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Don't Forget Your Power! (Part 2)
Last week we talked about the Coronavirus and how that was mostly getting contained and it is really the economy now that was the big question. We talked about how when faced with a problem, we should follow a simple 3 step formula:
-stay calm and use logic
-look around us at how things really are, not what media and others want us to think
-use what you have learned and know to chart the best course for your situation
This keeps you from getting emotional, making mistakes, and not relying on the government or anybody else to save you. YOU have the power to chart your course and YOU should own that.
I've got to be honest, I have never seen the market swing so wildly on emotion as this market is right now. A month ago, the sky was falling and there was abject fear as stocks got crushed. Back then I was writing and telling everyone, the Coronavirus is not as bad as the markets make it seem and compared the numbers more to a typical flu season.... I tried to bring calmness to my sphere of influence. Now, in my opinion, they have gone too far the other way, and the market is rallying as if as soon as America opens back up, we will be back to February numbers. So as a leader of my business and my family, I need to still again try to stay calm, use logic, and see if this giddiness is really something I should buy into. So are we out of the woods? Will the economy just burst back to life next month as America begins to open back up? How do I plan accurately for the next 6 months?
So first, let's look at America opening back up. Will all of America open back up on May 1 or will some states open up and others continue on lockdown? If some of the biggest states like NY and CA open up later than May 1 or very cautiously taking it slow, as it seems likely to believe, then it is IMPOSSIBLE for us to get back to February numbers by June. Those are HUGE states that drive a lot of GDP growth. If they are not back to fully open and running by July, how can we get back to pre-corona numbers in June? All the economic numbers coming out in April are for March when we only had 2 weeks of shutdowns, we need to wait at least until May to even see the total effect of all this unemployment and all these delayed government hand out checks. Have we seen the mid point of the economic impact yet? These questions can not be answered right now as 5 Million NEW people filed for unemployment just last week. When companies do open up and hire again, will they immediately hire all 22 Million people back to work or is it likely they will hire back slowly as the need arises?
Will the people so afraid of corona that they are wearing masks and gloves everywhere they go, suddenly all hop on planes and go vacation as soon as the government says it is safe to tip toe back into the water? Or will it likely take some time for that fear to subside? I will vacation as soon as they let me but I don't think it wise to believe that everyone will. As stewards of our lives we need to look at all this and say, "what is the most likely scenario?" As I see it, there are 3 ways this can go:
1. Goldilocks-Everything opens up and everyone immediately goes back to normal
2. The real numbers are much worse than we thought, people skipping payments causes huge defaults, and we spiral out of control into a full and deep and long recession
3. America opens back up slowly, growth improves and things get better slowly, and over 4-6 months we get back to a more normal economy.
I think I addressed Goldilocks up above, in my opinion, that is just not realistic. What about everything being far worse and this thing crashing hard-the second scenario? It can not be ruled out until we see the full depth of the carnage that this shut down has caused. And that won't be until at least May. But just watching the way the Fed and the Government is doing whatever it takes and throwing whatever money they have to at the problem, and based on the fact that this was more of a government forced shut down then an underlying deep economic problem, I tend to lean toward this being unlikely as well. It seems to me they will do whatever it takes to make everyone feel good again by election time. (Long term, all this debt has MUCH greater ramifications for America then anything else we have going on right now), but in the short term, it appears to be working. The major markets (bonds, corporate bonds, stocks) have all stabilized in the last few weeks.
This leaves us with option number 3 which seems the most logical to me. As states open up, attitudes improve, more people are working, socialization is happening again and the underlying economy should improve. As more and more businesses open, more and more people get hired, more and more people get back to normal, and with so much cheap money being thrown at the problem by the Fed, it seems most logical that we will have a tough second quarter, and see real improvement economically begin by Q3. The stock market, always looking 3 months ahead will likely start a rally it can maintain and by Q4 we are back to what one can say is normal.
I STILL DO NOT THINK WE GET BACK TO THE ECONOMY WE SAW IN FEBRUARY. Some businesses will never re-open. Some changes, like remote networking, will stick. But it will be at least a good economy, one in which you can work again and ply your trade without fear of the government or "disease". If I had to plan my business and life (and I do), then I am leaning toward option number 3....a strengthening and stable economy by Q4 but keeping a wary eye on May numbers understanding that a crash is not completely out of the question. With that in mind, I will be keeping expenses in check and driving innovation and improvements in my business to be even stronger by Q4.
This is not a finite game, it is an infinite game as Simon Sinek references and the name of the game is STAYING IN THE GAME. Focus on getting better, keep costs tight, run a good ship and your business can get set up to not only survive-but thrive! Talk to you next week!
Karen Schimpf
Commercial Capital, LTD
Commercial Capital, LTD
(512) 354-5949
karenschimpf at gmail.com
Give me a CALL TODAY at 512-354-5949 or get started by filling out this form!
P.S. WE HAVE PRIVATE MONEY TO LEND! $2mm to $20mm. Bridge loans. Fast close. All asset types. Up to 70% LTV. We can also do cash-out to 50% no questions asked on the cash out up to $1 Million for single-family investor 1-4 units-give us a call today if you need money NOW, call today at 512-354-5949 or get started by completing this form.
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