How Should We Prepare for Market Uncertainty? (Bad Bad News Podcast Guest)
I had an opportunity to be a guest on the Bad Bad News Podcast hosted by Ms. Samira Fatehyar. Samira and I attend weekly (virtual) market discussions held by one of our former Pepperdine professors from the Master's program. After one of the weekly market discussions, we struck up a conversation to catch up on business life after Pepperdine.
We discussed the nature of our respective businesses. We had many things in common: changing our respective industry's business model to heighten our respective clients' experience and deep roots in ethics. Samira and I share the same ethical standard of providing unbiased information to our clients. Samira has extensive experience and a deep passion for Real Estate. Samira is the President of Rockwell Consultants, a Real Estate Consulting firm based in Reno, Nevada.
Samira invited me to be a guest on her podcast Bad Bad News to have the opportunity to talk about what steps people can take to help with the uncertainty in markets.
Listen to the interview from the Bad Bad News Podcast episode "What's Next?" or you can read the transcript below.
Samira: Alright, thank you so much Leyder Aiden Murillo for coming on the show and talking with us today.
Aiden: Yeah, glad to be here. Thanks for inviting me.
Samira: Of course, so let's get right into this since it's the biggest thing on everyone's mind right now, and you're a financial advisor. What was your initial reaction to the news of President Trump contracting COVID-19 and has there been a major theme in regards to the questions you've received from your clients?
Aiden: Well, first of all, I think almost everyone was shocked, right? I couldn't even think about like anything at the moment. I was just in plain shock. But then you know, 5 seconds later financial advisor kicked in and I'm like OK, what is this going do to the markets tomorrow or later on overnight?
And I was kind of thinking, OK, what's going to be my conversation perhaps with clients and which is a great follow-up question you asked me. The major theme is what will happen if the president you know if something happens to him and he doesn't come back from it and I think just like anyone, nobody really knows what the market would do.
It’s like you have to play a role as a psychologist working with clients as a financial advisor so you can calm them down and tell them hey, it's OK, the markets don't like volatility and any type of shock, so this would cause volatility. So what we mean by volatility that means that markets perhaps abruptly sell-off, or somehow there's a spike, so it goes up and down. I like to say zigzag, it's just easier for people to actually comprehend that. I just told them, hey, there's gonna be perhaps increased volatility. Zigzags going up and down. And let's see how it transpires. But most of the time I always tell my clients focus on the long term, don't focus on the short term because everything that’s short term is just noise.
You know we're gonna look back one year from now and we're gonna be like, oh yeah, that happened, but my portfolios, perhaps is doing way better. So it's like one of those weird oddities where markets perhaps sell off and you know it just turns around. It's just one of those natures of of the markets. Nobody really has a crystal ball. You just have to go forward.
Samira: Yeah no for sure, and because you're talking about volatility, usually we think of volatility and uncertainty being the same thing. With so much uncertainty in the market, what are some important things keep people can keep in mind when they're looking at everything that's going on right now?
Aiden: You know, especially right now, during the election time. Markets are going to be more volatile. You know, one candidate says one thing, the other candidates says another, the market's not gonna like it or the market will like it and then all of a sudden you know you have people coming in and out of all these trades and again don’t just focus on the short term.
You know that's how people lose money actually. And like I mentioned earlier, markets don't like volatility. They don't like surprises, so everything can be really, really crazy in the short term. Then the other thing is you have to realize that regardless of who wins the election, they're going to be focusing on the economy and the way that they could combat this pandemic that we're currently in. So you know, just move forward and just think of the light at the end of the tunnel like that’s what I like to say, don't focus on the beginning part of it, just focus on the very very end. What's your goal? What are you searching for, basically?
Samira: Awesome, yeah no this is great advice. So you talked about after the election and the market reaction. Do you foresee different market reactions depending on the outcome of the election at all?
Aiden: Well, it depends again who's the potential winner. Obviously again one may want to break up perhaps big companies. Another one will want, perhaps less government intervention, so that may mean more tax cuts.
So it all depends on who is the winner. But obviously what's going to be effective is that there has to be some sort of a middle point somewhere and how we get that is just by working together obviously. And you know, I have to remain impartial because again, I'm a financial advisor. So basically what happens is that the US, the American people decide who they want as a president. And we as financial advisors have to work with the people that they choose to have in the government.
So for us, it's just like an art. You know we have to really be fancy when it comes down to who does the public want us to work with and how do we structure their portfolio to make sure that there isn't any you know high risk in their portfolio. So to answer your question directly, I don't have a crystal ball, so I can't really tell what will happen, but there maybe you know some leaning more towards one or the other. That's all I have to say because I have to remain impartial.
Samira: That’s totally respectable. So kind of following up on that, as a financial advisor, I’d say you have strategies that would work in both cases, correct?
Aiden: Yeah, that's correct. So right now the way that I've structured my clients' portfolios is you want to minimize risk as much as possible. So if there's any type of safe-haven sectors, perhaps utilities, consumer staples, you know more exposure to that, because those are the most common sectors that rise when there is uncertainty or some sort of volatility. And obviously, we've seen some sort of a great disconnection right now with technology, because normally in times of recessions, technology tends to do very, very poorly. You know, those are considered to be growth sectors, so I think the reason why we're seeing such an upward push on technology right now is because of the technology that we're currently using right now during this pandemic. Whether it's you know, using video conferencing, whether it's podcasting, you know all of these little companies that make these technology ventures, and all of a sudden we're just using it.
You know it's one of those things that we consider a one-off black swan type of event because it's not normal. You know, even though there’s a whole past performance is not indicative of future performance, you know whatever happened in the past really can't foresee the future, so this is one of those types of aspects where you know the past kind of has it a little bit wrong. You know, because tech normally should be selling off, but it's actually performing very well. And you know, in times of growth, if we have a great turn around in the economy, tech sector tends to move up. Consumer discretionary tends to move up, so we call that sector rotation and it's all about, you know, being ahead of the curve as much as possible and just like how you said there is a way to perform both aspects if it's underperforming and if you have an underperforming economy, how do you structure portfolio and when it's performing very well, how do you structure for that. So, yes, there is a way for you to gain exposure in both types of economies.
Samira: Yeah, you you brought up an interesting point about the recession and how in previous recessions we're not seeing something that we can take from the past and apply it to the rule now. So I think unprecedented really comes to mind in that sense. And so who knows, maybe during the recovery, tech will somehow drop. We don't really know, but I think anything is up for grabs in a way it's like you know we truly don't have a crystal ball in and what you said previously.
Aiden: Yeah, and then just like for example, bitcoin I'm really not a fan of it, but—you know, well depends, I am kind of a fan of it, but I have like a lot of friends that have done that type of investing in Cryptocurrency, so that's why I'm kind of in-between. I am a fan of it, but then I'm not because then all of a sudden, everyone piled into cryptocurrency. When you know, there's uncertainty as well, and you know, some people don't understand how cryptocurrency works. I still don't know how sometimes it works. There's no value to it, and it's hard to actually predict any type of a value to it because there's no asset back to it.
There's nothing saying, hey, this is, bitcoin, and it's backed by a holder, backed by a government or something. I had a lot of my friends before—you know, the hype that—you know how it went up to $10,000, and everyone on the news was being covered and then all of a sudden I started hearing people like on the street talking about it and I'm like oh man, this is gonna be something really hard if someone from the street is telling me to buy cryptocurrency, during this type of a market like this was right before the pandemic obviously.
We all know that it was a booming, booming market. So this is what we call a hype investment. And so we have to be careful about those two, because all of a sudden one specific sector or one specific assets just seems to take off. And then everyone's like, oh yeah, it's not fear of missing out (FOMO). And then, like I wanna be rich, I want to be rich. And then what happens is that it just pops and then just all of a sudden everything just seems to be like, oh man, what happened to my money? And one of those things is like right now, everyone just seems to put in money, perhaps in tech, and then all of a sudden it sells off and they panic.
You know just how like we were talking there is no crystal ball, but people think that they do have a crystal ball because they see everything going up, right and then all of a sudden everything kind of pulls back and then they get scared again and then they take out their money and they’re at a loss now that's how you lose money. That's why I always tell my clients, we as financial advisors—my firm, we don't time the market because obviously that basically kills your investment. You just have to see it through the long run. Yes, we don't have a crystal ball, but at least we can try and be defensive and use analytics and all these other equations to make sure that your portfolio does not have that much risk and we try our best.
But no, there's no guarantee in any investment, that's where you're giving up, because if you put it in a bank account, obviously it's backed by the bank, so there's assets behind it and in investments, there is some sort of backing of it, but it's an investment you know. You have to think of it like that. There's no guarantee right, when you own a small business, there's no guarantee you're going to make money. Whereas in a bank you have it in a bank, and their sole purpose is to actually protect your money. Investments is the other way around. That's why you're getting much more risk for that, you're trading off something to gain something. That's that's how investments kind of work.
Samira: No, that's really interesting, and I think this is a great segue into my next question. Do you currently think we're seeing a bubble forming in any or all asset classes right now, and if not right now, do you expect one in the future?
Aiden: I honestly think there is somewhat of a bubble brewing in, perhaps—not so much a bubble, I think of it much more of a deflation, in real estate, and here is the reason why. And it's quite simple. You don't have to have a doctorate degree. You don't have to have an MBA from Pepperdine, which full disclosure I have and you have to be smart about it.
Think about it. There's so many real estate companies right now that are trying to keep people from leaving as tenants and they're offering them free rent. I think I was reading on Bloomberg or on CNBC that some of them are actually giving them incentives like gift cards, and I'm like that's totally the negative of it. You know, the whole purpose of a business is to bring in money, and then you know you grow from it. But here you're actually paying people to stay. So one of the things is right now—since there's so many people out of work and you know we don't know how exactly this virus is going to, how we're gonna see it at the end of the tunnel. We don't know exactly how it affected real estate that—we don't know if companies are going to still exist from this, and it's quite simply they—you know people, tenants, even—you know regular people just like you and I and even companies you know because they have office buildings, and we don't know how it will affect everyone because right now no one is probably perhaps paying rent. And you know there there can cause some sort of—you know some negativity towards that, because then people are going to not have homes or we're not gonna have offices and so real estate I think is gonna come out a little bit hurt from this. Because again, people aren't paying rent, and then if they're having all these moratoriums right now then there's no guarantee that people are going to catch up to the rent.
It's like paying a credit card. You keep going to the store or a fancy store and you keep buying that—you know shoes that you like you keep putting it on credit on your credit card and all of a sudden at some point you're at $15,000 worth of debt. So what guarantees these real estate companies that you're gonna be able to pay that all back all at once? Or, you know in payments? And on top of that you have to pay the new rent that's coming due. And then for corporate offices—yeah, well, they probably see this as an opportunity to downsize, because, “hey, we were still productive, we were still running at 100%. Granted, let's say 90 or 85%, but we were still able to do it from our workers working from home. Rather than spending so much money on rent on a fancy office, let's just have them work from home." And that affects the real estate.
So you see, in essence, it's kind of like a domino effect. And it kind of comes down and you don't need to have that whole academic background just to see it around you, and it's currently happening. There's some layoffs already occurring because—you know, companies have realized, "hey, we can we can function as a company still at 70% we can layoff these 30%. There's no need to have this 30%. We can still be efficient at 70%, so let's just lay those people off." And then what happens? People don't end up paying their rent or their mortgage, and they downsize their rental space, and boom we have all these influx of properties just coming into the market, flooding the market or rent continues to go down and so that affects the real estate sector. That's just in a broad spectrum.
Samira: Yeah, no, that’s a good thing you brought up because there's three things I kind of want to add to it. One, I saw legislation that they want to pass that they want to ban or basically forgive all the rent that has not been paid. Which you and I both know, that’s a terrible idea because there's you know, mortgages that need to be paid, there’s still responsibilities on the other end. Two, there's been a big debate amongst CEOs of companies saying that, yes, you know, right now they're able to work remotely, but they're not as productive right now. Which I think you and I in the Millennial generation, disagree with that. You know, my business, at least is remote work and has been before the pandemic and I've been productive, so I think they're really underestimating the Millennial work ethic.
Aiden: Sorry, full disclosure, mine is also remote too, so I've always been remote. I think it's just one of those things where us Millennials just like being remote. Yeah, it's just that work culture. I guess that we'd like to bring to ourselves, I don't know.
Samira: Yeah, and oh, the third point was you know, you said there's going to be a huge supply of real estate coming on the market, you know, and I truly believe that too. But I think this opens another opportunity for creative spaces being made, I mean, like Millennials are really into experiential real estate of like, you know, sitting down somewhere and just hanging out instead of you know malls being places to just go and shop. You know they want the experience with it. So I think it will create great opportunities in the end and Covid-19 has just acted as a catalyst to make all of this stuff happen faster, which I'm a total fan of.
Aiden: Just to reiterate on the creative space, I'm not too sure if you remember that WeWork—they were planning to go on an IPO. So what an IPO is an initial public offering, so that means they were going to initially begin trading, having their stock available to the public. And so there was so much massive hype on this creative space, but then—you know—everyone was looking at their financials and then all of a sudden it didn't make sense. And this was pre-Covid so perhaps they were expanding too quickly. So now imagine them right now during Covid— how they're perhaps using so much cash—we call that cash burn— their runway and they're using up so much of it that perhaps they may not be around. You know these little companies were ahead of the game and then all of a sudden Covid hit. So imagine how an investment would have gone public. And if an investor would have put in their money and then all of a sudden this hit, boom! All of a sudden the cards is kind of tumbling.
Samira: Yeah, it would have been a catastrophe, but I also was never a fan of WeWork, just looking at their debt structuring and the liabilities they took on. I was like this is not gonna work and it's not going to be profitable in that way. I think coworking space definitely still has a role, and I think there's going to be several people that are gonna be like I can't work from home. I need to go and work in a space. Not a traditional office building, but a coworking space, so I definitely see an opening for that, but WeWork I was just not a fan of. I'll be honest.
Aiden: I was skeptical about it because all of a sudden all of these spaces sprang up, and I was just thinking, wow, real estate is very capital intensive, so how are they getting so much cash infusion from these tenants or people that work there? But they weren't, they were just getting money from investors from private investors, so obviously they weren't public yet so private investors such as venture capitalists or accredited investors, institutional clients, so they were really burning through that cash. So it was one of those things where I guess it was foreshadowing something in the future Covid, but imagine if they would have gone public and then if investors would have piled into this. Because it was just all the hype, I remember that there was a hype for it. Yeah, go to WeWork and I was actually thinking of going into WeWork and and and getting office space at one time. But then it's like I kind of was hesitant because I was thinking, well, you know, kind of do like being more productive on my own. And I really can't talk out loud when it comes down to a client and I talking so I don't think it would have made sense for me to get WeWork. But don't get me wrong, it seems like fun. They had like a like all these coffees and these cool amenities in it. But yeah I do believe they will make a comeback, but will it take time? Of course it's just we're all going to be afraid to travel outside, perhaps.
Samira: 100% and I have a few friends that are thinking of doing a smaller version of WeWork and so I think we're going to see a lot of the smaller companies coming in and offering some of you know even better amenities than WeWork offered. But it just creates you know that ripple effect of more opportunities coming in. But, I do wanna spend a little bit of time talking about you and what makes you different from others in your field and why you chose to open up your own firm.
Aiden: So the funny thing about opening my firm, well there's a story behind that. So I started my MBA course right? And everyone knew me as the investment guy because I was working in finance. I was working for financial advisors. And so you know, I've been in the industry since 20, late 2013 or so. So that's a long time—to me it’s a long time. But I noticed that, in the industry there were these minimums and income requirements and you have to fit a specific theme. And when I went to Pepperdine from my MBA back in, you know 2016—it seems like such a long time ago. Everyone knew me as the financial guy, so everyone kept on asking you about advice like, "hey where can I manage my money? How can I do it? Can you invest my money?" And unfortunately, I would always have to tell him, unfortunately no. And they would ask me why. Simply put, because you don't meet a specific theme and I'm sorry that you don't meet that specific theme.
It hurt me because I don't like turning away people because I want to help people. So for me it was such a bummer and all of a sudden, I was just thinking why can't I do that? You know, why can't I be a financial advisor that doesn't have all these requirements and all these themes you have to meet some sort of a theme? And I just was thinking, OK, you know what, let me think about it and then all of a sudden I just got a lot of friends telling me, hey open it up. You know, don't be backed by any other company. Be fully independent, which I am, you know, because a lot of these other firms have these themes because for them it's a way for them to make money. Let's say you have to have $1,000,000 worth of assets under management, so investable assets or you have to have 250,000 of a salary. And that for them transfer into money, because that's where that pays for their other employees and for their rent or for their technology, right?
So I was just thinking, you know what I don't want to be like that I want to be different. I want to have a firm where young professionals, small business owners, educators, and married couples come to me for help because they're the ones that deserve it the most. Young professionals are just getting out of college or getting their MBA's, and they don't know how to invest or they just watched YouTube and all of a sudden they crashed their portfolio. I've seen it. I have a blog post out there about that, and you know, small business owners that are just starting out, but don't meet the imcome requirement for that either. And educators since I have a background in education, so my sister is an educator. She's a teacher and while I was in the University undergrad I worked at school, so I have that much of a deep connection with teachers. And I know what they deal with every day, and I know how budgets kind of get closed up for them. So this is why I opened myself up. And then married couples, it's it's quite simply—I'm not married, but it's interesting the way that you have two personalities coming in and you have to come together when it comes down to finances and like I previously mentioned as a financial advisor, you have to act like a psychiatrist or psychologist and calm people down. It's the same way when it comes down to married couples, you have one person over here, perhaps wants to go buy an Xbox or something and you have someone over here that wants to go buy groceries. Where do you have to meet you know? Obviously that example is obvious, but you know what I'm saying. One person over here wants to do one thing and the other one, so you have to kind of meet together to make a budget and and work together as a team.
So again, the whole point was for me to make it available to all these specific clients with no minimums, no assets, no investable assets, and no income requirements. I just wanted to be totally different, run my firm my own way and I think anyone that's listening to this if you worked in a specific job for so many years, at some point you just get tired of it because of the cultures, perhaps shifting or the routine tends to be different now. You just plan on just thinking, ok, I wanna do it in my own way. Perhaps their way is ok, but I can perhaps do it better. How can I shift it or change the way that I can do this to be my way. So that's why I decided to open up my firm and and be totally different from other financial advisors.
Samira: No, that's really great. You know, I resonate with a lot of the stuff that you did yourself with my own business. And it's all about disrupting the industry and I'm all for that. You know, by creating your own business model and then—you know—starting small and then growing, and hopefully it'll catch on. I feel like Pepperdine taught us both to have very high business ethics and that's something I really pride myself on. And I bet you do too. So I'm really happy to hear that. Do you have any general advice to give our listeners?
Aiden: Some general advice, so just if you haven't worked with anyone, when it comes down to your finances, you can't really wing things anymore. You know, before we could, but now things have gotten a little bit more complex, right?
We can't know all the answers basically, so as small business owners as well, we have to delegate tasks to other people or other companies that we don't have the expertise in. So for example, my marketing, I delegate that to a marketing firm. I'm not good at marketing. I'm good at analyzing and working with clients, so that's my thing, but again, we have to delegate these little tasks even though we don't think of it as important. We see it as perhaps an expense, but think of it as more of investment. Right? If you put in, you know $100, what are you gonna get out of it? Perhaps you're gonna get out even more than that.
You know and just basically try it out and if it doesn't work for you, then that's when you need to seek the help because I know that there's perhaps people that are perfectionists out there that want to do everything on their own and just to save a buck or two, but will that buck or two really make more of an expense for you down the line or make you lose more down the line? Because you're taking the wrong advice. You're reading the wrong thing. There's so much information happening right now in this world. You get bombarded with information like Covid here— you know— airlines over here, missing earnings. Which one is the correct funnel to use and the correct answer is there isn't any. Because there's so much information happening out in the world that we as individuals cannot condense it into something.
So when you get to that point where you're like overwhelmed and you're like oh my goodness, I don't even know how to structure my 401K or my SEP IRA. How would I do that? That's when you need to seek out the help from perhaps a financial advisor, financial planner, financial consultant, because there's many different types in the field. And one of the things that you may need to ask is how do you get paid as a financial advisor? There's some out there that get paid on commission, some that don't get paid on commission that are just fee only. By the way, I’m fee only.
Just keep asking as many questions and it's always good to try something new. And if you're afraid, don't be afraid. You know you're not signing anything in the end of it, by just talking or having a free consultation with someone. Just talking to someone about it makes you a little bit more calmer. That's what I've noticed and again, don't go to expert uncle over here that says I did so well in the market over here, you should invest the same way as me. Seek out a professional that has years of experience, some sort of designation CFP, CFA. All of those type of designations because those are the ones that are acting in your best interest as a fiduciary. And don't be afraid you know and remember, this is your money.
You worked hard for it, so I don't think you want to be working for the rest of your life. You want to enjoy life right? So just because you lost money now doesn't mean you are not going to perhaps enjoy in the future. You will, but at the same time how much harder do you have to work now for that? Again, if you lost money or you did something wrong, you basically messed up.
Samira: Right. And to add to your point, there's also the opportunity cost of, you know, I could be, you know, on YouTube researching how a lot of people became millionaires overnight. Or I could be, you know, doing other productive things to create more money or to have a more spiritual grounding. I mean, there's a bunch of other things that people could be doing different, you know with their time. So that brings up a great point. And so if any of my our listeners would like to contact you, what's the best way to reach you?
Aiden: Yeah, so basically I have my firm's website www.wolfpackim.com. That's all one word. And there's a yellow “start here” button on it. So basically that shows you the process of how we go about in our meetings, basically. So it's just very simple. The website is designed to make it as simple as possible for information so potential clients can book an appointment, whether it's a 30 minute free consultation or you know if they are a client there's a way for them to to schedule a 60 minute client meeting with me.
So all the information is there as well of all the services that I provide. Financial planning, investment management and again the main focus—just like how you said earlier is my main goal is to have my clients focus on their finances, but at the same time continue what they’re passionate about, because that’s the where they become who they are. If you’re passionate about your business, you will focus 100% on your business and not worry about your finances. If you’re a teacher you will focus 100% on your students and be passionate about it. You shouldn’t be venturing off on finances because perhaps that’s not your thing. You have individuals like us that do that. Again, all that information is there for you guys. They can also follow me on social medias, most of my usernames are @wolfpackim. Or just google me.
Samira: Thank you so much Aiden for coming on the show. We’d love to have you back.
Aiden: Yeah, for sure!
Written with permission from Ms. Samira Fatehyar, President of Rockwell Consultants LLC & host of Bad Bad News Podcast.