Momentum Podcast: 604

Crisis Predictions Part 2

by Alex Charfen

Episode Description

The reality of what is going to happen here is finally starting to set in. The White House released an estimate today that we could have 100,000 to 240,000 deaths from this virus. The reason they updated their previous estimate is that the math is finally setting in. The reality of New York is very real. This is going to be an unprecedented financial and human crisis.

As entrepreneurs, we should understand what the most likely scenario is. Not the politicized scenario but the one that is proven through math. Math is how we run our businesses, math is how we make a profit, and if you're anything like me, you see the world through equations. I've been looking at some of the equations behind this crisis and we need to brace ourselves for a very long recovery.


Full Audio Transcript

This is the Momentum Podcast.

The reality of what's happening in the world today is finally starting to set in. The estimates come back and they keep growing higher and higher. New York is a very real situation right now. In this episode of the Momentum Podcast, Alex is going to take you through another set of predictions based on his expertise and what he's seen in crisis in the past. This information is going to be more valuable for your business than just about anything out there. I hope you enjoy.

I'm Alex Charfen and this is the Momentum Podcast, made for empire builders, game changers, trailblazers, shot takers, record breakers, world makers and creators of all kinds. Those among us who can't turn it off and don't know why anyone would want to. We challenge complacency, destroy apathy, and we are obsessed with creating momentum so we can roll over bureaucracy and make our greatest contribution. Sure we pay attention to their rules, but only so that we can bend them, break them, then rewrite them around our own will. We don't accept our destiny, we define it. We don't understand defeat because you only lose if you stop, and we don't know how. While the rest of the world strives for average and clings desperately to the status quo, we are the minority, the few who are willing to hallucinate there could be a better future. And instead of just daydreaming of what could be, we endure the vulnerability and exposure it takes to make it real. We are the evolutionary hunters, clearly the most important people in the world because entrepreneurs are the only source of consistent, positive human evolution and we always will be.

Today's been a really tough day. I went to Whole Foods with my daughter this morning and it is so disorienting. I keep saying, it's like being on the set of a movie, but it's like being on set of a really bad movie where nobody looks at each other, nobody talks to each other. I think this phrase, social distancing has really created like social distance and it was so, so difficult to be there this morning. And this afternoon, this evening I've been looking at some of the numbers behind this crisis and this it is very difficult to go to Whole Foods and look at the numbers behind this crisis at the same time.

I'm going to make some predictions around what's going to happen here. But first, I just share some perspective. So at the beginning of the foreclosure crisis in 2007, Cadey and I were wiped out in Florida. We had a very large real estate business, we were making great money, we were doing really well and literally the foreclosure crisis just like hit us like a truck. And I wanted to understand what the truck was that hit me. I didn't understand just why was it so bad? Why was it so challenging? What was happening? And so I started doing a ton of research. I started looking at the numbers behind the foreclosure crisis and what happened and why was business getting challenged so significantly. And I remember thinking like, why did we get wiped out? What happened to the Florida numbers?

So I went and I started researching all the numbers I could get my hands on. And what made sense to me was to look at what type of mortgages were failing and why were they failing. And so I started looking at those in the market. And when I started doing the math, here's what I saw, was that there was this problem of exponential growth in the mortgage market that was going to have exponential challenges in the normal market. And here's what I saw. As mortgage rates went up, a very predictable percentage of those mortgages would go bad. And you knew when mortgages were written, so you knew when their mortgage rates would go up. So I would look at a map of the country. I did look at a map of the country and I could see where subprime started was in California and in Florida and in the Northeast.

And that's where most of the subprime mortgages were. And for those of you who didn't live through the crisis, what happened was there was a whole bunch of mortgages written that had radical increase in interest rates that triggered a foreclosure or had payment terms that changed that triggered a foreclosure. And you could very predictably look at the numbers and say, this is what's going to happen because once it gets to this interest rate, here's how many foreclose. And so I did all of the math and at the time what was being said was we were in a six month to one year real estate correction. And I started saying we were in a seven to 10 year real estate correction. And everybody told me I was crazy. And the reason that nobody understood it or the reason so many people had a hard time comprehending what I was saying is, is because it required looking at exponential math, looking at here's all of these mortgages that are going to go bad.

And then those mortgages are going to trigger a bunch of distress properties in the market. And so then the people who need to sell won't be able to sell. And then we'll have this glut of property in the market and then people who actually want to get out of properties can't, and the whole thing kind of caves in on itself. And that's exactly what happened for years in the real estate market during the foreclosure crisis. And here's what happened. Today, the White House revised their numbers on the coronavirus on how many people are going to die in the United States, from what was previously, I mean the first number was zero. We were going to have zero cases. And then I've heard all kinds of different numbers, but today it was 140 to 240,000 people could pass away. And the White House is telling us to get ready for a couple rough two weeks.

I heard stuff like this during the foreclosure crisis. I'm not making a political statement. I don't care whether you like the president or not. The information coming out of the White House has been a train wreck during this crisis. And today was the first day where their estimates are even close to what math is showing to be true. But unfortunately they're using math that's based on other countries that have gone into complete lockdown where we haven't done that here. And so when you look at the numbers behind this crisis, it feels so much like the foreclosure crisis because it even looks like the same map.

When I look at the map of this crisis, when I started first sharing information in the foreclosure crisis to places that were hot zones were California, some in Nevada, Florida, the Northeast. And then I told everyone, hey, this is going to move inwards across the country because as mortgages reset, not just on the coast, but as they reset along the coast lines and in middle America we're going to have the same foreclosure crisis everywhere. And here's what I would hear all the time. Well, Alex, you don't understand, things are different here in and then insert whatever state or city or County or wherever the person lived. And by the end of the foreclosure crisis, there wasn't anywhere in the United States that hadn't been touched, hadn't been affected, hadn't had foreclosures, hadn't had property value losses. The entire country was affected by it. But it was so hard for people to comprehend it at the beginning because of the exponential math. Well, today we're in the same exact boat. When I look at that map and I see that we have hot zones in California, in New York and Florida, well, what we are going to have is we're going to have hot zones across the country.

And so as an entrepreneur, here's what we need to understand. We need to start predicting what's going to happen. So when the White House comes out and says, we're going to have 100K to 240,000 deaths, we need to know we're in this for a lot more than just a couple of weeks. We're in this for a while. This is going to permanently change human behavior. What we're going to see over the next few weeks is going to make it so that there are months of limited, if not just terribly frightened movement by human beings. When I go out today, I see a lot of scared people. Scared people don't spend a lot of money. Not only have 3.2 million people lost their jobs, but now people are terrified. They're scared. And now with these predictions coming out from the White House, which has been very optimistic throughout this entire crisis, now this is changing based on math. And so I think we're going to see a lot of financial challenges, a lot of severe economic distress. And there's going to be a challenging human toll here, a really challenging human toll.

And so as an entrepreneur, I think we need to stay away from the news and stay away from the video. If you need to read about this, read about this, but be careful watching video. It imprints so deeply. And right now every one of us is experiencing trauma, not drama with a D, but trauma with a T. And this is traumatizing. Changing your lifestyle is traumatizing. Changing your routine is traumatizing. Being isolated is traumatizing. And we need to all collectively admit that this is going on with us and be really careful about what we absorb. And I have hope, I'm an eternal optimist. I have hope that we are going to see humanity come forward in this crisis. They say that in crisis people are more of what they are.

Well I hope there's a lot more of the people who are loving and caring and kind and we see that come together in this crisis because this is going to be incredibly challenging. And I do think that there's some rays of hope. I think the fact that we have the U.S. military, the most incredible military in the world, and it's because of the human beings in the U.S. military. I've spent a lot of time with our military and I guarantee you when they're called on because they will be, they have been, and they're going to be a lot more, they will be popping up offices across the country. They will blow the world away with their responsiveness if they're given the correct orders. I really think that's going to happen.

I believe in the U.S. medical system. The people who are out there right now, my sister is one of them, my cousin is one of them, I have so many friends, in-laws, family. The U.S. medical system has some of the most incredible human beings in it right now who are going into, in some areas what is really a war zone, and making things happen, so there is hope here. And U.S. creativity, U.S. ingenuity, like what we do here in the United States is different than the rest of the world. It's interesting, a lot of the world points fingers at us, but when somebody gets sick they come here to get better if they have money. And that's real.

And we still have the best political system in the world. And so I have tons of hope. And here's what I know about this crisis for entrepreneurs. This is going to be incredibly challenging. As an entrepreneur, you should be a realist. You should want to know what's going to happen so that you can adjust and adapt and overcome. Because even though this may turn out to be the biggest challenge in the history of modern humanity, which it's shaping up that way right now, it also represents the biggest opportunity in modern humanity for all of us. And it's okay for both of those things to exist in the same place. And we should be unapologetic about the fact that as entrepreneurs we are going to seek the opportunity here. The opportunity to create solutions, the opportunity to make a contribution, the opportunity to move things in the right direction, the opportunity to help people who need it right now. The opportunity to bring connection back to a world where we've lost a lot of it. The opportunity to bring human beings together even if it's virtually, to be able to connect with each other.

As entrepreneurs we will rise above this noise, identify the opportunity, connect to it, get into momentum and take the world with us and with everything that is going on. That is absolutely what is needed right now. And I want anyone who follows me and anyone who listens to me to understand what's going to happen. I think that the current estimates might be a little bit low and I hope that they're not. I think with some of the news that's coming out from New York right now and some of the challenges that are being shared, maybe people will start taking social distancing more seriously and we won't see as much challenging or irresponsible behavior.

I think also what's happening in some of the cities that we're seeing is that we're going to see what's happening in New York and California. There's going to be graphic pictures that come out, graphic video that come out. It's going to force governors to enforce more controls in their States. And so hopefully this number comes down, hopefully. But as entrepreneurs, we need to understand that there's every bit as much possibility that this number goes up over time due to the fact that we didn't catch this virus coming in. We didn't really invoke a national social distancing to the party. There's still a ton of interstate travel happening right now. We haven't shut down the interstate travel. So these numbers might be greater. But when we started hearing numbers from what has been a almost purely optimistic institution since the beginning of this crisis, and again, not a political statement. Go look at the quotes, it's just there. You can't argue that they've been incredibly optimistic, maybe under informed and optimistic.

And now for them to put this number out, we need to know it's coming for awhile. So here's what I want you to know. As entrepreneurs, we can overcome this and we always have. We were made for this. The hardest challenges create the biggest opportunities. And people are going to need us now more than they ever have. So this is the time to look at your business and say, is this business going to exist in a crisis market? Is this business going to do well in a crisis market? If you're selling a vitamin, you need to sell a painkiller. When everything's going great, when the world is awesome, people will buy vitamins to make it better. When they're in a crisis, when they're in pain, they are only looking for a painkiller. And the vitamin is just annoying. So look at your business right now. Are you selling a vitamin or a painkiller? Are you showing people how to get ahead in this market? Are you showing people how to solve a problem? That is how you will survive. And so the numbers are incredibly challenging and sobering. As a human being, I am moved by the reality of what's going to happen, and I'm also concerned. I will be vigilant and keeping my immune system high and I will be vigilant in protecting myself from exposure until this thing is over because it's very real and we're about to feel it. But at the same time, I know this is going to be a massive opportunity for entrepreneurs to do what we're meant to do, to rise up and change the world.

So if you'd like to get updates on what's going on in this market, if you want to understand what's happening, if you want to engage with me more, we've created a Facebook group called the Billionaire Code Community. You search for Billionaire Code Community and add yourself. Answer a few questions for my team and we'll make sure that you get approved. And if you have any questions, let me know. But I want everyone who follows me to know the reality of what's happening. And so while it's not the most fun thing to share, we need to be prepared as entrepreneurs. We need to know what's really happening. It's okay to be an optimist. I would rather you weren't a pessimist, but I want you to be a realist first, and know what's really going on. So thanks for being with me here tonight and take care of yourselves.

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