Winners, losers, also-rans, and the clueless …

If you’ve ever been in a crowd when something surprising happened … or even in a game of musical chairs, you know …

… people respond VERY differently when stressed.

Some think, decide and act very quickly. Experience, confidence, coaching, and maturity are all factors.

Then there are those who act quickly … without thinking. It doesn’t always end badly, but it often does.

With the shoot-first-ask-questions-later group, it’s usually immaturity, inexperience, lack of training, arrogance … even desperation … that gets them in trouble.

Others take way too much time to think … and then act too slowly. They often miss the best opportunities or fail to avoid rapidly approaching danger.

This quintessential “paralysis of analysis” is usually rooted in inexperience and lack of training. But pride and extreme fear of failure is often the biggie.

And of course, they’re the folks who completely freeze under pressure.

They can neither think nor act … they’re the proverbial deer in the headlights … suffering emotional and intellectual overload.

These folks are often in denial … using avoidance and reliance purely on hope as their primary strategy … and abdicating personal responsibility for their results.

Which are YOU?

It’s a hard question. We all want to be Joe Cool … calm, confident, collected, decisive … taking effective action under pressure.

Yet we all have our limits. And sadly, we don’t often discover them or work at expanding them until we fail under fire. Not good.

This is a VERY timely topic because in case you hadn’t heard … the world’s economy and financial system is under EXTREME stress right now.

Some of it is likely to roll downhill onto Main Street real estate investors. So if you’re not stressed yet … get ready.

NOW is a really good time to look honestly at your own investing and emotional IQ …

… not based on your goals, aspirations, ideals, or vision … but rather on your actual history of performance under pressure.

If you’re younger, you may not yet have a resume of stressful investing or business experiences to reflect on.

So use what you have … experience in school, sports, games, and even relationships (they’re stressful!) … to find clues into your psychology.

It can be humbling. But it’s an important exercise.

It’s well known by those who study the emotional side of investing … the art of managing fear, greed, procrastination, and arrogance …

… successful investors are able to act decisively and diligently in times of extreme stress.

That’s because they’ve learned to stay level-headed, think clearly, rely on data and expert advice.

Those who FAIL to keep their cool under pressure usually only win small (if at all) … often lose (often big) …

… and sometimes aren’t even in the game at all … missing opportunities like a little-leaguer swinging against a big league pitcher.

There’s a lot of shift happening right now.

And with a polarized election season now added to the mix, it’s about to get a whole lot shiftier … and emotional.

Our friend Blair Singer says …

“When emotions run high, intelligence runs low.”

Your mission is to remain aware, prepared and rational … so when threats and opportunities pop up, you’re able to act wisely and decisively.

Easy to say. Sometimes hard to do. Yet VERY important to work at nonetheless.

In tumultuous circumstances, it’s natural to want to stop, sit down, or cling to anything or anyone familiar in search of stability.

Sometimes that’s smart. After all, there’s a reason money is moving into real assets like metals and real estate.

But it’s not smart to cling on to obsolete strategies, paradigms, or methods. As things change, you might need to change also.

How do you know what to think and do?

One of our strategies is to watch experienced investors … especially those with access to great advisors and quality research.

That’s why we noted billionaire Sam Zell’s and Warren Buffett’s moves into gold.

You may or may not be interested in gold … but the overt and implied reasons behind big money moves contain clues …

… about the economy, financial system, currency, and interest rates.

All investors, real estate and otherwise, are wise to pay attention to those things.

But while gold and real estate are both considered “real assets” … they are also very different.

Real estate is the opposite of a commodity or an asset class. It’s not uniform in all places. Every property is unique right down to the address.

Yet even seasoned real estate investors tend to think about real estate only in the context of their niche and markets.

If you’re into apartments, that’s what real estate is to you.

Or if you’re into office buildings … or retail … or farmland … or single-family residences … that’s what real estate is to you.

Of course, real estate is also more than a niche …

If you’re into residential real estate in New York, you’re having a certain kind of experience right now.

But if you’re investing in residential real estate in JacksonvilleCentral Florida or Phoenix, you’re having a VERY different experience than those in New York.

Overall, residential real estate … especially housing … is red hot. Housing starts are upHomeownership in the US soars to its highest level since 2008.

But that doesn’t mean every house in every market is on fire. Some are. Some aren’t. Some for good reason. Others … not so much.

It’s the ambiguity of real estate which creates the opportunity. And when shift happens, pockets of opportunity and disaster open up.

The important point here is real estate is NOT an asset class … and as things shift, there will be winners and losers.

So back to billionaire watching …

Reuters reports … sovereign wealth funds are re-thinking once-reliable real estate.

“The COVID-19 pandemic has forced sovereign wealth funds to think the previously unthinkable.”

Perhaps the same thing that happened to Warren Buffett and his position on gold.

“ … the funds are retreating from many of the real estate investments that have long been a mainstay of their strategies.”

“… shifting … funds increasingly investing in logistics space, such as warehousing, amid a boom in online commerce during the pandemic, while cutting back on deals for offices and retail buildings.”

Such shifts in behavior can have seismic effects on the global real estate market …”

Of course, if you’re investing in Main Street self-storage centers or mobile-home parks … you’re likely well-insulated from the “seismic effects” created by the equity repositioning of these behemoths.

But while their moves might not affect you … and you may not emulate WHAT they do … you can still learn from WHY they’re doing it.

They’re responding to the STRESS of COVID-19.

Do you think these behemoths think COVID-19 and its ramifications will pass quickly and the world will soon be back to business as usual? Or not?

After all, Buffett backtracked on one of his most outspoken positions and pulled a page out of Peter Schiff’s playbook … dumping dollars and buying gold.

Similarly, these sovereign funds are shifting HUGE long-term holdings from certain real estate niches (the projected “losers”) into others (the projected “winners”).

As shift happens bigger and faster, winning will require more intelligence and greater emotional control.

If you’re not already diligently developing those things … it’s probably a REALLY good idea to get started soon.

Notice that the big boys aren’t taking a Wait and See approach, but rather they Think and Do. That’s a clue.

Meanwhile … what’s clear is the world is changing quickly … the big boys are making their moves … and old paradigms are being re-evaluated.

Our experience, both good and bad, tells us the informed, level-headed, rational, decisive investors will most likely be the biggest winners.

Think and Do is better than Wait and See.

Six valuable lessons from Warren Buffett’s shocking move …

Mega-billionaire investor Warren Buffett made big news recently when he made a move into gold mining shares … while dumping big banks and Goldman Sachs.

This surprise move is notable for several reasons and there are important lessons and actionable insights for Main Street real estate investors.

While we could dive into how this move is being construed by some as a vote of no confidence in the U.S. dollar in favor of gold …

… we’ll focus today’s muse on 6 key lessons from watching Warren work.

 

Lesson #1: Always pay attention

It’s indisputable that Buffett is a brilliant big-time billionaire investor. So anything he says or does is worth dissecting.

Buffett is a voracious reader … and we’re pretty sure it’s not People Magazine or GQ.

He’s diligent to read to acquire information, knowledge, news, and views related to money, markets, economics and the politics affecting all of them.

No doubt he’s looking for clues to help see the financial future before it’s here. As every investor should be, he’s trying to get in front of a wave to wealth.

He knows just ONE great idea can be worth a FORTUNE … literally.

 

Lesson #2: Keep an open mind

One of Buffett’s more notable investment philosophies has been his criticism of gold. He’s on record saying he has zero interest in owning it.

But apparently, Buffett appreciates the obvious trend in gold … and presumably believes the drivers underneath gold’s rise are sustainable.

Of course, we think this is something EVERY investor should be watching … even if they never own a single ounce.

As we’ve discussed MANY times, gold’s pricing reveals a lot about the future of the dollars we all earn, save, borrow, invest and measure wealth by.

Of course, everyone wakes up to what’s “apparent” at different times.

Often, the farther your prejudices and paradigms are from current realities … the longer it takes to see change. We’re all guilty of it.

As we pointed out last year, fellow mega-billionaire and big-time real estate guy Sam Zell lost his gold virginity last year.

We have no idea if Buffett’s disdain for gold stopped him from seeing it sooner … or if Zell’s “real asset” mentality helped him see it sooner …

… but based on the price action since Zell got in, it seems Zell’s timing has been better.

In any case, it’s important to remember … the world sometimes changes in ways that require shifts in both paradigms and investment philosophy.

Dogmas are fine if you’re lonely and need companionship. But investing often requires a healthy dose of pragmatism.

Sometimes, as the world changes … so should you. At the very least, it’s wise to keep an open mind.

 

Lesson #3: Adapting to opportunity doesn’t mean abandoning your principles

Buffett is a patient, principled, disciplined investor.

He looks for undervalued, profit-producing, well-managed enterprises. He doesn’t speculate on price.

Like a smart real estate investor, Buffett focuses on cash flow … knowing cash flow creates real equity.

And he’s quite willing to sit out hot-money-induced rallies.

In other words, Buffett doesn’t chase the market. Nor does he jump on bandwagons simply because everyone else is.

Of course, this is precisely why his move into mining shares and away from banks is so encouraging to gold-bugs … and concerning to dollar hawks.

After all, if Buffett is getting into metals and out of dollars, then there must be solid fundamentals supporting the rally in gold … and the reciprocal fall of the greenback.

But it’s notable that Buffett didn’t buy gold itself. Rather, he bought shares in a well-established gold mining company.

By choosing a miner over the metal, Buffett is investing in a profit-producing enterprise … one he presumably considers undervalued but well-positioned for the market dynamics he anticipates.

So Buffett is adapting to market dynamics, but still running his game.

Smart. Principled. Disciplined.

 

Lesson #4: When Mega-Billionaires talk (and act), you should listen

Billionaires aren’t always right … and you may not agree with them. But they’re certainly qualified to have an opinion worth considering.

Warren Buffet, Sam Zell and Ray Dalio are three legendary mega-billionaire investors … and their words and actions are signaling SERIOUS concerns about the dollar.

Of course, our mere mega-millionaire friends like Peter Schiff and Robert Kiyosaki are singing out of the same songbook.

We’re not sure how many people screaming fire it will take to trigger a stampede to the exits … but the alarms are getting louder and more intense.

(Sniff, sniff …) Do you smell something burning???

 

Lesson #5: Better to be fashionably late, than completely miss the party

Buffett didn’t fail to make his move just because he’s a little late to the party.

While we certainly understand the concern and wisdom of thinking twice before jumping on a bandwagon at record price levels … mega-trends move slowly.

And once you see one … even if you’re late … it doesn’t matter what happened before. The past is cast.

What REALLY matters is whether whatever caused the move still exists and is likely to create more of the same going forward.

Even at record high dollar gold prices, Buffett apparently sees a solid, shiny future.

Of course, we’re not trying to persuade you to purchase precious metals. That’s your personal prerogative.

Our point here is that arguably the most famous and respected investor of our time is making moves that teach timeless principles that apply to investors of all types … including real estate.

And they also happen to affirm the significance of concerns about the intense pressure on the dollar 

… which of course, impacts everyone, including real estate investors.

 

Lesson #6: Assets which don’t produce income aren’t really investments

Lack of yield has been Warren Buffett’s core objection to gold.

So it’s not a surprise Buffett is choosing to invest in mining companies over buying the gold itself.

Robert Kiyosaki has been making the cash flow argument for decades.

Kiyosaki says the definition of an asset is something that puts cash in your pocket. In other words … a true asset is one that cash flows.

Notably, Kiyosaki also has been saying … and LONG before Ray Dalio recently did … that cash is trash.

Yet, unlike Buffet, Kiyosaki is a BIG proponent of holding gold. Not as an investment (no cash flow) … but as money (savings).

Clearly, Kiyosaki makes a distinction between currency (cash) and money (gold).

And no less than the legendary J.P. Morgan (the man the institution is named for) told Congress in sworn testimony …

“Money is gold and nothing else.”

(You can read it yourself on page 5 of this transcript)

So money, cash, and investments are THREE different things as far as Kiyosaki is concerned. Makes sense to us.

But back to Buffett …

We’re guessing Warren Buffett views gold as simply a widget people like to buy … like furniture or houses … without any expectation of income.

Buffett also owns an $800 million stake in Fruit of the Loom. We doubt he considers underwear an investment.

So just as real estate investors like Kiyosaki buy properties for cash flow, Buffett buys businesses that cash flow … BUT …

… to be bullish on a business, you must believe their product will have durable and growing demand … along with a sustainable competitive edge.

So while Buffett may not like gold as an investment, he apparently likes it as a product. And who can blame him? The demand is big and strong.

A growing number of people and institutions …including central banks … consider gold an alternative to currency and bonds as a liquid reserve.

That could be Lesson #7.

But whether YOU think gold has any role to play in your personal portfolio, Buffett’s surprising move contains a LOT of lessons and insights all investors can learn from.

Lessons from a legendary billionaire real estate investor …

Even if you’re a die-hard cash flow investor … more intent on collecting properties than flipping them … it’s still important to pay attention to market cycles.

After all, though you might not plan to “sell high”, it’s sure nice to “buy low”.

Besides, “buy and hold” doesn’t mean you’re not harvesting equity when conditions are ripe … which is usually closer to a cycle top.

So, what is a “cycle”? Why do cycles happen? And what do they look like?

Maybe obviously, cycles are the ups and downs of prices or economic activity. And they always seem so obvious when charted after the fact.

Of course, cycles are hard to see when you’re buried in the weeds of the here and now. That’s why it’s smart to listen to seasoned investors.

Economic cycles … those sometimes severe and shocking ups and downs … happen for a complex variety of reasons … but are rooted in a fundamental pattern of action and over-reaction.

Think of it like a car fishtailing on an icy road …

It starts with a sudden acceleration or braking. Then a cascade of exaggerated actions and reactions take place … with lags in between … as both driver and vehicle strive to find an equilibrium and get back in sync.

Skilled and experienced drivers keep their emotions in check …

… calmly making proven moderate adjustments to quickly regain control and get the vehicle pointed safely in the right direction.

Of course, that’s just one car and one driver.

In a professional race, it’s a cohort of highly skilled drivers. In your daily commute, it’s a diverse collection of amateurs.

In financial markets, there’s an eclectic mob of professional investors, politicians, bankers, business executives, and upper-middle-class workers …

… all subject to greed, fear, and ego.

It’s amazing there aren’t bigger market wrecks more often.

The tell-tale sign of a cycle top is when everyone has piled in … and the prevailing belief is the good times will never end. But then they do.

Professionals recognize this and get out of the way and wait.

There’s an old investing adage attributed to some fellow named Rothschild …

“The time to buy is when there’s blood in the streets.”

Hmmm. Makes you wonder how much money you’d make if you could find a way to trigger such a bloodletting? But that’s a discussion for another day …

For mere mortals like us, it’s simply a matter of watching events unfold … and getting in position to move in when others are moving out.

Of course, you don’t want to “catch a falling knife” … another investing adage which refers to buying a failing investment.

So just because everyone’s selling doesn’t necessarily mean you should be buying. Sometimes there’s a reason an asset goes “no bid”.

Cheap doesn’t mean bargain. There’s no guarantee that something cheap won’t go to zero.

Of course, with tangible assets like real estate, the “zero” scenario is less likely.

Still … when leverage is involved, equity can most definitely go to zero … even if the property doesn’t.

How do you know the difference between an opportunity and a trap?

For clues, we watch smart, seasoned investors like Sam Zell. Fortunately, Sam’s come out of his shell, so he’s appearing more often in media to share his immense wisdom.

So, when we saw this headline pop up, we took time to listen to what mega-billionaire real estate investor Sam Zell has to say …

Sam Zell Says He’s Buying Distressed Oil Assets During the Slowdown
Bloomberg, 11/14/19

What’s nice is there’s a video and you can hear it straight from Sam himself.

Like most brilliant people, he says a lot in a few words. You can watch for yourself, but in short, Sam sees TEMPORARY distress in oil assets. And that’s a GOOD thing.

Now we’re not saying you should invest in oil, although there are some compelling reasons to consider it right now.

But oil is a sector where Sam Zell sees opportunity. However, the lessons are less about oil and more about how Sam recognizes and reacts to market conditions.

Here are some of our key takeaways from Sam Zell’s comments …

Look ahead and anticipate the next boom or bust … and react NOW, not after the fact. In other words, be proactive and get in front of opportunity as it develops.

Always pay attention to the supply and demand factor.

This is a common theme any time Sam Zell talks about how he evaluates opportunity. When supply and demand get out of sync, prices can rise or fall disproportionately. This “gap” creates attractive buying or selling opportunities.

Zell obviously doesn’t think demand for oil is going anywhere soon, even though there’s a temporary over-supply driving prices down.

It’s these “low” oil prices that are creating issues for oil producers … and creating opportunity for investors like Zell.

That’s because, as we’ve noted before, there’s a lot of debt in the oil sector which was put in place when prices were higher.

And just like a real estate investor levering up a property during peak rents … when rental rates fall, debt can go bad fast … creating an urgent demand for cash.

Cash is king in a crisis.

It seems obvious. But it’s hard to sit on “idle” cash when everything’s booming. Yet legendary investor Warren Buffet is sitting on over $120 billion cash right now. Maybe there’s a reason.

Real assets cash flow.

Zell mentions he doesn’t lend. He buys assets. And if you listen carefully, he talks about how cash strapped oil producers are selling cash flow. That’s what Zell appears to be buying.

There are probably many more lessons. Sam’s a fun guy to study. Unlike Buffet, Sam Zell is fundamentally a real estate guy.

And as we learned from Ken McElroy in the wake of the 2008 downturn, the energy sector … and oil in particular … is a huge and important driver of economic strength in several U.S. markets.

So for that reason alone, oil is a sector real estate investors should watch. Right now, oil is energy, and energy is fundamental to all economic activity.

Meanwhile, remember that in both up cycles and down cycles, there are ALWAYS opportunities in real estate.

That’s because every regional market, neighborhood, and individual property is unique … there’s often a lot of room to negotiate a profitable win-win …

…and there’s much a smart investor can do to proactively add value without needing to depend on unpredictable external factors.

We think it’s safe to say that demand for real estate, like oil, is probably not going away anytime soon … no matter what’s going on in politics or trade.

Just be careful to use financial structures you can live within both up and down cycles.

A reality check you can cash …

If you’ve been around awhile, you know there are optimists, pessimists, and realists.

Optimists see the upside and sunshine in everything.  They’re chargers and they’re not afraid to take bold … even impulsive action.

Of course, optimists sometimes run full-speed into a brick wall they COULD have seen, but chose not to … because it didn’t fit their worldview.

Still, if you take enough shots on goal, you’re bound to score eventually … so there’s something to be said for unbridled optimism.

Then there are the pessimists …

Pessimists see the dark and down-side in everything.  There’s no amount of upside that can outshine the enormous list of every possible thing that might go wrong.

Pessimists are pros at predicting problems … including many that never happen … and saying “I told you so” when things do go wrong … and worse, are often quite content to sit “safely” on the sidelines doing nothing.

Of course, you can’t win if you don’t play. 

But when your definition of winning is “not losing” … for those who see mistakes as devastating failure rather than valuable learning opportunities … that’s okay.

But perhaps there’s a productive middle-ground …

Multi-billionaire real estate investor Sam Zell says his strength is his ability to see the downside in a deal … and move forward anyway.

Zell says everyone can see the upside.  This doesn’t take any special skill or fortitude … except perhaps to keep believing after losing repeatedly.

But to soberly acknowledge the risks … and then find a path to proceed based on probabilities and a reasonable risk-adjusted return … THAT’s Sam Zell’s billionaire super-power.

Sam Zell is a realist.

We like listening to billionaires.  And we’re careful to listen to people both inside and outside of real estate … especially those who manage mega-amounts of money.

These big-time money managers have the time, the smarts, the resources, and the responsibility to gather lots of data and opinions, think long and hard, and then make great decisions more often than not.

Billionaire Jeffrey Gundlach is founder and CEO of DoubleLine Capital, which is a huge investment firm. 

Gundlach’s a renowned expert in bonds and has been recognized as one of the top 50 most influential people in the world by Bloomberg Markets.

Of course, real estate investors should always pay close attention to the bond markets.  The bond market is WAY bigger than the stock market … and directly impacts the cost and availability of money and mortgages.

More importantly, bond investors are arguably the most astute observers of the economy, the Fed, the dollar, and the politics affecting prosperity.

So when we saw a recent Reuters headline reporting on Jeff Gundlach’s comments about the economy in a recent investor call … we thought it worth noting.

“’Nominal GDP growth over the past five years would have been negative if U.S. public debt had not increased,’ said Gundlach.”

“ ‘… the GDP … is really based exclusively on debt – government debt, also corporate debt, and even now some growth in mortgage debt.’ ”

Wow.  We’d call that a reality check.

Think about that.  Five years of “growth” in a decade long “recovery” is really just a bunch of borrowed money fluffing things up.

That’s like using your credit card to remodel your house, buy a new car, and take a fancy vacation.  Your friends and neighbors think you’re prosperous.  But your income didn’t really grow … just your spending.  

Of course, if you’re using debt for productive investment … where investment returns exceed the cost of debt … then you could make the argument going into debt is smart.

That’s like using your credit card to buy new tools, remodel a property, hire a lot of workers, and then rent the property out for a profit.

Time will tell if enough of the new debt generated will be productive enough to pay for itself and add to real GDP.  Right now, according to Gundlach, it’s still net negative.

Meanwhile, we stay with our long-held belief that it’s probably wise for real estate investors to focus on niches and areas which hold up well or are more attractive in weaker economies.

It doesn’t take much smarts to do well in a booming economy.  A rising tide lifts all boats.  The biggest risk is getting sloppy and not being ready for a slow down.

But in any economy, even recessions, rich people tend to fare well. 

Of course, it’s hard to collect residential rents from the affluent.  But resort and medical are two areas where affluent people will continue to spend … even in a stagnant economy.

For working class folks and their employers … low-tax, affordable markets with good infrastructure, nice quality of life, and a business-friendly environment will likely continue to grow at a disproportionate rate.

A realist sees both the opportunity and the risks … then finds a path forward.

And for all the pessimists, here’s another reality check …

Check out this list of GDP growth indexed to notable events, including wars, depressions, recessions, and a variety of crises.

Take a look at it and ask yourself if there’s any point in the history where you wouldn’t wish you bought more real estate 20 years earlier.

Real estate is fundamental to human existence.  As long as there are people, there will be demand and opportunity in real estate.

So watch for clues in the news … to both find opportunity and to get reality checks from unbridled optimism … but don’t let the fear-mongering put you on the sideline.

Sometimes the biggest risk is not taking one.  Be bold.  Be smart.  And stay connected to people and ideas that expand your thinking and possibilities. 

Until next time … good investing!


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What this legendary real estate investor is buying NOW …

Even though most of us will never become billionaires, it’s sure fun trying.

But if we want to have a chance of making it BIG, it’s probably smart to watch and listen to those who’ve actually done it.

After all, as Tony Robbins says, “Success leaves clues.”

To which the Godfather of Real Estate, Bob Helms, adds … “You don’t need to give natural childbirth to a good idea … you can adopt!”

So when multi-billionaire real estate investor Sam Zell has something to say, we pay attention and take notes.

In a recent appearance on Bloomberg News, Zell reveals what he’s doing right now and why.  It’s a short clip, and you can watch it here.

There are some great pearls of wisdom to glean … and if you’ve been followingThe Real Estate Guys™ for a while, some of them will sound familiar.

But that’s not because we’re super smart.  It’s more because we’re well- informed from spending quality time with lots of really smart people.

Sam Zell is buying gold … for the first time in his life.

We think that’s REALLY interesting.

Of course, we’ve been following gold for quite some time … for a lot of reasons.

So while it’s interesting that Zell is buying gold for the very first time in his long and uber-successful investing career … what’s even MORE intriguing is WHY.

In the interview, Zell offers up two reasons.  One is obvious.  The other is more subtle … and leads to some even more subtle lessons.

All this from a guy who wrote a book titled Am I Being Too Subtle?

First, Zell says he’s buying gold because of the supply and demand dynamic.  He overtly states he sees gold supply constrained going forward.

It’s obvious from Zell’s comments that it’s important to understand supply and demand when investing in anything, because …

When supply is low relative to demand, there’s opportunity.

Yes, we realize that’s Investing 101.  But it’s also a GREAT reminder that even at the billionaire level, successful investing is based on basic, timeless concepts.

However, there’s MORE to be gleaned from Zell’s comments about gold …

While he openly explains that he sees the supply being constrained, he onlyimplies his confidence in persistent demand for gold.

 After all, if supply drops … but demand drops too … there’s no imbalance, and therefore, no opportunity.  Zell’s too smart to miss that.

So Zell must see gold demand holding … or increasing.

That means the supply and demand dynamic in gold is SO compelling that billionaire Sam Zell is buying gold for the FIRST time in his EPIC career.

That’s telling in and of itself.  But wait!  There’s more …

In addition to constrained supply combined with persistent and growing demand going forward … Zell must think the opportunity in gold is quite good right now relative to other investment options.

Which begs the question …

What’s different in TODAY’s world to push the prospects for gold so high up Sam Zell’s priority ladder?

After all, he’s been around a LONG time … through stock market crashes, recessions, financial crises.  What’s different NOW that makes gold alluring? 

That’s a topic too big for this commentary … and our limited brains …

… but it will be a hot topic of discussion with gold experts Brien Lundin, Dana Samuelson and Peter Schiff aboard the upcoming Investor Summit at Sea™.

We’re guessing part of the answer is wrapped up in Sam Zell’s second subtle comment …

Sam Zell is buying gold as a “hedge.”

Hmmmm … that’s interesting.   A hedge against what?

Investopedia defines a hedge this way …

“A hedge is an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security.”

Well, THAT’S interesting.

So Zell is using gold to “reduce the risk of adverse price movement in an asset.”

And he apparently considers gold to be highly useful as “an offsetting position in a related security.”

Which begs yet another question …

What asset / related security is Zell worried about … for the first time in his long and illustrious career?

Our guess is it’s the U.S. dollar.  In fact, we’d bet a beer on it.

And there’s one more clue we think bolsters the argument Zell is hedging the dollar …

Zell is bullish on oil.

 Wow.  What a coincidence …  our recent episode on precious metals was immediately followed with an episode on oil and gas.

Maybe Zell’s been listening to The Real Estate Guys™ radio show???

Um, probably not.

More likely, we’re learning a lot from all the smart folks we hang out with and listen to … and we’re starting to think like billionaires.  We hope so.

So why oil?

Also coincidentally … just a week before the Sam Zell interview was published, we published our weekly newsletter and talked about … oil.

So we won’t take time here to explain why we think oil could be a big story going forward.  You can read our thoughts here.

But this Zell interview affirms what we and many of our big-brained pals have been monitoring carefully for several years …

The dollar is under attack … from both internal and external forces.

So anyone who earns, invests, borrows, lends, or denominates net worth in dollars … most likely YOU … should probably take steps to become more aware and better prepared.

After all, if multi-billionaire real estate investor Sam Zell is hedging against the dollar … it’s smart to pay attention and consider doing the same.

Until next time … good investing!

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Seven lessons for better investing …

With less than 7 weeks remaining in 2018, we’re taking a short break from our obsessive-compulsive perusal of the financial news.

Because with an exciting New Year about to begin … full of hope, challenges, and opportunities … it’s a great time to focus on some important fundamentals.

Lesson# 1:  Invest in yourself first and frequently

Think of the amount of money you put into fixing up a property in the hopes of generating a few thousand dollars of profit or cash flow.

How much MORE important are YOUR education, skills, and network over the rest of your career?

For a fraction of what you’ll spend sprucing up just a single property, you can increase your sales skills, gain more strategic clarity, expand your economic education, and grow your professional network.

Any ONE of those things can pay you back 10x or more in just a few years.  Plus, investing in your education and networks sets you up for …

Lesson #2:  Focus on relationships, not transactions

Sure, we understand you need to do deals … to produce profits … so you can pay the bills and keep investing.  But transactions are really just a by-product of great relationships.

When you put the transaction over the relationship, you risk killing the goose that lays the golden eggs.

And remember, every person you know knows MANY more people you don’t.

So even if the person in front of you isn’t ready to do a deal today, someone they know might be.

This is where YOUR education and network come into play …

When you know things other people don’t, but need to … or when you know people other people don’t, but need to …

… YOU have something of great value to enhance a relationship or work through one contact to reach another.

Most people won’t give you a referral if they think you want to sell their referral something.

But they’ll happily connect you if they think you will HELP their referral.  That’s based on trust, which is based on the relationship.

It sounds so easy … and it is.  But for some reason, most people focus on the small value of the transaction and miss the HUGE value of the relationship.

Lesson #3:  Emphasize mission and values

The old adage says, “People don’t care how much you know, until they know how much you care.”

It’s true.  But it goes further …

People do business with people and brands they trust.  And when you focus on mission and values, and filter all you say and do through them …

… over time, you’ll create a trustworthy reputation.

Of course, a good, trustworthy reputation will attract more people into your life … and that means more relationships, and ultimately, more deals.

Lesson #4:  Build a business and portfolio that works for YOU … and not vice-versa

We’re old enough to remember when Michael Gerber’s now classic title, The E-Myth, was the hot new business book.

But the timeless lessons are as applicable today as ever.

Too many people … employees, entrepreneurs, and investors … do the “two-step.”

They set out to do whatever they can find to make money based on the belief that if they can just make enough money, THEN they can go do what they REALLY want.

The problem is when you don’t love what you do, either you let off the gas and never really succeed …

… or worse, you lose yourself in service to a business, portfolio and lifestyle you don’t really enjoy.

And then you just hold your breath until the day you can sell it or retire on your investments.

Better to ask yourself EARLY what’s really important to you … how you want to live … what you love to do … and then build a business and/or portfolio around THAT.

It’s a harder problem to solve, but you’ll LOVE the answer when you find it.

Lesson #5:  Develop and maintain a clear vision

We all run around with pictures in our mind. How we see the world … how we see ourselves … what we’re working to accomplish.

The challenge for many is the picture is fuzzy.

It’s like driving in the fog.  You have a sense of direction … but aren’t exactly sure how to get there.

You’re feeling your way … scared to go too fast and miss a turn or fall into a ditch.

Yet some people are taking bold action and moving aggressively through life.

What’s the difference?

Clarity.

Bold action takers can “see” exactly where they’re going, what they’re building, and WHY … and that vision inspires and emboldens them to move towards the goals with enthusiasm and confidence.

We say, “When you have clarity of vision, strategy and tactics become evident.”

So when you’re not sure what to do, focus on your vision.  Just seeing the end from the beginning is often enough to tell you what to do next.

Lesson #6:  Always see the downside

Really?  Doesn’t focusing on the negative create paralysis?

Only for amateurs.  Pros are more afraid of what they DON’T see than what they do … because you can’t avoid or manage risks you aren’t aware of.

Billionaire real estate investor Sam Zell says everyone sees the upside.  That’s what they look for and what motivates them to go for it.

But Zell says his success comes from being able to see the DOWNSIDE too …  and then making plans to mitigate it … even if it means walking away.

Pessimists ONLY see the downside and can’t act.  Optimists only see the upside and hope for the best.

We’re pretty sure hope is not an investment strategy. Be a realist and get good at seeing and managing risk.

Lesson #7:  Always pay attention to cash and cash flow

Profit and net worth are important.   Cash and cash flow are essential.

A business mentor of ours once taught us that cash is like oxygen, while revenue is like water, and profit is like food.

You can survive for a long time without profit … if you have revenue and cash.

You can survive for a little while without revenue … if you have cash.

But run out of cash … and you’ll be dead very soon.

Pre-politician Donald Trump once told us it’s always good to have cash in the downtimes. We say, “Cash Flow controls and Cash Reserves preserve.”

So have some liquidity at all times. Write off the lost opportunity cost on the cash as an insurance premium.

And do NOT count on credit for liquidity. We did that once … and it didn’t end well.  Lenders tend to cut off credit when you need it the most.

Bonus Lesson:  Use firewalls to avoid portfolio contagion

Let’s face it.  Some investments are more risky than others.

But if you don’t have firewalls, then just ONE risky investment can implode your entire portfolio.

You might have a solidly built, cash-flowing portfolio of properties, and a high net worth with good liquidity, and hedges against inflation and deflation.

But just ONE lawsuit, or personal loan guarantee on just ONE risky deal, or pulling money out of performing property or business to feed a loser …

… and EVERYTHING goes … UNLESS you use legal structures, mental discipline, and emotional control to isolate risk.

It’s a bigger topic than we have time for here, but we address it in ourIntroduction to Strategic Real Asset Investing webinar.

You can get the webinar as a free bonus when you order the Future of Money and Wealth video series … which is a great primer on several risks ALL investors should be paying attention to right now.

Until next time … good investing!


More From The Real Estate Guys™…

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


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Can you handle the truth?

“You can’t handle the truth!” 

 – Jack Nicholson in A Few Good Men

Neither optimists or pessimists can handle the truth.Optimists refuse to acknowledge the part of reality that’s negative …

… while pessimists can’t see the ever-present opportunities hidden behind the problems.

While we’d rather be optimistic than pessimistic, maybe it’s better to be BOTH.“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.” 

 – F. Scott Fitzgerald 

Here are some thoughts about risk and opportunity from legendary real estate investor Sam Zell …

People love focusing on the upside.  That’s where the fun is.  What amazes me is how superficially they consider the downside.”  

“For me, the calculation in making a deal starts with the downside.  If I can identify that, then I understand the risk I’m taking.   Can I bear the cost?  Can I survive it?” 

You can only take calculated risks if you look carefully at both the upside AND the downside.

Today, the entire global financial system is largely based on “full faith and credit” … primarily in the United States dollar.

And there’s a gigantic investment industry that’s built on perpetual optimism …and a belief non-stop debt-fueled growth FOREVER is actually possible.

Even worse, the entire financial system’s fundamental structure literally REQUIRES perpetual growth to avoid implosion.

That’s why central banks and governments are COMMITTED to debt and inflation … at almost ANY cost.

But as Simon Black points out in Future of Money and Wealth 

History is CLEAR.  Empires and world reserve currencies don’t last forever.

And irredeemable paper currencies and out-of-control debt ALWAYS end badly … at least for the unaware and unprepared.

Optimists can’t see this.  So they take HUGE risks they don’t even know exist.

Pessimists can’t act.  So they miss out on the HUGE opportunities that are the flip-side of the very problems they obsess over.

Robert Kiyosaki stresses the importance of being REALISTS …

… standing on the edge of the coin, seeing BOTH sides … and then being decisive and confident to ACT in pursuit of opportunities while being keenly aware of the risks. 

We created the Future of Money and Wealth to gather a diverse collection of speakers and panelists together … to examine the good, the bad, and the ugly …

… so YOU can have more context and information to make better investing decisions. 

Chris Martenson opens our eyes to the physical limitations of long-term perpetual exponential growth which depends on unlimited supplies of clearly LIMITED resources.

Of course, as these critical resources dwindle, they’ll become very expensive as too much demand competes for too little supply.

When you see nation’s fighting over scarce resources, it’s a sign of the times.

But of course, there’s OPPORTUNITY hidden inside of crisis.

And to seize the opportunity, you must understand it … or it just sits there like a hidden treasure under your feet.

But it’s not just recognizing trends.  It’s also TIMING.  And being a lot early is much better than being even just a little late.

To beat the crowd, you can’t wait for the crowd to affirm you. 

To get timing right, it’s important YOU know what the signs are.

What does it mean when Russia dumps Treasuries and buys gold?  What caused Bitcoin to sky-rocket in 2017?  Why are there bail-in provisions in U.S. banking laws?

Peter Schiff saw fundamental problems in the financial system back in 2006 … and screamed from the rooftops that the financial system couldn’t support the then red-hot economy.

Few listened … then WHAM!  In 2008, the weakness of the financial SYSTEM was exposed … and MANY people were CRUSHED.

Peter insists the REAL crash is still yet to occur … and everything that made the financial SYSTEM weak in 2006 is MUCH WORSE today.

Yet small business and consumer OPTIMISM is at all-time highs.  The ECONOMY appears to be BOOMING … again.  And Peter’s still screaming out his warnings.

The Fed is RAISING interest rates to cool things down.  But history says EVERY SINGLE TIME the Fed embarks on a rate raising campaign it ends in RECESSION.

In Future of Money and WealthFannie Mae chief economist Doug Duncan reveals when he thinks the next recession is coming … and WHY.  We listen to Doug because he’s got a really good track record.

The 2008 crisis exposed real estate investors to the REALITY that what happens on Wall Street, at the Fed, and in the global economy … can all rain down HARD on Main Street. 

Ignoring it doesn’t make it go away.  And you’ll die of old age waiting for the storm clouds to blow away.

There will ALWAYS be risk.  There will always be OPPORTUNITY. 

It’s not the external circumstances which dictate what YOU get.

It’s really up to YOU … and your ability, like Sam Zell, to see both opportunity and risk, so you can aggressively reach for opportunity while carefully navigating risks.

Education, perspective, information, and thoughtful consideration are all part of the formula.

That’s why we created the Future of Money and Wealth video series.

Future of Money and Wealth features TWENTY videos … over fourteen hours of expert presentations and panels …

… covering the dollar, oil, gold, real estate, crypto-currencies, economics, geo-politics, the new tax law …

… PLUS specific strategies to protect and GROW wealth in the face of potentially foundation-shaking changes to the financial system.

Just ONE great idea can make or save you a fortune. 

Future of Money and Wealth might just be one of the best investments you’ll ever make.

To order immediate access to Future of Money and Wealth … 

Click here now >> 


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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.

Forecasts, fallacies and fortitude …

As of this writing, the Fed hasn’t yet announced their economic forecasts or whether they’ll raise interest rates.

The talk on the street says the Fed will raise by 25 basis points (.25%).

History says a recession is coming … because 10 of the last 13 times the Fed engaged in a rate hike campaign, that’s what happened. They’re not particularly skilled at “soft landings”.

The Fed also has a dismal record for economic forecasts. They chronically see sunshine even when clouds are forming. But that’s not why Wall Street pays attention to them.

Day traders, hedge fund managers, and other players in the Wall Street casinos fixate on the Fed … hoping to be on the right side of whatever flow of cash results from anything they do or say.

Their mantra is “buy low, sell high” to generate cash flow. It’s a fast-paced, high stakes game perfect for adrenalin junkies.

It’s also a game which generates brokerage fees, highly taxable capital gains, and big bonuses. So both Wall Street and Uncle Sam love it.

Meanwhile, real estate investors sit off to the side … casually interested in what the Fed does … but much more concerned with collecting rent, watching expenses, and managing cash flow.

Cash flowing real estate is pretty boring. And super sexy. Like a faithful wife or girlfriend.

But if the Fed’s likely hike is signaling a higher probability of recession, what’s a real estate investor to do?

Here are some thoughts gleaned from a Business Insider article quoting legendary real estate investor Sam Zell

“Sure, I’m always looking for unlocked potential … but everybody wants to look at how good a deal can get. People love focusing on the upside. That’s where the fun is. What amazes me is how superficially they consider the downside.

For me, the calculation in making a deal starts with the downside. If I can identify that, then I understand the risk I’m taking. What’s the outcome if everything goes wrong? What actions would we take? Can I bear the cost? Can I survive it?”

Zell also says, “… taking risks is really the only way to consistently achieve above average returns … in life, as well as in investments.”

In other words, success is not about avoiding risk, but rather in understanding, accepting and managing risk … and only taking it on when the upside is worth it and you can afford the downside.

Here are some things for real estate investors to think about in preparing for the possibility of recession …

Consider increasing liquidity

Right now, there’s a lot of equity in both stocks and real estate. If you’ve got excess equity on your balance sheet, it could be an ideal time to convert some of it to cash.

Yes, it’s tempting to be fully deployed in good times. But if things slow down, cash is king. And if asset values fall, the market’s going to take the equity anyway. Better for you to grab it first.

Emphasize durability of cash flow

It’s a lot more fun to push rents to increase net operating income, and you should always look to optimize income. But earn it by delivering better value and not just by riding a hot economy.

If times get tough for your tenants, they’ll start looking for value. When they do, make sure they find YOU at the top of the list.

Look for ways to trim expenses, lock in solid tenants with competitive longer-term leases, and restructure debt with an emphasis on stability.

You may leave a little on the table, but consider it recession insurance.

Gravitate towards affordable markets

If recession comes, businesses and households will be much more aggressive in seeking value.

Once you know you’re competitive in your current markets, consider expanding your portfolio into markets that are likely to be popular with people and businesses looking to save.

Over-priced markets and properties will probably recede. While affordable markets and properties will likely benefit from increased demand.

Watch for “Sea Change”

Sometimes recessions are just bumps on the road of business-as-usual.

Sometimes recessions are part of a much broader transformation.

There are MANY things going on in the world which are far from business-as-usual. Like recessions, they can be unnerving, but they also create opportunity.

The dollar’s future as the world’s reserve currency, technology’s impact on labor, unprecedented global debt, the ascent (and now slowing) of China … are some of the many macro-factors we pay attention to.

Each of these has the potential to change the investing landscape in substantial ways.

Consider this CNBC headline …

‘Made in China’ could soon be ‘Made in the US’

“Contrary to widespread belief, China isn’t the cheap place to manufacture that it once was, and rising costs have been forcing manufacturers to explore new countries to make their goods.”

The article quotes the president of a Chinese textile firm …

“Add in the possibility of a lower corporate tax to as little as 15 percent, as proposed by Trump, and the U.S. becomes a no-brainer for many manufacturers …”

Could hard times in China lead to a resurgence of the U.S. rust belt?

Here’s the point …

Recession in and of itself isn’t necessarily a “bad” thing. It’s an event. In fact, it’s a regularly recurring event.

Recession isn’t necessarily universal or global. In other words, it doesn’t affect all industries, people or locations the same way at the same time.

A recession in one place can lead to a boom in another and vice-versa as people, businesses and money flow to and from challenges and opportunities.

Like winter, a recession is a season. It may not be as fun as the sunshine, but for the prepared it’s not a big deal.

Going back to the wisdom of Sam Zell … acknowledging the reality of the downside isn’t a reason to hunker down and do nothing. Doing nothing has its own downside.

The world is full of very real threats … and that’s GOOD. It creates movement from which pockets of opportunity emerge.

Because, as Sam Zell says “… taking risks is really the only way to consistently achieve above average returns …

Your mission, should you choose to accept it, is to become a well-informed and diligent risk-taker.

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.