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Prediction: 2021 is going to be a total shit show. Place your bets now.

csalvato

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A few points worth mentioning:

- First, a lot of people don't realize that deflation is a lot like gravity -- it's a natural economic force that is always acting to push prices down. Barring any other economic impetus, an economy will naturally tend towards deflation. This is simply because economic, business and manufacturing processes tend to get more efficient, and with margins staying the same, prices will naturally fall. So, if there are no outside forces acting on the economy (think: the Fed or Congress), deflation will occur over time;

- Next, people aren't spending a ridiculous amount of money. 4Q20 GDP growth is forecast to be about 2.8%, or pretty close to the average over the past 10 years. And annual GDP *contraction* is looking to be about 3.6%. Spending is much more on track than it was 6-9 months ago, but it's still far from stellar;

- Third, consider that stimulus money is likely to run out at some point soon, and deflationary forces occur when demand for goods and services drop. When there is less money flowing through the economy -- like there may be in the near future -- deflation is much more likely;

- Finally, consider that with the income/wealth gap widening, more money is flowing to the wealthy. What do wealthy people do with excess money? Hint: They don't buy more groceries or consumables. They buy assets. So, poorer people will be buying fewer commodities and wealthy people will be using the money to buy assets. This will lead to asset inflation, but CPI disinflation (or perhaps deflation).

Put all those things together, and it's not hard to imagine a pretty strong deflationary force.

Of course, there's also forces on the other side -- increased money supply, low interest rates, compressed cap rates on investments, etc. -- which tend to favor inflation.

Depending on how strong the forces are on each side -- which will very much depend on Fed and Congress decisions over the next 12-36 months -- things could go either way.

That said, the Fed wants inflation. And the Fed generally gets what it wants. So, if I had to bet, I'd bet on inflation...at least long-term...
Thank you again for your thoughtful reply and correcting my misconceptions.

It turns out I was incorrect about people spending like drunken sailors, which is good info to know.

From your post, it looks like you still believe the bet is inflation, though you did a good job explaining how there are deflationary forces at work, and what they are.



@MJ DeMarco I'm constantly reaching to react to a post with a "thanks" instead of a "like" or "love", and I'm also always looking for a "thanks" emoji (usually the praying hands). If you're reading, I put in a vote for those two things to be added to the forum. @JScott's post above is an example of where I'd use one or both.
 
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csalvato

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Hey Kak (or anyone else really), what are these charts supposed to represent? Throw as many big fancy economic terms and concepts in there, I'm in finance and economics learning mode, and I like to deep dive into any new terms and concepts I come across. It's slowly all coming together in my head, piece by piece.

The first is DXY, or an index that tracks the USD against various foreign currencies.

When it goes down (as it has been doing), it generally means the dollar is weaker compared to the world economy.

It is a weighted geometric mean of the dollar's value relative to following select currencies:


More info on the Dixie here: U.S. Dollar Index - Wikipedia

The second is the M2 Money Stock. The M2 is a measure of the amount of money in circulation. Theoretically, more money means individual unit (i.e. the dollar) is less valuable.

Showing M2 Money Stock rocketing upwards would usually be taken as a symbol that inflation is going to take off.

KEY TAKEAWAYS​

  • M2 is a measure of the money supply that includes cash, checking deposits, and easily convertible near money.
  • M2 is a broader measure of the money supply than M1, which just includes cash and checking deposits.
  • M2 is closely watched as an indicator of money supply and future inflation, and as a target of central bank monetary policy.

More info on the M2 here: What Is M2?
 

WJK

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Thank you for the writeup. What a journey you've had! I also can't imagine doing law school on nights/weekends while working full time, I had trouble in regular Uni doing just regular part time jobs! But law + RE investing seems like a powerful combo.
Thanks for your kind words. Yes, it was tough to work and keep up my classes. I was a single woman on a mission -- to get through school and get my degree. I continuously listened to tapes of law lectures when I was awake. And I slept with my legal outlines under my pillow. I still use that education every day in my RE business.
 

WJK

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A few points worth mentioning:

- First, a lot of people don't realize that deflation is a lot like gravity -- it's a natural economic force that is always acting to push prices down. Barring any other economic impetus, an economy will naturally tend towards deflation. This is simply because economic, business and manufacturing processes tend to get more efficient, and with margins staying the same, prices will naturally fall. So, if there are no outside forces acting on the economy (think: the Fed or Congress), deflation will occur over time;

- Next, people aren't spending a ridiculous amount of money. 4Q20 GDP growth is forecast to be about 2.8%, or pretty close to the average over the past 10 years. And annual GDP *contraction* is looking to be about 3.6%. Spending is much more on track than it was 6-9 months ago, but it's still far from stellar;

- Third, consider that stimulus money is likely to run out at some point soon, and deflationary forces occur when demand for goods and services drop. When there is less money flowing through the economy -- like there may be in the near future -- deflation is much more likely;

- Finally, consider that with the income/wealth gap widening, more money is flowing to the wealthy. What do wealthy people do with excess money? Hint: They don't buy more groceries or consumables. They buy assets. So, poorer people will be buying fewer commodities and wealthy people will be using the money to buy assets. This will lead to asset inflation, but CPI disinflation (or perhaps deflation).

Put all those things together, and it's not hard to imagine a pretty strong deflationary force.

Of course, there's also forces on the other side -- increased money supply, low interest rates, compressed cap rates on investments, etc. -- which tend to favor inflation.

Depending on how strong the forces are on each side -- which will very much depend on Fed and Congress decisions over the next 12-36 months -- things could go either way.

That said, the Fed wants inflation. And the Fed generally gets what it wants. So, if I had to bet, I'd bet on inflation...at least long-term...
Just keep in mind that the Feds are a private bank... who have their own interest in mind...
 
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MJ DeMarco

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@MJ DeMarco I'm constantly reaching to react to a post with a "thanks" instead of a "like" or "love", and I'm also always looking for a "thanks" emoji (usually the praying hands). If you're reading, I put in a vote for those two things to be added to the forum. @JScott's post above is an example of where I'd use one or both.

Praying hands for thanks? How about a handshake? Or the raised hands? Not sure which one best represents a "thanks."
 

Bekit

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Praying hands for thanks? How about a handshake? Or the raised hands? Not sure which one best represents a "thanks."
On next door, thanks is a smiley face. That could also be an option.

A thanks reaction would be awesome to have on the site. I'll add my vote for one.
 
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Kak

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I'm going to say, given the results of the runoffs last night... The country will get a LOT more stimulus, and more super dovish fed policy. I am actually kind of shocked gold is down, which is hilarious. Nothing about a democrat takeover of the senate is bullish for the dollar. They may even try for a UBI.

Not that Republicans were ever some saving grace fiscally. They are just democrats with slightly lower taxes, slightly fewer murdered babies, slightly more guns and 9/10 of the spending.
 

ljean

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My infrastructure stocks are up huge today, thanks Dems!
 
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JunkBoxJoey_JBJ

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Praying hands for thanks? How about a handshake? Or the raised hands? Not sure which one best represents a "thanks."
Handshake vote... since I miss them.
 

MJ DeMarco

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sparechange

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Holy crap, the NWO is starting... Watched the DC protest and storming in, great stuff.

The US military should do their job and protect their citizens, throw Biden in a military prison for national security reasons.

''The Army exists to serve the American people, to defend the Nation, to protect vital national interests, and to fulfill national military responsibilities''

If the BLM protests in the US of eh were of any indication the amount of violence that can happen, America is going to turn into a war zone.
 
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WJK

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This sure is a Constitutional mess! This fight isn't going to die down any time soon. (The legal challenges are continuing and there was a court ruling in Georgia this morning that can affect the runoffs.) I'm worried about the economy and our power position relative to China in the coming few years. Unemployment numbers are up today reflecting the recent lockdowns. I was hoping we could pull through this moment without falling off the edge of the earth.
 

sparechange

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1610087156906.png

''Federal isolation site''

Well then.. do you think ya get poutine and hockey reruns with beer provided on a big screen tv inside these isolation sites?

Looks like MJ was right about the travel disaster for this year in regards to not running the summit.
 
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evergreen_scene

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This thread sounds like a Bitcoin hustle in disguise. The BTC bubble is going to pop soon. Once the sheep run out of money it won't climb any further. I am staying completely out of BTC and Altcoins.

The price of BTC is dependent on people pumping money into it. I have been seeing people all over the internet trying to hype it up for this reason. Sorry, not a sucker. Plus, at any moment, the government can ban it. Not safe if you ask me.
BTC in March 2020: $4k
BTC in Jan 2021: $40k

> Sorry not a sucker.

Sure sound like one to me, lmao
 

Raja

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I believe this video belongs here:
 

Turbine3

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Hey Kak (or anyone else really), what are these charts supposed to represent? Throw as many big fancy economic terms and concepts in there, I'm in finance and economics learning mode, and I like to deep dive into any new terms and concepts I come across. It's slowly all coming together in my head, piece by piece.
Look at the bottom chart:
Whenever the probability goes over about 27/28 a gray area follows - ie recession

Look at the CAPE chart:
Notice the current CAPE rate - meaning "overvalued" as she mentions, and compare it to history - back to the 1880's....

Free charting site to look at the chart of any stock or market:

Plug in these ticker symbols to get an idea of the broad US markets:
DJIA
COMP
SPX
NYA
GLD
SLV
MCHI
UUP
DBP
EDV
SQQQ
QQQ
 
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NewManRising

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Kal-El1998

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I agree, I don't think people understand economic ramifications nearly as much as they should. However, I think we should all have the mindset of doing our best to not let it effect us financially. We all know how to go out and make money, and frankly I'll do so out of rebellion. They think they can control me financially? I'll show those mofos who's boss!
 

Phil Yu

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I am very optimistic for 2021. i have been working hard on my CPA exam since early 2020 while trying out bitcoin trading and social media platform building on the side. The short squeeze on Gamestop gave me more energy as i watch the birth of many over night millionaires (not that i will become one). Market crashing means chance of buy it undervalue.
 
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So much stuff to dive into here in Canada (political wise) I hope things will go back to normal this year, there have been some talks about restricting travel even more within the country and I'm planning on touring all of my homeland which may be illegal in the near future :wideyed:
 

PapaGang

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A few points worth mentioning:

- First, a lot of people don't realize that deflation is a lot like gravity -- it's a natural economic force that is always acting to push prices down. Barring any other economic impetus, an economy will naturally tend towards deflation. This is simply because economic, business and manufacturing processes tend to get more efficient, and with margins staying the same, prices will naturally fall. So, if there are no outside forces acting on the economy (think: the Fed or Congress), deflation will occur over time;

- Next, people aren't spending a ridiculous amount of money. 4Q20 GDP growth is forecast to be about 2.8%, or pretty close to the average over the past 10 years. And annual GDP *contraction* is looking to be about 3.6%. Spending is much more on track than it was 6-9 months ago, but it's still far from stellar;

- Third, consider that stimulus money is likely to run out at some point soon, and deflationary forces occur when demand for goods and services drop. When there is less money flowing through the economy -- like there may be in the near future -- deflation is much more likely;

- Finally, consider that with the income/wealth gap widening, more money is flowing to the wealthy. What do wealthy people do with excess money? Hint: They don't buy more groceries or consumables. They buy assets. So, poorer people will be buying fewer commodities and wealthy people will be using the money to buy assets. This will lead to asset inflation, but CPI disinflation (or perhaps deflation).

Put all those things together, and it's not hard to imagine a pretty strong deflationary force.

Of course, there's also forces on the other side -- increased money supply, low interest rates, compressed cap rates on investments, etc. -- which tend to favor inflation.

Depending on how strong the forces are on each side -- which will very much depend on Fed and Congress decisions over the next 12-36 months -- things could go either way.

That said, the Fed wants inflation. And the Fed generally gets what it wants. So, if I had to bet, I'd bet on inflation...at least long-term...
Agree with all of this. I rebalanced some of my positions to bonds recently. However if currency stabilizes this year, then I might be out of luck.
 
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csalvato

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So we aren’t even one month into 2021, let’s recap what happened:
  1. Attack on us capitol
  2. President of the us banned from all social media
  3. Parler all but eradicated
  4. Biggest trading scandal in the past 10 years
  5. Many states still under extreme corona restrictions
Hell, my first post seems to be too optimistic about 2021 now :rofl:

The story of 2021 will get a lot worse.

But because I can face reality, I’m making money this month, and my business is hitting a whole new stride. This would not be happening if I didn’t do the reflection posted in the OP.

See you all in Feb!
 

WJK

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So we aren’t even one month into 2021, let’s recap what happened:
  1. Attack on us capitol
  2. President of the us banned from all social media
  3. Parler all but eradicated
  4. Biggest trading scandal in the past 10 years
  5. Many states still under extreme corona restrictions
Hell, my first post seems to be too optimistic about 2021 now :rofl:

The story of 2021 will get a lot worse.

But because I can face reality, I’m making money this month, and my business is hitting a whole new stride. This would not be happening if I didn’t do the reflection posted in the OP.

See you all in Feb!
I'm optimistic about 2021 for me. Most of your list is about the current political rangles. I don't see those items directly affecting my businesses. I got my Corona shot a week ago, and my second one is scheduled for next month. So, I assume I not gonna die from that particular plague. And the beat goes on...

So, here are my business thoughts on 2021 -- I always attempt to run counter to the markets. I know that people are basically herd animals. They act as a group, going in the same direction, at the same time. Since I know this truism, I simply watch to see which way they are headed and what obstacles are before them. At the same time, I try to ascertain their overall emotional temperature so I predict their reaction to those foreseeable obstacles. This analysis also gives a clue as to their next direction.

Here's how I visualize this mental exercise. Have you ever seen a herd of sheep or cattle in a pen approaching an open gate. The herd mills around for a while in the pen. Then, if anything distributes them, the herd leader makes a run for that open gate. And the herd quickly follows on the leader's heels. They'll trample each other to try for their chance to squeeze through that gate. They don't neatly line up and march out as a group. There is no "equity" in that run for the gate. No one individual stops to analyze the disturbance and its relative personal danger. The whole herd rushes to force their way through that open gate. They are afraid as a group, and that's enough to cause the stampede. The term "afraid" is interesting because this stampede can be either for risk aversion or FOMO (fear of missing out). Either way, it a group mentality.

The world of business works the same way. Sometimes I can feel the change in the air. Other times, I just study the trends. And I watch for cycles. The pendulum swings back and forth, rarely deviating from its normal path. The players may be different. The goods produced may be different. Many of the elements can be different. But, human behavior has been repeated again and again...
 

csalvato

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I'm optimistic about 2021 for me. Most of your list is about the current political rangles. I don't see those items directly affecting my businesses. I got my Corona shot a week ago, and my second one is scheduled for next month. So, I assume I not gonna die from that particular plague. And the beat goes on...

So, here are my business thoughts on 2021 -- I always attempt to run counter to the markets. I know that people are basically herd animals. They act as a group, going in the same direction, at the same time. Since I know this truism, I simply watch to see which way they are headed and what obstacles are before them. At the same time, I try to ascertain their overall emotional temperature so I predict their reaction to those foreseeable obstacles. This analysis also gives a clue as to their next direction.

Here's how I visualize this mental exercise. Have you ever seen a herd of sheep or cattle in a pen approaching an open gate. The herd mills around for a while in the pen. Then, if anything distributes them, the herd leader makes a run for that open gate. And the herd quickly follows on the leader's heels. They'll trample each other to try for their chance to squeeze through that gate. They don't neatly line up and march out as a group. There is no "equity" in that run for the gate. No one individual stops to analyze the disturbance and its relative personal danger. The whole herd rushes to force their way through that open gate. They are afraid as a group, and that's enough to cause the stampede. The term "afraid" is interesting because this stampede can be either for risk aversion or FOMO (fear of missing out). Either way, it a group mentality.

The world of business works the same way. Sometimes I can feel the change in the air. Other times, I just study the trends. And I watch for cycles. The pendulum swings back and forth, rarely deviating from its normal path. The players may be different. The goods produced may be different. Many of the elements can be different. But, human behavior has been repeated again and again...

Spot on!

Those 5 events are relevant for me, personally.

My business is directly impacted by in-person events being eradicated, so I’d be in a bad place if I didn’t reflect on the state of the game on Jan 1.

I’m also heavily invested in crypto, which I believe will is affected by all five of the things I listed.
 
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neofox

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My prediction is that 2021 will be a good time to scoop up small businesses which have the ability to flourish post-COVID. People will want to quit because of financial stress, they want to retire and don't have anyone to pass it down to, etc.

I know someone whose parents manufacture food products which are popular globally. I suggested that they hire a CEO / GM to handle the business and the kids can act as shareholders but the kids simply aren't interested. They feel like it's just a hassle/too much work to own a business and they want something with less pressure in their lives.
 

csalvato

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My prediction is that 2021 will be a good time to scoop up small businesses which have the ability to flourish post-COVID. People will want to quit because of financial stress, they want to retire and don't have anyone to pass it down to, etc.

I know someone whose parents manufacture food products which are popular globally. I suggested that they hire a CEO / GM to handle the business and the kids can act as shareholders but the kids simply aren't interested. They feel like it's just a hassle/too much work to own a business and they want something with less pressure in their lives.
What an excellently spotted opportunity. :clap::
 

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