It was not hardly three months ago that everyone was glowing and bragging about how well their investment business was going — whether it was their investments via their 401K, their IRAs, their E-trade account or even their real estate investing. It seemed that all you had to do was throw a dart and you would hit a winner. â€œAnother record breaking day for the Dow Jones today,â€ was heard not just once a month but often several times in a week. We were on top of the market. And even though optimism was soaring many had forgotten the disciplined wisdom of the ages that is chiseled into stone — things like â€˜what goes up will come down,â€™ â€˜buy low and sell high,â€™ and â€˜pigs get fed, hogs get slaughtered.â€™
â€œBut David,â€ you might say, â€œwho could have foreseen a pandemic caused by Chinese people eating bats!â€ Very true. Who could have foreseen such a catastrophe — such that Wall Street would crash by 30% in less than 3 weeks, and America would find itself with over 22 million unemployed requiring a rushed two trillion dollar stimulus package that ran out within 10 days! No one could have foreseen that — IN PARTICULAR. Even so, there will always be something unforeseen that will bring the market down. It could be 747s crashing into the two towers in New York City or the slow landslide of the banks and real estate and Wall Street due to corruption and greed like we saw in 2008-2009. The point is there will always be SOMETHING — we just canâ€™t say what it will be.
I have been counseling and pleading and crying out in the street for people to remember the basics, to be a student of history. The market was â€˜timedâ€™ for a crash 2 years ago — we have been blessed to see it go so long and so high. However few heeded history or the sage wisdom of investing. This is what I was counseling clients and investors to do for the last 2 years:
- â€˜Buy low sell highâ€™ Therefore cash in your winnings in Wall Street. Put your winnings into a cash position so when the crash comes you will not lose anything.
- â€˜Buy low sell highâ€™ Therefore as your real estate is at a peak value, cash in your equity before the market declines and your equity evaporates.
- â€˜Build a wall of protection; Therefore have cash reserves that would allow you to survive without fear if you were without income for 6-12 months. (By the way, this does not mean it all has to be in a bank getting a beating by inflation — most of our clients are setting up a private reserve where their cash is getting an average of 9%/year)
Many of you have not been deeply hurt by the crash. Just be sure that even if the virus disappears tomorrow and the quarantine is lifted, the economy will not be the same for a long long time. The wounds are deep and many sectors of the economy are on life support. So how will you recover? Better yet, how can you be ready to make this time in history what Tony Robbins calls â€˜the biggest economic opportunity you have seen in 20 years?â€™ Here are a few suggestions.
GET A TEAM There is not a successful (wildly successful) person on this planet that did not become such without the help of a team of great advisors and consultants. The DIY approach is what gets every entrepreneur started but it will not see them across the finish line. Find tax professions, financial professionals, investment professionals and other successful people to help you re-engineer your financials to survive and even thrive in this environment.
GET YOUR CASH If you have equity in your real estate – get it out. I donâ€™t mean a HELOC (that will be revoked very soon as the shock waves continue in the market). Get a cash out refi and bank the money — be in a hurry while lenders are still favorable (that door is shutting quickly!). If you have over $100,000 in an IRA or 401k then take it out — cash it out. Reach out to me and to Roger Herring and we can show you how to beat the taxes and benefit from having no early withdrawal penalties this year. Sell what you can. Tighten your spending at home. Conserve cash. WHY? So you will be ready to BUY BUY BUY when investments have hit rock bottom.
DONâ€™T GAMBLE Let me put this bluntly — you ARE NOT smarter than the hedge funds that employ thousands of investments wizâ€™s to study stocks and bonds. If they are taking losses and can miss you will do so also — far worse. Stay in your FREAKIN lane. If you know how to take $10,000 and turn a good profit in real estate donâ€™t get distracted by the Wall Street casino. If you do want to diversity and buy Wall Street while itâ€™s low, then I could recommend money managers who have disciplined and informed strategies that allow you to win even if the market drops. This goes back to getting a team.
BE THANKFUL My VA in Bangledesh has the coronavirus. I canâ€™t imagine what horror he is going through in a world of such poverty and pain. We have each other. Most of us have our health. We have a government that is feverishly working to keep our country afloat. We have our faith and our family. Gratitude drives out anxiety and fear.
Can we recover? Absolutely. We can come out of this stronger than ever, wiser than ever. But only if we learn from our mistakes and re-engineer our game plan. This will require more than a PIVOT. This will require a totally different playbook. May you be blessed with MORE.