Expert Tips for Navigating Uncertain Times

In uncertain times, we all need a little wisdom to guide us to the right path.

So today, we bring you the words of the wise.

Property prices are continuing to inch upward in many markets. And the stock market is starting to tumble down. How should investors navigate the turmoil?

Listen in to hear from some of the smartest folks we know on their predictions for what the future holds … and their best tips for staying smart and focused in the midst of the storm.

In this episode of The Real Estate Guys™ show you’ll hear from:

    • Your expert host, Robert Helms
    • His amateur co-host, Russell Gray
    • Brien Lundin, author of the Gold Newsletter
    • Economist Peter Schiff
    • Chris Martenson and Adam Taggart, authors of Prosper!
    • Rich Dad Poor Dad author Robert Kiyosaki

 


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Brien Lundin on metals and money supply

Brien Lundin is our go-to expert on precious metals. He writes the Gold Newsletter and directs the New Orleans Investment Conference.

His predictions about the metals market have been spot on. We asked him how he keeps his thumb on the pulse. The short answer? “Experience,” says Brien.

Three decades of reading, researching, and making connections have given Brien enough information to come to the conclusion that, “Metals have settled into a fairly reliable long-term pattern.”

In fact, he says the future for metals is as close to inevitable as possible in the investing world.

High debt in the U.S. and other countries means their currencies will be depreciated, at least to some extent, and that means higher gold prices in the long term, says Brien.

With a predicted three or four rate hikes coming from the Fed in the next year, Brien predicts we’ll continue to have a weaker dollar for several years.

Why should real estate investors be interested in metals? Alternative investments like precious metals allow you to divorce yourself from the levers the government pulls to adjust the economy, says Brien.

Confused about the options? “Roll up your sleeves,” and dive in, says Brien.

Brien also had some words of advice … “Look around you to get the best investment advice.”

One way to do that? Attend the New Orleans Investment Conference. The conference is packed with people looking to learn. Off-mic conversations are part of the package!

Peter Schiff on the global economy and Puerto Rico

“It’s easier than people think to predict the future. The hard part is predicting the ‘when,’” says Peter.

Economists have been predicting a dollar crisis for a while, and Peter thinks we are in the beginning of that crisis … “The dollar is dropping like a stone against the Chinese yuan,” he says.

Why? According to Peter, it’s payback for monetary policy mistakes from the Fed that led to the major economic crises of the past few decades, including the dot-com bubble and the housing bubble.

“As the dollar is falling, prices are rising,” says Peter. Oil prices are up. Bond yields are rising, and that means interest rates are rising too. Peter predicts the combination of rising prices and high interest rates will be too much for the market to bear.

Crisis is coming, he says.

“What’s going to kill us is the government’s cure,” Peter adds. After the real estate bubble collapsed, the government attempted to pump up the market by slashing interest rates … and succeeding in completely re-inflating the bubble. That bubble will make the crisis worse, he says.

Peter has started his own investment fund through Euro Pacific Capital. He aims to help investors diversify out of the U.S. dollar.

Gold stocks have moved up, says Peter. “We are really poised now for major gain.”

And what about Puerto Rico? If you’ve been listening to the show, you’ll know Peter not only invests in Puerto Rico, but lives there too.

“It’s green again,” says Peter. There are some problems due to service providers who have left the island. But overall, “People think it’s worse than it is,” he says.

In fact, Peter thinks there’s more opportunity in Puerto Rico than before Hurricane Maria. Abandoned properties and foreclosures could be the perfect opportunity for investors to step in.

Chris Martenson and Adam Taggart on social capital and the Summit at Sea™

Chris Martenson and Adam Taggart, co-authors of the invaluable book Prosper!, chatted with us about some tangible steps to help YOU prosper.

Key among them is social capital.

“What are your strengths and weaknesses?” asks Adam. “Find people who have complementary skills and can fill in your weaknesses.”

“No one can really have a handle on everything,” Chris adds. In our rapidly changing world, he says it’s wonderful when you can recognize people as kindred spirits … and learn from many points of view.

One way to get around some kindred spirits is to attend our annual Investor Summit at Sea™. In fact, all of the guests in this episode will attend the Summit.

It’s more about context than content, Chris and Adam agree … and we’re sure the context of the Summit will be the environment of your investor dreams.

Robert Kiyosaki on humility and getting around smart folks

Robert Kiyosaki doesn’t believe in school. “The trouble with going to school is that you have to be an expert by yourself, and that keeps you small,” he says.

More important than money or school smarts? “A very smart team” that operates on the basis of mutual respect and trust.

Robert recommends hanging around people who DON’T think they’re the smartest people in the room. Humility is a great tool, he says.

“All coins have three sides. Most people think there’s only one side … theirs,” says Robert. “It’s impossible for a coin to only have one side. Intelligence equals standing on the edge and looking at both sides.”

Like F. Scott Fitzgerald once said, “The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function.”

Robert recommends getting around other investors so you can get around a variety of ideas. He recommends the Summit … and you’ll be able to meet him if you come!

Plus, Robert’s wife Kim Kiyosaki will hold a special ladies-only session at the Summit. Robert encourages female investors and partners of investors to attend and learn about why they don’t need a man to get ahead.

Meet and mingle with smart people

No one knows where the future is headed with certainty … but there’s one thing all our smart investor friends are certain about, and that’s the importance of getting around the right people and assembling your team.

Want to reach out? The Investor Summit at Sea™ is the perfect first step.

Unable to attend the entire Summit? Consider joining us on land for the first two days. We’re holding a brand-new event, a conference we’re calling The Future of Money and Wealth.

Hoping to see you there!


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.

Doomsday scenario …

Imagine a scenario where a giant asteroid is on a collision course with Earth.  When it hits, a huge portion of the world will be destroyed.

Scientists and politicians know it’s coming.  But it’s years away.

Fearful of triggering panic, the information is suppressed.  Even when leaks get out, they’re spun to seem insignificant.

Of course, those in the know realize real estate and businesses in the region facing obliteration will become worthless.

They also realize values in safe areas will skyrocket once people realize what’s happening and flee the danger zone … bidding up anything available where it’s safe.

So insiders begin quietly divesting themselves of assets in the danger zone … and begin to systematically accumulate assets in the safe zone.

They know there’s time to warn people, but want to make all their moves before acknowledging to the world the gravity of the situation.

Along the way, astute observers piece together the clues.  They realize what’s happening and use all means available to sound the alarm.

Some are dismissed as conspiracy theorists.  Others as doom porn profiteers.

Meanwhile, news feeds are filled with sensational, but trivial headlines … keeping the masses distracted.

So most people go about their daily business, completely unaware a disaster of epic proportions is slowly, steadily looming closer.

Most will be caught completely off-guard.  Some will reap huge profits simply through happenstance … because they accidentally own property in the safe zone.

Most in the danger zone escape with their lives, but not their fortunes.  Because their wealth and income are all based exclusively in the danger zone, they lose everything.

However, a few alert people in the suspected danger zone decide to hedge by acquiring property and expanding their businesses into other areas.

They reason that so long as the underlying investment makes good sense in its own right, even if a disaster never strikes, they really aren’t worse off for diversifying.

Sure, it takes extra time and effort to learn a new area, build relationships, and make the investments … but the incremental expense is accounted for as an insurance premium.

What would YOU do? 

And what does this have to do with your investing?

Perhaps obviously, the asteroid is a metaphor for a catastrophic financial event … say, the collapse of the U.S. dollar or the global financial system.

Could it happen?  Will it?

Of course, no one knows.  But there’s plenty of smart people out there who think it’s already started … and is inevitable.

It may not destroy the entire world.  But it could destroy yours … depending on how well you’re prepared … or not.

Robert Kiyosaki says the stock market will eventually collapse under the weight of baby-boomers hitting age 70-1/2 and beginning forced liquidations.

It hasn’t happened yet, but that doesn’t mean his premise is false.

It can be reasonably argued massive money printing and Central Bank interventions are propping markets way up … at least temporarily.

Chris Martenson says an economic system reliant on compounding growth and abundant energy is doomed to fail.  You can print money, but you can’t print energy.

So when energy production fails to compound as quickly as debt, an economic implosion is inevitable.  There’s no economic activity without energy.

Worse, Chris says, collapse will happen quickly because of the exponential nature of debt.

You can double the straw on the camel’s back many times … but the final doubling ends it all very quickly.

Consider the growth of only U.S. debt (the rest of the world is just as bad) …

1992 – $4 trillion

2000 – $6 trillion

2008 – $10 trillion

2012 – $16 trillion

2017 – $20 trillion

Notice the speed at which the debt is growing.  It’s compounding like a cancer.  And at some point, it consumes the host.

In 2006, Peter Schiff warned the world about the 2008 financial crisis.  People scoffed.

Peter says the next crash will be even bigger because everything wrong in 2006 is MORE wrong today.

Critics of Schiff’s theory point at the stock market … and the fortunes being made … to claim all is well.

Maybe.  But Venezuela’s had one of the best performing stock markets in recent history … and it’s plain all is not well in Venezuela.

Not surprisingly, people are fleeing Venezuela… a reminder of how economic conditions, harsh or otherwise, stimulate migration.  Of course, that’s of interest to real estate investors.

But this isn’t about Venezuela.  It’s about human behavior in the face of possible disaster.

Some ignore facts they don’t like.  Others deny them.  Still others spin them, while most simply don’t understand and can’t be bothered to try.

A few will remain rational, curious, diligent, and proactive.  Common sense says those folks generally fare better.

Clues in the News …

Bloomberg recently reported China is considering slowing or even ending lending money to the United States.

Markets responded by dumping bonds, which drove up interest rates.

So yes, what China does with its balance sheet affects YOUR interest rates on your Main Street USA rental properties.

Of course, China doesn’t want bond prices to fall when it’s holding a bunch of them … especially if they’re thinking of selling.  They just want to quietly unload.

Unsurprisingly, China decried the Bloomberg report as “fake news”.

But if U.S. news is “fake”, what are non U.S. news sources saying?

Here’s an interesting headline from Sputnik News on January 16th …

Chinese Media Explain How Russia and China Can Escape “Dollar Domination”

You should read it, but two important components are oil and gold.

“ … both Russia and China are also stepping up with exploration and acquisition of physical gold reserves, hedging against the implications of a possible collapse of the de-facto world currency.”

Of course, the de-factor reserve currency they’re referring to is the almighty U.S. dollar.

Hmmm … maybe China and Russia see an asteroid on the horizon.

Doom porn?  Conspiracy theory?  Or clues of a possible cataclysmic event coming to an economy near you?

We don’t know.  But we took Robert Kiyosaki’s warnings in 2006 too lightly and paid a BIG price.

Since then, we’ve gotten to know Peter Schiff, Chris Martenson, and Simon Black.

Peter keeps us sufficiently freaked out.  He makes sure we don’t fall asleep at the watch.

Kiyosaki teaches us to keep an open mind, to seek out diverse perspectives, and talk with other interested and thoughtful observers.

Chris Martenson reminds us to pay attention to energy.  And he’s accurately predicted the recent run-up in the price of oil.

Simon Black advocates the pragmatic wisdom of having a Plan B … not being overly dependent on one location, economy, currency, or investment.

Simon says you’re no worse off to be prepared … and it could make all the difference in your future.

All of these very smart friends … and many more … will be with us for our Investor Summit at Sea™ in April.

It’s unfortunate not everyone reading this can afford the time and expense to be there.

Even more unfortunate are those who can, but choose not to.  They have the most to lose … and gain.

We don’t know if the “asteroid” reports are true or not.  But every investor owes it to themselves to consider the arguments and the options.

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

Until next time … good investing!


More From The Real Estate Guys™…

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

The disrupted American Dream …

One of today’s most popular buzzwords is “disruptive”.  It describes an event, idea, or invention that upends the status quo in some aspect of life or society.

“Disruptive technology” is used for everything from Amazon to Uber.

And as we’ve previously discussed, many of these things impact real estate and investing.

But disruption transcends technology.

Donald Trump’s election and Brexit are two examples.  The world appeared to be on one course … then boom.  A new direction.

So, political norms, societal norms, government and business models …almost everything is being disrupted right before our eyes.

In fact, disruption is so commonplace, it’s become the new normal.

But really, disruption is nothing new.  It goes back to pre-historic times.

The wheel was disruptive … and revolutionized the world (sorry, we had to…)

Farming was disruptive.  It changed the entire societal model … accelerating labor specialization, commerce … even banking.

The printing press was disruptive … connecting human minds past and present at greater speed, for lower cost, and with greater accuracy than ever before.

The U.S. Constitution was disruptive … protecting private property rights for the common man … the foundation on which all personal wealth is based.

That’s a personal favorite. 😉

Radio, telephone, personal computing, the internet, smart phone … all disruptive … each one taking idea sharing to never-before-seen levels.

Trains, automobiles, and airplanes all disrupted the transportation norms of their time … allowing people and their possessions to circulate faster and less expensively.

Now blockchain technology … at least for now … is threatening to disrupt how freely money and wealth circulate.  And governments have noticed.  Uh oh.

Of course, history shows with every disruption, there are winners and losers.

For every railroad baron or millionaire automobile maker, there were thousands of wagon-makers and liveries put out of business.

So while disruption isn’t new … the rate is unprecedented.  The world we live and invest in is evolving at a dizzying pace.

Blink and you miss huge opportunity.  Or worse, you get wiped out by a trend you didn’t even see coming.

The faster the world is going … the further ahead you need to look.

 So with this mindset, here’s a headline that caught our attention …

Why it makes more sense to rent than buy – Market Watch, 1/13/18

Obviously, a real estate headline.  But disruptive?  Seems pretty mundane.

After all, the rent vs. buy debate has been going on forever … usually linked to temporary circumstances favoring one side over the other at the time.

But this article references two interesting reports …

One is the ATTOM Data Solutions 2018 Rental Affordability Report.

It notes … buying a home is more affordable than renting in 54 percent of U.S. markets, but 64 percent of the population live where it’s cheaper to rent.

Hmmm …

Looks like folks prefer to rent where they want to live than buy where the numbers make sense.  Apparently, buying just isn’t that important to them.

Which leads to the second report, A Revision of the American Dream of Homeownership.

This one’s a premium report, so the link’s to the press release … but look at the title … “a REVISION of the American Dream”.

The idea that something so foundational as the American Dream is being … disrupted … is something worth thinking about.

Market Watch did another article based on this report … “Renting is better than owning to build wealth – if you’re disciplined to invest as well.”

Some might say it’s a hit-piece on real estate to entice millennials to put their savings in the stock market rather than a home.

But that would be cynical.

More interesting is the possibility there’s really a disruptive trend developing in terms of the way society views home ownership.

Consider this …

We have a friend who’s a very successful millennial, who can easily afford to own any kind of car … several of them … if he wanted to.

He doesn’t.

Now that he’s discovered ride-sharing, he sees no value in owning a car … not as a status symbol or an investment.

We’re not suggesting this guy’s viewpoint represents the millions of millennials out there.  But it’s worth noting.

Millennials are a big, powerful demographic rolling through the seasons of life … just like the baby boomers did.

Except millennials aren’t like Boomers …they live in a different world and view it through their own lens.

Career, opportunity, family, community, home ownership … roots … are very different today compared to 50 years ago.

In a world where you may change jobs a dozen or more times in a career, and you operate in a global economy, with a social network that’s not local, but virtual …

… home ownership can go from being stabilizing to burdensome.

The sharing economy is changing the way people think about the value of owning things they simply want the use of.

Absent paradigms of ownership, sharing is arguably more efficient.  But for the first time in history, it’s logistically possible.

No generation before has had as many options for sharing as there are today.  

And while pay-per-use seems like a no-brainer when discussing a depreciating asset like a vehicle, Market Watch isn’t the first to argue a home isn’t a great investment.

The pioneer in the “your home is not an asset” mindset is none other than our good friend (and boomer), Robert Kiyosaki.

Of course, Robert’s an avid real estate investor, so his issue isn’t real estate.  It’s about respecting the difference between consuming and investing.

Investing is about profit.  But when you consume, you want value … the right mix of quality, service, and price.

Some people rent their residence because they get a better value, have less responsibility, enjoy more flexibility and variety …

… and it frees up money to invest in rental properties.  They get a better ROI.

So they own real estate … just not the home they live in.

If there’s a new attitude about home ownership working its way into the marketplace, it could lead to a new experience in landlording too.

Because now you might have more affluent, well-qualified tenants competing for longer term tenancies in nicer properties in better areas.

Stable people with good jobs and incomes, who want to live and keep a nice home in a good area, but don’t want the responsibility of home ownership … can be great tenants.

They can also be a way for you to collect premium properties while someone else pays for them.

It’s a trend we’re watching.

Until next time … good investing!


More From The Real Estate Guys™…

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

A big story keeps getting bigger …

We’re just two weeks removed from an epic educational and networking experience at the New Orleans Investment Conference.

While we were there, we threw a little private party and Robert Kiyosaki, Peter Schiff, Chris Martenson, and Brien Lundin all showed up to hob-nob with our listeners.  Very fun.

During the conference, Robert Helms emceed a fascinating panel called The Future of Money, with panelists Doug CaseyDanielle DiMartino Booth and Chris Martenson.

(Side note: Chris Martenson, Brien Lundin and Peter Schiff are all confirmed for the 2018 Summit at Sea™ … and we’re still recruiting several other VERY notable speakers.)

It’s clear the future of money and wealth is on the threshold of MAJOR change.

For most people “the dollar” is synonymous with money because their income and wealth are denominated primarily in dollars. So the future of the dollar is an important topic.

Right now, the U.S. dollar is the world’s reserve currency … and Treasuries are considered the safest, most liquid place to save excess dollars.

Treasuries are Uncle Sam’s IOUs.  They’re technically called bills, bonds, and notes … but they’re all debt.

Treasuries also play a major role in how market interest rates are determined … so if you’re a user of debt, the future of Treasuries affects you also.

Yields (rates) and prices of Treasuries are a function of supply and demand.

Like apartment buildings, when investors bid prices UP, yields (like cap rates) fall. 

You may already know it, but just in case, the math is simple:  Income / Price = Rate

For example, $60,000 net operating income on an $800,000 property is a 7.5% cap rate. 

If investors bid the property up to $1 million, it’s $60,000 / $1,000.000 = 6% cap rate.

So high demand creates upward pressure on prices, and downward pressure on yields (cap rates).  Make sense?

The same with Treasuries.  As long as demand is robust relative to supply, interest rates are low.  Strong demand for Treasuries means low interest rates.

If anything substantially alters the supply / demand equilibrium in Treasuries, YOUR asset values and interest rates will feel it.

Lots of government debt means lots of Treasuries for sale.   We’re pretty sure that’s not changing soon.

But TOO MUCH supply means lower prices.  Just like when lots of houses in a neighborhood are for sale at the same time.

DEMAND for Treasuries comes from private investors (small and large), and political investors (governments and central banks).

Private investors buy Treasuries to park large amounts of cash, use as gambling chips in the Wall Street casinos, or serve as collateral in complex financial transactions.

Governments also buy Treasuries as a place to park their reserves.  China and Japan are at the top of the list with over $1 trillion each. 

Treasuries are denominated in dollars.  So countries buy dollars with their own currency, or sell things to the United States and get paid in dollars … then use those dollars to buy Treasuries.

To keep the worldwide economy going, Uncle Sam issues lots of Treasuries and the Fed prints lots of dollars.

As long as everyone trusts the dollar, it’s all hunky-dory.  And this is why so many of our big-brained friends are concerned. 

As we chronicle in our Real Asset Investing special reportChina’s been making substantial moves to undermine the dollar as the world’s reserve currency.

We recently commented on this … and the story continues to unfold.

Here’s the quick backstory …

When the dollar became the most trusted currency on earth in 1944 it was backed by gold.  In 1971 Uncle Sam defaulted on the gold backing.

Not surprisingly, the world dumped dollars which triggered excessive inflation (rising prices, loss of purchasing power).  The U.S. quickly came up with a plan to save the dollar.

Uncle Sam made a deal with Saudi Arabia … for oil to ONLY be sold for dollars and the Saudi’s would invest their profits in Treasuries.  Clever.

Then the Fed raised rates to nearly 20% to “break the back of inflation.”  If you wonder why inflation is scary, look at life in Venezuela right now.

Inflation is caused by too many dollars in circulation relative to goods and services available.

High interest rates slow borrowing.  It’s a long story, but new dollars are born when you borrow.  Reducing borrowing slows the birth of new dollars.

High interest rates also suck excess dollars into banks and Treasuries, as people and nations save for yield (interest).

These moves shifted demand for the dollar from Uncle Sam’s savings (gold) to the oil and bond markets. 

Back then, the U.S. had the biggest manufacturing economy, most productive workforce, the strongest military, and very little debt.

Of course, MANY things have changed … and more change is likely coming to an economy near you.

Today, no one cares about gold … except China and Russia, who are accumulating hundreds of tons a year.  Hmmm… that’s interesting.

Coincidentally, Russia and China are the #2 and #3 military powers in the world behind the United States.

China is now the largest manufacturing economy and top importer of oil.  Russia is the #2 seller of oil … behind (wait for it …) Saudi Arabia.

Russia and China recently made a deal to trade oil in Chinese currency (the yuan) … instead of dollars.   

China already has major oil producers Iran and Venezuela on board the petro-yuan train.

And now there’s talk China will “compel” the Saudi’s to deal in yuan too.  When you’re the big customer, you have negotiating leverage.

China also recently announced plans to create a yuan-denominated oil contract, which some say is a big step towards creating a robust yuan-backed bond market.

And to top it all off, it’s been reported China is flirting with the idea of backing those petro-yuan contracts with gold.

The Chinese are infamous for seeing a good idea and copying it. 

Right now, it seems China has reverse-engineered the dollar’s rise to dominance and is simply copying it … and it looks like they’re making steady progress towards their goal.

The BIG questions are …

What does it mean to YOU and what can YOU do to grow and protect YOUR wealth?

Of course, that’s a HUGE discussion and we’re working on something BIG to address it.

For now, when you think about the future of money and wealth, here are some things to consider …

Investors, many probably born after 1971, are piling into Bitcoin … driving it up at an insane rate.

Motives we’ve heard for Bitcoin-mania include moving wealth into an “asset” which can’t be simply printed out of thin air.

Interestingly, Bloomberg reports that online searches for “buy Bitcoin” have exceeded “buy gold.” 

Some use the border-less nature of Bitcoin to escape capital controls and discreetly move wealth out of totalitarian jurisdictions. 

Of course, some are buying Bitcoin simply because “it’s going up” and they want to strike it rich in dollar terms.

Meanwhile, plans have been announced to launch a Bitcoin futures market … just like already exists for gold.  

Ironically, futures markets are the very mechanism many pundits claim gold prices are suppressed with … to discourage those concerned about the dollar from seeking safety in gold.

We’ll see what happens to Bitcoin.  Meanwhile, Russia, China and several other nations continue to accumulate gold.

As for the U.S., it’s all about the red-hot stock market.

Of course, as our friend Simon Black points out, the top performing stock market is Venezuela. So a booming market isn’t necessarily the bellwether of a healthy economy.

Where does real estate fit into all this?

History says real estate fares pretty well when shift happens.

Even in chaotic financial times, people still need a roof over the head, crops still need to grow, commerce goes on … and real estate is at the center of human activity.

Of course, that doesn’t mean all real estate investors everywhere make it. 

We took it hard in 2008 because we weren’t prepared for a sudden shift.  We’re working hard to be better prepared today.

One thing’s for sure … there’s never been a more important time to get SERIOUS about your financial education and strategic network.

Until next time … good investing!


 More From The Real Estate Guys™…

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

North Korea and you …

With so much craziness in the world, we thought we’d consider what it might mean for real estate investors.

After all, why should paper asset investors get all the thrills of global instability?  Real estate investing might be stable, but it doesn’t have to be boring!

Biggest sword competition …

You may have heard that U.S. President Trump and North Korean Supreme Leader Kim Jong-un recently publicly compared sword sizes.

Since both the U.S. and North Korea are nuclear powers … this has the world understandably jittery.  Though things seem to have calmed down the last few days.

Still, geo-political jitters usually amplify the two basic emotions of investing … fear and greed.

Scared money tends to flee to “quality.”  (Trapped money flees to Bitcoin … but that’s a different discussion …)

Frightened investors are more concerned about preserving capital and purchasing power (which aren’t necessarily the same thing) … than making a profit.

For much of recent history, a flight to quality meant piling into the U.S. dollar and U.S. bonds.

But with another debt-ceiling debacle on the horizon, record debt at every level, pensions in crisis, huge unfunded liabilities, and an economy sending very mixed messages …

… it’s not inconceivable the world might not continue to see the U.S. dollar and bonds as the financial fallout shelter of choice.

Meanwhile, greedy money tends to focus on front-running the scared money, and buying up the scared money’s abandoned assets at bargain basement prices.

As for real estate investors …  we sit on the sideline munching popcorn and collecting rent checks.

But that doesn’t mean there aren’t risks, opportunities and lessons for real estate investors to learn from all the drama.

War is expensive …

We recently discussed the potential shift from “monetary” stimulus (cheap money funneled from central banks to the financial markets) …

… to “fiscal” stimulus (government spending funneled into the economy on infrastructure and military spending).

Now we’re not saying Uncle Sam is purposely pursuing war to stimulate the economy.  That would be far too cynical for two happy-go-lucky real estate guys.

But IF more war happens, it’s sure to be expensive.  And because Uncle Sam already operates at a deficit and has no savings (technically “broke”) … it means a lot more borrowing.

The big question is … from whom does Uncle Sam borrow?

This matters because whom Uncle Sam borrows from to pay for more war … and how it’s done … will probably impact asset prices and interest rates.

Watch your monitors …

If Uncle Sam issues bonds (borrows) and the bids are soft, interest rates rise.  It also says something about the way the world views the dollar (not good).

Of course, this means rising interest rates in the whole swimming pool … including good debt (your mortgages) and bad debt (your tenants’ credit card and car loans).  Either or both of those affect your bottom line.

Another sign confidence in the dollar is declining will be a spike in gold prices.  

If gold catches a bid, it could mean scared money would rather hide in a barbarous relic with no yield … over stacks of paper with pictures of dead people printed in green ink.

(Not sure how green paper is less useless than yellow metal … but that’s a different debate …)

But if big money prefers gold over greenbacks, it’s a clue about the direction of the dollar.

And assuming your assets, liabilities, and income are all denominated in dollars, we’re guessing the value of the dollar is of interest to you … or should be.

Pre-emptive strike …

So what do you do when you don’t know what’s going to happen?

Here are some things to think about …

Uncle Sam already has a huge debt problem.  Another war doesn’t change anything … it just speeds it up.

In the short term, a flight to quality could be temporarily good for the dollar and drop rates by creating demand for both dollars and bonds.

If rates fall for a season (and even if they don’t … they’re pretty low right now), it might be a great time to back up the truck and load up on lots of good debt … and use it to acquire assets that conservatively yield more than the cost of the loan.

That’s effectively going “short” the dollar based at a time of temporary strength.

You can also go a little further short by adding some gold to the mix.  But remember, gold isn’t about profit … it’s about preservation of purchasing power.  

Sure, a falling dollar causes gold to go “up” in dollar terms, but so does everything else, so more dollars doesn’t put you ahead … it just keeps you from falling behind.

Side note …

If you’re not really sure about gold or how it fits into what you’re doing, join us when we speak at the New Orleans Investment Conference in October.   

Some of the biggest brains in precious metals and resource investing will be in New Orleans … along with our friends Robert Kiyosaki, Simon Black, Peter Schiff and Simon Black.  It’ll be like an Investor Summit at Sea™ reunion!

Back to our story …

Something else to consider carefully right now are the markets you’re invested in … because the idea of “flight to quality” applies to real estate markets too.

People and businesses will move to where they can get a better life at a better price.

We like affordable markets in low tax, business friendly, fiscally sound states …

… places with good infrastructure (transportation, utilities, medical, education, resources), strategic location (distribution, travel hub, geographic amenities), and diverse economic drivers.

Also, take a look at your current debt and equity structure.

It might be wise to harvest excess equity and lock in low long-term rates on properties you’re committed to owning long term.

You can then use the proceeds to pick up additional properties in growth markets … or add some cash, precious metals, or high-yield private mortgages to add some diversification into your portfolio.

Stay calm and invest on …

It’s easy to freak out when the world is weird.  But it’s been weird before and it’ll be weird again.

Meanwhile, unlike so many other styles of investing, real estate allows you to hedge most probable outcomes.

Plus, there’s the time-tested assurance that virtually every major power player in the food chain has a vested interest in supporting real estate.

No one wins when real estate loses … and even as we learned in 2008 … if a bomb goes off in real estate, the powers-that-be move heaven and earth to fix it as quickly as possible.

Sure, there’s risk.

But it’s risk that’s largely understandable, reasonably mitigated and … so long as you’re structured to weather the occasional economic storm …

… real estate is arguably the most stable and easily operated investment vehicle available to everyday people.

Until next time … good investing!


 More From The Real Estate Guys™…

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

Clues in the News – Housing Sales, Home Improvement and Foreign Investors

Every real estate investor is afloat in a vast economic sea. As an investor, it’s easy to believe you’re on stable ground … only to wake up and find you’ve drifted far from your goals.

We believe SMART real estate investors (you!) have to act a bit like ocean biologists … tracking the winds, noting the undercurrents, and keeping detailed observations of the environments you find yourself inhabiting.

One way to take your notes is to read the news. And in this edition of Clues in the News, we bring the news to you! Listen in to hear from:

  • Your economic sea biologist host, Robert Helms
  • His lowly research assistant, Russell Gray

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Slumps in home sales, builder confidence

This is a trend we’ve been observing for a while … existing home sales are decreasing. In June, they dropped 1.8% to the second lowest level this year.

If we stopped right there, you might think the economy is in trouble because people aren’t buying houses. But let’s take a closer look.

While sales of homes overall are dropping, the median home price in June was $263,800 … 6.5% higher than the same time last year.

All housing types aren’t equal. While prices are rising for houses in the 250k+ category, they’re falling for homes under 100k.

Just further evidence, like Robert Kiyosaki says, that the rich are getting richer while the poor are getting poorer.

The article linked above quotes Lawrence Yun, NAR chief economist, who says, “The demand for buying a home is as strong as it has been since before the Great Recession.”

So why are home sales dropping?

Many factors could contribute to a slow market … the growing number of millennials with high debt and inadequate income, for example. And the flux of institutional investors entering the real estate market.

Severe housing shortages are also leaving folks on the sidelines.

While the average median home price has risen, the median price of a new home has dropped by 3%.

Homebuilder confidence in recent months has reached record lows … leaving buyers hoping for a new home in the lurch.

If you look at the stock market, it would be easy to believe everything is peachy. But look at homebuilders … and you’ll see an indicator that not everyone has a bright outlook right now.

Fewer new homes, more home improvement

Speaking of homebuilders, housing inventory is at a 30-year low.

This while home prices have risen to pre-crisis levels in most markets (and far higher in a select few).

It’s a conundrum. Why are homebuilders moving at a snail’s pace? Why is homebuilder confidence so low?

Take a look at capital markets, and you’ll get a partial answer … real estate is heavily dependent on financing, and while the markets may have recovered from 2008’s recession, banks are still wary about giving loans.

In addition, 78% of homebuilders complain that labor shortages are their No. 1 concern.

Reliable, skilled labor is difficult to find. One reason? Construction workers found different careers during and after the recession … then never returned to the home-building business.

In lieu of buying new homes, homeowners are instead spending record sums on home improvements.

According to an article in the Wall Street Journal, “A shortage of new single-family homes across the U.S. is pushing up prices and locking many buyers out of the market.”

Note the certainty in that statement? Reporters are quick to assign cause and effect.

It’s your job to look at the bigger picture and see what’s going on. Then reexamine the conclusions made in the news … and draw your own.

Sales to foreigners up, buyers and sellers struggle outside U.S.

While home sales overall are down, Forbes reports that foreign investments in U.S. properties have skyrocketed recently. Sales to foreigners are up 49% over last year.

If you’re a U.S. investor familiar with the current political situation, you may be wondering what these investors are thinking.

But think about it … the U.S. has strong property rights, lots of renters, a relatively stable government, and strong infrastructure.

Buyers from China and Canada want to move their cash to a place where they see a better long-term future … and the U.S. fits the bill.

Speaking of Canada, a model produced by Better Dwelling predicts that Canadian home prices still have farther to fall.

Canadian real estate markets started crashing when the Canadian government made policy changes that hinder foreign investment.

It’s a lesson for investors to look at both the economics and the politics of a situation … then align themselves financially to policy decisions for the smartest payoffs.

You also need to be aware of the data … and what that means in terms of rising trends. While the Canadian housing market is struggling, lonely urban centers are predicted to be the next big real estate trend in the country.

While our friends across the border are seeing home prices fall drastically, our friends across the pond are seeing a dearth of affordable housing. 

An article we found recommends the London government lower tax rates for new homeowners and suggests 100% mortgages as another option.

The alternative is that London will see a “brain drain” as young workers unable to find affordable housing move outside of London.

This is a problem in the U.S. too, as large companies seek to find locations where workers can afford decent housing and quality-of-life measures are high.

The good thing about problems? (And there is a good thing.) If you’re creative, a problem is only an opportunity to create a solution.

Businesses and people need good places to live. Real estate markets have the opportunity to create them.

Homelessness and hedge fund managers

A recent article in Bloomberg listed the cities where rent hikes leave the most people homeless.

The bottom line is markets with less slack see more homelessness. The message for you? Slack is good.

It’s crucial for you to dig into your local market and figure out the dynamics driving outcomes. Many things can put a squeeze on your bottom line … make sure you’re aware of current and potential trends in demographics, jobs, and the local economy.

Winning markets don’t require a good economy to stay viable. They allow you to stay profitable even when factors change and be the recipient of demand when other markets are struggling to keep prices down and renters happy.

Remember, when you invest in the rental marketplace, you’re getting into a long-term contract. But a stable one.

Stability is probably one of the big reasons hedge fund managers and other wealthy investors are making a break for real estate.

They see the opportunity for a safe haven … but most don’t want to get their hands dirty. If you do, you may find doors opening for you.

Tune in to our next episode to hear an amazing guest make his case for entrepreneurship.

Until then, go out and make some equity happen!


More From The Real Estate Guys™…

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

Alternative Financing Sources for Your Real Estate Business

Ready to invest in real estate, but don’t have the capital?

Acquiring capital is an oft-looked part of building your real estate portfolio. But don’t fret … where there’s a will, there’s a way. Over and over, we see creative solutions for investors’ need for capital.

The latest expert guest on our latest show offers new capital ideas WE hadn’t even heard of yet.

We always like sharing interesting new ideas, especially those that give real estate investors a competitive advantage. So listen in, and hear how Joe Nielsen at Clear Capital Group, Inc., can help you turn your real estate investments into a REAL business.

In our latest show you will hear from:

  • Your master debt collector, Robert Helms
  • His number-crunching co-captain, Russell Gray
  • Real estate investor, advocate for small business owners, and founder of Clear Capital Group, Joe Nielsen

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The need for alternative capital solutions

Joe Nielsen, a long-time listener of our show (thanks, Joe!), was growing his own real estate portfolio and needed capital.

After spending many weeks … which turned to months … filling out endless applications and providing volumes of documentation only to be declined and forced to start over again, Joe kept thinking, “There must be a better way.”

In fact, if you’re looking for capital from banks and credit unions, stats are stacked against you. Less than 10% of businesses that seek funding actually get it.

So Joe created a new capital solution. He founded Clear Capital Group, Inc., a specialty commercial finance firm, to help the 90% who are rejected by banks.

Debt: A critical tool for real estate investors

Before we dig into details on how Joe at Clear Capital Group can help you, let’s talk about why debt is a GOOD thing in real estate.

Some people are raised to be debt-adverse, in every situation. Let’s back up and think about this though. There are two kinds of debt, and they are majorly different. Our quick definitions:

  • Bad debt –High-interest rate credit purchases on consumer goods that offer little to no return in value. You PAY to have this kind of debt, sometimes twice as much as the item’s original cost.
  • Good debt –Provides you a long-term return through an investment. This kind of debt PAYS YOU to own it.

See the difference?

In real estate, debt is a critical tool. In fact, the GOAL is to accumulate debt. Our friend and mega-bestselling author, Robert Kiyosaki, says the right debt is a very good thing because of leverage and tax benefits.

We use debt prudently when it’s available. (Remember, debt not always an option! Sometimes we go through whole economic cycles when it can’t be accessed.)

Managing your portfolio of debt

So with that primer, a lot of people don’t pay enough attention to managing their debt. They focus more on the monthly grind of covering utilities, property management, and maintenance.

Banks know this, so traditional lenders often require you have “debt-coverage ratio,” meaning you have enough cash flow coming in, they feel confident you won’t default.

When you get a loan on property, be prudent about it. Do your homework. Make sure you understand your credit, cash, and income sources.

Now you’re dealing with the financing needs of business. Growing your business means investing in more properties, so you save up a down payment and do it again.

Once you have several loans under your belt, it gets harder to get more. That’s where Joe and Clear Capital Group can help.

Seeing capital options more clearly

Clear Capital Group helps real estate investors across the United States get access to capital.

For example, if an investor has 10 properties and wants to invest in another one, the bank will likely tell them, “Sorry, you’re maxed-out on debt.”

Clear Capital Group can take those properties off of an investor’s private portfolio, so their debt-to-income ratio is viewed more favorably.

“You can have as many transactions as you want with healthy debt,” says Joe.

Another option is “wrapping them up” and getting a blanket loan. “This makes it more flexible and clears up the mess of being ‘Fannie and Freddied out’ that happens to a lot of investors,” Joe says.

Underwriting with Clear Capital Group is similar to a multi-family apartment building, and they do have some restrictions. For example, your properties need to be similar product types in near proximity to each other.

They will view your portfolio as a solid mass, and hope to see at least an 80% occupancy rate. Their fees and terms are for a 20-30 year amortization, and although their rates are higher than bank financing, they are fixed for 7-10 years.

“We can turn you into a legitimate business that we can lend to,” Joe says. “For example, this capital could help you with fixing and flipping so you can pay contractors and cover cost of materials.”

The biggest mistake investors make

Joe says it’s a mistake to find a property before you’ve found your financing.

“I educate my clients to prepare for financing first, THEN find the property that fits your strategy,” Joe says. “Seek out a lender and understand your financial profile,” advises Joe. “You want to identify the options available to you.”

This reminds us of our secret to finding a great deal: your Personal Investing Philosophy.

We also say there’s a “Personal Funding Philosophy” – meaning you need to determine the amount of risk you’re willing to take.

At Clear Capital Group, they help you in three ways in their complimentary initial consultation:

  • Identify the options available to you.
  • Determine a strategy.
  • Help you achieve it by connecting you to the right lender.

We’re personally very excited about the tools available, some of which we didn’t know about. You can learn more in Joe’s report, “Tools for Funding Your Real Estate Investing Business,” which you can get by emailing tools@realestateguysradio.com.

Remember, a consumer thinks about saving, where an investor thinks about profit.

When you’ve got access to capital, you differentiate yourself. You’re not competing with every mom and pop investor out there.

Give yourself a competitive edge in the marketplace with Joe’s report, and ‘til next week … go make some equity happen!


 More From The Real Estate Guys™…

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

Kiyosaki, Griffin and Black on Paying Attention and Choosing Wisely

Our latest show was recorded with you in mind – it’s a special one, unlike anything we’ve ever shared before! It takes place while cruising the open seas during our 15th annual Summit at Sea™.

You get to be a fly on the wall during an organic, non-scripted conversation with three of the world’s smartest experts in real estate and investing. (Lucky you!)

The way we see it, life is a buffet. And it’s up to you to choose wisely about what to put on your metaphorical plate. Our guests are here to help you choose the right portions. They will be dishing out juicy tips about how to get ahead of the game … and stay ahead.

In our latest show you will hear from:

  • Your bold Master and Commander, Robert Helms
  • His co-captain, Russell Gray
  • Mega bestselling author and investing expert, Robert Kiyosaki
  • Legendary author and film producer, Edward Griffin
  • International entrepreneur and founder of “Sovereign Man,” Simon Black

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The buffet is open

Every year at the Summit at Sea™, we witness an interesting paradox. Some of the brightest people gather onboard a beautiful cruise ship and we spend our time sharing wisdom and learning from each other.

But when we come out of our classes and go on deck, we see the other side of the coin. We see people lined up at the buffets and bars who are just waiting for things to happen to them.

“I call these people the victims,” Simon Black says. “The world is changing so fast. Demographics are changing. We have to make decisions on a daily basis about how to create capital. When you have uncertain times, there is something to be said about getting together with the tribe at an event like Summit.”

That’s is something we can all agree on: property sharing at its finest. Intellectual property, that is.

“The truth of the matter is all the great shifts in history have been driven by 1-2% of the population,” G. Edward Griffin says. “The rest were just followers.”

Look who’s talking

We all want to affect real change. Events like Summit at Sea™ are a catalyst for change. The power is palpable.

Ed, Simon, and Robert are three of our outstanding faculty members who use their life experiences to engage the minds of millions by creating valuable educational tools.

Ed’s work is astounding. His books, such as The Creature from Jekyll Island and The Fearful Master have changed how we think about the world around us.

Simon’s international entrepreneurship training teaches others how to make more money and keep that money, which ultimately increases personal freedom.

Robert is best known for his little purple book that continues to cause a financial revolution. Rich Dad, Poor Dad has been motivating people around the world to reshape their financial goals for 20 years.

History repeats itself

The best way to prepare for the future, whatever that may be, is to look to the past for answers to today’s economic and geopolitical questions.

“Everything that is happening has happened before to some extent,” explains Simon. “If we think about the Ottoman Empire, we see that the people existed to support the Empire rather than the other way around. I hope this isn’t our future, but we have seen similar instances in our own lives.”

Civilizations have come and gone. Ancient Rome. Babylon. Greece. Once thriving metropolises left in shambles because people weren’t willing to read the signs.

What are the signs to look for?

“We need to watch for the corruption of money,” says Robert.

As a kid, Robert would collect dimes, quarters, and half dollars because he had a suspicion money wasn’t exactly as it once was. Turns out, he was right.

“In Roman times they would steal silver by filing it off coins,” Robert says. “In 1964, the U.S. did a similar thing by using cheaper metals to plate the coins. And as a kid, I knew what was happening just by the looking at my money.”

Like Robert, we know human beings are intuitively smart about their money. Sometimes their education just needs a little fine-tuning.

“We are smart enough to read the signs,” Robert adds. “We know that when bad money comes into circulation, good money goes into hiding.”

Taxation without representation

What about the new hot-button topic? Taxes.

We want people to start thinking differently about taxes and their income in general. Once people can see innovative answers to basic questions about taxes, debt, capital gain, and investing, we’ll have a nation armed with the keys to success.

“Tax is one of my favorite topics,” says Simon. “Many people still believe the idea of paying taxes is moral. That we are somehow morally obligated to pay. But if we look, we’ll see an overwhelming level of waste and fraud.”

Robert has also been thinking unconventionally about taxes for years. And his financial journey ultimately turned his investments, savings, and other capital — maybe even the coins he collected as a kid — into millions of dollars.

“My whole game is to make millions of dollars while not paying taxes — legally, of course,” Robert says. “The reason the rich are getting richer is because they have no debt and they don’t pay taxes.”

Outsourcing our problems

Ultimately, what we want our listeners to gain from hearing these experts is they have the power to choose. With education and proactivity, they can earn millions, find true success, and make the world a better place.

Today’s problems might reflect our past, but they don’t have to be our future. We CAN’T sit back and let the changes just happen. We CAN’T outsource. We have to be it all — the manager, CEO, and owner of our destiny.

We have to think differently. Past generations may have faced similar issues to our current wealth gaps, stock inflation, and housing bubble, but it’s our job to discover new answers.

At the end of the day, we’d say humanity is something you can always bet on …

… and take straight to the bank.

“I think all the trends point out that we are on the verge of a financial emergency,” Ed explains. “But the root word of emergency is emerge … and those who plan and think will emerge from the rubble better than before.”

The sweetest reward

The buffet of life is spread across the table and you get to choose your reward. So will you take the Jell-O or go for the crème brûlée? There is no better time than now to take control of your life. And there is no better way than joining us and other field experts at our next annual Summit at Sea™ event.

To learn more about upcoming registration, please visit our website for information about the advance notice list.


 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.

This might BLOW YOUR MIND …

Join G. Edward Griffin, Robert Kiyosaki and a host of other notable speakers for an event that will BLOW YOUR MIND …

If you’re familiar with the 1999 sci-fi movie The Matrix, you may recall the red and blue pills.

The blue pill allowed the hero Neo (played by Keanu Reeves) to remain in a computer induced illusion which SEEMED like the real world.

But it was fake … and hid the reality of Neo’s enslavement.

The mysterious mentor Morpheus (Laurence Fishburne) challenged Neo to take the red pill and “free your mind” to see the much harsher reality …humans enslaved by machinery.

Neo took the red pill.  Once enlightened, he became engaged in a very real world fight for true freedom.

But for one of Neo’s comrades, the artificial prosperity of slavery was too tempting.  It was easier to enjoy faux freedom than fight for the real thing.

What does this have to do with real estate investing?

Maybe nothing.  Maybe everything.

G. Edward Griffin’s iconic book, The Creature from Jekyll Island – a Second Look at the Federal Reserve, pulled back the curtain on the origins, mechanics and motivations of what is arguably the most powerful institution on the face of the earth.

It’s a VERY controversial work.  Not everyone agrees.  But it opens the imagination to the possibility there’s more to the Fed than meets the eye.

Some lay the blame for the dot com stock bust and subsequent real estate bust and mortgage meltdown directly at the feet of the Fed.

This alone makes the Fed worthy of study by any serious real estate investor.

The Fed could just be the tip of the iceberg …

The foundation of real estate riches is private property rights.

Every real estate investor should be VERY aware of any infringement upon their rights to own and profit from property.

But what if there are some people who believe your rights to profit from your property should be limited?

What if they’re working behind the scenes to infringe on your property rights?

Anyone paying attention knows this has been going on for some time.

It started innocently enough with eminent domain laws, which subordinated the individual’s property rights to the “greater good” based on the government’s best judgment.

Of course, there’s a long list of abuses of eminent domain.  But until it gets close to home, no one pays attention.

Later, the wars on drugs and terror effectively suspended constitutional due process … allowing the government to seize property first and prove guilt later.

Not surprisingly, there’s a growing list of abuses here also.

But again, so long as it’s the “other” guy and not you, it’s (maybe) okay.

Today, there are global environmental treaties being contemplated which may further erode your private property rights.  Where will they lead?  How will YOU be affected?

We’re attending the Red Pill Expo to find out.

More than just money …

On our 2016 Investor Summit at Sea™ we did a special panel discussion called Health – The Ultimate Wealth … which turned out to be one of the most popular sessions.

After all, what does it profit you to gain a fortune in real estate but lose your health?

This Summit session was born out of a personal crisis … when one of our very own was diagnosed with stage 4 cancer.

This horrible event led to an urgent study of the disease and treatment options, and ultimately to a shocking discovery about alternative treatments which are largely hidden from cancer patients.

We’d heard the stories.  But until we experienced it first hand, it just seemed like so much conspiracy theory.

But it’s not.

And it made us wonder … what other really important things do we not know about?

Standing on the edge …

Our friend and favorite teacher, Robert Kiyosaki, has taught us the importance of looking at BOTH sides of an issue … by standing on the edge of the proverbial coin.

Legendary shock rocker Frank Zappa said it best … “The mind is like a parachute.  It only works when it’s open.”

So we’re heading to Bozeman, Montana on June 23-24 for the Red Pill Expo.  We’re not sure what we’ll hear or whether we’ll like it.

But we have immense respect for both G. Edward Griffin and Robert Kiyosaki.

So when Robert Kiyosaki told us he’s rearranging his vacation to be in Bozeman, that was good enough for us.

Besides, the worst thing that happens is we’ll see a beautiful part of the world, and re-connect with our friends Ed Griffin and Robert Kiyosaki.

And who knows?  We might just pick up another piece of life-changing information or make yet another valuable relationship.

As Smash Mouth sang in All-Star, “You’ll never know if you don’t go.”

Click here now to join us at The Red Pill Expo.


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

Real estate still makes sense in uncertain times …

The world is full of alarming headlines which should concern any alert investor:

Pension Crisis Too Big for Markets to Ignore

The Federal Reserve Could Reduce Its Monstrous Balance Sheet Soon – That Should Terrify Everyone

The retail apocalypse has officially descended on America

We could have pulled up more, but you get the idea.  Scary stuff.

Of course, we’re still on a high after our recent Summit at Sea™ with Robert Kiyosaki, Peter Schiff, G. Edward Griffin, Simon Black, Chris Martenson, and many other really smart people.

If you’re familiar with any of these guys, you may wonder why we’re still excited.  After all, these guys are notorious for decrying the many problems facing the global economy.

But their concerns are only half the story.

There’s also lots of opportunities available … many of which are unique to real estate

So while it may be bad timing to buy an over-priced property hoping to flip it to the greater fool for fast cash, high-priced properties create opportunities too.

If you’re the proud owner of a highly-appreciated property, you have the gift of equity.

Your equity can be repositioned from an over-priced market to a growth market through a cash-out refinance or 1031 tax-deferred exchange.

Consider this headline from the LA Times

Leaving coastal California is a ‘no-brainer’ for some as housing costs rise

The article highlights a couple who are leaving Huntington Beach for Phoenix.

There’s a lot of that going on right now.  People and businesses move around in order to survive and thrive.

The key is to get on the right side of the flow.

Of course, not everyone leaving high-priced areas will want or be able to buy.  And until they do, we’d love them to rent … from us!

So record-low home ownership rates might reflect weakness in the overall economy, but they actually create demand and opportunity for landlords in affordable markets.

There’s ALWAYS an opportunity.

Now this isn’t to say that all real estate anywhere is a good deal.  Or that maximum leverage on every property is the ideal portfolio structure.

But don’t let the doom and gloom of mainstream news dissuade you from developing your real estate investing opportunities.

Real estate is not a fad.  As long as individuals are permitted to own properties, those who do will be wealthier than those who don’t.

Real estate is real.  It’s considered by the world’s wealthy to be a safe haven asset.

So when bombs are dropping, financial markets are volatile, geopolitical tensions are high … capital seeks shelter in the dollar, Treasuries, gold and real estate.

But consider that the dollar is under attack by two very formidable forces … China and Russia. If they succeed, it could cause problems for the dollar.

Besides, the dollar is only a temporary hiding place for frightened capital.

What about U.S. Treasuries?

Debt denominated in the world’s reserve currency, and backed by the world’s biggest economy and military, tends to attract flight capital.  It’s safer than other debt.

But the U.S. is also the world’s largest debtor … with no apparent plan to stem the hemorrhaging of red ink.

And if anyone eventually creates a strong alternative to the dollar for global trade, especially in oil, then Treasuries could be in real trouble.

A weaker dollar means debt holders will want higher interest rates to compensate for the lost purchasing power.

Hopefully, that makes sense.  If not, think of it this way …

There was a time when you could buy 100 pieces of bubble gum for one dollar.  A penny a piece.

If you loaned someone a dollar, it’s worth 100 pieces of gum.  But if the dollar loses purchasing power, it might only buy 50 pieces of gum … now two cents each.

If you thought that might happen, you’d need the borrower to pay you back two dollars just to be EVEN.  And you’d probably want a little more for your risk.

That extra dollar is “interest.”  And when the currency is losing purchasing power, you need MORE interest to compensate.

Make sense?

The problem is if interest rates rise, bond values drop.  In the interest of time, we won’t explain this now, but grab a calculator and play with numbers until you get it.

So rising interest rates mean a loss of principal for capital placed in bonds.

This makes bonds a scary place to park long-term capital for wealth preservation.

And with next to no yield, safety of principal is really the primary purpose of parking cash in bonds.  No wonder foreigners have been dumping Treasuries.

How about gold?

We like gold.  It’s shiny.  There’s no counter-party risk.  It’s easily convertible into any currency.  It’s been used as money for thousands of years.  It’s survived the rise and fall of empires, currencies and cultures.

BUT … gold pays no yield.  It just sits there like a stack of cash.  And tax law can make it difficult to move in and out of.

Which brings us (finally) to real estate

We’re admittedly homers for real estate.  After all, we’re The Real EstateGuys™.

Still, we think there’s a LOT to like about real estate in uncertain times … like right now.

First, real estate is a tangible, physical asset.  Stock in a company that goes out of business isn’t worth the paper the shares are printed on.

Real estate doesn’t have counter-party risk.  If you park cash in real estate, no one else needs to do anything for the property to have value.  Your asset isn’t someone else’s liability … like an insurance contract, a bank deposit, or a bond.

Of course, if the tenant pays rent, the property becomes MORE valuable.

But what if the tenant doesn’t pay?

With real estate, you can evict a non-paying tenant and replace them with one who does.  Try to do that with a bond.

If a bond issuer owes you money and fails to pay, you can’t just replace them with someone who will.

The debt just goes bad … and you lose.

We could go on.  But you get the idea.

Real estate was valuable a thousand years ago, and it’s probably going to be even more valuable a thousand years from now … especially as more people compete over less land.

So the question isn’t really about real estate.  It’s about how much YOU will own.

Until next time … good investing!


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

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