0:00 [Music] welcome back everybody to another wonderful episode of the careful boys we have with us the cash flow doctor eric here's me and as a bonus we got chris over there okay eric speaking as a financial expert and i hope it's not too late for me to be asking this but with the recession and everything what do we do man and what is a recession how are we gonna make it and what is really happening right now that's a great question are we yeah are we in one how do we know well according to the fed you know not really but yeah we are i feel like every year they say we're in a ████ recession yeah is that true so let's first talk about what the technical definition of a recession is so technical definition of it is two consecutive quarters where you have
0:50 constrained gdp growth instead of it going positive it's going negative for two quarters so quarter two of 2022 that were in 2022 had a loss and they're predicting that the upcoming quarter quarter three is going to be a loss as well because of inflation all this stuff what about quarter one is that a growth or quarter one was actually if i recall correctly i think it was like flat so we're we're on the verge of recession so we need a third quarter to figure out which direction it's going so that's that's a technical definition but the challenge with that is the the it depends on how you look at it from either quarterly or monthly because you might have had let's say january and february the gdp technically during those months were up and then the last month was down right so if you're doing it from quarter core perspective your variation might shift so there's there's two sides if
1:41 you have the technical side and that's what all the news pundits are talking about but that's not entirely accurate we want to look at it from a monthly perspective now from uh from a general like macro economic side of things i personally feel and like a lot of other economists feel like we've been we've already been in a recession for a little bit so the whole nature of this whole two quarters in a row reduced gdp growth are we officially in a recession are we starting it now i think we've already had it and we've already been inside of it right so i don't know if that answers that question but i a lot of us feel this yeah yeah pretty much they've been they've been lying yeah but they told us it was retract like what was it like it was transitional like the the the inflation's not a thing like it just trans you just print money it's trying to transitory transitory transitory transitory inflation so
2:32 that's that's the second facet of it which is kind of dynamic and that our situation right now is very different than previous recessions so i've been an entrepreneur and i lost everything in the 2001 recession i lost everything in the 2008 recession so i've lived through a couple of these and you know i kind of have a little skin under my teeth from like these different recessions right but like this one's a little bit different from those previous two right the first one in 2001 was when he had the dot-com bubble it imploded 911 happened a whole bunch of things happened and it caused this whole recession to happen and then 2008 was different that was the whole mortgage crisis where they're providing loans to people that didn't qualify for that's the short right for loans right and then you had these big financial companies really going under this one's very different especially with inflation right now so we right now we feel inflation is high and we believe in inflation size because gas
3:23 is high rents high the rent's too damn high let's go ████ pizzas 50 cents more the chicken fake is now 4.99 oh yeah criminal man man but arizona iced tea 129 right is it 129. it went up even though it says 99 cents on the bottle or the can no they are staunch defenders of inflation um i thought that that stuff was a bad sign maybe this is the chinese market but but there are challenges right this is not our traditional inflation we have this huge amount of money that was printed two years ago in 2020 and then on top of that too there is some transitory issues our supply chain is still disrupted because of covet gas prices did spike and they are starting to come back down again thank goodness which is really nice come back down to ████ six dollars
4:13 it makes six dollars make good look it look good like oh yes perfect six dollars amazing are they coming back down because of is that good news or are they coming back down because of something bad that they're doing like are they just printing more money or you know there's this is a very complex situation and the challenge with it is is us as humans we want to simplify things so sometimes people have conspiracy theories sometimes we listen to news folks that try to boil this complex situation down into biden or trump or whatever you can't really do putin right you really can't do that it's super complicated yeah right so we have we have food issues and food supply chain issues and some people have this conspiracy theory oh they're burning down these food supply things to create a square fighter and cause scarcity but the reality is like in global markets right now we have a very tight supply chain and
5:04 what we've realized is we've we've lived in as we call just in time model of production thanks to toyota thanks toyota yeah toyota created it tune us over and the challenge of that is it's a very lean production model which in bull market times is good because they're you're running as lean as possible maximizing profit margins you're only producing things when you need it but the problem is if one little cog breaks in that system you're ████ right so we're seeing it in automotive one little company that makes a chip disrupts the entire porsche production right and you see in the food space and the food side of things you you have ukraine which is the biggest bread basket of europe they can't ship their grain out because of what's happening with ukraine and russia and russia recently signed a an agreement that allowed ukraine to ex finally export their grain and then
5:56 russia the next day they bombed the port right so we have these issues and the challenge with it is like technically the world is making more food than the entire world can consume so from a global perspective you're like how's this one country ████ us all up but the challenges you have to remember like supply chain is very fragile right now like if you had grain in the us and we're one of the biggest exporters of rain it's very hard for us to ship grain overseas and when we do that instead of like countries like countries inside of africa being able to get it from local areas and they have this small shipping cost now if they bring it in from the u.s you have to add in the shipping you have to add in the profit margin you have to add all these things it causes food costs to go up so you have this like this compounding thing and the challenge that we have as as americans we see things from a perspective of this is just
6:47 happening in america so it's biden or trump or whatever the news is saying it is yeah but this is a global spouchy voucher in this mask he's about to retire he's about to just like finish it up after this after this turn his mic drop was the recession dude that was a ████ man ████ fouchy he's like i cheated i'm ouchy without ████ she's ouchy as regular citizens seeing all this happen yeah what can we do to stay afloat like is there any yeah so i i honestly think there's just two ways to look look at it and we were chatting about this earlier right we have this we have this kind of like um conundrum of thrift so here's kind of the thing normally when we hear the word recession it strikes fear into a lot of folks so you're starting to see and i see it as an accountant we work
7:37 with a lot of enterprise level companies we work a lot of nft companies all the stuff the moment the word recession was spit out everyone stopped hiring everyone stopped expanding everyone stopped trying to build things because they're like we just need to tighten up the ropes right so that's normally what's going to happen is all of us feel concerned that we need to save more money just in case for the rainy day and that is important to do but there is this conundrum of thrift because in the u.s the whole idea of the the recession is based on what we call two quarters of gross domestic product or gdp and gdp is the us the vast majority of gdp is produced through consumption so if we as americans save and we don't spend what does that do to gross domestic it keeps going down it keeps going down right thank you teacher right and then
8:27 i was gonna say it first they paid attention economically so proud of you so proud so like if you think of it right like it creates us like this this this cycle where people are spending less and then that means companies like ████ we need to make less stuff and oh we don't need as much payroll so let's let people go and now there's less people that's able to consume and it creates this cycle right so from at least from my perspective i think it's very important for all of us to to look at paying down consumer debt to look at purchasing items that are essential to our household what's consumer debt just like all of our own credit cards pay our own credit cards off if you can right like or or at least cut down on expenditures that are non-essential right because at the end of the day it's like the more liquid capital you have
9:17 the better off you'll be and i work with a lot of investors too and right now i'm telling a lot of the investors that are in our practice this is a really good time to just stack cash even though it may constrain the recovery because what's going to happen is as a recession goes on people are going to fire sale assets and it's a great way of investing back into the market right and a lot of wealth is created in recessions and this is a normal thing like that the reality is in the economy we have booms and we have bus this is very normal right these are cyclical things that happen so the more we can prepare ourselves and just at least understand the risks that are out there like i wouldn't be in a position of taking larger risks without doing more research right for example like i'm still like in my company i'm still expanding i'm still hiring because i see there's a lot of need for the tax and the accounting side
10:08 of things but in general terms like for most folks a lot of folks that might be listening into this i would highly recommend to start thinking about spending less on things that you don't really need right still live life still enjoy life still do your things but like if you're deciding on buying a 4 000 louis vuitton bag when you don't really need a louis vuitton bag maybe hold on to that cash for a bit longer just smash and grab like whatever that's a good idea we'll just do that in california you're not going to get in trouble for it yeah they'll let you go yeah yeah we're seeing that behavior too because i think netflix just announced they lost a million subscribers yeah that's huge so i think people are kind of like checking their own uh where they're spending their money and then like oh maybe i don't need like 20 things maybe i only like hulu or amazon
10:58 prime or whatever so i think yo i've been spending bread on these subscriptions how much if you just add them all up yo at least over 200 on on subscriptions yo i mean i got all of them bro i got netflix and pornhub premium youtube huh pornhub premium and only found a premium no i don't have i don't have any of those those accounts my cheats but yeah you know yeah ip's gonna sign it at the same time yeah yeah but yeah canceling i mean just looking at those alone and then even like oh food eating out oh my gosh the worst he now will get you so you said you were that's a need for me yeah me too premium oh both it's a it's a life it's a it's a life force yeah watching pornhub at cheesecake [Laughter] so you said having been through the 2001 yeah and
11:50 the 2008 do you feel like this one we're currently in is comparatively worse or is it not as bad i think it's a little bit worse i was just hoping you wouldn't why do you think it's a word i think like let's use the word worse in a subjective framing let's give a little bit more context to this right like the challenges that we have now are multitude things we we're living in a much more globally interconnected society right like where people are realizing even avian england they're realizing the whole concept of nationalization and doing the brexit was flipped it didn't work for them it's costing them about 42 or 45 billion dollars for that one decision and we don't know that we're very interconnected as a society where in 2008 2001 we weren't as much right so they they always say when america sneezes the world catches a cold
12:41 right so we are we do have a set of global challenges that are very different and in terms of the recession we're looking at things more than just as economics right now if we're looking at food shortages around the world especially in these three world countries what do you think led on this onset of terrorism and people wanting to attack all these other countries it was hunger lack of opportunity all these things and we're starting to get into this macroeconomic situation where these countries are again going to be facing lack of food have hunger starvation all these things people want to get mad again it's going to cause like a rise in potentially terrorism or instability globally so in terms of the recession like i kind of feel like we can recover you know get out of it in 12 to 18 months it's typically the average of a lengthy recession 12 to 18 months to kind of get out of it and start
13:31 recovering again but i think we're going to have a lot of other global issues that are going to come from this particular thing and all from covet and valcine who would have known that this fragile supply chain who would have known that this fragile supply chain that we have to maximize profits and i love capitalism like i'm an entrepreneur but that the capitalist system that we've built has been very fragile we've been focused purely on maximizing profit without creating sustainability and it's gonna ████ us up right we're gonna have to grow out of this or figure this out wow it definitely definitely doesn't feel like we're on the up and up with things yeah you know what i'm saying so you saying this isn't really a surprise it's like the last like couple years days of just i mean i mean especially dealing with this pandemic so definitely it doesn't feel like we're this is going to
14:21 come out all sunshines and rainbows and stuff it's like it's like every restaurant you drive by it's like now hiring now and it's like dude i didn't know that there's all these jobs that couldn't be filled which is weird because in a recession you think there's not enough jobs yeah yeah but then it's like there's so many places yeah i saw a ████ burger king it was like we'll give you a sign-on bonus and this and i was like for burger king dude makes me want to go work yeah yeah king taco has like a was like a 15 hour starting yeah damn king taco and benefits it's just like what uh andy nguyen was saying about how he couldn't get after staffed enough because people didn't want to work so shout out to everybody who is still working a job that they don't have to do respect for that for sure yeah absolutely so it's we definitely have a
15:12 very unique global macro economic situation so for those of you guys listening in i think the biggest things to kind of start thinking about now is maybe put off luxury purchases maybe start considering paying down credit card debts you don't have this like ongoing debt right because as they start raising interest rates the credit card debt is also going to go up because usually it's prime rate plus a percentage right so you want to make sure that you have that under control start making sure you have some rainy day funds set aside have some extra liquid cash right so if something was to happen if you got laid off or whatever you have some capital to get you through the challenges most people live paycheck to paycheck because again we have this consumerist consumption society yeah i mean i have amazon boxes show up my house all the time and i'm like do i really need this whatever it is i ordered yeah probably
16:03 sometimes sometimes it's necessary it's a good deal every time i buy anything on amazon because i'm a person of convenience i always get three right on my office three tires he gets three times tires even though you need four yeah no cut it down you know i ████ i need batteries and then i don't even go look at my battery box the amount of batteries i just ordered three of them and it comes in i'm like all right cool got my batteries and then when i go put them away i see that i already had a stack of ████ three bags so when the world comes to an end we're all going to bartend yeah oh no for sure all of them are probably expired already because i'm not even using them i just keep adding new ones on top even your gun safe that big you know what's a funny a weird uh paradox too is that
16:53 you start to reclassify which things are luxury right and like things that you got used to during the pandemic like ordering food is now a luxury which is odd because it's like i got so used to postmating but actually that costs way more postmates ruin the economy i think yeah you said it was great but i think it's mostly postman it's like personal economy that's uber lyft dude during cove though i feel like uh postmate postmating so much was kind of justified right because you're like yeah i don't want to interact yeah yeah yeah this is the safest way and then like and then jill's at home yelling at me like do you really need to spend 15 bucks on boba i'm like yes i do because my mental health is just as important as physical health you don't want to go off yourself you got to stay in the house
17:43 that's what they tell me what's what she says so there's this one part of economic theory from so there's this famous economist called keynesian that's his last name and he has this one part of his theory called the animal spirit and like what does animal spirit have to do with economics but that's all about the psychology of it right when people are in fear or when they're in greed dictates the or the the length of how long it takes to recover from something so the moment that the word recession gets spitted around everyone is in fear and everyone's constraining so until there is a situation or there is like uh some sort of a trend where people feel confident again we're going to keep going down a rabbit hole or a stagnation of growth right so the people need to feel like stable or something before it starts going back up and that's that's a challenge that we've had ever since code
18:34 the technology like that the challenge with that is like we've been in very unstable times for the last i don't know four years between the last administration this administration both administrations not knowing what's going on the economic situation covid do we wear masks do we get vaccines all these different things it's created this level of instability or inherent fear that also dictates and determines how people spend and how they consume right so a lot of things beyond just the printing of money a lot of a lot of things beyond just the supply chain right it's like this human dynamic which is crazy what do you think about investments right now you're know people they're like right now is the cheapest time to buy stocks crypto real estate whatever you think like in a recession is a good time to start buying some things because they are like at the lowest i mean the the idea or the notion that we're at the lowest is very subjective
19:24 like and again not financial advice do your own research um but i've spoken to and i've interact with a couple of very wealthy folks even a couple of billionaires and they're all just sitting with dry powder on the side to buy in because they're like it's not the lowest it's not the lowest yeah right we still have a lot of things that need to happen we've had a market that's done very well in the last couple of years including because of all this growth of the money supply that needs to have a correction that needs to have a calming down again it's that that boom and bust cycle so we're probably somewhere in the middle of the halfway down to the bus cycle that's what i was going to ask is like the last one it was clear the last recession because everyone there was a domino effect and a stock market tank and then like where a lot of the homes went like you know foreclosed and stuff and then people lost jobs and then like because i was a graduate in 2009
20:17 and i couldn't get a job anywhere because no like all the places that we're hiring it was taken over by over qualified dudes that got laid off of their jobs so they were doing the entry-level college kid jobs some dude that might so my dad's a car dealer at commerce casino a dude with a phd applied to be a dealer during that time i'd probably be probably because it was an anthropology phd useless my dad was laughing and he was like man i ████ came here to container we got the same job hell yeah [Music]
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