Is this Really a Recovery? What industries will survive? What industries will thrive?

hey everybody it's ken so one year ago things got pretty serious obviously we all shut down the pandemics started the virus started spiking and you guys know the rest of the story so here we are one year later and even back then a lot of economists were trying to predict you know how long this recession was going to happen was it going to be short-term was it going to be long-term and there were all these different kinds of recoveries and so that's what i want to talk to you now about what i think might be the recovery on where we're headed and also potentially some of the problems that we might have as a result of where we are right now one year later so let's first talk about the different types of recoveries as you guys have probably read about and seen from all the different economists and all the different studies that are out there the first one of course is what they call the u-shape recovery so this is a recovery where the business cycle kind of moves along and then it hits down into this recession this is the average gdp and this is called the recession trough and so the difference here this is basically time so you really have two things the gross domestic product or the gdp or the output of the business cycle peak and then how long this is going to happen this is what obviously everybody thought would originally happen so the next one that we need to take a look at was the v-shape recovery and obviously this is what we wanted to happen and it did not happen and that is a real sharp spike from some kind of economic issue like the pandemic we of course didn't know how long it was going to happen how long it was going to last here we are a year later and of course the only difference between these two is basically the time so the first one with the u shape was just a longer time period the v shape of course is a shorter time period and it spikes right back up to become a v the other one that people thought was going to happen was this w shape recovery which is essentially almost two recessions so here we are on the peak we have a time issue here it briefly recovers and then it we go through another recession and then now we are in this new peak well that certainly didn't happen here because what needs to happen here is that everyone needs to rise up and that's not exactly what's going on right now which we're going to talk about in a minute so we're definitely not in a w-shaped recovery because that's basically a double whammy that's when we're in a recession then a mini recovery then another recession the next one which is an l-shape recovery which really isn't technically a recovery at all but i want to show it to you guys of course this is gdp again and this is time and this is the line here and this is the business cycle and essentially this is the slow growth now there is a number of people that are actually experiencing this right now but essentially there's a new term which is called a k-shaped recovery which is where i think we are right now and that basically is a recovery that unfortunately is very very uneven in other words some people have gotten through this very well and some people have not what we're saying right now is this called a k-shaped recovery which i agree with what's really happening is some people are flourishing coming out of this pandemic and some are not so in other words same situation here with this business cycle peak part of the gdp we all know what happened we went into this recession and some of us came out of it and some of us are still struggling along almost like an l shape and a u-shape together but this is basically what they're calling a k shape so this is the issue that we're having right now some industries and some people are thriving through this and some are not and some are going to be stuck down in here and are stagnating even sinking some of these people that lost their jobs and are unemployed are going to be in big big trouble for a long period of time hey guys i know that we threw a lot of charts and graphs and stuff at you here just make sure and know that you don't have to take notes we're going to throw this in the show notes for you and again thank you very much for watching make sure you hit the subscribe button the like all the things we would love for you to do because these things take a lot of time and effort thank you so much so let's first talk about what is a recession the recession if you really want to take a look at it look at nber the national bureau of economic research they're kind of known as the organization that kind of recognizes as the authority of what a recession is or isn't and what they defined it as is the starting and ending dates of a u.s recession of what constitutes this is a significant decline in economic activity spread across the economy lasting more than a few months normally visible in real gdp real income employment industrial production and wholesale retail sales which we have definitely seen so let's take a look at it visually on this graph and what this is as you guys know i like to use the federal reserve of st louis charts and this has another chart that's overlaid with the nber dated recessions and these recessions are in the gray here so you can see on these these are all gray and of course here we are today and the blue line is the unemployment rate so you can see where we are we're about eight percent in 1950 we were somewhere around 10 11 in 1984 1985 and as you guys know we got a lot better and then we peaked again after the 2008 recession you kind of see this this was the leg this was after the recession kind of hit and here we are in 2020 through 2021 where we peaked obviously the highest it's ever been but now that the economy reopened people have gone back to work but in my opinion we're still pretty high right here if you draw a line all the way across so we obviously are still not out of the woods and this is what i want to talk to you about on the lower half of that k part of the recovery you can't really even call that a recovery even though the economists are calling this a k-shape recovery really it's a recovery for a lot of the wealthier people and some industries that are doing very very well so you truly can't even really call this a recovery for many many many people let's talk about the u.s economic booms and busts because i think you got to look at this from a big picture to be able to get an idea of the lags and the things that happen and this is just one more thing it was horrible what we all just went through obviously and that's where we are here but as you can see as you go back we've been here before we are going to recover some industries are going to recover quicker and some are not and there's going to be lots of economic policy thrown around a lot of this but this is back in the 1890s recession we go back to the panic of 1907 there's a lot of talk around the spanish flu and what happened during that period of time and the economic boom called the roaring 20s that happened during that period of time and then the stock market crashed which was in 1929 and then that led us into the great depression and of course we went into war so this was a very interesting period of time for you to watch and a lot of you are going to say oh that was a long time ago that could never happen here well the reason why i put it up here was that you guys can see these periods of economic booms and busts do turn into things and it has historically and just because you haven't lived through it doesn't mean it's going to not happen today so now as you can see in the 70s and 80s we had this great inflationary period and i remember as a kid where interest rates were 15 and 20 percent you went and got a car you might have a 16 17 18 interest rate on the money just to buy that car so obviously we got through that period and then of course we had the great recession in 2008 i went through that i owned a bunch of real estate during that period of time so obviously this is as of the second quarter 2020 and here we are in the first quarter of 2021 the reason i pulled this up is because look at where we are and now we've come up and this is just the difference between quarter to quarter on the gdp from let's say last year to this year this is a very important piece for you to watch the question is how high are we going to go and where's the economy heading and how much output and how much business activity and how is the spending and all the things that could that are going to happen in 2021 where are we heading because that's going to be the big difference on where you want to be for your real estate investing for your renters and where you're going to want to move your money so let's first talk about this k-shape recovery so what they're saying in 2021 prior to covid 2019 the economy was doing pretty well no matter where you were on that economic scale if you were making a lot of money you were salaried high paid business owner or whether you were working a peace job and working as a working in a restaurant or amusement park it didn't really matter generally everyone was doing pretty well till about here which was march of 2020. then of course we hit this economic recession and everybody fell and the ones we now know that have recovered and i think it's more important to focus on these industries rather than the people i know a lot of the media tends to go to the people and honestly this is affecting everyone and so what we really need to focus on mostly are the industries not to say that all that stuff isn't important but really there's massive industries that are doing very well and massive industries that are not so if you want to invest somewhere you want to work somewhere you want to start a career somewhere you obviously need to focus on the recovering industries and not wait for the industries that need assistance right now today and that are on a lifeline with a lot of government assistance so here's a couple recovering industries technology retail software services and when i say retail what i mean is really direct to consumer or online purchases not necessarily the big box stores we'll get into that a little bit later but retail was really up during the pandemic because people were ordering from home and things were being delivered to their home and they weren't going out and shopping the industries that need assistance are travel entertainment hospitality and food services now this should not come of a surprise to you guys but these industries have changed dramatically all these industries are in various stages of transition you got the travel industry which is obviously hotels and airlines and cruise ships and things like that the entertainment industry which i have friends that own theaters they own movie theaters i have one guy that owns like 60 screens that's what he calls them screens he's obviously in big trouble and that is he's paying rent to some landlord who's also in trouble the hospitality and the food service industries as you guys know is a lot of piecemeal and very seasonal these are industries that are going to be changed for a long period of time so if you're going to stay in these industries you guys need to know that things like ai and things like that are changing those industries as a lot of these are going online they're going on takeout and things are happening without people as these businesses have tried to figure out how to stay open on the recovering industries they need people so these are industries that you want to be out in front of whether you're investing and you have renters in that area or whether you just want to change careers these are industries that you want to be in because these industries are here these are definitely recovering they say that they're not technically in a recession anymore but these people are definitely still in a recession and these are mostly in the industries of travel entertainment hospitality and food services so when you hear people talk about a k-shaped recovery what we're really talking about are certainly people what we're really trying to say here is certain industries are going to flourish here and certain industries are not and they're going to be changed permanently and you're all what you're going to see is a massive massive round of discussion and stimulus dollars here i really believe that we're going to spend a lot more money on these people here a tremendous amount of money focused down here so if you guys have anything in this particular area you might want to take a look at potentially exiting changing your focus over the next few years into these recovering industries these recovering businesses and by the way as you guys all know it's not limited or restricted to just these there are several others that are doing very well all you got to do is go look on the internet so now let's talk about the areas of major weakness and we talked about how we're having a k-shape recovery and some people financially are doing very very well and some people are not so this is the unemployment rate from 2014 to 20 january 2021 it was actually through march 4th but it's as early as i could find before we were shooting the video today but again if you guys look this unemployment rate is still pretty high if you take a look at and what they're saying is that we still have about 10 million jobs that are never coming back these 10 million jobs are simply missing and as of the beginning of the year there were about 8.6 million fewer employed than there were a year ago just before the pandemic began threatening the united states according to the bureau of labor statistics what that means is we have about a 10 million person issue right now today and as you guys know the economy is pretty much open right now a lot of the governors are releasing their mask mandates a lot of the vaccinations are happening a lot of the states are opening i understand a lot are still closed and i understand their safety issues i understand that might not be exactly the case in your particular sub mark from a macro it looks to be like in the next few months most of the united states is going to be back open and i don't actually see this number getting any better so what we were really taking a look at is we have about a 10 million person unemployment 10 million people have been displaced 10 million people are going to be financially harmed over the next period of time that's going to be a massive weight on the economy moving forward so if we just look at the hospitality industry alone almost 4 million jobs from one year ago have affected just that industry and just in that hospitality industry we have a 16 unemployment rate in just hospitality if you own real estate investments or rentals in those particular area the chances of those recovering in the short term are probably not that great so the big issues facing us right now in my opinion is we're going to have some food insecurity here we're going to have some poverty and we're going to have a quality reaching generational highs as a result of what we just went through so what does all that mean if you take a look at the 2021 projections for gdp but let's first take a look at what gdp is so gdp as i said is an estimate of the total value of all goods and services it produced during a specific period of time usually a quarter or a year its greatest use as a point of comparison did the economy grow or did it contract as compared to the prior quarter so gdp can be calculated by adding up all the money spent by consumers businesses and government in a given period of time it can also be calculated by adding up all the money received by all the participates in the economy so that would be the stimulus money in either case a number is an estimate of nominal gdp and then one thing that you really need to be careful of here is that real gdp actually does not include inflation it's just the real output whereas nominal gdp actually is adjusted for inflation and we're going to talk a little bit about that in a minute so let's look at the projections here for the next nine months in 2021 as you can see from the congressional budget office what they're showing here is massive expansion in 2020 what they're projecting here is that the real gdp growth is spiking right now we're gonna actually have a pretty robust anywhere from a four to five percent gdp not far off of what we saw pre-pandemic so that's what the congressional budget office says right now one thing that they did say that i think is really important and of course this is a guess is they believe that the number of people employed is projected to return to his pre-pandemic levels in 2024. so what they're saying is that we're going to have a rough few years of unemployment until we get back to that period of time obviously we don't know if this is going to happen or not but that's what they believe is going to be true at this time obviously that would be great for everybody if that did happen another great website is statista which i like to show as you guys have known i've showed this before so this was the 2019 gdp this was the original forecast for 2020 gdp basically 2.9 and then this is the pandemic so this is 2020 and this was the reforecasted 2020. so this is what they thought it was going to be and this is what it was so now what they've done is they've taken the original forecast for 2021 which if you take a look at the congressional budget office from a gdp standpoint they believe that we're back to where we were pre-pandemic and what statista says is they've actually reinstated the gdp to go up another two percent so they're saying that we should have a gdp growth of 2021 and why is this important guys and how did this number get to be what they're saying is people savings are up really high and now that some of the stimulus has hit the economy that they believe people are going to go out and start spending again and that's going to give us a tremendous bump you're going to see this rise in gdp so now let's take a look at what i think are going to be the real issues moving forward i think we've got a human factor to deal with as well so in other words when the government talks they talk about real gdp and economic growth they're talking about real wages labor productivity and investment as you guys know the stock market is all-time high bitcoin's at all-time high real estate's an all-time high mostly in markets that have low supply which is a lot of markets right now and i as you as i've said i think that's going to change but we still have high inflation we still have high unemployment and this current account here that's our deficit that's still high so the only thing really that's doing well is this gdp number which i just got done talking a lot about but it's not the only thing and i think one of the bigger issues that we all need to focus on and something that we can really help everyone with next year is this well-being index and nobody's really talking about this and that's why i'm talking about the human factor so these are real things that you guys can help with in 2021 and 2022 and that's life expectancy happiness levels and environmental factors and what we have here is we have real issues going on that not a lot of people are talking about one is we've talked about the government borrowing and the national debt we've already discussed all that but then we have real disposable income for people going down because of these inflation numbers we have income inequality which is being talked about right now and there's going to be more and more policies i think going after the rich taxing them and trying to distribute this money equally we got exchange rate issues we got investment level issues here are some things that you really need to watch for next year i think we're going to have increased poverty i think we're going to have increased crime i think we're going to have education levels that have really been disrupted from the quarantine but also from you know these kids learning in the zoom and also i think people are starting to question is college even worth it i think as you guys know we have unemployment high i do think for a lot of you guys they're investors obviously we're going to have a lot more renters i experienced this in 2008 when everybody got disrupted and then of course we have i think a mental illness issue as well so these are real issues that are affecting people and it doesn't necessarily get reflected in the gdp numbers that i was talking about earlier but the government is going to focus you there so if we can do anything here it's to support the small business there's four million small businesses that are in trouble that have run out of ppp i know this is a political hot potato but there's 31 million jobs that represent small business in the united states and a lot of these small businesses are in big big trouble and they employ people one two three people at a time and they need your help if you guys really want to make a difference this is the time to embrace entrepreneurship this is the time to start taking a look at some side hustles this is the time to start looking at starting a small business that can grow some of the best big name businesses that you guys know today all started during recessions or at the end of some of these recessions as the economy came out of this if you really want to make a difference start taking a look at what the economy needs solve some problems start to be a producer and not as much of a consumer you can help all these things you can help all these people just by being in the right place at the right time so thanks again for listening

Channel: Ken McElroy

Views: 39,018

Keywords: Rich Dad, Entrepreneurship, Investing, Personal Development, Get Wealthy, Earn Wealth, Ken McElroy, Entrepreneur, Rich Dad Advisor, Success, Business, Self-Help, Coaching, Real Estate, Real Estate Entrepreneur, Real Estate Investing, Freedom, Lifestyle Business, Hustle

Id: CSAKl2yKX00

Length: 23min 34sec (1414 seconds)

Published: Fri Mar 26 2021