to articulate in this show, namely,

00:08:07.080 | that good financial planning is done for personal reasons and to some extent, possibly even

00:08:15.080 | to a great extent, can ignore the markets.

00:08:26.100 | I think that if you grasp that and implement it, it can help you to sleep well at night,

00:08:31.480 | it can help you to make wiser financial decisions and to be more confident in your decisions.

00:08:39.640 | I do not know how to predict the future of the stock market.

00:08:43.600 | I am baffled, genuinely baffled by much of what the reality is that is reflected in the

00:08:52.880 | stock markets.

00:08:55.260 | And that probably shouldn't be a surprise.

00:08:59.160 | After all, we use the term stock market, but it actually doesn't exist in the sense that

00:09:07.600 | the stock market is not one thing.

00:09:11.580 | We use the term to refer to the buying and selling of securities, buying and selling

00:09:17.360 | of shares of ownership in companies.

00:09:20.880 | But what the stock market reflects is simply the individual's decisions of hundreds of

00:09:28.700 | millions of people on a global basis.

00:09:33.360 | And to think that you can accurately predict on a broad basis the individual decisions

00:09:38.800 | of hundreds of millions of people, to me, seems futile from the start.

00:09:44.240 | I mean, just think about this.

00:09:46.860 | Think about the amount of work that goes into the business of predicting the actions of

00:09:54.080 | anywhere from thousands to tens of thousands to millions to, in some cases, tens of millions

00:10:00.100 | of people over something as finite and binary as a political election.

00:10:09.100 | Think about it.

00:10:10.460 | Think about right now.

00:10:11.460 | The presidential election in the United States is coming up in a couple of months.

00:10:16.060 | Who's going to win?

00:10:18.020 | President Trump or Joe Biden?

00:10:20.800 | Who's going to win?

00:10:23.100 | You have a simple binary decision, right?

00:10:25.960 | One of those two men will win.

00:10:28.940 | And yet how difficult is that to predict?

00:10:32.060 | Now how much more difficult is it to predict whether an individual company's value will

00:10:38.540 | go up or an individual company's value will go down?

00:10:42.520 | And then how much more difficult is it to predict that the net results of hundreds and

00:10:48.920 | hundreds, in many cases thousands of companies on a global basis, all of who are in different

00:10:55.180 | markets?

00:10:56.180 | That's a very, very difficult thing to do.

00:10:58.700 | I don't believe it's impossible.

00:11:00.180 | I believe that you can find one corner of the market that you know well.

00:11:05.060 | You can choose a handful of companies that you follow closely.

00:11:07.860 | You can develop a trading strategy.

00:11:09.340 | You can study something and make some guesses to some degree of accuracy.

00:11:16.860 | But the idea that any of us normal people could speak accurately about the stock market

00:11:24.540 | is very hard to believe.

00:11:27.100 | It's a very difficult task.

00:11:29.660 | But you don't have to speak accurately about the stock market if you'll do good financial

00:11:34.580 | planning.

00:11:36.780 | So back to Benjamin's question.

00:11:38.780 | What I would point out is that Benjamin did the right thing.

00:11:45.780 | How do I know he did the right thing?

00:11:47.300 | Because he said, "I'm happy with it.

00:11:48.780 | No regrets, no grudges."

00:11:50.100 | What did he do?

00:11:51.100 | He said, "I took a strong cash position in late March."

00:11:54.260 | I don't know what that means.

00:11:55.420 | I don't know if he sold stocks, if he didn't sell stocks.

00:11:58.740 | Who knows what that means.

00:11:59.740 | Maybe he just started saving more money.

00:12:01.140 | But he took a strong cash position and it seemed wise at the time.

00:12:05.340 | I would say it was wise at the time.

00:12:07.660 | I advocated very loudly for you to take a strong cash position, to be conservative,

00:12:14.420 | to be thoughtful, to be defensive.

00:12:17.180 | I said that you should keep cash reserves on hand.

00:12:20.580 | I even said you should keep physical currency reserves on hand.

00:12:26.060 | And I don't regret any of that commentary.

00:12:29.180 | In my opinion, that was the wise and prudent thing to do.

00:12:33.380 | Thankfully, we have thus far, and I think on this particular scenario, we have avoided

00:12:39.860 | all of the worst case scenarios.

00:12:43.580 | All of the worst case scenarios have been avoided.

00:12:47.140 | There have been a number of cities in Spain and in Italy, maybe New York City, where the

00:12:52.060 | hospital started to get full, but the worst case scenarios didn't exist in this particular

00:12:56.700 | pandemic.

00:12:58.820 | But it was still wise and prudent of you to be thoughtful and to be careful.

00:13:04.940 | And I think one of the things that would make my commentary different than some other people

00:13:08.940 | is I believe that the prudent approach, I believe the smart approach, prudent brings

00:13:16.720 | with it a value judgment.

00:13:17.900 | I just think it's just flat out smart.

00:13:20.020 | The prudent, there I go with it again, prudent and smart approach to danger and to risk is

00:13:27.620 | to react quickly, and I say it's even logical to overreact early.

00:13:35.460 | Give you, I guess, an example, okay?

00:13:38.220 | The mask debate.

00:13:39.940 | At this point in time, I am totally comfortable going anywhere in the world without a mask,

00:13:45.460 | at this point in time, knowing what I know about coronavirus.

00:13:49.580 | This point in time, I don't have much fear of getting the disease.

00:13:53.620 | I assume that at some point I'll probably get it, and so I don't intend to get a vaccine

00:13:59.700 | for it.

00:14:00.700 | I'd rather get the disease and deal with that than deal with the vaccine, at least the way

00:14:04.660 | things look right now, at least the way that the data that is available at now.

00:14:09.540 | Of course, I reserve my right to change my mind.

00:14:13.300 | I figure that this particular strain of coronavirus is going to be with us for a long time.

00:14:18.500 | It's infected the whole world.

00:14:20.500 | I'll probably get coronavirus at some point in time.

00:14:23.180 | I don't want to.

00:14:24.180 | I'm not going to go out of my way.

00:14:25.180 | I've got a friend of mine who's got coronavirus right now.

00:14:27.500 | I'm not going to his house to try to have a coronavirus party to get the disease and

00:14:32.660 | get it out of the way with, but I'm not concerned about it at this point in time due to my medical

00:14:37.500 | profile and due to my family, et cetera.

00:14:40.740 | I figure I'll probably get it at some point in time.

00:14:43.140 | I don't want to get sick.

00:14:44.140 | I figure I probably will.

00:14:45.940 | So I'm totally comfortable with the concept and the thought of getting coronavirus right

00:14:50.700 | now, totally comfortable with the idea of going around without a mask on.

00:14:53.820 | Okay, I get it.

00:14:55.740 | That happens.

00:14:57.420 | I was not comfortable with that in March.

00:15:01.060 | In March, I wasn't going anywhere.

00:15:04.780 | In March, if I did leave my house, I was very thoroughly masked up with a mask, a face shield,

00:15:11.100 | et cetera.

00:15:12.100 | I was very stringent and careful about my decision making, minimized exposure, didn't

00:15:17.300 | go to anything indoors that could be expected.

00:15:21.440 | I was very, very careful in March.

00:15:25.660 | And given the chance, I'd do exactly the same thing again because the data wasn't available.

00:15:30.580 | The data was too confusing.

00:15:32.060 | The data was too strange.

00:15:33.900 | You had lies from the Chinese government.

00:15:38.420 | You had coverups.

00:15:39.740 | You had suppression of information.

00:15:41.780 | You couldn't get a straight answer from anybody on anything.

00:15:45.820 | You had extreme positions that didn't seem to be well-founded.

00:15:50.740 | You had some people predicting the death of hundreds of millions of people.

00:15:54.300 | You had some people saying, "Oh, it's nothing."

00:15:57.180 | It was not possible at that point in time to make a really well-informed decision, in

00:16:02.060 | my opinion.

00:16:04.260 | I could not understand why.

00:16:06.900 | Back in the—I don't know if you guys remember this with all the mask debates going on globally,

00:16:11.420 | but I was wearing a mask everywhere in March, and when I left once every couple of weeks

00:16:16.740 | to go to the store, I was wearing a mask everywhere when the CDC in the United States was advising

00:16:23.100 | against mask wearing.

00:16:25.100 | And Dr. Anthony Fauci was in public saying, "You should not wear masks.

00:16:30.180 | Masks don't do any good."

00:16:31.180 | I thought, "That's crazy.

00:16:33.080 | Masks might not ultimately do any good, but they'd probably do something.

00:16:37.020 | It just makes sense that they would probably do something."

00:16:40.020 | And of course, we find out, as was expected, it was a lie.

00:16:42.620 | It was a knowledgeable misleading of the public because the government overlords decided that

00:16:48.820 | they were the ones who were going to be thoughtful and careful with the information to manipulate

00:16:53.980 | the public to their will.

00:16:54.980 | It's stupid.

00:16:55.980 | Why you never believe government people when they say anything?

00:16:58.460 | They have to lie.

00:16:59.800 | They have to lie because they believe it's the morally right thing to lie.

00:17:02.700 | And so you should just always assume that all government representatives are lying because

00:17:07.740 | they believe that lying is the morally right thing to do.

00:17:11.300 | So forgive me, I didn't mean to engage in so much hyperbole there.

00:17:17.340 | It's not hyperbole.

00:17:18.940 | I didn't mean to become so emotional.

00:17:21.860 | The point was that the data at that point in time was not clear, was not available.

00:17:28.340 | And so what do you do when you have a potentially significant risk?

00:17:36.280 | You protect against it.

00:17:37.960 | You stockpile cash.

00:17:39.800 | With my business owner clients, private clients that I work with, I advocated very hardcore

00:17:47.520 | protection.

00:17:48.920 | You have to wait and see what works out.

00:17:51.880 | And some clients said, "Okay, we think this business is going to be okay, but it may not

00:17:55.600 | be."

00:17:56.960 | And across the board, though you might be doing fine, there are lots of other people

00:18:01.120 | who are not.

00:18:02.240 | And though you might not be doing fine, there are lots of other people who are doing totally

00:18:05.960 | fine.

00:18:06.960 | The data wasn't available.

00:18:08.000 | So the intelligent approach was overreact early and then adjust as needed.

00:18:15.600 | I lean on hurricane metaphors because it's the best example that I know of, of dealing

00:18:20.960 | with risk.

00:18:21.960 | It's something that being a native Floridian, I'm intimately familiar with.

00:18:26.400 | Hurricanes are very serious threats.

00:18:29.960 | They claim lives every year.

00:18:31.840 | They destroy millions of dollars of property every single year.

00:18:36.040 | But they are notoriously fickle threats.

00:18:38.960 | They're very hard to predict, although we're much better at predicting them than we once

00:18:43.160 | were, but they're still notoriously difficult to predict.

00:18:46.920 | And even to the last minute, you don't know whether one is going to hit you.

00:18:51.680 | And so you have a choice to make.

00:18:54.320 | The choice is, am I going to be the kind of person who prepares for hurricanes or am I

00:18:58.960 | going to be the kind of person who doesn't?

00:19:01.280 | There are millions of people along the coastlines of the Carolinas and Florida and Texas and

00:19:06.360 | Louisiana who don't prepare for hurricanes.

00:19:09.040 | They don't have a flashlight in their house.

00:19:11.740 | They don't have plywood for their windows or shutters or anything.

00:19:16.120 | And there are millions of people who will go their entire life and never be negatively

00:19:20.360 | impacted by a hurricane.

00:19:23.560 | And so they look at it and say, "Ha, look, I didn't need to do anything because I've

00:19:26.720 | never been impacted by a hurricane."

00:19:29.600 | On the other hand, many of us will eventually be impacted by a hurricane and your experience

00:19:35.180 | of the hurricane will be dramatically different based upon the amount of forethought that

00:19:40.900 | you've put into the situation.

00:19:43.720 | Use a few examples.

00:19:46.340 | When a hurricane is predicted for your area, ideally you should have almost nothing to

00:19:52.520 | do except possibly top off the car's gas tanks.

00:19:57.380 | The hurricane lines in stores are terrible.

00:20:00.920 | Oftentimes you can't get what you want.

00:20:03.040 | Thankfully, just like with a lot of financial risks and pandemic risks, et cetera, it's

00:20:06.960 | a lot better now than it was 20 years ago.

00:20:10.920 | I am so impressed these days by grocery stores and their ability to handle major disasters.

00:20:18.440 | It is awesome what they're able to do.

00:20:21.320 | Companies like HEB or Publix or Costco or Sam's Club, it is incredible to see how good

00:20:29.240 | their supply chain managers are at redirecting supplies and quickly getting the appropriate

00:20:35.280 | supplies to a place that's in need.

00:20:37.140 | It is awesome.

00:20:39.220 | I have tremendous concerns about just-in-time inventory management.

00:20:42.360 | I think it's a major threat to your life.

00:20:45.240 | I am amazed at how good we are now, those stores are, at supplying needs.

00:20:52.760 | But even so, going last-minute hurricane shopping is a pain.

00:20:57.940 | If you're going to do things like board up your house, going out at the last minute trying

00:21:01.520 | to get plywood at Home Depot is a real pain.

00:21:04.440 | It stinks.

00:21:05.700 | I don't think that's any way to live.

00:21:07.520 | I think the proper thing to do if you're going to live in hurricane country is buy a house

00:21:12.840 | that's well-built.

00:21:14.880 | If you can afford to, then you go ahead and just buy a house that's built for hurricanes.

00:21:19.120 | The house is hurricane rated, everything is properly done.

00:21:22.960 | You buy a house that has storm windows so you don't even have to cover the windows.

00:21:27.040 | Then you make sure you keep all the time proper supplies in the home, store of water, battery

00:21:32.720 | system for electrical power, generator, fuel storage, etc.

00:21:36.360 | You keep a standard maintenance contract with your yard maintenance crew to keep the yard

00:21:40.840 | trimmed.

00:21:41.840 | Then if a hurricane is coming your way, maybe you spend an hour or so going out on the back

00:21:46.120 | deck, bringing in your deck chairs, putting them in the garage, putting up the braces

00:21:48.880 | on the garage door for the wind load.

00:21:51.740 | It's pretty simple, not that big a deal.

00:21:54.600 | Now maybe you can't do that, so you go ahead and buy shutters.

00:21:58.960 | Those people who buy shutters in advance can be prudent.

00:22:02.360 | If the hurricane is coming their way, they just go ahead and close the shutters.

00:22:05.360 | Takes 15 minutes, you go around the house, slide close the accordion shutters, lock them

00:22:09.140 | all up, you're done.

00:22:10.140 | I have some friends that do this, it's great.

00:22:12.140 | Go to the house, 15 minutes, the shutters are all closed.

00:22:14.840 | You don't even have to think about should I close the shutters.

00:22:16.780 | It's not as crazy, should I go to the store and get plywood.

00:22:20.520 | Some people buy the shutters that take a lot of work.

00:22:22.880 | They're more likely to procrastinate.

00:22:24.760 | So they wait and then they go out at the last minute, put up the panels, take several hours,

00:22:28.620 | but at least that's better than plywood.

00:22:31.040 | And so your goal and your ambition living in hurricane country should be that about

00:22:36.300 | the only thing you need to do when there's actually a hurricane watch issued for your

00:22:40.280 | county is fill up your gas tank.

00:22:45.480 | Life is easy when you take those preparations.

00:22:48.320 | Now not everybody can do that, certainly.

00:22:50.980 | Not everybody can live in that kind of house, not everybody can afford the bill for the

00:22:55.840 | hurricane shutters.

00:22:57.040 | That's not a prudent use of money for some people, but it's really great to live like

00:23:02.200 | that way, life that way.

00:23:04.420 | And so from the perspective of financial planning, preparing for a disaster should be the same

00:23:09.160 | thing.

00:23:10.220 | There should never be a need to freak out because the market's dropping and here's this

00:23:14.540 | big new thing.

00:23:15.540 | There should never be a need to do that.

00:23:18.740 | Most of us, of course, we don't keep six months of rice and beans in our house.

00:23:23.020 | Most of us don't.

00:23:24.260 | And so you say, you know what, I'm going to go ahead and get a couple extra months of

00:23:27.160 | rice and beans or whatever your version of that is.

00:23:30.860 | But the goal, the idea, the ideal is to live a prepared lifestyle.

00:23:36.620 | The goal is to have your portfolio values squared away because you know they're right

00:23:41.700 | if times get tough or if they don't, if they're not tough, in good markets and in down markets.

00:23:46.860 | Now if your strategy involves you specifically taking advantage of some buys, maybe you have

00:23:52.380 | a buy list, you have some companies that you're watching, you've done, maybe you're a value

00:23:55.980 | investor and you've done a valuation and you see markets are dropping, then you just go

00:23:59.400 | to your buy list and you say, here are some companies that I think are worth a lot of

00:24:02.500 | money.

00:24:03.500 | Oh, these are good prices.

00:24:04.860 | Let me start buying.

00:24:06.820 | On the other hand, maybe you find yourself caught unaware.

00:24:11.340 | You're usually sitting on a large stockpile of cash.

00:24:15.060 | You're usually well insulated, well insured, but you recently stretched to make a new investment

00:24:20.700 | and all of a sudden you find yourself with less cash and the storm clouds are gathering.

00:24:25.460 | You might need to just go ahead and divert money to cash for a little bit of time.

00:24:29.800 | But in a properly run life, in a properly run financial life, those variations should

00:24:35.660 | be modest.

00:24:38.080 | I took cash out of the bank, extra cash out of the bank back in March because I was concerned

00:24:43.240 | about the ability to get cash.

00:24:44.360 | I was concerned about bank runs.

00:24:45.880 | I didn't predict the national coin shortage.

00:24:49.400 | That's weird, but I was concerned about the ability to get cash out of the bank.

00:24:54.560 | I would have been fine if I'd never taken cash out of the bank because I always keep

00:24:57.160 | cash on hand.

00:24:59.520 | I'm proud of the fact that I said you should get cash out of the bank and I got some listeners

00:25:03.120 | to go and get $3,000 or $5,000 or $10,000 because that's prudent planning for all times.

00:25:09.640 | Same things.

00:25:11.840 | What I want you to focus on is you should be well prepared for situations at all times.

00:25:22.400 | It's not a bad idea to use the emotion of an impending event, that sense of dread that

00:25:29.000 | you have, to go ahead and do what you know you need to do.

00:25:32.680 | I remember a number of years ago, I knew I needed to store more fuel.

00:25:38.440 | I knew I needed to buy a battery and an inverter for my hurricane plans.

00:25:42.200 | I didn't do it.

00:25:43.760 | You always feel like, "I don't need to go do this right now.

00:25:46.480 | I don't really want to go and spend all this money right now."

00:25:49.600 | Then the hurricane came.

00:25:50.800 | Okay, I'll go do it.

00:25:52.920 | I went ahead, stocked up on the fuel, purchased the battery and the inverter and got it done.

00:26:01.080 | You can use the fear of the moment.

00:26:03.140 | If this caused you to recognize that you should keep an emergency fund on hand, great.

00:26:08.280 | You should use the fear of the moment to get you to do what you know you need to do.

00:26:14.040 | And then when the worst case scenario doesn't happen, as long as you were thoughtful and

00:26:19.760 | prudent and you didn't overreact in a stupid way.

00:26:24.920 | I'm okay with overreaction, but not stupid overreaction.

00:26:29.640 | As long as you were prudent and you didn't do anything you would regret, you have no

00:26:33.240 | worries.

00:26:34.240 | You have nothing to fear about.

00:26:36.400 | That's the philosophy that I hold to.

00:26:38.240 | I believe that it's logically correct.

00:26:42.040 | I believe that it's emotionally correct.

00:26:45.040 | I believe that it leads to a peaceful life.

00:26:49.280 | I don't regret having a lot of cash because it allows me to feel totally at rest and totally

00:26:55.520 | at peace.

00:26:56.520 | That's what Benjamin mentioned.

00:27:01.680 | Can you put a price tag on it?

00:27:02.680 | Yeah, you can compare what would my portfolio values be if that cash were invested versus

00:27:06.600 | what would my emotions be.

00:27:08.720 | I don't regret it myself.

00:27:10.560 | If you regret it, then make a different choice.

00:27:13.800 | Now let's talk about the stock market.

00:27:17.480 | What did I get wrong?

00:27:18.480 | What did you get wrong?

00:27:21.560 | I don't know.

00:27:22.560 | It's pretty astonishing how fast the stock market recovered.

00:27:27.860 | Pretty astonishing.

00:27:29.800 | I did not expect basically a five-month turnaround.

00:27:36.180 | I'm skeptical that that was the end of it, but at the end of the day, how can I know?

00:27:45.440 | How can I predict hundreds of millions of people and their individual actions?

00:27:54.160 | That's very, very hard to predict.

00:27:58.520 | I think there's good reason to believe that many sectors of stocks are overvalued.

00:28:06.160 | I think there's good reason to believe that many stocks are overvalued.

00:28:08.960 | I guess probably the most interesting one would be a company like Tesla.

00:28:12.000 | A few weeks ago, the market cap of Tesla was $450 billion, something like that.

00:28:21.000 | I saw somebody made the comparison.

00:28:24.400 | I wish I'd checked the numbers myself.

00:28:26.440 | I just saw it made, so if this isn't accurate, you let me know.

00:28:31.360 | You could either buy all of Tesla for $450 billion-ish, or you could buy all of Ford,

00:28:38.320 | GM, Toyota, Honda, and Nissan and still have $100 billion left over.

00:28:48.320 | That's pretty staggering, pretty stunning to see that one company with modest sales

00:28:57.880 | figures is valued more than Ford, GM, Toyota, Honda, and Nissan.

00:29:03.360 | I saw the headlines from today that after being excluded from the S&P 500 listing, Tesla

00:29:15.720 | lost more value than General Motors and Ford combined.

00:29:23.200 | The stock dumped off 20-something percent in a day, and it lost more value than GM and

00:29:31.000 | Ford's entire market value combined.

00:29:37.320 | Tesla has been a winner for a lot of people.

00:29:40.120 | Would you buy it?

00:29:43.120 | Would you buy it at the current price?

00:29:47.560 | That's the kind of question you have to answer.

00:29:48.680 | I wouldn't.

00:29:50.360 | I cannot conceive of a world in which Tesla is worth more than GM, Ford, and Nissan, and

00:29:56.600 | Toyota.

00:29:58.000 | I can't see anything particularly all that unique about their technology, any particular

00:30:03.200 | strength that they have, but maybe I don't know the market.

00:30:06.160 | Maybe I'm wrong.

00:30:07.160 | Here's what's so fascinating.

00:30:09.920 | I think we live in an era, a new era with regard to financial markets.

00:30:16.080 | How do you know what the numbers even should be?

00:30:18.520 | Let me throw a couple other interesting tidbits at you from a financial newsletter that I

00:30:23.800 | read.

00:30:24.800 | Here are just some interesting market extremities of recent days.

00:30:29.000 | Amazon is now 43% of the S&P 500 Consumer Discretionary Index.

00:30:35.320 | One company is now 43% of the S&P 500 Consumer Discretionary Index.

00:30:39.960 | Nearly two-thirds of the market is underperforming so far this year.

00:30:43.200 | Only one in three stocks are actually in the green for the year to date.

00:30:46.880 | One in five stocks are down 50% or more from their all-time highs.

00:30:50.680 | The five largest stocks in the S&P 500 have a combined market cap that equals the smallest

00:30:56.920 | 389 stocks.

00:30:59.800 | I repeat, the five largest stocks in the S&P 500 have a combined market cap that equals

00:31:05.600 | the smallest 389 stocks.

00:31:08.880 | Apple, Amazon, Microsoft, and Google, four companies, have a combined market cap over

00:31:17.240 | $6 trillion that is greater than the GDP of every country in the world save the United

00:31:24.040 | States and China.

00:31:26.600 | And Tesla, prior to today, Tesla has become the ninth largest stock in the United States

00:31:31.160 | having surpassed Walmart with one-twentieth of the revenue.

00:31:38.440 | So you know, for my bullish friends, you say, they say, "Well, none of this matters."

00:31:44.240 | Maybe it doesn't, right?

00:31:45.440 | Maybe it doesn't matter.

00:31:47.720 | But to say it rather blithely to me, it's just, it seems strange to say it, again, blithely.

00:32:01.120 | When you look at the price to earnings ratios and you look at some of where we are, it's

00:32:06.720 | historic.

00:32:07.720 | It's absolutely historic.

00:32:11.320 | But what should you do about it?

00:32:12.600 | I don't know.

00:32:13.600 | You should focus on your individual financial plan.

00:32:16.840 | So if you need more cash, you should sell stocks, not because the market is overvalued,

00:32:19.880 | but because you need cash.

00:32:22.120 | Why did I not tell my aunt to sell stocks?

00:32:27.760 | The reason was I did an analysis of her financial plan, not of her portfolio value.

00:32:34.220 | I did an analysis of her financial plan.

00:32:37.300 | And what did her financial plan say?

00:32:39.560 | She lives in a paid-for house.

00:32:41.760 | She has no debt.

00:32:43.520 | She has a steady pension income that's guaranteed to come in.

00:32:48.520 | She has very low expenses.

00:32:50.680 | She could actually, with a little bit of belt tightening, which she was happy to do, she

00:32:55.280 | could live on her pension income without touching her stocks.

00:32:59.000 | She grows a garden in her backyard.

00:33:01.840 | She has food in her pantry.

00:33:04.000 | And so in her situation, why should she sell stocks and get out of the stock market?

00:33:08.720 | Now would I run my financial life the same way that she does?

00:33:11.840 | No.

00:33:12.840 | She's not me.

00:33:14.240 | She's not going to go and buy a rental property.

00:33:16.240 | She's not going to go and invest in condos on the beach in Nicaragua.

00:33:20.800 | She's not going to buy gold coins and put them in a coffee can.

00:33:25.220 | For her, a well-diversified portfolio across broad financial asset classes is an excellent

00:33:31.960 | solution.

00:33:32.960 | And I didn't tell her to sell.

00:33:33.960 | I told her to sit tight.

00:33:36.580 | But the reason she could do that was because she had a good financial plan.

00:33:39.920 | And that's my message.

00:33:40.920 | You can control your financial plan.

00:33:43.780 | You can't control the stock market.

00:33:45.700 | You can't control the US economy.

00:33:47.620 | You can't control the US government spending.

00:33:51.460 | You can control your individual plans.

00:33:56.660 | Now, let's talk about catastrophe for a moment.

00:34:04.460 | Well, in my opinion, catastrophe is possible at any point in time.

00:34:12.760 | And history is filled with catastrophes.

00:34:19.540 | Sudden massive catastrophes are on a broad scale are very unlikely.

00:34:26.280 | The worst case predictions seem to very, very rarely play out.

00:34:30.460 | And you need to be careful that you don't depend on doomsday movies or post-apocalyptic

00:34:39.600 | books for your accurate understanding of reality.

00:34:43.820 | A doomsday movie is fun.

00:34:47.240 | A post-apocalyptic book is great.

00:34:50.160 | I love them.

00:34:51.160 | They're fun.

00:34:52.160 | They're not reality though.

00:34:54.560 | And reality is generally much more tame than those narratives.

00:35:01.920 | And so we need to always begin by recognizing that catastrophic predictions very, very rarely

00:35:07.800 | play out on a broad scale.

00:35:10.280 | Why?

00:35:11.280 | Why not?

00:35:12.280 | Why don't they usually play out?

00:35:14.240 | I think there are many reasons.

00:35:17.820 | First of all, the risks are often overly emphasized.

00:35:26.360 | In addition, they don't play out because human beings are smart.

00:35:32.020 | What do you think we would see all around the world if the coronavirus pandemic were

00:35:39.660 | 10 times more lethal than it has proved to be?

00:35:44.500 | What do you think we would see if instead of something like a 0.4% infection fatality

00:35:49.300 | rate, you had a 5% infection fatality rate?

00:35:56.300 | There would be no debate about masks.

00:35:58.840 | There would be no debate about lockdowns.

00:36:01.140 | There would be no debate about people getting back to work and opening up their businesses.

00:36:06.620 | We would all be sitting in our houses, sending money to vaccine companies to develop a vaccine

00:36:12.040 | and voluntarily supporting them and doing internet sleuthing on every drug known to

00:36:15.900 | man to try to come up with a new therapeutic cure.

00:36:19.600 | Because human beings are smart.

00:36:22.420 | They can accurately assess risk for themselves and they can accurately assess information.

00:36:28.220 | Why do you see so much pushback all around the world?

00:36:30.620 | Just yesterday I saw in Spain some police officers were trying to arrest a woman for

00:36:36.380 | not wearing a mask and all the bystanders accosted the police officers, pulled them

00:36:41.140 | off of the woman and got the woman free.

00:36:42.820 | It was great.

00:36:43.820 | It was great to see that, that pushback after watching people arrested all over the world,

00:36:48.380 | people in Australia and all over the world arrested for not wearing a mask.

00:36:52.140 | It was great to see the bystanders say, "No, you're not arresting this person."

00:36:55.220 | I think we'll see a lot more of that.

00:36:56.980 | I think you see it the strongest in the United States, a culture that's deeply rebellious

00:37:01.740 | at its core, but you'll see it around the world.

00:37:04.420 | Why?

00:37:05.420 | Because people look at it and say, "It's not that big a threat.

00:37:07.500 | You're killing me with this stuff.

00:37:08.500 | I'm not going to do it.

00:37:09.500 | I'm not going to comply."

00:37:11.780 | Because they're smart.

00:37:16.260 | People understand that the risks are not what we previously feared.

00:37:19.700 | And so in the midst of catastrophe, people quickly adjust, companies adjust, people react

00:37:28.020 | quickly and this is so often what is unknown to prognosticators.

00:37:33.020 | Prognosticators assume that everything is going to continue as it is and thus disaster

00:37:37.260 | is inevitable.

00:37:38.260 | The most striking example of this would be if you were to go back to the 1970s and look

00:37:42.700 | at all the predictions about overpopulation and global famine and whatnot.

00:37:46.620 | Many smart people looked at that and said, "Wow, this is really catastrophic and this

00:37:51.260 | is really, really bad and this is the population bomb is going to explode and everyone's going

00:37:55.340 | to die."

00:37:56.340 | It didn't happen.

00:37:58.300 | Why not?

00:38:00.340 | Reason is because the prognosticators didn't account for human ingenuity and human changing.

00:38:05.620 | They didn't account for massive plummeting of birth rates.

00:38:10.040 | They didn't account for massive increases in productivity from an agricultural perspective,

00:38:14.700 | etc.

00:38:15.700 | Which is why I don't take most disaster predictions, I shouldn't say I don't take them seriously.

00:38:24.740 | I don't think the worst case scenario is likely.

00:38:28.540 | You see something like global warming, right?

00:38:30.580 | The world is going to fall apart because of global warming.

00:38:32.540 | I don't think so.

00:38:33.540 | I don't think so.

00:38:34.540 | Will there be changes?

00:38:35.540 | Sure.

00:38:36.540 | I have no reason why I'm opposed to the concept of global warming, but I don't think it's

00:38:40.100 | going to be a disaster catastrophic prediction because people will change.

00:38:43.460 | What are going to be the solutions to whatever problems end up resulting?

00:38:46.580 | I don't know, but I guarantee you they'll be developed and there will be no catastrophe.

00:38:55.140 | You see it again and again.

00:38:57.020 | You see that people are the world's greatest resource.

00:39:00.140 | They're resilient, they're smart, they're thoughtful.

00:39:03.500 | So when you try to figure out what's going to happen to the United States or the US economy

00:39:09.940 | or the US markets or the US fiscal situation, although I find it very easy to say there's

00:39:18.180 | going to be a major problem, I don't mean that in a doomsday scenario.

00:39:27.340 | And I think being outside of the United States gives me far more appreciation of the United

00:39:30.900 | States than many other people have.

00:39:33.660 | First we always need to look and say, why have all the previous bears been wrong?

00:39:41.500 | People have been predicting the implosion of the United States due to overspending since

00:39:46.340 | the 1970s, maybe earlier, I don't know.

00:39:50.060 | The government debt is at $1 trillion.

00:39:53.480 | So what?

00:39:54.980 | Government debt is at $5 trillion.

00:39:56.740 | So what?

00:39:58.220 | In this case, running a what?

00:40:02.460 | We don't know the numbers for sure yet, but a couple, trillions of dollars of deficit.

00:40:08.860 | The answer could be, so what?

00:40:13.780 | I think it's a very serious problem.

00:40:17.340 | I think it's a problem that will be very difficult.

00:40:20.860 | But is it an end of the world as we know it scenario?

00:40:23.160 | Is it a catastrophe?

00:40:25.380 | Probably not.

00:40:26.380 | And the reason is you're dealing with a country and a people of tremendous resources.

00:40:34.820 | Let me give you two examples that affected me.

00:40:36.700 | I want you to think about two major, major disasters, one of which happened in Haiti,

00:40:43.260 | the earthquake of 2010, the other of which happened in Japan, the earthquake and subsequent

00:40:49.580 | tsunami of 2011.

00:40:53.800 | If I took you to Haiti today, you would see major signs of the earthquake and major dysfunction.

00:41:03.620 | I don't know this for sure, but I would bet, and any of my Japanese resident listeners,

00:41:08.100 | let me know, I would bet that if we went to Japan, with the exception of the zones that

00:41:14.260 | may be forbidden with the nuclear reactors and whatnot, I would bet that it would be

00:41:19.540 | difficult at this point in time for a layman observer to see the results of the tsunami

00:41:27.660 | in Japan.

00:41:29.660 | Why?

00:41:31.560 | I was in Haiti in 2012 and I was just stunned at how it was more than two years after the

00:41:37.040 | earthquake and I saw UN vehicles and Red Cross people and whatnot, but I was just stunned

00:41:41.620 | at how nothing was happening.

00:41:43.780 | At that time, the presidential mansion was still not in ruins, but there were major problems.

00:41:49.340 | There were entire towns that were in ruins.

00:41:51.900 | I was stunned.

00:41:53.380 | Whereas in Japan, if you go back and you look at the reports from Japan two years, three

00:41:57.260 | years after the tsunami, in many cases, at least through the limits of a photographer's

00:42:04.380 | lens, in many cases you couldn't see it, or at least all the stuff was cleaned up.

00:42:09.940 | At least all of the trash was cleaned up.

00:42:12.980 | The airports were working again.

00:42:15.020 | The roads were rebuilt in many cases, very, very quickly.

00:42:19.020 | And I thought this is a really good example of how incredibly durable countries that have

00:42:26.640 | resources are compared to countries that aren't.

00:42:30.580 | Japan has had financial problems for decades.

00:42:33.200 | They have a population crisis.

00:42:35.660 | They have economic problems.

00:42:37.820 | But life in Japan can be great.

00:42:42.220 | It's not a post-apocalyptic wasteland.

00:42:44.420 | Haiti, on the other hand, is very much like a post-apocalyptic wasteland.

00:42:48.140 | It's a very difficult place, very difficult for anybody to make progress.

00:42:53.980 | And so when you look at the United States, for all of its dysfunction and for all of

00:42:57.580 | its problems, don't take the perspective that it's just going to collapse.

00:43:03.500 | It's not going to collapse.

00:43:06.780 | Doesn't mean it won't be crises, won't be difficult things.

00:43:08.980 | It's not going to collapse.

00:43:11.700 | Similar things like with the US dollar.

00:43:13.700 | Does the US dollar have problems?

00:43:15.060 | Sure.

00:43:16.060 | It's a better option than many other places.

00:43:18.500 | And so what you need to evaluate is you need to evaluate where are you in the world and

00:43:22.660 | see it seriously.

00:43:25.180 | This is where I think it's so hard for Americans especially, because as US Americans, we're

00:43:32.020 | so used to thinking of ourselves at the center of the world, and we see the problems in our

00:43:37.340 | own lives that we don't see what we're comparing to.

00:43:41.660 | Example, Lebanon.

00:43:44.820 | Lebanon has been quite literally and metaphorically leveled.

00:43:50.060 | Lebanon was already dealing with a tremendous financial crisis, was already dealing with

00:43:55.460 | hyperinflation.

00:43:57.060 | Then they have this catastrophic explosion.

00:44:03.260 | Lebanon will not recover quickly.

00:44:06.660 | And so if you're living in Lebanon, you're living in a country that doesn't have the

00:44:10.860 | resources to recover quickly.

00:44:13.020 | It's a devastating situation.

00:44:15.700 | It was already a financially devastating situation.

00:44:20.300 | But for a wealthy Lebanese businessman who had his financial accounts in the United States,

00:44:28.740 | he's insulated.

00:44:31.180 | And maybe his primary home was in Beirut, but if he had a secondary home out in the

00:44:35.180 | countryside that he could go to, try to keep his business going, or maybe fold up shop,

00:44:39.940 | or have some diversification into business operations, he can be okay.

00:44:43.740 | It's going to be a long, difficult recovery, but all the stuff we talk about, all the stuff

00:44:47.940 | you do to prepare for things works.

00:44:50.660 | It works.

00:44:51.660 | And if that Lebanese businessman had moved some money from stocks into cash to prepare

00:44:56.460 | for the global pandemic, he probably was able to pick up some deals during the local hyperinflation

00:45:02.140 | that was happening there, and probably is now grateful that he has cash, because he

00:45:09.500 | figures out how can I rebuild my businesses and rebuild my community in the wake of this

00:45:14.140 | devastation.

00:45:16.020 | But Lebanon and the United States are not the same.

00:45:19.420 | If you leveled Washington DC to the ground, if you dumped 10 nuclear missiles into the

00:45:29.820 | heart of Washington DC, psychologically it would be a major impact.

00:45:36.540 | Functionally, financially for the country, it would be a modest blip.

00:45:43.460 | Think about something like 9/11.

00:45:45.140 | 9/11 leveled to, I guess, how many, what?

00:45:50.660 | A bunch of really important buildings in the heart of New York City.

00:45:57.580 | It's hard to imagine devastation worse than 9/11.

00:46:01.860 | Psychologically, massive influence.

00:46:04.700 | Financially, a blip, a blip.

00:46:10.060 | If you had enough cash in your account so you didn't have to sell stocks for a few years,

00:46:13.900 | you were fine.

00:46:16.260 | Could it have been worse?

00:46:17.260 | I guess.

00:46:18.260 | And I think it's important to look at threats and try to understand the severity of threats.

00:46:24.160 | Why was I so concerned about a pandemic?

00:46:26.020 | I was just talking with a friend of mine about disaster planning.

00:46:30.300 | Okay?

00:46:31.300 | And we were talking, I don't know why, I never intended to become like the disaster expert,

00:46:36.620 | but I guess it is a unique thing that I understand and pay attention to that most people don't.

00:46:41.980 | But we were talking about disasters and we were talking about nuclear war.

00:46:48.100 | And for me, this was the cornerstone in my thinking when I realized that nuclear war

00:46:55.220 | I had thought nuclear war was this just unsurvivable thing.

00:47:00.340 | That if nuclear warheads went off in Seattle, Washington, I would be dead in Florida.

00:47:06.140 | Right?

00:47:07.140 | It's silly, but you have this idea that nuclear war just makes a post-apocalyptic world everywhere.

00:47:13.220 | Then I started studying it and I realized how incredibly survivable nuclear war actually

00:47:20.860 | is.

00:47:23.140 | Now the threat of nuclear war is a serious, legitimate, very real threat.

00:47:29.860 | For you to go back to during the cold war, there were a couple of times during the cold

00:47:35.620 | war where basically the world was one man's decision away from actually launching a hot

00:47:44.180 | nuclear war between the Soviet Union and the United States of America.

00:47:48.220 | And it would have been bad.

00:47:50.540 | It wouldn't have been, however, unsurvivable.

00:47:53.540 | When I realized that, it made me realize how even this thing that seems totally catastrophic

00:48:02.060 | and genuinely is really a catastrophe, it would be fairly localized, fairly isolated,

00:48:07.820 | and it's eminently survivable.

00:48:11.260 | Other ones, right?

00:48:12.260 | Remember one of the disaster movies or disaster books that really hit me hard was the Lights

00:48:16.900 | Out book.

00:48:17.900 | Phenomenal book.

00:48:19.260 | So well written.

00:48:20.260 | It just puts me to tears to read that book.

00:48:23.580 | But it's all about the threat of electromagnetic pulse and has become the basis of many preppers'

00:48:29.620 | concerns and I think rightly so.

00:48:33.580 | If the electricity goes out for the long term, it would be a major, major cause of death

00:48:40.620 | in any country in the world, but especially in a modern advanced technologically dependent

00:48:45.180 | country.

00:48:46.980 | But when you actually look at it and you think about what happens in electromagnetic pulse,

00:48:51.540 | I think the risk that is drawn by a novel like that is wildly overstated.

00:49:01.140 | Shielding and modern equipment is much better than it once was.

00:49:03.940 | It's getting better all the time.

00:49:05.660 | The actual logistics of detonating a successful electromagnetic pulse attack over a large

00:49:11.180 | area are vanishingly difficult.

00:49:15.180 | Could a terrorist set off a localized small nuclear bomb at ground level and with that

00:49:21.180 | wipe out a city's electrical grid?

00:49:23.740 | Sure.

00:49:24.740 | Wipe out a state on the other hand or a country?

00:49:27.220 | Very, very difficult and wouldn't be 100% killing of all of the electrical issues in

00:49:32.260 | my opinion.

00:49:34.420 | But what is the issue?

00:49:36.380 | What is the most lethal?

00:49:37.780 | The answer is it's a pandemic.

00:49:42.220 | Actually in my opinion, anybody who didn't take the threat of a pandemic seriously, especially

00:49:49.660 | back in the beginning of 2020 when the data was very strange to cover, was foolish at

00:49:56.780 | best and stupid at worst.

00:50:00.820 | A pandemic, a global pandemic, disease pandemic is one of the very few genuinely global events.

00:50:12.860 | If you have the right combination of a lethal disease that kills a lot of people but not

00:50:17.380 | too many so it can still replicate, our modern world is sitting wide open for a pandemic

00:50:25.020 | and the follow on economic effects of it are catastrophic, which is why the lockdowns have

00:50:31.380 | been so catastrophic.

00:50:32.380 | Now were the lockdowns the right move or not?

00:50:34.980 | At this point they sure seem to not be, but were they the right move back then?

00:50:40.460 | If I were emperor of the world, I wouldn't have said it.

00:50:42.340 | I wouldn't have imposed lockdowns.

00:50:44.620 | I wouldn't have closed businesses because I believe that's a fundamental violation of

00:50:49.620 | my responsibilities as the emperor of the world, but I understand why they did.

00:50:54.900 | I'm not too mad about it.

00:50:57.220 | But a pandemic is genuinely that terrible.

00:51:00.980 | And so it's nice to do some quarterbacking, but man I'm glad that things are not as bad

00:51:07.740 | as they would have been.

00:51:09.700 | And that was my realization through it.

00:51:12.500 | As I worked my way through it I realized this is not romantic, this is not fun, this is

00:51:18.500 | terrible.

00:51:20.140 | And I didn't want it of course, I'm not that immature, but still you always wonder well

00:51:26.340 | what's it going to be like?

00:51:27.580 | It's terrible as we all know now, it's terrible.

00:51:31.700 | So where do we go from here economically, in the markets, the fiscal situation?

00:51:38.420 | I don't have any regrets about what I said with regard to preparing, being heavy on cash.

00:51:48.860 | If I had perfect foreknowledge and I knew that five months later the stock market would

00:51:53.780 | be totally recovered I would give exactly the same advice again.

00:51:58.660 | Zero regrets about that whatsoever.

00:52:07.500 | In many cases, for many people, possibly even for you, having access to things like cash

00:52:16.540 | is setting things up for you to have bargains and opportunities, which is always the way

00:52:22.580 | that you want to profit off of a crisis.

00:52:25.780 | Why do I advocate for people to not have every dollar invested?

00:52:30.240 | Part of it is defensive, part of it is offensive.

00:52:33.780 | I try to teach this at the basic levels of personal finance.

00:52:37.280 | Why do I recommend to a young person that before they go and they start obsessing like

00:52:43.180 | I did, which I now consider a mistake, why do I recommend that a young person accumulate

00:52:47.460 | $10,000 in cash before they start buying stocks in their IRA?

00:52:55.980 | Which by the way, it's totally fine with me if your $10,000 is in cash in a Roth IRA,

00:53:00.700 | that's a great way to split the difference, but why do I want them to have that?

00:53:03.660 | Well, if you think about a young person and you think about what can be had if you have

00:53:07.700 | $10,000 of cash and you need a car and there's a guy that's selling a lovely, very sexy Toyota

00:53:14.940 | Corolla, four years old, and if you can give him cash today, he'll give it to you for six

00:53:20.420 | grand instead of its blue book value of 12 grand.

00:53:25.080 | Those kinds of deals make a big, big difference.

00:53:27.360 | Cash is not just defensive, cash is an opportunity fund.

00:53:30.560 | What about that same guy though, the defensive side?

00:53:32.420 | A young person has $10,000 of cash is effectively bulletproof from getting laid off.

00:53:37.100 | They don't like their work, they just cut that career short and say, "That's it, I'm

00:53:40.100 | leaving."

00:53:41.100 | They don't have to sit around and go through what most of us have gone through, "I got

00:53:43.660 | to go find another job."

00:53:44.900 | They can just leave because when you can live on $800 a month, that $10,000 makes you effectively

00:53:50.540 | bulletproof.

00:53:51.540 | You can leave any job where you're mistreated and you can cut all the time-wasting stuff

00:53:55.420 | short and make much faster progress in your career.

00:53:59.980 | So I don't regret the advice, I think it was prudent advice given the time.

00:54:04.660 | And if you saw that the market dropped by 40% and you looked around and said, "I don't

00:54:08.420 | need this cash," I hope you bought.

00:54:11.580 | I hope you looked down and said, "Hey, I've been watching XYZ Company and I'm going to

00:54:17.860 | buy some of this."

00:54:19.740 | And that's where fortunes are made.

00:54:23.540 | What's going to happen from here in the stock market?

00:54:27.660 | No idea about the stock market.

00:54:30.420 | Stock market to me is driven by a number of interesting benefits and a number of interesting

00:54:35.980 | problems.

00:54:37.460 | Some of the problems would be things like mass participation.

00:54:41.220 | I'm convinced that many people, if they were professional stock investors, would not buy

00:54:45.740 | into many companies and into the stock market at its valuations if they knew what they were

00:54:52.820 | doing.

00:54:53.940 | But the reality is most stock purchases are made totally automatically.

00:54:59.980 | You get a paycheck, you get paid $10,000 a month and you put $1,000 a month into your

00:55:05.220 | 401(k), well there's automatic stock purchases.

00:55:08.780 | How do we measure the impact of that on the market overall?

00:55:11.420 | I don't know, but I think that the numbers that we face are new.

00:55:15.540 | There's such an overwhelming victory of the stick with it, dollar cost average in, by

00:55:21.340 | passive investments.

00:55:22.820 | There's such an overwhelming victory in the marketplace that I think that makes for a

00:55:26.820 | much more resilient market than many other scenarios, but I'm not close enough to it

00:55:30.980 | to know.

00:55:31.980 | I don't know what's going to happen with the stock market.

00:55:33.780 | What's going to happen to the economy in the United States?

00:55:36.740 | Well it's taken a beating, but the people who are being affected by the economy, and

00:55:41.860 | this is where things are so tricky with the stock market too, are often not that important

00:55:46.380 | to the economy.

00:55:48.180 | This is what's so difficult about the way that the markets are set up.

00:55:55.140 | Your brother-in-law who got laid off from his job as a restaurant manager, how much

00:56:01.420 | does he actually contribute to the economy?

00:56:05.100 | Not that much.

00:56:07.060 | Not all that much.

00:56:08.060 | Makes $60,000 a year, not that much.

00:56:12.860 | It's not that big a thing.

00:56:14.660 | Whereas how much does a company like Amazon contribute?

00:56:18.020 | Well, a lot.

00:56:20.020 | There's a lot of economic activity associated with Amazon.

00:56:23.700 | This is where when you look at things, it's so hard to figure out where people started

00:56:28.700 | buying less.

00:56:29.700 | Well yeah, on the local basis, restaurants are getting hammered.

00:56:34.700 | Everybody who works in the restaurant segment is getting hammered, but are those people

00:56:37.580 | who got laid off of restaurants still buying stuff on Amazon?

00:56:41.440 | They do, right?

00:56:42.440 | They're spending their stimulus checks and their savings on that and their credit card

00:56:45.620 | debt on Amazon Prime and books and games and all that stuff.

00:56:50.180 | They're still active there.

00:56:51.740 | And so figuring out where these things go, I don't know.

00:56:56.220 | I don't see any kind of catastrophe for the economy.

00:56:59.940 | What I see is changes.

00:57:03.900 | That's always what happens.

00:57:04.900 | You almost never have catastrophe where everything falls apart and it goes back to the old way.

00:57:09.900 | What you see is massive changes.

00:57:12.060 | And so are major segments of the economy falling apart?

00:57:14.940 | Yeah.

00:57:15.940 | Commercial real estate in a big city, New York City, yes.

00:57:19.020 | Lots of companies canceling their big expansion plans.

00:57:22.260 | But is that bad on the other side?

00:57:25.460 | I don't think it's bad on the whole.

00:57:27.260 | It's just going to mean growth and change.

00:57:29.220 | And so your job is not to worry about the economy, but your job is to look and say,

00:57:34.900 | what's happening in the economies that I can track?

00:57:38.020 | If you're a commercial landlord in New York City, it's not as rosy of a future as it was.

00:57:44.020 | If you were a taxicab medallion investor and you got decimated, totally decimated, you're

00:57:50.020 | bankrupt right now.

00:57:51.860 | On the other hand, if you're a real estate agent in South Florida, you're doing better

00:57:56.180 | than ever.

00:57:57.180 | I've been amazed to see how strong the real estate market is.

00:58:02.680 | All across the country, you hear reports of people saying, man, real estate market here

00:58:06.900 | is so fast.

00:58:08.420 | And so that's where we've got to be is you've got to say, what are the trends?

00:58:12.420 | What's happening in the economy?

00:58:13.420 | What are people doing?

00:58:14.580 | And then put yourself in the way of some of that money with a trade, with a business,

00:58:19.700 | with some way to capitalize on where things are going right now.

00:58:23.660 | What's going to happen with the fiscal situation?

00:58:26.460 | I don't know.

00:58:27.460 | I didn't mean to sound so dumb.

00:58:29.700 | I don't know.

00:58:30.700 | I don't know.

00:58:31.700 | But the point is that I don't have the competence to make long-term predictions.

00:58:38.500 | I say that and I'm going to make one.

00:58:41.020 | Obviously, the US government will default on its debt.

00:58:46.300 | But I think that default, number one, is not necessarily directly related to the economy

00:58:51.020 | and the stock market.

00:58:52.980 | Just like the economy and the stock market are not fundamentally intertwined necessarily,

00:58:59.260 | or your local economy is not fundamentally intertwined with the stock market, I think

00:59:03.300 | that the fiscal situation is not fundamentally intertwined with the economy and the stock

00:59:06.820 | market.

00:59:07.820 | Just because the US government defaults on its debt doesn't mean that the stock market

00:59:11.420 | doesn't go up.

00:59:12.940 | I don't know.

00:59:15.580 | But it won't be paid.

00:59:16.620 | So how will it be defaulted on?

00:59:17.820 | I think just a series of changes.

00:59:19.260 | They'll change the laws.

00:59:20.540 | They'll add means testing to Social Security.

00:59:22.780 | They'll change the retirement ages.

00:59:24.260 | They'll adjust this, adjust that.

00:59:26.260 | And it can go on for far longer.

00:59:28.540 | I think that one of the things that should be very clear is that anybody who makes a

00:59:32.420 | prediction that this has to end by this date, it's hard to find anyone who has made those

00:59:37.300 | predictions accurately.

00:59:39.880 | So the absolute numbers are hard.

00:59:43.940 | There's no absolute valuation of the price to earnings ratio that is right.

00:59:47.940 | There's no absolute valuation of the price of gold that is right.

00:59:52.820 | You're always investing and comparing your investments and the use of your dollars to

00:59:56.580 | what alternative investments are available.

00:59:59.740 | And so why, for example, is the US stock market doing so well?

01:00:04.660 | I don't know, but I think probably one reason would be it's the best place available for

01:00:10.660 | many investors to put their money, even on a global scale.

01:00:14.420 | What else are you going to do with your money?

01:00:15.420 | What else are you going to invest in?

01:00:17.220 | It's so easy to invest in.

01:00:18.220 | It's so strong.

01:00:19.860 | Companies are so strong, globally diversified, powerhouses, et cetera.

01:00:23.300 | So there's all these factors that are just outside of your control.

01:00:30.140 | I want to focus now as I wind down is how do you get ready?

01:00:36.980 | What did I mean when I said if the Fed and Congress can dump an insane amount of money

01:00:42.220 | and save this sinking ship one last time, that would be awesome.

01:00:44.620 | It would also mean I would triple down on my bet against the future of XYZ.

01:00:48.380 | What I meant when I said that was I don't want my future to be tied to any one thing.

01:00:55.740 | I don't want my future to be tied to any one market.

01:00:58.380 | I don't want my future to be tied to any one industry.

01:01:01.820 | I don't want my future to be tied to any one country.

01:01:05.780 | I want to be diversified.

01:01:08.860 | I don't want to just have stocks.

01:01:10.060 | I want to have stocks and real estate and a business that's creating cash flow.

01:01:13.780 | I don't want just a business creating cash flow.

01:01:15.140 | I want all the others.

01:01:16.300 | I want to be diversified.

01:01:17.780 | I don't want to just own paper assets.

01:01:19.380 | I want to own real assets and I want to own business assets.

01:01:22.620 | I want to be diversified.

01:01:24.140 | And I don't want to be dependent on one economy, one, you know, the American economy as strong

01:01:30.440 | as it is.

01:01:31.440 | I don't want to be dependent on it.

01:01:32.440 | I want to be, I don't want to be independent.

01:01:33.940 | Sorry, I don't want to be dependent on one currency.

01:01:38.380 | I don't want to be dependent on one location.

01:01:42.340 | I want to be ready.

01:01:45.340 | But the reality is there are different versions of that.

01:01:48.860 | There's the best case scenario and then there's the worst case scenario.

01:01:52.380 | On the best case scenario, I'd like to have a handful of businesses all paying me millions

01:01:56.560 | of dollars a year.

01:01:58.500 | I'd like to have investments all around the world in all different asset classes in all

01:02:03.540 | different situations.

01:02:04.540 | It's going to take me some time to build that.

01:02:07.620 | On the worst case scenario though, I just want to have some safe places to go, some

01:02:14.060 | protection and some insulation against bad things happening.

01:02:18.300 | And what I think you can see from even this current economic crisis, which is, we don't

01:02:22.940 | know the full extent or the full length of it, but very, very severe, likely to be continue

01:02:28.760 | for a time, is you see how the basic fundamentals, the personal finance 101 works.

01:02:38.080 | It works.

01:02:39.080 | Right?

01:02:40.080 | My aunt, no debt, paid for house, modest fixed expenses, able to live on her social security

01:02:47.300 | check and has an investment portfolio that's healthy as well to give her discretionary

01:02:53.260 | money.

01:02:54.260 | It worked.

01:02:55.260 | And a garden in the backyard.

01:02:56.260 | It works.

01:02:57.260 | She's not suffered.

01:02:58.260 | She doesn't need anything.

01:02:59.460 | She didn't need some fancy plan.

01:03:00.980 | She didn't need...

01:03:02.920 | It works.

01:03:04.180 | The basics work.

01:03:06.620 | So engage in the basic common sense prudent financial management.

01:03:12.100 | Debt.

01:03:13.660 | Handle debt carefully.

01:03:15.780 | Strive for no debt, if that's appropriate for you.

01:03:19.820 | Being debt free, you have all the options in the world.

01:03:23.860 | If you're a business owner and your businesses were shut down by the government, if you have

01:03:30.220 | no debt, you lay off all your employees, you pay the basic fixed costs that you need to

01:03:35.740 | keep the lights on so your building doesn't grow mold and do the very basics and you wait

01:03:40.660 | until you can reopen.

01:03:42.660 | And you're not bankrupt because of it.

01:03:46.340 | Why are all these big brands going bankrupt?

01:03:48.700 | Why does J.Crew go bankrupt and Hertz car rental, et cetera?

01:03:54.900 | It's because they have debt.

01:03:56.620 | Massive massive amounts of debt due to the financial engineering of the financial class.

01:04:02.240 | So in your situation, if you avoid debt, you'll have a rock stable business.

01:04:06.380 | Dave Ramsey's not hurting.

01:04:09.940 | He's doing fine.

01:04:12.220 | So no debt, worth having.

01:04:14.760 | If you have debt, making sure that it's carefully segmented, making sure that the debt is located

01:04:20.900 | on these assets over here, but these other assets over here are okay.

01:04:25.200 | So in a worst case scenario, call the creditors, sorry guys, can't pay, take the assets and

01:04:30.340 | you just simply carve off that portion of your asset base, but everything else is still

01:04:34.780 | safe.

01:04:36.260 | Or carefully negotiated debt.

01:04:38.820 | If you had all your debt, right, I have the credit card course, the credit card course

01:04:44.340 | that I teach.

01:04:45.500 | If all of your debt was unsecured debt, just simply credit card, and you lost your job

01:04:52.700 | back in March and you couldn't pay your credit cards, your life would not have changed in

01:04:59.900 | the last six months.

01:05:03.100 | Nothing was taken from you.

01:05:05.620 | Nothing disappeared.

01:05:07.580 | You just couldn't pay your credit cards.

01:05:11.180 | The credit card companies understand.

01:05:13.080 | You tell them, listen, when I get a job, I'll pay you.

01:05:15.980 | When you get a job, you're going to go back and pay them.

01:05:18.180 | Obviously your credit rating is going to be hurt, but your life is okay.

01:05:24.100 | Which is why it's so important to think about the kinds of debt that you accept and how

01:05:27.860 | you negotiate that debt.

01:05:31.200 | At its core, you always have a bankruptcy plan.

01:05:34.520 | You always make sure that if I go bankrupt, what do I come out the other side with?

01:05:39.160 | And make sure that you think about that with everything that you do.

01:05:42.380 | That's 101, prudent financial management.

01:05:45.680 | What else?

01:05:46.680 | Insurance.

01:05:47.680 | Being properly insured against common risks.

01:05:49.900 | If you have health insurance and you got COVID and you got all these hospital bills, health

01:05:53.200 | insurance take care of it.

01:05:55.680 | If you got car insurance, you probably got discounts because you're not driving, but

01:05:58.840 | all the nuts and bolts, house insurance, all the stuff still works.

01:06:05.400 | Investments.

01:06:06.400 | If your investments were thoughtfully diversified in advance of the crisis and they're properly

01:06:13.920 | chosen for you based upon your financial needs, everything has worked.

01:06:21.280 | You know, some of the old things about don't invest money you can't afford to lose.

01:06:26.380 | If you didn't ignore that, you were fine when the markets were down 30%.

01:06:30.840 | Little things like don't invest money in stocks that you need within five years.

01:06:35.560 | If you paid attention to that, you've been fine because your market value's recovered.

01:06:41.180 | Cash management.

01:06:42.400 | Making sure you have the ability to protect yourself and you have emergency funds.

01:06:47.600 | Three to six months emergency fund goes a long way for many people.

01:06:52.560 | One year emergency fund, great.

01:06:55.080 | Whatever your particular approach is.

01:06:57.280 | It worked.

01:06:58.580 | It works.

01:06:59.580 | It's still working and it worked.

01:07:02.040 | I've hammered the need to keep an income.

01:07:04.760 | I've said it again and again.

01:07:06.400 | If you can keep your job through a crisis, you're going to be fine.

01:07:10.920 | Well, if you can keep your job through a crisis, you're fine.

01:07:15.520 | Is unemployment up?

01:07:16.680 | Yes.

01:07:17.680 | But why do we work so hard?

01:07:18.680 | Why in my radical personal finance guide to career and income planning, why in that course

01:07:22.280 | do I work so hard on making sure that you have a network, a place that you can go?

01:07:26.800 | Why do I focus on having everything squared away?

01:07:30.320 | It's because if you lost your job and you had a network, you could have another job

01:07:33.760 | quickly.

01:07:34.760 | There's been plenty of things that you can do.

01:07:36.880 | It's so important that you not ignore that stuff because if you could just simply keep

01:07:40.880 | your job, you've been fine.

01:07:45.320 | You've been totally fine.

01:07:47.040 | You got to be a high performer.

01:07:48.440 | You got to have economically valuable skills so you can directly trace your production

01:07:54.600 | and your productivity to your income so you're not just dead weight at your company.

01:07:59.680 | And you need to maintain backup plans, backup careers, backup jobs, et cetera.

01:08:03.840 | It worked.

01:08:04.840 | It's still working.

01:08:05.840 | It works.

01:08:08.280 | What about a prudent relocation plan?

01:08:10.600 | The ability to leave a problem area and go to where there are fewer problems.

01:08:16.080 | Right now, there are people all around the place whose cities are being rocked by violence

01:08:21.120 | who are using their relocation plans.

01:08:24.000 | If you're living in a downtown corridor where people, protesters are burning down buildings

01:08:29.360 | on your block, et cetera, you have the ability to relocate.

01:08:33.400 | And it's simple.

01:08:34.400 | It's calling your cousin who lives a couple of counties away and saying, "I'm going to

01:08:37.840 | send the kids out for a couple of weeks at the farm.

01:08:41.560 | Just wanted to let you know the city's not working for us right now."

01:08:45.680 | I've talked in my preparedness courses and whatnot, I've talked about the importance

01:08:50.320 | and value of even just a simple strategy.

01:08:54.520 | I have this thing about even if you don't have anything at the basic level, having a

01:08:58.440 | little cargo trailer with a nice tent in it and some food and some electricity stuff and

01:09:04.160 | some basic tools and whatnot that you could just hook up your cargo trailer and go camping.

01:09:08.680 | If you were locked down in New York City and you couldn't go anywhere, couldn't do anything,

01:09:12.180 | you could just hook up your cargo trailer if you had a car and go upstate, go out on

01:09:17.140 | some government land or go to a campground and you can live well.

01:09:20.440 | You can fish every day, go to the lake, you can do great.

01:09:22.600 | Or you go out anywhere and that stuff works.

01:09:26.200 | Maybe you've implemented a little bit more.

01:09:27.460 | You have your vacation house.

01:09:29.440 | Where did all the New Yorkers go?

01:09:31.380 | They went to their second homes.

01:09:32.880 | It's perfect.

01:09:34.420 | Having a second house can be simply, "Oh, we've got the cabin on the lake."

01:09:37.800 | Or, "We like to go out in the summertime to our country cousin's farmhouse."

01:09:43.160 | Or maybe you just have a little flat in a far off city, a little apartment that you

01:09:47.660 | maintain.

01:09:48.660 | It's not much, but it's something.

01:09:50.220 | South Florida, you keep a little apartment in Miami.

01:09:52.220 | Well, you just go down to your apartment in Miami and then you weren't locked down like

01:09:56.200 | New York City was.

01:09:57.260 | You had the ability to go.

01:10:00.500 | Maybe you maintain a beach house on a Caribbean island and you simply go to your beach house.

01:10:06.000 | In our current world, that stuff has worked great.

01:10:08.700 | You're still working from remotely.

01:10:10.560 | Now instead of being locked down, you can go to the beach, you can take the sun, you're

01:10:13.620 | not stuck in the middle of a city somewhere, not able to go anywhere with kids driving

01:10:18.220 | you crazy.

01:10:19.220 | You're fine.

01:10:20.420 | Now, I recommend, this hasn't generally been necessary for most people, but making sure

01:10:26.060 | that you think about physically supplies.

01:10:27.780 | So security.

01:10:28.780 | It feels good to have a security plan.

01:10:31.340 | If you've got crowds of angry people coming through your front yard, it's nice to have

01:10:36.740 | a security plan in those situations.

01:10:38.740 | Food, water, energy, medical supplies, none of that has been necessary for this crisis,

01:10:45.820 | but it all still makes sense.

01:10:48.680 | When you realize how inexpensively the average person can provide for those basic needs and

01:10:54.780 | be totally bulletproofed, it's a no brainer.

01:10:59.120 | So in a worst case scenario, you're totally fine.

01:11:02.240 | I mean, this is the stuff that I teach in my How to Survive and Thrive During the Coming

01:11:07.220 | Economic Crisis course.

01:11:09.460 | I talk a lot about international relocation, but it really works.

01:11:13.300 | It really works.

01:11:14.940 | The United States, if you had a second passport from a little Caribbean country and you kept

01:11:20.860 | a little piece of real estate there that you could go to, you could get to the country,

01:11:24.140 | you could get in, do your little quarantine, and be fine.

01:11:26.900 | There have been many places around the world that have been totally open for a while when

01:11:30.860 | Europe was shut down and when the United States was shut down.

01:11:34.060 | You're fine.

01:11:35.500 | If your jobs have disappeared in your city and you can move to another city, or I talk

01:11:39.860 | about even just being able to move to another country and get a job, it all works.

01:11:46.220 | Hope I haven't been a broken record in this, but my point is that the reason you prepare

01:11:50.540 | for disaster is so that you can go through it easily and comfortably, so it's not disruptive

01:11:57.140 | to you.

01:12:00.220 | I think it's possible to over-prepare for disasters.

01:12:03.060 | Some people, it's just fun for them.

01:12:05.860 | It becomes their hobby, and they're total catastrophists.

01:12:09.420 | But I'm not going to waste my life preparing excessively for something that probably won't

01:12:14.300 | happen.

01:12:15.460 | But a little bit of preparation makes life good in the middle of catastrophe.

01:12:21.940 | In the same way that having a generator, having storm-proof windows, and just making it a

01:12:27.580 | habit that you keep some water and food in your house and some gas for the generator

01:12:32.180 | for your Florida beach house, in the same way that that makes most hurricane warnings

01:12:37.220 | relatively a non-event, and if your house gets blown down, you have proper insurance

01:12:42.020 | and you decided to leave or you had some kind of storm shelter in the middle of it, makes

01:12:45.900 | it mostly an inconvenience rather than a catastrophe, the same thing applies to good financial planning.

01:12:53.540 | You do good financial planning so that you can be minimally affected.

01:13:01.620 | I have a friend of mine who runs an education business, and it's in a foreign country, and

01:13:10.900 | his business collapsed because he had to send all his students home, and his business collapsed

01:13:16.180 | because the foreign country closed the borders, and so no international students were allowed

01:13:20.180 | to come in.

01:13:22.740 | He laid off some of his staff members completely, cut everyone's pay to 50%, but he's not worried,

01:13:30.020 | even though business revenues are zero, he's not worried and hasn't been worried for the

01:13:35.860 | past six months because he has money, he has cash, doing a little bit of work from home,

01:13:43.500 | but when the borders open up, he'll be back at it.

01:13:46.820 | Might take a few years to recover, but it's not the end of the world.

01:13:50.860 | The end of the world is the guy who doesn't have reserves, who got too far out over the

01:13:58.020 | tip of his skis.

01:14:00.460 | That's the problem.

01:14:02.060 | So there's nothing wrong with being prudent, there's nothing wrong with preparing.

01:14:08.460 | It works.

01:14:13.700 | I have tried to stay away from making market prognostications.

01:14:19.420 | I think it's fine for that to be done, but I think that the value of the stock market

01:14:25.820 | in most individuals' people's financial lives is vastly overrated.

01:14:32.200 | There is abundant information and abundant noise about the gyrations of the market.

01:14:38.580 | I think that the value of good financial planning is underrated, and people underestimate how

01:14:47.260 | valuable it is to be able to think about your personal life in a holistic way and then properly

01:14:56.460 | protect it.

01:14:58.900 | Stocks are great.

01:15:00.340 | The American stock market is awesome.

01:15:03.300 | It is very useful.

01:15:06.460 | I have no problem of people being involved.

01:15:10.300 | I'm not saying run for the hills and buy gold.

01:15:12.900 | I think you should own some gold, but not all.

01:15:15.420 | All your money should not be in gold.

01:15:18.580 | If you get this stuff right, then you're insulated from the markets enough that you can let them

01:15:23.460 | run.

01:15:24.820 | That's always been the power.

01:15:25.820 | When I was a financial advisor, managing portfolios, selling stocks, I always said, "My job is

01:15:32.340 | to keep you invested.

01:15:34.380 | If I do my job right on the financial planning side, I'll be able to talk you into staying

01:15:38.500 | in the market so you don't bail out and destroy your portfolio."

01:15:41.980 | I still believe that.

01:15:46.460 | The markets are wildly unpredictable.

01:15:49.260 | 30% declines are normal business.

01:15:53.420 | 50% declines happen regularly.

01:15:56.340 | You should expect it.

01:15:59.220 | This is how you prepare for it so that it doesn't cause you major harm and major damage.

01:16:07.500 | I want to take a moment as I go and I want to emphasize to you that there's always been

01:16:12.420 | a method to my madness in the courses that I sell.

01:16:18.420 | There are three courses right now on the website, radicalpersonalfinance.com/store.

01:16:23.320 | Those three courses are all related to this theme.

01:16:27.380 | I've mentioned them in the show.

01:16:28.860 | The first was career and income planning.

01:16:32.540 | My headline that I wrote on the ad, "Increase your income and enjoy a richer life now by

01:16:35.780 | finding or developing work you love."

01:16:38.580 | What I've focused on is if you have an income and you maintain it through a recession, you

01:16:45.340 | can ignore most recessions and in fact, they become for you an opportunity, the ability

01:16:51.860 | to buy things at discounted value.

01:16:55.180 | But you've got to build a solid income plan.

01:16:58.460 | That income plan should give you a life that you love now while you're working and it should

01:17:02.860 | throw off so much money that you have the money to invest in case in the future you

01:17:07.940 | don't want to work for money anymore.

01:17:10.940 | Radical Personal Finance, Guide to Career and Income Planning available.

01:17:13.140 | Number two, how to survive and thrive during the coming economic crisis, a rational modern

01:17:18.100 | approach.

01:17:20.100 | In that course, I lay out that economic crisis is inevitable.

01:17:26.860 | Most of those crises will simply be on an individual level.

01:17:30.020 | Some of them will be large scale.

01:17:32.460 | Can they be global?

01:17:33.460 | We're in the middle of it.

01:17:35.420 | But I lay out some strategies in that course that work.

01:17:39.220 | Half the strategies in the course are about being prepared to be a resilient person.

01:17:44.380 | If you're debt free, if you have solar panels on your roof that are providing for your electricity

01:17:48.860 | needs, if you have some food stored or you have a little garden in your backyard, if

01:17:53.380 | you have some income sources, you're totally fine.

01:17:57.420 | In addition, you should be prepared to relocate.

01:17:59.300 | I talk a lot about international relocation and you can see the value of that right now.

01:18:03.780 | I talk about getting residency in foreign countries, second passports, etc.

01:18:09.060 | Americans have a hard time going many places in the world.

01:18:12.660 | If you square this away in advance, you go ahead and get yourself another passport.

01:18:18.260 | Right now, you can travel the world on a St. Kitts and Nevis passport.

01:18:22.620 | It works great.

01:18:23.620 | American passport, not so much.

01:18:25.780 | If you're an Italian citizen, you can get into Italy right now and once you're in Italy,

01:18:29.740 | you can get into the EU.

01:18:31.700 | You're fine.

01:18:32.700 | You've got to square that stuff away.

01:18:35.620 | If you open the world up to you, I talk in that situation about a simple example, about

01:18:39.740 | having a ... I talk about a bug out location.

01:18:43.320 | Your bug out location can be simple.

01:18:44.540 | It doesn't have to be a cabin in the woods unless you want one.

01:18:46.820 | It can be a little apartment in downtown Paris or downtown Sofia or downtown wherever you're

01:18:56.660 | interested in going.

01:19:00.780 | A little apartment in another place allows you to leave a place where it's bad.

01:19:05.380 | If you were living in Italy and you kept a little apartment in Huntsville, Alabama, then

01:19:10.260 | you were fine when everything in Italy was going bad.

01:19:12.620 | If you're living in Huntsville, Alabama and you keep a little apartment in Trento, Italy,

01:19:17.580 | then you're fine when you go.

01:19:20.220 | How to survive and thrive during the coming economic crisis is on the site.

01:19:23.140 | Then finally, how to borrow money safely and never pay interest using credit cards.

01:19:26.940 | In that course, I talk about the value of credit cards and I talk about how if you build

01:19:31.500 | a credit card portfolio before you need it, it gives you a very safe, very low cost way

01:19:37.360 | of borrowing money.

01:19:39.180 | Right now, you see the value of that.

01:19:41.220 | If your debt is structured as unsecured debt and the whole world goes crazy, you're fine.

01:19:50.580 | That's why you think about the security of your debt.

01:19:53.240 | If you structured your credit card portfolio in advance so that you have $100,000 of credit

01:19:57.620 | available to you and you lost your job and you needed to borrow $10,000 or $15,000, you're

01:20:01.620 | fine if you've planned in advance.

01:20:05.240 | You're not fine if you had one credit card with a $10,000 credit limit available to you

01:20:09.420 | and you needed to borrow $10,000 or $15,000 and you're not doing that cheaply.

01:20:13.660 | You got to build it before you need it and that's available for you on the website as

01:20:16.860 | well, how to borrow money safely and never pay interest using credit cards.

01:20:19.940 | Go to radicalpersonalfinance.com/store to purchase those courses, radicalpersonalfinance.com/store

01:20:25.100 | and I'll be back with you soon.

01:20:29.940 | Welcome to AutoZone.

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Did_We_Get_It_Wrong_Reflecting_on_the_Unexpected__Recovery_of_the_Stock_Market