The role of housing in economic growth …

Some people think housing is a driver of economic growth.  But that doesn’t make sense to us.

Sure, a robust housing market creates a lot of jobs from construction all the way back through the supply chain.

But housing itself is a by-product of prosperity, not a creator of it.  After all, who buys a house first … and then gets a job?  It’s the other way around.

So we think housing is not a leading indicator, but a trailing indicator.

With that said, in addition to reflecting economic prosperity, housing definitely plays a role in driving economic activity.  But not in the way most people think.

So let’s take a look …

Economic activity isn’t about asset values.  It’s about velocity … transactions … how fast money is flowing through society.  That’s why they call it currency.

But it isn’t really money that’s flowing.  It’s credit. It’s a subtle, but important difference because you can’t create money from nothing.  Only credit.

If you’re not familiar with the VERY important difference between money and credit, you should strongly consider investing in the Future of Money and Wealth video series …

… because G. Edward Griffin (author of The Creature from Jekyll Island) does an amazing job of explaining it all in an easy to understand way.

The fundamental principle to understand is that a loan is an asset to a bank.

When a bank makes a loan, they effectively create “money” from nothing by issuing credit.

Obviously, the biggest loans in most people’s lives are mortgages on houses.  So that means banks are creating LOTS of “money” by extending credit.

Meanwhile, governments issue bonds, which are simply humungous, glorified IOUs … like a mortgage.  Except the collateral isn’t a house … it’s the citizens’ earnings.

And when the mother of all banks, the Federal Reserve, buys government bonds, they are effectively creating “money” by issuing credit.

Now when all this “money” gets into the financial system it pushes asset prices up.  But not evenly.  And no one know for sure where it will all end up.

If lots of the new “money” goes into bonds, bond prices go UP and interest rates go DOWN.  There was a LOT of that going on over the last decade.

Similarly, if it goes into stocks, then stock prices go up.  There was a lot of that over the last decade also.

One big driver of rising stock prices has been corporations pigging out on cheap debt and then using the proceeds to buy back their own stock.

But remember, this isn’t economic activity … it’s just inflation of asset prices.  So it’s a mistake to think a rising stock prices means a booming economy.

In fact, “stagflation” occurs when prices go up, but economic activity is slow.

And just last week, former Fed chair Alan Greenspan said he sees stagflation coming to an economy near you.

At the same time, fellow former chair Janet Yellen is warning of excessive corporate debt.  We were just talking about that in our last commentary.

Funny.  Neither Greenspan or Yellen has said anything about the Fed going insolvent.  Pay no attention to that man behind the curtain.

Meanwhile, Fannie Mae’s economics team recently announced their prediction of slowing economic activity in 2019.

And just so you don’t think they’re merely jumping on the bandwagon, Fannie Mae Chief Economist Doug Duncan predicted this in his Future of Money and Wealth presentation on our last Investor Summit at Sea™.

All this to say, there are some notable experts saying the economy could be in for some headwinds in 2019.

So back to housing and its role in goosing economic activity …

Anyone paying attention knows housing prices have bounced back nicely from their 2008 debacle.

And almost everyone who bought early in this last run-up has built up gobs of equity.  Good job.

Unsurprisingly, consumer confidencecash-out refinances, and consumer spending all surged in 2018 … as households became equity rich … and then tapped that equity to SPEND.

In other words, credit flowed through housing to consumer spending which drove a lot of economic activity.

So it’s not housing construction that’s a leading indicator … it’s rising prices and equity.

But as housing price appreciation slows … it’s no surprise consumer confidence is dipping too.

Remember, consumers are usually the last ones to realize what’s coming.

So again, it’s the flow of credit into home prices and equity … and then the flow of credit through home equity to consumers … and then from consumers into the economy … that be a leading indicator of what’s coming down the line.

There’s one more nuance to consider …

As we’ve been pointing out for the last few months, there are LOTS of reasons to think more money is heading into real estate.

A combination of the best tax breaksOpportunity Zones, and nervous stock investors fleeing Wall Street in record numbers to seek a safer haven in housing … all could have real estate setting up for a nice run.

But be cautious.

Because if Alan Greenspan is right about stagflation … rising prices without rising real wages and economic activity …

… then real estate PRICES could rise from big money seeking safety … while the rents you use to control the property could be under pressure.

Consider RentCafe’s recent year end report, which found the most popular things renters searched for in 2018 were “cheap” and “studio.”

So as we’ve been suggesting for quite some time …

… it’s probably safer to focus on affordable markets and product types… using long-term fixed financing … and focusing on solid cash-flows to position your portfolio to ride out a slow-down.

We’re not saying there will be slow down.  But others are.

And it’s better to be prepared and not have a slow-down, than to have a slow-down and not be prepared.

And remember … asset prices and economic activity are NOT one and the same.

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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Preparing for the Future of Interest Rates and the Dollar

We’re concerned about interest rates … and you should be too.

Consistently rising interest rates affect your ability to borrow money for investments.

In this episode of The Real Estate Guys™ show, we dig into how the Federal Reserve and central banks affect interest rates. We talk about the future of the dollar. And we discuss how rising interest rates affect YOU.

We met with two knowledgeable experts in the economics field. You’ll hear from:

  • Your interested host, Robert Helms
  • His uninteresting co-host, Russell Gray
  • James Grant, economic expert and author of eight books on the U.S. financial system
  • Nomi Prins, former Wall Street analyst, journalist, and six-time author

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James Grant on interest rates and securities

James Grant was named by Ron Paul as his likely candidate for Chairman of the Federal Reserve. Over the years, he has been a voice of reason … he calls himself “a ‘yes, but’ guy in a ‘gee whiz’ world.”

We got right into the subject of interest … interest rates.

Are rates going up? “Rates tend to trend over the long term,” James says.

They’ve been on the down-swing since the 1980s, but they may be on the up-swing again … and although rates are currently rising, James emphasizes we’ll have to wait and see whether the trend continues.

James says investors should look to the bond market for clues.

A 10-year treasury bond delivered a yield of 1.37 percent in 2016 … the lowest yield since the year 1311, according to a study by the Bank of England.

In the early 80s, a 30-year security would’ve netted you a 14 percent yield. That’s a big difference.

Today, almost every security is priced next to nothing when investors account for taxes and inflation, James says.

Who manipulates interest rates? The Federal Reserve.

“It’s an act of malpractice that the Fed and central banks worldwide are manipulating these rates,” he says.

And real estate cap rates are driven by interest rates.

To James, this means we now live in a world of great danger. “We live in a kind of hall of mirrors,” he says.

On forecasting the future and investing in gold

James notes forecasts are for people who think they know what’s going to happen … when the reality is, no one actually knows.

“We can’t know the future, but we can know how it’s being handicapped in the present,” James says.

He finds it helpful to remind himself of how our descendants will think of us.

And he says, “Successful investing is about having everyone agree with you … later.” Investors must imagine plausible outcomes before the market catches up.

We asked him his thoughts on gold investing. “Gold is interesting because it’s where people flee,” James says. “But it’s really an investment, not a flight asset.”

Gold is a way to step outside of orthodox institution investments. “Gold is simply money to me. It’s a cash balance. It’s something the central bankers can’t debase.”

To hear more from James Grant … and keep your eye on interest rates … check out Grant’s Interest Rate Observer, an independent journal covering financial markets.

Nomi Prins on the Federal Reserve and the world market

Journalist Nomi Prins was a member of Senator Bernie Sanders’ panel of advisors on Federal Reserve reform. She’s coming at this from a different angle than James Grant … but both guests are incredibly informed, with lots of great things to say.

In 2007, Nomi wrote that there could be a problem if financial institutions and the government continued the credit derivative system and high leverage.

No one wanted to hear it. But then ’08 happened.

Nomi says that over the last 10 years, “The Fed has subsidized a lot of credit problems that existed before the ’08 crisis by creating electronic money.”

That has raised the level of artificial leverage.

And THAT means the next market collapse will come from an even higher height than in ’08, she says.

Even worse, many central banks around the world created electric money and dropped rates when the Fed did. Nomi examined this situation in her book Collusion.

“We’re in a very precarious situation going forward,” she says.

Quantitative easing … the introduction of new money onto the market … causes inflation and collapses markets, starting with emerging markets.

In order to retain capital, central banks in these countries have to raise rates and increase the value of their currency. That’s what’s happening now.

This, in turn, lowers the value of foreign currencies relative to the value of the dollar. So, any debt these countries have has to be paid back or renewed at a higher rate.

Apparently, however, the U.S. is back to quantitative tightening now, says Nomi.

The Fed’s statements and its actions and reports tell different stories.

Fed Chair Jerome Powell SAYS current quantitative tightening is official. That means the government will continue to sell … but not re-invest … assets.

But in reality, the Fed is selling much more slowly than they’ve said they will.

The reason? “They know that if they sell too much too fast, rates will increase too fast, and the value of assets will go down too fast,” Nomi says. “They want to be in a holding pattern.”

More on quantitative easing, coming crisis

Nomi wants people to know there is NO correlation between GDP growth and quantitative easing. However, there is a very high correlation between quantitative easing and the stock market.

She thinks the next financial crisis will look like a bunch of smaller crises that add up to big gaps in liquidity and credit availability.

Nomi says she sees a few things happening around the world … bond defaults are creeping up in emerging markets, and certain countries are starting to have major credit problems.

“I think all of that will come to bear on the Fed.” And because of that, Nomi says, “I think their language will start to move toward growth slowing.”

Think two rate raises over the next year, instead of the forecasted four.

She predicts extreme appreciation is not going to happen. Rates will stay low, although they might continue to rise a bit relative to the Fed.

What about real estate? “Commercial real estate may have more leverage, so rate hikes will have more impact.”

Instead, Nomi recommends “any area where rent can overcompensate for an increase in cost.”

She says there are currently opportunities in emerging markets where there’s still room for upward growth in prices.

Mexico City, for example, is a place where prices are low, the government has a strong growth strategy, and there is opportunity in the near team.

Lessons learned

Debt doesn’t operate in a vacuum. Interest rates have a HUGE impact on whether your investments will be successful.

You don’t need to understand ALL the mechanics … but you should have a basic understanding of WHAT will affect interest rates and WHERE they’re headed.


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.


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

Future of Money and Wealth

The economy may be strong …

but what about the financial system supporting it?

 

Discover the opportunities hidden inside a FRAGILE financial system … and how to HEDGE against inflation, deflation, and even stagflation.

Featuring voice largely shunned by mainstream media, the Future of Money and Wealth reveals …

 

  • The REAL trade war no one’s talking about … and how Russia and China are making major moves to take down a major U.S. stronghold …

  • Which assets are in bubbles now … and specific strategies to fortify your balance sheet … before it’s too late …

  • The shocking truth about oil … it’s direct impact on YOUR wealth … and how to profit from what’s about to happen …

  • Who the new tax law REALLY helps … and how YOU can use it to grow more wealth faster (it’s NOT an IRA) …

  • PLUS … candid conversations about crypto-currencies … wealth privacy strategiescontingency planning … and MUCH MORE!

 

Just ONE good idea can make or save you a FORTUNE …

 

Future of Money and Wealth brings you a HUGE collection of experts, thought-leaders, and real-world investors … who ALL volunteered their time to share their best ideas, warnings, and strategies with over 400 people in the live audience …


Robert Kiyosaki is the author of Rich Dad Poor Dad

Robert Kiyosaki

Famous for being the greatest-selling personal finance author in history (Rich Dad Poor Dad series), Robert is a mega-millionaire investor in real estate, precious metals, and oil. He’s also an avid student of money, economics, investing, and the financial system. He was one of the few pundits publicly warning the world about the 2008 financial crisis.


Doug Duncan PhD is the chief ecoomist for Fannie MaeDoug Duncan

Doug is SVP and chief economist for Fannie Mae, which is perhaps the most dominant force in U.S. residential lending.

Doug is responsible for strategic research, including how Fannie Mae’s activities affect housing. He’s been named one of Bloomberg / Business Week’s 50 Most Powerful People in Real Estate.


Peter Schiff is the CEO and Chief Global Strategist for Euro-Pacific Capital, the best selling author Crash Proof and The Real Crash, and the host of the Peter Schiff podcastPeter Schiff

Peter’s also a multi-millionaire investor, money manager, and outspoken financial pundit.

A best-selling author in his own right (Crash Proof 2.0 and The Real Crash), like Robert Kiyosaki, Peter was on record vociferously alerting people in 2006 about the impending financial crisis.

 


Chris Martenson is host of the Peak Prosperity podcast and the creator of The Crash Course.Chris Martenson

An economic researcher and futurist, Chris is an expert in the relationship between energy, the environment, and economics. Rising to prominence with his groundbreaking video series, The Crash Course, Chris is a best-selling author (Prosper!) and hosts a popular podcast featuring interviews with a variety of thought leaders and experts.


Simon Black is the founder of Sovereign ManSimon Black

A former Army intelligence officer turned international entrepreneur and investor, Simon’s a worldwide traveler, an avid student of political and financial history, and has developed an eclectic portfolio of investments and business ventures all over the globe.

Simon’s diverse experience and global perspectives make his presentations both practical and enlightening.


Tom Wheelwright is Robert Kiyosaki's personal CPA, a Rich Dad Advisor, and the best-selling author of Tax Free WealthTom Wheelwright

Tom’s a high energy tax and wealth strategist, a best-selling author, an entrepreneur … and is Robert Kiyosaki’s personal CPA.

Tom’s extremely well-versed in the new U.S. tax law and shares how investors can use it to build substantial wealth and permanently reduce taxes.

 


Kim Kiyosak is the best-selling author if Rich Woman and co-founder of the Rich Dad CompanyKim Kiyosaki

Kim is a high-powered real estate investor, entrepreneur, and best-selling author of Rich Woman. She’s co-founder of the Rich Dad company and a popular speaker on the topics of investing,
entrepreneurship, and empowering women.

Kim co-hosts the Rich Dad radio show, and is an avid student of investing, economics, and personal development.


G. Edward Griffin is the author of the Creature from Jekyll IslandG. Edward Griffin

Ed is a renowned investigative journalist and best known for his epic and controversial book, The Creature from Jekyll Island – A Second Look at the Federal Reserve.

Ed has a deep and historical understanding of money, currency, central banking … and a knack for explaining all of it in an easy to understand way.

 


Brien Kundin is the produced of The New Orleans Investment Conference and the publisher of Gold NewsletterBrien Lundin

For nearly four decades, Brien’s been an active student, investor, commentator, and newsletter publisher in the precious metals industry.

As producer of the longest running investing conference in the world, Brien’s one of the most informed, connected, and intelligent experts on money, precious metals, mining, investing, and economics.


 

Future of Money and Wealth is brought to you by The Real Estate Guys™ Radio Show

 

Broadcasting on conventional radio since 1997, The Real Estate Guys™ radio show is an investment talk program focusing on real estate as the core of a real asset portfolio.

 

After being among the many real estate investors caught completely unaware and unprepared for what happened in 2008 …

 

… hosts Robert Helms and Russell Gray are on a mission to bring the brightest and best real asset investing experts together to share insights, ideas, and strategies for building and preserving real, sustainable wealth.

 

The Real Estate Guys™ co-host Russell Gray explains why …

 

What YOU DON’T KNOW you don’t know can COST YOU BIG

 

Sound dramatic? Maybe. But consider this …

 

Wealth Wiped Out Without Warning

In 1929, 1987, 2000 and 2008 … millions of people were financially DEVASTATED by market disruptions they didn’t even see coming.

 

Meanwhile, in those very same markets … informed and prepared investors not only survived … they THRIVED.

 

What’s the difference?

 

Be Careful Who You Listen To

Successful investors didn’t buy the hype from Wall Street, financial media, and politicians who downplay dangers … just so they can earn fees, placate advertisers, and win votes.

 

Remember this classic assurance?

 

“Importantly, we see no serious broader spillover to banks or thrift institutions from the problems in the subprime market.”

Federal Reserve Chairman Ben Bernanke on May 17, 2007

 

Oops. Of course, just a year later the financial system melted down … triggering the GREATEST FINANCIAL CRISIS since the Depression.

 

But successful investors back then understood history. They looked at the financial system underneath the “strong” economy … and saw reasons to be alarmed.

 

They paid attention to the people and signs others were ignoring …

 

… so they could be proactive to get in position to prosper while there’s still time.

 

TODAY, there are record levels of consumer, corporate, and government debt

 

… and rising interest rates are already triggering loan defaults … to levels not seen since the 2008 crisis.

 

Stocks indexes are setting bubble highs … and market volatility suggests traders are ready to run for the exits … crashing prices … at the first sign of recession.

 

And that’s just some of the more obvious challenges facing Main Street investors.

 

But there’s GOOD news …

 

Many successful investors prospered through past market disruptions and YOU can too.

 

By finding new ideas, strategies, and the right experts you’re better able to see what’s coming sooner

 

… so you can be proactive preparing YOUR business and portfolio to both survive and THRIVE through the next crisis.

 

Future of Money and Wealth brings YOU important insights from many top experts … so YOU can be more aware and prepared.

 

Eavesdrop on the Experts …

 

Imagine being a fly on the wall while some of the biggest brains in economics and investing share expert insights and discuss the most pressing issues facing investors today ..

 

You don’t have to imagine … because the Future of Money and Wealth is all on videotape and ready for YOU to watch from the comfort of your own home or office!

 

Just ONE good idea can make or save you a FORTUNE …

 

Explore the future of money and wealth with people well-qualified to have an opinion …

 

Speakers include Rich Dad Poor Dad author Robert Kiyosaki and outspoken financial pundit and money manager Peter Schiff.

 

Both men are famous for LOUDLY warning the 2008 crash was coming … in spite of being mocked by mainstream financial media.

 

Back then the economy was STRONG … but the financial system was FRAGILE. And while many “experts” couldn’t see it … Kiyosaki and Schiff did.

 

And while Federal Reserve chair Ben Bernanke was DEAD WRONG … Robert Kiyosaki and Peter Schiff were RIGHT.

 

Today Robert Kiyosaki and Peter Schiff are concerned again. And this time they’re not alone.

 

Fannie Mae (yes, THAT Fannie Mae … the one making most of the mortgages in the U.S.) chief economist Doug Duncan points out that most of his predictions from last year turned out to be eerily accurate …

 

… and then reveals when he thinks the NEXT recession will strike (it’s not that far away)

 

And that’s just one of TWENTY powerful expert presentations and panels recorded at the Future of Money and Wealth conference.

 

Other important topics include …

 

    • Where real estate is likely headed … and which niches are best positioned for profit

 

      • Why oil and gas are likely headed higher … and the important impact on the economy and opportunity for investors

 

        • The fascinating rise of block-chain technology … and how crypto-currencies are changing the future of money and wealth

 

… PLUS a shocking revelation about the RAGING currency war between the U.S. and the tag team of Russia and China.

 

Far Away But TOO Close to Home …

 

You’ll discover there’s a WHOLE LOT MORE to the sparring between Uncle Sam and Russia and China than the mainstream media lets on.

 

And while it may seem like it’s far away from YOUR income and investments … it’s NOT.

 

If you earn, save, or measure your wealth in dollars …

 

… you REALLY need to understand the Future of Money and Wealth.

 

Nearly 400 people in the live audience at the Future of Money and Wealth conference were blown away. They called it “life-changing”, “eye-opening”, and “invaluable”.

 

But don’t take our word for it … watch for yourself …

 

Here’s the GREAT NEWS …

 

We videotaped the ENTIRE event … all TWENTY presentations and panels …

 

… nearly fourteen compelling hours of essential education

 

… and we’ve organized them all into one powerful online video series.

 

Now YOU can hear directly about the Future of Money and Wealth from Robert Kiyosaki, Peter Schiff, Doug Duncan, Chris Martenson, Tom Wheelwright, Brien Lundin, Simon Black, G. Edward Griffin … and MANY other top experts.

 

You may not know who all these people are right now … but you’ll be REALLY glad to hear from them.

 

Their wisdom is impacting the lives of many millions of people all around the world … and it can help you too.

 

Real World Investors React …

 

It’s one thing to hear and understand what’s happening in geo-politics and macro-economics. It’s another to decide what to DO about it at the micro-level.

 

So we included lots of practical insights from a great collection of niche experts, including …


Adam Taggart is co-founder of Peak Prosperity and co-author of ProsperAdam Taggart

Adam started his career as investment banker and saw first hand how broken Wall Street is. Later, he helped a company go from start up to acquisition in Silicon Valley. Today, Adam and his partner Chris Martenson develop and share ideas to help people prosper even when the world is full of uncertainty.


Kathy Fettke is the co-founder of Real Wealth NetworkKathy Fettke

Kathy’s a highly successful real estate investor, syndicator, and investment club leader.

She’s also a frequently featured expert real estate pundit in media and at conferences.

 


Gene Guarino is founder of Residential Assisted Living Academy and an expert in residential assisted living investingGene Guarino

Gene’s a recognized leader in the residential assisted living facilities investing space. He’s a trained, but not practicing Certified Financial Planner. Gene saw opportunity in solving one of the major problems facing an aging demographic … and grabbed it.

 


Beth Clifford is an international real estate developerBeth Clifford

Armed with a formal education in classical economics and graduating with honors, Beth cut her business teeth on the streets of Wall Street.

Today she’s CEO of a groundbreaking offshore real estate development and construction company.


Brad Sumrok is the founder of Sumrok Apartment Investing MasteryBrad Sumrok

Brad freed himself from the corporate grind in less than 5 years by investing in apartment buildings.

The 2008 financial crisis crushed many homeowners … and made many apartment investors multi-millionaires. Brad not only built a portfolio that survived the crash … he thrived through it.


David Sewell is an international agricultural investor and entrepreneur

David Sewell

David is a Canadian-born international agricultural investor and entrepreneur operating in Latin America.

With an MBA in Corporate Finance and an extensive background in real estate, securities, syndication, and international business … there’s not much David hasn’t seen.


Damion Lupo is founder of Total Control FinancialDamion Lupo

Damion is a modern-day financial renaissance man with expertise in real estate investing, precious metals, and crypto-currencies. He specializes in strategies using alternative assets and sheltering wealth from predators and taxes through qualified retirement plans.


Patrick Donohoe is founder and CEO of Paradigm LifePatrick Donohoe

Patrick is a financial strategist and an expert in the unique use of life insurance contracts for enhanced cash management and private banking.

He has a degree in economics, hosts his own financial podcast, and is an avid student of economics, investing, and financial history.


Dana Samuleson is owner of American Gold Exchange, and an expert in precious metals and numismatic coins.Dana Samuelson

Dana has been in the precious metals business for decades.

He owns and operates a long-established precious metals and numismatic coin dealership, and is past-President of the Professional Numismatic Guild.

 


 

It’s said to truly understand a subject, you need to study it from multiple perspectives.

 

Wealth that took a lifetime to accumulate can be lost or severely diminished in a financial crisis.

 

To survive and thrive when a financial system collapses or resets takes understanding, awareness and preparation. Future of Money and Wealth is an affordable, fun, and easy way to get started!

 

A tremendous value …

 

This program cost MANY thousands of dollars to produce. With travel, hotel and registration … every person at the taping paid thousands.

 

And the information in this video series is EASILY worth thousands of dollars … because just ONE great idea can make or save you a FORTUNE.

 

So we could charge a LOT more for this program … and it would be totally worth it.

 

And of course, we need to charge SOMETHING to cover costs … AND more importantly, so you have enough skin in the game that you’ll actually watch it all.

 

But as you’ll see … it’s important to get this vital information out to as many people as possible. So we’re making it a no-brainer …

 

Get ALL 20 videos … 14 hours of compelling content … for only $497 (regularly $1997)

 

PLUS a SPECIAL BONUS when you act today … the Strategic Real Asset Investing webinar.

 

HUGE value … great price … powerful, life-changing information. But ONLY if you watch it!

 

Remember … what you don’t know that you don’t know could cost you a fortune … just ask all the people blind-sided by the last financial crisis.

 

“An investment in education pays the best dividend.”
– Benjamin Franklin

 

Good advice. No wonder Ben’s on the $100 bill.

 

Now it’s decision time …

 

You’ve read this far for a reason.

 

You’re concerned about the future … YOUR future … but while it’s easy to be interested, it takes an investment of time, money and effort to actually get educated and busy implementing.

 

But if you think that’s a burden …

 

Consider the price of NOT being informed and prepared …

 

And even if “this time it’s different” (famous last words) …

 

.. and there’s never going to be another financial crisis … sunshine and unicorns for as far as the eye can see …

 

Which is worse … to be prepared and not have a crisis … or to have a crisis and not be prepared?

 

Remember, the course you don’t watch can’t help.

 

Whatever you have, you’ve worked hard for.

 

And remember … the flip side of a crisis is opportunity, so it’s not gloomy … there’s a lot to look forward to and plan for.

 

For the informed and prepared … the future is bright. But for those who aren’t … not so much.

 

With the stakes this high, it’s time to …

 

To your prepared and prosperous future,

 

Robert Helms and Russell Gray
Hosts
The Real Estate Guys™ Radio Show
Producers of Future of Money and Wealth

 

P.S. Think about how much financial education you got in school. Most people get NONE … and so they’re easily herded into a system designed to feed the banks interest, the government taxes, and Wall Street commissions and fees.

 

Worse, without context … it’s nearly impossible to recognize major problems forming … while bankers, politicians, and financial media claim all is well.

 

Future of Money and Wealth will shock and enlighten you … and help you prepare yourself and your portfolio to PROSPER through what many experts believe is an inevitable economic re-set.

 

You’re a click away from changing your future …

 

Get ALL 20 videos … 14 hours of compelling content … for only $497 (regularly $1997)

PLUS a SPECIAL BONUS when you act today … the Strategic Real Asset Investing webinar.

Just ONE good idea can make or save you a FORTUNE …

Lessons from Facebook’s face-plant …

No doubt you’ve heard Facebook’s stock face-planted recently. But just in case, here’s the whole gory story in just three headlines over five days …

Facebook stock hits record high ahead of earnings – MarketWatch 7/25/18

Investors … continue to shrug off … gaffes … with privacy and security … Chief Executive Mark Zuckerberg … said … the company has not seen an impact on the company’s top line.”

Facebook’s stock market decline is the largest one-day drop in US history

– The Verge 7/26/18

“Facebook’s market capitalization lost $120 billion in 24 hours.

Facebook’s stock set to enter bear-market territory after third straight decline – MarketWatch 7/30/18

“The stock has now fallen 22% from its record close … on July 25.”

Of course, if you’re a real estate investor this may seem like only a moderately interesting side story buried in all the news flying across your screen.

And maybe that’s all it is.

Then again, maybe there are some things to be gleaned from this epic implosion … even for real estate investors.

Lesson 1: Just because everyone else is … doesn’t mean YOU should

Your mom probably taught you that. But it’s good investing advice too. It’s never smart to be late to an equity party … or late leaving.

The so-called FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) are the “must have” stocks for … just about EVERYONE.

The problem is popular assets often get bid up well past their fundamental value … as speculators jump in hoping to ride the upward trend for awhile …

… and hoping to be fast enough to get out before the trend turns.

Of course, hope isn’t a very good investing strategy.

Lesson 2: Don’t ignore problems just to keep hope alive

Notice the quote about investors continuing to shrug off bad news … ignoring the obviously developing problems at Facebook.

So when Zuckerberg comes out right before the bad news … even as Facebook’s stock was heading to a record HIGH … and says the problems aren’t affecting the top line …

… investors apparently chose to believe him, … and not heed the clues in the news that clearly showed Facebook was headed for stormy seas.

Now, investors are suing Facebook and Zuckerberg for misleading them.

But investors should also look at the big picture, and consider the motives of these who claim as is well.

Remember this classic assurance from the world’s foremost banker?

“Importantly, we see no serious broader spillover to banks or thrift institutions from the problems in the subprime market.”

– Federal Reserve Chairman Ben Bernanke on May 17, 2007

Just a year later the financial system all but imploded.  But the danger signs were there …

Peter Schiff and Robert Kiyosaki were warning people. Most didn’t listen.

We didn’t. But you can be SURE we listen today.

Lesson 3: Momentum is a condiment … not a meal

With real estate, sustainable profit is all about the income.

Sure, it’s great when things get hot and people want to pay MORE for the SAME income.  But at some point, the numbers don’t make sense.

You can bad fundamentals and invest primarily because “it’s going up.” But when momentum fades, prices snap back to fundamentals.

If you’re on the wrong end of it, it’s painful.

Of course, if you see it coming, you can cash out via refinance or sale, and store up some dry powder for the soon-to-be-coming sale.

Lesson 4: Trends and indexes are interesting, but the deal’s what’s real

We have a big, diverse audience … so we talk about big picture stuff. It’s important to see the big picture.

After all, every asset you own is floating in a big sloshing economic sea.

If you’re not aware of weather patterns and watching the horizon, you might not see storm clouds and rough waters forming.

But investors make money in EVERY kind of economic environment, so it’s not the conditions which dictate YOUR success or failure.

It’s your attention to being sure each individual deal YOU do makes sense.

That means the right market, product type, neighborhood, financing structure, and management team.

Keep the deal real … and have plans for what you’d do in a variety of economic situations …

… so when conditions change you’re not caught unaware and unprepared.

“The time to repair the roof is when the sun is shining.”

– John F. Kennedy

Lesson 5: Train wrecks in stocks can be tee-up for real estate

This is our favorite.

It’s not that we take joy when the stock market reveals its true character … but we know it’s a wake-up-and-smell-the-coffee moment for many Main Street investors.

As our friends Chris Martenson and Adam Taggart recently pointed out

… if you take the FAANG stocks out of the stock indexes, the highly-touted stock index returns would have been NEGATIVE.

It’s hard to diversify when you you’re exposed to the hot stocks everyone’s piled into … directly or indirectly.

So as Main Street investors come to suspect the disproportionate influence just a few arguably overbought stocks have on their TOTAL net worth and retirement dreams …

… history says people’s hearts turn home to an investment type they instinctively understand and trust. Real estate.

So for those raising money from private investors to go do more and bigger real estate deals, a stock market scare can make it easier for your prospects to appreciate what you’re offering them.

Lesson 6: Do the math and the math will tell you what to do

Very few paper asset investors we’ve ever met actually do the math.

They either buy index funds based on trends and history, and don’t realize most are exposed to the same small group of hot stock everyone owns …

… or they buy stocks based on a hot tip, a gut feeling, or a recommendation from someone they think is smarter than they are.

But real estate math is SO simple to understand and explain.

And when you can quickly show a Main Street paper investor how a 15-20% annualized long-term return on investment real estate is quite realistic … with very moderate risk …

… real estate is the CLEAR winner.

Even a modest 3% per year price appreciation on 20% down payment (5:1 leverage) is 15% average annual growth rate.

Add to that another 2% or so a year in amortization … paying down the loan using the rental income … you’re up to about 17% annualized equity growth.

Toss in another modest 3-5% cash-on-cash and some tax benefits and you’re pushing 20% annualized total return pretty fast.

And that’s just bread-and-butter buy-and-hold rental property.

There are all kinds of specialty niches and value-add plays which allow active investors to goose returns …

… or for a syndicator to put a lot of meat on the bone for their passive investors … and still take a piece for doing the work.

Lesson 7: Monitor your portfolio for weak links and over-exposure

Lots of paper investors who didn’t even know they were exposed to Facebook are finding out the hard way …

… just like when we didn’t realize our whole investing and business model depended on healthy credit markets.

So be aware …

When you’re overly exposed to a critical factor like interest rates, credit markets, a tax law, a specific industry or employer, or even a currency or financial system

… you run the risk that a single unexpected event can take a BIG bite out of your assets.

And while you might not be able to fix everything right away, the sooner you’re aware of the risks, the sooner you can start preparing to mitigate them.

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.

Protecting equity from bursting bubbles …

One of the primary purposes of easy money (“quantitative easing” or QE) is to inflate asset prices, bloat balance sheets, and create a wealth effect.

The formula is simple.  Print gobs of money, buy bonds to drop interest rates, and flood the markets with liquidity.

Corporations borrow cheap money to buyback stocks … pushing stock prices up and triggering big bonuses for execs.

Corporate raiders borrow cheap money leveraging operating cash flow into leveraged buyouts … triggering mega-mergers and acquisitions … and fat fees.

Real estate investors borrow cheap money … leveraging rental income into big mortgages … bidding up prices, creating lots of equity, and compressing cap rates.

Even everyday homeowners get in on the action … borrowing cheap money and leveraging their paychecks into big mortgages … pushing up prices and creating lots of equity.

And some of the equity boom in real estate comes from folks moving some of their stock equity into fancier houses.

Of course, from a portfolio management perspective, it’s probably not a bad idea to reposition fickle, volatile paper equity into boring, stable real estate equity.

For those with real estate equity in bubbly markets, it’s probably a good idea to consider repositioning some of that equity into less bubbly real estate markets.

After all, if quantitative easing was about inflating asset prices … what’s the likely outcome of quantitative tightening?

Right now, the Federal Reserve is raising rates and shrinking its balance sheet … which is the OPPOSITE of what they did to inflate asset prices.

So it’s reasonable to be concerned about the equity on your balance sheet.  If the prices of your stocks and real estate fall, so does your equity.

This all begs the big question … how can you protect your equity from bursting bubbles?

Aside from selling everything and sitting in cash … which has its own risks … one strategy is to simply reposition equity into assets which are less affected by leverage.

It’s why Jim Rickards (Currency WarsDeath of MoneyRoad to Ruin) recommends allocating a portion of your balance sheet into real assets, including gold and unleveraged real estate.

Of course, these strategies are easy to talk about.  But in the real world, it takes some work to actually implement them.  And it starts with education.

But you’ve read this far, so you’ve already begun the process.  Good job!

We get into much greater detail in the Future of Money and Wealth video series.

In fact, in module 13 of 20, there’s a detailed strategy (too big to explain here) for repositioning equity for wealth preservation, privacy, and increased cash flow … and some other VERY cool benefits.

But there’s more to protecting equity than simply understanding a strategy.

If you’re going to move equity from highly-leveraged stock or real estate markets into less-leveraged real estate markets, you’ll need to find and learn those markets.

One of our favorite un-leveraged real estate markets is Belize.

There’s a long list of reasons why we like a very specific market in Belize, including the fact it’s not leveraged … yet.

That’s because getting wealth into non-leveraged real estate markets insulates your equity if credit markets seize up like they did in 2008.

Just look back on what happened in Texas in the financial crisis that temporarily wiped out lots of equity for a several painful years …

Sure, you could get loans in Texas … but Texas law restricted some of the more aggressive lending.  So less air got into Texas values.

That’s a big reason why the Texas markets didn’t bubble as much as other markets, which made it boring pre-crash … but VERY attractive post-crash.

Well, Belize was even MORE stable than Texas going through the crisis … and that was before Belize had as much global exposure and demand to prop it up as it has today.

We thought Belize made sense heading into back then and we like it even better today.  That’s why we continue to share it with people through our discovery trips.

It’s not for everybody, but we think everyone would be wise to take a closer look.

Last year, Hilton Hotels decided to plant a flag in Belize.  Marriott just announced earlier this year.  Big players like this little market for a reason.

When you see big brands making moves into a market, it’s a leading indicator of market strength.

And when you have a chance to get in a market BEFORE leverage arrives, you have a good chance of catching a big equity wave.

Of course, if the leverage never happens … you simply have a chunk of your wealth parked in a stable market with some VERY desirable lifestyle perks.

So whether you do it in your own account or with partners through syndication, Belize is a market to consider right now … and you can learn all about it on our next fun-filled discovery trip to beautiful Belize.

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.

Pension Crisis Threatens Property Owners

Pension Problems Piling Up …

Anyone paying attention knows the world is facing a global pension crisis.  And if you don’t think it will affect you … think again. 

Consider this report recently issued by the Federal Reserve Bank of Chicago …

How Should the State of Illinois Pay for Its Unfunded Pension Liability?  The Case for Statewide Residential Property Tax 

“The State of Illinois has a very large unfunded pension liability and will likely have to pay much of it off by raising taxes.” 

And guess what?  Illinois isn’t the only place with pension problems.  California is a HUGE mess too … as is much of the country.

According to this report from The Pew Charitable Trusts, only four states had at least 90% of the assets needed to pay promised benefits.

It’s BAD.  And the Federal Reserve apparently wants to tax property owners to fix it. 

“In our view, Illinois’s best option is to impose a statewide residential property tax …”

“ … the tax rate required to pay off the pension debt over 30 years would be about one percent.”

 But it gets WORSE … are you sitting down?  This is SHOCKING …

“There are good reasons to pay off … pension debt through … residential property tax … home values go down …”

“ Current homeowners would not be happy, but … would not be able to avoid the new tax by selling their homes … because home prices should reflect the new tax burden quickly.”

In other words, prices will crash, and upside-down homeowners are trapped.

Nice.

In a presentation at Future of Money and Wealth, we warned that financially strapped governments would turn desperado.  This is a classic example. 

This isn’t hyperbole or conspiracy theory.  We don’t make this stuff up.  These are the Fed’s OWN WORDS.  You can (and should) read them yourself. 

Here’s a link to a PDF we highlighted to make it easy for you.   And here’s a link to the Chicago Fed’s website where you can see the source with your own eyes.

The writing is on the wall.  Property owners are easy prey because the asset is right out in the open.

BUT … the low hanging fruit are properties in jurisdictions where the desperado taxman has authority.

That’s why many savvy investors park wealth in non-domestic property … in countries where the tax burden is small.

If you’ve been following us for any length of time, you’ve been bombarded with invitations to come to Belize.  And this is another one. 

We don’t understand why EVERYONE reading this wouldn’t drop everything and immediately register for the next Belize discovery trip … and learn how to invest in offshore real estate.

You don’t need to be a multi-millionaire to diversify your wealth internationally.  But you do need to get educated and connected.   

The Belize discovery trip is a great way to start.

And the trip is not just relatively affordable … it’s FUN! You get a multi-day semi-private educational tour personally led by our very own Robert Helms.

And one last suggestion on the educational front …

We videotaped the entire 14 hours of the Future of Money and Wealth conference … and you can click here to order the entire collection of Future of Money and Wealth presentations and panel discussions.

In spite of all the rosy economic rhetoric … and yes, there are some good things happening … there are still some BIG landmines out there.

This latest trial balloon from the Fed should be a wake-up call for all real estate investors.  Isn’t it prudent to explore options while there’s still time?


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.

The future of interest rates …

Interest rates are a big deal for real estate investors … for many reasons.

The first and most obvious reason is because interest rates are the price of the money you borrow to invest with.  Higher rates mean higher payments and less cash flow.

Of course, even when you pay cash for your properties, your tenants probably carry consumer debt … car loans, credit card, and installment debt …

Higher rates mean higher debt payments for your tenants, so less of their monthly budget is available to pay you rent or absorb rent increases.

Also, your property values, exit options, and liquidity are all affected by interest rates.

Higher rates mean buyers have less capacity to bid up comparable properties … and fewer buyers can afford to buy your property when you’re ready to sell.

For these reasons and others, most real estate investors and their mortgage advisors pay very close attention to interest rates …  especially when financing or re-financing.

But there are other very important reasons for real estate investors to care about the future of interest rates …

Interest rates are a barometer for the health of both the currency and the overall economy.

Last time we looked, most real estate investors transact and denominate wealth in currency (dollars for Americans) … and your rental properties, tenants’ incomes, and overall prosperity all exist inside of the broader economy.

So the potential for big changes to either the currency or the overall economy matter to real estate investors just like they do to paper asset investors.

In fact, based on the amount of debt most real estate investors use, interest rates are arguably even MORE important to real estate investors.

We’re just a couple of days away from our Future of Money and Wealth conference … with nearly 400 people coming … and right now we’re thinking a lot about the dollar and interest rates.

Peter Schiff is speaking.  Peter wrote Crash Proof in 2006 and released it in 2007.  Back then, he loudly warned of an impending financial crisis whose roots would be in the mortgage market.

Sadly, back then we didn’t know Peter, and we didn’t read his book.  Then 2008 happened, and we were blindsided by the financial crisis.

So now we read more … a LOT more.

We make time to listen to people like Peter Schiff, Robert Kiyosaki, and Chris Martenson.  And we work hard to share them with our audiences.

A very interesting book we just finished is Exorbitant Privilege by Barry Eichengreen.  He’s Professor of Political Science and Economics at Cal Berkeley.

Eichengreen published Exorbitant Privilege in 2011, which means he probably wrote it in 2010.

Keep this in mind as we share these prophetic excerpts from Chapter 7, “Dollar Crisis”…

“What if foreigners dump their holdings and abandon the currency [dollar]?  What, if anything, could U.S. policymakers do about it?”

“It would be nice were this kind of scenario planning undertaken by the Federal Reserve and CIA … it would have to start with what precipitated the crash and caused foreigners to abandon the dollar.”

Note:  Eichengreen probably didn’t know at the time that James Rickards, former attorney for Long Term Capital Management (the hedge fund at the center of the near financial meltdown of 1998), was participating in precisely this kind of planning, which Rickards describes in his book Currency Wars, published a year after Exorbitant Privilege.

Back to Eichengreen’s prophetic 2011 commentary …

“One trigger could be political conflict between the United States and China.  The simmering dispute over trade and exchange rates could break into the open …

“… American politicians … could impose an across-the-board tariff on imports from [China].”

WOW … Eichengreen wrote that at least 7 years before this March 22, 2018 headline from CNBC:

Trump slaps China with tariffs on up to $60 billion in imports: ‘This is the first of many’

Back to Eichengreen in 2011 …

“Beijing would not take this lying down.”

CNN Money on April 3, 2018:

China to US: We’ll match your tariffs in ‘scale’ and ‘intensity’

Eichengreen in 2011:

“Or the United States and China could come into conflict over policy toward rogue states like North Korea and Iran.”

If you’ve been following the North Korea drama, you probably know this one’s been back and forth.

Last summer, China seemed to side with North Korea.  Then they tried to take a neutral position.

But recently Kim Jong Un paid a secret visit to China.  Of course, no one really knows what that was about.

But based on recent trade policy it seems the U.S. isn’t sucking up to China for help with North Korea.  So maybe the U.S. and China disagree on North Korea?

Now STAY WITH US … because the point of all this is … according to Eichengreen …

China’s relationship with the United States and the U.S. dollar has a DIRECT impact on the future of YOUR money, interest rates, and wealth.

And if you’re like most Main Streeters, you may not completely understand the connection …

… just like we didn’t understand what Credit Default Swaps had to do with our real estate investing in 2008 … until everything suddenly imploded …

… despite reassurances from the wise and powerful man then behind the curtain of the Federal Reserve, Ben Bernanke.

And the point here isn’t Iran, or North Korea, or tariffs, or trade wars … it’s about whether China gets upset enough with the U.S. and opts for the nuclear option …

Eichengreen in 2011:

“… China [could] vent its anger and exert leverage … by … dumping [Treasuries] … would send the bond markets into a tizzy … interest rates in the United States would spike.  The dollar would crater … could cause exporters, importers, and investors to abandon the dollar permanently.”

Obviously, there’s a LOT more to this topic than we can cover today.

Our point for now is that way back in 2010-11, Eichengreen envisioned a scenario in which conflict with China could create a dollar crisis.

As you can see, today’s headlines are living out his concerns.

When you read Eichengreen, like Jim Rickards, he talks about things reaching a tipping point … where everything happens fast.

We lived that in 2008 and it was NO FUN.  But that was only because we were on the wrong end of it.  While we got slammed, others made fortunes. They were informed and prepared.  We weren’t.

So be cautious of normalcy bias and complacency when it comes to contemplating the possibility of a dollar crisis.

Better to be prepared and not have a crisis … than to have a crisis and not be prepared.

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.

The Future of Money and Wealth

The world economic order is under-going massive change right now.  We’re literally watching it unfold in the daily news.

Yet few investors really understand what’s happening and why … or what they can do to both grow and protect wealth during these historic times.

 

“Those who can’t remember the past are doomed to repeat it.” – George Santanya

 

In two power-packed days our all-star line-up of notable experts will explain …

 

  • How the U.S. dollar is under attack and what it means to Main Street investors

  • What are the best and worst investments based on what’s happening now … and where it’s headed

  • How savvy investors are preparing to be on the right side of an historic wealth transfer most people don’t see coming

 

Remember, the flip side of crisis is opportunity.  But pretending everything is fine … and not being prepared in case it’s not … can be dangerous and expensive.

 

“Maintain unwavering faith you can and will prevail in the end, regardless of the difficulties, and at the same time, have the discipline to confront the most brutal facts of your current reality.” – Jim Collins, Good to Great

 

Click here now to learn more about The Future of Money and Wealth >>

 

 

Expert Insights from the New Orleans Investment Conference

We were lucky enough to spend some time at the New Orleans Investment Conference, the longest-running investment conference in the United States.

In this episode, we chat with three expert guests. They share their expertise on all things investing, from cryptocurrencies to gold, the Federal Reserve to commercial real estate, the international oil market and the U.S. dollar.

Our guests touch on real-estate-specific issues, but they also give us the big picture about what’s going on in the financial space … and how that will affect investors of all types.

PLUS … our three guests have never before been featured on The Real Estate Guys™ show. Listen in to hear brand-new, timely insights from these money pros!

In this episode you’ll hear from:

  • Your top-dollar host, Robert Helms
  • His dollar-short co-host, Russell Gray
  • The godfather of real estate, Bob Helms
  • President of Neptune Global, Chris Blasi
  • Author of Fed Up, Danielle DiMartino Booth
  • Senior editor of the website International Man, Nick Giambruno

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Cryptocurrencies and precious metals, oh my!

Chris Blasi is an expert in all things money. He founded the precious metals exchange Neptune Global and has patented a new way to invest in metals.

We asked him to give us his insights on the cryptocurrency trend.

“Cryptocurrencies are all the rage,” he told us. That doesn’t mean they’re always the best choice.

Cryptocurrencies are digital currency backed by blockchain software. That means it is susceptible to the same issues as other software, like code issues, storage databases, and scaling.

Bitcoin is the big name in cryptocurrency right now, but there are hundreds of initial coin offerings, or ICOs, put on the market every day as people create new cryptocurrencies.

These cryptocurrencies have cost investors millions, Chris warns. “People need to step back and look at the market more closely” before making the jump to investing in cryptocurrencies, he says.

“Cryptos are actually a polar opposite of gold,” Chris says. Gold is a tangible asset, while cryptocurrencies are entirely digital.

That doesn’t mean he’s saying yay or nay to digital currencies … only cautioning investors to understand what they really are.

“Cryptos offer speculative gains,” he notes. “Do your homework and invest in moderation.”

Nick is actually an expert in gold … he developed a patented unit of trade for precious metals, the PMC ounce. It’s a unit of trade that corresponds to proportions of physical gold, silver, platinum, and palladium.

Using real-time technology, investors can buy and sell PMC ounces of metal immediately through Neptune Global.

The goal is to offer a turnkey precious metals fund … backed by real assets. And the PMC ounce has been architected to capture the blended return of each metal, smoothing out the volatility of trading in just gold or silver, for example.

Fed up with the Federal Reserve

Danielle DiMartino Booth has dipped her feet into all matters related to money. She has experience in private and public equities, worked as a finance journalist, and spent nine years at the Federal Reserve. She recently published the book Fed Up, her take on what’s wrong with the Federal Reserve.

We started by asking Danielle to give us an overview of the Federal Reserve.

The Fed is a quasi-public organization that is intended to function as the central bank of the United States.

Unlike some conservative politicians and finance experts, Danielle doesn’t want to abolish the Fed. She gave us her take on what we need to do to reform the Fed:

  1. Go from a dual mandate to a single mandate. The current Federal Reserve operates on a dual mandate of 1) protecting the value of our dollar and stabilizing prices and 2) maximizing employment. Danielle is in favor of completely dropping the labor mandate, which she believes would help keep both inflation and the value of the dollar in check.
  1. Reduce the number of local Federal Reserve banks from 12 to 10 and add a bank to the West Coast. In a largely cashless society, the need for so many districts has clearly dissipated, says Danielle.
  1. Hire knowledgeable people who represent regional economies. Get rid of the majority of the regulators in the Federal Reserve. Instead of hiring PhDs, hire people who actually understand the inner workings of the U.S. financial system.  Give each district a permanent vote on the federal open market committee, and change the complexion of the Federal Reserve board so it’s composed of people who are actually on the receiving end of the policies the Fed makes.

Danielle is ridiculously knowledgeable about the Fed, but she also had a lot to say about real estate. We asked for her thoughts on the real estate market.

“Investors are missing the forest for the trees,” Danielle says. “I’m seeing the forest.”

Danielle notes that commercial buildings are overbuilt right now, and that abandoned B- and C-class malls and retail structures can only be repurposed for so long. That glut of overdeveloped, centrally located land will cause an oversupply problem, she says.

Another problem? “There are not enough low-cost homes.” We are facing a housing shortage that will only get worse in the next 20-30 years.

The people who benefit most from the overall real estate situation, Danielle says, are the people who are perceptive and get in while the fire is still burning and prices are at rock bottom.

The yuan, the petrodollar, and what it means for YOU

Nick Giambruno is a reporter and editor for Casey Research, specifically their International Man website.

We asked him about an intriguing article that appeared in the news for about a half second.

It’s about China’s hopes to price oil in the yuan (instead of the U.S. dollar) using a gold-based futures contract.

Why is this significant? Nick walked us through what this could mean.

If China is successful, “This will usher in a new era in the international monetary system,” says Nick.

A quick history lesson:

  • In 1971, Nixon ends the Breton-Woods system; the dollar is no longer backed by gold
  • To preserve the value of the dollar, Kissinger creates the petrodollar system, in which the U.S. government agrees to provide protection to Saudi Arabia in exchange for oil being priced in U.S. dollars
  • The petrodollar system gives other countries an incentive to hold U.S. dollars

If China goes forward with its new money mechanism, it could divert 400-600 billion dollars in oil sales every year that would normally go through U.S. currency.

This could have a HUGE impact on international financial markets. Oil is the most valuable commodity in the world right now … essentially, Nick says, “China is going for the jugular of the U.S. financial system.”

How does the breakdown of the petrodollar concern you? “The breakdown of the petrodollar will have clear consequences for interest rates.” And as we all know, interest rates are the price of money.

We hope you learned something new from our expert guests! Now go out and make some equity happen!


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.

Fed rate hike looms …

Do you remember the opening scenes from the classic movie Mary Poppins?

The camera focuses on a weather vane changing direction as observers comment …

Looks like the winds are changing over 17 Cherry Tree Lane” … home to one George W. Banks.

But today it’s the Fed’s Janet Yellen – not Mary Poppins – bringing winds of change. 

And it’s not over Cherry Tree Lane, but 1600 Pennsylvania Avenue … home to one Donald J. Trump.

According to CNBC, “It’s (almost) official:  The Fed is raising rates next week.”

“If there were any doubts about whether the Federal Reserve would be hiking interest rates this month, Wednesday’s blockbuster jobs report almost completely removed them … pushed market-implied probability of a Fed move to 92 percent …”

Of course, interest rates are the price of money … or rather, currency … in an economy. 

And because the U.S. dollar is the reserve currency of the world, Fed policy affects the entire world … including lowly real estate investors, our tenants, and their employers.

So will the Fed raise rates?  And if they do, what does it mean to investors … real estate and otherwise?

Let’s just do a short re-wind … 

Right after the election last November, we said, “… the odds [of an interest rate increase] are probably higher now because we’re guessing the Fed isn’t a fan of Donald Trump.

Of all the aspects of a Trump administration, the one we find MOST fascinating is the dance between President Trump and the Federal Reserve.”

Of course, now we know the Fed actually did raise rates … albeit only a token amount … in December.

Then President Trump gave his first big speech to Congress.  And as we observed shortly thereafter, the stock markets LOVED it.

Now the markets think the Fed will raise again in March, so the stock market’s pulling back.

Dizzy yet?

Not if you’re a real estate investor.  You’re just watching all the gyrations, and collecting your rent checks each month.  Market fluctuations are bo-ring … in a GREAT way!

We like to point this out when talking to whip-sawed stock investors about the calming benefits of investing in real estate.  Sometimes a little boring is fun.

However, with the probability of a Fed hike looming, here are some things for real estate investors to think about …

Mainstream financial pundits ASSUME a Fed rate hike is automatically bad for real estate. 

The theory is higher interest rates make homes less affordable. You hear this ALL the time.

And when newbie real estate investors hear this, they get nervous about investing. But there’s so much more to the story …

First … if fewer people can afford to buy homes, then more people need to rent!  Duh.  And who’s that good for? Landlords.

Next, higher Fed rates are usually introduced as a tool to slow inflation as measured by the CPI or Consumer Price Index.

Well, a higher CPI is usually the by-product of higher wages … which is usually the by-product of a tight labor market. 

Go back and read the CNBC excerpt.  The Fed is expected to raise rates because of the “blockbuster” jobs report.  In other words, a tightening labor market.

Now we’re not saying the U.S. economy employment situation is great and wages are rising.  But perhaps the Fed is trying to get ahead of the curve.

Then again, this Bloomberg article suggests wage growth might NOT accompany this jobs “boom.” So maybe the Fed agrees and won’t raise rates. Or maybe they will anyway.

The point is NO ONE KNOWS … and it doesn’t REALLY matter.

If rates don’t rise, the stock market will roar a while longer.  Great!  More time for stock investors to take profits, and move some paper wealth into nice, boring real estate.

If rates do rise, there will be fewer qualified home-buyers, which leads to more people needing to rent some nice, boring real estate.  Great!

If job growth stagnates and wages fall, there will be fewer homebuyers, less new build inventory expanding competitive supply, and more renters seeking out AFFORDABLE markets and property types.

And as long as you’re okay investing in nice, boring, affordable markets and properties, you’ll be there to meet the demand. Great!

Of course, if job growth continues and wages rise, so will rents and mortgage rates.  A rising economy lifts all assets.

And for real estate investors who’ve locked in nice, boring, long-term fixed financing on their nice, boring properties … you’ll have lower fixed costs against those rising rents. 

This means better cash flow and equity growth.  Great!

The point is that if real estate investors focus on affordable markets and properties, and structure deals with sustainable financing and cash flows …. it doesn’t matter much which way the wind blows or how hard.

Until next time …. good investing!


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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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