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

Interviews recorded live at the 2019 New Orleans Investment Conference!

Host Robert Helms talks with an outstanding array of experts on precious metals, the Federal Reserve, economics, and investing including …

Money manager Peter Schiff, former Fed official Danielle DiMartino-Booth, billionaire Rick Rule, renowned economist Mark Skousen, and gold expert Brien Lundin.

Listen in and gain valuable perspectives into the many factors affecting the economy, jobs, interest rates, the financial system and more!


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 — The Fed, the Repo Market, and Real Estate Investing

When you’re an investor … the state of the financial system is always on your mind. 

The Fed shocked the world when it pushed an emergency infusion of cash into a distressed financial system. 

In 2008 … it took $85 billion per month to stabilize the U.S. financial system. 

Today, the Fed is injecting $75 billion PER DAY. 

Does this mean our financial system is in trouble? 

We’re searching for Clues in the News about the Fed, the Repo Market, and what it could mean for investors like you. 

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

  • Your stable host, Robert Helms
  • His fabled co-host, Russell Gray 

Listen


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Staying Smart in a Changing Market

We look at a lot more than just real estate. That’s how we stay smart in an ever-changing market. 

This week, we’re looking at what’s going on at the Federal Reserve … and we’re not just talking about the interest rate change. 

But let’s start there. 

The Fed came out and dropped interest rates by 25 basis points … which is one-quarter of one point. 

It’s important to note that the Fed doesn’t actually drop interest rates, because they don’t set interest rates. 

What they do is set a target and a range. 

They dropped the high end of the range down 25 basis points … and that manipulates the markets. 

The Fed also goes into markets and buys and sells bonds … again manipulating interest rates. 

So what is the effect of those actions on a real estate investor?

Sometimes it can be confusing … but it starts with understanding that yields … which are interest rates on bonds … are a function of supply and demand. 

When money floods into the bond market, it means that the interest rates come down. When money leaves the bond market, it means that interest rates go up. 

Many people think that if the Fed lowers the interest rates, mortgage rates are going to go down … BUT really the opposite is what would happen. 

Today, it’s different. 

The money that is moving around isn’t coming from the market. The Fed is putting more money into the system. 

That means investors are playing with new money that is in the system … and bonds go up and stocks go up. 

For the last decade, there has been a big infusion of money into bonds … so much so that it has driven interest rates yield down. 

There are $250 trillion of total bonds out there … $17 trillion of them are negative yields. 

It’s important to understand because, at the end of the day, a real estate investor is a user of debt. 

As investors, we have to pay attention to what the Fed is doing … and we should watch other investment categories like stocks and oil and gas and metals. 

All these things play together and play off of each other. 

The Repo Market

Now, something happened this week that hasn’t happened since 2008 … and it has got a lot of people nervous. 

The repo market dried up. People were going in to raise short-term cash … and there was no money. 

The repo market is like a pawn shop. It’s where Wall Street traders go to hawk a bond. It’s the same thing that house flippers do … but it happens in a day instead of over the course of several months. 

Remember that the bond that you hold is valuable because it has a rate of return. 

There’s a payment associated with it. It’s a poker chip in the Wall Street casino. 

Healthy markets require certain components. There has to be cash. There has to be assets. There have to be buyers. There have to be sellers … and there has to be trust. 

If any one of these components breaks down, then the system locks up until people fix whatever the problem is. 

On September 16, 2019, people showed up at the repo market … and there wasn’t enough. 

So, in order to get cash, they had to start bidding up or discounting what they were selling. 

Interest rates went all the way up to nearly 10 percent … and the Fed’s target is about 2 percent. 

So, the Fed had to step in. They pumped in $53 billion the first day. 

It wasn’t enough. The next day they had to put in another $75 billion. 

Still not enough. The third day, the Fed added in $75 billion more. 

That’s more than $200 billion in three days. And it STILL wasn’t enough. 

So, the Fed lowered the rates … and every single day of the following week they pumped another $75 billion into the market. 

The question for investors is … why did this happen?

Well, nobody knows. It’s a big mystery. 

Ultimately it all comes back to those key components … buyers, sellers, cash, assets, and trust. 

If there’s no cash, you can’t have buying and selling … and people don’t trust the marketplace enough to come in. 

What You Can Do To Prepare

Every listener out there that didn’t live through 2008 really needs to wake up and understand what can happen. 

For those of you that did live through 2008, this is probably like deja vu. 

But there are things you can … and probably should … do to be prepared just in case this is a real crash. 

It may not be. It may be just a little crash … but if you’re prepared, a crash is a great wealth-building opportunity. You can go into a marketplace and pick up bargains. 

The best thing you can do is get educated. Education is not just consuming knowledge and perspectives … it’s processing and thinking and conversing with experts. 

The second thing you can do is pay attention. We obsess about the news because there is so much you can learn from what is happening around you. 

From a practical portfolio management standpoint … right now you can lock in low rates for the long term. Take advantage of that. 

And you can take the combination of cheap interest rates and equity and pull some of that equity out and get liquid. 

Store that liquidity in something that allows you to pivot to other currencies. 

All of this is so you can be prudent as you look ahead into the unknown. 

Listen to the full episode to learn more about today’s Clues in the News!

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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Podcast: Clues in the News – The Fed, the Repo Market, and Real Estate Investing

The Fed shocks the world with an emergency infusion of cash into a distressed financial system.

It took $85 billion per month to stabilize the financial system in 2008. Today, the Fed is injecting $75 billion PER DAY.

Is the financial system in trouble? What’s an investor to think … and do?

Listen in as we search for Clues in the News about the Fed, the Repo Market, and what it could mean to real estate investors.


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!

Jerome Powell has spoken … now what?

In our last edition, we discussed what gold might be revealing that the Fed isn’t … while waiting to see what Fed Chair Jerome Powell would say to Congress.

But now the great and powerful Powell has spoken … and there are a couple of notable nuggets worthy of an inquisitive real estate investor’s attention.

According to this report by CNBC, the Wizard of the Emerald Printing Press told Congress …

“… the relationship between … unemployment and inflation … has gone away.”

If you’re not a faithful Fed watcher (and therefore have a life), you might not know about the Phillips curve. It’s been a guiding principle for the Fed interest rate policy for a long time.

It goes without saying (but we’re saying it anyway) that interest rates are important to real estate investors.

After all, debt is arguably the most powerful tool in the real estate investor’s toolbox. And interest rates profoundly affect both cash flows and pricing.

Many investors rely on their mortgage pro for interest rate guidance. Most mortgage pros watch the 10-year Treasury. But Treasury prices are strongly impacted by Fed jawboning and open market activities.

By watching further up the food chain you can get more advance notice of the direction of rates … and better position yourself to capture opportunity and avoid problems.

Through their comments, Fed spokespeople … chief among them Chairman Powell … send signals to those in the market who care to pay attention.

Of course, sometimes a little interpretation is needed. In this case, it seems to us Powell is being pretty clear.

The Phillips curve … which presumes that full employment leads to higher wages which leads to high inflation (prompting rate hikes to preempt it) … “has gone away”.

In other words, don’t assume high employment will trigger the Fed to raise rates.

But just in case the message wasn’t clear enough, Powell also added …

“… we are learning that the neutral interest rate is lower than we had thought …”

In other words, there’s a NEW normal in town … and the Fed is abandoning (just like Peter Schiff has been telling us they would) rate hikes and tightening.

But unlike Peter Schiff, the Fed is just now figuring this out.

So the great and powerful Wizard pulled not one, but TWO doves out of his hat.

(For the un-initiated, when the Fed is “hawkish”, it means tightening the currency supply by raising rates … while “dovish” is easing … like quantitative easing … and lowering rates)

It seems the Fed looked over the economic landscape … (and over their shoulder at the real estate guy in the White House) …

… and concluded the punch bowl fueling the longest recovery in history needs to be spiked again.

You might agree or disagree.

But it doesn’t matter what YOU think the Fed SHOULD do. We’re pretty sure they’re not asking you. They’re sure not asking us.

They think what they think. They do what they do. And THEY are the ones behind the curtain with their hands on the levers.

Our mission as a real estate investors (accumulators of mass quantities of debt used to control assets and cash flows), is to watch and react appropriately.

So here’s some food for thought …

Fed “dovishness” usually translates into higher asset prices … primarily stocks and real estate. Equity happens!

It’s EASY to get enamored of equity growth based on momentum (price changes) and not fundamentals (income). Be careful.

Sometimes the Fed loses control or misses a major problem until it rolls over the market.

If your portfolio is anchored with strong fundamentals, you’re more resilient.

Equity is wonderful, but fickle and unproductive.

If your balance sheet is telling you you’re rich, but your cash flow statement doesn’t agree, you’re not really rich.

Read that again.

The key to resilient real wealth is durable passive income. And rental real estate of all kinds is a time-proven vehicle for building durable passive income.

But wait! There’s more …

It’s no secret President Trump wants to weaken the dollar … and has been pressuring the Fed to make it happen.

Based on the Fed’s recent shift of direction, it seems it’s not just interest rates headed down … but the dollar too. The currency war could be about to escalate.

And remember … the dollar has a 100+ year history of losing purchasing power.

So if you’re betting on the direction of the dollar long term … we think DOWN is the safer bet. And right now it seems that what the Wizards are planning.

This is where real estate REALLY shines.

That’s because an investor can use real estate to acquire enormous sums of dollars TODAY (via a mortgage) which effectively shorts the dollar.

Those dollars are used to buy tangible, tax-advantaged, income-producing, real assets which not only pays back the loans from their own income …

… but unlike debt, grows nominally (in dollars) in both income and price as the purchasing power of the dollar falls (inflation).

That’s why we say, “Equity Happens!”

And when it does, it’s a good idea to consider converting equity into cash using low-cost long-term debt, and then investing the proceeds in acquiring additional income streams and assets.

Of course, you can only do that when the stars of equity, lending, and interest rates all align. Right now, it seems they are.

We think last week signaled an important change of direction. And while the financial system is arguably still weak, it’s working …

… so it might be a good idea to do some portfolio optimization while the wheels are still on.

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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Is THIS the next crisis?

We’re just back from yet another EPIC Investor Summit at Sea™.  If you missed it, be sure to get on the advance notice list for 2020.

It’s hard to describe how transforming and powerful the Summit experience is.  So we won’t.

Instead, today’s focus is on the flip side of the Fed’s flop on interest rates … in context of the #1 thing Robert Kiyosaki told us he’s MOST concerned about.

We recently commented about the Federal Reserve’s abrupt reversal on plans to raise rates and tighten the supply of money (actually, credit … but that’s a whole other discussion).

The short of it is … there’s more air heading into the economic jump house. 

Based on the mostly green lights flashing in Wall Street casinos since then, it looks like the paper traders agree.  Let the good times roll.

Real estate investors care because the flow of money in and out of bonds is what determines interest rates.

When money piles into bonds, it drives interest rates LOWER.

Not surprisingly, as we speak … the 10-year Treasury is yielding about 2.3% … compared to nearly 3.3% less than six months ago.

While a 1% rate change may not seem like much, it’s a 43% decrease in interest expense or income (depending on whether you’re borrower or lender).

So as a borrower, your interest expense is 43% lower.  Obviously, with record government debt and deficits, Uncle Sam needs to keep rates down.

But as a lender (bond investor) you’re also earning 43% less.  And yet, lenders (bond buyers) are lining up to purchase.

That tells us they probably expect rates to fall further and are speculating on the bond price.

But whatever the reason, they’re buying, so bonds are up and yields are down.

As you may already know, lower Treasury yields mean lower mortgage rates.  So this headline was quite predictable …

Mortgage Rates are in a Free Fall with No End in SightWashington Post, 3/21/19

Falling mortgage rates are bullish for real estate values because the same paycheck or net operating income will control a bigger mortgage.

This purchasing power allows buyers to bid up prices … IF they are confident in their incomes, and IF their incomes aren’t being directed towards rising living expenses.

So lower interest rates don’t automatically mean a boom in real estate equity.  But they help.  We’ll probably have more to say about this in the future.

For now, let’s take a look at the other side of falling rates …  the impact on savers and especially pension funds.

Remember, if you’re investing for yield, your income just tanked 43% in only six months.  Unusually low interest rates creates problems for fund managers.

During the Summit, Robert Kiyosaki revealed he’s VERY concerned about the global pension problem.

Low interest rates are only one part of the problem.  A much bigger part is the demographics and faulty model underneath the pension concept.

The net result is there’s a growing disparity between pension assets and liabilities.  And it’s not a good one.

Like Social Security, both public and private pensions worldwide are on a collision course with insolvency … led by the two largest economies, the United States and China.

This problem’s been brewing for a long time.  But it’s a political hot potato and no one has a great answer.  So the can keeps getting kicked.

But we’re rapidly approaching the end of the road.  And this is what has Kiyosaki concerned.

Yet few investors are paying attention … probably because it all seems far away and unrelated to their personal portfolio.

However, the pension problem has the potential to affect everyone everywhere.

The reasons are many, but the short of it is the problem is HUGE and affects millions of people.  The pressure for politicians to do SOMETHING is equally huge.

Peter Schiff says the odds of them doing the right thing are very small.

Our big-brained pals say it probably means 2008-like mega money printing and bailouts … except even BIGGER.

So what does all this mean to Main Street real estate investors?

Keep in mind that some of the biggest pension problems are states and local municipalities.  California and Illinois come to mind.

Unlike private corporations, public pensions don’t have a federal guarantee.

But even if they did, Uncle Sam’s Pension Benefit Guaranty Corporation (PBGC) is in trouble too.

According to this government report, the PGBC will be broke in 2026

“ … the risk of insolvency rises rapidly … over … 99 percent by 2026.” – Page 268

Sure, the Fed can simply print all the money needed to save the PGBC … and Social Security … and more … but at the risk of ruining faith in the dollar.

As we detailed in the Future of Money and Wealth, China’s been systematically moving into position to offer the world an alternative to the U.S. dollar.

Will they succeed?  No one knows, but it’s yet another story we’re paying close attention to.

Meanwhile, unlike Uncle Sam, states and municipalities can’t just monetize their debts away with a little help from the Fed.

Of course, we’ll bet if the stuff hits the fan, the Fed will “courageously” attempt to paper over it … just like they did with Fannie Mae and Freddie Mac in 2008.

But many observers contend the Fed’s recent inability to “normalize” either rates or their balance sheet means they might not have the horsepower.

In other words, it may take MORE than just the full faith and credit of the United States to persuade the world the dollar is still king.

Oil and gold might be more convincing.  Perhaps this explains some of Uncle Sam’s recent foreign policy moves?

Of course, that’s conjecture FAR above our pay grade.

But until the pension problem becomes a full-blown crisis and federal policy makers attempt to ride in on their white horses …

cash-strapped states and municipalities are on their own … and likely to do desperate things in their attempts to stay solvent.

Some will adopt policies designed to attract new business and tax revenue.

But we’re guessing most will push the burden onto consumers, businesses, and property owners.  That seems to be the way politicians roll.

So when you’re picking states and cities to make long-term investments in, pay attention to the fiscal health of the local governments.

And if your tenants are counting on private pension benefits, they may not be aware of 2014 legislation allowing a reduction of those “guaranteed” benefits.

If YOU have any direct interest in private pensions, you should read this page.

You’ll discover that plan participants can vote against a reduction. But even if most who vote reject it … if not enough people vote, it can pass anyway.

For retired carpenters in Southwest Ohio, benefits drop on April 1, 2019 … along with their ability to pay you rent.

The bad news is the pension problem is a slow-motion train wreck.  It’s rolling over small groups of people a little at a time … but it’s building momentum.

The good news is it’s slow-motion right now, so  there’s time to watch, learn, and react.

But Kiyosaki says it’s a big deal that’s probably going to get a lot bigger. 

From a real estate investor’s perspective, some markets will lose, and others will gain.

Choose carefully.

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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Main Street needs Main Street investors …

When the 2008 financial crisis hit, the mortgage industry was at the epicenter … and the disruption of funding feeding real estate crushed housing values.

But it’s important to remember, the problem was NOT real estate.

After all, people still needed and wanted places to live.  So the demand for housing remained stable.

It was credit markets that failed.  And in a credit-based economy, everything stops when credit markets seize up … including home loans.

Without a steady influx of fresh debt to fund demand, prices collapsed … taking trillions in equity with it.  And it wasn’t just real estate.  Stocks tanked too.

Mortgage and real estate is just where it started.

The double-whammy of teaser rate resets … and the resulting big monthly payment hikes which sunk a lot of homeowners …

… and then the negative equity led to a rash of defaults by even prime borrowers …

… all of which caused a credit market contagion that scorched financial markets world-wide.

Of course, this all created huge problems for Wall Street, the banks … and for Main Street.

So Uncle Sam and the Federal Reserve got heavily involved to “help” … and to no surprise … Wall Street and the banks came out on top.

The banks needed relief from realizing their losses on their financial statements, while finding a fast path to re-inflating values.

After all, property values are the collateral for all those mortgages.  And when values drop, borrowers walk … along with the prospects of loss-recovery.

So Wall Street rallied and raised many billions of dollars to buy up Main Street houses …

… even as millions of homeowners were being demoted to the rank of tenant.

So now instead of collecting mortgage payments, they collected rent.

As a real estate investor, you probably think that’s better.  Who wants to be a lender, when you can be an owner … enjoying tax breaks and building equity.

But Wall Street doesn’t think like you … and that’s our point.

Today, those Wall Street buyers are landlords.  And by some accounts, they’re not doing a very good job for the Main Street tenants.

Shocker.

Don’t get us wrong.  We’re all for investors stepping in to clean up a mess.

Investors are like the white corpuscles of the economy … bringing capital to damaged areas and healing blight and distress.

It’s one of the reasons we’re excited about Opportunity Zones.

We just hope Main Street investors and syndicators don’t get pushed aside again by the wolves of Wall Street.

The issue is there’s a BIG difference between the way Wall Street money and Main Street money behaves.  And it’s not about savvy … it’s about heart.

Big money guys (and gals, we suppose) have a way of looking at things.

Remember this classic 2012 quote from mega-multi-billionaire and legendary investor Warren Buffett …

“I’d buy up ‘a couple hundred thousand’ single-family homes if I could.” 

Of course, we all know money’s not the gating issue for Buffet.  He can buy anything he wants.  So what could his hesitancy be?

Maybe he agrees with Sam Zell, who’s been quoted as saying this in 2013 …

“An individual investor can buy 25 houses and monitor them. I don’t know how anybody can monitor thousands of houses.”

Really?  We know Main Street investors like Terry Kerr at MidSouth Homebuyers who successfully manage thousands of houses.

So it’s not impossible to manage a big portfolio well. You just need to be committed to doing it … one tenant at a time.

The folks we know who excel at single-family property management really care about their tenants as human beings … and deal with them as individuals.

They’re focused on creating cash-flow as the PRIMARY investment result … as opposed to simply a necessary evil to offset holding costs until a capital gain can be realized at sale.

Buffett and Zell are smart guys.  Buffett saw the opportunity in single-family homes … but had the good sense to know he wasn’t the right guy for the job.  Ditto for Zell.

Big money moves in broad strokes, which is fine when you’re dealing with commoditized assets and you can buy and sell in bulk.

But real estate … especially single-family homes … is not an asset class and can’t be effectively commoditized.  And neither can property management.

We think Main Street tenants are much better served by Main Street landlords … like YOU … so long as you remember the main thing is happy tenants.

Happy tenants means longer tenancy, less turnover and vacancy, and better real-world cash flows.

Of course, you don’t need to be a small-time investor to build a portfolio of single-family homes.

When you learn to syndicate, you can combine bulk money with individual property investing … and build a portfolio of hundreds or even thousands of homes.

Being big isn’t bad.  Wall Street’s problem isn’t its size.  It’s its mindset.

As the legendary Tom Hopkins says …

“Don’t use people and serve money.  Use money and serve people.” 

Because when you do, you’ll end up with both.

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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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.


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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.

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