8/12/12: In Search of Goldilocks – Bearing with Politics When Investing

Is government too big, too small or just right?  And what does this have to do with real estate investing?  Guests Steve Forbes and Tom Woods visit to help us consider the controversial subject of the “just right” role of government in the marketplace.

As real estate investors, we care about how rules, regulations and even political rhetoric affect our investing.

Property taxes, zoning, rent control, fair housing, truth-in-lending, eminent domain, environmental controls; Fannie, Freddie and FHA (lions and tigers and bears, oh my!)  affect landlords, tenants, markets, neighborhoods, jobs, loans, etc.

Wow.  That’s a lot to think about.  We just want to collect the rent and have a beer.

But, as we learned (the hard way) in late 2008, if you don’t keep your eyes open, a big macroeconomic wave can come wash away all your hard earned investments.  And because sometimes it’s hard to see the forest for the trees, we get some big brains to help us see the big picture.

Behind The Real Estate Guys™  white-gold plated microphones:

  • Your big huggy-bear of a host, Robert Helms
  • Your too small but furry co-host, Russell Gray
  • Our billionbear guest (back for his second appearance on the show), Steve Forbes
  • Our don’t-get-lost-in-his-last name beary special guest, Tom Woods

So…when you’re Editor-in-Chief of one of the best known business publications on earth, you have TEN digits in your net worth, and you’ve been a serious candidate for the presidency of the United States, we’re guessing you’re pretty well informed and connected.

Of course, all that doesn’t make you 100% right (whatever ‘right” is), but you’re certainly qualified to have an opinion.

So we ask Steve Forbes where he thinks the U.S. economy is, where it’s headed, and what he thinks needs to happen to make it better.

His answer?  Get government out of the way so capitalists can do what they do best: start and grow businesses.

Great!  More businesses mean more tenants for our office and retail properties, jobs for our residential renters, and overall prosperity for everyone.  Sounds wonderful.

Of course, there are lots of details to be worked out which we don’t have time to discuss… like WHERE those businesses are most likely to happen.

But’ it’s certainly a subject we’ll continue to monitor for… pretty much forever.

After all, when you distill real estate investing macro-economics down to its essence, it’s really about the cost and availability of capital to acquire properties (the financial markets) and finding tenants, both businesses and individuals, to provide the income. Capital and the cash flow on the capital.

So Steve Forbes says smaller government is a step in the right direction.  For now we’ll watch what actually happens and see if he’s right or wrong.

Next, we visit with a newcomer to The Real Estate Guys™ radio show,  Tom Woods.

Tom is a best-selling author, a senior fellow at an economic think tank, and he’s a prolific pundit having appeared on CNBC, MSNBC, FOX News Channel, FOX Business Network, C-SPAN, and Bloomberg Television, among other outlets, and has been a guest on hundreds of radio programs, including National Public Radio, the Dennis Miller Show, the Michael Reagan Show, the Dennis Prager Show, the G. Gordon Liddy Show, and the Michael Medved Show.  (And now The Real Estate Guys™ radio show!)

Tom is also a regular fill-in host on Peter Schiff’s radio show.  And since Peter is joining the faculty of our 2013 Investor Summit at Sea, we figured Tom was a guy we’d like to meet.

It turns out that Tom is working on a film called The Bubble.  Interesting!

Tom tells us the film is about a cast of characters who accurately predicted the mortgage meltdown which kicked off The Great Recession we’ve all been enjoying so much these last few years.

He says the reason these economic gurus knew the problem was coming wasn’t based on complicated or highly secret formulas, but rather basic economic principles anyone can learn.  Do tell.

The key, he says, was to pay more attention to what the politicians and bankers actually DID, then all the reassurances they SAID.  In other words, government and Fed actions were painting a picture – and it’s not always the same as the story they tell.

It’s indisputable that the mortgage meltdown and resulting recession had a PROFOUND impact on the fortunes of real estate investors in EVERY market.

So it seems to us that understanding why the meltdown occurred and more importantly what is likely to happen to going forward, should be of HUGE interest to every real estate investor.

Now, if you’ve been listening to the show for the last three years, you know the meltdown and its underlying causes has been one of our major themes.

We’ve sought out many experts on economics  -specifically of the Austrian school (like Tom) since most of the people we know of that were the most accurate in predicting the bubble subscribe to the Austrian philosophies.

Of course, a lot of these Austrian guys disagree strongly with most of the bankers and politicians running the show right now, and they aren’t afraid to say so.

To us, it’s kind of like watching a movie.  It’s really hard to find a movie that doesn’t have some violence, profanity and/or sexuality.  Some people are offended by it.  Some people really like it.  But if you want enjoy the story the movie tells, you’re likely to get some things that rub you’re the wrong way.

Like Steve Forbes, Tom Woods thinks the answer is less government and more free market.  We know people who are anarchists and think the government should be completely eliminated.  Then there’s the crowd who think government needs to own and control everything to make sure it’s all distributed amongst the people “fairly”.

So too big, too small or the ever elusive “just right”?

We think it will be a never ending tug-of-war between differing agendas.  And no matter what you or we think “just right” conceptually, in the real world (where all our money and investments are), it’s a constantly moving platform.

As a real estate investor, your mission (if you choose to accept it) is to look through all the noise and decide what you think is most likely to happen and why, then invest accordingly.

We may not like the rain.  But we watch the weather report anyway, then we dress accordingly.  And yes, we know the weatherman is wrong some (if not most of the time), but it’s better than not watching at all.

So take a listen to Steve Forbes and Tom Woods, then watch the political weather vane to decide how you want to dress your investing in the coming months and years.

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8/15/10: How Capitalism Will Save Us – An Interview with Steve Forbes

The Real Estate Guys™ sit down and talk with Steve Forbes about jobs, the economy and real estate.

We don’t know about you, but any time a billionaire, a CEO of a major company, a best selling author or a legit presidential candidate is willing to sit down and chat, our response is always, “Yes!”.   In this case, our special guest for this episode, Steve Forbes, is ALL of those things wrapped into one.  So we’re super jazzed to bring this exclusive interview to you.

In the broadcast booth at the Freedom Fest conference in Las Vegas:

  • Your Host and interviewer extraordinaire, Robert Helms
  • The just-happy-to-be-here Co-host, Russell Gray
  • Special guest, Forbes Magazine CEO, Steve Forbes

 

 
Mr. Forbes was the keynote speaker at the Freedom Fest conference and remained in attendance for the entire event.  In spite of a recent neck surgery, he was very accommodating and so Robert was able to sit down with Mr. Forbes for an impromptu interview.

Steve Forbes with Russ and Robert at Freedom Fest. Russ wrestled Steve into doing the interview, which broke Russ’ glasses and injured Steve’s neck. But the interview went well and we were all smiles afterwards.

We decided to ask him about his latest book, Why Capitalism Will Save Us – Why Free People and Free Markets are the Best Answer in Today’s Economy. Mr. Forbes’ thesis is that too much government is bad for business because it increases costs, diminishes productivity and takes too many resources away from creating jobs for an ever-growing population.  He calls for “sensible rules of the road” to provide a basic framework in which free people can conduct business.  Of course, the great debate is over what’s “sensible”.  His position is that less is more.

What we’re really interested in is jobs. Jobs are where our tenants get their rent money.  It’s where home buyers get the income stream to make the mortgage payments that prop up the property values that create passive equity.  Jobs are near the top of our due diligence check list when evaluating a market to invest in.  It’s one of the reasons we like Dallas right now.  Among U.S. markets, it’s doing pretty well.  Ironically, another great job market is Washington DC, but if there’s a changing of the guard over the next couple of elections, that could change.  But we digress…

So Mr. Forbes shares his thoughts on the economy, job creation and the role of government in real estate, specifically Fannie Mae and Freddie Mac.  In his position as the CEO and editor-in-chief of Forbes Magazine, he gets to talk with many of people who shape, interpret and respond to public policy.  We really enjoyed our time with him and hope you will too!

On a side note, Steve Forbes is the nicest billionaire we’ve ever interviewed.  Actually, he’s the only billionaire we’ve ever interviewed.  But he’s still a very nice guy.  So, if you’re a billionaire and want to come on the show and be nice to us, just give us a call.  Our door is always open. 🙂
 

 
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