08/02/15: Investing Inspiration and Enlightenment from Freedom Fest

Freedom is more than just an ideal.  It’s a powerful force which inspires super-human effort, creativity and sacrifice.

Freedom is what inspires many real estate investors to invest time and risk capital.  They want to be financially free.Freedom is one of mankind's most precious rights

In our 6th annual pilgrimage to Freedom Fest, we met several very interesting people…each of whom have a unique a real estate story to tell.

We’re quite sure their stories will inspire you!

Exercising their right to free speech in this enlightening episode:

  • The founding father of The Real Estate Guys™ radio show, host Robert Helms
  • His talent-free co-host, Russell Gray
  • Chinese immigrant to the U.S. and real estate investor, Lily Tang Williams
  • International farmland investor and entrepreneur, Craig Colley
  • Managing Director of the Competitiveness and Enterprise Cities Project, Shanker Singham
  • Venture capital and private equity entrepreneur, Erick Brimen
  • Real estate syndicator and long-time listener, Dr. Eric Tait

Freedom Fest bills itself as the world’s largest gathering of free minds.  After attending six years in a row, we’d have to agree.

And while we always enjoy landing interviews with big names like Steve Forbes, Grover Norquist and Donald Trump, sometimes the most interesting people we meet are far from household names.

The opening session at Freedom Fest featured a panel of people who were sharing their answer to the question:  Is the American Dream Still Alive?

One of the panelists was a fiery Chinese immigrant named Lily Tang Williams.

Lily got us so fired up, we decided we wanted to share her with you!

As you’ll hear, Lily is from mainland China.  And in spite of all the progress made in China, their people are far from free.

So Lily decided she wanted to leave China and come to America to pursue the American Dream.

Lily Tang Williams arrives in America from China in 1988She borrowed some money from relatives and landed in America.  She could barely speak English and had $100 of borrowed money in her pocket.

But she had a dream.

And as fate would have it, she picked up a copy of a little purple book called Rich Dad Poor Dad by Robert Kiyosaki.Rich Dad Poor Dad is a book about investing and business that has impacted the lives of millions of people around the world

Now Lily had more than a dream.  She had a plan.

She realized she could buy real estate using the lender’s money.

So she called up her friends in China and said, “Hey!  Let’s buy some U.S. real estate and become financially free!”

But her friends said no.

Undeterred, Lily and her husband did it anyway.

Today, they own several properties and Lily is a full time real estate investor.

No matter how many times we hear these stories (and we hear them a lot!)…we never get tired of them.  We can only imagine how Robert Kiyosaki feels.

Next on deck is Craig Colley.

Craig’s story is very different.

He ended up looking OUTSIDE the United States for opportunity and ended up in Nicaragua where he discovered the concept of investing in timber.

Craig found out that no matter what gyrations the financial markets are going through…booms, busts, panics, collapses, corruption or geo-political turmoil…

Trees just keep growing…about 6-8 percent per year.  Stop and think about that for a moment.  The asset is the tree and it grows…naturally….consistently…predictably.

Trees keep growing...pretty much no matter what's happening in the worldCombine this with a similarly predictable phenomenon…global population which just keeps growing too. And along with that growth comes a growing need for timber.  It’s the same thing we like about farmland in general.

When you’re investing for the long term, you can almost completely ignore all the daily drama of financial markets…and simply bank on trees and population to just keep growing.

When you consider the long term trend of currency devaluations around the world, investments in farmland which produce a durable, universally needed commodity like timber make sense as a long term, inflation hedged,  and relatively stable long term investment.

Eventually those trees get sold.  But you still have the land.  And guess what?  You can grow more trees!  That’s nothing to bark at.  Nice.  Sounds like a stupid pun we wood make.  We probably shouldn’t branch off into humor.  We better just leaf it alone.  We don’t want our audience to splinter.

Okay, on back to the broadcast…

Then we sat down with Shanker Singham and Erick Brimen.

Shanker is a big time braniac with a really cool English accent.  So not only is Shanker truly brilliant…but he SOUNDS super smart as well!

Shanker Sigham is the Managing Director of the Competitiveness and Enterprise Cities ProjectWe’d read off his resume, but we’d get carpal tunnel.

The main thing to know is that Shanker heads up something called the Competitiveness and Enterprise Cities Project though Babson College.

Babson College is one of the most prolific and respected entrepreneur schools in the world.

The Competitiveness and Enterprise Cities Project is all about coaching countries on how to attract people, business and capital by creating a welcoming environment called an Enterprise City.

It’s like an enterprise zone on steroids.

Think of the U.S. way back in the early days…a place with a stable set of laws which protected the freedom of enterprise and its fruits…rather than hindering it with obstacles and burdens.

Of course, it takes money to get things going.  And that’s where Erick Brimen comes in.

Erick raises capital from private investors to acquire the land.  And he does it when he knows the city is about to be approved by the government.  Very clever.

This is clearly inside information, but guess what?  As we always say…inside information is perfectly legal in real estate.  We love it.

Naturally, when the enterprise zoning is announced and business and capital start to arrive, the land appreciates substantially…and not based on inflation…but because of an actual increase in demand.

Awesome.

But what’s even better is the social aspect of this type of investing.

You can imagine the impact on the region in terms of creating opportunities for the local people.

It’s like when Walt Disney surreptitiously aggregated land in central Florida…and then built Disney World.Disney World changed the economy of Orlando Florida

Sure, he made millions.  He deserved to because he created massive value for the world.

But that “enterprise city” called Disney World created many thousands of jobs and all kinds of local businesses sprouted up around it.

The point is it’s not only possible…but preferable…to do well by doing good.

So when the entire Freedom Fest experience was over, we sat down with our good friend, long-time listener and alumni of our Secrets of Successful Syndication seminar…Dr. Eric Tait…and asked him to share his reflections in his very first Freedom Fest.

In short, Dr. Tait found…as we have over the years…that Freedom Fest is a great place to go to find a smorgasbord of people and ideas.  And while you might not agree with everything everyone says, your thinking and imagination are stimulated.

So listen in to this episode and allow yourself to be both inspired and enlightened!

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9/28/14: Your International Economic Plan

The world’s economy is growing ever more global. Is yours?

Governments, corporations and wealthy investors have been investing globally for decades.  Even Mom & Pop paper asset investors practice international diversification through foreign stocks, bonds and currencies.

But real estate investors tend to be very geographically focused.  Many only invest in the particular area they happen to live in.  Maybe it just seems too daunting or troublesome to invest the time and money to figure out how to invest out of area, much less out of country.

However, there’s a reason why most non-real estate investors have a global strategy.  So doesn’t it stand to reason real estate investors should think about it too?

To find out, we sit down and visit with two international experts.

On location at Planet Hollywood in Las Vegas, Nevada:

  • Your international host, Robert Helms
  • His homely co-host, Russell Gray
  • The original international man and renowned global investor, Doug Casey
  • A purveyor of international properties that come with an amazing bonus, Jon Green

One of the first rules of investing is diversification.  After all, no one can predict the future.  And there are so many wild cards, how can you know how any investment will really come out?

You can’t.  So the wise thing to do is organize your investments in such a way that if one or more components of your portfolio fail, it doesn’t completely wipe you out.

And according to many of the pundits we’ve spoken to, for Americans especially, going global is more important than ever before.

They point out that for many decades, Americans have enjoyed a unique position in the world, but things are changing.

Specifically, since 1944, the United States has enjoyed having the dollar holding the envious position as reserve currency of the world.

After World War II, the U.S. had the biggest gold hoard, the strongest economy, the biggest army and the most stable government.

Most of all, the U.S. dollar was backed by real gold.  And because you could exchange $35 of your dollars for an ounce of gold, the dollara was literally “as good as gold”.

After 1971 that changed, but the U.S. still had the world’s strongest economy, the largest storehouse of gold, and a strong balance sheet.

Today, it seems apparent that China could very easily pass up the U.S. as the world’s biggest economy.  Uncle Sam is also no longer the biggest creditor, but instead is the world’s largest debtor, owing nearly $20 trillion…not counting unfunded liabilities which could run the total well over $100 trillion.

To top it all off, there are several fairly credible industry watchers who suspect that most of the U.S. gold supply is effectively gone.  That is, it may physically be in the warehouse (though no one knows for sure, since they won’t show it to anyone), there may be multiple claims on all of it.

So who knows what will happen?

No one.  Which is why it’s important to diversify.

The point is that based on the substantial changes in the global financial landscape, there are different risks…and OPPORTUNITIES…that didn’t exist before (at least not on the same scale as today).

So it’s no wonder that corporations and wealthy individuals have established a presence in multiple jurisdictions.  And it isn’t just for tax benefits, privacy, asset protection and escape from burdensome regulations.

There are also great opportunities which present themselves when people, money and industry move around.

Doug Casey tells us about several real estate purchases he made going back to the 70’s.  As you’ll hear, Doug did quite well.  And it was simply a matter of recognizing economic and demographic shifts and getting in front of it.

Those changes are continuing.  In fact, it could be argued they’re accelerating.  Certainly, the ability for every day investors to discover these opportunities is greater today than ever before simply because of the speed at which information flows.

Also, some Americans are looking to invest off-shore not just for the return on investment.  They’re looking for a different kind of diversification.  Specifically, they want to have citizenship, a passport and a home in another country.

Some may think that’s radical.  Others might think it’s cool.  But for the people who do it, it’s a strategic move to give themselves a plan B….a way to move around the world, own assets or establish a life outside the United States.

Why would anyone want to do that?

Because no one knows what will happen.  And when you’ve built up enough wealth, you grow concerned about how to protect it from failing currencies and financial systems, or confiscatory taxation, or asset seizure by overly indebted governments.

If you don’t have enough wealth yet to worry about this, then we hope you’re on your way.  To help you know what to do when you get there, listen in to our conversation with international man, Doug Casey and economic citizenship concierge Jon Green.

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8/17/14: Property Rights – The Foundation of Prosperity

The ability to own private property is the foundation for building wealth with real estate…or anything else for that matter.

But what is “ownership” without control?  And what happens when society’s needs and desires slam up against individual rights?

Conflict.

Sometimes it’s just heated debate and angry rhetoric.  Often, it ends up in litigation with issues being decided in the courts.

In this episode, we visit with two lawyers…each of whom are involved in defending individual property owners’ rights against incursions by governmental agencies.

In the studio courtroom and on location exercising our first amendment rights:

  • Your prosperous host and landlord of the microphone, Robert Helms
  • Tenant of the co-host seat, Russell Gray
  • Attorney, filmmaker, activist and farmer, Karen Bulich Moreau
  • Attorney with Pacific Legal Foundation, Anastasia Boden

When rank and file real estate investors think about property rights, it’s usually in terms of zoning, building codes and rent control.

But there are a whole host of other rights that are often part of property ownership including air, water and mineral rights…and more besides!

Government can and does restrict the unfettered use of private property...and in some cases will seize or force the sale of private propertyDuring the mortgage crisis and even today, we hear stories about the government essentially forcing a property owner to turn over their private property to the government for “fair compensation”…even if the property owner doesn’t want to sell.  And who decides what’s “fair”?

More importantly, how the government just step in and force a private citizen to sell (or buy…but that’s a different debate) something against their will?

The government invokes a power called eminent domain.  The premise is that the private property owner’s rights subordinate to the “greater good” in the sole judgment of the government.  That may not be the technical legal definition, but for all practical purposes, that’s the way it works.

The potential for abuse is obvious and to no great surprise uncomfortably common.

Similarly, government agencies from city to federal, can (and do) restrict the ability of property owners to use, develop or harvest resources from their own private property.Government restrictions on use can lock up the economic value of a property

So while the government doesn’t necessarily take title to the property, the restrictions imposed can dramatically affect the value of the property or the economic benefit derived therefrom.

In this episode we visit with two attorneys.  Each is actively involved in litigation defending individual owners from value eroding restrictions on the use of their privately owned property.

Karen Moreau is at the heart of an energetic debate surrounding the rights of private property owners in New York state from harvesting rich natural gas deposits located under their property.

The state says the property owners can’t lease the mining rights to energy companies because of environmental concerns.  Some say it’s more about nearby property owners simply wanting to preserve the serenity of their vacation homes.

It’s a controversial topic.

It seems logical in a civilized society that an individual property owner should have some degree of responsibility and accountability to fellow citizens.

After all, should a property owner really have the unfettered right to set up a nuclear waste dump or run a skunk farm in the middle of a suburb?

On the other hand, it’s easy for non-owners who are insulated from the financial consequences to impose their will on a property owner simply through majority vote.

For example, what if the residents of a tract of homes adjacent to your undeveloped acreage decide they like to look at the open space your property provides?  They each have one vote and so do you.

Can they decide you don’t have the right to enrich yourself by building more houses on your land?  Or should you have an inalienable right to do with your own property what you wish?Mining can impact the aesthetics of a property

As you can see, it’s not cut and dried.  And because of that, it’s a hot topic of debate from local planning commission meetings to the halls of Congress in Washington DC.

We’re not here to venture an opinion about the way it should be.

Instead, we want to raise awareness among real estate investors that the politics of property rights can affect your economic benefit of ownership.

And the problems caused by these conflicts can also create some very interesting investment opportunities.

So listen in to the insights of these lawyers and expand your ability to recognize the risks and opportunities hidden in the property rights debate.

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7/28/13: From the Floor at Freedom Fest – Coffee, Coins and Capital Controls

The real estate we love to invest in floats in an economic sea teeming with other financial and political life forms.  And each of these denizens of the dollar (after all, the greenback is the world’s reserve currency…at least for now), have an impact on the overall financial ecology.  There are symbiotic relationships, predators and prey, natural and man-made disaster (can you say “derivatives”?), and a host of other factors which affect where we find opportunities and how we manage them.

That’s why we like to attend Freedom Fest each year.  It’s like an ancient watering hole (to switch metaphors) where all kinds of different creatures gather to refresh themselves.

This year was no different.  We arrived with our microphones, set up shop, and started talking to a variety of extremely interesting people.

In the past, we would go for the “big game” and proudly bring back to our tribe (that’s you) interviews with folks like Steve Forbes, Herman Cain and Peter Schiff.  We still like all those guys (Peter’s returning as a faculty member for our 2014 Investor Summit at Sea™), but since Forbes, Cain and Schiff are all on TV and radio all the time, we want to bring some thoughts from people you might not otherwise every hear from.

So, behind the microphones, wearing our real estate wetsuits and diving into the deep sea of discussion at Freedom Fest:

  • Your intrepid hunter of interesting ideas, Robert Helms
  • His gatherer of great guests, Russell Gray
  • International agricultural real estate investing expert, Wayne Kurtz
  • Coffee farmland investing executive, David Sewell
  • Rare coin and precious metals dealer, Van Simmons
  • Economic collapse prepper, Max Wright
  • Freedom Fest founder, economist and author, Mark Skousen

As you can see, we have a pretty full dance card for this episode.  Freedom Fest really is a smorgasbord of ideas. And the first one that whet our appetite is the notion of offshore agricultural investing.

Our first guest is Wayne Kurtz, who is the Chief Commercial Office for Liquid Investments.  We first met the Liquid Investments gang at last year’s New Orleans Investment Conference.  Back then, we were intrigued by their whole program, so we were excited to see them at Freedom Fest and grabbed Wayne for a quick chat.

Liquid Investments offers investors the opportunity for cash flow and long term equity growth through coconut farmland in Brazil.  Really.

But if you think about it, it makes sense.  After all, many Americans and Brits are looking to get their money off-shore.  And while the U.S. is chasing down foreign bank accounts, it’s still relatively private to own real estate offshore.  Even better, it’s nearly impossible to confiscate.  But even if you’re not paranoid about an over-reaching government, the investment still has attractive merits.

Coconuts, like oil, corn, copper and coffee, are a commodity.  And coconuts are surprisingly useful and growing in demand.  So like an oil well, you can turn a coconut farm into a cash flowing machine.  Of course, it all happens on real estate, which is a tangible asset and can be a great hedge against inflation.  Unless you’ve been asleep, you’ve probably noticed that every major country is printing money at a record pace, so a hedge against inflation is probably a good idea.

So we get the quick overview, and invited Liquid Investments to come back on the show to go into more detail. Stay tuned!

Keeping with our theme of agricultural real estate, next on deck is David Sewell.  David is the VP of Investments for Terra Cafetera in Colombia.  Once again, we’re offshore (unless you happen to be from Colombia), and we’re talking farmland.  Except this time, the crop is coffee.  We probably don’t have to tell you how popular coffee is.  Or how unlikely it is that people will ever stop drinking it.  Or that Colombia is renowned for producing some of the best coffee on earth.

So David gives us an overview of what he and his company are doing.  Good stuff…kept us awake. 😉

Next we switch from coffee to coins as we welcome Van Simmons to the microphone.  Van is a numismatic coin dealer.  Mark Skousen says when it comes to this topic, Van is the Man.  That’s good enough for us, so we pried him away from his impressive display of collectible coins and sat down to talk.

What do coins and precious metals have to do with real estate investing?

Directly?  Nothing.  But as we noted at the top of this post, all these various financial vehicles either affect each other or are indicators of potential market changes.  Besides, “real estate” is really just a preface to the core function of being an investor.  So we’re always interested in all kinds of investments.  Yes, it’s true.  We’re investors first, and real estate guys second (don’t tell our producer).

It used to be that the U.S. dollar was “as good as gold”.  In fact, before August 1971, Federal Reserve Notes (those green pieces of paper with pictures of dead presidents) were redeemable in gold.  But after the U.S. went on a giant spending binge in the ’60s, Uncle Sam started hemorrhaging gold, so President Nixon slammed the door to Fort Knox.  It’s took awhile, but after an orgy of money printing at the turn of this century, investors began stocking up on gold as way to hedge against a falling dollar.  You probably know gold was THE investment of the 00’s.

But lately, gold (and silver) have fallen on hard times.  Does that mean the dollar is back?  Maybe.  If it is, then interest rates will likely rise. Now THAT matters to real estate investors.  So while we watch bonds to see how the market feels about the dollar, gold helps us understand how the market feels about currencies (of which the dollar is only one).

(If your head is already spinning, just take a deep breath and make plans to join us on the 2014 Investor Summit at Sea™, where we’ll be talking Schiff with our friend Peter…you’ll catch on fast).

Of course, numismatic coins and bullion are two different animals.  Going into the interview, we weren’t necessarily fans of collectible coins.  It seems like when times get tough, premiums for rare coins would fall, right?

But then when you muse on it a little longer, you realize that (to quote our friend Robert Kiyosaki), “the poor are getting poorer, the middle class is getting wiped out, and the rich are getting richer.”  That’s the impact of inflation.  While consumers’ purchasing power is being eroded by incessantly rising prices (albeit slowly right now, thanks to a very weak labor market), anyone with means is buying investments which hedge or even benefit from inflation.  The uber-rich are playing arbitrage (borrowing cheap and investing for a profit) and buying tangible assets.  And while commodities markets are very volatile (some say manipulated), collectibles are more stable.

Interesting stuff.  As soon as we’re super rich, we’re buying rare coins and fine art.  But in the meantime, it still might be fun to put a coin or two in the portfolio to see what happens.

Our next guest is even MORE interesting…

Max Wright represents an organization called the Success Council.  The short story is they belief the greatest wealth transfer in history in underway right now, and they want to help people be on the right side of it.  Of course, they aren’t the only ones who think this is happening.  But sounding the alarm is one thing, guiding people to safety is another.

Our visit was far too short to draw any conclusions about their theories and practices, but there’s enough credible people proclaiming the same thing that we’re always interested in getting another perspective.  Long time listeners of The Real Estate Guys™ radio show know that since the mortgage meltdown, we’ve sought out a litany of opinions on the topic.  And as the markets continue to gyrate and convulse, you can be sure we’ll continue to bring you a diverse range of viewpoints.

Because when the foundations of the economy are fundamentally changing, it’s important for diligent investors to test their paradigms and make sure they aren’t snoozing when a big economic shift happens.

Last, but not least, we visit with Freedom Fest’s founder and a 2013 Summiteer, Mark Skousen.  He shares with us that this year’s 7th annual Freedom Fest is their best ever -with record attendance and national television exposure.  So while not everyone agrees on policies or priorities, everyone wants to be enjoy more freedom and prosperity – and that’s what Freedom Fest is all about.

So tune in to this edition of The Real Estate Guys™ radio show recorded at Freedom Fest 2013.  Enjoy!

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9/9/12: Rhetoric and Reality – A Look at the History of Economic Policy

As the U.S. presidential elections rapidly approach, there’s a lot of talk about economics and economic policy.  You probably noticed.

At their convention, the Democrats invoked the spirit (and oration) of ex-President Bill Clinton.  The GOP conjures up wistful visions of Reagonomics.  Dire predictions of fiscal cliffs, debt-ceilings, defaults, hyper-inflation, depression, civil unrest and other calamities pepper the debate.

It seems that EVERYONE has an opinion about what the future holds.  But what does history say?

To find out, we sit down with another big brain (one you’ve probably never heard of) in sunny Las Vegas, Nevada.

Tossing their own rhetoric into the radio ring for this episode of The Real Estate Guys™ Radio Show:

  • Your who-would-you-rather-have (rhetorically speaking) host, Robert Helms
  • Your his-mom-wanted-him-to-be-a-reality-TV-star (not really) co-host, Russell Gray
  • Special guest, Associate Professor of History and Economics at San Jose State University, Dr. Jeffrey Hummel

In our likely never to be written book, “It’s Not Obama’s Fault”, we’d put forth the idea that Mr. Obama, like every President before him, are victims or beneficiaries of “the economic cycle”, or what Jeffrey Hummel calls “the business cycle”.

Now we’re not picking sides here (life is too short for that). And if you’re into blaming Presidents for economic conditions, then Bush and Obama are both well deserving.  And if Romney wins, we’re sure he’ll have his turn in the barrel too.

But rather than try to find consensus on theories and concepts, Jeff persuades us that it’s useful to take a look at the history of the business cycle.  Everyone might disagree about what might happen if this or if that.  But since history has already happened, there’s less to argue about – and more to learn.

So why should real estate investors care?  Yes, you guessed it, it’s a somewhat rhetorical question. 😉

Obviously (we hope), the ups and downs (cycles) of the economy affect jobs, incomes, interest rates, asset values and the confidence of consumers, builders, lenders, employers, buyers and tenants.   And ALL of those things affect real estate and therefore provide important context to our investing decisions.

For example, some pundits have expressed grave concerns about the possibility of debt-burdened states defaulting.  But did you know that way back in 1840 there were four states that repudiated their debt and four more that defaulted?  Like today, they turned to Uncle Sam for help, but then-President Martin van Buren blocked the bailouts.  OMG!  What’s going to happen?

Oh, wait.  It already happened.  So we don’t have to guess.  We can look at history and find out.  But if you don’t know, then you’ll have to listen to this episode and hear what Professor Hummel tells us.

What we like about looking at history is that it helps us calm down.  When we are so focused on the now, we sometimes forget that markets have been cycling for a lot longer than we’ve been around.  We’re guessing they’ll still be cycling long after we’ve gone.

So even though there are many very real things to be concerned about, sometimes talking a giant step back and a few deep breaths can give us enough perspective to press forward when everyone else is running scared.

When we look at today’s real estate market, we keep coming back to the same thing.  Properties are selling below replacement costs, interest rates are at historic lows, there’s a growing renter population and still not enough new product coming on the market to meet the population growth.  Put all that in a blender and it looks pretty good for investors.

Add to this the notion that even though this down cycle has lasted longer than most, history teaches us that sooner or later the cycle will take the economy back up – and when it does, those investors who are actively acquiring bargains today, while properties are on sale, are going to come out the big winners…no matter who wins in November.

So listen in to our extremely interesting interview with Professor Jeffrey Hummel – and consider what your personal history will look like 20 years from now, depending on what you choose to do (or not do) today.

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7/22/12: A Midsummer Investor’s Dream – Housing, Jobs, Consumer Confidence and Economics

Bad news for housing can be great news for investors.  But it means seeing a bigger picture and exploring the dichotomy of mainstream news and main street reality.  Alas, we thinketh such contemplations requireth aid.  But fear not!

Behind the microphones to help you sorteth it all out:

  • The Bard of broadcasting , host Robert Helms
  • Your Puck of pontifications,  co-host, Russell Gray
  • The Godfather of Real Estate, Bob Helms
  • Special Guests, former Chief Economist for the New York Stock Exchange and current Economics Editor for Barron’s Magazine, Gene Epstein
  • Special Guest, Director of  Economic Research for the Reason Foundation, Anthony Randazzo

We shall abandoneth the allusions of 16th century English soest thou may understandeth better that of which we are attempting to speaketh…

Long time listeners know that for each of the last three summers, we’ve headed to Las Vegas to attend Freedom Fest.  We always pack our mobile microphones grab interviews with some of the very interesting people we meet.  This year is no exception.

In this episode, we start out the conversation talking with Gene Epstein.  Gene is the former chief economist for the New York Stock Exchange and is currently the economics editor for Barron’s magazine.

Now, like most folks on Wall Street, Gene is a paper asset guy – stocks, bonds, mutual funds, REITS, etc.  And when Wall Street guys talk real estate, they don’t mean rental properties owned by individual investors.  That idea doesn’t compute for them.  But that doesn’t mean we can’t learn from them.  We just need to remember where they’re coming from.

What’s great about talking to guys like Gene is that it helps us see the bigger economic picture so we can put our mom and pop real estate investing into a broader context.  We’ve said it before and we’ll say it again:  what happens on Wall Street affects Main Street.  So main street real estate investors should be paying attention to macro-economic trends just like any other type of investor.  We do these interviews to help you do just that.

Gene starts the show off on a high note (not really), pointing out the US still has doggedly high unemployment and anemic GDP growth that is just “crawling along” at about 2% a year. Since GDP is measured in dollars and the Fed has been pushing the dollar down, you could probably argue that the economy is not growing at all.

Side note: We think GDP should be measure in terms of actual products produced.  After all, if you’re cranking out 1 million widgets a year at $10 each, your productivity is 1 million widgets.  Measured in dollars, it’s $10 million a year.  But what happens when inflation (a falling dollar) causes the same widget to sell for $12.00 each?  Now, measured in dollars, you’re productivity is $12 million a year.  Wow!  Your GPD “grew” 20%!  But did you really grow?

No.  You’re still only cranking out 1 million widgets a year.  So real productivity is flat. This means you don’t need any more space or people (get the real estate connection?).  The point is that the way we report GDP can be very deceptive and it’s easy to think an economy is growing, when it really isn’t.

Back to Gene…

He says the US economy is “not in a good place”.  But (and it’s a nice one), he doesn’t see a fiscal cliff or some similar financial apocalypse looming.   Whew.  We’ll cancel our advance tickets for the flight to Mars.

Gene says that we’re not seeing serious price inflation even though we should because “the Fed is printing money like there’s no tomorrow”.  Why don’t we see price inflation (yet)?  Because the labor market is weak and oil prices have dropped.

Hmmm….what does that really mean?

If the money supply is expanding (which is what happens when the Fed “prints”, a.k.a. quantitative easing), then absent an increase in productivity (making more stuff) prices should rise, right?  More dollars chasing the same goods equals rising prices…UNLESS some other component of cost goes down to offset the inflation (say…labor and energy).

Here’s the dirty little secret:  another way to increase productivity is to reduce labor costs.  That is, companies can be more productive by making more stuff with the same people, OR they can be more productive by making the SAME amount of stuff with LESS people (or at least less expensive people).

Of course, businesses would like to sell more, but the market decides that.  And if the market’s weak (it is right now), then businesses have to look for things they have more control over – like labor costs.

But what does that have to do with main street real estate investing?

Well, if business are going to continue to be squeezed by inflation, they might be forced to lay people off and/or move to cheaper locations inside or outside the United States.  If you’re a real estate investor, it’s bad when your tenants get laid off, can’t find a job, or the companies that employ your tenants (or rent your commercial building) decide to move away.  So yes, real estate investors should care a lot about these macro factors which are affecting businesses.

But an astute investor knows there’s a bright side.  After all, one town’s loss is another town’s gain.  That is, those companies and their jobs are going somewhere.   Your mission, if you choose to accept it, is to figure out where they’re going and to go there.

The first day of the due diligence seminar we just wrapped up was about  understanding the economic, geographic and demographic factors that affect the movement of people and money in and out of markets.  It’s something we talk about quite a bit during our real estate market field trips.

Meanwhile, Gene echoed something that 2013 Summit at Sea™ faculty member Peter Schiff has been telling us:  One of the unpleasant medicines necessary to heal the ailing economy is higher interest rates.

Actually, Gene didn’t say that directly.  But he meant it.  Because what he did say is that the U.S. needs to implement similar policies to those used in the early 80’s.  Since we’re old enough to remember the early 80’s, we know that interest rates were high.

It sounds counter-intuitive. After all, lower interest rates makes it easier to borrow.  Isn’t that good?  Maybe.

But lower interest rates punishes savers, especially when you combine it with a falling dollar (inflation).  After all, who want to save when the dollars are going down in value and the paltry interest earned isn’t even keeping up with inflation.  This is why Robert Kiyosaki says savers are losers.

But (obviously), if interest rates were to go up, it would create a host of ramifications too big to describe here. For anyone managing  big portfolio of debt (which describes most active real estate investors), then Fed policy is something to be watched VERY closely.  You can bet the lenders are paying attention.

As if all this wasn’t enough, when we’re done chatting with Gene Epstein, we get Anthony Randazzo on the microphone in this his second appearance on The Real Estate Guys™ radio show.

Anthony is the director of economic research for Reason foundation and he specializes in housing finance and macroeconomic policy.  Hey!  We were just talking about that.  Good timing.

Anthony is pretty analytical.  He spends his time researching statistics, analyzing data, drawing conclusions and making policy recommendations.  Then when we talk to him, he gives us the Cliff Notes version. It’s like being buddies with the smartest kids in the class.

Anthony points out that housing is (and almost always has been) flat when adjusted for inflation.  That means that houses, like other “hard assets” generally retain their relative value over the long term as the dollar loses its value.

Think about that one.

Today, it takes more dollars to buy a house and car than it did 30 years ago.  But it doesn’t take more house to buy the same amount of cars.

Huh?

Let’s say you could buy 10 brand new cars for the price of one new house.  In 1970, that might be ten $4,000 cars to buy one $40,000 house.

But in 2010, it might be ten $40,000 cars to buy one $400,000 house.  Or vice versa.

The point is that relative to each other, the cars and houses retained their value.  It didn’t take more cars to buy a house.  The ratio stayed the same.  But it took a WHOLE lot more dollars to buy the car or the house.  Why?  The value of the dollar dropped.

Now, back to real estate.

Obviously, real wealth is built accumulating things of real value.  Even better when that thing of real value generates monthly cash flow. And even better, when there are tax breaks.  And even more better (we know, that’s terrible grammar), when you can buy it using borrowed money. And even extra more better (yes, it’s getting bad), when interest rates and purchase prices are low and income (rents) are up.

Yes, that time is now.

So, our two guests both agree that housing will be “bad” for the next few years.  We hope they’re right.  That means the sale will continue and bargain shoppers will be stocking up.

Now you know why we like to talk to all these economist types.  They cheer us up!

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5/27/12: Economics, Politics and Freedom – Making Financial Decisions in an Election Year

What do The Federal Reserve, the IRS, the income tax, Fannie Mae, Freddie Mac, FHA, HUD, the mortgage interest deduction, Section 8, accelerated depreciation, the 1031 tax deferred exchange and our personal “favorite”, inflation, ALL have in common?

Each of them are creatures of politicians.  Of course, we could add to this list (for days), but you get the idea.

It’s impossible to pay attention to your investments without paying attention to politics.  Some think that politicians drive economics, but we tend to think that economics drive politicians. But at the end of the day, does it matter?  The bottom line that the two are linked – like the chicken and the egg.

So with the U.S. headed into one of the more interesting political seasons in recent history, you can bet the rhetoric will hit high gear and a lot of it will be focused on “the economy, stupid”.

As real estate investors, we care a lot about the supply and cost of capital, job creation and tax rates.  Like it or not, politicians like to “manage” these things.  And while we can’t control what politicians do, we sure want to anticipate it – especially if big changes are being proposed.  End the Fed?  Return to a gold standard?  Raise taxes on capital gains?  Tax the “rich”? Eliminate the mortgage deduction?  Lions, tigers and bears – or just a lot of bull?

What’s an investor to do?

We think a good start is to pay attention to people who are paying attention and are qualified to have an opinion.  To help you, we packed up our portable studio and headed to the Las Vegas Money Show where we hit an interview jackpot!

In the silver state, behind The Real Estate Guys™ silver microphones for yet another spin of the radio roulette wheel:

  • Your dynamic dealer of dialog and host, Robert Helms
  • Your crapped out co-host, Russell Gray
  • Special guest, author, lecturer, Ph.D and really nice guy, Dr. Mark Skousen

This is Dr. Skousen’s third appearance on the show, but the first time face to face.  Our experience is that getting together face to face is WAY better than phone, internet, Skype, texting or running string between cans.  Before we ever get on the microphones with Mark, we enjoy a nice conversation, talked through the show, and then discussed some things we’d like to work together on after the interview is over.  More on that later…

So lesson #1:  Get out and meet people face to face.  Yes, it’s more expensive and time-consuming.  But the results make it one of the best investments you can make.

But back to this episode…

In addition to having a big education, as the founder and promoter of Freedom Fest (one of our personal favorite conventions of the year), Mark is probably one of the most connected people we know. He knows politicians, businesspeople, money managers, academics and media pundits.  That means he has perspectives that are bigger and broader than the average person.  So we’re always anxious to hear what he has to say.  Fortunately, as you’ll hear, he’s not afraid to share his opinions.

So right out of the gate, Mark tells us that he’s concerned about the path the U.S. is on. No shock there.  A lot of people feel the same, though there are certainly a big group who believe we just need to give the current direction more time.  So Mark isn’t sure what the voters will decide.  Only time will tell.

Nonetheless, we’re interested in knowing what the think is happening and how it compares to what he thinks should be happening.  And we’re specifically interested in jobs.  It isn’t that we aren’t interested in same-sex marriage, abortion, birth-control, or even whether 9/11 was an inside job or if President Obama really was born in Kenya.  Those are all interesting topics.  But when a prospective tenant fills out a rental application, we don’t ask them those things.  We just want to know if they have a job.

So Mark says Uncle Sam has been making it harder for the American businessperson to create jobs and get the economy moving again.  And he thinks America needs new leadership. More importantly, he tells which policies help and hurt.  After all, Mark says, economics is political and vice-versa.

So what policies are most likely to stimulate economic growth?  Well, no one can predict the future, but Mark is a free market guy who thinks that more regulation hinders growth.  With Dodd-Frank looming, healthcare reform rolling out, and the Fed being active with stimulus, there’s a lot of tinkering going on.  He’s not a fan because when a business is directing time and money into government and compliance, they aren’t competing for customers and improving productivity.

Then we ask him what he thinks about real estate right now.  You’ll have to listen to get the full answer, but he sees real estate as one of the better places to be right now.  We humbly agree. 😉

Of course, we couldn’t let him go without talking about Freedom Fest. We were already excited about it, but hearing him got us even more enthused.  So, off mic, we told him about our recent Investor Summit at Sea™ with Robert Kiyosaki and G. Edward Griffin, which got him excited.  Before long, we agreed to talk to Mr. Kiyosaki and Mr. Griffin – and next thing you know, both of them are now speakers at Freedom Fest!

We told you.  Good things happen when you get out and get face to face with people – especially, the right people.  So make your plans to come join us at the next Freedom Fest.  Who know?  You just might get lucky.  Meanwhile, enjoy this episode of The Real Estate Guys™ radio show!

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8/14/11: August and the Economy Part 2 – Perspectives from Two Men Who Would Be President

So it’s not every day you get to sit down with a bona fide presidential candidate face to face and ask whatever you want.  In our case, we got to do it TWICE in one day!  Very fun.

Now whatever you political bent, the issue isn’t what YOU think SHOULD happen.  What we’re interested in is what the people who will be shaping the debate, if not actually running the show in 2013, are thinking.

Our two guests happen to be Republican candidates, so if you’re on the other side of the fence, just hold your nose and listen anyway.  The more info you have, the better you’ll be able to invest.  Again, you don’t have to agree, you just need to understand the possibilities.  And if you know a Democratic candidate who wants to be on the show, let us know!  All viewpoints are welcome. 🙂

Behind the illustrious silver microphones in our spacious, upscale mobile studio (including folding chairs and table):

  • Your presidential host, Robert Helms
  • Your vice-presidential co-host, Russell Gray
  • Special Guest, Director of Economic Research for the Reason Foundation, Anthony Randazzo
  • Special Guest, Two Term Governor of New Mexico and current Presidential Candidate, Gary Johnson
  • Special Guest, Businessman and Presidential Candidate, Herman Cain

When you’re an elected official, you have a bazillion thinks to think about.  And you need a lot of help thinking.  It’s kind of like being a busy real estate investor.  You need to have a team of people who stay on top of changes in landlord law, taxes, mortgage guidelines, credit scoring, asset protection and estate planning – just to name a few!

So we kick off this show talking to Anthony Randazzo, a big brain whose job it is to study, think and advise on economic matters.  One of the things Anthony studies are GSEs (Government Sponsored Enterprises, like Fannie Mae and Freddie Mac).

If you’ve been paying attention, you know that Fannie and Freddie play a major role in U.S. housing (and the bond markets), were very much at the center of the mortgage meltdown, and have lots of people in Washington who’d like to see them go away. Kind of like how Ron Paul wants the Fed to go away.  It may never happen, but if it did it would change a lot things we take for granted as real estate investors.  So, it’s important to pay attention to what the big brains and the politicians (not that the two are mutually exclusive :-)) have to say.

Then we talked to Gary Johnson and Herman Cain.  We won’t paraphrase those conversations here, but you can be sure we asked about jobs and real estate.  And of course, we asked what they thought needed to happen to create more jobs. And unlike many shows, we let them talk.  We found it very interesting and we think you will too!

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5/29/11: Freedom and Prosperity – Celebrating Memorial Day

Happy Memorial Day! We decided this was the perfect day to reflect upon two of fundamental rights which make up the essence of freedom:  the right to own property, and the right to free speech.

After all, Memorial Day is about remembering the sacrifices made by the brave men and women throughout U.S. history who’ve made the ultimate sacrifice defending the U.S. Constitution – and the rights the Constitution protects.  And even though our audience has grown worldwide, most people around the world recognize and appreciate the role the U.S. has had in promoting freedom, directly and indirectly.  Yes, the U.S. has its detractors – and certainly it isn’t perfect, but when it comes to property rights and freedom of speech, the U.S. has played a huge role.

So for this episode, we invited back a man who is the producer of a large convention where people gather to study, discuss and debate issues pertaining to individual freedom.

Featuring freedom lovers:

  • Host and free speaker, Robert Helms
  • Indentured co-host, Russell Gray
  • Special guest, Freedom Fest promoter, economist and author, Dr. Mark Skousen

In our quest for knowledge about the economics of real estate, we paid a visit to the Freedom Fest convention in July 2010.  We weren’t sure what to expect, but we came away very impressed.  While the event clearly carries political undertones, it’s a lot more about the ideas and principles that should matter to everyone who values freedom of speech and property rights.  As real estate and radio guys, we’re clearly in both camps, so we’ve decided to go back to Dr. Skousen’s Freedom Fest 2011 this July.  We’ve already heard from several listeners who plan to join us there, so we invited Dr. Skousen to give us a preview of what he has planned.

It’s easy to get caught up in the technical aspects of real estate investing and the deals and details that dominate our daily lives.  We think it’s good to take a time out from all of that, and just chat about the bigger picture that makes our dreams of real estate riches possible.  So listen in and consider the importance of free speech and private property rights to your own hopes and dreams.  And then give thanks for all the people that have sacrificed to secure those blessings for you.

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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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