How to Lose Money by Not Being Prepared for the Apocalypse with Neal Bawa
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PAUL: initial jobless claims this week the week of March 25th 2020 rose to five times their record level in US history hi welcome everyone I’m Paul Moore.
JOSH: and I’m Josh Thomas how to lose money is a podcast where we discuss defining moments of success through distinctive stories with failure of failure with business owners, investors and entrepreneurs.
PAUL: today our guest is Neal Bawa who’s going to tell us how to lose money by not being prepared for the apocalypse hey Neal.
NEAL: hey there Paul great to be back on the podcast thanks for having me.
PAUL: yeah this is a special episode and josh is gonna take it from here and tell us what is going on in our show today.
JOSH: so yeah normally we we kind of go through a single failure and and we extract some lessons from that but at this moment in time in history the entire planet is struggling with the same thing with the global fallout and the economic impact of the coronavirus and so there are a lot of health issues and health concerns and there are also a lot of economic stability concerns and everybody’s running around like crazy well while they’re sheltering in place of course of course but you know there’s there’s a lot of questions and not a lot of answers and so we’re bringing Neal onto kind of talk about this a little bit and so so Neal will kind of dig into this a little bit in a second but just kind of give us you know if you were to sum this up in one sentence what’s happening right now?
NEAL: I think it’s a failure amongst our part amongst every nation on earth to anticipate a pandemic I you know people call this Black Swan I say it’s a failure to anticipate a pandemic given that this is not the first one.
JOSH: hmm so and so we’re gonna we’re gonna kind of dig into what that means to us here in a minute but Paul Tell us a little bit about our guests today somebody that’s a you know Well-known good friend of both of us.
PAUL: yeah Neal Bawa is the mad scientist of multi family besides being an entertaining speaker Neal bow-wow is a data guru really is a process freaking an outsourcing expert Neal treats his 200 million-dollar multifamily portfolio as an ongoing experiment in efficiency and optimization the mad scientist lives by two mantras his first mantra is that we can only manage what we can measure his second mantra is see rule number one I’m Just kidding his second mantra is beats gut filled by a million miles these mantras and a dozen other disruptive beliefs drive profit for his over 500 investors Neal we’re so glad you’re on the show before we jump into this I just finished a mastermind call with some of the smartest multifamily guys in the country people we would all know including Michael Blanc and reboots what do you think is going to happen if you had to predict it’s so hard but if you had to predict what’s gonna happen in your 200 million-dollar multifamily portfolio what do you think is gonna come down the next few weeks you can just give us the same answer there.
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PAUL: how do you know you are immune I mean I mean I get it that you can have a higher level of immune system.
NEAL: you’ve already gotten it not shown symptoms so keep in mind that sixty percent of the people that get this don’t show symptoms and if you got it didn’t get tested during the 15 days that you had it then you already had it and you don’t know right and you didn’t show any symptoms so you are never going to know unless yet there’s a test that shows you that pricks your finger and says ah this guy has antibodies for coronavirus in his bloodstream therefore not only is he immune but for the next six months he cannot distribute the virus to other people that’s good news even though they correct it all of this is conjecture but some of these things are happening this device that I mentioned the 3d printer device was invented by a hospital system in one of the most affected counties and so I’m pointing out that human ingenuity and American ingenuity will kick in over the next four months so I think a four month hurricane and I don’t want to call it a category 5 I’m gonna call it a category 6 because nothing like this has ever hit us and so to me the big question is you know can be survive the next three months or the next four months I think that the stimulus bill check off a bunch of boxes there I do think that I have to say this have you ever seen Congress move this quickly I mean they didn’t do do so in 2008 they had a very tiny bill in the first few weeks and then it took him a few months to come up with the next step but this bill they started working on it 14 days ago and today it’s likely to get the president’s signature so I think that I have to say and I’m usually very nasty when I talk about Congress but in this instance I think they’ve done their part the other thing is I mean if you look at
the Fed instead of doing what the fed’s a Federal Reserve always done which kind of stagger and slowly move on steps I think they threw the kitchen sink they went around the house they ripped out
all the other sinks they ripped out all the plumbing and they threw it all at once because they realize that this thing is different from every other enemy we’ve ever had and that is because and I want to state this this is I think the most powerful thing that I’ve learned about the coronavirus human beings think in linear terms 1 then 2 then 3 then 4 then 5 so by the time we get to 5 the virus gets to an astonishing number because the virus is not linear it’s exponential right which means it goes 1 10 100 1000 10,000 so in the time that human beings have gotten the 5 the virus has gotten to 10,000 and I believe that the people that understand the exponential function are the people that fought these kinds of pandemics before Ebola and SARS and Mars most people keep drilling it into the politicians that you cannot react normally because this thing grows very fast so imagine an adversary that was fighting you in 40 50 countries two weeks ago and then it was a hundred countries and then it was 150 and now it’s 193 today 193 countries and in each country it doubles every three to seven days in size so you’re fighting Godzilla only Godzilla is 3 to 7 3 times as twice the size in 3 days right and in some parts of the US twice the size every two days so I believe that we are beginning to understand that an hour respond rates are improving as a result of that and that’s why we have Congress that has passed a law in two weeks.
PAUL: Right so I was on the phone with a friend from Shanghai and Hong Kong the other night we had a conference call and they said that we’re crushing the US and they’re both Americans by the way they said we’re crushing the U.S. here in China as far as fighting this because number 199 and this is their number I know if it’s true 99.999% of people are wearing masks and really social distancing and second we built two hospitals in Wuhan in ten days each America can’t even get a architecture plan you know a permit in 10 months far less ten days what do you say to that Neal?
a five-day growth rate in infections it leads down to 9.6 Spain is down to 18 point one South Korea 1% Iran 6% and the United Kingdom is down to 18 Jeremih Down to 13 here’s what I can tell you here’s the good news in every single case all the numbers that I’ve mentioned to you those five-day rates are lower than the five days before all eight instances and one of those include China by the way all eight instances the five-day run rate is grower than a four days is lower than the five days before that and
here’s the real good news the one-day rate yesterday in every instance was once again than the five-day rate it’s already slowing but we can’t see it because everyone is just looking at the number of cases everyone’s looking at number of cases and I’m telling you Paul The number of cases is not relevant it
will always grow faster because you know it’s affecting more people but you know what it’s important the only number that’s important is what is that the growth rate it’s daily growth rate because if it stays at 25% it’s gonna kill us all but the good news is our 30-day growth rate is 33% our five-day growth rate is 28% our one-day growth rate is 24%so even though the u.s. is doing a piss for a job compared to all of the other countries that I just mentioned it’s slowing at the same rate so anyone that thinks that social distancing is not working is welcome to go to coronavirus real estate there’s no forum by the way we didn’t this website doesn’t capture your information it’s never designed for that just go there the graph is right there right go there scroll to the graph and look at it the data is very clear social distancing works and it appears to be working at the same rate in all six countries actually all seven South Korea is an odd one out because they do things differently we cannot use them as an example but Iran Right where Iran’s daily growth rate was so much higher it was 53% on March 1st today it’s dropped to nine even the
United Kingdom which we’ve loved bashing was as high as 41 percent on March 5th today 18% point is I came on the show and by the way I was the gloom doom guy posting videos on the web four weeks ago
saying this is much worse than people think and it turned out to be much worse than people thought but I’m also pointing out today that the data today is not showing gloom and doom right watch my video on March 11th and you’re gonna say Neal you were just horribly gloom and doom my point is in the last 15 days the efforts that we’ve made are bearing fruit but no one can see them yet because you’re not tracking the daily growth rate and this chart tracksuit everyday the United States daily growth rate is there it’s dropping for sure and what’s nice is it’s dropping for every other country as well this methodology unquestionably works and based on this we will peak within the next 30 35 days.
PAUL: so let’s let’s kind of thank you for that it’s it’s great to have a clear view effective and but data in science to back something up and really appreciate it it’s very difficult to get any reliable information because we all live in our own echo chambers to a certain extent okay so let’s talk about two things Neal you are anticipating that we have four months of serious fight ahead of us and then we have a period of recovery after that so my question is if you are a business owner or an investor which is the vast majority of our listener base if you’re a business owner or an investor what are you recommendations for the next four months and what are your recommendations for that recovery period that comes after?
NEAL: depends on your beliefs I am now that data tells me today that we are going to beat this thing and I didn’t have that data to support ten days ago I mean if you actually look at that chart on that website and scroll up ten days ago you would have seen why I was so depressed and why I didn’t think that we would beat it but the last ten days of data shows that we are going to to beat this thing and yes it’ll come back and we’ll have partial shutdowns this is very much a two steps forward one step back think but if you are like me and you believe that over the next four months this is going to resemble the greatest hurricane in history well then the rebound from hurricanes has always been very quick whether it’s tourism whether it’s travel it rebounds from these sorts of events has been quick yes this is different in that it still will be infectious back by then but we will have taken a number of other measures I absolutely believe that between now and the end of June we will find a number of methods that we don’t have today to slow this thing down not to kill it but to slow it down and I Mentioned some of those one of them is the plasma transfusions if you take plasma from people that have been infected they have antibodies you inject them into somebody that’s sick and is in a hospital they recover much faster much faster right we will find people who will donate their blood and we will inject plasma into people I expect that by the end of June we’ll have you know hundreds of thousands of people being treated using plasma and by the way that is a proven methodology because it’s not new to coronavirus we’ve used plasma infusions before we’ve just never had the need to use them at a mass scale so going back to me looking at this as a four month hurricane I see q3 as a time when every kind of real estate asset is likely to have lower prices why the commercial market is free I mean at this point it’s free you might think that interest rates are low they’re not take a look at what’s happened to interest rates in the commercial market over the last 10 days they’ve gone up they’ve gone about a great deal no and also Fannie Mae and Freddie Mac are putting brand-new restrictions on us including requiring 12 months of mortgage and insurance as an impound which means that for a 20 million dollar project we now have to raise a million to more in equity so to a million somewhere in that range yeah it for a 20 million dollar stock boy now .