The world has gone MAD …

In case you haven’t noticed, there’s a LOT going on in the world as we sail into a brand new investing decade …

In addition to wars and rumors of wars, a growing number of notable people are publicly expressing concerns …

… not just about the economy and financial markets, but the system itself.

Perhaps the most notable is Ray Dalio of Bridgewater Associates, the largest hedge fund in the world.

In a recent article, Dalio warns …

“The World has Gone Mad and the System is Broken”

Dalio’s essential thesis is the system of free money has created a series of negative trends that will eventually converge into a fundamental and epic re-set.

“This set of circumstances is unsustainable and certainly can no longer be pushed as it has been pushed since 2008. That is why I believe that the world is approaching a big paradigm shift.”

Of course, just because he’s successful doesn’t mean he’s right. But Dalio is certainly well-qualified to have an opinion worth paying attention to.

But as we’ve learned from studying smart people, understanding what they’re saying takes some time and effort.

We think it’s worth it. Because any “big paradigm shift” involving the financial system affects EVERYONE … including lowly Main Street real estate investors.

If you’re new to this discussion, consider making a modest investment of time and money to watch our Future of Money and Wealth presentation, “The Dollar Under Attack”. It’s helped a lot of real estate investors see a bigger picture.

It’s important to understand the difference between the “economy” (activity) and the “system” (the structure supporting the activity … including currency, banks, credit, and bond markets).

Remember, the economy was humming along leading into 2008 … booming, in fact. But the system was faulty under the hood, and ultimately broke down.

Just like a car, the economy can go faster or slower … but only while it’s mechanically sound.

If the vehicle’s systems fail, then the car is incapable of speed … and may not even run at all.

Then, when the car breaks down, your skill as a driver is meaningless, except perhaps for avoiding catastrophe when it happens.

In all cases, you end up on the side of the road going nowhere.

The same is true with the financial system and your skill as an investor. If the financial system fails, it can sideline a lot of people … including you.

Of course, the financial system, like a car, has gauges … indicators of performance, health, or impending failure.

But not all gauges are easily seen. And reading them requires education.

That’s why we hang out with smart people like Chris Martenson, Peter Schiff, Brien Lundin. G. Edward Griffin, and Robert Kiyosaki.

Even better, each of these guys are connected to lots of other smart people like Danielle DiMartino Booth, Mike Maloney, Grant Williams … and many more.

You may not yet be familiar with some of these names. Except for Kiyosaki, none of them are serious real estate investors … and that’s GOOD.

As we learned (the hard way) in 2008, when you live in an echo chamber of people who all hope … even need … the economy and financial system to be functional …

… there’s a tendency to ignore or discount even the most obvious problems.

As Upton Sinclair said …

“It is difficult to get a man to understand something when his salary depends on his not understanding it.”

There were warning signs leading up to 2008. Peter Schiff and Robert Kiyosaki both saw them and publicly warned people. Very few listened.

Unsurprisingly, both Schiff and Kiyosaki stopped getting invited on to mainstream financial shows. Wall Street’s not likely to advertise on programs outing a failing system.

And people making millions in the mortgage business weren’t interested in hearing how the mortgage markets were about to implode. Ditto for real estate, stocks, and bonds.

However, smart investors are wise to look beyond their own normalcy bias and the filtered news which is produced by people whose livelihood depends on a rosy narrative.

Risks are ever-present … and the worst are those you don’t see coming.

But before you go full fetal freak out, we’re NOT saying the end of the world is nigh. After all …

“A bend in the road isn’t the end of the road … unless you fail to make the turn.”
Helen Keller

But if Dalio and others are correct, then there’s more than a reasonable probability of substantial changes to the financial environment we’re all operating in … then it’s worth preparing for.

After all, it’s better to be prepared and not have a crisis, then have a crisis and not be prepared.

Remember … ignoring risk isn’t optimism, it’s foolishness.

Legendary real estate investor Sam Zell says one of his greatest assets is the ability to see risk and move forward. You can’t navigate a hazard you don’t see.

So what are some things our smart friends are watching heading into 2020?

Gold, oil, debt, the Fed’s balance sheet, bonds, and interest rates.

These are like the dashboard gauges for the health of the financial system.

Right now, at least three are blinking red … gold, debt and the Fed’s balance sheet.

It’s also important to note that those three are also leading indicators for bonds and interest rates.

That’s because if the world loses faith in the dollar, they won’t buy U.S. debt, which is growing at a staggering rate.

In spite of all their bickering, Congress and the White House manage to agree to big time spending.

And if the world loses its appetite for U.S. debt, then either interest rates rise (something which directly affects nearly all real estate investors) …

… or the Fed needs to buy up the new debt with freshly printed money. This is called “monetizing the debt” … and would show up on the Fed’s balance sheet.

Some say this “monetization” could lead to hyper-inflation. Others think it means the U.S. could go into decades-long stagnation like Japan.

Maybe.

The difference is Japan doesn’t issue the world’s reserve currency and enjoys a friendly relationship with the country that does (the United States).

So we’d say the United States situation isn’t exactly the same as Japan. But what do we know? We’re just two dudes with microphones.

Maybe there are clues in the news …

The world’s super-rich are hoarding physical gold
Yahoo Finance, 12/10/19

Hmmmm … it seems the “fear” trade … those looking to park wealth someplace “safe” are choosing gold … in addition to, or instead of U.S. Treasuries.

If instead of Treasuries, you’d expect interest rates to rise as bond prices fall due to less bidding.

But while there’s currently only a little upward pressure on rates, it’s not much … so someone must be buying them. Chris Martenson says it’s the Fed.

In other words, the Fed might be starting to monetize the debt.

So it’s notable the “super-rich” are following the lead of the world’s central banks in acquiring gold. No surprise, as of this writing, that gold is trading at a 7-year high.

In other words, if Chris Martenson is right, everyone (except the Fed) would rather own gold than U.S. debt denominated in U.S. dollars.

But we know Uncle Sam can’t default. The US can print an unlimited number of dollars. So no one is avoiding Treasuries because they don’t think they’ll get paid back.

The concern must be the value of what they’ll get paid back with … the dollar.

Think about your paradigm of wealth. Do you denominate wealth in U.S. dollars? Are you ready for a “big paradigm shift”?

Buckle up.

The new decade should be an exciting ride … scary and dangerous for those not strapped in with the right education, information, portfolio structure, and tribe.

Education, preparation, and tribe have never been more important. If you’re not seriously investing in those things, perhaps now is the time to start.

Meanwhile, we’re bullish on Main Street.

We think real people who do real work and own real assets will fare much better than those counting on paper promises from Wall Street, bankers, politicians, and pensions.

If you’re a fan of real estate and other real assets, you’re already on the right track. Now it’s time to take it to the next level.

Robert Kiyosaki on Private Investing and the Three Kinds of Money

We’re sitting down at the Rich Dad radio studio with our long-time friend and the Rich Dad himself … Robert Kiyosaki!

As the world’s best-selling personal finance author … Robert is sharing his thoughts on the important differences between public and private investments. 

Robert calls these differences “the three kinds of money.” 

We’ll also revisit the enduring message of Robert’s record-setting book, “Rich Dad, Poor Dad,” … and talk about the dangers and opportunities facing investors today. 

In this episode of The Real Estate Guys™ show, hear from:

  • Your idea-rich host, Robert Helms
  • His humor-rich co-host, Russell Gray
  • “Rich Dad, Poor Dad” best-selling author, Robert Kiyosaki

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Public investment vs. private investment

This week we’re going to talk about the difference between public and private investments … and who better to share ideas than Robert Kiyosaki. 

Robert has been on our show more than any other guest … and for good reason! He is the best-selling personal finance author in the world. 

We’re at an interesting point in the real estate business … but also in the economy. 

One of the themes that we’ve been talking about is the idea of private versus public and investing your money in a place that you understand … and that you’re educated about. 

Robert says the first step to understanding public versus private is to understand the shadow banking system. 

“The shadow banking system is what brought down the subprime market. It wasn’t real estate that brought down the market,” Robert says. 

What the shadow banking system did was inject the veins of the world economy with the most toxic asset classes. Robert says that the way they get you is via public stock market. 

But the beauty of being a real estate guy, Robert says, is that you are actually an untraceable part of the shadow market … but you can also function as a private entity. 

“I realized that the reason I make so much more money is I’m private. I’m not in the stock market,” Robert says. 

If you buy a house and it’s a rental house, that’s not a public transaction … it’s a private transaction. 

With all the uncontrollable factors of the public sector … shenanigans, as Robert likes to say … becoming a private investor is a great option. But it’s not without risk, and it’s not without trouble. 

The pros of being public is that you can get in and out quickly. It’s easy to change your course. It’s not the same if you have bought an entire apartment complex. 

If you are going to be private … your number one priority is your financial education. 

Cash flow and education

The biggest place where people get stuck is that they don’t understand the fundamental premise of what wealth is. 

It’s cash flow. 

When you start betting on the asset price … whether it’s the price of the house or the price of the stock or with negative interest rates … you’re not investing for cash flow yield. 

Instead, you’re investing hoping that somebody will come along and pay more for that same bond than you paid for it. It’s all gambling … and they want you in their casinos. 

If you invest in things that are real and are producing fundamental profits … you have staying power. You have resilient wealth. 

Part of being a real estate investor is getting in touch with your inner investor. We call it a personal investment philosophy … figuring out what you want real estate to do for you. 

And then you get educated. 

You could look at the fact that real estate isn’t liquid as a negative … but it’s also a positive. 

Since the market moves slowly, you don’t have to jump on a deal this minute or it’s gone. 

Instead, you get educated. You study markets. You study properties. You study how the rent works … and then you can grow wealthy over time. It doesn’t have to be an overnight success. 

Three types of money

Robert says that he believes there are three types of money today. 

The first is God’s money … gold and silver. It will be here long after we are gone. 

Then, there’s government money … flat currency … fake money. The only reason fake money exists is for paying taxes. 

The third type of money is people’s money … things like Bitcoin and other cyber money. 

Keeping these three types of money in mind can help you develop your investment philosophy as you move forward. 

Robert often says that only lazy people invest their own money … which is why we are big fans of syndication. 

Syndication is a great way to get private. You can invest or create investments that aren’t public investments. 

Whatever you do … whatever your personal investment philosophy … get educated, get private, and get out and make some equity happen. 

Hear more from Robert Kyosaki by listening in to our full episode!

More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.


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Lessons from a legendary billionaire real estate investor …

Even if you’re a die-hard cash flow investor … more intent on collecting properties than flipping them … it’s still important to pay attention to market cycles.

After all, though you might not plan to “sell high”, it’s sure nice to “buy low”.

Besides, “buy and hold” doesn’t mean you’re not harvesting equity when conditions are ripe … which is usually closer to a cycle top.

So, what is a “cycle”? Why do cycles happen? And what do they look like?

Maybe obviously, cycles are the ups and downs of prices or economic activity. And they always seem so obvious when charted after the fact.

Of course, cycles are hard to see when you’re buried in the weeds of the here and now. That’s why it’s smart to listen to seasoned investors.

Economic cycles … those sometimes severe and shocking ups and downs … happen for a complex variety of reasons … but are rooted in a fundamental pattern of action and over-reaction.

Think of it like a car fishtailing on an icy road …

It starts with a sudden acceleration or braking. Then a cascade of exaggerated actions and reactions take place … with lags in between … as both driver and vehicle strive to find an equilibrium and get back in sync.

Skilled and experienced drivers keep their emotions in check …

… calmly making proven moderate adjustments to quickly regain control and get the vehicle pointed safely in the right direction.

Of course, that’s just one car and one driver.

In a professional race, it’s a cohort of highly skilled drivers. In your daily commute, it’s a diverse collection of amateurs.

In financial markets, there’s an eclectic mob of professional investors, politicians, bankers, business executives, and upper-middle-class workers …

… all subject to greed, fear, and ego.

It’s amazing there aren’t bigger market wrecks more often.

The tell-tale sign of a cycle top is when everyone has piled in … and the prevailing belief is the good times will never end. But then they do.

Professionals recognize this and get out of the way and wait.

There’s an old investing adage attributed to some fellow named Rothschild …

“The time to buy is when there’s blood in the streets.”

Hmmm. Makes you wonder how much money you’d make if you could find a way to trigger such a bloodletting? But that’s a discussion for another day …

For mere mortals like us, it’s simply a matter of watching events unfold … and getting in position to move in when others are moving out.

Of course, you don’t want to “catch a falling knife” … another investing adage which refers to buying a failing investment.

So just because everyone’s selling doesn’t necessarily mean you should be buying. Sometimes there’s a reason an asset goes “no bid”.

Cheap doesn’t mean bargain. There’s no guarantee that something cheap won’t go to zero.

Of course, with tangible assets like real estate, the “zero” scenario is less likely.

Still … when leverage is involved, equity can most definitely go to zero … even if the property doesn’t.

How do you know the difference between an opportunity and a trap?

For clues, we watch smart, seasoned investors like Sam Zell. Fortunately, Sam’s come out of his shell, so he’s appearing more often in media to share his immense wisdom.

So, when we saw this headline pop up, we took time to listen to what mega-billionaire real estate investor Sam Zell has to say …

Sam Zell Says He’s Buying Distressed Oil Assets During the Slowdown
Bloomberg, 11/14/19

What’s nice is there’s a video and you can hear it straight from Sam himself.

Like most brilliant people, he says a lot in a few words. You can watch for yourself, but in short, Sam sees TEMPORARY distress in oil assets. And that’s a GOOD thing.

Now we’re not saying you should invest in oil, although there are some compelling reasons to consider it right now.

But oil is a sector where Sam Zell sees opportunity. However, the lessons are less about oil and more about how Sam recognizes and reacts to market conditions.

Here are some of our key takeaways from Sam Zell’s comments …

Look ahead and anticipate the next boom or bust … and react NOW, not after the fact. In other words, be proactive and get in front of opportunity as it develops.

Always pay attention to the supply and demand factor.

This is a common theme any time Sam Zell talks about how he evaluates opportunity. When supply and demand get out of sync, prices can rise or fall disproportionately. This “gap” creates attractive buying or selling opportunities.

Zell obviously doesn’t think demand for oil is going anywhere soon, even though there’s a temporary over-supply driving prices down.

It’s these “low” oil prices that are creating issues for oil producers … and creating opportunity for investors like Zell.

That’s because, as we’ve noted before, there’s a lot of debt in the oil sector which was put in place when prices were higher.

And just like a real estate investor levering up a property during peak rents … when rental rates fall, debt can go bad fast … creating an urgent demand for cash.

Cash is king in a crisis.

It seems obvious. But it’s hard to sit on “idle” cash when everything’s booming. Yet legendary investor Warren Buffet is sitting on over $120 billion cash right now. Maybe there’s a reason.

Real assets cash flow.

Zell mentions he doesn’t lend. He buys assets. And if you listen carefully, he talks about how cash strapped oil producers are selling cash flow. That’s what Zell appears to be buying.

There are probably many more lessons. Sam’s a fun guy to study. Unlike Buffet, Sam Zell is fundamentally a real estate guy.

And as we learned from Ken McElroy in the wake of the 2008 downturn, the energy sector … and oil in particular … is a huge and important driver of economic strength in several U.S. markets.

So for that reason alone, oil is a sector real estate investors should watch. Right now, oil is energy, and energy is fundamental to all economic activity.

Meanwhile, remember that in both up cycles and down cycles, there are ALWAYS opportunities in real estate.

That’s because every regional market, neighborhood, and individual property is unique … there’s often a lot of room to negotiate a profitable win-win …

…and there’s much a smart investor can do to proactively add value without needing to depend on unpredictable external factors.

We think it’s safe to say that demand for real estate, like oil, is probably not going away anytime soon … no matter what’s going on in politics or trade.

Just be careful to use financial structures you can live within both up and down cycles.

New Orleans Investment Conference – Money, Metals, and More!

We’re coming at you with interviews recorded live at the 2019 New Orleans Investment Conference!

We’re sitting down with a remarkable lineup of economic and investment experts … from precious metals to the Fed and beyond!

Listen in for valuable perspectives into the economy, the job market, interest rates … and more!

As always, we offer information … not advice. Always run your ideas by a qualified professional. We’re here to provide commentary, education, training, and resources to help investors like YOU find success. 

In this episode of The Real Estate Guys™ show, hear from:

  • Your invested host, Robert Helms
  • Money manager, Peter Schiff 
  • Former Fed official, Danielle DiMartino-Booth
  • Billionaire and CEO of Sprott US Holdings Inc., Rick Rule
  • Renowned economist, Mark Skousen
  • Gold expert, Brien Lundin

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What’s going on with gold

As much as we love real estate, we also keep our eyes on other economic metrics. 

For this episode, we’re in New Orleans at the 45th annual New Orleans Investment Conference … and we have a lot of great guests for you. 

We’re talking gold mining, the Fed, the economy … and more!

Russ was unable to make it to the event this year … but money manager Peter Schiff is filling in. 

“This conference started in the ’70s. Because of inflation, people started buying gold. The same thing is happening today, so this conference never goes out of style,” Peter says. 

At its root, this really is a gold conference. So, let’s start with gold. 

People don’t really appreciate the fact that gold has been going up. In the last two decades, gold has increased in value five times over. 

That’s a greater increase than the Dow or the S and P. 

Central banks are creating inflation and printing a lot of money. They are basically saying that they don’t want savers to have a positive return. They want you to lose money on your savings. 

So, what are you going to do? 

For many people, gold is the answer. They hold gold instead of placing money in a traditional savings environment. 

This conference is unique because we have gold buyers but also gold producers in the audience. 

“I think there’s an incredible investment opportunity in gold mining stocks, because this whole sector has been overlooked by Wall Street,” Peter says. 

When the price of gold catches up to where it should be, there’s going to be many mines that come into production and are much more profitable. 

But investing in gold in this way does come with risk. Peter recommends working with an expert who understands this specialized business to ensure you put money behind the right mining company. 

The merits of mining

Rick Rule is a billionaire CEO … but his expertise is in mining. 

Many people think of gold and silver and think of small coins … but there is a lot that happens before mined gold becomes that coin. 

You have to permit and finance the construction of a mine. You have to operate a mine and … when the gold is gone … you have to responsibly close the mine. 

“There’s a lot more losers than winners in this business,” Rick says. “Mineral exploration is really technology, so it’s a similar situation to high tech venture capital. Most ventures fail.”

The point, according to Rick, is don’t try to beat the market too much by taking many risks. 

Instead, participate in the market, and buy into the best companies to avoid making mistakes. 

Rick says that the best way to begin is by owning some physical gold. Then, invest in a company that has growing reserves and revenues rather than companies that are cannibalizing their existing asset base. 

The state of the Federal Reserve

Danielle DiMartino Booth is still “fed up” … she worked at the Fed and then wrote a book about how it is bad for America. 

Needless to say … she offers a unique perspective. 

“I was able to be there at the advent of taking interest rates to the zero bound, of venturing into this grand experiment of blowing up the Fed’s balance sheet,” Danielle says. 

All along the way, Danielle says, there were assurances that this move would be temporary and reduce the size of the balance sheet … but we now know it’s neither of those things. 

In addition to quantitative tightening, currency in circulation around the world has been going up, and that pulls an additional amount of reserves out of the financial system. 

Danielle says that foreign central banks had been parking a lot of money at the Fed, because they have negative interest rates at home … doubling the effect of pulling reserves out of the system. 

The treasury had depleted its checking account … so they had to rebuild the balance. Now we’re running trillion dollar deficits. 

And in a matter of weeks, the Fed has ramped up its own liquidity injection … something Danielle says we would have thought of as unheard of a year ago. 

So, it’s going to be interesting to watch how things play out. 

Diversification in a bull market

Mark Skousen is a renowned economist and the longest standing speaker at the New Orleans Investment Conference. 

Mark is always in touch with the market cycle … and he has some observations of the current economy. 

“This is the longest-running bull market in our history, and this is the most disrespected stock bull market in history,” Mark says. 

Mark also reminds us that diversification is key … and that different assets can perform very differently under the same economic conditions. 

“You have to take what the market gives you. So, you want to be positioned to see a turnaround coming, one way or another, and weather it,” Mark says. 

Protecting your money 

Brien Lundin knows gold … and this conference is his showcase for what resources like precious metals can do for a portfolio. 

“Right now, we are in a confirmed gold and silver bull market. Everything is pointing toward much higher prices,” Brien says. 

Big trends in the economy and geopolitics are pushing for much higher gold prices. Gold and silver are the primary ways that Brien feels people can protect themselves from monetary depreciation. 

“I would urge people to just learn about other investment classes. Ask the tough questions, and find the best way to protect your money,” Brien says. 

To hear more from our interviews at the New Orleans Investment Conference … listen in to our full episode!

More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.


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Renting to the rich is finding fans among professional investors …

While the rest of the world fixates on the Fed’s latest interest rate bloviation, we’re taking a mini-vacation from Fed watching to focus on something a lot more fun.

Jones Lang LaSalle recently released their Global Resort Report for 2019 and it’s got some investing intelligence we think you’ll find interesting and useful.

As our long-time audience knows, we’ve been big fans of resort property investing for quite a while.

Resort property investing is a great way to derive rental income from affluent people.

Also, because your “tenants” and their income come from all over the world, the right resort property can reduce your dependency on any single regional economy.

But that’s not to say the local market doesn’t matter.

In fact, geography matters a lot. Often, it’s a geographic amenity that’s the primary attraction and your competitive advantage.

Think about it …

There are only so many beautiful beaches, world-class diving destinations, or snow-capped skiable mountain ranges on earth.

And even the best developers can’t put those things in someplace they don’t already exist. Even mega-man-made amenities like theme parks are hard to replicate.

So when you find a market with a rare and attractive amenity, with the right supply and demand dynamic, you have the opportunity to own a cash-flowing world-class asset.

No wonder the JLL report says …

“Over the past five years, resorts have been the darling of the hotel investment community …”

The report also mentions a few of the key factors driving the desirability of this exciting and profitable real estate niche …

“… consumer focus on experiential travel and an affinity towards lodging assets with an authentic local feel.”

“… solid growth in international tourist arrivals, which are anticipated to grow 4.0 percent in 2019 to 2.2 billion travelers and continue rising at this pace throughout the next decade.”

“RevPAR performance of resort markets has continued to outpace other locations, such as urban, suburban and airport.”

The JLL report highlights three specific U.S. markets, but the lessons apply no matter where you’re investing.

Now if you think resort property investing is only for the uber-wealthy investor … think again.

As we highlight in a recent radio showmany small investors are finding big opportunities in short-term rental properties.

Of course, for investors who want to play at a bigger level, syndication is always an option.

But whether you go big or small, there’s a lot to like about resort property investing … and it’s not just the financial rewards.

When you own a beautiful cash-flowing resort property, not only do you earn profits, but you gain some lifestyle benefits too.

If you invest in a market you’d like to regularly visit, you can probably make some or all of your travel expenses tax-deductible.

After all, it’s important to inspect your investment from time to time.

Of course, unlike that lovely C-class multi-family property on the border of the war zone, you probably wouldn’t mind staying a week or two in your beautiful resort property.

But back to the JLL report …

Rather than simply quote the report, which you can (and should) read for yourself … let’s just glean some investing ideas from the three aforementioned excerpts.

First, it’s important to know your avatar. Who’s the customer?

The report kicks off with the answer … it’s the “consumer focus” versus a business traveler.

Remember, resort property investing is a subset of hospitality. So while most resorts function like a hotel, not all hotels are resorts. Resorts are about consumers.

Of course, the key to attracting consumers is giving them the right experience. Here again, there’s useful intelligence in the report.

Consumers are looking for “lodging assets with an authentic local feel”. Think about that before you buy a Holiday Inn in a ski town.

Notice also that the projected growth is driven by “international tourist arrivals” which benefits “resorts across the world.”

The good news is with the right property, you can attract customers from around the globe … including wherever the demographics and economies are booming.

So it’s pretty important to make sure the market and property you pick have a broad international appeal … and adequate access. There’s no point in owning a beautiful property that’s difficult to get to.

And while we’re big fans of international diversification, if you’re going to invest outside your home country, be sure you’re familiar with the local laws and customs.

We know all that might sound intimidating, but it’s not that hard.

It starts with having a good local team in place BEFORE you purchase the property. Of course, this is true domestically as well.

The great news is if you get it right …

“RevPAR performance of resort markets has continued to outpace other locations, such as urban, suburban and airport.”

RevPAR is hospitality lingo for a metric called Revenue Per Available Room. Higher is better. It’s more rent per square foot.

So the report is essentially saying resort properties are more profitable than the everyday hotels you see around town or near an airport.

Even better, in addition to being a great way to derive rents from the affluent and diversify into high-quality markets …

… we think you’ll find resort properties are a whole lot more fun than most of your other rental properties.

And the due diligent trips sure don’t feel like work!

Bank of America just made the case for real estate …

In this week’s perusal of the news, this headline caught our attention …

Bank of America declares the “end of the 60/40” standard portfolio 
Market Watch 10/15/19

We know it SEEMS like a pretty benign article … irrelevant to real estate investors. But au contraire mon frère …

There’s actually quite a bit of useful intelligence packed into BofA’s thesis.

Here’s what they have to say …

“Investors have long been told that the ideal portfolio should carry 60% of its holdings in equities and 40% in bonds, a mix that provides greater exposure to historically superior stock returns, while also granting the diversification benefits and lower risk of fixed-income investments.”

This, as they say, is “conventional wisdom” for paper portfolio strategy. It’s basically a straddle between principal risk (stocks) and safety of principal with income (bonds).

Except in today’s topsy-turvy financial markets, BoA admits this no longer makes any sense …

“ ‘The relationship between asset classes has changed so much that many investors now buy equities not for future growth but for current income, and buy bonds to participate in price rallies,’ [says Bank of America] …”

Stocks for income and bonds for price speculation? That’s a substantial role-reversal.

Before we dive into the real estate ramifications, let’s dig a little deeper into the essence of their position …

It’s easy to understand the first part … an ideal portfolio hedges both inflation and deflation while positioning for equity growth, yield, and protection of principal.

Of course, real estate can do all that MUCH better than stocks and bonds. But we’ll come back to that in a moment.

The bigger revelation in this article is BoA’s admission that paper assets aren’t working properly right now.

This is something most Mom and Pop investors (and their financial advisors) aren’t fully aware of. If they were, this BoA research note wouldn’t be newsworthy. But it is and that’s telling in and of itself.

Here are the problems in a nutshell …

Bonds are producing next to no yield. They’re next to useless for the production of income, as any pension fund manager can tell you.

Bonds are in a bubble … significantly over-priced. That’s why bonds produce no income …

(A bond’s price is inverse to its yield, so low yield equals high price … and ridiculously low yield equals ridiculously high price.)

When any asset price exceeds fundamental valuation, there’s a possibility … in fact, a high probability … the bubble will deflate, and the price will fall.

This means as a vehicle for adding income and preservation of capital to a balanced portfolio, bonds are failing on both counts.

Bonds have now devolved into nothing more than gambling chips for speculators in the Wall Street casinos …

… and tools for economic intervention vis-à-vis interest rate manipulations by central banks.

In fact, it could be argued that central banks aren’t even focused on the economy. After all, why lower rates when the economy is “booming”?

More likely, the financial system is far more fragile than anyone cares to admit … and central banks are trying to prevent collapse.

Remember, bond values are inverse to yields. If rates rise, bond prices fall.

With TRILLIONS of dollars of bonds leveraged throughout the system, falling bond prices could trigger a chain reaction of margin calls.

Think 2008 on steroids.

Once you understand all this, the logical conclusion is …

“ ‘there are good reasons to reconsider the role of bonds in your portfolio,’ and to allocate a greater share toward equities.

Ya think?

By now you may be thinking, “So what? I’m a real estate investor. I don’t own bonds.”

Smart. But most real estate investors make liberal use of credit markets. When bonds implode, they often take credit markets with them.

Real estate is a lot more challenging when credit markets are broken. And it’s downright deadly if you’re not structured IN ADVANCE to weather frozen credit markets.

But why does BoA sound the alarm now? Because …

“ ‘…this is happening at a time when positioning in many fixed-income sectors is incredibly crowded, making bonds more vulnerable to sharp, sudden selloffs when active managers re-balance,’ ”

In other words, as portfolio managers wake up to the risks of bonds and scramble to get out before the crowd … they become the crowd … and WHAM, the bottom falls out.

The credit market collapse of 2008 converted us into avid bond market watchers. But there’s also some opportunity here.

The core message of the BofA research note is …

“ [BoA] advise[s] investors to add more exposure to equities, particularly stocks with high dividend yields in under-performing sectors … which can be bought at inexpensive valuations.”

To translate this into real estate investor …

Stocks or “equities” represent ownership in operating businesses.

In real estate, operating businesses are things like an apartment building, a self-storage complex, a mobile-home park … or on a small scale, a rental home.

“Dividend yields” are operating profits distributed to shareholders … just like real estate rental income distributions to property owners.

“Under-performing sectors” could be likened to regional real estate markets or product types and price points which aren’t over-bid.

Of course, BoA doesn’t speak real estate investor, so they’re talking paper assets.

But the economic conditions they see and the actions they recommend in response not only make sense, they make the case for real estate investing.

After all, real estate provides a hedge against inflation. Over time, as the currency loses value, real estate’s value denominated in currency tends to rise.

And FAR better than bonds, whose yield is fixed, rents also tend to rise over time in response to inflation.

Of course, if deflation occurs, the value of the income stream becomes more valuable. And as prices fall, tenants purchasing power increases.

And even if a property falls in value 40% and never comes back (unlikely) …

… if you only put 30% down and the tenants eventually retire the 70% loan, you’re still “up” … apart from the tax breaks and cash flow along the way.

Best of all, real estate investors can use lots of relatively inexpensive long-term debt without fear of a margin call.

Of course, mortgages are only available when credit markets are healthy, so now’s arguably a good time to stock up on cheap long term debt.

However, just because real estate is awesome, it doesn’t mean real estate is without risk. Pay close attention to cash flow.

Still, compared to nearly every other investment vehicle, real estate arguably offers a lot less risk and more resilience against a variety of economic changes.

And unlike stocks and bonds which are essentially commodities traded in global exchanges where it’s hard to find a “hidden deal” … real estate trades in extremely inefficient local markets.

And because every property, neighborhood and ownership is unique, it’s much easier to buy a property at an “inexpensive valuation”.

So whether you’re only investing in your own account, or profiting from sharing your expertise with other investors, it’s encouraging to realize …

… real estate is a powerful solution to the challenge of building a resilient portfolio in changing times.

Pension problems percolating …

In a complex financial eco-system, there are MANY components, dependencies, and inter-dependencies …

… any of which can be the catalyst for a seismic economic earthquake.

The flip side and basis of real estate’s stability is real estate’s relative lack of liquidity as compared to publicly traded securities.

After all, you can’t hit a buy or sell button and execute a real estate transaction in seconds like you can with stocks, bonds, currencies and options.

Real estate moves slowly.

That’s why real estate prices and rents don’t bounce around on a daily basis after a Presidential tweet, an executive faux pas, a jobs report, or even a Federal Reserve interest rate pronouncement.

It’s also why so many Mom and Pop investors come home to real estate when the Wall Street roller coaster ride becomes a little too nauseating.

But because most minor economic waves tend to break harmlessly against the breakwater of real estate’s stability…

… real estate investors can get bored of watching the horizon for the occasional financial tsunami.

And boredom’s not the only problem.

There’s also the issue of overwhelm. In today’s complex world, there’s not only a lot more to watch, there’s a lot more chatter.

While lots of information is generally good, some stories get lost in the noise. And entering an election year, there’s a LOT of noise out there.

But it’s a mistake to tune out and assume all is well. Or to put blind faith in the “smart” people whose hands are on the controls.

Sometimes, those in control are the very people creating and downplaying the problems.

Remember, it was then Fed chair Ben Bernanke who assured the world in 2007 that the sub-prime crisis was contained and didn’t pose a threat to the economy.

We all know how that ended.

Current Fed Chair Jerome Powell recently assured the world that the U.S. economic expansion is sustainable.

Perhaps.

But there’s a long list of alarm bells going off … in bond markets, in oil, in trade, the dollargeo-politics, and the resumption of easy money (just don’t call it QE).

Okay. Take a breath. Yes, Halloween is coming up, but we’re not trying to scare you … much.

It’s unwise to unplug a blaring smoke alarm because it’s interrupting your sleep.

If you’re trapped in the wrong slow-moving real estate and you wake up late to a developing problem …

… you may not be able to rearrange your portfolio fast enough to avoid losses and capture opportunities.

Remember … a bend in the road isn’t the end of the road unless you fail to make the turn … and problems and opportunities exist concurrently in any transition.

Events are often only as good or bad as your personal awareness and preparation make them.

So back to our threat assessment …

You’re going to be hearing more about problems with pensions.

But before you check out because you think pensions don’t have anything to do with you … think again.

You may not have a pension. But lots of people do.

More importantly, pensions control a HUGE chunk of assets in the economy, including stocks, bonds, and real estate.

While there may be many reasons for any particular pension fund’s failure, there are a couple of undeniable macro-factors common to all …

… artificially low-interest rates and an aging population.

This one-two punch has many pension plans on the ropes.

Recently, General Electric (GE), an iconic company once revered for its great management, announced it’s freezing workers’ pensions.

GE is FAR from alone.

Both public and private pension programs, not to mention Social Security, have been on a slow motion collision course with insolvency for many years.

There are many potential ramifications for real estate investors. Some good. Some not so much.

Starting with the not so good …

Loss of purchasing power creates a ripple effect in any economy … affecting which states, cities, neighborhood, product types, and price points people can afford for housing.

Jobs and wages are important. But neither have a direct impact on retired people living on fixed income.

When costs tenants can’t control rise for essential items such as energy, healthcare, food … they’re forced to cut back on big things they can control, like rent.

Think about that when you jump on the senior housing bandwagon. Not all senior housing communities or investments are created equal.

Also, for investors with properties in retirement markets … even if YOUR tenants aren’t depending on pensions and social security directly …

… those retirement checks still provide the economic fuel for the local economy.

After all, your tenants might work at the restaurant, gas station, grocery store, dry-cleaner, auto shop, or landscaping service providing services to retirees.

When retirees cut back, it affects those tertiary businesses and their employees (your tenants). Pay attention to these dependencies.

Bigger picture, failing pension plans mean potential bailouts.

While the Federal government can (for now) still print unlimited amounts of dollars, local municipalities cannot.

So failing local government pensions create a huge temptation for local officials to increase property taxes and the costs of municipal services.

Landlords are easy targets for pandering politicians in cash-strapped towns.

And while you might not pay directly for all municipal services, it doesn’t matter. If the tenant’s costs go up, it puts downward pressure on their ability to pay you rent.

It’s a complex eco-system and we’re all inter-connected.

Bailouts also could mean big federal tax increases, or perhaps even worse … loss of faith in the dollar, rising interest rates (pressure on both you and the tenants), and a general decline in the economy, jobs, and wages.

Robert Kiyosaki tells us failing pensions are one of his biggest concerns right now.

There’s more to watch out for, but before you go into a full-fetal coma, let’s end on a high note …

The flip-side of any crisis is opportunity.

When asset prices collapse, those who are liquid, educated, well-connected, and emotionally prepared can acquire quality assets at bargain prices.

So note to self: Now is the time to get liquid, educated, well-connected, and emotionally prepared.

Sadly, many retirees will sell homes to raise cash, then enter the ranks of renters. So just like 2008, demand for rentals in the right areas could actually increase.

Therefore, it’s important to really understand your markets, their drivers and demographics, and to be mindful of the product types and price points favored by an increasingly large retirement population.

For example, multi-story homes can be less desirable to seniors. Warm weather is a plus … who wants to shovel snow in their 70s?

Great local medical services are also really important to seniors.

And if retirees have moved away from friends and family in search of affordability, great transportation infrastructure is another valuable market “amenity”.

And of course, areas with an overall lower tax burden help those fixed incomes stretch further.

It’s not rocket science, but you do have to think.

That’s why we attend conferences and listen to smart people talk about all these things from different perspectives.

It’s also why we host the Investor Summit at Sea™ each year, where we get together with big-picture thinkers together and street-level niche experts to find ways to think big but invest small and smart.

Whether you join us at these events or find your own tribe, we encourage you to take your nose off the grindstone a few times a year and confer with the smartest investors you can find.

Because even though you can’t possibly watch it all and see every threat or opportunity forming, your tribe can. And you can all learn faster together.

Until next time … good investing!


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.


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Clues in the News – Stocks, Negative Rates, Oil, Gold and You

If you’re wondering which way the financial winds are blowing … look to the news!

From the rollercoaster ride of the stock market, to negative interest rates on mortgages, to big moves in gold and oil … it appears the winds are changing. Something is coming. 

Savvy real estate investors are reading the signs and asking, “What should I do?”

Join us as we study the mystery that is the headlines and discuss what all these things mean for investors like YOU. 

 In this episode of The Real Estate Guys™ show, hear from:

  • Your headliner host, Robert Helms
  • His mysterious co-host, Russell Gray 

Listen

 


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The dance between stocks and bonds

On today’s edition of Clues in the News, we’ll go beneath the headlines to find out how all the goings-on in the market impact real estate. 

They say that the time to repair the roof is when the sun is shining. 

Right now, markets are good. Real estate is strong. Rents are durable. Jobs are great. Gold is high … so we need to dig into the headlines. 

Even though we’re in real estate, it’s important to pay attention to other industries and markets like oil, bonds, and gold. 

When we try to understand what’s going on in the world economically, it’s like that old game Mouse Trap. Every action has a reaction. 

And there seems to be a dance between the stock market and the bond market. 

When people are feeling good, investors buy stocks … because they are feeling bullish that the asset value of the stock that they bought was going to go up. 

When they get fearful … they sell stocks and go for safety in bonds. 

Bonds are basically IOUs. The best bond you can get is from the U.S. government, which prints the world’s reserve currency … the dollar … making it impossible for them to ever default. 

But as we saw in 2008 … it is possible for your credit to seize up. 

So, you can rearrange your affairs in order to capitalize on the opportunities that will be created by whatever is going to happen to the market in the future and mitigate the risks. 

Signals from the yield curve inversion

When you hear bonds and stocks, you may be thinking that it doesn’t have much to do with real estate. 

But it does … because interest rates are the fuel that we use to drive our real estate purchases. 

You’ve probably heard recently that rates are headed down and the Federal Reserve is planning to cut rates another quarter of a point. 

We certainly look at that to see what the long-term prognosis is for owning real estate. Then we look at the short-term housing markets. 

But in between, there are all kinds of signals. 

One of the big signals that happened last week was a yield curve inversion. 

You don’t have to necessarily understand what that is at a deep level. What you do have to understand is what it means. 

In other words, if you’re driving down the road and see that oil pressure is green, you know you’re good. 

If it falls below the green, you know that if the light turns red and you don’t put oil in your car, your engine is going to blow. 

A yield curve is like that. It’s the relationship between short-term interest rates and long-term interest rates. 

When you take on a loan, the yield curve should slope up so that the lower rates are closer to you and as time progresses they go up as they forward further in time.

When the curve inverts, it goes the other way. 

All you really need to know is that the last seven recessions were preceded by a yield curve inversion. On average, the recession came 22 months later. 

Whatever happens, there is always a flow of money to and a flow of money away. You want to make sure that you’re always in the flow of where it’s coming. 

Growth in gold

Meanwhile, gold prices are reinvigorated by the yield curve. 

Gold prices pick up on fears of a global recession because those two markets, the stock market, and the liquid metals market can hit the buy or sell pretty fast. 

That’s in part because gold is a proxy for currency. Gold is at record highs in many currencies around the world, not just the dollar.

When countries are trying to compete in international trade, they have an advantage when their goods are cheaper. 

So, if they devalue their currency so that the purchasing power of their trading partners goes up, they can sell more goods. 

When people begin to lose faith in their currencies … they look for something that allows them to step out of a currency and still hold liquid wealth. 

Some people are using Bitcoin, but the vast majority of investors … especially institutions and sovereign governments … are using gold. 

Last year, central banks around the world purchased more physical gold than at any other time since 1970.

If you think about insider trading when it comes to currencies … there’s nobody more insightful than central banks. 

The effects of oil

All economic activity is derived from energy … and in modern society, that energy is primarily oil. 

So, as the cost of oil goes up … it’s actually friction in regard to economic activity. 

When you think of what happened coming out of the great recession, the economics in the United States that were producing all theat jobs leading to recovery … were ENERGY PRODUCING LOCALITIES. 

The other side of it is an economic problem … a lot of the oil that has been built upon bonds issued by oil companies are counting on higher oil prices. 

When those oil prices drop, they still have the same debt service.

There’s a lot of fragility out there … and nobody knows what could be the catalyst that’s going to ignite the debt bomb that creates the next debt implosion. 

But one of the things to pay attention to is all of the debt in the oil industry. 

We look at it for the cost of the input to the daily lives of our tenants. When gas is more expensive, it increases their cost of living. 

So, they’re going to be more resistant to rent increases … and they will be moving out of the higher priced places into the lower ones. 

And then of course, it can also point to the health of the credit markets. 

Time to pay attention

There’s a lot to be licking your chops at … so to speak … with what is happening in the world right now. 

And NOW is the time to pay attention. 

Learn more from the Clues in the News by listening in to the full episode. 


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.


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Easy money is both a symptom and a sickness …

As of this writing, we’re not sure what the Fed will do with interest rates, though it’s widely expected they’ll cut.

So as much as we’d like to talk about what it means to real estate investors, we’ll wait to see what happens.

And even though mainstream financial media are finally paying attention to gold and the future of the dollar … these are topics we’ve been covering for some time.

But if you’re new to all this, consider gorging on our past blog posts

… and be sure to download the Real Asset Investing report

… and for the uber-inquisitive, check out the Future of Money and Wealth video series.

After all, this is your financial future … and there’s a LOT going on.

In fact, today there’s a somewhat esoteric and anecdotal sign the world might be on the precipice of its next major financial earthquake.

But before you go full-fetal, this isn’t doom and gloom. We’re too happy-go-lucky for that.

It’s more an adaptation of a principle from Jim Collins’ classic business book, Good to Great

Confront the brutal clues.

Of course, the original phrase is “Confront the brutal facts.” But as great as data is, sometimes data shows up too late to help.

So, while facts may confirm or deny a conclusion … clues provide awareness and advance warning.

But just like with facts, you must be willing to go where the clues lead.

In this case, we’re just going to look at one clue which has a history of presaging a crack up boom.

For those unfamiliar, a crack up boom is the asset price flare up and flame out that occurs at the end of an excessive and unsustainable credit expansion.

In other words, before everything goes down, they go UP … in spectacular fashion.

Here’s a chart of the housing boom that eventually busted in 2008 …

See the bubble that peaked in 2007? It’s hard to miss … in hindsight. It’s hard to see when you’re in the middle of it.

Peter Schiff saw it in 2005 and published his book, Crash Proof, in 2006 to warn everyone. Few listened. Some mocked.

In 2008 it became painfully obvious to everyone.

Of course, for true real estate investors … those busy accumulating tenants and focusing on the long-term collection of rental income …

asset prices are only interesting when you buy, refinance, or sell.

As long as you stay in control of when you buy, refinance, or sell … you can largely ride out the bust which often occurs on the back end of a boom.

And if you’re paying attention, you use boom time as prime time to prep … and the bust as the best time to buy.

Today it’s safe to say, just based on asset prices alone, we’re probably closer to a bust than another big boom.

But the current run-up could still have more room to boom. As we said, it’s hard to tell when you’re in the middle of it.

Shrinking cap rates are one of the most followed metrics for measuring a boom.

Cap rates compress when investors are willing to pay more for the same income. That is, they pay more (bid up the asset price) for the same income.

But when the Fed says low-interest rates are the new normal, maybe it means so are low cap rates.

It’s one of MANY ways Fed policy ripples through the economy … even real estate.

But there’s another sign that’s hard to see unless you’re an industry insider, and while not scientific or statistical, it still makes a compelling argument the end is nearing …

Lending guidelines.

Think about it … booms are fueled by credit. It’s like the explosive fuel which propels rising asset prices.

The only way to keep the boom going is to continually expand credit.

But any responsible head of household knows you can’t expand credit indefinitely … and certainly not in excess of your capacity to debt service.

At some point, the best borrowers are tapped out. So to keep the party going, lenders need to let more people in. That means lowering their standards.

We still have a “backstage pass” to the mortgage industry and see insider communications about lenders and loan programs.

When this subject line popped up in our inbox, we took notice …

24 Months of Bank Statements NO LONGER REQUIRED

To a mortgage industry outsider that seems like a lame subject line. But to a mortgage broker trying to find loans for marginal borrowers, it’s seductive.

It suggests less stringent lending criteria. Easier money.

Sure, the rates are certainly higher than prime money. But with all interest rates so low, they’re probably still pretty good.

And these are loans with down payments as low as 10% for borrowers just 2 years out of foreclosure or short-sale. Hardly a low risk borrower.

Usually, lenders want to see TWO years of tax returns and a P&L for self-employed borrowers. They’re looking for proof of real and durable income.

Not these guys. Just deposits from the last 12 months banks statements. And they’ll count 100% of the deposits as income, and won’t look at withdrawals.

So a borrower could just recycle money through an account to show “income” based solely on deposits.

The lender is making it STUPID EASY for marginal borrowers to qualify.

All of this begs two questions:

First, why would a lender do this?

And second, why would a borrower fabricate income to leverage into a house they may not be able to afford?

We think it’s because they both expect the house to go UP in value and the lender is growing increasingly desperate to put money to work at a decent yield.

Pursuit of yield is the the same reason money is flowing into junk bonds.

And if the Fed drops rates as expected, it’s likely even more money will move to marginal borrowers in search of yield.

Today, MANY things could ignite the debt bomb the way sub-prime did in 2008. Consumer, corporate, and government debt are at all-time highs.

Paradoxically, lower interest rates take pressure off marginal borrowers … while adding to their ranks.

It’s hard to perfectly time the boom-bust cycle.

But careful attention to cash-flow protects you … whether structuring a new purchase or refinance. It means you can ride out the storm.

Meanwhile, it’s smart to prepare … from liquefying equity to building your credit profile to building a network of prospective investors …

… so if the bust happens, you have resources ready to “clean up” in a way that’s positive for both you and the market.

No one knows for sure what’s around the corner … but there are signs flashing “opportunity” or “hazard”.

Both are present, but what happens to you depends on whether you’re aware and prepared … or not.

Until next time … good investing!


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.


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From Disney World to Bizarro World …

The real estate story behind Walt Disney World in Florida has a valuable lesson for investors today … and it’s not what you think.

If you’re unfamiliar, Walt Disney decided to create a new and improved East Coast version of his epic California Disneyland. But he needed land … LOTS of it.

So he went to Florida.

By then, Disney was a household name and the success of Disneyland was well known. This created a problem for Disney.

If local landowners realized Disney was behind the assemblage of land needed to build another park, it could take a lot more time and money to get the project done.

So even when the land deal hit the news in May 1965, Disney waited months to announce his plan to build Disney World.

The obvious lesson is to avoid showing deep pockets when the other party has leverage.

But that’s not why we’re talking about it today.

There’s something else going on in the world … something we’ve been watching for some time … that could become one of the biggest financial stories in the last 50 years.

So while financial reporters hang dutifully on every word that proceeds out of the mouth of Jerome Powell today

… there’s another voice in the marketplace only a few nut jobs (like us) are paying attention to.

Gold. And yes, this matters to real estate investors.

But it’s not what gold is doing in response to what the Fed says. It’s about what gold is saying about the state of the system that the Fed is not.

Of course, there are implications for you and your investments … real estate and otherwise.

The quandary for pundits everywhere is why the Fed is considering lowering interest rates in the midst of “the greatest economy ever”.

Typically, interest rates are lowered to stimulate a sluggish economy.

Sure, it’s possible the economy could be far less robust than claimed.

You probably know this is now officially the longest “recovery” on record … so perhaps a preemptive boost is a good idea.

Maybe the Fed is simply yielding to President Trump’s pleas to go tit for tat with those pesky currency manipulators … to help keep America’s exporters competitive.

If you read the financial news, it’s easy to get lost in all the conjecture surrounding the dollar, the Fed, the economy, and interest rates.

But while people are bickering about political intervention in monetary policy, and what it all means to asset values …

 central banks around the world have been quietly stocking up on gold at the fastest pace in 50 years.

So what?

Think of Wall Street and insider trading. When insiders of a corporation buy or sell … it’s often because they know something others don’t.

Savvy stock traders watch these moves for clues about the future of the stock.

When it comes to money … or more accurately, currency … you can’t get much more “inside” than central banks.

It’s reasonable to think they know something.

Most “investors” look at gold as a trading vehicle … something to buy and sell in order to create currency “profits” in the same way a flipper trades houses to generate currency profits.

But central banks can print currency … at next to no cost. They don’t need to trade gold or anything else to generate currency. They can print all they want.

Think about that.

Could it be gold has another role in international finance?

Apparently, China and Russia think so. Along with Poland, Hungary and Malaysia … to name just a few. The list is long.

Another notable advocate for putting gold back in money is Judy Shelton. Shelton is President Trump’s latest nomination to the Federal Reserve Board.

It’s also notable that of ALL the things Fed Chair Jerome Powell could say in his limited testimony to Congress, he chose to warn them against a return to the gold standard.

Maybe it’s just us, but reminds us of this admonition from the Wizard of Oz

“Pay no attention to that man behind the curtain!”

So what does all that have to do with Disney?

Remember, Disney wanted to accumulate land without anyone realizing what he was really up to. Everyone just looked at each deal as a one-off.

Disney and his team were careful to be sure no one saw the master plan until he unveiled it.

(Of course, people playing close attention figured it out … but by the time the masses knew, the deal was done).

But think about this …

If YOU had an unlimited credit card, no ethics, and knew you were about to go bankrupt … might you use your credit to buy and stash things of real value before the card is shut off?

If the players in the casino know the house is about to go bust, there’s a mad dash to cash in the soon-to-be-worthless chips.

Just remember, these are big, lumbering central banks and a worldwide financial system. “Soon” can take months … or years.

So no one knows exactly when the tipping point comes. It’s slow at first … and then all at once.

We’ve been watching this story develop since we first wrote about it in our Real Asset Investing report in 2013.

We discuss it in more detail in the videos of our more recent Future of Money and Wealth conference.

It’s clear there’s SOMETHING going on …

The ultimate currency insiders are aggressively acquiring gold. Nations who had entrusted their gold to third parties are steadily repatriating. Perhaps not so trusting anymore?

Lots of things going on geo-politically have no apparent rhyme or reason, until you look past the chatter about democracy and human rights … and just follow the gold and oil.

Richard Nixon shocked the world on August 15, 1971 when he changed the entire global monetary system in a “temporary” defense of the dollar.

Gold and oil spiked as the dollar collapsed. Interest rates were eventually hiked to over 20% to save the dollar. Every individual and business on the planet was affected.

Some people lost fortunes while others made them. The difference was (and still is) awareness, preparation, and a willingness to act when others stand paralyzed.

Some people noticed the exploding debt of the 60’s, the silver coming out of the coins in 1964, and the French President’s public warning about misplaced faith in the U.S. dollar.

People paying attention back then positioned themselves to prosper in spite of … or more accurately, because of the turmoil.

That’s why we attend and produce investor mastermind events like the New Orleans Investment Conference and the Investor Summit at Sea™.

It’s where we talk with alert investors and savvy thought leaders … searching for actionable intelligence in a noisy, chaotic world.

Though largely ignored and misunderstood by many on Main Street, there’s a very public and aggressive global search for alternatives to the U.S. dollar.

Whether it’s gold, crypto, the yuan, or something else … if and when a viable alternative to the dollar is embraced by the rest of the world …

… Americans could well be faced with spiking interest rates (the Fed will lose control), a collapsing dollar, rising asset prices in dollar terms (inflation), falling values in real terms, and a contracting economy (recession).

Those with low fixed-rate debt, real assets (including gold), cash-flow producing investments (like rental property), are likely to be big winners.

The world didn’t END when Nixon reset the system. It just changed.

So this isn’t doom and gloom … it’s hope and opportunity … IF you’re among the aware, prepared, and prone to act.

After all, if you own solidly cash-flowing properties in affordable markets, while holding a chunk of your liquid reserves in gold (with no counter-party risk) …

… and nothing happens, how are you worse off?

But if gold is the canary in the coal mine signaling that the Wizards are up to something, it might be smart to be hedged.

Until next time … good investing!


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