Which rabbit to chase?

The person who chases two rabbits catches neither …

Another week and a thousand sub-plots and angles to the COVID-19 story and how all this might affect real estate investors.

In a run-of-the-mill market gyration, those are usually fun and relevant rabbit-trails to go down. But there will be plenty of time for that later.

Sometimes it’s more important to stay focused on the main thing … even if it’s a little boring, redundant, or even (gasp!) political.

This is one of those times.

Think about it …

Virtually all major factors impacting the future of the economy, financial system, and currency that your portfolio and financial security depend on are being driven by policy.

Market participants like buyers, sellers, investors, tenants, and businesses all seem to be left out … or perhaps “locked down” is more accurate … of the process.

And the “gauges” most people focus on to determine the national, state, corporate, and individual health are questionable at best.

Whatever is going on right now is a far cry from “free” markets. It’s all driven by Federal Reserve and government (again, they’re not the same thing) policy.

So are we here to critique policy or rant about what “should” be?

Heaven forbid.

We’re not that smart … or brave. Besides, no one in charge is asking us what we think, so our opinions don’t count much in the real world anyway.

But with a thousand things to distract you, we’re simply pointing out that policy matters … and it’s a good idea to pay attention to policy so you can pivot to avoid problems and capitalize on opportunities.

As of this writing, we’re waiting to see what the Fed will say and do. They’re the makers of those important monetary policies which affect everyone everywhere.

For the uninitiated, the Federal Reserve is the issuer of U.S. dollars. The U.S. dollar currently serves as the reserve currency of the world.

Even though a lot of people know this … very few really understand it … and that’s a problem for both individuals and societies …

“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

– John Maynard Keynes

The Fed expands and contracts the amount of dollars in the system to directly or indirectly manipulate interest rates, inflation, asset prices … including stocks and real estate.

If you’re paying attention, you’re watching a hyper-active Fed operate in real-time.

The Fed underwrites the United States government’s debt and deficits … including all the stimulus spending, bailouts, and vote-buying handouts by both parties.

If you think of dollars like blood … a currency that flows through the body of the economy supplying nutrition to individual cells (people) and organs (organizations) …

… then it’s easier to understand the impact of the quantity, quality, and velocity of those dollars.

There are MANY issues at play in today’s world. But we think the dollar may well be the most important developing story.

Of course, long-time followers of The Real Estate Guys™ know we’ve been watching the dollar for quite some time.

The long-term demise of the dollar is a mega-trend which began in 1913 …

SO much we could say about this one chart, but we’ll save it for future rants.

Profiting from the dollar’s persistent decline is the essence of leveraged real estate investing and the main thesis of Equity Happens.

Yes, we know we need to re-release Equity Happens. It’s on the to-do list. But it’s kind of flattering to see used copies trading for hundreds of dollars.

In fact, let’s use Equity Happens as a quick case study in inflation …

Right now, the supply of Equity Happens books is small. Apparently, the demand is high, so the price has been bid up.

(Note: We don’t get any of that premium. We wish. But it goes to the used booksellers. We’re still rummaging around the garage looking for copies so we can get in on the action.)

But the high price of Equity Happens isn’t the result of inflation. It’s the result of limited supply against relatively high demand. A copy of Equity Happens is rare.

Compare that to Rich Dad Poor Dad, the best-selling financial book in history.

At the same time Equity Happens is selling for over $400 per copy … nearly a 20x premium to the retail price …

… Rich Dad Poor Dad is selling for $5.39.

Does that mean Equity Happens is the better book? Or the demand for Equity Happens is higher than Rich Dad Poor Dad?

Not at all. In fact, far from it.

Now stick with us because this is the important lesson …

The disparity in price between Equity Happens and Rich Dad Poor Dad is a function of how many copies of Rich Dad Poor Dad have been printed.

While we only printed less than 100,000 copies of Equity Happens … untold millions of copies of Rich Dad Poor Dad are in the marketplace.

As a product, abundant supply is fantastic for the consumer. Mass production creates abundant supply which produces low prices and allows more people to acquire the book.

In other words, falling prices are a boon to consumers. It expands the ranks of the “haves”. Cheaper books mean more people can afford them. Remember this when some official tells you deflation is a threat. It is … but not to you.

What if Rich Dad Poor Dad wasn’t a book, but a currency that you were earning and saving … how’s it working now?

Let’s say you went into the market and traded the blood, sweat, and tears of your labor for 100 copies of Rich Dad Poor Dad at a time when the book sold for $12.

Then suppose Robert Kiyosaki prints another 10 million copies because his printing cost is only pennies per book.

This printing increases supply and drives the book price down from $12 to less than $6.

Yes, more people get copies of Rich Dad Poor Dad. In fact, maybe Kiyosaki deposits books directly into the libraries of readers everywhere.

But you … you worked for your copies at a time when the value of your work was based on a price of $12 per copy.

And you saved your copies in your library so you could trade them later for other books you’d like to read. But now, your copies are worth half as much.

You lose. The act of printing more books diluted the value of the books you already earned.

Now, go back and re-read the story of Equity Happens and Rich Dad Poor Dad … but replace Equity Happens with gold, Rich Dad Poor Dad with dollars, and Robert Kiyosaki with the Federal Reserve.

Monetary policy … the printing of dollars … affects you and EVERYONE earning, borrowing, saving, and investing in dollars.

And just in case you didn’t hear, the Fed is printing TRILLIONS of them … more and faster than at any other time in history.

There are a LOT of angles to the cascading crisis created by COVID-19, so it’s easy to take your eye off the main thing. We could be wrong, but we think the main thing is the dollar.

Unfortunately, most Americans and the pundits who inform them aren’t really talking about the dollar. So we are … and have been for years and years.

Today, everything is moving bigger and faster. Extreme policies are likely to produce extreme results.

Whether those extreme results harm or benefit you and your portfolio depends on how aware, prepared, and responsive YOU are.

But your results also depend on what everyone else in the eco-system does … and the policies they support. So talk with your family and friends. Encourage them to pay attention too.

Spreading financial awareness and preparedness helps flatten the curve of economic impact to the financial system.

Like COVID-19, bad ideas are highly infectious … especially when people are highly vulnerable. Ideas affect individual actions and institutional policies.

We’re not telling you what to think or do.

But if you’ve been hitting the snooze button up to now, it’s probably time to snap to attention and start studying. Think and do is better than wait and see.

There’s a lot more to this chain of events to come.

Thanks to all of you who’ve taken the time to send a little sunshine our way.  It means a lot to us!

Here’s what The Real Estate Guys™ Radio Show community is saying … 

Awesome analogy for gold, dollar, and the Fed! … ” – John Y., 6/10/2020

And now the REAL contagion begins …

Although there may be some debate about the true origin, cause, and date of the COVID-19 virus … there’s no doubt about its presence and impact today.

And just as the health crisis began quietly, before exploding onto the scene, so it may be with the subsequent financial crisis.

After all, if you’re not both an epidemiologist and paying attention … or listening to one … like our friend Chris Martenson at Peak Prosperity …

… you probably didn’t know anything about COVID-19 until there was no toilet paper on the shelves at your local store.

Clearly, there were people who knew and acted sooner than others …

… and we’re guessing most folks would prefer to be in the group who’s aware and prepared.

Fortunately, being late to the toilet paper run didn’t result in being completely wiped out. (Sorry, we couldn’t resist.)

But as the health crisis and resulting lock down has mutated into an economic crisis …

… and is already showing signs of spreading into a financial crisis 

… the consequences of being ignorant and ill-prepared could be a whole lot messier to handle than a toilet paper shortage. (Okay, we’ll stop now.)

Punning aside, our point is there are abundant and alarming clues in the news that a financial contagion has already begun.

But preparing for it is a lot more complicated than simply stocking up on paper products … including cash.

Preparing is also a lot bigger than just looking out for you and yours.

Just as society rallied to “flatten the curve” … slowing the contagion to preempt the number of afflicted from overwhelming the health system …

… we’re “all in this together” and need to flatten the curve of people going broke and overwhelming the financial system.

Because while you might be able to get along in life not exchanging germs with other people …

… it’s impossible to live in a world of free enterprise without trading with others.

We all need each other to be financially healthy if we want to build resilient prosperity.

So, it’s in everyone’s enlightened self-interest to both prepare individually … and help others prepare to prosper through the wild ride looming on the horizon.

That’s why we’re organizing a Crisis Investing webinar … featuring a STELLAR faculty, including …

Richard Duncan – Economist, best-selling author, former consultant to the IMF

Peter Schiff – Money manager, best-selling author, podcaster, financial pundit

Robert Kiyosaki – Mega-millionaire investor, greatest-selling financial author in history, host of the Rich Dad Radio Show

Nomi Prins – Former Wall Street insider, geopolitical financial expert, investigative journalist, best-selling author

Danielle DiMartino-Booth – Former Fed insider, popular market commentator, financial newsletter publisher, best-selling author

Brien Lundin – Gold expert, publisher of Gold Newsletter, New Orleans Investment Conference producer

And that’s not everyone. The Crisis Investing webinar is a big and important project.

We’re working hard to collect the thoughts and perspectives of a large, well-qualified group of thought leaders, insiders, and seasoned investors.

By the way … this isn’t a pitch … because the webinar is totally free.

So, be sure to tell your family, friends, neighbors, associates and total strangers to get on the Advance Notice List ASAP.

Remember, most of the “experts” on mainstream financial media are directly or indirectly underwritten by and beholden to Wall Street and the big banks.

So, most don’t understand or value Main Street investing … especially real estate. Yet that’s where most people live … and where all the fallout lands.

Of course, it’s possible to see danger coming in time to get in position to avoid most problems and capture many opportunities.

Of course, this requires focus and diligence because these are truly unprecedented times …

Fed’s balance sheet tops $7 trillion, shows increasing buying of corporate bond ETFs
MarketWatch, 5/21/20

Not sure what that means to you? You’re not alone … and that’s the point.

The wizards behind the curtain are pulling levers, flashing lights, and using smoke, mirrors, and fancy words to manipulate the currency, credit markets, and interest rates YOU depend on.

Hint: The Fed’s balance sheet represents how many dollars they conjure out of thin air … and it’s nearly doubled since the COVID-19 crisis hit just a few months ago.

But anyone with even a rudimentary understanding of economics knows that no amount of money printing creates products and services.

If it did, then the Fed could just print money and everyone could stay home and watch Netflix.

But like any form of debt, money printing is simply a claim on existing and future products and services.

If you earn, borrow, or measure wealth in dollars, this should concern you.

Meanwhile …

Over 4 million Americans are now skipping their mortgage payments
MarketWatch, 5/24/20

With nearly 40 million jobs lost in the last few weeks … defaults on rent, mortgages, car payments, credit card payments should surprise no one.

Sure, the Fed can print money for Uncle Sam to direct deposit to everyone.

And MAYBE they’ll use it to make debt payments … versus less important things like say … EATING.

But you may recall …

Alarming number of Americans don’t have enough savings for unexpected expenses

New York Post, 1/30/20

“One in four Americans do not have enough money saved to cover more than two months of expenses, according to a recent poll.”

Many of those folks are your tenants. But it’s not just the little guys who are struggling as the economic contagion spreads …

Default Notices Are Piling Up for Retailers Unable to Pay Rent
Bloomberg, 5/22/20

Hertz, slammed by coronavirus, to continue under bankruptcy protection
Chicago Tribune, 5/26/20

‘No business is built for zero revenue.’

NO business is built for zero revenue. Neither is any city, state, or nation.

No society can survive long without production AND commerce.

So, while it’s good that the world is coming out of its COVID-19 induced economic coma …

… the extent of the damage … and what’s temporary vs what’s permanent … will not be known for some time.

But with so much uncertainty remaining about whether the health crisis at the front end of this chain of calamity is past its peak …

… there’s no rational reason to think the subsequent economic crisis is even close to over.

And even if it was, all those missed payments and printed money is likely to create a financial system crisis … and perhaps even a currency crisis … down the road.

So our bet is things get MUCH choppier before they get better.

BUT … that’s not all bad news. In fact, there’s likely a lot of opportunity in all this mess.

So rather than go full-fetal freak out … or waste a bunch of time blaming (pick a perp or scapegoat) … or philosophizing about what the people in charge should or shouldn’t do …

… we think you’re better served to stay focused on what YOU can do NOW.

We’re sorry if this is a little repetitive …

… but if you were on the deck of the Titanic, would you want the crew to stop boring you with repeated directions to the lifeboats?

Of course, no one knows exactly the “best” way to mitigate risks and capture opportunities … there’s still too much unknown.

But as we often say, focus on being diligent to control what you can so you’re in the best position to respond to what you can’t.

And listen to as many smart people as you can who are also diligently preparing and paying attention. That’s what the Crisis Investing webinar is all about.

The follow up to the webinar will be to take all these expert perspectives and then come up with the best ideas and action plans.

But be patient. With MANY hours of interviews, the project won’t be ready for a few more weeks. Stay tuned!

Meanwhile, we still think it’s wise to get as liquid as you can while you can … especially with respect to equity and taking advantage of the cheapest mortgage money you may ever see.

Take a good look at your portfolio … and think about how it would respond to rising rates, a banking crisis, a credit market collapse, or a substantial decline in rents.

Remember, “no business is built for zero revenue”.

Sometimes you simply can’t save everything from a worst-case scenario. So it’s also important to know when to retreat and preserve capital … so you can live to invest another day.

But if you’re liquid, conservatively structured, well-educated, and connected … you’ll probably hold onto most of what matters …

… and easily make up any losses by grabbing the bargains likely to be littered across the landscape as this all unfolds.

And if this turns out not to be as big a deal as it seems … how are you worse off for being prepared?

Real estate and the economic pandemic ahead …

Here’s another installment in the continuing saga of Crisis Watch 2020 …

Last time, we discussed the scope and sequence for the mutation of the current health crisis into a potential dollar crisis.

If you haven’t read it, try to fit it into your hectic sheltering-in-place schedule.

We think it’s important to have context for the deluge of data, news, and opinions overwhelming your senses. Without context, it’s just a lot of scary noise.

Today we’re considering the future of real estate in a perpetual and post-pandemic world. After all, we are The Real Estate Guys™.

And last time we looked, none of the talking heads on mainstream financial media are talking to real estate investors. So, we will.

Of course, real estate is a vast topic with a multitude of sub-sectors. Each is affected by both micro and macro factors.

All that is obviously WAY too much for a deep dive in a weekly muse.

But with only a few exceptions, when it comes to real estate, it’s really ALL about jobs and incomes.

And right now, it’s no secret the jobs market is imploding in unprecedented fashion. The Atlanta Fed is projecting a STUNNING 42% decline in Q2 GDP.

Imagine if your blood pressure, paycheck, or rents declined 42%. Ouch.

The Federal Reserve and the U.S. government (not the same thing) are frantically trying to stave off depression with both monetary policy (lower interest rates) and fiscal stimulus (government spending).

But at the end of the day, it takes real jobs to produce real income to make real rent and mortgage payments on real estate. Really.

It’s productivity that creates products and gives money its value. Money from nothing doesn’t create goods and services to consume.

More money and less production usually leads to shortages and high prices. That’s hard on everyone, but especially tenants.

So, policymakers are like Han Solo flying into the asteroid belt in Star Wars: The Empire Strikes Back … attempting to successfully navigate a VERY dangerous landscape.

The plan seems to be for the Fed to use EXTREME dollar printing to fund ginormous government spending, suppress interest rates, and buy almost everything from local bonds to ETFs … maybe even stocks.

Ostensibly, the goal is to prevent a collapse of asset prices and the financial system (banks and bond markets) they support.

This presumably buys time for the economy to be re-ignited, so businesses, jobs, and incomes are restored. But at what price? And will it work … fast enough?

Maybe. But it’s probably smart to be prepared in case things don’t go as planned. This crisis is unprecedented. No one really knows what will happen.

In practical terms, we think increasing liquid reserves, tightly managing cash flow, dumping marginal properties in marginal markets, and staying tight with your mortgage professional are all things that make a LOT of sense right now.

We’re guessing free cash flow, liquidity, and access to capital will all be very valuable in the very near future.

For active and aspiring syndicators, NOW is a GREAT time to expand and educate your network of prospective investors …

… preparing them to join you in taking advantage of the bargains likely coming to a neighborhood near you.

Meanwhile, some investors are choosing to sit on the sidelines until AFTER the crisis passes and things stabilize.

Waiting for things to stabilize could be a BIG mistake …

First, things don’t “stabilize” on their own. Things stabilize because intrepid investors step into the chaos and go bargain shopping.

Think about it. It’s the very act of grabbing the best deals while others sit out which puts in a price bottom and stabilizes a market.

So a stabilized market is one that’s already been picked over. If you want the best bargains, you need to be among the brave and bold.

This isn’t to suggest throwing caution to the wind and buying anything anywhere for any price. That’s dumb any time, but especially when a storm is clearly on the horizon.

But if you’re in it for the long haul, which is what true real estate investing is all about …

… then the best “price” is a whole lot less important than great long-term financing.

That’s because when the best price is available, it’s often because financing is limited, expensive, or not available at all.

So, go back and think about where we’re at in the pandemic …

A health crisis leads to a lock down which crushes commerce … taking revenue, jobs, and paychecks with it.

Real estate values start to fall because buyers are either unable or unwilling to buy … and demand slows. Of course, that usually proves to be TEMPORARY.

Meanwhile, the economic crisis means missed payments and debts going bad. Lenders get nervous and credit starts to tighten. It’s already happening.

Of course, bad debt in a debt-based system is its own next-level nightmare.

IF the economic crisis continues, the bad debt contagion spreads … collapsing credit markets and threatening the banking system.

Think 2008 … only WORSE.

When this happens, credit’s not just tight. It’s nearly non-existent.

So yes, bargains are everywhere, but you better have CASH.

That’s why we think it’s smart to convert equity to liquid reserves while both equity and great financing are still available.

Of course, when you find the right deal in the right market with the right cash flow and you’re able to obtain great LONG-TERM financing …

… then you can ride the price train down and back up again on the backside.

Remember, what happens from the time you buy until you sell doesn’t matter much as long as cash is flowing positively in between.

Plus, with the updates to the tax law, rental real estate got an additional boost to the already awesome tax reform accelerated depreciation credits.

These tax breaks reduce taxes in the future, but can now also help you reclaim taxes paid in the past. This all really helps with your cash flow early in your ownership when you need it the most.

Lastly, consider how much pressure is being put on the U.S. dollar to prop up the entire world’s collapsing asset prices and credit markets.

Gold is signaling concerns about long term inflation. Smart investors are paying attention. We hope you are too.

Will the dollar soften, crash, or collapse … causing the dollar price of real assets like real estate and gold to soar?

No one knows. But it’s certainly possible. We’ll be digging deeper into this hot topic in our upcoming Crisis Investing webinar.

But whether it’s only the 2 percent per year inflation the Fed targets … or a much higher rate which could result if the Fed loses control and the dollar collapses …

… the key to profiting from inflation is DEBT.

And the best debt on earth is real estate debt because you enjoy very low interest rates and payments which can be locked in for the long term …

… with no margin calls …

… plus you get control of a real asset that produces income for servicing the debt …

… plus you only need to put in a fraction of the price … 30% or less down payment in many cases… which means you don’t have much capital at risk if you get long term deflation …

… plus you get fantastic tax breaks to further enhance your after-tax cash flow.

Meanwhile, you earn inflated dollars which might be worth less against today’s products and services … but worth a lot when paying off that old debt.

So the key is to acquire cash flowing assets with debt. This is real estate 101, but what makes it work is INFLATION.

And right now many pundits believe (and gold is confirming) the stage is being set for accelerated inflation.

The danger, as any seasoned investor will tell you, is lack of liquidity.

But with dollars losing value and banks paying zero interest, who wants to hold cash?

This is where gold comes in … not as an investment, but as liquid reserves that can insulate you from long term inflation.

In a world where massive printing of dollars (inflation) is the singular “vaccine” being administered to prevent economic contagion …

… it’s arguably urgent to start taking precautions to prepare for the potential decline of the real value of the dollar.

The main ingredients are income property, debt, and gold.

When you mix them properly, you insulate yourself from the negative effects of inflation while positioning yourself to create real profits.

We’ll be talking more about this timely and important subject in the weeks ahead. Stay tuned!

The next stop in the coronavirus cascading crisis tour …

If you’re tired of hearing about the COVID-19 coronavirus crisis … get over it.

We’re on the front end of a series of cascading crises that will likely affect every investor on the planet … including YOU.

Pretending it’s not happening … or blindly trusting the great and powerful wizards behind the curtains … or pulling the covers over your head and hoping for the best …

… will NOT make any of it go away.

Of course, HOW it affects you could depend on how well you pay attention, understand what’s happening, and take effective action.

There will be WINNERS … and LOSERS.

We’re far from experts, but we’re fortunate to have access to some of the smartest folks on the planet. And they’re ALL monitoring the crisis VERY closely. Seems like a good idea.

As you may know, we’re organizing an EPIC mega-webinar featuring discussions with MANY of our big brained friends to find out what they’re seeing, thinking, and doing.

We realize you’re being bombarded with information … we all are … so rather than just pile more on, let’s focus on creating some context to process all the info better.

It’s important to think about how the crisis is likely to spread …

What started out as a health crisis quickly mutated into an economic crisis as cities, states and nations worldwide virtually shut down in unison.

These lock-downs have suppressed both the supply and demand for all kinds of good and services.

Because the decreases in production and demand aren’t perfectly synced, there have been both shortages (toilet paper) and gluts (oil) … the effects of which range from inconvenient to devastating (no toilet paper?!?).

But that’s just the beginning …

Lock-downs stop revenue, profits and paychecks … which stops debt service.

This is where the economic crisis mutates into a financial system crisis. 

But unlike toilet paper and oil, the signs of stress in the financial system are harder to see. That’s why financial system failures blind-side many Main Streeters.

Yet there are many clues in the news IF you know what to watch for.

It starts with obvious headlines …

Coronavirus-caused spike of homeowners in forbearance surges on
– Fox Business via Yahoo Finance, 5/4/20

Of course, this surprises no one.

When people don’t have jobs and incomes, they can’t make mortgage payments. For those old enough, this elicits flashbacks to 2008.

Except now, it’s not just mortgages. It’s corporate debtconsumer debtmunicipal debt, public and private pensions, and much more.

Basically, virtually all IOU’s everywhere are in danger of going bad.

This is counter-party risk … when your asset is someone else’s liability … if they fail to perform, your asset loses some or all of its value.

Even your bank account (your asset) is your bank’s liability (they owe you). If the bank fails and you have more than the insured amount, YOU could have a problem.

Counter-party risk is EVERYWHERE in today’s debt-based system.

Yet while bad debt is one level of awful, it gets worse when gamblers in the Wall Street casinos use derivatives to magnify their gains.

Of course, the extreme leverage created through derivatives cuts TWO ways.

Sure, extreme leverage turns tiny gains into massive profits … but it can also turn bad bets into a systemic crisis.

We’ve gotten into the weeds of how all that works in the past, so we won’t rehash it now.

But the first clue in the news indicating stress in the financial system is when asset prices are falling and cash is running low …

… as everyone is madly selling everything and the kitchen sink to raise cash to cover margin calls on their bad bets.

Of course, that’s also when quality assets get caught in the downdraft, so if you’re aware and prepared (i.e., liquid), you can step in and snap up bargains.

Which leads to another clue in the news … savvy investors sitting on huge war chests of cash.

According to a recent Bloomberg article …

“assets in money-market funds have soared to a record $4.77 trillion amid a flight to safety by investors this year.”

Business Insider reports Warren Buffet’s Berkshire Hathaway has a record $137 billion cash pile.

Yet as Buffet explains …

“Berkshire’s cash pile isn’t overkill given the cataclysmic risks posed by the coronavirus pandemic.”

(Buffet is the same guy who called derivatives “weapons of mass financial destruction.“)

Now, with all these demands for cash, it isn’t surprising to see headlines hinting that there’s not enough to go around.

Interestingly, as you may recall, the current cash crunch didn’t grow out of the coronavirus crisis. It preceded it.

We noticed this back in September when the Federal Reserve started pumping billions of dollars per day into the repo market.

(The repo market is like a pawn shop for banks to hock T-Bills for dollars.)

Since then, the Fed has injected trillions of dollars directly and through Uncle Sam … driving interest rates down to zero … and perhaps negative …

… and stepping in to buy debt no one else can or will, including U.S. Treasuries, and now for the first time ever, corporate debt.

This is very similar to how the Fed put in a bottom to the free-falling mortgage-backed securities market back in 2008 … except WAY bigger.

All this suggests the financial system could be far more stressed than the wizards behind the curtain let on.

Which brings us to the final stop in our progression of dominoes from health crisis to economic crisis to financial crisis …

… a dollar crisis.

As we’ve been pointing out, the financial bondo the Fed is slathering all over the dents in the economy and financial system are dollars.

ALL the pressure is on the dollar, which should concern EVERYONE who earns, owes, spends, and denominates wealth in dollars.

The coronavirus health scare alerted the American politicians and public to a sick dependency on China for critical supplies like masks and medicines.

Naturally, Americans are uncomfortable with this dependency and lawmakers are preparing bills to bring the medical supply chain back to the USA.

Of course, as real estate investors, this interests us because it could mean the creation of new jobs in whatever regions land these factories.

But our point today is that just as Americans realize they don’t want to depend on an adversary for something as critical as life-saving medicines …

… Chinese (and Russians and others) similarly don’t want to depend on the U.S. for something as essential to commerce and prosperity as currency.

So as we first pointed out way back in 2013 in our Real Asset Investing Report, and later updated in our Future of Money and Wealth presentation, The Dollar Under Attack …

… the calls continue for a global alternative to the U.S. dollar as the world’s reserve currency.

And with the Fed conjuring trillions of new dollars out of thin air to prop up sagging asset prices, hold together collapsing credit markets, backstop virtually all insolvent corporations, states, plus the federal government, and suppress interest rates …

… the final stop on this cascading coronavirus crisis tour could be a dollar crisis.

So don’t get tired or bored of watching a slow-motion train wreck. Slow means you have time to get out of the way.

If you’ve been asleep up until now, it’s time to wake up. Because things are picking up speed.

Are you aware and prepared? Stay tuned …

Crossbreeding billionaire brilliance …

Personal development guru Tony Robbins reminds people …

“Success leaves clues.”

The idea is that success isn’t purely a product of blind luck or extreme innate ability. For guys like us, that’s REALLY good news.

Success is much more a matter of developing the knowledge and discipline to take aggressive action based on proven patterns and principles.

So if you carefully observe both what a successful person does and how they think, you can often replicate their thinking, behavior, and results.

Similarly, if you’ve had success in one area of life, you can probably apply those principles to other endeavors and achieve success there too.

That’s why we pay attention to successful people … even those who aren’t real estate investors.

So we perked up when we saw this headline …

Warren Buffett offers his 2 best pieces of advice for aspiring young investors

– Yahoo Finance 4/28/20

Of course, notwithstanding his investment in Berkshire Hathaway Home Services, Warren Buffet isn’t really a real estate guy.

But Warren Buffet is arguably one of the most successful, famous, most admired investors in modern history. There’s probably a lot to learn from him.

And since we need a timeout from our intense monitoring of the macroeconomic tsunami forming on the horizon …

(we’ll do a deep dive on our upcoming Crisis Investing webinar)

… today we’re looking at what real estate investors can learn from Warren Buffet.

After all, at nearly 90 years old, Buffet has seen his fair share of crises. Few people on earth are as experienced at navigating stormy economic times and building wealth in spite of frail financial infrastructure.

So according to the Yahoo Finance article and accompanying interview video, Buffet’s first tip is to learn accounting.

Tip number two is do NOT invest based on charts (an approach referred to by stock traders as “technical analysis”), but rather to focus on “buying good businesses instead.”

As with most brilliant people, there’s a lot of wisdom packed into just couple of sentences. So let’s take a moment to unpack it and look for principles we can apply to real estate investing …

TRADERS attempt to buy low and sell high … going from cash to asset to cash. The mindset is to accumulate cash.

INVESTORS seek first to acquire a stake in a profit-generating enterprise. They focus on accumulating cash FLOW … or what we call the ongoing efforts of others.

Of course, they’re happy to buy low and enjoy some capital gains too. But the purpose of buying is to acquire cash flow.

In real estate, flippers and wholesalers are TRADERS … they hustle to go from cash to asset to cash.

The difference between a stock and real estate trader is the real estate trader has the ability to improve the asset (add value).

So the real estate trader has some degree of control over creating the capital gain they wish to realize. The stock trader does not.

But whether in stock or real estate trading, the long-term financial performance (the accounting) is less important than the short term “mood of the market” (the technicals).

If the market is hot and new buyers are piling in … especially if those buyers are equipped with cheap credit … then it’s a lot easier to sell high to the next guy.

This investment philosophy is sometimes called “The Greater Fool” because your exit always requires someone coming along willing and able to pay more.

And when rising prices are dependent upon healthy credit markets and abundant jobs, and one or both crash, the line of greater fools gets short real fast.

So the challenge, as many traders just discovered, is hot markets can turn cold quickly … and you can end up a reluctant long-term holder.

Of course, with leverage (margin on stocks, or mortgages on real estate), you may not be able to hold on for the long-term. Then it’s a wipe out.

Mortgages are far more forgiving than margin debt on securities, but negative cash flow on a negative equity property is no fun either.

On the other hand, real estate INVESTORS are much more like Warren Buffet 

… except instead of buying businesses, real estate investors are looking to populate portfolios with profitable cash-flow producing properties.

This is a very timely discussion, because in challenging times like these, QUALITY matters.

And when it comes to sound investments, quality is cash flow.

To survive and thrive long-term, it’s important to look for sound properties … in relatively strong markets … managed by great teams … and serving a viable demographic.

Yes, many markets are weak now … and getting weaker. Ditto for demographics. But some aren’t. And some are well-positioned to bounce back better when things open up again.

So it’s not all doom and gloom. In fact, markets which are dipping now, but positioned to bounce back soon, could present great acquisition opportunities.

This isn’t the time to sit out or tip toe through the trauma.

However, you’ll need to know how to look at the operating financials of an income property … the accounting of real estate.

Warren Buffet says, “that’s got to be like a language to you.”

In other words, you’re not looking at the entrance price, exit price, and profit potential. You’re looking at how to hold for the long term in between.

The Yahoo article refers back to an annual letter Buffet sent his investors way back in 1988 …

“Our favorite hold time is forever.”

– Warren Buffet

In Seven Habits of Highly Effective People, Steven Covey explains it’s important to “begin with the end in mind.”

When you approach real estate as a commodity to trade with your end game being cash … then you’ll focus on short term circumstances and structures to produce short term results.

Then, at the end of the transaction all you end up with is cash.

Worse, cash in the bank pays next to no yield, and with the Fed printing trillions, there’s a possibility (probability) cash will lose value.

So to protect your “profit” you’ll need to quickly find another asset to buy.

But when you approach real estate as a “going concern” … a business … then you underwrite, structure, and manage it very differently … for the LONG term.

It’s not a date, it’s a marriage.

This matters more than ever right now …

It’s not a stretch to think prices for many properties will be falling as the damage done by the COVID-19 shutdown permeates through the economy.

We expect a big chunk of the damage to metastasize through credit markets, further weakening the economy and letting a lot of air out of property prices.

This is a very challenging environment for real estate traders. It’s hard to buy low and sell high when prices are falling faster and farther than any value you might add.

Meanwhile, many investors will sit on the sidelines and let viable deals go by because they don’t want to “pay too much”.

But if you have a 10 or 20 year hold horizon (remember … “our preferred hold time is forever”) …

… it’s less important what you pay today versus having a viable property and structure you can live with long term.

Sometimes prices can fall so you could theoretically buy lower. But if it’s because the availability of capital or credit if limited, it might hider your ability to buy with an optimal structure.

Also, real estate isn’t a static commodity. If the property is in good shape and you pass at the higher price, the lower later price could be because the condition of the property or tenant mix deteriorates.

So sure, you might wait and get the lower price, but is it a better buy? Maybe not. That’s why we say if the deal in front of your make sense, buy it.

Lessons from Warren Buffet’s career suggest that quality is present in all markets.

The time to buy is when an individual deal makes sense and can be structured for the long haul.

If the bust becomes a boom, all ships rise with the tide.

But if the boom becomes a bust, only the well-structured property ownerships will survive to the next boom.

Investing is different than trading. And success is simply a matter of focusing on the relentless execution of the boring basics.

Sure, it’s fun to flip the hot property and find yourself neck-deep in a pile of green paper.

And if you’re short on liquidity, you may need to do that from time to time (though we prefer syndication as a preferred path to having more cash to invest with).

But if you’re aspiring to build a portfolio of properties and a pile of passive income, then it’s wise to take a long-term approach and focus on fundamentals as a proven path to resilient prosperity.

Until next time … good investing!

Inflation or deflation? That is the question …

Just when you thought things couldn’t get any more insane, the price of oil dropped all the way to NEGATIVE $37.

Of course, it bounced back to a positive (but still very low) price of about $12.

We’re guessing there’s a big opportunity somewhere in all of that … just like if rents crashed temporarily. We’ll look into it.

Meanwhile, Uncle Sam is rolling out Free Stimulus Money Phase whatever … all freshly printed by the (privately owned) Federal Reserve.

We’re not sure how many dollars the Fed can print before dollar-holders start moving into something else. Russia dumped dollars for gold quite a while ago.

Looks like Bank of America thinks more investors will follow suit …

Bank of America recently RAISED its 18-month dollar price target for gold to $3,000 an ounce … 50% higher than gold’s all-time high …

… because “the Fed can’t print gold.” (the title of B of A’s report).

So it’s not just Peter Schiff, Robert Kiyosaki and Jim Rickards who think the dollar could be headed down … and gold is where many will flock for safety.

If you’re a nose-to-the-grindstone Main Street real estate investor and haven’t paid any attention to the dollar, gold, and oil …

… it’s time to wake up and smell the crisis.

Because as we discussed in our last muse … and the one before thatthe fundamental flaw in the financial system is too much debt.

We won’t beat that horse again except to say it seems the Fed is betting the dollar is strong enough to paper over all of the debt and neither will implode.

So the question every investor … including real estate investors … should be considering is …

will this economic shutdown and money printing result in inflation or deflation?

Inflation makes your rents (and expenses) go up. At least once it makes its way through the entire system.

Of course, wages haven’t seen much inflation in a long time. So demand-driven rising rents actually pushed some people down the ladder or out onto the streets.

Inflation causes equity to happen all by itself … no hammer, paint, or new carpet needed.

Inflation makes debt easier to pay off.

That’s why all borrowers, including indebted governments, LOVE inflation … and central banks work furiously to create it.

Of course, deflation is the opposite of all that.

Deflation causes equity to disappear and wages and rents to decline. It makes the mortgage payment harder to deal with.

Deflation causes debts to go bad, which is why banks (lenders) are scared to death of it.

Once a deflationary spiral begins, it’s really hard to stop it. Ask Japan.

Deflation (or preventing it) is what the Fed’s “price stability” mandate is REALLY all about.

So the Fed’s not interested in keeping prices low … it’s trying to keep them HIGH and rising at least 2% per year.

But as the Rolling Stones said and the Bank of Japan can attest … you can’t always get what you want. At least not exactly when, where and how you’d like.


Yes. At least in terms of prices. Both can be present at the same time, and we’re already seeing it. Gold is up while oil is down.

That’s because rising and falling prices are factors of currency supply, leverage, and supply vs. demand.

When the Fed prints money, it increases currency supply. If you focus solely on that, you see hyper-inflation. After all, they’re printing TRILLIONS.

But when credit markets collapse (the reason the Fed is printing), leverage decreases … letting air OUT of prices.

That’s why real estate values plummeted in 2008. Anything dependent on financing falls when financing fails.

And when supply is short in the face of demand … prices rise … if you can get product at all. Think of recent price gouging in medical masks or toilet paper.

Conversely, when demand disappears in the face of strong supply … prices collapse … as just happened in oil.

Currency supply, leverage, supply and demand are like three tension wires holding an old-fashioned TV antenna upright.

The trick for the wizards behind the curtain is to balance them so prices remain “stable” … which for the Fed means plus 2 percent per year.

The trick for a lowly Main Street investor is to watch all this …

… and then accurately anticipate what’s likely to happen and auickly position to avoid catastrophe and capitalize on opportunities.

It’s also important to consider whether the factor causing the shift is permanent or temporary.

Will oil demand be this low forever? For a while? For a season? What about unemployment? Dollar demand?

We know … it’s a little complicated. But it’s not rocket science. And it’s worth the effort to gain context for all the non-stop info in the daily financial news.

Armed with context and information, your mission is to thoughtfully consider what to do in different scenarios.

This is a VERY IMPORTANT exercise RIGHT NOW … because everything is changing so fast.

The time to design the fire escape isn’t when the house is on fire. And there’s already a fair amount of smoke. This is no time to hit the snooze button.

We’re going to leave you with some questions to ponder for now, while we get back to work on the upcoming Coronavirus Crisis Investing webinar …

If unemployment remains high and wages fall, then which geographic markets, demographic markets, and product niches are likely to win and lose?

If credit markets seize up as badly or worse than 2008, how will your current portfolio of deals, debt and equity be affected?

If real estate prices collapse, what can you do NOW to mitigate the risks and capitalize on opportunities?

And the super-bonus extra-credit question …

If the dollar loses reserve currency status, what happens to your portfolio, liquid net worth, and purchasing power? How can you hedge?

Hey, no one said real estate investing is paint by numbers.

Diligent investors need to think, imagine, and mastermind with each other to find creative ways to survive and thrive.

You can’t control external factors, but you can decide how to react. Do your best to accept the challenge and enjoy it.

After all … “We’re all in this together.”

Until next time … good investing!

An economy in triage …

(Here’s a 5-minute money read)

You probably know the global economy caught a virus and suffered a massive heart attack. Cash stopped flowing, creating a cascade of problems …

… including individual cell damage, organizations and systems in danger of failing, and almost certainly … brain damage.

So the monetary doctors at the Federal Reserve are infusing enormous volumes of liquidity … perhaps hoping sheer pressure will force cash to flow.

Concurrently, Uncle Sam is injecting free money right into Main Street bank accounts …

… while local governments are selectively allowing certain chosen industries to provide “essential” products and services.

We’re not criticizing or complimenting. It’s simply an observation of what’s happening.

In recent rants, we suggested that insane, absurd, unsustainable levels of systemic debt is the primary vulnerability …

… the kryptonite of the “super” economy the United States was purportedly enjoying … right up until it wasn’t.

It’s a long, convoluted rabbit trail to explain, but the short of it is simple … when cash stops flowing, debts go bad.

That’s bad enough. But of course, it gets worse …

All that debt is underpinning artificially inflated asset prices (yes, that’s where the inflation ended up … they just call it “the wealth effect”).

As debts go bad, asset prices PLUMMET …

… UNLESS, the Wizards behind the curtain conjure many trillions of new dollars out of thin air to prop up … EVERYTHING … and push asset values back up.

Of course, all those dollars aren’t really free.

But no one in the White House, Congress, the Federal Reserve, or the mainstream financial media will say it, because …

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
– Henry Ford

But YOU should know it.

It’s the reason real estate investing has been arguably the most powerful and reliable builder of real wealth for many decades.

Properly structured income-producing properties allow investors to hedge deflation, ride inflation, and enjoy high after-tax yields on equity along the way.

Of course, there’s risk. And real estate investing is more work and takes more education than “invest and forget” or “buy low/sell high” paper asset investing.

But with ALL forms of investing … when external factors change, your investing strategy and tactics need to change too.

Right now, external factors are changing FAST. But it’s too early to tell if we’re facing an unpleasant cold front … a deadly blizzard … or a new ice age.

However it’s safe to say storm clouds have formed … and inclement economic weather is threatening to engulf the entire world.

This is notable because it usually takes a strong lead dog to pull the pack and sled through the snow … though that sometimes comes at a price.

China took on nearly $33 trillion in new debt to help pull the world out of the Great Financial Crisis of 2008. It’s doubtful they’ll do it again.

So contrary to popular myth, this 2020 crisis-in-waiting is probably NOT 2008 all over again.

Of course, the how and why won’t be clear until we’re on the other side.

But YES, the sun will come back out … eventually. Right now, it’s cloudy and cooling with very limited visibility.

So rather than delve into tactical details for right now …

(we’re interviewing many of our boots on ground teams and we’ll be talking on the radio show about what they’re seeing and doing right now)

… we think it much more useful to share what we’re watching and why …


The MOST important thing is jobs.

When we interviewed then-candidate Donald Trump and asked about his housing agenda, his one-word answer was, “Jobs”.

But jobs are only the start of the financial food chain.

Tenants’ jobs provide your rent, which provides your mortgage payments. Obviously, homeowners’ jobs are the source of their mortgage payments.

Mortgage payments often get made to servicers, who in turn forward the income to investors often via mortgage-backed securities (MBS).

But when enough payments get missed, those MBS lose value. And if they’re leveraged, that loss in value triggers margin calls.

Margin calls then force leveraged paper investors to post cash or face a forced sale of their pledged assets at a loss.

(This is where all the excessive systemic debt is the biggest problem … in that regard this IS 2008 all over again … only bigger)

If you’ve ever been on the wrong end of a leverage stock investment and received a margin call, you know exactly what that’s like.

Sometimes, highly-margined paper traders need to sell anything and everything at ANY price in order to raise cash … or end up bankrupt like Lehman Brothers in 2008.

These fire sales cause paper asset prices to collapse, triggering more margin calls, and a vicious downward cycle of asset price deflation.

That’s financial system contagion and when you see RED flashing across all the financial market indices.

The “patch” is for the “Plunge Protection Team” and/or the Federal Reserve and their proxies to step in and bid up prices … the Fed’s “asset purchase programs“.

Of course, when this happens, markets see a blip up, and cash-starved traders “sell the rally” … which of course, creates more red.

Right now, the Fed is SO active, paper traders default to buying anything the Fed’s buying just to catch a free ride.

We wish real estate underwriting were so simple.

The REAL solution is productivity (jobs), NOT printing currency.

But neither the government nor the Federal Reserve can “create” jobs. The best they can do is foster an environment where private enterprise creates jobs.

Right now, just the OPPOSITE is happening. They’re shutting everything down.

Until that’s fixed and businesses have time to rebuild … economic malaise and financial system (credit markets, banks, currency) instability are likely.

Sorry to burst your bubble … oh wait, something else already did that.

The Dollar

As we’ve been pointing out for some time, the Federal Reserve is using their printing press to “borrow” trillions of new dollars from the purchasing power of ALL dollar holders worldwide.

Read that again. And if you don’t CLEARLY understand it, then make a note to study this topic until you do.

It’s probably the most important financial concept most people don’t understand, but should …

“By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” 
– John Maynard Keynes (look him up)

A fantastic resource for understanding the foundation of all this is The Creature from Jekyll Island by G. Edward Griffin.

Creature is a much more useful horror experience while sheltering in place than binge watching The Walking Dead.

And while you’re digging deep into the design of the dollar system, be sure to study its ascendancy to world’s reserve currency status in 1944.

Then go even deeper and consider what YOUR world will look like if the dollar loses that reserve currency status. Most Americans are NOT ready.

However, as we chronicled way back in 2013Russia and China have been on a mission since 2010 to knock King Dollar off the throne.

As pointed out in the opening session of the Future of Money and Wealth program, Russia and China are in a MUCH better position to pull it off today.

Are they? Will they? Maybe. Maybe not.

But it’s no secret they want to … and have been working on it for a long time. They’ve reiterated it in word and deed on many occasions over the last 10 years.

Which brings us to …


Gold is the oldest and most universal form of money.

“Gold is money. Everything else is credit.”
J.P. Morgan

And apparently, the rest of the world is adding to their gold savings ….



Again, this has been going on since 2009, when China publicly warned the U.S. about protecting the value of dollar.

But Uncle Sam’s debt swelled nonetheless.

And the Fed’s balance sheet exploded from $800 billion to $4.5 trillion in 2012 … and is now $6.6 trillion and still GROWING. That’s all freshly printed dollars.

No wonder the world went to work on breaking their dependency on the dollar.

You may know gold is at all-time highs against every major paper currency in the world … except the dollar.

Stated inversely, paper currencies have collapsed to their all-time lowest values against gold … and the dollar is getting there … probably soon.

The ultimate currency insiders … central banks … accelerated their gold acquisition over the last two years. Hmmmm ….

What’s in YOUR safe?

Bringing it Home to Main Street

It’s no secret all us outsiders are on the front end of what looks to be a severe economic contraction.

Individuals, businesses, industries, asset classes, and even countries …are going to feel it. Real estate is not immune.

But even as you prepare for the worst, there are bright spots …

U.S. Manufacturing and Agriculture

In the short term, it’s ugly.

But long term, it seems policymakers and John Q. Public realize it’s important to have more manufacturing back in the United States.

Shortages of masks and medicine sent a message. We’re guessing many industries will consider or be coerced into moving.

So we’ll watch for opportunities in currently overlooked geographies where a migration of manufacturing might create a resurgence in real estate.


Again, energy is depressed right now because of a temporary collapse in demand.

But that also means choice assets are on sale. Meanwhile, less efficient production is going off-line … perhaps permanently.

So unless you think economic activity has ceased forever, then at some point the demand for energy should rebound … even more so if more manufacturing makes its way back to the USA.

Cheap Debt

Stimulus almost always means free money.

While borrowing to spend is stupid, borrowing low and long to invest high and short can be very smart … and profitable.

And right now, credit markets haven’t collapsed … yet.

So, it’s probably still a great time to quickly load up on cheap dollars, some precious metals, and high-yield debt secured by real estate you wouldn’t mind owning.

Distressed Assets

Of course, tough times means wrong-footed investors will need to let go of nice properties in good markets because they’re only structured for sunshine.

They’re selling because they have a problem, and when you buy … even at a discount … you help solve their problem.

And while it’s nice to buy at the very bottom, what really matters is where everything is at 10-20 years from now.

So, don’t be shy to buy if a deal makes sense … even if there’s a chance more air will come out. After all, you don’t know what will happen tomorrow.

Until next time … good investing!


Doing what you can to weather the storm …

Welcome to Part 2 of our discussion on the root cause of the current coming financial crisis and what you can do to survive and thrive.

We got a lot of positive feedback on Part 1 (thanks for that!) and folks have been anxiously waiting for this Part 2.

Fair warning: This is a whopper … and we didn’t get to everything. This easily could have been a three- or four-part series … or even a book or full day webinar!

(We’re working right now on the webinar … stay tuned!)

For now, we’re guessing most HIP (Hunkering In Place) people have more time these days, so we’re hoping you won’t mind the “bonus” material in this edition.

Last time we highlighted how the world is saturated in absurd, insane, unsustainable amounts of debt.

Debt is the cancer the Coronavirus crisis exposed, but the financial system disease pre-existed the virus. It’s been a concern of alert investors for years.

That’s because even the slightest disruption of payments can trigger downward spiral contagion of margin calls, fire sales, asset price deflation, and a lock down of credit markets.

That’s what happened in 2008 … and this portends to be MUCH bigger.

With global economies operating skeleton crews, commerce has declined precipitously and cash has stopped flowing.

It’s a global economic heart attack.

And with layers and layers of hypothecated debt daisy-chaining balance sheets of governments and financial institutions around the world …

… a wide-spread disruption of payments is an abject financial catastrophe of biblical proportions.

That’s why the PTB (powers that be) are desperately funneling freshly printed money directly to anyone (which is everyone) who has payments to make …

… while concurrently putting a faux bid on critical credit assets to prop up values and balance sheets.

And that’s just what we can see. Who knows what’s happening behind the curtain.

One thing few people are tracking or preparing for is the possibility the dollar might not be strong enough to paper over a global debt implosion.

It’s unnerving … yet important to pay attention because it takes time to react and things are happening big and fast.

So ready or not, the storm is here. However, the worst hasn’t hit yet … and when it’s over (this too shall pass), we expect there will be lots of opportunity.

Your mission is to get in position NOW so you can cash in when the clouds clear.

So if you haven’t read part 1, click here now to catch up.

Remember, there’s nothing you can do about events and circumstances outside your control. So while politics and philosophy are interesting …

… it’s best to focus on the short list of things you CAN control … so you can better react to those things you can’t.

Here are some suggestions …

Get Centered

First and foremost is MINDSET. How you think and what you believe affects your actions … and your actions determine much of what happens to you.

Mindset matters even more when facing adversity and chaos. Times like these can quash your enthusiasm and optimism.

You won’t see opportunities you don’t believe are there. And you won’t work or sacrifice to prepare if you’re convinced your efforts are futile. Hope is powerful.

Hope isn’t an irrational fantasy. In addition to the prescient warnings history gives us about the possible and probable dangers in the future …

… history tells us that tough times don’t last because humans always find a way to both survive and thrive. If they didn’t, we wouldn’t be here.

Of course, just because some people thrive … doesn’t mean YOU will. But if some can, then so can you … and it starts with mindset.

Get Smart

Equip yourself with knowledge, wisdom and perspective. It’s important to increase your education in the things that matter most.

If all this financial system, macro-economic, geo-political mumbo-jumbo is new to you, it can be overwhelming. But so was algebra … and most of us figured it out.

Think about how much time, effort, energy, money, and thought you put into earning, spending, saving, and managing “money”.

Then remember that all those activities fit inside a complex system … with powerful people and institutions either influencing or directly controlling critical factors.

Can you afford NOT to take your financial education SERIOUSLY?

Of course, you’re reading this, so we’re preaching to the choir. Your mission is to go evangelize to the world.

Every person you inspire to take effective action to grow and protect their wealth makes the very society YOU live and invest in more prosperous … both for you and everyone else.

We’re all in this together and we need each other to succeed. And speaking of others …

Get Connected

The next thing you can work on is your network … or what our friends Chris Martenson and Adam Taggart at Peak Prosperity call “social capital”.

The old cliché, “It’s not what you know, but WHO you know that’s most important” became cliché for a reason. It’s TRUE.

Your network of fellow investors, mentors, advisors, and boots on the ground teams are essential sources of wisdom, intelligence, deals and capital.

Yes, it’s temporarily harder to get together physically in today’s wild world of compelled isolation …

… but it’s also never been easier to find and connect with other people through technology.

Of course, reconnecting with your party friends from college and complaining about being locked down isn’t what we’re talking about.

Be diligent to build relationships with the RIGHT people … those who are realistically optimistic, studious, thoughtful, connected, and active.

Just go watch It’s a Wonderful Life to remind yourself of the value of social capital.

Okay … we’re guessing by now we’ve already lost some of the left-brained engineers. But if you don’t make mindset, education, and strategic relationships a priority …

… all the tactical training in the world can’t help you because you probably won’t have the emotional, intellectual, or relationship capital to take action.

If money solved all the problems, we wouldn’t be having a crisis.

Now with all that said, let’s take a look at a few things the window of opportunity could be closing on. If you can’t focus on everything, these are worthy of top of list consideration …

(Remember … we don’t give professional legal, tax, or investing advice. We simply share ideas for your consideration as you consult with your own advisors and mastermind group.)

Get Liquid

Cash is like oxygen.

If it stops flowing in from commerce, you need to breathe from your balance sheet … by either liquidating assets or tapping into credit lines.

When you know you’re headed underwater, it’s smart to take a DEEP breath … before it’s too late. History says when you need credit the most, it’s least likely to be there for you … in spite of the marketing slogans.

Look at an experienced player like Ford Motor Company. They borrowed heavily in 2006 ahead of the 2008 crisis … and survived without a bailout (unlike GM).

And Ford just did it again.

They’re not the only ones. MANY seasoned CFOs are drawing down credit lines even as credit markets are tightening.

Meanwhile, in a desperate attempt to keep credit markets open and backstop everyone, the Fed is printing as many dollars as it takes … and it’s taking a LOT.

We think investors who get liquid while they have equity and access to affordable credit will be happy campers down the road.

After all, in a crisis cash is king. Or is it?

Actually, it’s liquidity that’s king. So while dollars are the life-jacket du jour right now, they may not be the lifeboat you’re looking for.

Get Real

Even though we’re The Real Estate Guys™, we’ve been around long enough to remember when dollars and money were the same thing.

The coins we’d buy our comic books with were made of silver. And dollars the U.S. printed were simply coupons redeemable for the real money … gold for foreigners and silver for citizens.

Of course, all that changed decades ago. In 1965, the United States stopped minting money and started minting zinc-plated copper tokens.

Gresham’s Law says when bad money is introduced into an economy, the good money goes into hiding. Good luck finding a silver coin in your change at the grocery store.

In 1971, President Nixon told the world their gold-backed dollars were no longer gold-backed. But while the dollar stopped being money, gold didn’t.

That’s why that $35 ounce of gold in 1971 is now worth $1600. The gold didn’t change. It’s still 1 ounce. It just takes a lot more dollars to buy it.

So an ounce of gold in 1971 was a better long-term store of value than 35 dollars.

There’s SO much to say on this one topic. For now, we’ll focus on just a few important points …

Precious metals give you a place to park liquidity outside of counter-party risk where you can pivot into virtually any currency. Those are two nice features in many forms of crises … including a dollar crisis.

Precious metals are real … just like real estate. When currencies fail, anything real is worth more than paper money. Look at toilet paper in Venezuela.

People are confused and confounded by metals because they think of them like a share of stock or a piece of property … just a something to flip for capital gains … in dollars.

Part of getting real is learning to think of wealth and profit in non-dollar terms. It’s not easy … especially for Americans.

So while traders use metals (or more accurately, futures contracts) to flip for dollars … cash flow investors complain precious metals don’t produce a yield, so what good are they to hold?

Yet, Mr. Cash Flow himself, Robert Kiyosaki, is a serious collector of metals. Think about that.

We find it easier to think of precious metals as equity.

And when we have equity in properties and we’re not ready to use to buy more properties, we’d rather have it in metals than in dirt.

As much as we love real estate equity… it’s very fickle, fragile, illiquid, non-private, and accessible to predators.

At the Future of Money and Wealth conference, we explained a simple strategy to convert real estate equity into precious metals …

… while improving cash flow, privacy, asset protection; reducing taxes and counter-party risk;

… and simultaneously hedging equity against both inflation and deflation.

Whew! That’s a lot of output from one simple strategy. And you can’t do it with paper assets.

Folks who were there in 2018 and acted on this idea are likely VERY happy they did. They probably made MANY times what they invested to attend the conference.

Of course, there were also those who “saved” by NOT attending. Remember, how you think affects what you do, which affects your results.

The MAIN point is it’s not too late to take a good look at precious metals as an alternative to cash (especially in the bank) for your liquid reserves.

Get Protected

This is probably the most boring of preps, but still super-important for anyone with a lot to lose. Crises can make people crazy.

Frightened people are buying guns, dogs, and security systems to protect against the possibility of desperate and hungry street thugs from taking their treasures.

But when stuff gets weird, street thugs aren’t the only people who are desperate and hungry.

So are opportunistic tenants, employees, customers, and their lawyers.

If your lawsuit protection and insurance structures aren’t updated and robust, NOW is a great time to evaluate them.

The best time to repair the roof is while the sun is shining. The next best time is when dark clouds are forming, but the deluge hasn’t hit yet. Like NOW.

Get Going … and Going … and Going …

You probably know there’s a WHOLE lot more to riding out this storm.

Here are some closing tips … and we’ll have a lot more in the Crisis Investing webinar we’re putting together.

This is probably a great time to revisit your financing and lock in low rates long term on properties you plan to keep.

It’s a great time to review or develop a serious tax-saving strategy to help pay for your “roof repairs”.

Explore all your options under the various stimulus bills and loan programs.

Consider helping your tenants explore their options for financial help. After all, some of those funds can be used to pay you rent.

Be proactive with your lenders to be sure you understand your options if you do suffer a reduction in rents.

That’s defense. But you can’t score without paying offense.

Even if you’ve restructured and gotten liquid, you might need extra reserves to ensure your own stability through the storm. But it’s hard to play offense without resources.

So if you don’t have enough funds to capture all the opportunities you anticipate, the timing has never been better to learn to raise private capital.

Sure, lots of stock market millionaires may find themselves demoted to the thousandaire club.

But the multi-millionaires … the millions of people with a few million or more left over … even after a nasty bloodletting … are going to be eager to rebuild.

Those folks have capital to invest. And while they may be interested in real estate, they may not want to get their hands dirty.

YOU can help them … for a slice of the pie. When you get a few of those people on your bus … all your little slices add up, so you can play big without taking big risks.

Lastly as we’ve been saying since 2008, markets and teams matter.

Picking the geographies, demographic, product types MOST likely to prosper in the coming economic environment is a more important than ever. And wherever that is you’ll need to have (or be) a great boots on the ground team.

With all this stimulus still rolling out, it’s not yet clear where, when, and how the trillions will make its way to Main Street.

But the Fed and the politicians are DESPERATE to get the cash into circulation.

You can bet we’ll be watching how all this plays out and which markets benefit most … as should you … and all the people in your strategic network.

One thing is certain …

No matter how the world changes, people will still need real estate to live, work, farm, and play on.

So stay tuned because as you can tell, we have a LOT to say on this topic. After all, we’ve been preparing for this time for over a decade.

Until next time … good investing (from a safe distance)!

The root of the real crisis is being exposed …

It’s no secret we’re a couple of older dudes who got creamed in 2008. But like the economy, we bounced back. Unlike the financial system, we got the lessons.

Read that again and think about it.

If you got on board the real estate gravy train after the last crisis, congratulations … and welcome to your first crash. It’s looking to be a whopper.

For those who went through 2008 like we did, welcome back! We’re about to take a wild ride … and it should be a THRILLER.

The big message is: this is NOT the time to take a wait and see approach to portfolio and opportunity management. Things are moving too fast.

Investing intelligence is a blend of emotional control technical knowledge, and intellectual discipline.

Stress in the real world is where you test your skills. And yes, it’s a little unnerving.

Anytime the stakes are high and you’re pressed to edge of your confidence, it’s tempting to hide, deny, procrastinate, or complain about things you can’t control … to the detriment of diligently working on the things, you can control.

So rather than dive into the weeds of the plethora of clues in the news … they’ll always be there … we think it’s a good time to do some diagnosis.

After, all prescription without diagnosis is malpractice. You can’t know what to work on if you don’t understand the root of the problem.

In this case, we think there are two primary roots of the current crisis … one you can control, and one you can’t.

Let’s start with the root cause of the current crisis that you can NOT control.

It may or may not be interesting to you … and you might not agree with the premise … but be patient and work through it.

It’s arguably the most obvious yet misunderstood contributor to the malaise the coronavirus crisis is exposing.

In one word … debt.

Absurd, insane, unfathomable and unsustainable levels of debt … which has spread like a cancer throughout the global financial system.

The current metastasization started in 1913 with the founding of the Federal Reserve system, which gave bankers and politicians the ability to create unlimited amounts of debt.

The Federal Reserve Act and the 16th Amendment also created the income tax and the IRS, effectively equipping the government to use the productivity of the people to make the debt payments on all that debt.

Armed with this powerful new temptation, it took less than two decades to blow up a bubble known as the Roaring Twenties.

The expansion of credit led to mass consumerism, a stock market boom, and the nation’s “wealth” (based on inflated asset values) to double from 1920 to 1929.

Of course, the party ended in spectacular fashion leading to the Great Depression.

Sound familiar?

When debt bubbles implode, asset prices collapse … and the FIRST place this symptom manifests is in the stock market.

The Great Depression led to an unprecedented consolidation of power when President Franklin D. Roosevelt declared a “war on poverty” and gave America “The New Deal”.

So before there was World War II, FDR was already a wartime president.

Wait, we’re having deja vu.

FDR’s New Deal included Social Security, a proliferation of agencies and regulations, and the effective confiscation of the citizens’ gold.

FDR’s initial phase-out of the gold standard allowed the Fed to print virtually unlimited amounts of dollars.

In fact, the Chairman of the New York Fed admitted in a 1946 speech that there was no need for taxes to pay for anything because the Fed could print unlimited amounts of dollars.

He confessed the only reason for taxes was to “express public policy in the distribution of wealth and income” and in “subsidizing or in penalizing various industries and public groups”.

In other words, taxes allow the government to pick winners and losers in what is supposed to be a “free” market.

Wait, we’re having deja vu again.

Events like the Civil War, the Panic of 1907, the Great Depression, and 9/11 … demonstrate how crises always result in bigger, more powerful government and less personal freedom.

We’ll leave it up to you to decide if big government and less freedom is good or bad, but the facts are indisputable.

After 1933, it was illegal for Americans to own gold, while foreign holders of U.S. dollars and bonds could redeem dollars and U.S. bonds for physical gold.

But when the world realized the Fed was printing WAY more dollars than there was gold, it became obvious that the “official” gold price of $35 was too low.

So the world, led by French President Charles de Gaulle, started showing up at the U.S. “gold window” to redeem paper dollars for real gold.

By 1971, the U.S. gold reserves had dropped from 20,000 tons to less than 9,000 tons with no end in sight to the hemorrhaging …

… so President Nixon abruptly “closed the gold window” … effectively defaulting.

Of course, Nixon knew the dollar would collapse causing inflation.

So in an attempt to preempt inflation, Nixon also made it illegal for private businesses to raise prices or pay higher wages.

Yes, history buffs, in the “land of the free”, the government, unilaterally and without warning, mandated price and wage restrictions to private businesses … to “protect” everyone.

Of course, price controls didn’t last because they don’t work. More recently Venezuela tried it, and it didn’t work there either.

The Venezuela government said stores couldn’t raise the price of things like toilet paper. So when you showed up at the store, there wasn’t any.

To find toilet paper in Venezuela, you had to buy it on the street … and it cost a lot more than the official price.

Wait … we’re having deja vu again … again. That’s so weird.

So back to the dollar collapse after Nixon’s default …

In just a few years, gold went from $35 per ounce to $800 per ounce. Or more accurately, the value of the dollar crashed against gold.

Dollar holders smart enough to redeem their paper dollars for gold early did well. Those who didn’t, not so much.

By now, you may be recognizing some eerie parallels between the past and present. History doesn’t always repeat itself but often rhymes. That’s why we study it.

The point is these events kicked off an entire 49-year history … from 1971 to 2020 … of unhindered, exponential, and unsustainable expansion of debt.

If 49 years rings a bell for you, go look up the biblical concept of jubilee. It’s weird how all this is unraveling after 49 years. Probably just a coincidence.

(For more perspective on how the past helps predict the future, consider investing in our Future of Money and Wealth programYou’ll probably wish you bought it two years ago, but better late than never.)

Of course, YOU can’t stop Uncle Sam from spending trillions of dollars …

… or the Fed from printing trillions to fund government spending, push down interest rates, buy up toxic assets, and pump up asset values.

They’ve already begun doing all those things. The big question is whether the dollar can carry the load. It survived the 70s … mostly.

Time will tell what happens this time.

For now, it’s important to realize what the Fed is doing … and what history says is likely to happen when they do. Being confused or afraid isn’t a wise option … it only feels safer.

It’s like standing at the beach watching the distant tsunami coming toward you … it seems slow at first … then it’s on you. It can be hard to believe and scary.

But turning around so you can’t see it won’t make it go away.

So today, the COVID-19 coronavirus has stopped the economic heartbeat of the globe. Cash is not flowing, which means debt service is going to become a real problem real fast.

Remember, back in 2008, it only took a relatively few sub-prime mortgage borrowers to miss payments … and the financial system nearly collapsed.

The current debt crisis is probably going to be a LOT bigger. It could easily be The Real Crash Peter Schiff has vociferously warned about.

Of course, if the world had less debt and more savings, we could all shelter in place for a few months and everything wouldn’t unravel.

But the world is awash in debt, has little savings, and without productivity to service all the debt, a chain reaction of defaults seems virtually certain.

The government, the Fed, and the banks all appear to realize the gravity of the situation … and unlike 2008, they’re sprinting to get in front of it.

It really all comes down to the Fed and the dollar. The Fed is willing to print as many as needed to buy up everything and send everyone money.

It seems like either the debt will go bad (deflation) or the dollar will (inflation) … or both. And it’s all out of your control.

So what’s a real estate investor to do?

We’ll take that up in Part Two. Stay tuned …

Investing in Indianapolis

Investing in Indianapolis


Discover what’s in store in “The Crossroads of America” … Indianapolis!


Deciding where to build your portfolio is extremely important.

Today, the US coastal markets are overpriced … and while many midwestern and southern markets are affordable … they don’t show the exciting promise of appreciation.

Indianapolis is unique. Its low cost of living, growing population, and location in the middle of every major trucking route in the country means BIG opportunities for savvy investors.

The team at High Return Real Estate has compiled the best of their Indy knowledge and made it available to investors like YOU.

Their assets are producing some of the highest returns in the real estate investing arena … with cash flow at three times the national average!

In this special report, learn:

✓ Projections for Indianapolis’ growing economy

✓ Which major employers and industries choose Indianapolis as their base

✓ What life is like in this bustling city

✓ Important Indy rental market stats

✓ And more!

Find out if Indianapolis is the right move for your next investment!

Simply fill out the form below to access Investing in Indianapolis …


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