Social justice and equality, like their inverse, social injustice and inequality … can be polarizing political themes.
But this isn’t a political commentary, so keep an open mind!
Robert Kiyosaki has been warning for many years the rich would get richer … the poor would get poorer … and the middle class would be squeezed.
In the U.S., metrics like the historically low labor participation and home ownership rates, high levels of consumer debt, and stagnant-to-falling real wages are all indicators of where the middle class live.
The reasons and blame for these results are debatable. There’s plenty of both to go around. We have our ideas on the matter … and you may have yours … but the data just sits there.
Meanwhile, stock and bond markets (notwithstanding the recent tick up in rates), have powered upward … making the rich much richer.
So the financial condition and future of America FEELS very differently, depending on which side of the inequality divide you’re on.
A quick glance at the election map also illuminates the divide … as does social media and daily news.
Today, the U.S. has President Trump (and might have had President Sanders) largely because people being squeezed out of the middle were looking for a non-establishment answer.
But what if the problems … and the solutions … are more systemic and less political?
If the Titanic is sinking, it doesn’t matter who the captain is.
And if it’s not, then it still probably doesn’t really matter. Sinking is caused by the ocean and weather … things outside the captain’s control.
Now before you tune out, this is NOT a doom and gloom piece. We’re too optimistic for that.
But it’s smart to look at what’s happening and ask what it means to real estate investors.
So far, low home ownership rates have meant increased demand for rentals.
That’s GOOD for real estate investors … and rental growth and occupancies have proven this.
High bond prices brought low interest rates, which decrease debt service costs, and improve cash flows.
Also GOOD for real estate investors.
High stock prices have created paper wealth in 401ks and stock portfolios.
Ditto for home prices.
Some of this equity has found its way into real estate private placements, which has been GOOD for real estate syndicators.
Like Peter Schiff says … “Good economics is bad politics, and good politics is bad economics.”
So even if economic inequality is bad policy, there’s still a lot of investing opportunity inside of it.
Economic issues in the second Bush administration gave rise to the Obama administration. Issues during the Obama administration gave rise to the Trump administration.
So again … MAYBE the issues aren’t political, but systemic. And we should study, debate, and react to the systemic issues … perhaps more than the political issues.
That’s what James Rickards contends in his latest book, The Road to Ruin.
We’re not all the way through it, but so far it’s a REALLY interesting read … as are all Jim’s books.
Of course, with the Super Bowl fast approaching, no commentary this week would be complete without a football analogy. 😉
So let’s think about a game plan for approaching investing in any environment …. even one where there are systemic problems and the potential for radical political change.
A successful game plan addresses offense, defense, and special teams. And once in the game, it’s about focus, execution, and adjustments.
Warren Buffet says rule No. 1 in investing is “Don’t lose money” … and rule No. 2 is “Don’t forget rule No. 1.”
In other words, defense is important. The old football adage is “defense wins championships.”
In Jim Collins’ now classic book, Good to Great, he says you must confront the brutal facts. Yet, most people don’t want to.
Investors don’t like listening to the bears. We like to think we’re always going to come out on top, which pushes us to keeping investing.
But you MUST. It’s how you prepare for the worst, even while you hope and work for the best.
Defensive investing means moving assets away from high risk environments into lower risk places … maintaining adequate liquidity stored in safe places … and being diligent in managing cash flow.
Of course, while it’s true, “If they don’t score, we can’t lose” … if YOU don’t score, you also can’t win. So offense is important, too.
The BEST offense is to take what the opposition gives you. That is, it’s typically not a good idea to show up and just run your script. Conditions change.
The best teams enhance their probabilities for success by creating match-ups … pitting their strengths against weaknesses in the opposition’s defense.
As we’ve seen, economic weakness can create scoring opportunities.
MANY real estate millionaires were born out of the 2008 financial crisis …the same crisis that wiped out those only playing offense when conditions changed.
So trends in economics, demographics, geo and local politics, technology and other factors, all take something away and give something else.
Your equity-building mission is to look for high probability match-ups and run some plays.
Sometimes special opportunities arise that aren’t directly part of your wealth preservation or wealth building game plan. It’s more chaotic and free-form.
Sometimes it’s more about fast reactions and smart in-the-moment judgment.
When unexpected situations arise, your ability to quickly assess and respond can prevent disaster or help you capitalize on rare opportunity.
But you need to be smart, decisive, and quick to act.
We’re in the final phases of selling out our 15th Annual Investor Summit at Sea™. This is where we gather each year with thought leaders, subject matter experts, and active investors from around the world.
We talk about what’s going on in the world, what the trends are, where the challenges and opportunities are … and how to increase probabilities for success.
When we arrive for the Summit, the world will be different than today.
We’ll be about 70 days into the Trump administration. We’ll have a lot more visibility into what America will be doing over the next four years … and how the world is reacting.
It’s our annual “half-time” intermission … a break from the day-to-day action …to huddle with coaches and fellow players to analyze and adjust game plans.
But whether you join us, or find your tribe elsewhere … we encourage you to listen to great thinkers. Talk with them if you can … and schedule intermissions away from the daily game to look at the big picture and adjust your game plan.
If Rickards and Kiyosaki are right, there could be an iceberg on the horizon.
But remember … some folks survived the Titanic. We’re guessing they were the ones who saw the problem sooner, heeded warnings, and got into the lifeboats early.
Until next time … good investing!
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