Show notes from Episode #155 of the Sweaty Startup Podcast.
Nick has spent the past two weeks talking to as many smart people as would take his call; business owners, entrepreneurs, private equity managers, real estate owners, logical thinkers and truth-seekers alike, he asked them what they’re afraid of and what they think the future holds that can impact our lives. Everybody is worried about COVID-19 right now, and rightfully so, but there’s a lot more that can pull the rug from under our economy that we need to monitor.
Many businesses and people are strapped for cash right now because they still have ongoing expenses with little to no revenue. With that, they’re taking out unsecured debt in the form of personal and small businesses loans. Unsecured debt is a real concern because it’s not backed by any asset, making them riskier than a typical loan. This looks bad on your financial statements when trying to buy real estate or get approved for a loan or line of credit, and it looks even worse when people aren’t able to pay them back.
Be wary of all unsecured debt. Sometimes it may be the only option to stay afloat, but you’ll usually be financially safer if you can get by without it.
In 2015 gas prices were $3.40 on average per gallon, dipping to $2.50 in 2016. Recently, prices have absolutely tanked as Saudi Arabian and Russian suppliers have flooded the market. The US energy sector was already hanging on by a thread, supported by bond funds, and they simply can’t make oil cheap enough to compete with these suppliers.
If prices stay low, the US energy sector may come near collapse and need a bailout. We need to produce our own oil; it’s an obvious national security risk to be completely dependent on Russian and Saudi Arabian oil suppliers. This could have much longer-lasting effects on our economy than the current global pandemic.
Real estate loan market
Rates have been lowered to spur the economy, but that doesn’t mean it’s translating directly into homebuying. Mortgages and other loans are now seen as riskier because job security for the average American is significantly down, and interest rates for homes have gone from just under 3% to over 5% within a week. Buyers can’t afford the new rates, and lenders are afraid to lend, threatening to bring the real estate market to a halt.
There’s a ton going on behind the scenes in the economy that we need to be focusing on. This can and will impact us, our businesses, our families, and others around us. Read from a variety of trusted sources, get advice from and listen to smart people, challenge viewpoints, and look for the truth.
Temporary unemployment [1:45]
Real estate loan market [7:40]