“Buy when there’s blood in the streets, even if the blood is your own.” – Baron Rothschild
How’s that quote to kick off your day? I’m just here serving up sunshine and rainbows.
But, I’m also serious. Over the coming months, I believe you are going to see more businesses close, more layoffs, and more stock market volatility. Before you go panicking though, by the end of this newsletter, you are going to start to see the massive silver (or should I say gold) lining.
That is why we created the UA business buying checklist (in the course). Go in and make sure you are checking off the steps to be prepared in the months to come. This tool paired with the monthly calendar will show you exactly your timeline for acquisition.
Now to the black cloud. I don’t pretend to have a crystal ball, but think on this… in April and May, the US government made up over 30% of ALL personal income in the US.
Government handouts my friends, are not sustainable. Neither is a stock market at all time highs during a global shutdown. Neither is this ridiculous new thing called EBITDAC (earnings before interest, taxes, depreciation, amortization (aka write offs) AND Corona Virus). Yup, you read that right, companies are using their “supposed” earnings they THINK they would have had if Covid-19 hadn’t hit to pad their ACTUAL earnings.
Goes like this:
- Company: Our EBITDA (fancy word for how much $ we made) was $10MM YTD
- BUT our EBITDAC was $50MM YT
- Analyst asks, “Wait I’m confused you made $50MM or $10MM?”
- Company responds, “$10MM. BUT I super promise 100% we would have made $50MM if not for Covid-19.”
Hmmm. Reminds me of children. Mom asks, ‘“Johnny, did you make your bed?” Johnny answers, “Yes Mom.” Mom goes to look at bed, bed is not made. Johnny says, “Well I WOULD have made it but I had to play Cowboys and Indians real quick.” (Are we even allowed to play that anymore? Probably not #cancelkidsgames)
So you see, the world has gone batsh*t crazy and I’m not even talking politics. I tend to believe there is no better time to underperform as a company because you can just blame all your bone head decisions on the great Covid-19. Now those are the bad actors, however, tragically for many businesses Covid-19 and the government lockdown HAS murdered them.
Case In Point #1
Case In Point #2
THIS INCENTIVE COMING WILL CHANGE THE DYNAMIC IN YOUR FAVOR.
So the question becomes, what do we about it?
We here at Unconventional Acquisitions don’t bemoan issues unless we have solutions to them.
So we turn to history, then apply 21st century opportunities to it. What do I mean?
Why to love Down Markets
In every disruption there is a massive amount of noise and panic BUT those with cool heads and capital to deploy can prevail.
Just a reminder of history:
- $1,000 investment made in 2009
- Would be worth more than $2,700 as of end of 2019
- That’s a total return of more than 175%
- S&P 500 itself was up 227% during that period.
Or Look to Private Companies:
- “Our decrease in net worth during 2008 was $11.5 billion.” Ouch that must have hurt to write.
Also read – Berkshire Hathaways 2009 Shareholder letter:
- “Our gain in net worth during 2009 was $21.8 billion.”
Warren is chuckling all the way to the bank in that beat up Buick. He increased his wealth by 2x just one year after the crisis.
Keep that in perspective for any business deals you are doing. Plenty of people will question if it’s possible to get low valuations, plenty of people will say it’s not, plenty of people will get uncomfortable trying to negotiate. They’ll accept the sellers’ frame. You won’t.
Codie Sanchez & Ryan Snow
Co-founders Unconventional Acquisitions