Which rabbit to chase?

The person who chases two rabbits catches neither …

Another week and a thousand sub-plots and angles to the COVID-19 story and how all this might affect real estate investors.

In a run-of-the-mill market gyration, those are usually fun and relevant rabbit-trails to go down. But there will be plenty of time for that later.

Sometimes it’s more important to stay focused on the main thing … even if it’s a little boring, redundant, or even (gasp!) political.

This is one of those times.

Think about it …

Virtually all major factors impacting the future of the economy, financial system, and currency that your portfolio and financial security depend on are being driven by policy.

Market participants like buyers, sellers, investors, tenants, and businesses all seem to be left out … or perhaps “locked down” is more accurate … of the process.

And the “gauges” most people focus on to determine the national, state, corporate, and individual health are questionable at best.

Whatever is going on right now is a far cry from “free” markets. It’s all driven by Federal Reserve and government (again, they’re not the same thing) policy.

So are we here to critique policy or rant about what “should” be?

Heaven forbid.

We’re not that smart … or brave. Besides, no one in charge is asking us what we think, so our opinions don’t count much in the real world anyway.

But with a thousand things to distract you, we’re simply pointing out that policy matters … and it’s a good idea to pay attention to policy so you can pivot to avoid problems and capitalize on opportunities.

As of this writing, we’re waiting to see what the Fed will say and do. They’re the makers of those important monetary policies which affect everyone everywhere.

For the uninitiated, the Federal Reserve is the issuer of U.S. dollars. The U.S. dollar currently serves as the reserve currency of the world.

Even though a lot of people know this … very few really understand it … and that’s a problem for both individuals and societies …

“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

– John Maynard Keynes

The Fed expands and contracts the amount of dollars in the system to directly or indirectly manipulate interest rates, inflation, asset prices … including stocks and real estate.

If you’re paying attention, you’re watching a hyper-active Fed operate in real-time.

The Fed underwrites the United States government’s debt and deficits … including all the stimulus spending, bailouts, and vote-buying handouts by both parties.

If you think of dollars like blood … a currency that flows through the body of the economy supplying nutrition to individual cells (people) and organs (organizations) …

… then it’s easier to understand the impact of the quantity, quality, and velocity of those dollars.

There are MANY issues at play in today’s world. But we think the dollar may well be the most important developing story.

Of course, long-time followers of The Real Estate Guys™ know we’ve been watching the dollar for quite some time.

The long-term demise of the dollar is a mega-trend which began in 1913 …

SO much we could say about this one chart, but we’ll save it for future rants.

Profiting from the dollar’s persistent decline is the essence of leveraged real estate investing and the main thesis of Equity Happens.

Yes, we know we need to re-release Equity Happens. It’s on the to-do list. But it’s kind of flattering to see used copies trading for hundreds of dollars.

In fact, let’s use Equity Happens as a quick case study in inflation …

Right now, the supply of Equity Happens books is small. Apparently, the demand is high, so the price has been bid up.

(Note: We don’t get any of that premium. We wish. But it goes to the used booksellers. We’re still rummaging around the garage looking for copies so we can get in on the action.)

But the high price of Equity Happens isn’t the result of inflation. It’s the result of limited supply against relatively high demand. A copy of Equity Happens is rare.

Compare that to Rich Dad Poor Dad, the best-selling financial book in history.

At the same time Equity Happens is selling for over $400 per copy … nearly a 20x premium to the retail price …

… Rich Dad Poor Dad is selling for $5.39.

Does that mean Equity Happens is the better book? Or the demand for Equity Happens is higher than Rich Dad Poor Dad?

Not at all. In fact, far from it.

Now stick with us because this is the important lesson …

The disparity in price between Equity Happens and Rich Dad Poor Dad is a function of how many copies of Rich Dad Poor Dad have been printed.

While we only printed less than 100,000 copies of Equity Happens … untold millions of copies of Rich Dad Poor Dad are in the marketplace.

As a product, abundant supply is fantastic for the consumer. Mass production creates abundant supply which produces low prices and allows more people to acquire the book.

In other words, falling prices are a boon to consumers. It expands the ranks of the “haves”. Cheaper books mean more people can afford them. Remember this when some official tells you deflation is a threat. It is … but not to you.

What if Rich Dad Poor Dad wasn’t a book, but a currency that you were earning and saving … how’s it working now?

Let’s say you went into the market and traded the blood, sweat, and tears of your labor for 100 copies of Rich Dad Poor Dad at a time when the book sold for $12.

Then suppose Robert Kiyosaki prints another 10 million copies because his printing cost is only pennies per book.

This printing increases supply and drives the book price down from $12 to less than $6.

Yes, more people get copies of Rich Dad Poor Dad. In fact, maybe Kiyosaki deposits books directly into the libraries of readers everywhere.

But you … you worked for your copies at a time when the value of your work was based on a price of $12 per copy.

And you saved your copies in your library so you could trade them later for other books you’d like to read. But now, your copies are worth half as much.

You lose. The act of printing more books diluted the value of the books you already earned.

Now, go back and re-read the story of Equity Happens and Rich Dad Poor Dad … but replace Equity Happens with gold, Rich Dad Poor Dad with dollars, and Robert Kiyosaki with the Federal Reserve.

Monetary policy … the printing of dollars … affects you and EVERYONE earning, borrowing, saving, and investing in dollars.

And just in case you didn’t hear, the Fed is printing TRILLIONS of them … more and faster than at any other time in history.

There are a LOT of angles to the cascading crisis created by COVID-19, so it’s easy to take your eye off the main thing. We could be wrong, but we think the main thing is the dollar.

Unfortunately, most Americans and the pundits who inform them aren’t really talking about the dollar. So we are … and have been for years and years.

Today, everything is moving bigger and faster. Extreme policies are likely to produce extreme results.

Whether those extreme results harm or benefit you and your portfolio depends on how aware, prepared, and responsive YOU are.

But your results also depend on what everyone else in the eco-system does … and the policies they support. So talk with your family and friends. Encourage them to pay attention too.

Spreading financial awareness and preparedness helps flatten the curve of economic impact to the financial system.

Like COVID-19, bad ideas are highly infectious … especially when people are highly vulnerable. Ideas affect individual actions and institutional policies.

We’re not telling you what to think or do.

But if you’ve been hitting the snooze button up to now, it’s probably time to snap to attention and start studying. Think and do is better than wait and see.

There’s a lot more to this chain of events to come.


Thanks to all of you who’ve taken the time to send a little sunshine our way.  It means a lot to us!

Here’s what The Real Estate Guys™ Radio Show community is saying … 

Awesome analogy for gold, dollar, and the Fed! … ” – John Y., 6/10/2020

And now the REAL contagion begins …

Although there may be some debate about the true origin, cause, and date of the COVID-19 virus … there’s no doubt about its presence and impact today.

And just as the health crisis began quietly, before exploding onto the scene, so it may be with the subsequent financial crisis.

After all, if you’re not both an epidemiologist and paying attention … or listening to one … like our friend Chris Martenson at Peak Prosperity …

… you probably didn’t know anything about COVID-19 until there was no toilet paper on the shelves at your local store.

Clearly, there were people who knew and acted sooner than others …

… and we’re guessing most folks would prefer to be in the group who’s aware and prepared.

Fortunately, being late to the toilet paper run didn’t result in being completely wiped out. (Sorry, we couldn’t resist.)

But as the health crisis and resulting lock down has mutated into an economic crisis …

… and is already showing signs of spreading into a financial crisis 

… the consequences of being ignorant and ill-prepared could be a whole lot messier to handle than a toilet paper shortage. (Okay, we’ll stop now.)

Punning aside, our point is there are abundant and alarming clues in the news that a financial contagion has already begun.

But preparing for it is a lot more complicated than simply stocking up on paper products … including cash.

Preparing is also a lot bigger than just looking out for you and yours.

Just as society rallied to “flatten the curve” … slowing the contagion to preempt the number of afflicted from overwhelming the health system …

… we’re “all in this together” and need to flatten the curve of people going broke and overwhelming the financial system.

Because while you might be able to get along in life not exchanging germs with other people …

… it’s impossible to live in a world of free enterprise without trading with others.

We all need each other to be financially healthy if we want to build resilient prosperity.

So, it’s in everyone’s enlightened self-interest to both prepare individually … and help others prepare to prosper through the wild ride looming on the horizon.

That’s why we’re organizing a Crisis Investing webinar … featuring a STELLAR faculty, including …

Richard Duncan – Economist, best-selling author, former consultant to the IMF

Peter Schiff – Money manager, best-selling author, podcaster, financial pundit

Robert Kiyosaki – Mega-millionaire investor, greatest-selling financial author in history, host of the Rich Dad Radio Show

Nomi Prins – Former Wall Street insider, geopolitical financial expert, investigative journalist, best-selling author

Danielle DiMartino-Booth – Former Fed insider, popular market commentator, financial newsletter publisher, best-selling author

Brien Lundin – Gold expert, publisher of Gold Newsletter, New Orleans Investment Conference producer

And that’s not everyone. The Crisis Investing webinar is a big and important project.

We’re working hard to collect the thoughts and perspectives of a large, well-qualified group of thought leaders, insiders, and seasoned investors.

By the way … this isn’t a pitch … because the webinar is totally free.

So, be sure to tell your family, friends, neighbors, associates and total strangers to get on the Advance Notice List ASAP.

Remember, most of the “experts” on mainstream financial media are directly or indirectly underwritten by and beholden to Wall Street and the big banks.

So, most don’t understand or value Main Street investing … especially real estate. Yet that’s where most people live … and where all the fallout lands.

Of course, it’s possible to see danger coming in time to get in position to avoid most problems and capture many opportunities.

Of course, this requires focus and diligence because these are truly unprecedented times …

Fed’s balance sheet tops $7 trillion, shows increasing buying of corporate bond ETFs
MarketWatch, 5/21/20

Not sure what that means to you? You’re not alone … and that’s the point.

The wizards behind the curtain are pulling levers, flashing lights, and using smoke, mirrors, and fancy words to manipulate the currency, credit markets, and interest rates YOU depend on.

Hint: The Fed’s balance sheet represents how many dollars they conjure out of thin air … and it’s nearly doubled since the COVID-19 crisis hit just a few months ago.

But anyone with even a rudimentary understanding of economics knows that no amount of money printing creates products and services.

If it did, then the Fed could just print money and everyone could stay home and watch Netflix.

But like any form of debt, money printing is simply a claim on existing and future products and services.

If you earn, borrow, or measure wealth in dollars, this should concern you.

Meanwhile …

Over 4 million Americans are now skipping their mortgage payments
MarketWatch, 5/24/20

With nearly 40 million jobs lost in the last few weeks … defaults on rent, mortgages, car payments, credit card payments should surprise no one.

Sure, the Fed can print money for Uncle Sam to direct deposit to everyone.

And MAYBE they’ll use it to make debt payments … versus less important things like say … EATING.

But you may recall …

Alarming number of Americans don’t have enough savings for unexpected expenses

New York Post, 1/30/20

“One in four Americans do not have enough money saved to cover more than two months of expenses, according to a recent poll.”

Many of those folks are your tenants. But it’s not just the little guys who are struggling as the economic contagion spreads …

Default Notices Are Piling Up for Retailers Unable to Pay Rent
Bloomberg, 5/22/20

Hertz, slammed by coronavirus, to continue under bankruptcy protection
Chicago Tribune, 5/26/20

‘No business is built for zero revenue.’

NO business is built for zero revenue. Neither is any city, state, or nation.

No society can survive long without production AND commerce.

So, while it’s good that the world is coming out of its COVID-19 induced economic coma …

… the extent of the damage … and what’s temporary vs what’s permanent … will not be known for some time.

But with so much uncertainty remaining about whether the health crisis at the front end of this chain of calamity is past its peak …

… there’s no rational reason to think the subsequent economic crisis is even close to over.

And even if it was, all those missed payments and printed money is likely to create a financial system crisis … and perhaps even a currency crisis … down the road.

So our bet is things get MUCH choppier before they get better.

BUT … that’s not all bad news. In fact, there’s likely a lot of opportunity in all this mess.

So rather than go full-fetal freak out … or waste a bunch of time blaming (pick a perp or scapegoat) … or philosophizing about what the people in charge should or shouldn’t do …

… we think you’re better served to stay focused on what YOU can do NOW.

We’re sorry if this is a little repetitive …

… but if you were on the deck of the Titanic, would you want the crew to stop boring you with repeated directions to the lifeboats?

Of course, no one knows exactly the “best” way to mitigate risks and capture opportunities … there’s still too much unknown.

But as we often say, focus on being diligent to control what you can so you’re in the best position to respond to what you can’t.

And listen to as many smart people as you can who are also diligently preparing and paying attention. That’s what the Crisis Investing webinar is all about.

The follow up to the webinar will be to take all these expert perspectives and then come up with the best ideas and action plans.

But be patient. With MANY hours of interviews, the project won’t be ready for a few more weeks. Stay tuned!

Meanwhile, we still think it’s wise to get as liquid as you can while you can … especially with respect to equity and taking advantage of the cheapest mortgage money you may ever see.

Take a good look at your portfolio … and think about how it would respond to rising rates, a banking crisis, a credit market collapse, or a substantial decline in rents.

Remember, “no business is built for zero revenue”.

Sometimes you simply can’t save everything from a worst-case scenario. So it’s also important to know when to retreat and preserve capital … so you can live to invest another day.

But if you’re liquid, conservatively structured, well-educated, and connected … you’ll probably hold onto most of what matters …

… and easily make up any losses by grabbing the bargains likely to be littered across the landscape as this all unfolds.

And if this turns out not to be as big a deal as it seems … how are you worse off for being prepared?

Unlock Next Level Success by Turbo-Charging Your Amazing Brain

The human brain is one of the most amazing things on the planet … but scientists say that we only use a small fraction of our brain’s potential. 

No matter how successful you are … that means your brain is capable of SO MUCH MORE. 

We’re talking to someone who tapped into the under-utilized power of the human mind to get better performance … and more success … from himself and his team. 

Listen in and discover how to take your real estate game to the next level by activating your amazing brain!

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

  • Your brainiac host, Robert Helms
  • His maniac co-host, Russell Gray
  • Author, speaker, and business growth expert, John Assaraf

Listen


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Your most important tool is your brain

What’s the most important tool for being successful in real estate investing? YOUR BRAIN. 

Today, we’re talking about how you can activate your brain and create fuel for your success. 

If you study success principles in any endeavor, you’re often going to be able to translate those directly into whatever you want to be successful in … including your real estate investing business. 

You definitely need to understand the specifics of real estate. But your team begins with you. 

If you have muddled thinking and don’t know exactly what you’re trying to accomplish, it will be hard for you to lead a team. 

You have to think about your mindset. How you think and what you believe affects what you do … or if you do anything at all. 

When people have results they don’t like, they say, “I’ll change my actions.” But it goes farther than that. It’s time to change the way you think. You have to be strategic and intentional. 

Our guest today has made a practice of studying this very thing. In fact, the reason we wanted to have him on the show is because he is an amazing real estate guy. 

John Assaraf has been investing for more than 30 years. He was one of the largest broker owners in the world, managing tons of agents and offices. 

But through his experience, he has figured out that it’s not just what you do … but why and how you train your brain.

The difference between success and mediocrity 

“When I was 26, I bought the franchising rights for RE/MAX of Indiana and proceeded to open up 85 offices,” John says. “So, I understand the residential, commercial, industrial side of real estate.”

John loves real estate … and that’s what led him on his search to figure out what holds people back and what makes people successful. 

When John was building RE/MAX of Indiana, he had 1,500 real estate agents. Some made $25K a year. Others made more than $1 million a year. 

“I was fascinated and wondered how it was possible that I’m giving the same training, the same coaching to all of my agents, and there is such different levels of success,” John says. 

By unlocking some of the mysteries of the mind, John was able to help his agents have an average income of $120K. 

What did he teach them?

“I really didn’t teach them much about selling real estate or investing in real estate. I taught them how the level of success that they would achieve would be directly a reflection of their beliefs, their self-image, and the habits they developed,” John says. 

John worked to help his agents augment their beliefs from limiting beliefs to empowering beliefs. 

There’s a saying in the neuropsychology field that says you will never outperform your hidden self-image. 

When you work on your self-esteem and self-worth, when you eliminate your limiting beliefs about what’s possible or not possible for you. 

When you start to recalibrate what you do to match the income or wealth that you want to achieve, then you have the inner game and the outer game aligned. 

So, the person who is making more money than you is not necessarily smarter than you. 

Until you train your brain to think differently and increase your self-worth, you wouldn’t act upon the information that they have in the same way. 

Training your brain

Our brain is a highly organized organism. Self-confidence is a neuro muscle. So is willpower. 

So, what would happen if we thought about some of our neuro muscles as things that we can strengthen or weaken, just like other muscles?

“If we disempower a network in our brain, it weakens. If we reinforce a new powerful network in our brain, like confidence or awareness, then we start a deliberate evolution of ourselves,” John says. 

John’s book, Innercise, is a user’s manual on how to use your brain better. “We have more control over our own brains than we ever thought possible,” John says. 

Too often, though, we take our brains for granted. 

So, we must start with awareness. Be aware of the thoughts you have. Are they empowering or are they destructive? Are they building blocks that will help you achieve your goals?

Then, think about emotions. 

Emotions are nothing more than the effect of what is happening in your subconscious mind. Emotions cause feelings, which can have a powerful enabling or disabling effect. 

After feelings comes behavior … the actions you take. 

John says, “When you look at your bank account and it doesn’t have the money you want, don’t get mad. Get curious.”

How can you shift your thinking? How can you shift your emotions? How can you change your behavior?

Changes on the outside happen because of changes on the inside first. 

For more on how to turbo-charge your amazing brain, listen in to the full episode!

More From The Real Estate Guys™…

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


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Finding and Creating Value in a Hot Market

Markets can seem like a mystery. They’re hard to time … and no one wants to sit on the sidelines and miss out on an opportunity. 

Luckily, our guest today has been in the game for quite a while. He has found ways to thrive in ALL kinds of markets … and he is sharing his take with investors like YOU. 

Ken McElroy is real estate partner and advisor to Rich Dad Robert Kiyosaki. He knows how to find value in a hot market … so let’s get started!

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

  • Your hot host, Robert Helms
  • His hot-diggity-dog co-host, Russell Gray
  • Real estate guru and Rich Dad advisor, Ken McElroy

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Meet Ken McElroy

Our good friend Ken McElroy is an icon in real estate. He started out in property management and decided it would be better for him to own apartments. 

Today, he owns more than 7,000 units. 

Ken has a lot of practical, pragmatic wisdom … and he LOVES helping people grow and be successful.  

That love is reflected in his work as Rich Dad Advisor for real estate to Robert Kiyosaki and in his library of books. You’ve probably read Ken’s classic The ABCs of Real Estate Investing

Well, we’re at an interesting time right now. We’ve been in a really long cycle … and everyone wants to know what is going to happen next … and what to do about it. 

Navigating market changes

“One of the mistakes people make is that they try to time everything,” Ken says. 

There’s nothing wrong with thinking about things and trying to consider what the future will bring, but don’t overanalyze yourself into a corner. 

If you’ve bought correctly, and you’ve made some good money … you shouldn’t be concerned. 

Ken said his team had some properties that they really didn’t want anymore. As you grow your portfolio, you’ll have things doing really well, things doing just fine, and things that are taking up your time. 

As you feel like you are coming to the end of a cycle, it’s a good time to dump any projects that aren’t paying off for you. 

But what about if you’re trying to force equity?

One of the classic ways to force equity is ground up construction. Ken says he is still seeing those opportunities today, but investors should be prepared for market changes. 

As the market changes, you may have to rework your strategy. You take what the market gives you. 

Ken also says not to discount the power of small wins. Small wins add up. Look for opportunities to cut costs without cutting quality. 

This is especially true if you are involved in new construction or you are working with a large amount of units. 

If you can save $10 on 100 units, that’s $1000. Look for the small wins … and if you can, buy in bulk. 

In a hot market, the key is finding opportunities to add value. If you increase value, you increase your profit. 

Keys to success in partnership, investment, and family

Ken and his real estate partner, Ross, have been working together for nearly 20 years. That partnership has been key to his success. 

What makes them so effective as partners?

“We stay out of each other’s way, but we keep each other accountable,” Ken says. 

Ken and Ross have a clear division of responsibility that plays to their strengths. Ross handles tax and legal. Ken handles operations and equity. 

Together, they work on acquisitions. 

Ken says that in your partnerships, it is important to keep each other updated and in the loop. “We periodically sit down and make sure we each know about the moving parts,” Ken says.

Those moving parts include investors and tenants. Does taking care of tenants automatically translate into taking care of your investors?

“We think that that is really where it all starts,” Ken says. “Our tenants and our employees are as important if not more important than our investors.”

Why? Because if tenants are being treated well, you can reward your employees. And if they are happy … they keep doing a great job. 

All good things flow up. The investors benefit from happy employees and happy tenants. 

Ken points out that that same lesson applies to family as well as business. 

“If you haven’t played the cashflow game with your kids, you’re crazy,” Ken says. “My kids were not particularly great at math, but we invested in their education and treated them well.”

Ken says that by the time his kids got into finance and higher math in school, they understood income and expense, asset and liability, what a stock purchase was, and how capital gains work. 

Part of treating your kids well is helping them understand the hard work that goes into purchasing and investment. 

“My sons went to private school, and a lot of the kids were driving fancy cars. I made them save their money and buy their first car. It’s hard, but it’s easier to teach them to make money than to give them money forever,” Ken says. 

For more tips and wisdom from Ken, listen in to the full episode!

More From The Real Estate Guys™…

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


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Podcast: Finding and Creating Value in a Hot Market

Robert Kiyosaki’s real estate partner Ken McElroy sits in as we tackle the timely topic of finding value in a hot market.

Markets are hard to time. And no one likes to sit on the sideline missing out on opportunity. But when cap rates are compressed, finding deals that make sense is a challenge.

Fortunately, Ken McElroy has been in the game for quite a while … and has found ways to thrive through all kinds of markets.

So listen in as we learn how to find and create value in hot markets … with Robert Kiyosaki’s Rich Dad Advisor for Real Estate, Ken McElroy!


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!

Coronavirus could be coming to Main Street …

By now you’ve probably heard about the coronavirus. It’s big news and appears to be getting bigger … and there are MANY angles on the story.

Of course, we’re just The Real Estate Guys™ … not the virus guys … so we’re not qualified to have an opinion on the health risks or odds of a global pandemic.

But whether the coronavirus is truly an existential threat to all humanity … or just another run-of-the-mill frightening event that fades into obscurity …

… it’s certainly creating some economic upheavals all investors (even real estate investors) should be paying attention to.

And as long as we all survive long-term, the coronavirus crisis is raising notable concerns and creating short-term opportunities.

To be clear, we’re not making light of it … or suggesting that economic consequences are the most important aspect of the coronavirus story.

But since we don’t have the expertise or ability to change what’s happening or to advise on how to avoid the health risks … we’ll just focus on the investing considerations.

It’s safe to say the coronavirus could be the proverbial “Black Swan financial pundits constantly obsess about.

No one saw it coming, and then … BOOM! It’s here. And it’s already having a profound effect on stocks, bonds, currencies, and commodities.

Of course, the big question is … what does the coronavirus mean to real estate investors?

In the short term, it creates an opportunity …

As freaked out paper asset investors jump into safe havens, lots are ending up in U.S. Treasuries.

This is bidding bond prices UP, driving bond yields DOWN …meaning interest rates are falling.

This pulls mortgage rates down and provides real estate investors with an opportunity to restructure existing debt and take on new debt

… and lock in those low rates for the long term.

Meanwhile, some safety seekers are piling into gold … and we think there’s two parts to that story … maybe three.

First, gold is the ultimate safe haven because there’s no counter-party risk (assuming you take physical possession) and you avoid specific currency risk.

In other words, you can store wealth in gold, and later convert it into ANY currency … not just the one you bought it with.

American brains often tilt here … because they only think in dollar terms. But the rest of the world doesn’t.

Sure, the U.S. dollar is still considered the “safest” currency … but as we explain in our Future of Money and Wealth video, “The Dollar Under Attack” … there are reasons to be careful of the dollar long term.

And enough investors in the world appear to agree … and they’re bidding up the price of gold in their flight to safety. That says something about the dollar.

But the BIG coronavirus story isn’t falling interest rates, spiking gold prices, or crashing stock markets …

As is often the case, investors and mainstream financial media pundits fixate (and trade) the symptoms … sometimes missing the real problem.

There’s a YUGE difference between a booming economy and a strong financial system.

During this U.S. election cycle, you’re likely to hear about the “booming economy” … and it’s true.

But even more importantly, it’s NECESSARY … and that’s the concern.

A global economic slowdown isn’t just inconvenient … it’s systemically dangerous on an epic scale.

This is what our big-brained friends help us understand and navigate.

The world is piled nose-high in debt … most of it at very low interest rates. And yet, it’s barely being serviced.

There are many tapped out “zombie” businesses who don’t even earn enough profit to pay their interest … which means their debt is a slow-growing cancer.

A spike in interest rates or a decrease in prices or economic velocity accelerates their demise … but that’s just the beginning.

Besides the obvious ripple effect of job losses through communities and supply chains … some of which would affect Main Street real estate investors …

… the potentially bigger problem is the ripple effect through financial system balance sheets which are holding bonds as ASSETS … assets they’ve borrowed against.

This is EXACTLY what happened in 2008 with sub-prime mortgage bonds.

It wasn’t the direct losses from a relatively small number of sub-prime defaults that imploded the system. It was the contagion because those modest losses were magnified by leverage.

But unlike real estate, when the collateral (the sub-prime bonds) declined in value …

… Wall Street loans come with cash calls when the “margin” between loan and collateral value shrinks too much.

Margin calls exploded throughout the system … forcing everyone to sell everything to raise cash. This crashed prices, triggering more margin calls …

… creating a vicious downward cycle until the bottom fell out.

So the Fed (and other central banks) stepped in with MASSIVE amounts of “quantitative easing” to put in a bottom and stop the free fall.

They printed trillions and bought the “toxic assets” no one else wanted. And as we now know, they’ve been unable to withdraw the patch.

After 10 years, the Fed tried to “shrink their balance sheet” and “normalize interest rates” (i.e., stop propping things up) …

… and they failed miserably on both counts. In fact, they recently had to take emergency action to blow it all back up.

So there’s a LOT of air in the financial system right now … all propped up by record levels of debt … which can only be serviced by a “booming economy”.

And that booming economy keeps the frailty of the system off many commentators’ radar … while “alarmists” like Robert Kiyosaki and Peter Schiff don’t get much media time to warn people.

That’s the way it was in 2008 … and that’s the way it is now.

The setup is the same as 2008 … just bigger. WAY bigger. And it’s all rooted in gobs of global debt …

China has taken on enormous debt to fund its phenomenal growth the over last two decades.

The coronavirus could push China into even greater debt … not to grow … but just to prop things up as their economy slows.

Corporations took on records levels of debt to fund stock buybacks over the last decade. Of course, this helped boost stock prices, but is it reliable wealth?

Households are also carrying record levels of debt … probably feeling rich because of high home and stock equity on their balance sheets.

Sure, inflated assets can make people feel rich … boosting consumer confidence … but how stable is it?

Equity is awesome … but it’s fickle. The coronavirus is writing a reality check for stock investors right now.

Meanwhile, the coronavirus is shutting down factories … even entire cities … which MASSIVELY slows economic activity … with global ramifications.

It’s like if you had a gigantic credit card with triple your annual incomes in consumer debt …

… but are barely able to make the payments working 60- or 80-hour weeks … and then your hours are cut.

Now instead of just getting by … you’re being swallowed by the debt.

Except it’s not just you … or a single corporation … or a few thousand sub-prime homeowners … or even a tiny country with a small global economic footprint.

It’s the ENTIRE globe … and it’s emanating from the second largest economy on the planet.

It’s hard for China to be the manufacturing engine of the world with closed factories and entire cities quarantined.

That means they use less energy, buy less commodities, export less products … which means shippers have less to ship, retailers have less to sell, and on and on.

ALL those businesses and employees in the chain … many of which are loaded with debt … take a big pay cut … putting all that debt in danger of default.

To “save” it all, central banks will need to print like crazy … and gold prices tell us smart investors are concerned about that.

Gold is at record highs against EVERY currency in the world … except the U.S. dollar (yet).

Ironically, the financial contagion has the potential to spread FAR faster than the coronavirus itself.

YIKES.

Okay, take a deep breath. It’s not Armageddon.

But as you might guess, a scary place to be is in investments that are front-line to fragile financial markets.

That’s probably why alert investors are exiting into safer havens.

Well-structured real estate investors are likely to fare better than most paper asset investors … because real estate’s fundamental model is far more stable.

Think about it …

Do you see any headlines that say, “Rents are crashing as coronavirus spreads” or “Tenants break leases to escape coronavirus”?

We don’t.

So while paper asset investors are watching their 401k wealth go up and down like a roller coaster …

… real estate investors are quietly endorsing rent checks.

But it’s not just the cash flow of real estate that makes real estate stable …

It’s the priority in people’s lives to make those rent payments … and the ownership of a physical, tangible asset that doesn’t disappear in crisis.

Yes, if the coronavirus destroys humanity, demand for rental property will implode. But that will be the least of your worries.

And if the financial system implodes … as bad as that sounds … it will be bumpy for awhile … but a new system will be put in place.

So as long as you’re structured to weather the storm 

… with competitive rents and great customer service in markets with solid infrastructure and fundamentals …

… and stable underlying financing with enough cash flow cushion to absorb temporary softness 

… you might not get richer on your current holdings, but you can probably ride out the storm.

Of course, if you’re properly prepared, you’ll be in position to go bargain shopping in such a storm … which is exactly what Ken McElroy did in 2009-2012.

The world is volatile. Real estate is relatively stable compared to most other investments. But you still need to see the big picture and think ahead.

That’s why we hang out with people like Robert Kiyosaki, Peter Schiff, Ken McElroy, Brien Lundin, and other super-smart people.

After all, it only takes one good idea or heads up to make or save you a LOT of money when things get crazy. And you never know what that’s going to happen.

Until next time … good investing!

 

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The pension problem is about to get REAL …

Our good friend, multi-time Investor Summit at Sea™ faculty member (who’s back again for 2020!) … and greatest-selling financial author in history …

Robert Kiyosaki thinks pensions are the greatest threat facing the financial world today.

Of course, it’s not like pension problems are breaking news. The whole crisis has been unfolding for a decade as more of a slow-motion train wreck.

But over the last few years, the looming disaster is getting hard to ignore …

America’s utterly predictable tsunami of pension problems
– The Washington Post, 2/22/17

Pension Fund Problems Worsen in 43 States
– Bloomberg, 6/30/17

States have a $1.4 trillion pension problem
– CNN Money, 4/12/2018

The Pension Hole for U.S. Cities and States is the Size of Germany’s Economy
– The Wall Street Journal, July 30, 2018

“Many retirement funds could face insolvency unless governments increase taxes, divert funds, or persuade workers to relinquish money they are owed.”

And it’s not just government pensions. Some of the biggest corporations are also struggling under the weight of their pension burdens …

GE’s $31 billion pension nightmare
– CNN Business, January 19, 2018

Here Are 14 Companies Getting Crushed By Pension Costs
– Business Insider, 8/15/2012

You get the idea. Huge storm clouds have been forming for quite a while … in both the public and private sectors.

In an election year, you’d expect to hear some chatter about it. But we’re guessing you won’t because there’s no politically palatable solution.

Of course, ignoring the problem won’t make it go away.

That’s why Kiyosaki is shining light on it. You can’t prepare for or profit from a problem you don’t or won’t see.

So this is a situation we’ve been watching more closely of late. And clues in the news tell us pension problems pose a threat to real estate investors.

Desperate politicians have already proposed funding their shortfalls with property taxes and cuts to benefits for pensioners … some of whom could be YOUR tenants.

Meanwhile, major corporations like General Electric and United Airlines have already cut their pension benefits.

Of course, the flip side of bad news is GOOD NEWS …

Pension problems also create opportunities for real estate investors.

We think pension managers will eventually concede that for a chance to save their funds from the Federal Reserve’s war on yields …

… they’re going to need to get REAL … real fast.

Pension fund managers will need to funnel more money away from Wall Street and into Main Street.

Think of all the reasons Main Street investors LOVE real estate …

… reasonably consistently achievable double-digit total returns 

… inflation-hedged yields much higher than bonds and without the counter-party-risk …

… assets which aren’t practical as gambling tokens in the Wall Street casinos, and therefore much less volatile in terms of yields and principal value.

We know. You’re already convinced real estate is awesome. And you may be wondering why everyone doesn’t invest in real estate.

But don’t under-estimate the seductive allure of Wall Street marketing and the pervasive political pressure to promote paper assets.

Remember, an argument can be made that government and Wall Street sometimes work together to the detriment of Main Street.

But when Main Street gets mad … it’s every politician and pension manager for himself.

So when poking around the crevices of the internet looking for credible clues …

… and being mindful that things NOT being talked about in well-publicized political discourse is probably more worth paying attention to …

… and we came across a couple of interesting articles …

CalPERS gets candid about ‘critical’ decade ahead
– Capitol Weekly, 8/27/19

Yes, we realize this article isn’t “fresh” … but it’s still relevant today. After all, they’re talking about the “decade ahead” … and again, this is a slow-motion train wreck.

Here’s a notable excerpt …

Quoting a letter written to CalPERS by a third-party consulting company brought in to help figure out what to do …

“ ‘The financial world is changing, and we must change with it,’ said the letter. ‘What we’ve done over the last 20 years won’t take us where we need to go in the future. New thinking and innovation are in order.’ ”

Of course, who knows what they mean by that. “Change”, “new thinking”, and “innovation” are all buzz words that lack meaning apart from a suggestion or context.

But one thing is perhaps becoming clear to the pension managers … Wall Street’s not the answer …

“ Meanwhile, a line [the] letter is a reminder that CalPERS remains at the mercy of the market, as when the stock market crash and recession struck a decade ago: ‘The value of the CalPERS fund fell 24 percent in a single fiscal year, to about $180 billion.’ ”

So it’s against this backdrop that we found the second, more recent, article noteworthy …

Sacramento County launches tender for alternative assets consultant
– Institutional Real Estate, 2/11/20

“The $10 billion Sacramento County (Calif.) Employees’ Retirement System (SCERS) is seeking a consultant for its alternative assets portfolio …”

“The alternative assets consultant works with the pension fund’s investment staff to help develop and maintain strategic plans for the system’s absolute return, private equity, private credit, real assets, and real estate investments.”

Pension problems are rampant in governments … from nations to states to counties and municipalities, as well as corporations all around the world.

As pension managers realize there’s opportunity to grow absolute returns through private placement and real estate 

… it opens up a potential floodgate of money into Main Street opportunities.

Of course, if you’re just a Mom & Pop Main Street investor … or even a fairly successful real estate syndicator doing multi-million-dollar deals …

… you may wonder how YOU can get in on the action.

Like Opportunity Zones, pensions pointing their portfolios at specific markets and niches have the potential to provide a tailwind to EVERYONE already there … or going along for the ride.

So pay attention to pensions … not just for their potential to torpedo the financial system …

… but for the opportunities created as they act out on “new thinking and innovation”.

Lastly, keep in mind that like Fannie Mae and Freddie Mac back in 2008, and the FDIC today …

… the Pension Guaranty Benefit Corporation is a horribly underfunded quasi-government enterprise backing TRILLIONS in potentially failing pensions.

If a substantial number of pensions fail (a VERY real possibility) …

… it’s all but certain the Federal Reserve will need to step in to paper over the mess with trillions in freshly printed dollars.

This weakens the dollar and among the biggest winners are borrowers and owners of real assets.

This makes real estate investors who use mortgages double winners.

So while you may not be able to calm the stormy seas …

… you can choose a boat that’s seaworthy and equipped to sail faster when the winds of change (and a falling dollar) blowhard.

Until next time … good investing!

The world has gone MAD …

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

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

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

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

In a recent article, Dalio warns …

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

As Upton Sinclair said …

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Maybe.

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

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

Maybe there are clues in the news …

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

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

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

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

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

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

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

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

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

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

Buckle up.

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

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

Meanwhile, we’re bullish on Main Street.

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

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

Robert Kiyosaki on Private Investing and the Three Kinds of Money

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

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

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

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

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

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

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Public investment vs. private investment

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

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

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

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

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

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

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

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

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

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

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

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

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

Cash flow and education

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

It’s cash flow. 

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

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

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

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

And then you get educated. 

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

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

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

Three types of money

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

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

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

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

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

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

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

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

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

More From The Real Estate Guys™…

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


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

Podcast: Robert Kiyosaki on Private Investing and the 3 Kinds of Money

We sit down face to face at the Rich Dad radio studio with our long-time friend and the world’s best-selling personal finance author Robert Kiyosaki.

Kiyosaki shares his thoughts on the important differences between public and private investments, what he calls the 3 kinds of money, and revisits the enduring message of his record-setting book Rich Dad Poor Dad.

Tune in and discover what the most influential financial author in history has to say about the dangers and opportunities facing investors today.


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!

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