We continue our summer soiree into all things economic with a triple set of interviews from Freedom Fest.  This time we’re talking bonds, dividends and wealth management from a banking perspective – and how all that relates to real estate investors.  Not as exciting as how to evict a non-paying tenant, but here we go….

Adding their voices to the discussion at hand:

• The sultan of summers in sunny Las Vegas, host Robert Helms
• The prince of pointless ponderings, co-host Russell Gray
• Bond market guru and Oxford Club contributor, Steve McDonald
• Associate Investment Director for The Oxford Club, Marc Lichtenfeld
• President of Wealth Management for Everbank, David Conover

Wow!  That’s a pretty full house, but we suppose that’s a good thing when you’re in Las Vegas.

So we’ve been talking for quite awhile about the connection between the bond markets and the mortgage market.  Of course, the connection between the mortgage market and the real estate market is quite obvious.  But the connection is probably deeper than most people realize – especially if you’re an income property investor.

Steve McDonald goes as far as to say that “the bond market IS interest rates”.  And we know that interest rates affect every aspect of the economy including taxes, consumer spending, business investment (and employment), currency exchange and international trade.  Other than that, interest rates aren’t that big of a deal.  So, yeah, the bond markets matter.

Steve gives us a primer on the bond market and then tells us that “the bond market works secretly for the benefit of the ultra-wealthy” and is 40-50 times BIGGER than the stock market.  Now we’re even MORE interested!

If you’re a regular listener, you know we’re not big fans of bonds (or dollars) as a place to store wealth right now.  According to 2013 Investor Summit at Sea™ faculty member, Peter Schiff, bonds and the dollar are going to be the next and biggest crash.

At first, we thought Steve would disagree with Peter.  But au contraire… Steve actually agrees – and tells us that the bond market crash will make the housing market crash pale in comparison.  Then he goes on to describe some specific strategies for playing bonds in a fragile market.

One technique he describes is buying existing bonds at discounts.  Okay!  Now, we’re getting back to something we understand.  It’s the same as buying discounted mortgages.  That is, you increase your yield by paying less than the face value of the debt, so even though the current bond interest rate environment is low, you can earn high double digit returns.  That could (and perhaps will) be the topic of entire show…but not today.

All this to say that when Steve first sat down at the microphone, we weren’t sure we’d get along.  But before long (do you see it coming?), we bonded with Steve (sorry, we couldn’t help ourselves).

Whew.  And that’s only the first of three interviews in this episode.

Next, we chat with Marc Lichtenfeld who advocates dividend investing.  In fact, he just wrote a book on how to get rich with dividends.  It’s titled, “Get Rich with Dividends“.  Clever.

In this case, Marc agrees with Peter Schiff that stock investors should emphasize investing for income.  Hey!  Isn’t that the same mantra our friend Robert Kiyosaki has been preaching in Rich Dad Poor Dad?  Say “yes” because that’s the right answer.

Of course, Kiyosaki isn’t a stock guy and neither are we.  But it’s nice to know that we can all get along.  Rodney King would be so proud.

The point is: buying equities (stocks or real estate) that will likely retain their comparative value (i.e., hedge against inflation) over the long haul can be a rocky ride when markets are jittery.  But then those equities cash flow, even if the asset value is up and down, the cash flow can calm your stomach in the short term – and enhance your overall ROI over the long haul.  Brilliant!

Now we move on to interviewee number 3, David Conover from Everbank.

Last year at Freedom Fest, we interviewed another Everbank exec, Frank Trotter.  We were intrigued then by Everbank’s business model and offering, so we were anxious to visit with David and see what the world looked like through his eyes right now.

What’s interesting is that while there’s a lot of chaos in the banking business, Everbank has “robust expansion plans”. Why do we care about that?

First, we think it’s interesting when any business has robust expansion plans in this marketplace.  After all, we keep hearing about how businesses are hunkering down and running scared.  And since we like it when our tenants have jobs so they can pay the rent, we like to know what CEO’s are thinking when it comes to expansion.

What’s even more interesting to us is that Everbank is growing it’s mortgage lending operations.  We’ve been saying for awhile that one of the leading indicators of a heating real estate market will be the expansion of lending.  Everbank obviously sees opportunity in this space, so it’s something we’ll continue to watch.  When money starts flowing freely into real estate, it’s tide than can carry alert investors to handsome profits.

Also, real estate investors are typically sitting on piles (albeit some smaller than others!) of cash.  Dollars.  And we keep hearing that dollars are headed downward.  So what can an investor do to hedge against inflation, yet still have liquidity and safety?  David describes some unique banking products which give investors options to the dollar.  VERY interesting!

So all in all, this is a full deck of dialog that we think you’ll enjoy!

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