Progress
00:00:00.000 | Hello everybody, how's everyone doing? It's Sam from Financial Samurai and in this
00:00:05.280 | episode I want to catch up on a lot of things and a lot of good things that I've
00:00:08.640 | been seeing since the last episode. You know the stock market has rallied
00:00:13.000 | significantly from its bottom so it's looking so far that buying equities
00:00:18.960 | below $2400 on the S&P is a good move. You're up you know 15 to 27%
00:00:25.200 | depending on where you bought and also it looks like people are getting their
00:00:30.360 | stimulus checks of $1,200 per person if you make under $75,000 you get that full
00:00:35.440 | amount. $2,400 if you're a couple and you make under $150,000 and $500 per child.
00:00:42.840 | So there are people who are getting $2,400 plus $500, $2,900 and $3,400 and
00:00:49.640 | even more and that's finally hitting the bank out in mid-April. Further you're
00:00:55.600 | seeing small business owners which make up 99 plus percent of all businesses in
00:01:01.480 | America who also employ about 48% of all working Americans in America start to
00:01:08.960 | get their Paycheck Protection Program loans funded. Now it's really still quite
00:01:14.720 | slow given they were allowed to apply on what April 3rd and it's April 16th.
00:01:20.840 | Still a minority of applications have got their PPP funding and also the PPP
00:01:27.280 | funding of $350 billion has temporarily run out because there's a roadblock in
00:01:31.680 | Congress but expect that money to continue to go through. However I think
00:01:36.320 | all the loans will go through because politicians want power and they need to
00:01:40.960 | get re-elected. So all these businesses, 99% of all businesses, should get eight
00:01:47.120 | weeks of payroll paid for and that money will be forgiven if they keep their
00:01:52.880 | employees as is on their payroll with the same type of salaries. And then you
00:01:57.880 | look further down the line those people who unfortunately lost their jobs so
00:02:02.480 | something like 22 million unemployment claims by April 16th 2020. I mean that's
00:02:09.240 | a crazy amount. However the government is offering $600 extra unemployment
00:02:15.560 | benefits for weeks. I think up to 39 weeks which is not as high as the 99
00:02:19.960 | weeks during the 2008-2009 financial crisis but still it's a pretty good
00:02:24.600 | amount. Here in California you can earn $4,200 in unemployment benefits per
00:02:29.600 | person and if you have a dual unemployed household that's $8,400 a month and
00:02:36.480 | that's $100,800 a year. I think most of us most of us can provide for
00:02:42.960 | ourselves for $4,200 a month at least food and shelter and just the random
00:02:46.960 | basic necessities so that's really great. And even illegal immigrants here in
00:02:51.400 | California are getting I think $500 from a $125 million fund provided by
00:02:56.400 | taxpayers and private citizens. Say what you will I think if you're a productive
00:03:00.360 | member of society you should probably get some type of relief given everybody
00:03:05.040 | is getting some type of relief. So a lot has been going on I've gotten a lot of
00:03:09.440 | questions I just want to do a quick Q&A here. So the most common question I get
00:03:14.840 | is are you buying into the stock market rally and my answer is no I am not
00:03:19.840 | buying any more equities with the S&P 500 above was like $2,750 right now. I was
00:03:25.600 | buying all the way down to about $2,300 and I've stopped because I fully
00:03:30.000 | fulfilled my goal of boosting my equity exposure from 20% of net worth to
00:03:34.800 | 25% of net worth. In fact I've been trimming some equity positions that I
00:03:38.880 | bought earlier and reallocated some of my municipal bond funds into paying down
00:03:44.040 | some mortgage debt. I mean this is a crazy violent quick rally just like it
00:03:49.440 | was a crazy violent sell-off. I mean there are symmetries to that but you've
00:03:54.560 | got to believe that there's gonna be some hiccups on the way. You know the
00:03:57.320 | market always discounts the future and that's why you know coming up with a
00:04:01.040 | framework and saying okay where do you think earnings are gonna go and then
00:04:05.440 | coming up with that stock market bottom post that I wrote I think was a way to
00:04:09.960 | help people think about earnings and now we're gonna go into first quarter
00:04:13.920 | earnings and you know they're not gonna be good but hopefully we expected this
00:04:18.160 | but the real X factor is the second quarter and it's probably not gonna
00:04:23.160 | happen where we're gonna go straight up right back to $3,200 $3,300 we're gonna
00:04:27.560 | see a lot of false starts we're gonna see some problems we might see some
00:04:31.360 | reactivation in cases that we're seeing in South Korea and maybe in China. Who
00:04:36.440 | knows but you've got this second chance to reallocate your risk assets to be
00:04:44.320 | appropriate with your risk tolerance. I mean just think about all the noise and
00:04:48.960 | the doom and gloom they were hearing when you know the Dow was below $20,000
00:04:54.120 | and the S&P 500 was below $2,300 I mean people were talking about going 50% 70%
00:04:58.760 | lower greatest pain affliction ever in the history of mankind all that stuff
00:05:04.880 | and here we are much much much higher so if you were just freaking out at way
00:05:11.920 | lower levels you have a chance to right that ship and make sure your risk
00:05:16.240 | exposure matches your risk tolerance. Second question have your thoughts about
00:05:21.520 | a second half v-shaped recovery change? Largely no, largely no. Maybe we're gonna
00:05:28.120 | have more of a swoosh shape recovery but I still think there's gonna be a pretty
00:05:32.920 | solid recovery because this is a self-inflicted wound. I believe portions
00:05:38.720 | of our economy will start opening up in May and in June. I believe that we're
00:05:43.800 | gonna learn to live with the virus in our day-to-day lives we're just gonna
00:05:48.480 | make a lot more adjustments. I believe handshakes will be down, face mask usage
00:05:53.400 | will be up, there's gonna be a quota system for how many people can enter a
00:05:58.560 | store and so forth but we're gonna get things done and I think now we are much
00:06:04.120 | safer from the coronavirus than we were back in March because of all these
00:06:09.560 | lockdowns that we've been doing for the past three four weeks. I do believe the
00:06:14.400 | government will do everything possible to try to keep afloat as many
00:06:18.160 | Americans as possible and therefore if the lockdowns end in May or June and
00:06:24.640 | everybody gets their PPP loans and their stimulus checks and their
00:06:30.200 | unemployment benefits I think things will inevitably resume and I think
00:06:34.920 | you're seeing that in the stock market in a reflection that the curve is
00:06:38.240 | flatter than expected, less people are getting the virus as the model is
00:06:43.400 | expected and so forth. Next question I get is are you making any changes with
00:06:48.520 | your finances? Well I do like to review my cash position every day because it
00:06:52.680 | feels so good to see that cash and you just tell yourself ah nothing can take
00:06:58.360 | away from the cash but I'm readying my cash just in case there is an
00:07:03.320 | opportunity in the real estate market so I want to find that real estate seller
00:07:07.960 | who is the stock seller who's panic sold at Dow 18,600 and the S&P 500 at
00:07:15.280 | 2250. I think they are out there and you need cash to take advantage and you need
00:07:20.480 | to look to take advantage so that's one thing I'm doing. The second thing I'm
00:07:24.480 | doing is trying to replenish my cash because I spent about 90% of my cash
00:07:27.800 | buying equities on the way down and of course I didn't bottom ticket because I
00:07:31.960 | had multiple multiple tranches but I did use 90% of my cash and it feels good to
00:07:37.200 | have more cash during uncertain times. The other funny thing I'm doing which
00:07:42.680 | probably is irrelevant to most of you is I'm looking for personal finance sites
00:07:47.160 | to buy because what this pandemic has taught me is that hmm having an online
00:07:52.440 | media business no matter how small can actually be quite defensive and quite
00:07:59.240 | attractive because the government can't force me or any website owner to shut
00:08:04.520 | down their website. Yeah revenue could be down, business could be down but so long
00:08:09.240 | as you can keep on operating you can find a way. So again I think if there are
00:08:14.600 | people who over levered or just spend too much I don't know I think there's
00:08:19.920 | opportunity. I really do believe there's only a two to three month opportunity
00:08:24.360 | where there is tremendous value that can be had. For example when Silver Lake and
00:08:29.800 | Sixth Street Partners decided to invest 1 billion in Airbnb with a 10% interest
00:08:35.680 | rate and warrants that convert to an 18 billion valuation that's gonna be the
00:08:40.880 | stuff of legends folks I think in a couple years because Airbnb was valued
00:08:45.080 | at about it's like 40 something billion during the 2017 round and was expected
00:08:51.160 | to go public for 50 plus billion in 2020. So if you can get those type of terms I
00:08:56.880 | think in two three years when things normalize people are going to be talking
00:09:01.040 | about this deal and I think if you can aggressively hunt right now for deals
00:09:05.760 | whether it's in real estate or in private websites or just anything that
00:09:11.480 | you know you think could be at risk I think now is the time. We've already had
00:09:15.800 | our chance buying stocks they move so quickly and you've seen a massive
00:09:19.360 | rebound it's time to see if there's any laggard risk assets out there that may
00:09:24.240 | be very attractively valued. So overall I hope all of us are a little bit more
00:09:29.840 | hopeful than we were a month ago and there are a lot of positives as I've
00:09:34.640 | discussed in this podcast and there are a lot more positives that I haven't
00:09:38.360 | discussed such as healing your body from the grind of work, spending more time
00:09:44.800 | with your children, letting the earth heal a little bit more, less pollution
00:09:49.600 | and so forth. But again I am very optimistic in general as a person so of
00:09:56.240 | course take my view with a grain of salt and if you want a good dose of reality
00:10:00.200 | and negativity and all that just turn on the news or just go on social media or
00:10:05.600 | wherever you get your news. I'm personally going to reduce the amount of
00:10:09.400 | social media consumption and news consumption because I felt that it
00:10:14.200 | really weighed me down in the first quarter and I did write a first quarter
00:10:18.160 | 2020 recap entitled "The Most Brutal But Beautiful Quarter" and it was brutal
00:10:24.520 | obviously for all these reasons such as the lockdown and the fears of the virus
00:10:29.960 | and so forth but it was beautiful because I got to spend time with my
00:10:32.640 | family. And feel free to read the post and comment and share your thoughts and
00:10:38.120 | going forward I'm just going to continue to do what I've been doing for you guys
00:10:41.760 | and that is to write and to occasionally record and to share my thoughts about
00:10:47.040 | what's happening. So far I think we're heading in the right direction and if
00:10:51.600 | we're not I'm going to definitely tell you so stay tuned, stick around, be
00:10:56.560 | healthy, be happy, be loved, be hopeful, be safe and just keep on going. We're
00:11:02.960 | right in the thick of things that every day that goes by is one less day that we
00:11:09.880 | have to go through pain and I think things will get better and they are
00:11:14.480 | getting better. Take care, everyone.