WHAT IS THIS EPISODE ABOUT?
The economic markets have lost over 4 TRILLION dollars due to the coronavirus… How does that happen? How does a medical emergency cause $4 trillion dollars to “disappear”?
WHY SHOULD I LISTEN?
In this episode, we bring BACK on Think Different Theory’s trust financial analyst and genius money man, former Goldman Sachs money manager, Mr. Brad Gibb.
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WHEN DID IT AIR?
March 13, 2020
Be sure to follow me on Instagram @joshforti
You can find the transcripts and more at www.thinkdifferenttheory.com/189
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Disclaimer: The Transcript Is Auto-Generated And May Contain Spelling And Grammar Errors
Brad Gibb 0:00
No one has lost a dime. Okay, especially those following traditional advice, nobody’s lost a dime. And it’s because we’re we’re measuring the wrong thing. We’re stuck in this. We all are taught to count chickens before they hatch, and we’ve gotten so good at it. But then when they don’t hatch, we actually feel like we lost something.
You are now entering a new paradigm. So here’s my issue. I want you to find the answers to life’s biggest questions, things like how do I become happy and live with purpose? How do I make more money doing what I love? And what does it mean to be truly successful in all areas of life? My name is Josh 40 at Josh 40 on Instagram, and I asked life’s biggest questions and share the answers with you. My goal is to help you find purpose happiness and open your mind to new realm of possibility. By helping you think differently about everything you do know and understand. On this podcast. We think different. We dream bigger than we live. In a world without limits, this is a new paradigm. Welcome to the thing different
What’s up guys welcome back to another episode of Think Different Theory. My name is Josh Forti, and we’re just gonna dive right into it here today guys because the coronavirus is among us and it is affecting the world there’s like this huge, massive Was it the pandemic is that what is called Big panic right where the whole world is in chaos right now when I heard that Italy, Italy quarantine like a quarter of their population or something like that, like 16 million people or something ridiculous like that, which is just insane. You’ve got the stock market and an utter collapse and tumble you’ve got the world markets freaking out we’ve got the war on oil now, which I don’t even know that has anything to do with the coronavirus. And so anyway, one of the things that I’ve been trying to do with Think Different Theory is figure out a way to work in current events without having to be up to date on every last little thing that’s going on. As you guys know I had my, my little run there, I kind of went political. And I got out of that somewhat to the extent of I’m still very well-educated in that space. I don’t talk about it as much because I want to be able to present solutions, right? I’m a very solutions-based person that says, hey, if you’re going to tell me to freak out about something or tell me to do something like there’s got to be an answer, there’s got to be a solution. And very quickly, I realized that’s actually not like, at all how our government works. They, they like fear, and they don’t really present solutions. It’s just all corrupt. Anyway, so I was like, You know what, I’m not gonna go into politics. But I really do believe that it is important to understand what’s going on in the world today understand how things are affected and things are changing. And one of the things that I think is probably the most mystical smoke and mirrors hiddenness of it all is the financial markets and how the financial markets work, big money, big banks, you really don’t know what’s going on in there. So one of the things that I like to do is I like to bring on experts and people that know about what’s going on. in certain areas and talk to them about current events and so I’m one of the things that I’m trying to do with the podcast and with the show is kind of find through trial and error and through interviewing people, people that I trust in certain areas so that when stuff like the coronavirus does come up when there is an economic collapse, that I can point back to certain things and say, Hey, I’m going to bring you back on and you guys can go back and listen to the same person talk from that point of perspective and view and see the consistencies there and see what they’re saying. And we’ve had my next guest on the show twice. Now. We actually really recently just had him on for the opening of season two, but I brought him back on to talk about the financial markets and to talk about how the coronavirus specifically is affecting the financial markets because I mean on Monday, holy cow what two, we had 7.9% wiped off the stock market $2.2 trillion down or whatever it was 2000 points down in one day. So like there’s a lot going on, and I wanted to bring on people that no other talk about About understand their craft and can explain this to us in a way that we can understand. Not so much so we need to do anything about it but just so that we understand what’s going on and if decisions need to be made we have a complete picture of what it is that we’re actually doing here. So my next guest is the man the myth the legend himself we’ve had on twice Mr. Brad Gabe, welcome back to Think Different Theory man. I’m very very excited to have you back on here. Because I haven’t even let you introduce yourself or bring say hi yet, but I watched a what two days ago I think I boxed you and I was like, dude, the live that you just did in your Facebook group where you explained how the coronavirus is affecting the economy. And what you learned from being on Wall Street working for Goldman Sachs during the 2008 financial crisis just blew my mind and I was like, Alright, we got to bring you back on so thank you for making time to come back on the show. I’m super super excited to have you here man.
Brad Gibb 4:56
Josh man, your show is one of the few that I would drop everything to make time To be on and you it’s one of the only ones like this is the kind of stuff we only share behind the scenes with people that I can have that that context with I didn’t do a live in my personal profile out for the entire market. I think it would break people’s brains, right but your audience is one that I’m actually really excited to share with it and get get that feedback and see how it went because I really like that the engagement we’ve had in the past and then the way that they’re already trained and used to thinking different and asking questions and and really getting down and understanding the fundamentals of what’s working so I’m excited to be here and shared I turned out a lot of other interviews because there’s like No way man like, like you said with with politics. I don’t even like being labeled A pundit. You’re almost labeled me a pundit. Yeah, cuz I’m, I am not a trained pundit. I will won’t like take the party lines of what should be out there and being said, right, but we I do feel very uniquely qualified to talk about what is really happening and make a connection between something that seems totally out Related, like, why would a bunch of people getting sick in a new way? Wipe out $4 trillion of wealth in the United States? Like, where’s that connection.
Right and I think the thing I mean, and you’re, you’re pretty controversial when it comes to money because of the information that you do know. And guys, you can actually see he literally dropped everything. He’s not even in his studio right now. He’s at his, he’s in his home office at his home to do this. So like I said, I really do appreciate you making the time for this. But you have a completely different view and understanding of money because of your background at Goldman Sachs. You were there working at Goldman Sachs during the 2008 financial crash. And we have a crazy story that you’re going to share here in just a minute about what happened there. And I was just like, What on earth. Really quickly though, before we dive into that, I do want to give you the chance to kind of let people know about your podcast. It just so happens that this worked out really, really well this week. You have a brand new podcast that just launched this week right now. And just really, really briefly For those people that are brand new to you, or that have not heard you, or maybe they have heard you, but want to know a little bit more about this, we’re going to talk guys, and the type of content that you’re going to hear today is basically what you’re gonna hear over on this podcast. It’s awesome. It’s amazing. It’s epic. I’ve listened to it. It’s phenomenal. But explain 30 seconds a minute long what people can expect on the podcast once therefore, and how they can go subscribe to it.
Brad Gibb 7:20
Yeah, so the podcast is the culmination of 10 years of of my own journey. My two business partners Ryan and Jimmy, our journey to becoming financially free. 10 years ago, we were stuck. We were frustrated we we came to one solid conclusion that traditional advice was never going to get us where we wanted to go. But there was also this huge gap in the normal like what like the gurus on stage teaching, because it seemed like chasing the latest and greatest. There was no foundation, there was no frameworks that we dedicate ourselves to learning. And that’s now what we’re teaching. So it started with us It started with a small group. Then we launched to a much larger movement. And now we’re pulling back the curtains and it’s the only podcast dedicated Did to the foundations the frameworks the formulas to becoming financially free and we believe anybody that follows that not only we don’t just believe it we’ve proven that anybody that follows that can be themselves financially free in 10 years or less so that’s what the podcast is about. I love it
I love it um cash flow tactics calm slash Listen, I believe is a popular podcast don’t
Brad Gibb 8:22
go there yet. The podcast will get you there too.
Okay, put four or five podcast so cashflow tactics comm slash podcast or slash Listen, we’ll link that down below. guys go check it out. For those of you that like our like, I don’t know about this guy, too. He’s done two episodes on the podcast. Go listen to him. It’ll blow your mind. Russell Brunson. Steve Larson Rachel Peterson big, big big names. Give this guy all their money in our like, Yo, what do we do with it? Okay, so he’s very, very legit. All right, but I think this is a perfect segue into what we’re talking about here. Okay. coronavirus has freaked out the world. I mean South by Southwest what that gets cancelled 350 million dollars in revenue loss to the city of Austin. That’s ginormous, that’s huge people freaking out. People in Omaha here where I live in. But I suppose to California, I mean, I went to Costco and Walmart the other day, and we’re talking like, Oh, damn, and go look at my Instagram store like empty, empty, empty, everything is gone. And you said that you started your financial freedom journey about 10 years ago or so 10 years, or maybe a little bit more than that ago. And I think that kind of started around the time when you were at Goldman, and the markets crashed. I think that’s kind of where I want to pick up this story and kind of bring in some insider stuff. So I’m gonna kind of turn it over to you and let you just kind of explain this because I know I know. We want to talk about the fact that hey, people really didn’t lose any money. And we then we want to talk about how companies can go and kind of dump bad stocks and things like that and just kind of all of that. So take us back there to where you were and explain to us how the heck coronavirus is literally causing all this massive pain.
Brad Gibb 9:59
Okay Josh. Wait a minute, you just floated a concept there that I think probably half of your listeners are like now their brains are stuck. They’re like, wait a minute. You just said no one lost any money. What? What the heck? Like, let’s define that for a second and then let’s back up. Let’s do that. Yeah, because because what’s happened what’s what everybody’s freaking out about in the market is all this money lost and now we’re turning to what’s Wallstreet gonna do? What’s the Fed gonna do? How are we going to fix all this money that’s lost. And I always when everybody says this, I always sit around and scratch my head because I’m like, no one has lost a dime. Okay, especially those following traditional advice. Nobody’s lost a dime. And it’s because we’re, we’re measuring the wrong thing. We’re stuck in this. We all are taught to count chickens before they hatch, and we’ve gotten so good at it that then when they don’t hatch, we actually feel like we lost something
and just to clarify, nobody that hasn’t sold.
Brad Gibb 10:53
And that’s the big that’s that that’s the big key to it, right? Because you’ve got to stop measuring your wealth. In what a third party is a pin some dudes opinion of what it’s going to sell for. And by the way, the s&p 500 index is just some guys opinion of what something is worth sometime in the future. It’s not a real thing. It’s a guess it’s an index. It’s, it’s a projection. It’s not real. It’s not real money. It’s not real wealth. So the way I frame it, as I think about this way, one thing I happen to invest in is real estate. And even when I had real estate in 2008, when the valuation of real estate came down, and when it did that I didn’t count myself as having lost any money because I still had the same number of houses. I had the same number of doors, I had the same number of renters, I didn’t actually lose anything. And if you take it from that context, I can
What you’re saying here is Hey, listen, I own and I’m just gonna make up an arbitrary number here. You own 50 houses, right? And you’ve got 50 renters 50 cash flow and you know, units or whatever the markets crash, the value of your real estate if you were to go and sell one of those houses, once again, arbitrary numbers here. Let’s say each one of those houses across the board was worth $200,000 before the market crashed, and now the market crashes and they’re worth $120,000. You’re saying, Hey, listen, I didn’t lose anything. The value may have gone down, but I still own 50 houses and they’re still producing money for me.
Brad Gibb 12:21
Exactly. Because evaluation on a piece of real estate is just, it’s not a real thing. It’s some someone’s opinion, someone’s best guess that if somebody came along today and bought it for me what they would pay, right, and the stock market works the same way. It’s just what somebody is currently today. Amidst all the fear and anxiety and stress of this outbreak. That’s what somebody would pay for it right now. But if you owned 100 shares of Exxon Mobil, guess what? You still own 100 shares of Exxon Mobil you didn’t lose anything. The real asset that you have hasn’t gone anywhere. It hasn’t really changed. It’s just its positioning in the market has changed. And if anything that should expose how broken our the way that we measure our wealth is when it’s all measured on appearance, when it’s measured on public opinion, it’s a very dangerous place to be because we see what happens. Like it’s happened today as people get in a frenzy. If your wealth is tied to the general opinion of the masses, you’re in a pretty tough spot.
Okay, so for the for the dummy on here. That is like, Alright, because I understand what you’re saying, I went and watched your live and everything like that, but just so we’re very, very clear on what we’re talking about here. I have $50,000 into the market, let’s say all right, I’m once I don’t have 50,000 in the market, I’m smarter than that. But I put $50,000 into the market. I don’t know two years ago, three years ago when Trump gets elected, right? My $50,000 that I put in let’s say I bought a share at 50 bucks a share of something right? make it super easy here. What I own 10,000 I own 10,000 Shares right? Or 1000 shares 1000 shares
Brad Gibb 14:02
If $50,000 divided by 50 bucks. Yeah, you want 5000 shares, right? So I own 1000 shares of Company x. It’s an energy company, let’s say now that $50,000 today, Brad, or when I invested it was $50,000. Today, the value of that $50,000 has gone up, let’s say by, let’s say, by 50%. And let’s say, you know, I did really, really well, now that $50,000 did awesome, and is worth, I don’t know, $65,000 right? It went up by 25 30% whatever it was right? Today, now it’s dropped. And now my evaluation of that stock is only 45 grand. How did I not lose money here? Because you still own the same thousand shares the asset that you bought, were shares and you still have those shares, okay? If you if you decided that for whatever reason, because you need a whole bunch of toilet paper now. Then you need To sell all of those shares, and then bring in the $45,000. Now there’s a difference between what you paid. And when you turn to that thing back into dollars, how many dollars you got back for it. But as it stands, right now, what you did is you just converted dollars into shares, right? You traded one asset for another, and then you still have that asset that you traded it for. But the mentality that we want to unwind here is, as it went from 50,000 to 55,000, to 57,000 to 60,000, you were counting those as now I have that much money. And unfortunately, you’re taught this is public sentiment, right? This is actually measured. investor confidence is measured, that as my stock portfolio goes up, I feel more confident to spend money or to make decisions on the other side, right? Because because of how confident I’m feeling and you know what, where I’ll be in retirement, but that’s the downside is your wealth actually didn’t advance unless you somehow took those earnings and bought more shares. Right and bought more shares and bought more shares now actually control more assets. And I’m actually more wealthy as measured in assets, rather than just measured in the valuation of something.
So the media right now, and then we’re get to how the coronavirus is affecting this, the media right now is valuing or how they’re determining money made in last is based off of speculation from some random dude on wall street that says, hey, this asset was worth $200. Now, it just dropped 20%. So we lost 20% of our money, but the asset is still there. So what you’re saying is by definition, because you don’t own money, you own an asset. You don’t own money just like you don’t own money you own a real piece of real estate is real. If you sell that real estate and exchange it. Now we’re talking in terms of dollars, but the second you trade in those dollars, now we have to look at it in terms of assets owned, not in valuation of the asset. Right. Okay. So we look at that and we go, all right, there’s the fundamental foundation. Nobody made money. Nobody lost money. Unless you sold. You own the exact same amount of assets, the exact same amount of stock that we’re at. Yep. Okay.
Brad Gibb 17:18
Yep. And amateurs value what they do based on spec, the speculation level, right? The public opinion or evaluation, okay, true investors are looking through that to the actual assets that they own. And they make decisions at that level.
And, and I don’t want to spend too much time on this, but I saw a post. I can’t remember who it was, but I think it was on Bloomberg or something like that. And the headline was, world’s top X number of billionaires lose $200 billion in wealth in the first X number of dollars or X number of minutes in the market. And this lady tweeted about it and she goes, except for the fact that this is much different than other financial crisis is because These companies are actually still making money. Right? So it’s like the companies that you own share in are still turning a profit, they turn to 4%. I think it was on average 4% profit in quarter one. Whereas in the past when there’s been a financial crisis, they’re not making any money at all. So here, we might have lost valuation. But we’re still making money. And so this is where when I realized that I was like, Huh, and then that’s when your life kicked in. And I was like, Oh, my gosh, here’s exactly what they’re doing. So yep, talk to us. Right.
Brad Gibb 18:29
So the backstory to where Josh is leading with this is why how could public opinion be so swayed in the markets? It felt very reminiscent of 2008 I don’t think we’re headed into least I hope Anyway, when I head into the same sort of crisis, because we don’t have the same the same issues going on. This is I think this is much more of a flash in the pan. Although I do think another 2008 is on the horizon, but it felt very reminiscent I remembered so I guess I was in downtown New York City working for Goldman Sachs. When Everything melted down like I was literally, our building was next to Lehman Brothers. And if you remember anything about what was going on in a way things were shaky and Rocky, there was Fannie and Freddie stuff going on there were there were some other companies that had issues. But it wasn’t until Lehman literally overnight disappeared. That then everybody accepted Wait a minute, this is fundamentally different than what we’ve seen before. And and the economy started to process it and deal with it. And that was, that was really the off the cliff moment for the economy in 2008. We were literally next door to Lehman. And we were walking to work getting off the subway walking in as they were filing out with cardboard boxes. So we were at Ground Zero as this was all happening. And it was fascinating to see behind the scenes of how it was being dealt with. But before I share a couple of the meetings like it was my Jerry Maguire moment when I realized like holy like to be in some of those meetings behind the scenes. But before we wanted there, I want to back up a couple more years. And part of my story that I don’t share because people fall asleep. Because it’s not boring. Before I decided I want to go, I wanted to go into Wall Street and banking. I thought I wanted to get a PhD in accounting. I know you already like yawning at that, like getting a PhD in accounting. But what was fascinating to me is we married the discipline of economics to accounting and we tried to use accounting data to then look at the economy and understand what was going on. And one thing widely studied by PhD level accountants, because the data that’s actually available to see what’s going on in the markets is all the public accounting information that’s released. So there’s actually a very interesting discipline there, where we study recessions, we studied growth of companies, we studied the the movements of the stock markets through this lens of publicly available accounting information, to try to figure out what the heck was going on. Right. And what what I spent a year studying as I was getting ready to go and get a PhD, which I changed directions, which was Bullet dodge now No kidding survived there but the the year that I was prepping for that I got into the study around what’s called earnings management. Okay? And exactly like it sounds it’s only one notch below like financial statement manipulation or fraud, right? But it’s actually a completely acceptable in the world of accounting to manage earnings. Okay, because the market the way it’s really driven is off of whether a company hits or misses its quarterly and then annual earnings projections. Okay, and a company can be penalized, even if just like we’re talking about even if they’re profitable, but if they just miss what the market thought that they were gonna make, if they made x, but the market thought they were gonna make x plus something else, their stock can still be hammered. Okay, so you
Even if they’re profitable, and even if they have a good quarter per se, if they don’t hit expectations, they can still be quote, penalized,
Brad Gibb 21:57
they can still be their stock price can be punished Because they didn’t hit target, okay? I said they could still be totally profitable, paying out dividends earning money growing, just not at the rate everybody thought they were going to. And this goes back to the wild speculation that happens in the market trading happens when earnings projections are made, people are in in saying, oh, if they’re gonna make that much money, I’m gonna buy it because they’ll go up and then if they don’t go up, oh, everybody’s mad and Right, right. Okay, I should have been. And so this whole idea of earnings management is there to try to smooth that out and allow companies to deal with this highly volatile concept that’s going on. So what companies do, what gap accounting actually allows you to do is, if you’re good at it, and you say just within the rules in this gray area, you can wait to either release good news, or bad news, depending on when it would make the most sense for you. So literally every financial like every major company crash, like like Enron is probably one of the most famous ones. management was another big huge fraud case that came out there. It’s all done through the same mechanism of just managing how you account for things. Okay? Okay. That’s it just like where we put losses and how it’s all accounting. It’s all smoke and mirrors. It’s all I would, it’s all numbers. Okay. So why would somebody or why would a company want to do this, though? And you explain this on your other life, too? Like, why wouldn’t a company just report what actually happened? But yeah, because again, they have a target given to them externally, that they’re now held to. Okay, so if I was getting earnings of, let’s say, 100 million dollars, and I’m about to post 120 million, you might think that we would want to report the hundred 20 million and exceed expectation, right? But actually, what they want to do is they’ll take the extra 20 million, hide it in their accounting, and then wait until maybe the next quarter when they were again projected to make a million and they only hit 80. They’d rather than the 20 to hit the target, right and keep everything nice and level rather than show because 100 million 100 million is still 200 million. But if they if they show 100 100 they get one result, but if they showed 120 and 80, they could actually get a much worse. So they want to manage those earnings to be in line with expectation and to make a nice smooth state because the what I mean like the government or whoever’s reporting on or whoever’s, like setting the stars or they don’t like numbers going up and down, like it’s not the government, it’s the financial market. Okay, right. Everybody that’s researching and like all of this that’s going into it. Yes, there are expectations set that if something is moving a lot, it’s hard to get our our head around, we’d like things that are that are that are see that. Yeah, that that move in a way that we can explain
but as entrepreneurs know and as anybody that runs a business and are listening to this podcast, I mean, you know that you could have a $60,000 a month and then at $45,000 a month or you could have a, you know, $10 million month and then an $8 million month. And so, and it’s always interesting you look at these companies like Apple and Google and like things that you’re like, they’ve got to go and it’s not like that. Oh, yeah, they make the same exact dollar amount within 1 million every single month. I mean, that’d be ridiculous and ludicrous to think it’s yours.
Brad Gibb 25:22
If you want to do a little more looking into it, look up a documentary called chasing made off okay, so it was about the dude who found and uncovered Madoff and it was a forensic accountant that just basically lives by the premise there’s no such thing as straight lines and finance. So the straight to the line, the more manipulation that’s happening and if it’s a perfectly straight line, like made off was there has to be from God. So there are no straight lines in finance. But they want them we want them there we want we like that graph, right? That just goes from bottom left to top right. Nice instead,
and so they’re gonna put it on their paperwork and this is legal, gray area, legal. But legal to be able to hold funds. And it sounds like profit and losses.
Brad Gibb 26:08
So I feel like that’s an important part of the story here
Brad Gibb 26:11
So the example I use on my life might make sense here. Let’s say I’m a company that sells iPhones. Oh, I dropped my iPhone. Let’s say let’s say we sell these right. And I have a whole bunch of inventory of iPhone cases or iPhones. Case, let’s say case. Oh, that’s probably makes more sense. I sell iPhone cases. Right. And I’ve got a whole warehouse of iPhone 10 cases than the iPhone 11 comes out. How much do you think I can still sell my iPhone 10 cases? Were they still worth what they were worth? Or is demand going to shift in one iPhone 11 cases? Yeah,
a demand shift they’re probably
Brad Gibb 26:43
Going to want so if what I used to build it maybe I could use to sell it for 20 bucks. But now my demand for that is drying up because now elevens are coming out everybody’s buying 11 and they don’t need cases for their 10 anymore. If I have $100,000 of inventory of iPhone 10 cases It’s not worth what it was a few months earlier. Okay, that makes sense. Yep. And so technically, there’s some wiggle room in when I can announce and say, Hey, this inventory is not going to sell for what it was supposed to sell for. That’s a small example. And there’s bigger scale to this to where communicating that type of loss is what I want to manage. Right?
So if I’m a big multi million multi billion dollar corporation, and I’m holding inventory or product or something, that all of a sudden now I am stuck with it, and I cannot sell it for the original value that I thought I was going to be able to sell it for. I am stuck with it. I’ve got to dump it. But what you’re saying is, is I get to more or less where the company gets to, within a certain extent, hold that and gets to determine when I released that financial information. The actual statements that I released to the public.
Brad Gibb 28:02
Yep. Wow. Wow. So now look, now we find ourselves in this Coronavirus scare. And the companies that legitimately are affected by this are airlines, cruise ships, hotels, like there is a sector of the economy that is materially impacted that the city of you mentioned it was city of Austin, right? Just lost $75 million,
right over 50 million. We have to insure me right? Yeah,
Brad Gibb 28:25
Whatever that would be. Right. So there are some actual impacts to the economy. But why is the tech industry down? Why is that? You know, why is the food industry down like wire? Why is the entire I mean, the s&p 500 and the Dow measures the entire economy. Why is the entire economy down? when really it should just be connected to one or two? Well, let’s go back to this iPhone case seller example. If I have bad news that I’m waiting for a time to release it, when would you want to release it when all of my peers and everyone else is doing really really well? Or what I want to release that When there’s general negativity out there that I could sort of slip it into the noise and no one will notice. When would you want to release it?
I mean, I’d want to release it on a time when everybody’s doing bad.
Brad Gibb 29:11
Yeah. Because then I can release this information that again, nobody understands how we got there. Nobody understands gap well enough. Even the people reporting on financial companies can’t read financial statements. That’s the big secret. They don’t understand balance sheet income statement statement of cash flows, but if I can release it, and then when I have to go report my earnings, I can say, Don’t blame me the coronavirus. The whole economy was down we were it was just it was just everything and then it’ll all be fine. And then I got to release this. So what companies do is they time this and say, I’m gonna wait around and I’m dumping this and then everybody does it all together and they use it as an opportunity to get rid of that.
Okay, so if I’m understanding you correctly, this is the part that blew my mind. And I was like, Oh my gosh, cuz guys, like think about this. And correct me if I’m wrong here. What you’re saying Brad Company we’ve got the s&p 500. But that’s 500 companies, right?
Brad Gibb 30:05
So yeah, 500 largest companies,
500 largest companies in the country, right? 500 large companies, we’ve got great economy right now Trump’s in office, economy’s booming, everything’s going great or whatever, somewhere along this whole entire process of everything, they’re going to get caught up, make a mistake, have a bad month or a bad quarter. They have inventory that they now are holding, they have bad stocks or whatever that they’re like, Ah, okay, like, we could report these, but everybody else is doing well right now. Everything else is going good. If we were to release that right now, that would really hurt us because everybody else is doing well. If we’re not doing well, then that would look bad.
Brad Gibb 30:45
This proportionally punished we are
even if we might be doing just fine. If we look bad compared to everybody else, then we’re going to be disproportionately punished. So let’s wait not only
Brad Gibb 30:57
are you not only are you measured against earnings standards, you’re measured against the market as a whole. Right? Well, right. And because the market is so liquid if, if nobody likes you today, they can sell and move on to somebody else tomorrow, right?
So much cash, liquid cash in the company in the market right now. So you’ve got the markets going and doing super, super well. So these 500 companies, and I’m sure more than 500 companies are doing this. They basically wait and then they go, okay, we can only hold off for so long. Where’s the next panic? Where’s the next down? Where’s the next out for us, for us to be able to dump this. The economy has been good for a really long time. So they’ve been holding, they’ve been holding, they’ve been holding, and now all of a sudden, Coronavirus hits. Coronavirus comes in and goes, panic. And so the market starts to go like this. Everybody starts to go like this just a little bit. And so the companies go now.
Brad Gibb 31:50
That’s what’s happening. I it feels too reminiscent of 2008. Like, do I have examples that I could pull up and show you? No, but that’s what we studied. That happens. Right. Miracle evidence that in every recession that’s what happens and it feels too fast too quick and too unrelated to to a medical scare that it could I don’t think it can be anything I don’t see how it could be anything and and this
I mean guys right along with the fact that Coronavirus I mean, like we’re you’re not gonna die from it if you get it the only people that have died in America right now are what people that are 70 plus and compromised immune system so like Coronavirus is gonna kill you. So it’s not like literally people are dropping dead in the streets over this. I mean like
Brad Gibb 32:35
it’s not nobody’s turning into zombies, at least to my knowledge, right? Unless it evolves into a walking dead scenario. I think we’re going to be fine. They were going to be fine too. Okay, so what happened? I want to get back to this whole thing, the story that happened at Goldman, okay, because you keep saying like this feels reminiscent of 2008. This feels reminiscent of the recession like what happened there that led you to believe this. Okay, so now I entered going With this empirical knowledge and understanding of like how earnings management works and what’s going on, and then I got this mixed with the understanding of what goes on behind the scenes in a bailout. So 2008 we were being reassured by So just to clarify,
you understand what we just talked about, obviously, not the coronavirus, but like the gap, and how these companies will hold these earnings or losses until time like this before you start working for Goldman or I enter Goldman, and now you’re working for Goldman Sachs.
Brad Gibb 33:29
So I came in with that knowledge. And then now we’re in We’re in 2008, everything’s in full meltdown. And now we’re getting meetings called by the top brass of Goldman Sachs. Right. So they’re holding meetings for us internally to talk about what’s going on the future of Goldman Sachs reassure us that everything’s fine. And their agendas is where massive disconnect. This is in 2008. So like,
The morning so this is the morning that this all goes down.
Brad Gibb 33:57
These are the weeks following Okay. Okay. That Though yeah the Lehman Brothers collapse okay so whenever the I don’t have the date offhand but yeah the weeks following that because we were all freaked out we were all sure we were all getting our resumes ready like we thought Goldman Goldman Sachs gonna be next like what’s gonna go on right so right to keep us all focused as employees and still working so the company didn’t actually go down there were there were meeting after meeting after meeting called and the one I remember specifically was the top brass broadcast to the entire company like CEO dude. Yes, like that the heads heads of Goldman Sachs, as Hey, this is what’s going on with Goldman, reassure us everything are fine. And then regionally, we were broken out. So we were watching it as a big group in our building. And then after that was done, then our local, you know, executives or whoever they were then took QA, right to kind of talk
about they were like tele broadcasting it to everybody. So you have 300 locations around, right.
Brad Gibb 34:59
Right. So everybody Getting the same message and then and then
Cut stream, go to your direct authority. Let’s talk about this.
Brad Gibb 35:05
How’s everybody doing? And so they reassure us, Goldman Sachs is totally fine. Everything is great. We’re positioned differently than Lehman was for these reasons and and then everything is fine. And then here’s what’s going out the bailout. And this is what we’re going to do with the money. And this is how it’s going to be going and the whole time, I couldn’t help but see this contradiction of Goldman Sachs is fine. But we’re taking bailout money. Goldman Sachs is fine. yet we’re taking on X number of billions of dollars a bailout. And so when they cut livestream and start talking, they you could tell they wanted to clear the room as quickly as possible. And so when they asked, Does anyone have questions it wasn’t like, please bring up any questions and help us reassure you. It was more like nobody has any questions right? No one out there. dare ask a question. And this is what I knew my fate was sealed because I found myself all of a sudden, like, My hand was up. And someone called on me very surprised. And then I was surprised that I looked at my hand. I was like, why am I buying this? I have a question because I just couldn’t deal with the cognitive dissonance that was happening here.
Right? Because you’re sitting there like, I’m super confused, because you have more information than probably most people working at at Goldman, because you have gone and done this additional research. So they call on you.
Brad Gibb 36:26
And, and, and everyone looked at me like, what is why is this guy asking a question? What are you doing?
To go me as head of Goldman Sachs? So yeah,
Brad Gibb 36:36
So I asked the question, I was like, Alright, help me understand. You’re reassuring us that we’re completely fine. So why are we taking bailout money, like, help me understand the difference there? And I there were gasps in the room when I asked the obvious question that I was going to ask and the answer was, no, no, don’t worry. We’re playing the game. And we’re Supporting the bailout, we’re, we’re being a player in this to express confidence in in these actions that are being taken. And I don’t know about you, but I look at it and again, like inside of Goldman Sachs, this is a much harder concept to get your mind around, but they actually make markets right. They’re the one right that are really determining a lot of the pricing that’s going on. And so now they’ve got like, knowing what they could do with this. Clearly I can see why they took the money but again, it was it was more of this of this game that was going on in bailouts, none of that bailout money like went like think about that they’re already there’s already a proposal may have already passed. I don’t even know for the coronavirus. Those are not going to hospitals to buy like more IV fluid. That money doesn’t go directly to the companies that goes to the financial markets to bolster the the collateral damage. And that’s what Goldman was doing right they were their prime positioned to take advantage. Have that so.
So Goldman basically says to you, we’re fine. We don’t actually need the money. But we’re taking it any but we’re taking it anyway to the tune of billions of dollars. And now they get to just randomly go decide what happens with that money.
Brad Gibb 38:23
I mean, there were stipulations to it. But But coincidentally, a couple of months later, the largest bonuses ever paid to Goldman Sachs executives were paid. I mean, that was you go back and search that that happened. Right. Banks did the same thing. They made some pretty massive investments. So again, it doesn’t matter which pocket it came from, right if my left pocket all of a sudden gets a whole bunch more cash in it, the cash I had in my right pocket, I can now do things with it that I might not have done otherwise. Right. So even if it wasn’t the exact same dollar, Goldman was positioned, again, Goldman didn’t need the money. Why didn’t it Go to the companies that actually needed the I didn’t go I didn’t didn’t
that’s the question.
Brad Gibb 39:05
Because it’s not meant for that financial markets are not directly linked. And this is, again, it exposes this, this loss dump idea exposes the disconnect between actual company performance and what’s going on in the market and the valuations and what’s happening on the financial side. It’s two totally different worlds that are only loosely linked.
So when the government came in to bail out the banks per se, or I mean, we’re considering Goldman a bank, right? So when they came in to bail them out, what like, where does that money go? Like, I mean, I know like Goldman came in to do but like, what’s Goldman going to use the money for? And how does Goldman getting the money, help stabilize or rejuvenate a market or the economy?
Brad Gibb 39:57
Pull man there’s there’s lots of to unpack and I’m going to explain it in a way that is not complete. It’s accurate but not complete. Okay, so other people would pick this apart and say, No, that’s not what happened. Okay, sure. Other things happened as well. Okay. But But this is an understanding of it. So, what Goldman does to make a market is they will they will buy shares of companies to then sell to somebody else. That’s the definition of making a market, right? They’re not buying it for it. Think about a market as like a What do you call it like a roadside stand, right. And or a flea market? Right? The. So they’re, they’re creating a marketplace to buy and sell securities. And a lot of times they play the middleman on that. So if you place an order for some shares, you’re not buying it directly from the person who owned it. Goldman goes out and buys them and then sells it to you and they make a spread. There’s a bid ask spread. That’s where that concept comes from.
So they basically hypothetically if I’m honest Getting this correctly, I’m going to Super simplify this, let’s call this company one or group of companies, let’s just call them the hotel companies. All right? And Goldman decides, hey, look, we want to boost the hotel market right now. So, in a very, very overview, very basic scenario, you basically are saying they take the money, they go, alright, let’s go buy a bunch of their stocks. They buy up a bunch of shares of the company, right? And now they go, Hey, now they’re for sale for somebody else. And because they bought them up and they’re positioned as this leader of the market, all of us suckers that invest in the stock market go, Goldman bought it Goldman selling it, it must be good. Th”at’s where we go.
Brad Gibb 41:48
Yeah, so there’s a couple things right. They have unprecedent amount of market data so they know which industries are the most depressed yet still the most healthy so they could take the bailout money. Go buy all of that. That action alone increases demand. Right? Right changes prices just in the act of massively buying industries, but then turning around. And, guys, if you don’t think you buy what you’re being sold, then you don’t understand how you even work in your own life. Like we buy what we are sold. That makes sense. Like, yeah, you it just in life in general, like when you go to the grocery store, if you think everything you’re buying is because you thought of it. You’re wrong, like you buy what you’re sold. And so Goldman Sachs is the biggest seller of financial security. So what do you think they started selling? And what do you think people subsequently started buying the things that Goldman wanted them to? I thought immoral or wrong, it just is right, right is I buy peanut butter because I saw that for it rose right? So so they have one direct because they directly influenced demand. And then they can then create the market to go sell it once it’s recovered or force or recovered into it. That’s a very simplified version of I ever would have been done with it at that point. leads into the derivative markets were some of the most affected right, there were some credit issues in the market as well that it could have gone to. But it’s the same concept where they could find undervalued assets, acquire them, either hold them long enough or change market opinion on them to then bring them back up to their valuation. And then and then bring them back out. And then the politicians get to say, see, everything got fixed because the valuation recovered. But then you missed the point that Goldman got our money to buy it here and then sell it out to the broad public here. That’s so crazy. Make sense? Yes. So So if I’m a bank looking at this, and I have precedents, this is what goes through my mind now, in addition to the potential of companies dumping losses, to just say, Hey, I’m going to unload all this stuff at this and that’s going to be a better PR move. You can also look at Bank saying, Man, if there’s hard for me to I want free money just like anybody does. When when can banks get free money when the economy is good or when the economy’s bad
in the bad economy is bad.
Brad Gibb 44:00
Bad. So why don’t those companies who really control a lot of this make their similar moves to say, Oh, we need a bailout. It’s not going to hospitals, it’s going to the financial firms, and they have a lot of control over the public opinion of what’s going on.
So this emergency spending package that Trump administration passed this eight point, whatever billion dollars that he signed into it, it’s not like this is getting a check written to the hospitals to go out and do this. There is a large percentage of this money that is going to the markets.
Brad Gibb 44:36
And here’s why I believe that this is the math I did a couple of days ago. So this is probably diluted a little bit, but when I did it, it was $8.3 billion. And so per death, that was $26 billion, approved it per person who died to 2.6 26 billion per person. If it was only 8.3 maybe 26 million now. 26 million is what it last event out of 8.3 billion Yeah, probably 26 million. So I put a B instead of an MBA
Across the world?
Brad Gibb 45:07
Yeah, across 3000. So 8 million billion divided by 3000, I think is what I did. Yeah. 2.2 point seven $2.8 million per person who died worldwide, not even in the US in the US. We’re now as past wide, worldwide, and then or if you look at it just for everybody who’s sick, there are about 100,000 cases diagnosed at that point worldwide. So that puts it at about 800 grand per person diagnosed. So if you believe that 8.3 billion is gonna go to hospitals, like do you really believe that 800 It costs $800,000 to treat somebody, or to prevent that like, no, it there’s no possible way that that’s where it’s going. That makes sense. Like, this is where you have to put your hat on and actually think for a second and say, Well wait, like, this is the math. No one expects anyone to read. Due and saying, Well, if it’s an epidemic and it’s pumped up, and we could all die with this big Yeah, of course 8.3 billion. And people can’t even process how much $8.3 billion is? Yeah, it’s so much money.
It is so much money.
But I came to mark in the grand scheme of the markets. I mean, what is Goldman do a year? Amazon trillions, I’m sure.
Brad Gibb 46:21
Yeah. I mean, it’s, it’s a drop in that bucket. Right. But so it’s not going to treat people with a Coronavirus. That’s not what just got passed. It’s two bolts. And I haven’t read I pull up an economist article before we got on that. If you really read and look for this, it says to for the financial industry, like two to five I wish I had the quote here in front of me. I was just reading through a bunch of stuff. But yeah, it’s it’s not where did it say it said it right here. It said, we don’t. So it won’t. This is what he was talking about the bailout we recognize that this is the rate cut that the Fed did it won’t reduce the rate of infection. It won’t fix a broken supply chain we get that we do think we we don’t think we have all the answers but we do believe are actually providing a meaningful boost for the economy so all they’re not all that they’re trying to do is fight this this fear valuation of everybody thinking that they lost money and the only lever they have to do that is into the financial industry.
So a arbitrary numbers here just because you know there there absolutely is a direct impact of the coronavirus on the economy from a standpoint of people aren’t moving right like people are going I mean Heck, we got a quarantine notice right I mean, like my word right. So like and people I went to Walmart the other day, like I said, Everything sold out, which I said it’s totally the other day. I was like, man, Walmart must love the coronavirus holy cow man, they just stocking up right? Yep, make their shares no
Brad Gibb 47:48
Sure. people bought fewer plane tickets, but they bought a boatload more.
Why is the entire economy right? And that’s kind of my thinking is like we’re still like we’re still spending money. And never before in history, have we literally been able to spend money while quarantined? Like we could literally be locked up and be spending just as much, if not more, I think about many people, I believe when they’re bored, right? Yep. So they’re like, I’m not going to work. I’m not going here, I’m gonna stay home, I’m gonna buy clothes. So how does the market lose X number of dollars? So you’re saying, hey, look, and this is guys, we just want to be clear here. This is speculation based on education, right? I mean, we don’t have hard facts to back this up. But this is through education of what in your experience. So it’s like, we have a hint to the economy. People aren’t buying airline tickets. People aren’t traveling as much. Maybe they’re, you know, not going on vacations as much. There are certain aspects of that that are hurting, but at the same time, because they’re not spending money there, chances are they’re spending it elsewhere. And even if they weren’t spending it elsewhere, that’s one sector of the of the economy that’s going down. were like, why is the stock market crashing? And you’re saying, hey, pretty good guess I can’t guarantee it. But pretty good guess let’s look at earnings management. Let’s look at the gap. Let’s look at these companies that were the economy has been good for so long. They’ve been holding, holding, holding, they need to dump here’s a chance to dump let’s dump off and drop the stock market. 5000 points.
Brad Gibb 49:21
All right, and then let’s look at the incentives in the financial space as to where the bailout money is going to go and see how they could affect it.
And let’s see if we can get a chunk of that 8.3 billion bucks that Trump just approved because if we get rid of more of our shares, we’re going to get more money hypothetically. Right. Okay. So I want to briefly switch here before we wrap up and talk about why you think that this correction this coronavirus, scare the markets dropping 5000 points, potentially more I mean, I don’t know it’s five or 6000 now is on Monday. I don’t know list today but what Why you think this is a flash in the pan? Or why you don’t think this is going to be the next big 2008 recession or great depression or whatnot, when a lot of people are speculating that it could be why do you don’t think not think that it’s gonna headed that direction?
Brad Gibb 50:14
Yeah, I don’t think it’s the pin that’s going to burst the balloon. Right. And and I think it’s because it’s too focused into localized and almost too sensationalized, like, what the average person didn’t understand what was affecting everything in 2008 where people get their head around all right, there’s lots of people sick, we could all get sick like it’s, it’s a little too tangible and it’s a little too narrow for that. So I don’t think it’s going to be the pin. And also, we already saw the Fed take action interest rates got lowered. Yeah, I just can’t see it affecting I think the recession is going to come from a different pin which is going to be more linked to to either interest rates, debt, it’s gonna be a financial issue, not a medical issue, or something like that unless a war breaks out, it could be that as well. But I think it’s gonna be more linked to again, upheaval and changes in in interest rates, I think the Fed is going to run out of the ability to continually lower interest rates, and we’re already at 1%. Now. And so when when that lever stops working, then that’s when we’re going to start to see that the pin will emerge that will burst that bubble and especially right now where politics is it makes no sense for either side to have the economy completely sideways right now. Yeah. And so I think I just can’t imagine this being
Yeah, and I think it’s super interesting what you said right there at the beginning, which is, hey, like it consumers are educated for a while. In this particular context, it’s like hey, the markets are every single headline if I pull up my phone right now every single headline says its markets tanked due to Coronavirus scare, wreaks havoc on the economy, Coronavirus is that to the global economy and what to do about it. So it’s all centered around one thing, and people I think, are kind of under this assumption of, hey, once we get right once the coronavirus comes under control, everything else is going to go back to normal because now everything else is fine. Everything was good before so let’s just get past this and everything is gonna go back up, right?
Brad Gibb 52:37
Yep. Okay, so when in 2008 when my credit was torn up like mine wasn’t but the average person when their credit was torn apart and they couldn’t get a mortgage. They couldn’t refinance things like they people couldn’t get out of it right. But now when everything is back, they’ll book more plane tickets or book more cruises and it’ll all like it’ll, it’ll sort of self-correct. Yeah, yeah. And what it’s doing and jobs is a great opportunity for Bernie management and the financial industry to do some pretty awesome stuff with it
And if you’re an idiot invest in the stock market I mean I feel like now might be a good time to buy some stocks but I mean don’t do that listen to Brad instead. Okay, last question that I have for you and I’m gonna I’ll let you go I know you’re busy over there that we got this oil war going on with Russia and all that are you familiar with that Russia and Saudi Arabia and oil dropping below 30 bucks a barrel on Monday and all that jazz.
Brad Gibb 53:25
parts of it but give me your take on it cuz I’ve just got it piecemeal.
that’s the same and I haven’t dived in know if you had any thoughts on it if not, no big deal, but I just know that I watched a podcast by Dan Pena you know Dan Pena trillion-dollar Yeah, train our man he was he did a bunch of oil deals and stuff like that over in the Middle East A while back and he was basically saying how look like the Saudi Arabia is going to get fed up with fracking and fed up with people over here in the US, you know, drilling for oil. And all that. And he’s saying how, you know, they claim that they only have a couple hundred billion barrels or whatever, whatever it is reserved. He’s like, they’ve got trillions and trillions. I’ve seen it. It’s insane. They could literally starve us. Like, they could give away oil for the next like one or two years and still be fine set on oil, like literally for free, like all this stuff, right? So my thought process was, oh, so Saudi Arabia gets mad at Russia, they’re mad in Saudi Arabia is like, since they’re fighting with Russia, they’re gonna drop, drop the oil prices all the way down, and in theory, hurt a lot of people in America and hurt a lot of people around the world because if they control the oil prices, and can produce it and give it away for lower than what we can produce it here, then that’s going to hurt our economy. Do you? I mean, is there any truth? Do you know anything about that, or do you not want to speak on that right now?
Brad Gibb 54:45
Yeah, I mean, I again, I’ll I don’t know specifics all I’ll refrain from that on the specifics, but I’ll just ask the stupid question that no one will ask. How is free energy, a long term negative For anybody, like, I like free stuff, especially free stuff that’s very, very useful. So again, it’s a very localized pain that I think that if Saudis are stupid enough to give their oil away or give it away below what they can produce it at, yes, they can affect other countries abilities to profitably because what the wipe away what generally what goes on in oil wars is producing companies have their marginal cost to produce a barrel of oil, right? And if I can, if Saudis can do it for 10 bucks, but it costs Russia $15 right, then Saudis can sell oil at 12 bucks still make a profit not as much as they were, but still make a profit and make it economically non-viable for Russia to produce oil right because it costs them marginally more than it does. And I think it’s a pretty well-known fact that marginally it’s really easy to get the oil out of the ground in Saudi Arabia versus fracking in the United States or offshore oil. Wells and run.
Yeah. And the thought process behind it is, is the Saudis are pissed off because they’re losing their power because we’re doing it now they’re losing the thing. So they’re just gonna sink it sink the price until you have to buy it from them and then they’re gonna go, Okay, now we have power again, let’s put it back and and
Brad Gibb 56:14
What people don’t understand. Maybe they do. But what a lot of people miss here is. So there’s been a monopoly created in the Middle East where they all agree at what price they’re going to sell. Right? So the only way you can maintain that is to keep other competitors that can threaten that out. Right. And so this has happened lots of times happen Brazil, there was a big scare about how much maybe oil Brazil had in the same thing and they reacted they dropped prices to eliminate competitors and then they can raise it back up and enjoy the profits that they want to have. So that I think definitely is probably the game that’s happening being played there. And I think it definitely affects a country like Russia significantly more than it affects the United States. In the long run. I think it definitely because Russia uses oil as currency and as power as well, where the United States we are so much more self-sufficient than most countries and we can pivot and change a lot faster than then other countries can that it I to me I think it’s a short term thing for the Saudis to keep in their power and man I would much rather burn all of Saudis oil now even if it’s expensive or cheap because one’s gone is gone and we got a whole bunch in our country I don’t see a downside to using it right there their resources that way. I’ve sent them paper dollars all day long. Their oil. Oil is a real thing and papers, paper but yeah, I don’t know that. I think that’s what’s going on. And there definitely are bigger, broader issues. Certainly, that happened there, as as you at because oil and energy is almost like currency. At this stage definitely, definitely can cause lots of short term chaos but the bigger thing is is it’s more of that energy independence and if I can’t develop my energy because because it takes a lot of money to develop energy, right and if they shut my ability down and it all goes bankrupt, it now sets me back years and years and years as a country to be able to develop it effectively. Right so it can be definitely a tool Got it. Got it.
Okay. All right, man. Well, I appreciate your time the shortest shortest episode we’ve ever done. Look at that. We made it an hour bro under an hour. That was insane. Hey man, I really do appreciate you coming on guys coronavirus. This is how it affects the economy. This is what’s going on behind the scenes don’t freak out all right, if you get it take some vitamin C get a good night’s sleep, wash your hands and everything will be well back to guys as always, hustle hustle god bless you don’t be afraid to think different. We’ll link Brad’s podcast down below the rise up live free podcast go to cashflow tactics calm slash podcast or cash flow tactics comm slash listen to check that out. Make sure to subscribe. We rating and review. I appreciate you guys appreciate you all. I love you all. And I will see you on the next episode Monday. Who Guess what, one day before the Traffic Secrets launch is Monday. Stay tuned for that episode. We’ve got an amazing, amazing episode for you planned. I will see you then. I love you all. I’ll see you on Monday. Take it easy fam. Peace.
Yo, what’s up guys? You’ve been listening to The Think Different Theory with myself, Josh Forti, which I like to call, “A new paradigm of thinking”, and real quick, I got a question for you. Did you like this episode? If you did, I want to ask a huge favor. See, the biggest thing that helps this podcast grow, and that will spread this message of positivity and making the world a better place, is if you leave a review, a rating and subscribe to the podcast. What that does is, it basically tells the platforms that this is out on, that you like my stuff, and that I’m doing something right. So if you could take like three seconds out of your day and subscribe, leave a rating, and a review, I would be forever grateful for you. Also, I want to hear from you. I want to know your feedback, your ideas, and your questions for future episodes. So be sure to hit me up on Instagram in the DM @JoshForti or via email contact@ThinkDifferentTheory.com