Prefer to read? (Transcript)
Speaker 2 00:13 Hey, what’s up everybody? Good morning. Today is Saturday. Wakey wakey this is, you’re listening to business, illegal talk with Leah, Claudine on this beautiful Saturday morning. What’s up? Plug in.
Speaker 3 00:22 Good morning. Welcome to summer. Yes, it is here that we just went right, right straight from, from cold weather. The sun came out a little bit, but then all of a sudden we are officially on Friday
Speaker 2 00:33 48 degrees to 90 degrees in weeks.
Speaker 3 00:36 Yeah. And w it was, you know, just shortly ago we had the triple digits. It was crazy. But Hey, got to love the Lake.
Speaker 2 00:43 Yeah. I mean if California, we just, you know, we love our weathers. So for those who are not in California, well
Speaker 3 00:50 we want you to come and visit. That’s right. Come and visit and um, you know, hopefully bring with you some business opportunities and, and help, uh, help us keep control of our business community.
Speaker 2 01:02 Well, businesses booming, but we have an interest in topic for us to talk about today.
Speaker 3 01:06 Super interesting. And this is what we’re going to talk about today. Really super hot topic. I know there’s a lot of this, whether you’re watching the national news, the S the local news or just, you know, community talk. It seems like everybody wants to know, are we going into a recession? If we’re going in, when can we expect it? Why, how and so forth is such a huge subject. There’s no question that everybody’s kind of got a different opinion about it, but you know, at the same time it’s almost like talking about it. Is it going to jinx? We’ve got a good economy right now that’s driving business and we’re grateful for it. It wasn’t too long ago. Most of us can remember, um, you know, just a few short, um, short years ago that, um, business was at an all time stand still. So you know, that we’ve been shopping for, um, our new location here in Modesto.
Speaker 3 01:59 Yes, I heard the new. Yeah. And so we did, we did locate, we did locate, um, a really nice office building and really grateful to the agent who helped me out. It really, really was proactive about solving that problem for me. And he and I talked about that. And really super grateful for that. But, um, you know, that was the whole process. The market now is much different when we were looking for our last office space over in Turlock and, um, we know what was available and what the prices were and what sellers or lease lease ORs or landlords are willing to do to get a tenant in. Um, and what’s the competition like? It is 180 degrees different than it was, um, you know, 2011, 10, 11, 12. Um, and so it, it just has so much of an impact. So
Speaker 2 02:48 we headed into another degree, the other great depression or another depression, whatever you want to call it. So there was the great depression of 1929 and the great recession of 2007. Right. Uh, what’s next? So if you’re a business owner listening to this, how should you prepare yourself? Or is it a bunch of lies, a pack of lies that people are, you know, there’s a, I love this concept of fee fear-mongering. You know, where people are like, Oh my gosh, fear, fear, fear. Sometimes. That’s what, I don’t watch the news. You watch the news and I’m like, you, I’m going to walk away. I walk away depressed. Right. Or she’s just completely stressed out. And you’re wondering, I just like, you’re, you feel like your heart speeding and just what is this? My prep, my blood pressure is going up. Right. I’m not doing anything.
Speaker 2 03:27 No. I’m watching the news. Right. Well, you know, panic cells, that’s what the 24 hour news it leads. Yes. You know, I love, um, you know, not necessarily a plug in for the nightly news with David Muir. Um, and I love how he starts to show is like, Hey, as we come in the year tonight, 400,000 people have died and uh, you know, whatever the headline is, it’s got my attention. Right? Even though I hate bad news, I want to know what happened. Right. It’s like Dezeen bed in nature to want to know what’s going on is like the rubber necking, right. Look at what was going on, what’s going on. Right. We spent hours and hours in traffic jams because people are rubbernecking. I mean, particularly in LA and you spend a lot of time in LA and I spend a lot of time everywhere. But it’s true. So, um, don’t worry, it’s gonna be, I’m gonna, we’re going to land this plane.
Speaker 2 04:22 I know it’s a heady topic, but, um, I think you, you know, you should care about it. I think you, you should, you cannot, we cannot afford as business owners and entrepreneurs to bear our head, bury our head in the sand. I think that’s not the best way to do, like pretend is not there. It doesn’t work. No. And I was having this conversation with a client and making the comment that, and correct me if you think I’m wrong, but our economic system, our governmental system is set up to be cyclical in, in just in general in nature. Yup. So of course when we’re in a time where the economy is good, we have to somehow recognize and accept that there’s going to be a cycle. So we’re going to be on the other half of that at some point. You know, don’t, don’t freak out about it.
Speaker 2 05:13 Expect it. Well, I think, you know, knowledge is power, right? One of my lines and I S people who are in the know profit from downturns, you know, so people don’t make billions in war during war time I think is your attitude dictates your mindset as a business owner dictates how you actually operate your business as you process news that are coming from the outside world. Correct. So speaking of news, anything happening, I know you, congratulations. You got a new place and what are you moving in? We are in the next couple of weeks. Will we should be set up. We’re at 1101 Standerford sweet. A one. Very excited to be up on the North corridor and um, I hear businesses booming for your firm. We’re, we’re, we’re blessed. We’re blessed. We’re working hard and blessed. Um, and really to, um, get to know the community around, around where our new office is.
Speaker 2 06:01 We’ve already started, um, you know, walking, walk in the streets and knocking on doors and meetings. The business owners around us. So if I’m laughing, you know why I’m laughing? Because you’re going to go from working 12 hours a day to work at 18 hours a day. Oh sure. Why not? It was so much more fun at 12, let’s add another four. There’s not complain. I think business, this has been a great year for your firm. It’s been a great year for mine. And it just really understanding your business model and our business model and this is what we do. You advise and I think, you know, that’s why the feedback is so great in our show is because we come from different disciplines and you’d really, really care about knowing the laws in making businesses sustainable. While I do care about that, I care more about how am I going to make you be more profitable, right?
Speaker 2 06:48 Than you are today. How are you going to be more profitable tomorrow? Right. It’s funny. Okay, let’s just, just the concept be along that line. So when we talk about the, like our most ideal clients, I mean, no matter if you’re in business, no matter what you do yet, you have these ideal clients. My sisters, um, I high producing realtor over in the Bay area and she reads, refers to them as diamond clients, diamond, the diamond clients, you know, the ones that they’re, they’re great to work with and business is good and you know, they provide a lot of business. You don’t, you just love taking that diamond in the rough client and watching them grow. Yeah. And they turn into the like, you’re awesome. Your dream client. And they weren’t always, it wasn’t that, that they were always that way, but it’s that their business has grown and developed and you’ve been able to ride along with them and you kind of cultivate your best clients.
Speaker 2 07:43 So that’s what we’re excited about. Well, um, great. So let’s start kind of getting a little bit into, we only have a couple minutes to the break, but here’s the things that we’re going to really flesh out in the next hour. We’re going to talk about, um, interest rates, unemployment rates, trends, right? The trend can be your friend, um, uh, you know, upcoming technologies and how everything affects and what you hear in the news and what you’re walking in. Know what you hear on the radio while you’re watching the news and how does that matter to you. But because our audience, we mostly speak to people who have, uh, a going concern with a business. You know, you have a business that you’re growing and if you are already, whether whether you got talked into it or whether it was your idea and you’re driving a business, you need to know this stuff.
Speaker 2 08:25 You need to know where you’re up against to, to, to be successful. So this whole thing about, uh, there was this article that has all these articles. I mean I went and I did a little research and you know, Hey, is the collapse in other collapse common? And there were like hundreds of articles, right? People are writing. It’s really why don’t get it, why I don’t, you know, when you told me about the topic, I was like, really? Is that, that’s a, that that’s what going on. And you’re right. And I think, I think it’s like, again, we kind of instinctually know that our economy is cyclical and we know
Speaker 3 08:55 that we’ve had a good economy for awhile and business has been growing and we are kind of almost like, okay, here it comes. Wait, wait, wait, when is the next election year? Well, so, so that’s what I want to know from you. What is tied to this? What are, what are the things that we need to look for? I mean, we help businesses protect themselves and to get set up to weather storms. Um, you know, so we want to make sure that your contracts are in line so that you can have, um, a successful accounts receivable. Yes. Okay. So speaking my love language, right, right, right. So, you know, one of the things we, we, we as business people who are not financial analysts, like you, um, want to know what, what are the signs? Do we see the signs? Are they there? Is it coming?
Speaker 2 09:44 Right, right, right, right. So, um, great. So there’s this great things that we’re going to flesh out and, um, I wanna make sure that you are also, um, looking at as it pertains to your business. Everything you have to filter, you know, um, some, I I funny thing I was at up at, um, at an event sponsored by the SBA for middle market, lower middle market companies. Anyway,
Speaker 3 10:07 um, I’m going to tell you, tell me all about it. We might come back. We need to go to break. So right now you’re listening to business legal talk with Lee and Claudia and stay tuned. We’ll be right back.
Speaker 4 10:16 Mm
Speaker 0 10:18
Speaker 3 10:34 are you awake? I know it’s Saturday. I know you’re driving by. Make sure you have plenty of coffee. We were about to get started right now. You are listening to business
Speaker 2 10:42 illegal talk with Leon Claudine and out of beautiful central Valley California power talk. Hey, so, um, I’m gonna read this to you. See what you think. Yeah. In the United States. So if the United States had an economic downturn on the scale of the gray depression of 1929, can you live with change dramatically? So we’re about to, we’re about to put things in perspective. One out of every four people you know, with lose their job, the unemployment rate will quintuple from around an average about 5% to 25% economic output with plummet 25%. Um, it would fall near a $20 trillion level for from a 20 trillion. That’s a lot of zeroes to nearly 14 trillion instead of inflation of about 2% deflection will cost us cross prices to drop.
Speaker 2 11:37 And the consumer price index fell 27% from 1929 to March, 1933. So this is what a looked like. Had you been around 1929 right? Remember the hold the whole customer cash and carry and what brain it is literally transformed this society of the time it did. I mean, I don’t remember it, but we definitely remember hearing about it. We were not around, that’s for sure. No, but there’s, there’s a lot of lessons to be learned from that period of time. I mean fundamentally affected everything. I know this fact. So the first one, right? Unemployment such a key indicator. Unemployment. Right now it’s doing great. Right? Right. So, but let me take you back to 1993 when I first moved into California. Right out of college. I’m like, whoo, let’s just, you know, just turn and beaches. You’re less just California dreams. Right? Right. Guess what? I couldn’t find a job for a year. Unemployment rate was 12%
Speaker 2 12:38 yeah. I remember distinctly that they were, for every job you apply to in 1993 there were a hundred people wanting the same job. The probably had better credentials than you and me, right? That is what 12% looks like, but we’re talking about 25%. What? What is the likelihood of us hitting 25% anytime soon. Right? And consider where at 3.6 right now, 3.6 hello? 3.6 if you’re thinking about that, the bottom is gonna fall out next year. Well, we’re about to debunked all the whole thing right now. Okay. But remember what I said, when is the next, uh, election year. Next year. Next year. So what? The two group, you know, parties are doing, the Democrats and Republicans, they’re basically posturing. How do we angle the different topics, you know, immigration, which is a hot topic, right? I mean, immigration along can, it feels hours and hours of TV every day. Right? Right. But thus just then the economy, right? Whoever controls the economy sets the tone. Well, well everybody thinks they can do a better job. But the facts are the facts, right? So unemployment rate is, what is it again? 3.6. Alright, so in may of 2019. Woo. Wow. So, um, economic output with plummet 25%. Last time I checked our economic output, it’s doing pretty well. Uh, we’re talking about trillions and trillions would have to change
Speaker 2 14:11 and inflation about Ron, usually around two, 2% with cost processes drop. Now I know that are we have inflation. What is our inflation right now? Do you happen to know and no, I don’t, but I know that, um, there is discussion right now about lowing the fed lowering the interest rates. Interesting. So the, so this is what it looks like, right? So interest rates, um, what pushes, you know, a lot of, you know, the federal reserve setting up debt rates. And usually what happens is, you know, they set out the rate and everybody follows suit. So for every quarter of a percentage that goes up or down there is massive, really rad, massive ripple effect throughout the markets because banks buy, you know, the buy the fed rate and you know, bank and FDAC insured bank can actually loan up to $9 for every dollar they actually haven’t depository, right?
Speaker 2 15:04 Because their, their rate right now is 2.4%. Right? So think about it, right? So if you’re, if you’re a business owner going for alone, if we’re going to talk about it in another topic, that’s a topic unto itself. Banks profit from the spread, right in which they, they’re on the arbitrage business, just like a lot of businesses, right? So they, by law they sell high or they sell a little higher. Um, right now I can tell you business, the lending business is doing well, particularly the commercial business. You know, when you’re in a commercial side of the business and lending into the ag, you know, it depends. Different cities have different flavors of industries. Where we are right now, ag is big. Uh, logistics is big. Uh, service delivery is big, technology is big, and everybody’s getting along. Okay, everybody else pay for a loan.
Speaker 2 15:55 Don’t the banks make more money when the interest rates are higher? It depends, right? It depends. Um, it depends on their spread, right? If it’s that they’re borrowing it at whatever the rate is and then they’re selling it off at a higher rate. Correct. But if the rates keep going up, well the profits spread and people are demanding, you know, supply and demand, I want a loan, but your prime plus two is not as sexy as prime plus one from another bank. Right. So they’re all competing for the same spread. It’s a different flavor. And at the appetite for a bank to on risk. Right. In risk mitigation. Right. And so when as we came out of the financial crisis in 2007, eight, nine, 10, 11, I know there’s so many different names for that period of time. In any event, they were taking higher risks and giving out a lot of loans and people were taking them at higher rates way.
Speaker 2 16:53 Okay. You’re talking about 2007, eight, nine. Well, you know, what happened is a Freddie Mac Fannie Mae fiasco. Right. And, um, you know, that is, I had a feeling that this stated income deal from Washington mutual. I felt it almost immediately after then I heard about, you know, a hundred percent LTV, right. Stated income, which payment that is stated income, income and LTVs. Okay. For the, for those who who, okay, great. Great. So this is, uh, so the way worse a bank will give you a loan in a collateralized asset on if you’re, if you’re dealing in real estate, is the actual real estate, the property, the house, the house house, it clarity is the security pledge against the loan and use it in a 30 years. Uh, so we went back in the back in the old days, there was no such thing as 30 year loans.
Speaker 2 17:40 They were like 15 year loans. They weren’t 10 year loans. So we forget that things have been different. So we think that the 30 year loan fixed loan has always been there, but it hasn’t. But then it became the 40 year loan. So banks will lend against the value of the value in the value of the house. It changes. Right? Right. So as changes go up, you know, people can leverage. So a hundred percent loan to value means that if your house is worth half a million dollars, you could literally borrow up to the value of the property. Right. Which means it’s very risky business for the back. Correct. Right. What happens if, if what happens when plummet, values plummet and then you still have a loan for half a million dollar buy, your house is worth now 400,000, right? Guess what’s at risk? The bank bank and you, well you are your credit, you know, because if it goes upside down foreclosure.
Speaker 2 18:29 So what happened in 2007 I had a bunch of real estate, right? And everybody, they thought that, Hey, this was going to going to real estate values that I’m going to keep getting higher forever. Forever. So what used to be a house for $120,000 became a house for a hundred and sixty one thousand nine hundred and eighty thousand dollars and people thought, Oh my gosh, is it possible that we could have a $200,000 home in some parts of Los Angeles? It’s unthinkable. Then 200 came and then two 50 and then the average sales price was 300 I’m talking about the LA market cause I was there. Right? And when you bought a 300,000 Oh my gosh, it’s so expensive until the next $100,000 home came and then it became 500,000 and then guess what? We have a different problem now because the prices are so high, nobody can nail the buyer for it. So back to the LTV.
Speaker 2 19:16 So bad loan to value. Then we went to one 25 LTV. Right? And w and the stated income. So stated income means that the bank pulls your credit and see your FICOR seven 27 40 you at, you have a pretty good record of, you know, you paying your debts. I like that. And how much do you say you make? Um, I’m gosh, ah, let me think. Um, I make 200,000 a year. Okay, great. So they stopped to calculate the debt to income ratio and all those things and how are they going to justify their income? Well, it’s a stated income, so they’re going to price it a little higher, but then you tell them that is what it is and it’s your word. So we’re going to get some, Oh, maybe we need a three months worth of bank statements. Maybe we need the six months.
Speaker 2 19:56 And you move money around and you let it season for a while and all of a sudden you manufactured $200,000 worth of income, right? With no basis. Right. Stated income means is whatever you say it is. And I think everybody who’s gone and tried to get a purchase a house, um, since the, the mortgage crisis or meltdown or whatever we want to call it, has felt that because now banks are not just assuming it doesn’t happen anymore. No, you have to come in with, with, you know, good, um, solid proof. Um, and they’re not just taking any kind of statement that you, you can afford it. It’s just bad business. It is bad business people. People have to be qualified. And you know what, we all at some point failed trap for that. I thought, wait a minute, I should know better. But you know what happens? We have as humans, this inherent nature of the mob mentality we do
Speaker 3 20:48 and we as business owners have an inherit problem of qualifying for loans. So for a period of time they made it very easy for the business owner with the seed of income and we bought property with it. You bought property with it. Most anybody who’s listening right here bought property during that period of time because it was your opportunity to get in. Um, I think it was incumbent upon those purchasing land at that time and using stated income loans to really be honest with themselves about what they could afford, what they were, you know, comfortable, what their payment comfort level was, what their payment. Um, and so many people did not, they, they were people who had, you know, ideas of finally having that, you know, 3000 square foot house with a pool in the backyard and, you know, brand new and in the new neighborhood and all of that, that stuff.
Speaker 3 21:36 And, and the reality is, is, you know, obviously it was more than most could afford, but certainly when there was a little, um, a little assert, you know, the weather started to change, um, on the job market, um, people weren’t ready to weather the storm. And that’s what I hear people talking about. Now, is this coming back? Is it going to be that bad? I know in looking back when we were in, in business during that period of time in the market, we kind of saw it coming. I remember you being very nervous about 125% loan devalue. I was purchasing and thinking, gosh, that just can’t sustain itself. Um, so we kind of knew it was coming, but never knew it was gonna be that bad.
Speaker 2 22:19 Okay. So speaking of job growth, right? Which remember we talked about unemployment rate, an interest rate, but I just reading this article, job growth continues to be brisk with the average monthly gross expected to be a 184,000 in 2019 and expected 139,000 into 2020. Those are good numbers. Those are solid numbers. But here is what’s happening. Okay? I’m going to tell you, if you’re listening, you need to be aware of the trends. This whole thing about the gig economy, gig economy, where there is a shift. If you, Paul, after Paul have employees come up with this by the same results, 70% of people hate their jobs.
Speaker 3 23:00 Really? They need to start a business. Ah,
Speaker 2 23:04 well, funny thing you say that, right? So this is only this trend. It’s only moving on that direction. I think this is the unstoppable train. There is a bunch of things that are colliding technology ever increasing minimum wage. Yeah. Right. Um, fast food chains, testing robots because increasing litigation around labor in wage and hour law, which is your favorite, one of your favorite topics, right? It’s, we’re not coalition core four chain coalition, collision course for change. Now we got this people who are dissatisfied at what they do for whatever reason, right? And they see that the grass looks greener on the other side and you got 77 out of 10 employees than thinking, Oh my gosh, I gotta do something else. And then you’ve got the, this platforms, this, this new ecosystems, the Uber’s, the lifts, the Airbnbs, you know, they hear the stories of companies, you know, or individuals earning $300,000 a year and you don’t longer have to own a home to actually play in the Airbnb model. And the, all of this disruptions, all this technological disruptions and certain industries are ripe for causing change and the whole employment market and this whole gig economy. And then you go ahead.
Speaker 3 24:25 What was it did to add to that? The, the, when people are feeling more comfortable, they’re more likely to take a risk. And so if you have been in a job and maybe it’s not your favorite job, maybe you don’t really like the job, but you’ve been making good money, you’ve been able to pay your bills for a number of years and you know, maybe you’ve got a little bit of money stocked away and you know, things are kind of comfortable, you’re more likely to take that jump. Whereas when the market was just terrible, good point. People were so afraid to make a move and lose their job because they were looking around. I’m seeing people losing their jobs and Oh my God, they’re losing their houses and their cars and everything else.
Speaker 2 24:58 Interesting comment that you said, so they’re more confident than you are, they’re more willing, you are to take risks. Yes. When are you confident when the economy’s doing better, right? When despite the fear mongering, all the things that you’re hearing out there, if you’re looking at your paycheck and I’m like, Hey, I’m making pretty good money. I have all this paid time off, saved up. I get a, I can use all these things. Maybe I should try something. You become bullish on the market, right? You realize, okay, there’s an opportunity. So if you’re thinking at the outset, at the outset we said, Hey, is then the next great depression comment I, the jury is out. But my guess is no,
Speaker 3 25:38 I think I feel the same way because I think that there’s a really unique storm. I think everybody’s feeling a storm, but they’re misidentifying it as the recession storm.
Speaker 2 25:51 All right. Hey, hold your thoughts. Are I guys where we need to go to a break? I’ve been told, so you’re listening to business and legal talk with Lee and Claudine. We’ll be right back.
Speaker 4 25:59
Speaker 0 26:07
Speaker 2 26:20 Hey, what’s up everybody? Welcome back. This is Leo Lander, Burdett with business and legal talk with the Claudine. Hi, Claudine. How are you? Good. I think I have way too much coffee today. So much, never enough. Never enough age. I still AA. I got that article that said that, um, this whole research that was done in England, five half a million, that the more coffee you drink, the better you do. Oh my gosh. I took dad and I put it on the refrigerator and can’t stop. Justifies everything. Yeah. I sleep standing the research. Exactly. Little research. They solve all of our problems. I know that. It seems like every time a new research thing comes out, either drinking coffee’s good for you or bad for you and you wine is good for you or bad for your mob mentality. Right. What I do, I just do my, I just do do just do you?
Speaker 2 27:12 Yeah, that’s it. ITO. So back to this whole a fearmongering thing. Hey, we don’t want to instill any fear, but I think you should know from a couple of business owners we feel like and you know, take it, take everything we here. You can vow that. We’ll check it, but I think this future looks bright. I think the future looks bright. So let’s keep talking on this whole thing. We talked about interest rates and unemployment rates. Those are the indicators. Whenever something is about to happen, you know like when the storm is coming, usually you can eat. There’s certain things that happen, you know, the temperature drop or, or when, when something is about to happen, there are indicators. What we’re trying to give you some indicators right now, so you bear well-informed, right? Uh, the economy is doing well, the interest rates are doing well, unemployment rate is low, okay?
Speaker 2 27:54 What else is up? Stock market volatility. So let me kind of read this little bit of research volatility spokespeople, right? Right. But particularly investors, right? Right. Most investors don’t have the stomach to hang on with something. So when the building is on fire, everybody’s out, right? Right. But the shrewd investors, the businesses, that’s when they go in to buy, right? So somebody always profits from something, remember that? Right? Right. So keep that in minus, I read this. Volunteer volatility spokes investors, when the doubt swings 400 points in a single day, stock market losses suffered during the 2008 stock market crash were devastating. The Dow dropped 53% from its height of 14,043 in October, 2007 to 69 54 on March 5th, 2009 it dropped 7,000 777 points due to an intraday trading and September 29 2008 this largest one day drop ever. Investors who lost money are understandably still spooked by that experience.
Speaker 2 29:05 We know when something bad happens, you recoil. Yes. Like when you break a bone, you don’t want to use that arm for awhile. Right? Right. If you’ve been in a bad car accident, you don’t want to drive anymore or you know you are, or you want to take your street time and driving again. Right. This is exactly, we have emotions, we feel stuff. We’re not robots. We know in, in this whole thing plays out. So it’s full. The fluctuation, fluctuations of the stock market follow a business cycle. So in early 2016 stock prices plummeted. Investors lost trillions, not billions. Trillions in some countries went countries, not anybody’s when into recession. The followed losses in 2015 when almost 70% of all us investors lost money. According to some, it was the worst years of stocks since 2008. So we’re like eight years later, almost a thousand hedge funds shutdown in junk bonds were crashing.
Speaker 2 30:04 Five of the 10 largest one day P point drops in the Dow Kerr in 2018 the largest ever one day point drop in history of the Dow occurred in February 5th when he dropped 1,175 points. There was a time that the Dow never reached 10,000, right. That, that this isn’t this and passed. This was followed closely by the second largest ever drop. Uh, on February 8th when he’d lost 30,032, the three day other massive one day drops were 131 points on October 10th, 724 points on March 22nd and 665 points on February 2nd so this is my theory on, on, on this whole start, and this is my personal opinion. Okay. I don’t invest in things I don’t understand. Okay. You know what Warren buffet says? That’s really it right there. A lot of people get into stocks just because they think somebody’s, a friend of a friend told him that, Hey, you gotta put money in Apple because it’s going to keep going up forever.
Speaker 2 31:06 You know that the money in stock is not made when the come, they stuck us at $100 a share. No. The people who bought it at $2, those are already making money, right, right, right, right. And got out. Right. Right. 90% of people, so you know, if you use the whole bell curve on everything included, the stock market will tell you that 10% of the people will never touch it. They just afraid of it. Right? 80% will Willie invest when everybody’s investing right and lose money with everybody loses money. Only 10% of the investors actually know what they’re doing. So is then the moral of the story is to be in that position when it all drops. So if you knew, you know, I’m in that position, meaning you, your, you know, heavy cash or heavy, well, you know, S people say, Hey, the petrodollar, right?
Speaker 2 31:56 And you know that the dollar has not be pegged with the gold standard for a long time. And he went to the Petro and became the petrodollar petroleum. That’s a whole nother thing. But, um, the people who know who, what, you know George Soros, right? Who single handily collapsed the pound, the British pound many, many years ago. He actually made more money. You would think you made billions in one day more than any other person, just because he watches the trend. He’s, he says student of the game. Again, I don’t understand courtesy, so I’m not going to invest in currency. Right? Right. Bitcoin I the crypto currency, he may be the GRESB, the greatest. It’s the wild West from what I hear. I don’t know much about it. I don’t want to advise and I won’t get into it. Right. I only invest in the things that I know, so I don’t even pay attention to that.
Speaker 2 32:42 I know in my capabilities in entrepreneurship and helping other business owners be successful. Cause I understand metrics and I understand certain business cycles and I understand financials and I understand the certain industry verticals, right? I invest in those because I understand them. Same with you, right? You understand that legal trans, you understand where things are at. Our business is booming. Your businesses booming for every business that is going under. There are others that are actually doing well. So I think you stopped listening and start reading, right? You got to start reading, you know, you gotta, you gotta be able to know your world, you gotta be a student of the game and you got, you gotta stop feeding your mind with junk. Right? Right. Uh, you know, I read, I listen to podcasts. You know, you’ve got to keep your mindset up. So, so that’s the whole thing on the stock market. Oil prices have also been volatile, you know, they Rose 50, you know, we can go all these roads and, and where does it going to lead? Right? Interesting thing. Listen to this. When investors get spooked, banks gets booked. Right? Makes sense.
Speaker 2 33:48 Banks saddle you this whole thing about, um, let me kind of read through this. So the financial crisis of, Oh, let’s find that it kinda go over so that the financial, so what happened in 2008? Right? Um, it seems so long ago, but I think he bears in mind because that was truly, it wasn’t a depression, it was a recession, right? It was the great recession. The 2008 financial crisis weakened the economy structure. No kidding. Right. If a face is future globe, you know, because of what happened, the housing collapse was worse than the recession. Then in the great depression. I didn’t know that part.
Speaker 3 34:22 Oh, it was, it was significantly because, um, the housing prices fell in during the great depression only fell 24% roughly, you know, on average. Whereas during the great recession, uh, they went down 31.8%. It was far more dropping price in land value. But you know, that then without getting into the bundled mortgages and all of that. But you know, just kinda touching back on what we were saying earlier, was that the ability to get mortgages and then people were not able to make their payments because they really weren’t honest with themselves about their actual income. Pretty soon a bunch of houses get foreclosed on. Pretty soon the, the market is flooded with foreclosures and foreclosures always sell at less than, you know, the market rate. I mean, that’s the nature of a foreclosure. And so those folks who were heavy with cash, because when you go to the foreclosure auction, you buy in cash, you don’t go get to go get a mortgage, you literally have to put your money up right there. And then at the auction. Um, so those folks who are heavy, heavy with cash and can make those purchases, um, we’re able to really capitalize. Because once you bought the house, you had no mortgage. You could go get
Speaker 2 35:40 a mortgage on that house if he had good credit and you weren’t over,
Speaker 3 35:45 uh, overvaluing the mortgage itself. So if the house was, if you spend 100,000 cash, that’s, let’s just say the house is worth 100,000 you could T turn around and recoup 80,000 of it and then turn around and go buy again.
Speaker 2 35:57 Wow. So speaking of real estate in real estate, when is it that you make money on real estate? When you buy right now, what would you make? No, always made on the buy, right? So those savvy investors, so because of you invest in the themes, you understand, I favored real estate. Oh, understand real estate, right? Right. And had I known what I know now, back in the 90s when I bought a bunch of houses, I was buying retail and right, right. And getting loans and in 90% LTV and the whole not true investors would actually buy wholesale, right? So they buy 45 50 cents on the dollar, you know, they even savvier investors would actually buy the land,
Speaker 3 36:38 build on it, and sell it. Those are the real smart people. Well, that’s true. And I’ll tell you, even now the, the foreclosure market, the auction market is a very, very tough market there. You’re really not seeing the discounts that you used to see. There’s a lot of players who are trying to um, saw how good it got then and our are trying to jump in that market now. And it’s really a difficult,
Speaker 2 37:00 the thing to do. Why? Because in any business cycle,
Speaker 3 37:05 all was the leaders of the, you know, the discretionary stuff figured out, Oh my gosh I can actually make money on house flipping. And then by the time everybody else figures out its percent then the 80% comments says, Hey, I need to make some money. Right? And then they flood the market, right? And they, they squeeze out all the profits and then all of a sudden you had a bid in frenzy and this homeowner that has a house free and clear now wants to hold on because he’s getting three or four phone calls around these wholesalers and these, I don’t want to sell my house for 50 cents on the dollar anymore, right? I want to sell it for 75 cents to the dollar. Well, the bidding war that happens at, at the auction, you know, that that is a phenomenon in, in and of itself is people get caught up in the bidding and the next thing you know, nigh, I’ve got to have that house. I’ve got to have that out. And the guy across the, you know, the way from you, he’s got to have it to him and there’s no control over it.
Speaker 2 37:54 So I think you know the answer to this, but I think it, you know, it, it bears, it bears asking, so is, uh, is the home that you live in an asset or liability? It’s an asset if you own it outright. Ah, so my good friend, Robert Kiyosaki, rich dad, poor dad, right, right. It was really mind boggling to me because of this whole thing about commercial property versus residential, right? In commercial, when you’re actually evaluating your, evaluated the income or loss of that property, and then you look at the building, but it’s, it’s a business, right? Right. When you buy a house, it’s money coming into the house or out going out. It’s going out to serve as the debt that you have, right? You have to have the property taxes and then the insurance that you have to have, right. You live in it, then you get to use. You get a little bit of write off on it, but I think it’s understanding that whatever you get into uni didn’t understand that industry, that thing. So th there I was largely unaffected with this whole financial crisis on the stock market just because I don’t really,
Speaker 3 39:02 I don’t put all those my eggs in that one basket. Well, it seems like, um, you know, we through that whole thing, the people that stayed and just, you know, while they looked at their balance sheets and their balance sheets were upside down and they had lost a ton of money in the market, those that stayed the course and didn’t get out, have now recouped. Okay. I know people who unloaded 401ks who pulled all their money out, they were just inexperienced.
Speaker 2 39:29 Hey, guess what? Hold that thought. We’ll be right back. You’re listening to business legal talk with Leon. Claudine, we’re back.
Speaker 0 39:35
Speaker 1 39:47 welcome back.
Speaker 2 39:59 Listening to, if you just tune in, this is business and legal talk with Leo and Claudine. We’re here every Saturday at 10:00 AM dishing it out in business. Legal topic.
Speaker 3 40:11 Yes. And actually talking about something that’s really, really on everybody’s mind and I think you really touched on a really important points. I did. You did. You did. We’re going to, we’re going to give you a little credit on that. I know. Take it when you can. Um, it’s just that we do have an emotional, um, history. We have emotional memory and, and we, uh, I know suits suit certainly here in the Valley. Uh, so many people went through very, very difficult times. Losing your home to foreclosure is really, really difficult. Emotional, um, the creditors that calling the phone calls that, that, you know, feeling just awful because you couldn’t pay your bills. And I know so many people who went through it that we do have an emotional memory. So when times are good, we kind of maybe have a tendency to look back.
Speaker 3 41:03 And, and just be nervous that this isn’t gonna last. Um, and while to some extent it’s never going to always last because we are designed to be a cyclical economy. It goes up and it goes down to the ebbs and flows and some days are better than others or months or quarters or years are better than others. And so what we’re doing with our clients really is to help them, and this is what you’re doing with your clients, is to help them build the business so that your foundation and your framing is so incredibly strong. You have a good business ratio. And when in terms of revenue streams you have your books are in order, your accounts receivable or is that yeah. Is in order. Yup. We’re, we’re not leaving money on the table. We’re making sure that, you know, people are paying on time and, and we’re paying our bills on time so that when the weather does come, we don’t just get washed away. We’re not at such a great extent of risk. Yes, risk is important. Yes, risk is how we grow. Taking on debt is how we grow. But do we want to be over extended? Always want to remember that the ball can drop and what’s it gonna take to recover if that ball drops?
Speaker 2 42:14 Good point. Good point. So I think, you know, I’m still, um, you know, I, I love what I do. I love teaching. I love, um, instructing and guiding, uh, business owners and entrepreneurs. So I was last night I would just finish up a financial class for business owners that are lower middle market companies, you know, between two and 20 million. Um, in N a here in the central Valley is sponsored by the SBA. And we were talking about, um, key performance indicators, right? And you know, there’s a bunch of 20 of the up and coming stars of the, of, of in California and different industries and they were all like, Oh my goodness, what we didn’t know that we needed to know is a, where do you learn this stuff? You know, what were some, they don’t teach you that in college actually, how to actually run a business, right? Um, and this whole thing, you know, with the whole education system that you learn theory, but nobody really teaches how to actually do things, right.
Speaker 3 43:18 Oh, that’s law school Frey, any attorneys who are out there listening and I’m sure that they probably just chuckled right now because in law school we learned theory, but we don’t learn how to go file a case, right? Or actually, you know, you rely on your a supervisor when you get out of law school to teach you that in many occasions
Speaker 2 43:39 there’s a law, right? Right. And how to be a lawyer, how do and how to do it right. And how to not to, um, you know, embarrass yourself in front of your clients. So, and I mean, I, I know. And, and, and this is really what we’re passionate about. So I mean, we’ve seen double digit growth every year just because we, we tell people the truth. I mean, they don’t have to hire us with process. I can look at a set of financials said, within five minutes, I can tell you, Hey, gosh darn it. Your ratios are our whack. Do you know that you’re a B, you’re about two heartbeats away from heart, that heart attack and your business. They go, what? So if you have any questions about that, look us up. Find us on the email@example.com. And I highly endorse my good friend and colleague, ah, Claudine in where can they find
Speaker 3 44:32 you? We firstname.lastname@example.org and that’s S H E R R O n-law.com. And you can now find us in Modesto. Um, well actually doors will be open, um, in the next couple of weeks, but we are now going to be up on Stanford and I’m really looking forward to getting to know our Modesto community as well and beyond and beyond. So this does not, there’s nothing stopping you, Claudine, you know, putting uh, opening more offices. Who knows? I mean the future looks bright for you. So yeah, we want to just keep helping those business owners get protected, stay stable and be, be ready. Cause it’s just nothing but storms out there. So 20, 20 is the bottom going to fall out again? I just don’t, I don’t see it. I don’t see it. And there are so many people who do and there’s probably people who are, you know, driving down the road screaming at their radio right now. And that’s, I completely, um, understand and would love to hear from you. Yeah. We want to
Speaker 2 45:27 here what, you know, what your thoughts are. I think as it pertains to you and what you should care about a, you know, if you’re thinking about starting a business
Speaker 3 45:34 the right time, when is the right time? You know, I always, I always, um, when people ask me, Leo, do you think 2019 is a, is a good year to start a business? I always answered by saying, um, well the, the best time to plant a tree was 20 years ago and the next best time is today. So today is a good day for you to start a business, right? Uh, it would always be today. It’s not tomorrow. It’s today. And honestly, if you are, you know, perhaps at a job and you’re thinking that there is a business out there, I want to start it, but what it, you know, what if everything falls apart, I’m afraid to quit my job. You know, look at what it is you’re wanting to do and what is it that you have a passion for. And the old adage is, you know, if you, if you do something you love, you don’t work a day in your life, you actually do, Oh, let’s be real.
Speaker 3 46:21 Um, you got news for you. You’re going to put in the time you’re going to put in the time, but you’re going to enjoy it. You enjoy the process. It’s not about just the end result. It’s about the process that getting through it, um, coming home after a hard day and you know, kind of thinking, yeah, we did it. We, you know, we conquered it today. So think about what you’re wanting to get into and how that would fit into today’s economy. Again, you in earlier you brought up all of the trends, the trends that are happening in, in the Uber’s and the the tech and, and the ability to get your product out through the internet, which is going to completely revolutionize itself again in the next say five to seven years. What, what it is today. We will have no idea what it’s going to look like in five to seven years. So be a part, be a player, be a part of it.
Speaker 2 47:11 A great point. I think we don’t, we only have a couple minutes left, but one thing that I want you to start really looking at whatever business you’re in, you gotta be looking at this following trends, artificial intelligence, and how is this going to disrupt the markets. Also, this whole, that reshaping of the retail with a few weeks ago we had a show about, you know, you know, whatever happened to blockbuster and the know and Netflix, but there’s another evolution coming in. The companies that became the giants in the internet are coming into the Rita. We’re in basically blending the two, this whole Amazon buying whole foods and they want to have a footprint in the retail space. Retail is not going away, is shape.
Speaker 3 47:54 Yeah, there’s unintended consequences. There’s things that happen that we just didn’t plan to happen, but they happen anyway. So if you can be that person who looks for the unintended consequences and capitalize on it, and people who, people didn’t realize what a market was going to be created for homes at the auction. they just didn’t realize. I mean, I mean, people bought homes, people have always bought homes that at the foreclosure auctions. But when the Margaret mortgage meltdown happened, the end of 10 con consequences, it opened up this incredible market that you could go and you could purchase houses and you could, you know, modify them and flip them and you know, rehab them and so forth. Um, it created, it created an entirely new market. That market right now is rather saturated. Um,
Speaker 2 48:43 so what do you do? So that’s that, that alone is a conversation for another day. But I’ll tell anybody who is flipping and making buns boatloads of money, you’re going to have tax consequences. You’ve got to be wise about that by us. Want to put you put your cash at work and some passive income. When do you exit the rat race? When your expenses equal your passive income. So all of us are on a race to get out of the rat race, right? Right. So even if, you know, people sometimes underestimate that, you know, Hey, I want to get out of a job so I’m going to buy me a franchise. And they only thing that they do is buy themselves another job. So you gotta understand. Okay. So here’s, um, in other trend, this whole thing about the, the, the, the evolution of the employment mindset in the gig economy and in those industries, in those tech, the tech technology is always going to keep disrupting. Expect your industry. Think about if you’re in any industry today, can it be disrupted by technology? If so, could you beat in age? Could you become the agent of change? So as a business owner in an industry, so that is ripe for change.
Speaker 3 49:49 I was in Fresno yesterday, I’m meeting with the mutual friend of ours and we were driving through downtown Fresno and he was pointing out to me these buildings that are going up that are like social work centers.
Speaker 2 50:01 Yeah, like we work kind of is it, I know you were talking about,
Speaker 3 50:04 yeah, and I had I it certainly not happening here yet, at least not that I know of, but what? Explain that a little bit. What, what is really, it’s like a social workplace,
Speaker 2 50:16 you know, this whole experimentation and I think we’re going to be running out of time for it, but this whole thing about, you know the works workspace is right. We used to just go to work and go home. Right? Well now people are not going home after work. They’re staying around and they want to mingle. They want to have a drink after what they do want to walk to some where they want open floor, open spaces in this whole thing. I think the jury is out with this whole coworking situation and this incubation quasi incubators in which you are an a at a workplace where you actually pay the little bit of rent, but, but you give up some of your privacy, right? You play with other people and it stimulates, uh, intellectually to some of be, I don’t know if I could do it right.
Speaker 3 51:04 And so the, the concept is, is that there is activities built within the building, basketball, um, in different types, different types of, of activities, um, and social gathering that is generated the way the buildings are constructed. So small business owners or micro-business rent space there, they have the ability to go, you know, had their internet, had their desks, you know, that type of stuff. But the building is also created for a social space. And so that, the idea is that this is going to create a, um, creative environment, um, that people are going to clamored for. Well, I think the jury’s out too. I know that this is, uh, an idea over in the Bay area with a big tech companies and you know,
Speaker 2 51:48 we work with, we actually will raise hundreds of millions of dollars on this concept. And I think isn’t, the concept is not going away, I think is being explored, you know, where are the, this next frontier of, of change. So look out for trends and how they can benefit. So what is the, so, so to bring it back home is a recession or depression coming our way? I don’t think so. I think you outta be wise as a business owner and look at what trends you can use to your advantage to grow your business and be profitable and sustainable. Does that sums it up? What did they absolutely. Well, are we solid? Well, we want to thank everybody for tuning in. We had a great show today. We love to hear back from you. Reach us out online and have a great weekend. This is a legal talk with your Claudia. We’re out. Thank you.
Speaker 0 52:32 .