← Problems to Profit
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Are you tired of complicated business advice that rarely delivers any real results? I'm Preston Brown and I've built a nine figure portfolio by following simple business formulas that anyone can use. In my new book, you, First Million Made Easy, I reveal the exact system that I've used to generate hundreds of millions in revenue. And it's frankly a system that works in any industry, with any business and yes, in any market. The good news, it's not about hustle, it's not about running or working or struggling and what it is about creating money instead of just earning it. Because earning money is slavery while creating is freedom. It's about stopping the cycle of managing by crisis and building a business that doesn't depend on you. Transforming your business from a high paying job to an asset that generates money even when you're not there. Whether you're a startup or an established company, this formula will transform your business into a profit driven machine that gives you the time and freedom to to focus on what truly matters. Grab your first Million Made Easy now and let's start the journey of financial freedom together. I look forward to being a part of your story.
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Getting prepared for a potential economic downturn in 2025 is something that every entrepreneur should be doing. You want to make sure that if something comes, you're not caught in the chaos. Am I saying there will certainly be a downturn? No, I'm not. Am I saying that there are likelihoods that one could happen? Yes, I am. If you're not hedging for both the Trump super victory that we're all hoping for, where he's going to turn everything around, it's going to be a clapper, it's going to be a magic up acceleration. That's an awesome option. But we should also look at these significant threats to our economy that exist currently today. With the multiple wars, with the inflation that we have had under the Biden administration, with, with the frankly stall that we've seen in the real estate market, with the pain we have in the bond market, with the craziness going on and the massive overvaluation in the stock market, with the labor recession, the Bureau of Labor Statistics has basically hidden that happened in 2023, 2024. I mean, if we're not looking at those and thinking, wow, could any of these bubbles, what about the commercial real estate debt in the banking, could any of these bubbles hurt us? And the answer is yes. I mean, like, look, we're all hoping that everything's just going to go up. We've got a new President it's all going to be better. But guys, we need to also prepare for what could happen. I guarantee you, if you had access to the top boardrooms, the Googles, the Apples, the Microsofts, the Amazons, the Teslas, you would find them all talking about, what are we going to do if the market pivots? Okay, there's always the business you are today and the business you are becoming. And sometimes when there's multiple things that could happen, you need to look at what businesses could I become, what pivots could I make if there were circumstances, one or many, that happened or compounded and exacerbated the market? Remember over the last four years, the market which normally substantially changed over about a three to ten year period, started changing over a three to six month period at the same time, you know, same amount of change that it previously had in three to 10 years. All right, so on this episode, what you need to know so you can be prepared for the downturn and how, what you need to do to prepare, trust me, when relying solely on past strategies or waiting until the next recession hits, that's not the right plan. Okay, so if you're ready, let's dive in. Question one. What's going on right now in the economy that entrepreneurs need to understand? I'm going to try to put this in plain English. There's no way to put an economy into plain English because frankly, it's complicated on purpose. Okay. The reason the rich get richer and the poor get poorer is because the money system has gotten more and more complex since the 1970s when Nixon removed gold from the dollar and we switched from a currency that was asset backed to a currency that was fiat. We created what is called an arbitrage economy. We effectively changed the dollar, but we didn't change the Federal Reserve or the government that managed the dollar. Okay, that's sort of like saying, hey, I'm not gonna use this nail anymore, I'm gonna use a screw. But I'm not changing the hammer to a drill. I'm gonna use the hammer on the screw to fasten things. Okay, so is there a way to do this in plain English? Probably not. I don't necessarily like to make predictions on what is going to happen. I like to make predictions on what could happen. And Ray Dalio, who's kind of a hero of mine, he's a self made billionaire, runs a fund that has just done phenomenally well. He says if you worry, you don't have to worry, and if you don't worry, you have to worry. So Why? I don't want anybody negative and I don't want anybody stressing. I want to go through this episode on things we should worry about. One, labor data. I think this is a significant threat to our economy in this country. Okay? We are at risk of going into a labor recession. Nobody out there thinks that the Bureau of Labor Statistics has produced good, high quality data for the last four years. If I'm honest, it looks like they've basically been covering up the malfeasance and frankly the idiocy of, of the Biden administration. They've been reporting jobs data that makes absolutely no sense. And anybody that's paying attention, it's funny because the market reacts to the jobs numbers when they come out, but it doesn't react to the revisions when revisions come out a month later and take away all the jobs that just came in. The labor recession might have hit sometime in like October, November of 2023. And we just like wiped it away. We just pretended it didn't happen. It was like, I don't know if you guys have ever seen that, like somebody waving a flag. Look here, look here. Don't look at the thing happening over here. Look here, look here. That's kind of what's been going on. So we have a crisis, I think, in labor. I mean, yes, we've had good jobs numbers, so we've actually gone down a little bit in the quality of labor that we've delivered. People are taking on side hustles. They're becoming Uber drivers. They're doing anything they can just to maintain the their income. They're working more hours. I mean, you know, in the long run, this is going to cause a major, you know, crisis. Because if you had a parent four years ago as a child and now that parents working three jobs to make the same living and deliver the same lifestyle with inflation and bad labor data, then where's that going to put you from a standpoint of the quality nuclear family that we all kind of look for and hope for, that's already been destroyed by the divorce rate and now it's getting destroyed by people having to work how many jobs just to maintain current life needs. So that almost guarantees us pain in the long run, but in the short run, that labor data could come out and mess us up. Another thing, and this is just something to watch, something to pay attention to. Yes, we have a new president. Yes, that's exciting. But our last president's Treasury Secretary, Janet Yellen, borrowed tremendous amounts of money and frankly did so on short term. High interest rate. Bonds and between our debt and bonds that are now going to have to be reissued, new bonds, for the bonds that are coming due, you have about $7 trillion. Seven trillion. So we're not talking just a standard $2 trillion deficit which you generally always have in the last eight years. We're talking about $7 trillion. And if people trust the government less than they ever have, which is fair, you know, when there's a giant pedophilia scandal between Epstein and Diddy and there were all the famous Hollywood people and all the government officials involved, and for some reason they won't produce the list for the public to know who did it. Makes you wonder who's driving this ship and if we can trust them. You know, people are not gonna go out and be like, oh yeah, I trust the government more now that I know they're all a bunch of Pedder asses. So what do you think that's gonna do to bond prices? They're gonna drive up the prices if they can't sell bonds. So if they can't refinance the debt with new bond issuance, they're going to have to raise the price of bonds. What's that going to do? It's going to raise interest rates, it's going to make everything harder. Mortgage interest rates almost directly follow the 10 year Treasury. You can generally see 160 to a 200 and 250 sometimes basis point spread over the 10 year Treasury. Well, if the 10 year treasury gets much more expensive because nobody trusts the government, what, what do you think that's going to do to productivity in our country, which is the real metric everybody should be looking at. If the cost of debt goes up in an arbitrage economy, which in simple English means a debt driven economy goes up, then there's going to be less debt that people can afford because the debt is more expensive. If the debt is more expensive because they have no other way to motivate people to buy the debt, then we are going to cause a recession in 2025. Now do I think that'll happen? No, frankly I don't. I think the Fed, who is being very hawkish right now and saying, hey, we're not going to do the rate cuts, we're not going to do the pivot that we said we were going to do, we've completely changed our dot plot. They did that like on December 18th of last year and the markets have not reacted well to that. We've seen some stock market dips and everything else as a result. I think the Fed will pivot immediately, they'll turn around, they'll bail out the government, they'll start buying treasury bonds. But if we get that, you're not going to get a recession. You're going to get inflation. And inflation eventually does lead to interest rate gains because it's the only way to cure inflation. So how do we get ahead of this? That's another threat. And we'll jump into how to get ahead of it a little bit. I don't want to lose track. Let's talk about commercial real estate and banks. You know, banks, when interest rates are higher, actually don't do that bad. Especially your local banks. A lot of the local banks, like, you know, I know we had a little banking crisis a few years ago and we actually lost. It wasn't little. I mean, we lost dollar volume, more banks than we lost in 2008. So that was a big issue. And a lot of it was on bad commercial debt, bad bonds that they purchased when interest rates were low. And we all knew interest rates were going to be low forever. But now those same banks are dealing with commercial real estate debt, which was going to be improving massively as the Fed cut rates, but is now going to improve at a much slower rate because the Fed has turned around and said, no, we're not going to cut rates as quickly, which is significantly impactful to single family real estate and commercial real estate that was already upside down on their debt. And so we might see banks saying, yeah, we're not going to lend as much. We kind of want to recover. We want to, like, you know, slowly work out of all this pain. I don't think we're going to see as many bank failures, but once again, it's a financial problem because if they lend less, there's less productivity, and productivity is the real metric. Another one is there's just not enough places to put your money. And we've seen a massive influx of capital into the stock market. Well, the real estate market stalled because the cost of money went up super high. So people didn't put money there that otherwise would have gone in there. They would have used it to buy a house, used it for this. Everybody got an app on their phone, the Robin Hood, the this, that, the other, and they started buying stocks. And that was all good because stocks kept going up. For the last four years, despite a relatively bad economy, the government has pumped trillions of dollars into their big crony companies, their Wall street fat cat friends, and, and at least the s and P500. The beneficiaries a lot of that government spending have boomed. You know, your common stocks, your regular stocks have not done anywhere near what the s and P500 has done. But now they've had some gains as well. But you're seeing a lot of those folks that have been putting their money into stock drive up the value of stock. You're even seeing a lot of those folks borrow money to buy stocks. You're seeing a lot of companies more recently saying, okay, well we're existing on margin, which just means you borrowed money to buy stock. And they're saying, okay, well we're going to sell stock to pay down margin. Because we're worried about, you know, recession, we're worried about inflation. Worse, we're worried about stagflation, which is when you have inflation and you know you're having to drive up interest rates, you can't even stop it. Right. And so when people are selling off their margin, you can see optimism is declining. So that's another significant threat. Another thing that I find interesting is we actually have had an inverted yield curve. For years now, we've had an inverted yield curve. What that means is your short term bonds are trading at kind of a higher rate than, than your long term bonds like it should be. If you tie up your money for longer, you get a higher rate of return because the risk is your money's tied up for longer. Well, short term bonds have actually been inverted where they're getting more money for the short term than you are for the long term. That has recently uninverted. And normally when bonds un invert, you start feeling the pain that that was caused when they were inverted. And so we live in a new time. We used to be kind of in this world where cash is king and we've kind of moved to a world where cash flow is king. And the way you get cash flow is through debt. And we've seen it. It happened first with the government in the 70s and then we saw it follow quickly in corporate America. And even some of the big banks started borrowing money to loan money. And so they operated on the debt business. Then you started seeing it in the entrepreneurial real estate sector, kind of middle market companies started doing that. Now you see it even in small businesses. Almost everybody operates on debt. Well, that has a bottom. This all trickles down, right? And now it's trickled down to the consumer. The consumer has the highest credit card debt that we've seen historically, ever. So there's a lot of bubbles in this market that are close to burn, bursting and or are in the process of bursting. And will this cause a recession? No, but what I think it's going to cause is affordability issues. Remember, we got to look at what the definition of a recession is normally like. I mean, a stock market recession is when stocks drop 20%. Okay. Recession in Europe is when you have two negative calendar quarters. A recession in America, we have no idea what the definition is because we've probably been in one for the last four years. But the Biden administration, like everything else said, we need to change the meaning of the word recession. Oh, no, that's not a technical recession. Oh, no, this is not a technical recession. They never told us what the technical recession actually was, but they did tell us that we weren't in one, even though we had two negative calendar quarters, even though they revised that away late later. It was kind of funny. But a recession is generally when things go down. It's when you have deflation in pricing, right? A stall is when affordability creates a crisis and, and, or lack of affordability rather creates a crisis and people just buy less goods. People say, okay, well, I can't afford this, so I'm going to live off of less. I'm going to try to meet my needs with less. I'm still going to keep doing what I'm doing. I'm still going to try to maintain most of my lifestyle, but I'll live on credit a little bit. I'll get a second job or become an Uber driver to pay it, and I'm going to buy less stuff because everything costs more. And you don't generally, in a stall, see deflation in pricing. What you see is, I mean, you can, if it gets extreme, but normally deflation and pricing during a stall is also preceded by substantial amounts of bankruptcies, big and small business bankruptcies. And while we've seen a good amount of that, we would need far more to indicate that we're all the way there. If we get into a stall, you're going to see kind of supplies building up, manufacturers producing less, and slowly. There will be layoff cycles and eventually, and we've already seen the beginning of this, the Fed will have to make a pivot to avoid a recession. When you have an arbitrage economy that is running on deficits, which we are, we're in wartime spending even though, well, I guess we kind of are at war. We're just in proxy wars, but we're at wartime spending in peacetime, we can't afford a recession. So you will see the Fed bail us out. So what is my prediction for 2025. My prediction for 2025 is we're gonna have great oil policy, we're gonna end some wars, we're gonna improve international trade, but we're gonna be in triage, we're gonna be in kind of like the hospital. Like we had a major train wreck, car wreck impact situation that hurt everyone in 2020-2024. Bidenomics was an epic disaster. We literally elected a vegetable. Guys, you should eat your vegetables. Please, for the love of God, stop voting for them. And you know, with that we're now post rec, but we're not gonna have this like immediate uptick. I think 2025 is going to be mirrored in a lot of ways to 2024. We're in recovery, we're in the hospital right now trying to figure out what's the real condition of our condition, how do we cure this cancer we have. And I think the only way through is going to be with inflation, but hopefully it'll be a more comfortable inflation. I mean, guys, we're built on inflation. Like we live in a Keynesian economic reality, okay, like our Federal Reserve, even though Greenspan said we should never admit this, wants 2% inflation annually. And they set that target and they should set the target in 2025 for what the new normal is. It won't be 2%. It can't be 2% anymore. I mean, they're going to have to elevate that because it's not just us running on arbitrage, it's now the entire world running on arbitrage economies. So we need more inflation to bail our government and the governments of pretty much every country in the world and all the corporate fat cats that have been in bed with the government and the elites that have, you know, propelled all this stupidity forward. We need inflation to solve this. But we've got to have inflation that doesn't destroy the middle class. Like there's good inflation and there's bad inflation. Good inflation is when it starts from the bottom up. And the bottom up can only happen if entrepreneurs and investors are investing, which, which means it starts from the top down to create the bottom up. When I say the top down, I'm not talking like your standard trickle down economics, like where we try to just make the rich richer and kind of what, like the left paints it. We do need to de risk creating opportunities. We need to improve efficiency. We in our country do not have a debt problem, we have an efficiency problem. And the only way forward is either to cut spending massively, which we will not do like. Or maybe we'll cut it some, maybe we'll get to a balanced budget, but that'll be over four to eight years, not 2K. And so that's not a viable solution in the short term. Or we can raise taxes to, you know, 200% instead of the, what, 55% that it is for the average American? Because you got to think, like, even if you're not rich, 55% of your money goes to taxes. Whether it's property taxes or sales taxes or state taxes or income taxes or corporate taxes or Medicaid, Medicare, you know, there's a tax for everything. Fuck. There's a death tax. If you're wealthy and you die, they take some of your money. Like, they tax everything they got. So egregious they wanted to tax unrealized gains this last year. I can't even believe that was a real conversation. So there's no way to tax our way out of the problem. There's no way to cut spending and create more efficiency there. The only way forward is inflation. So how do entrepreneurs get ahead of this situation? What's going on and how do you get ahead? Make sure you are in inflation. Hedge assets. What does well in inflation? Gold and precious metals. But there's no cash flow associated with those. So can you get into mining companies that are mining gold and precious metals? I like those. I'm still bullish on those. I've been buying those for a few years and I've done pretty well. They generally have good dividends. If you're going through the stock market as well, what else is good on inflation? Wholesale real estate transactions. Right now, I would be looking for the deals that struggling people are selling. Okay. So if you're looking at large scale deals, multifamily shopping centers, things like this. I hate to say this, but you need to be cutthroat. Like, you need to understand that the people that are selling right now are the ones that are bleeding. And you don't want to buy their problem. You want to buy your solution. So you need to negotiate very aggressively and bring that deal down to wholesale. I'm seeing transactions right now go by where, you know, there's buildings that sold for like 25 million and then they're selling for like 7 million. Why? Because that's probably the real value. These are like office buildings in the sector that was hit extremely hard by Covid. Right. And they've just run out of money. So real estate does really well in inflation. Okay. They're not making enough New real estate because we have supply chain issues, we have costing issues, everything's gone up like people can't afford it. We have financing and debt issues like it's too expensive. So I think real estate, I'm very bullish on that over the next 10 years. But you need to get in wholesale so you can survive it. You know, if you're a homeowner looking for a new home, I would be looking for either resales that you can get at a good price or I'd be looking at builders complete new home inventory. I, I wouldn't be going for all the pre sales right now because the builders are not going to give you the specials on a pre sale that they're going to give you on that new home inventory. Builders have one home that they live in and if they're a big builder, hundreds or thousands of homes that they need a warm body to move into. And once that thing gets complete, it's a liability, not an asset. So you can generally get pretty good, you know, deals done on new home inventory. So for investments, what kind of businesses would I be getting into? In this type of economy, luxury products equal luxury margins. I would not go with anything that is not a luxury product. Because in recessions who gets crushed first? The poor and the middle class. We have a shrinking middle class. I would sell products that I knew that the rich would and could buy. That is something they're interested in because they never stop buying. Let's be real. Rolexes never stop selling. Selling. Okay, Timexes do. Nobody needs a wristwatch. Which one should you be selling? The one the rich guy's buying because he'll never stop buying. So I'd invest in things that are an inflation hedge. I'd invest in things that rich people will buy. I'd invest in luxuries. One of my questions that I have to give you all is how will this impact the listeners companies? Well, it kind of depends on what company you have. Like if you're in the real estate business, it's going to impact your company much more than if you're in the coffin business. People die in recessions just like they die in booms. Okay? Sometimes more people die in recessions than booms. So if you're in a need based business and you sell tomato soup, you'll be impacted. If you're in agreed based business and you sell, you know, non luxury items that are discretionary spending items, you're going to be dynamically impacted. If there's a downturn, do I think there's a downturn in 2025. I think 2025 will be a slight improvement over 2024. I do think there will be a downturn. I do not think it will be a recession. I think it will be a stall. Big reason for thinking that real estate's been stalled for two years. It's a leading indicator for the economy. Guess what? We're already seeing signs that the economy is going to stall just like real estate did. But guess what? If you're in the real estate business and the economy stalls like I predicted it will, you know, it gets bailed out first. Real estate, you know how to get an economy to boom overnight. Get housing running. Housing generally impacts 25 to 35% of the population because of all the goods and materials that go into the production of a home. The Fed drops rates. They make things more affordable. You see inflation come down. Hopefully the tariff battles don't go too crazy. We see mortgage rates drop. Housing will be the new leading indicator. It means we'll have a great 26, 27, 28 at some point, once we're all the way through whatever downturn we have, whether it's a stall or recession or anything else. But I do think we're going to see some stall. I think 2024 is going to be your mirror. I hope this adds value. I hope this helps you guys. I hope you all have an amazing day on purpose. And I hope you don't just look at the business you are, but also at the business you need to become to get ahead of what's coming. All of those different things can affect your business differently depending on the industry you're in. I cannot give you advice on how it's going to affect this business or that business or this business, because frankly, there's a million different types of businesses and it will not be the same for all of them. Have an amazing day on purpose.