How To Make Record Profits In This Uncertain Economy

Foreign.

Daniel Moran welcome back to capitalism.com today is a really important topic. We're going to talk about the economy, we're going to talk about where we are in the current cycle. And most importantly, I want to address how individuals like you and me can profit going into this next period of uncertainty. We've gone through a lot of uncertainty over the last two years following the global pandemic. But we're about to enter into what I think is going to be a multi year cycle of additional uncertainty. But it's a different type of uncertainty and it's the type that if played well, can be the greatest opportunity for entrepreneurs and investors to explode their net worth to increase their impact in increase their incomes. Now, the media narrative around right now is that we're about to enter a recession, that asset prices are coming down, that the real estate market is going through a bust, that stocks are in a bear market, and all of that is true. And I think that we're headed into a period of additional uncertainty and additional downside, maybe for the next several years. But if you can ignore the negativity that is happening in the media and in the marketplace, this is where people like you and I shine. All markets go through periods in which there is a wide open west period and then there's a consolidation and then you have a maturation. The wide open west period is where everybody is making money. We saw this in NFTs over the last couple years where it was just booming so much that you could buy almost anything and it would go up and you could flip it for a profit. Then you go through a consolidation period. This is where the winning projects or the winning businesses win and they start to capture more of the marketplace. And then you go through maturation. Maturation is where you have established winners in the marketplace and the people who want to come in and compete have to carve out their own space in order to win. And then that cycle repeats. We've seen market booms during wide open west periods. We've seen consolidations, we've seen maturation. And now we're starting to see that fracture. We're starting to see the end of this very long bull cycle. As I'm sure you're well aware, the Federal Reserve is doing everything that they can to try and keep inflation at bay. And their actions are coming too late. We've already seen very high inflation. We've already seen prices get out of control. We saw the real estate market get out of control. We saw the crypto market get out of control. We saw stocks continue to go up despite a global pandemic. I mean, are you kidding me? And now the Federal Reserve is acting as aggressively as possible to try and slow that down to prevent inflation from getting out of control. And as a result of that, we're seeing things get flushed out of the marketplace. We're seeing the real estate market finally come down. We're starting to see, we've already seen the crypto markets take a plunge. We're seeing stocks go through a pair, a bear market. And just so you have some context about where we are in this cycle, every time there is a crash, the most speculative things come down first. And then the less risky investments kind of fall at the back end of this cycle. So we saw crypto, for example, go through an 80% correction. Bitcoin hit its highs of about 68,000. At the time of this recording. It's trading at about 18 to 19,000. That is a full 80% correction. Now we're seeing stocks, especially tech stocks, go through that. We've seen very high quality companies like Square or Alibaba go through 60 to 80% corrections. And now it is starting to bleed over into the less risky asset classes. That's real estate and that's businesses. I believe that we're going to see that as a sustained trend over the next 12 to 18 months. But I believe that creates a window of opportunity for entrepreneurs like you and me to carve a new path to set ourselves up for the next bull run. I'm sure you've heard the quote from Warren Buffett where he says that investors should be fearful when others are greedy and we should be greedy when others are fearful. And the reason I want to talk about this with you today is because I see many of my peers and colleagues starting to get fearful when others are fearful, rather than getting greedy when others are fearful. Now we probably have more downside and more fear in the marketplace to come. That may continue for the next six to even 24 months. The next six months to two years will probably be a time of sustained higher interest rates. As the Federal Reserve tries to get a hold on inflation. You'll see more people be scared, scared out of the marketplace, which means fewer people will be starting businesses, fewer people will be buying businesses, and fewer people will feel safe enough to make investments in things like real estate, businesses and even the stock market. But if you can keep a cool head, if you can keep a long term view, that creates a huge buying opportunity. And that's what most people will miss. It's easy to justify investing in things when the numbers just keep going up. It takes more discipline and it takes more planning to be a wise investor when things are going down. And so in today's show, I want to share with you how I am approaching this next chapter and how I believe that if you play this well, you're in a position to 10 times your net worth over this next chapter. And if you miss this, you may be waiting seven to 10 years for the next cycle or you'll be getting into the game late when everybody else is starting to get greedy. To start, just for fun, I want to go over a couple of predictions of what I see coming over this next cycle. I shared in June when the stock market was hitting its lows before it started to bounce back up. I shared that I thought that the worst was over. I shared that I thought that we were nearing the bottom of the market, that we still might have about 10 to 20% downside to go, but that the worst of it was over. I stand by that prediction. But the timeline has shifted a little bit because we saw a jump over the last couple of months where we saw stocks and real estate have some relief. We saw stocks bottom at about 29,000 on the Dow. We saw the Nasdaq bottom at about 10,000 or 11,000. And I still believe that we have about 10 to 20% downside to go. That means that if I'm right, that the bottom of the stock market would be a Dow Jones at about 26,000, maybe a little bit lower, a Nasdaq at about 8,000, and that Bitcoin or the overall crypto market will still fall about another 10 to 20%, which would put a bottom at between 13 and 15,000. I do believe that that would be the bottom. I do think that that will be where things sort of level off. We might go lower than that, but at prices like that, I personally am comfortable adding positions to my portfolio. Now the other part of this prediction is I think we're gonna stay at those lows for quite some time. I think it's going to be quite some time before investors can shake off those losses and start to feel comfortable buying again. That means that we may not see a full recovery of where we were for many years from now. But that also means that we'll have a window of opportunity to, to accumulate investments. It means that we'll be in a period of accumulation of growth of our companies, of accumulation of talent, that's people, and that's accumulation of dividend paying stock growth stocks, cryptos that you believe in and other investments that will be at lows compared to where they may be in 10 years. It's important that we keep that type of a window in mind because as an investor and as an entrepreneur, we have gotten spoiled at things growing really, really quickly. We're now kind of trained to see bitcoin double or to see the value of our business double over just a short period of time. And we're going to have to unlearn that trained behavior. We're instead going to have to go back to really our roots as entrepreneurs of playing the long game, of accumulating assets for the long term. And if you believe in your company, if you believe in the investments that you make, then we're going to have, I believe, a window of opportunity that may last several years for us to accumulate as much of that as possible. But it requires a different muscle, it requires a different trained eye of instead of thinking about where things are going to be in a year, we'll need to think about where things are going to be in five years or 10 years. And it's the entrepreneurs and investors who can think like that who will come out of this ahead and be able to win during the next cycle. It's my opinion that we are not going to experience a productivity recession. In other words, I don't think that we are going to have a recession that is the likes of 2008 and certainly not like the Great Depression. What we're going through right now is an asset price correction. We still see very strong employment numbers. We still see very healthy profits in businesses, and some of that might come down as interest rates go up and as we see layoffs, as companies start to prioritize profit instead of growth, we might see an economic slowdown. But I do not believe that we are headed for the same type of panic that we experienced back in 2008 or during other major recessions or depressions. But I do believe that we are going to see a similar fall in asset prices. What that means is that the surface level value, the paper value of homes, of stocks, of businesses will come crashing down. But productivity and profits, I think at least the economic fundamentals suggest that those can still remain strong. Over the last few years, as interest rates were kept very, very low, businesses did not have to turn a profit in order to show growth. Since debt was so cheap and everything was going up in value, there was no incentive to prioritize profit or sustainability. You could start a business or invest in a business and see it get flipped very Quickly because other groups were able to borrow at low interest rates and pay really high prices for businesses and for other assets. That's not going to be the case moving forward. We have to prioritize profit. Now, for people like you and me, that's a foregone conclusion. Of course we prioritize profit. Of course we build businesses that are sustainable. But in the capital markets, that's not always necessary. You can be incentivized to overpay for businesses that don't turn a profit just so you can show top line revenue growth. Now, what that means for you and me is that we get to compete on a level playing field. It means that if you're building a business with the idea of profiting, who would have thought? Then you're back in the game. You get to compete with all of the big boys that are used to being able to borrow cheap debt and sell at crazy prices because you could go public or because the stock price would go up to justify an overpay for a purchase. Don't you wish you had a rewind button and you could buy things at the 2008 prices or the 2020 prices when everything came crashing down? Most of us wish we could do that. And I think we're going to have that. We're going to have that type of a rewind where we've sort of undone all of the boom that has happened in all of these different asset classes. For example, with interest rates rising, the average mortgage in the United States has gone from about 3% to about 6 to 6.5%. And that's of right now. Interest rates will probably continue to go up, which means that we might see 7, 8, maybe even 9% mortgage rates. If we hit 9%, that would be a tripling of the average mortgage rate. You, you know what that's going to do to the real estate market? It's going to make it fall by 50%. Now, most real estate experts will tell you it's not going to come down that much. But if you look at the numbers of what that means for a monthly payment, the same monthly payment today that would have bought a $500,000 house now only buys a $350,000 house.

And that means that if interest rates go up, that the same person who was buying a $500,000 house just a year ago will only be able to afford a $250,000 house or $300,000 house. That means that those of us who are in strong cash positions, meaning we're making money from our business will have the opportunity to buy things en masse, to buy real estate and stocks and businesses. And so I'm inviting you to consider that what we're entering into is a buying opportunity. It's a buying opportunity for talent people. It's a buying opportunity for advertising, It's a buying opportunity for inventory, It's a buying opportunity for businesses. It's an opportunity for you to go into this chapter with a growth mindset, but only if you can keep a five to ten year window. So what I want to do is play out with you what I think you need to have ready and how I'm playing this to be in a position to come through this extremely strong and to set myself up for the next several decades. So I mentioned being in a strong cash position, meaning you've got to have extra money in order to be able to buy up these assets at low prices. Which means two things. First, it means that your business needs to prioritize profit right now. Again, if you're a new entrepreneur, that's a foregone conclusion. But what I have done is I've started to look at my primary businesses where I'm generating cash flow, where I am paying myself, where I have monthly retainer clients, or I have cash flows being spun off. And I'm saying, how do I double down on this? How do I make these companies spit off as much cash flow as possible so that I can take that and put it into very long term investments? And I do believe that there are opportunities right now that are going to create more profit. For example, we're seeing a lot of people exit from places like Amazon, from places like Facebook advertising and from influencer marketing. These are all things that are sort of on sale right now. Advertising is going down in terms of price because people are exiting the marketplace. There are fewer people starting physical product businesses on places like Amazon. And influencers are hungry for opportunities right now. So the things that you and I have prioritized, like selling on marketplaces like advertising, like creating partnerships with people that we pay for sponsorships, these are all going on sale, their prices are coming down, which means that I want to buy more of them, which means that I want to double down on these. If you can position yourself to be the opportunity creator during this time rather than the person who is waiting for opportunities, then you're going to be in a position where you can negotiate and have people fighting against each other in order to work with you. So I am looking right now to be the opportunity creator. That means how do I create Visions for companies that are exciting enough to attract the influencers or the talent that want to work with me. Right now in one of my companies, I'm casting a vision so that I can attract a CEO from one of these companies that competes with me that I know is going to go through a hard time. If there's companies that have expanded over the last two years, they're probably going to contract, they're going to lay people off, they're going to cut expenses, and that's going to send fearful signals to those companies. That means that I'll be in a position to swoop up talent. You might have heard the story about me buying back my old company. I sold it for $15 million back in 2017. I bought it back for pennies on the dollar, about 3 cents on the dollar. I basically bought it back for the cost of the inventory that was sitting in a warehouse. Why was I able to do that? I was able to do that A because it was poorly run, B because the economy is going through uncertainty, and C, because I built up a network of investors that I could say, hey, this is the opportunity that I've decided to pursue. Let's go. And as a result, we were able to raise capital quickly, fund the business, acquire the business, and cast a vision from a place of safety, a place of excitement. Because we don't need to worry about making sales this month. We need to worry about how we build the foundation of a vision that is going to carry us through this chapter and come out as winners on the other side of it. If you can keep that type of a mentality, then you will be way ahead of everybody else. Because everybody else is thinking about contracting right now. They're thinking about saving money. They're thinking about where they can cut costs in order to stay profitable. Cause they can't borrow money at 0% interest rates anymore. So the first thing I'm doing is I am looking at my primary businesses where I am producing cash flow. And I'm saying, how do I double down on this? I'm also looking to create opportunities with investors. I'm building those relationships. Now I'm specifically doing that inside of my NFT project called the Capitalist Pigs, where I am bringing together a network of investors and entrepreneurs. And we're looking for these opportunities together. Now we're doing this as a group because when there's groupthink for these, for these opportunities, we're more likely to find the great opportunities. But also it puts me in a position to be able to be the opportunity Creator for these investors. So as I'm building this network, we're creating opportunities together and I am building those relationships with the people that I want to work with. How can you start to build relationships with investors now? How can you start to build up a network of people? Are you going to the places where investors are hungry for opportunities? Even if you don't have the opportunity now, can you be building relationships with them? So as you see the real estate market come down, or you see the prices of businesses come down, you are ready to strike when you see the one that calls your name. The third thing that you need to have in place is a clear thesis. A clear thesis means what is the strategy that you're following over the next several years? I'll give you mine. Mine is to maintain strong cash flow companies that pays for my life and allows me to invest long term. I'm taking that cash flow and I am putting that into very long term investments and aggressively. So I'm looking at the companies that I want to own for the next 10 years that pay strong dividends or that have strong growth projections. And I am doing that on a personal level, but on a business side. My thesis is to take ownership stakes in the companies that I believe in that come from my pipeline that I built. At capitalism.com there are physical product brands that I'm very familiar with because they read my book or because they joined one of our programs and they launched a great company. But now they're struggling and they're struggling because there's fewer people buying their product. They're struggling because there are no longer aggregators who are competing to buy their business at record prices and they're not sure how to navigate this. And I do. And I have the relationships, I have the capital and I have the know how to be able to guide that entrepreneur through, through this transition time. So my thesis is to continue to take ownership stakes in brands that I believe will be around for the next five years and to build very strong relationships with those CEOs and those founders and to help them grow their businesses during this downturn. And I believe that on the other side of this downturn, there will be another bull market. When there's another bull market, there will be another run up in the price of bitcoin and stocks and these businesses. And I need to position myself for that now and relax the timeframe that we've been used to over the last two years of having a quick flip. So how this plays out practically for me is maintaining strong cash positions, investing for cash flow and very long term. And on a professional side, taking ownership stakes in companies that I believe in while also starting new businesses. Many people will enter into this period believing that this is not a good time to start a business. They will believe that the economy is weak. They'll believe that the capital markets have dried up. They'll believe that Amazon sales are going down. They'll believe that there's other companies running out of business. And I'm here to tell you that all of that may be true. But you can find just as much evidence that this is the perfect time for you to start the business that you've always wanted to start. Because there's less competition, because there's less people advertising, because there's less people trying to compete with you on keywords, because there's less people trying to buy up talent, because there's about to be all of this talent coming into the marketplace from people who got laid off from big companies. There's just as much data to suggest that you can start the business of your dreams as there is to suggest that we're going into a recession. And my friends, entrepreneurs who are smart, they bet when everybody else is running in the other direction. This is the time, in my opinion, to get aggressive. This is the time to rub your hands together and say, this is the buying opportunity of a lifetime. If you believe that in 10 years Bitcoin's gonna be at 500,000, or that the stock market is going to be at a new record high, or that real estate is going to be re entering into a bull run, why would you not spend this time being aggressive as possible at buying up these assets, at deploying your resources into getting as much of it as possible? If you can get through this time, you will build a muscle that makes you the type of entrepreneur that can get through any cycle. I have chosen to accept that over the next couple of years, I will have to become a different type of entrepreneur. I have accepted that I will need to learn different ways to navigate hard times. And that's exciting to me because that means that I will come out of this stronger. If I do not expect the next few years to be easy, then I will get stronger. If you become strong while everybody else is weak, you're about to enter what I believe to be the greatest buying opportunity of our lifetime. If you can consistently and with discipline invest in the projects and the businesses, including your own, that you believe in, that will be around for the next five to 10 years, then you will accumulate wealth in a way that we dreamed of 10 years ago, that we dreamed of during this bull run. We're about to have that opportunity. Capitalists are made during hard times. Capitalists change futures when things are hard. Anyone can get rich in a bull market, but the ones who are leaders double down. Right now, none of us have a crystal ball. We don't know if we're going to go into a steep recession that lasts for 10 years or if this is going to be a small blip. My personal opinion is that we're going to have a two to four year period in which things are not as rosy as they've been. But I don't believe that we're going into a productivity depression. I believe that we're in a very special period in which we still have tons of opportunities but less competition. I'm inviting you to be one of the optimistic few that doubles down during this time and builds a legacy for yourself and those around you that lasts for generations. Thank you for being one of the 1%. One of the 1% of people that gets aggressive when everybody else is fearful. That doubles down when everybody is fleeing to safety because it's people like you and me that create change.

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