Jerome Powell has spoken … now what?

In our last edition, we discussed what gold might be revealing that the Fed isn’t … while waiting to see what Fed Chair Jerome Powell would say to Congress.

But now the great and powerful Powell has spoken … and there are a couple of notable nuggets worthy of an inquisitive real estate investor’s attention.

According to this report by CNBC, the Wizard of the Emerald Printing Press told Congress …

“… the relationship between … unemployment and inflation … has gone away.”

If you’re not a faithful Fed watcher (and therefore have a life), you might not know about the Phillips curve. It’s been a guiding principle for the Fed interest rate policy for a long time.

It goes without saying (but we’re saying it anyway) that interest rates are important to real estate investors.

After all, debt is arguably the most powerful tool in the real estate investor’s toolbox. And interest rates profoundly affect both cash flows and pricing.

Many investors rely on their mortgage pro for interest rate guidance. Most mortgage pros watch the 10-year Treasury. But Treasury prices are strongly impacted by Fed jawboning and open market activities.

By watching further up the food chain you can get more advance notice of the direction of rates … and better position yourself to capture opportunity and avoid problems.

Through their comments, Fed spokespeople … chief among them Chairman Powell … send signals to those in the market who care to pay attention.

Of course, sometimes a little interpretation is needed. In this case, it seems to us Powell is being pretty clear.

The Phillips curve … which presumes that full employment leads to higher wages which leads to high inflation (prompting rate hikes to preempt it) … “has gone away”.

In other words, don’t assume high employment will trigger the Fed to raise rates.

But just in case the message wasn’t clear enough, Powell also added …

“… we are learning that the neutral interest rate is lower than we had thought …”

In other words, there’s a NEW normal in town … and the Fed is abandoning (just like Peter Schiff has been telling us they would) rate hikes and tightening.

But unlike Peter Schiff, the Fed is just now figuring this out.

So the great and powerful Wizard pulled not one, but TWO doves out of his hat.

(For the un-initiated, when the Fed is “hawkish”, it means tightening the currency supply by raising rates … while “dovish” is easing … like quantitative easing … and lowering rates)

It seems the Fed looked over the economic landscape … (and over their shoulder at the real estate guy in the White House) …

… and concluded the punch bowl fueling the longest recovery in history needs to be spiked again.

You might agree or disagree.

But it doesn’t matter what YOU think the Fed SHOULD do. We’re pretty sure they’re not asking you. They’re sure not asking us.

They think what they think. They do what they do. And THEY are the ones behind the curtain with their hands on the levers.

Our mission as a real estate investors (accumulators of mass quantities of debt used to control assets and cash flows), is to watch and react appropriately.

So here’s some food for thought …

Fed “dovishness” usually translates into higher asset prices … primarily stocks and real estate. Equity happens!

It’s EASY to get enamored of equity growth based on momentum (price changes) and not fundamentals (income). Be careful.

Sometimes the Fed loses control or misses a major problem until it rolls over the market.

If your portfolio is anchored with strong fundamentals, you’re more resilient.

Equity is wonderful, but fickle and unproductive.

If your balance sheet is telling you you’re rich, but your cash flow statement doesn’t agree, you’re not really rich.

Read that again.

The key to resilient real wealth is durable passive income. And rental real estate of all kinds is a time-proven vehicle for building durable passive income.

But wait! There’s more …

It’s no secret President Trump wants to weaken the dollar … and has been pressuring the Fed to make it happen.

Based on the Fed’s recent shift of direction, it seems it’s not just interest rates headed down … but the dollar too. The currency war could be about to escalate.

And remember … the dollar has a 100+ year history of losing purchasing power.

So if you’re betting on the direction of the dollar long term … we think DOWN is the safer bet. And right now it seems that what the Wizards are planning.

This is where real estate REALLY shines.

That’s because an investor can use real estate to acquire enormous sums of dollars TODAY (via a mortgage) which effectively shorts the dollar.

Those dollars are used to buy tangible, tax-advantaged, income-producing, real assets which not only pays back the loans from their own income …

… but unlike debt, grows nominally (in dollars) in both income and price as the purchasing power of the dollar falls (inflation).

That’s why we say, “Equity Happens!”

And when it does, it’s a good idea to consider converting equity into cash using low-cost long-term debt, and then investing the proceeds in acquiring additional income streams and assets.

Of course, you can only do that when the stars of equity, lending, and interest rates all align. Right now, it seems they are.

We think last week signaled an important change of direction. And while the financial system is arguably still weak, it’s working …

… so it might be a good idea to do some portfolio optimization while the wheels are still on.

Until next time … good investing!


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Finding stability in an unstable world …

We’re just winding up a multi-part real estate investing webinar series we’re doing for our friends Chris Martenson and Adam Taggart at Peak Prosperity.

The webinar series is called Real Estate Investing for Profit and Safety 

The first episode, The Case for Real Estate, is nearly two hours long and free of charge.  You can check it out here.  If you love it, share it with your friends.  If not, let us know.

Our theme, which we think is an important one, is how real estate creates RESILIENT wealth when strategically located and structured.

Of course, if you’re a seasoned real estate investor … meaning you’ve lived through at least the 2008 financial crisis … you may already be convinced.

Even if you’re in the group who lost a bunch in 2008 (we feel your pain), hopefully by now you’ve realized there were lots of people who not just survived … but THRIVED.

So obviously, real estate wasn’t the problem.

If you’re an active or aspiring syndicator, you may find the series useful for explaining to your prospective investors why real estate is an attractive investment vehicle … and the value YOU bring to them by helping them get in the game.

Of course, for anyone who cares about their financial future, the daily news is full of reasons to look for ways to create stability in their portfolio.

Wild stock market price swings … rampant (seemingly systemic) corruption in large financial institutions … highly uncertain geo-political tensions

… unprecedented levels of government, corporate, and consumer debt … severely underfunded private and public pensions … Social Security

Yikes. 

So there’s a LOT to be worried about … IF you’re betting your financial future on fickle and fleeting asset PRICES.

And with “safe” havens like banks and bonds paying very low to no interest for over a decade, many Mom & Pop investors (and their financial planners) have succumbed to “buy low, sell high” as the means for creating spendable cash. 

Think about that.

“Buy low, sell high” is an investment strategy that tempts amateurs into the rigged casinos to compete with the pros.  

Trading also produces commissions for Wall Street, capital gains for the IRS, and cash float deposits for bankers (who lever it up 10-20x for fat profits so they can afford all those big fines).

And the challenge with “buy low, sell high” is it’s SUPER volatile and unpredictable.  Unless you’re tethered to the news with lightning fast judgment and reflexes, it’s easy to be late to enter or exit the party. 

The “solution” offered Mom & Pop investors is to buy trading software to compete with the pros … 

… or “invest for the long haul in a well-diversified portfolio” because the long-term upward (inflationary) “trend is your friend”.

Thanks to the Fed’s printing press, buy and hold works for boosting your balance sheet.  But it’s only PAPER wealth … unrealized gains.  You can’t spend it. 

To have real spendable money to live on, folks need CASH.

To get it … and avoid capital gains taxes … they borrow (confident in their paper wealth).

Or they liquidate capital (eating “the golden goose”) …. or take on substantial counter-party risk by purchasing higher yielding, riskier bonds.

Of course, if you’re a real estate investor, this is all foreign to you.  It’s a game you don’t play.  But MILLIONS of people do. 

And as baby boomers pile into retirement in a debt-ridden world where low and falling interest rates are a necessity of systemic survival 

… finding inflation-hedged, asset-backed sources of reliable, resilient, high-yield, tax-advantaged income is the Holy Grail. 

While not perfect, there’s nothing better than income-producing real estate to meet this huge and growing need.

Of course, as we often point out, small-time real estate investing is far too troublesome and inefficient for busy or retired folks to take on personally.

That’s why we keep beating the drum for the HUGE opportunity for real estate savvy entrepreneurs to get into the syndication business. 

Syndication isn’t just about making money.  It’s an important industry to help solve some of the most pressing economic problems facing the United States.

In fact, it’s SO important that both the Obama AND Trump administrations took bold action to remove barriers and stimulate the flow of capital into real estate syndications.

THAT alone should tell you something.

You may wonder why the mainstream financial press isn’t reporting on this. 

But think about it …

How many mainstream financial journalists are real estate investors or syndicators?

Not many. 

And who buys all those expensive ads on mainstream financial programs?

Big Wall Street firms.

But whether there’s some grand conspiracy to herd an unsuspecting public into the sheering pens of the Wall Street / banking cartel’s casinos …

… or if it’s just big money using their clout to buy ads and exposure for their products and services …

… it’s clear most Main Street investors don’t understand or appreciate the power of income producing real estate to create resilient wealth. 

But if YOU do, then YOU have a BIG opportunity … both as an investor and as an entrepreneur.

So be careful about getting paralyzed by the daily drama of mainstream financial news … especially when it’s related to real estate.

After all, most real estate commentary on mainstream news is directed at homeowners and people buying home builder stocks.

But when home ownership is down, prices are high, or builders aren’t building and selling as much … it’s all GOOD for landlords.

Besides, no matter what happens economically …

As long as there are people, they’ll need real estate … for homes, offices, food, and distribution centers to get products to consumers.  And people always needs places to relax, play, and heal.

Your mission is to acquire the skills, knowledge, and relationships to build a resilient portfolio …

… whether you manage only your own investments, invest through others, or create a business to help others take advantage of all that real estate provides. 

Time will tell … but it seems the global financial order is in the process of concurrent major disruptions. 

For some it will be traumatic and chaotic.  For others it will be exciting and profitable.  

The difference, of course, depends on awareness, preparation, and effective action.

And if it all turns out to be a lot of hype over nothing … well, better to be prepared and not have a crisis … than to have a crisis and not be prepared.

Chaos or calm, real estate is a historically proven place to effectively build, protect and pass on real, resilient wealth.  Tell a friend.

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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Keeping it real in the face of tariffs and trade wars …

When you trade in highly liquid, lightning fast, electronically enabled casino markets … you watch the news like a ten-foot tailgater at 100 miles per hour.

And that’s who most of the mainstream financial media cater to.

The more fear, uncertainty, drama, and doubt … the better (for ratings).  So they pour fuel on the fire.

The current drama du jour is President Trump’s up and down trade war with China. 

Paper markets are gyrating as nervous traders try to time the trends and skim “profits” from the volatility.  Politicians use every twist and turn as tool to score political points.

Meanwhile, on Main Street …

… folks get up every day and do their jobs, collect their pay, pay their bills, and largely ignore all the drama … most of which they don’t understand anyway (as if anyone really does).

That’s why investing in Main Street is SO different than investing in Wall Street.

Because while stock prices race up and down with every breeze of news or rumor … paychecks and rents remain relatively stable.  Boring.  But stable.

Of course, this doesn’t mean real estate investors can afford to be ignorant, naïve, or cocky.  Real estate’s stability and resilience isn’t invincible.

The pain of 2008 made it very clear – what happens on Wall Street can bleed over to Main Street … rare as it might be.

Fortunately, real estate investors can usually follow the proceedings from a comfortable distance … with plenty of time to react and avoid mishaps.

Besides, more often than not, many of the “doomsday” fears just fade into the archives of “breaking news” that didn’t actually break anything.

So life goes on.  People go to work and pay rent.  Passive income flows.  Equity happens … at least for those who aren’t paralyzed by all the drama.

Sure, we think it’s vitally important to watch macro-trends.  And we do.

Macro-trends provide clues about long-term migration patterns … warnings of systemic breakdowns (credit, currency) …

… and insights about whether any key drivers in our markets and niches of choice might benefit or suffer from whatever’s developing.

But once you’re in a market you like based on macro-factors …

… the real work of real estate investing is building and working with your local team … and closing on deals that make sense and are structured to withstand a macro storm or two.

Once you master this, you’re not just a successful investor in your own right … you also have the potential to become a hot property yourself.

Because even though the Wall Street roller-coaster is exciting for the young and daring …

… after a few harrowing experiences, many Main Street investors would prefer to reach for the brass ring of prosperity from the much calmer merry-go-round of real estate.

When it comes to their life savings, most folks want stability, ease, and an after-tax growth rate in excess of real world inflation.

Ideally, they’d love to simply park their money in a boring bank account and collect a steady stream of interest income.

The problem is it doesn’t look like banks will be paying anything remotely resembling an inflation-adjusted positive yield any time soon.

That’s a big reason why income-producing real estate is very attractive right now … perhaps more than ever.

Of course, real estate investing is very messy and inconvenient to most people.

Wall Street and banks are easier, but at the price of nauseating volatility, minuscule yields, and high taxes … now or in the future.

So when YOU know how to produce predictable, high-yield (after tax) passive income through an inflation-hedged vehicle like real estate … you’ll find more than a few folks willing to invest in YOUR deals.

But whether you decide to fly solo or pilot a plane full of limited partners, real estate remains appealing as a stable investment in uncertain times … perhaps more so now than ever before.

So grab your popcorn and watch all the geo-political and Wall Street drama from a safe distance.

Just be careful not to let all the commotion keep you parked in the garage.

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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Getting in the flow of money on the move …

Investors and their money are attracted to opportunities.  They purchase assets, including properties and businesses, in the pursuit of profits.

That’s probably why YOU are reading this.

It’s why we perpetually peruse the news … looking for clues about where investors, businesses, jobs and money might be going and growing.

After all, where people and prosperity are … demand and capacity to pay for real estate are too.

So when we saw this headline pop up in our feed, we decided to look past the political positioning and see if we could find opportunity …

Jobs Are Booming in Trump Country, But Pay Lags 

Bloomberg, 5/7/19 via Yahoo Finance

“ … the 2,622 mostly rural and exurban counties [Trump] won in the 2017 added jobs at twice the pace as they did under … Obama …”

“Red America overtook Blue America … in 12-month employment growth for the first time in seven years …”

Of course, the article is focused on the political ramifications … which is fine for raising your blood pressure or getting unfriended on Facebook.

But we really struggle with all that red and blue stuff.

When we look out the window from the airplane, we see mostly brown and green.  And when we talk to folks on the ground, it’s true there are different colors … but not blue or red.

Maybe we’re missing something.

In any case, we’re far more interested in discovering the investing opportunities of where “jobs are booming” and why … so we can get in on the action.

The Bloomberg article affirms a trend we’ve been commenting on for some time …

“… the changes are driven largely by a spread of growth to outlying areas typical of the late stages of an economic expansion and a bounce-back in energy production and manufacturing.”

In other words, when people get priced out of expensive areas because of a boom … they move to more affordable areas.

Meanwhile, the resurgences in energy and manufacturing are very important economic drivers to watch.

Energy has been a big jobs driver post-2008 … and continues to play an important role in the creation of domestic jobs.

Meanwhile, the rebirth of manufacturing is affecting some former boom towns whose fortunes fell as American manufacturing went offshore over the last two decades.

It’s no secret President Trump believes the U.S. must re-establish itself as a manufacturing powerhouse.  This makes sense for a guy who made his fortune building things.

What may be less obvious is how Trump hopes to achieve this fundamental transformation of the way America produces prosperity.  But there are clues.

We may or may not agree with Trump’s goals or methods.  But that’s not the point.  What matters is what he’s doing and the effect it’s having.

When we asked then-candidate Trump what a healthy housing market looks like in a Trump administration, he simply replied, “Jobs.”

Of course, back then it was just talk.  Now, just over two years on the job, headlines say …

U.S. creates 263,000 jobs in April as unemployment falls to 49-year lowMarketWatch, 5/3/19

Job openings in U.S. jump to 7.49 million — more proof of ultra-strong labor marketMarketWatch, 5/7/19

While there’s more to the story than we can delve into today, most observers agree those are pretty good numbers.

Of course, to get from interesting to actionable, we need to dig a little deeper …

Our good friend, world-class tax-strategist, CPA and best-selling author Tom Wheelwright wrote this in his recently updated book, Tax-Free Wealth

“ … tax laws … have evolved to become tools of social and economic policy making.”

But this isn’t a anything new …

Way back in 1946, then-Chairman of the Federal Reserve Bank of New York gave a speech and made these shocking admissions …

… taxes … serve … to express public policy in the distribution of wealth and of income … subsidizing or … penalizing various industries and economic groups …

In other words, tax laws move money where the government wants it.

Right now, the tax laws tell us Donald Trump wants money moving to Main Street.

As Tom Wheelwright explains in his presentation at The Future of Money and Wealth, the new tax law makes real estate EXTREMELY attractive for investors.

In fact, many real estate syndicators are having success attracting investors who are just as eager for tax breaks as they are for the profit potential of the deal!

And now that the opportunity zones regulations are becoming more clear (watch for a follow-up radio show on this hot topic shortly) … it’s likely even MORE money will be moving from Wall Street to Main Street.

For a glimpse of what’s coming, we took a look at the Jobs Opening and Labor Turnover (JOLT) report from the Bureau of Labor Statistics (BLS).

Here are some notable highlights … 

“The number of jobs openings increased for total private(+363,000) and was little changed for government.”

“ … largest increases in transportation, warehousing, utilities (+87,000) construction (+73,000), and real estate and rental and leasing (+57,000).”

No surprise there’s a lot of job-creating money going into distribution and related commercial real estate.

What remains to be seen is whether Trump’s tactics will trigger long-term sustainable domestic manufacturing … and the middle-class jobs that come with it.

There’s been some progress, but it takes a lot of capital to create the infrastructure to support serious manufacturing.

But just as the tax law helps attract billions into the shale oil production revolution …

… the Opportunity Zones tax incentives could pull billions into creating the real property infrastructure to rebuild atrophied manufacturing communities.

Money moving from Wall Street to Main Street.  We like it.  And it’s a trend alert real estate investors are watching carefully.

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.


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

The mid-term morning after …

If you’re an American, unless you’ve been in a coma or living under a rock, you know the United States just had one of the most energetic mid-term elections in quite some time.

The day after, both sides are disappointed … and both sides are claiming victory.

One of the advantages of being older is we’ve seen this movie before.

In our younger days, when elections didn’t go our way, we thought it was the end of the world.  Today, not so much.

It doesn’t mean we don’t care.  We do.  And certainly, politicians and their policies have a direct impact on our Main Street investing.

But it’s in times like these we’re reminded of the beautiful, boring stability of real estate.

Because while all the post-election drama and speculation plays out, people still get up and go to work and pay their rent.

And though the Trump-train just got slowed … like Barack Obama before him, big chunks of his agenda got pushed through early … and are likely here to stay for a while.

In other words, it doesn’t look like Obamacare or the Trump tax reform will be repealed any time soon.

More importantly, investors of all stripes … paper and real … now know what the lay of the land is for the next two years.

Early indications (based on the all-green dashboard of Wall Street) reveal there’s cash on the sidelines waiting to see what happened … and now that gridlock is the answer… money is pouring into everything.

We know that sounds counter-intuitive.  But while political activists push change … too much change too fast makes money nervous.

Investors and entrepreneurs need to make decisions about long-term risk and reward.  And when the world is changing too fast, those decisions are harder to make.

Way back in the lead-up to the 2010 mid-terms, we penned this piece about a concept we call “healthy tension.”  Just change the team colors and it’s just as applicable today as it was back then.

The point is that money and markets like gridlock.

At this point, from an investing perspective, it doesn’t really matter if any of us like or dislike what happened … politically.  It’s done.

Now we all just need to decide what it means to us and how to move forward … because life goes on.

So bringing it all back to Main Street …

We’re guessing all the great Trump-tax reform benefits for real estate investors… from bonus depreciation to Opportunity Zones … are here to stay.

And as we said just a week ago …  there’s probably a lot more money headed into real estate.  Nothing about this election appears to change that.

So gridlock inside the beltway means stability on Main Street.

Sure, it might be a little boring.  But real estate investors are used to boring.  And when it comes to long-term wealth building … boring is good.

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.


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

Trade war heats up and America’s Achilles heel

The Art of the Deal meets the Art of War

You’ve probably heard about the escalating trade war between the United States and China.

Maybe you think it doesn’t really matter to you … or you aren’t sure how.

But it’s a story we’re paying close attention to because we think there’s more to the story than meets the eye … with potentially HUGE ramifications.

Here’s a summary of the story in a series of headlines …

Okay, so what? What does any of this mean to a Main Street real estate investor?

Think of it this way …

If this was a military war and not a trade war … and there was a chance a bomb could land on YOU … would you pay attention?

But a bomb isn’t really the best analogy. It’s more like biological warfare.

There are financial diseases which could be unleashed into the financial system … and YOUR portfolio and future opportunities might get infected.

So now it’s not as simple as just watching out for dropping bombs.

Now you need enough expertise to recognize the symptoms of diseases while there’s still time to apply an antidote.

But when you KNOW the threat is real and the stakes are high, isn’t it a top priority to get knowledgeable fast?

In Greek mythology, when Achilles was born it was foretold he would die young.

To prevent this, his mother dipped him in magic water which made him invincible.

But the magic water didn’t coat his ankle where his mother held Achilles over the water, so that small part of his body remained vulnerable.

Achilles grew into a mighty man who survived many fierce battles. But one day, someone figured out his weakness … and shot a poisoned arrow into his heel.

Achilles died from the poison.  Today, the term “Achilles heel” is synonymous with a weakness, which in spite of overall strength, can lead to downfall.

In a trade war with China, is it possible Uncle Sam has an Achilles heel?

And if you’re an investor depending on any aspect of U.S. strength for your prosperity, it’s important to be aware and prepare for a possible downfall.

However, China may not actually be interested in destroying the United States.

Nonetheless, they could well be working on a plan to gain advantage over the U.S. … with potentially severe ramifications for Main Street investors.

We realize most American press is filled with reassuring commentaries about Uncle Sam holding all the trump cards (sorry, we couldn’t help ourselves) …

… and that China’s going to back down in this trade war.

And we’ll concede that might APPEAR to happen. But what if China’s playing a different game?

Consider these quotes from famed Chinese military strategist and philosopher, Sun Tzu, in his classic book The Art of War …

“An army may be likened to water, for just as flowing water avoids the heights and hastens to the lowlands, so an army avoids strength and strikes weakness.”

“Therefore, those skilled in war bring the enemy to the field of battle and are not brought there by him.”

So even if Uncle Sam is more powerful … virtually invincible, as Achilles was … it’s possible for a strategic adversary to strike a victorious blow …

… just like the biblical story of little David taking on invincible giant Goliath.

The counter-argument is that China’s self-interest precludes it from inflicting serious harm on the United States … because China needs the U.S. to buy all it’s stuff.

True … but back to The Art of War 

“ … the best policy is to take a state intact; to ruin it is inferior to this … To subdue the enemy without fighting is the acme of skill.”

“Take advantage of the enemy’s unpreparedness; travel by unexpected routes and strike him where he has taken no precautions.”

And since we’re in the mood for quoting … here’s something we wrote heading into our Future of Money and Wealth conference …

A very interesting book we just finished is Exorbitant Privilege by Barry Eichengreen. He’s Professor of Political Science and Economics at Cal Berkeley.

Eichengreen published this book in 2011, which means he probably wrote it in 2010. Keep this in mind as we share these excerpts …

“What if foreigners dump their holdings and abandon the currency [dollar]? What, if anything, could U.S. policymakers do about it?”

“… it would have to start with what precipitated the crash and caused foreigners to abandon the dollar.”

“One trigger could be political conflict between the United States and China. The simmering dispute over trade and exchange rates could break into the open … American politicians … could impose an across-the-board tariff on imports from [China].”

Eichenberg wrote this at least FIVE years before Donald Trump even announced his candidacy, much less started his Presidency.

He’s basically saying the U.S. dollar could be America’s Achilles heel. One that Uncle Sam may not be taking adequate precautions to protect.

So …. did China “bring the enemy to the field of battle”?

We don’t know.

But as discussed in detail at Future of Money and Wealth, it sure seems there’s a bigger game being played.

For individual investors to understand all this and take appropriate precautions takes an investment of time, money, and energy.

It’s a bit more complex than just watching for big bombs to drop.  And sadly, it’s too much effort for most folks.

So they’ll just hope for the best, and trust the people in charge to have the skills and motivations to do the right thing.

But after hearing Ben Bernanke tell everyone in 2007 that the sub-prime crisis was contained and there’s nothing to worry about … we’re not convinced.

So we’ll close with this final quote from Sun Tzu …

“To rely on rustics and not prepare is the greatest of crimes; to be prepared beforehand for any contingency is the greatest of virtues.”

If you think it’s a good idea to be aware and prepared for the ramifications of what the news is only hinting at …

… consider investing the time and money to watch the Future of Money and Wealth.

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.

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 >> 


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.

Headlines say real estate funds performing well …

Regular followers know we’re news hawks.  We scour the headlines for clues about opportunities and threats facing real estate investors.

We look at the good, the bad, the ugly … and consider things at the micro, macro, geo-political, and systemic level.

Even though we watch a broad range of real estate niches … we tend to look at the world through the eyes of a syndicator.

We think raising private capital to invest in real estate is the single BEST opportunity for real estate investors … and one of the best business opportunities in ANY industry.

So it didn’t surprise us when the following headline popped up on page one ofYahoo Finance, the most visited financial website on the internet …

Closed-End Real Estate Funds Are Performing Well

The real estate market is booming … Not surprisingly … funds that focus on real estate have been posting good numbers …”

A “closed-end fund” just means a fund which raises a specified amount of money, then closes to new investors.

This is different than a typical “open-end fund” like a mutual fund which continually accepts new investors.

Our point today is … 

Mainstream headlines are informing the market real estate is a winner …

…and that individual investors can access real estate through funds … versus taking on the personal hassles of tenants, toilets, and termites.

Of course, the aforementioned article is talking about publicly traded funds, which come with a host of risks most Main Street investors are unaware of.

But if YOU are thinking of investing in real estate through a publicly traded fund, OR …

… if you’re talking to Main Street investors about investing in YOUR real estateprivate placement (syndication) …

… then you’ll find it VERY helpful to understand the risks in public funds.

Publicly-traded real estate funds can be used as gambling chips in Wall Street casinos … just like any publicly traded stock.

This means speculators (gamblers) can short-sell, trade on margin, and use options … all of which add volatility to the share price.

So even if the underlying asset is as stable as the rock of Gibraltar … the share price can bounce all over the place as it’s traded in the casinos.

Of course, if you’re a long-term buy-and-hold paper-asset investor, maybe that doesn’t matter to you … just don’t watch the share prices or you might get nauseous.

But MUCH less understood is the counter-party risk every paper-asset investor faces because of the way paper-asset trading is facilitated.

In short, counter-party risk is the exposure you have when an asset on your balance sheet (a stock, bank account, a bond) which is simultaneously someone else’s liability.

In other words, they own the the asset and OWE it to you.  YOU own an IOU.

If the counter-party fails to perform or deliver … you LOSE.

Most people understand the concept of counter-party risk … but many don’t understand all the places they’re actually exposed to it.

And it’s a LOT more than you might think.

In the case of publicly-traded securities, like closed-end real estate funds, you’re NOT the registered owner … your broker is.

You get “beneficial ownership” through what is effectively an IOU from your broker to you.  The fund doesn’t even know you exist.

Of course, this is all fine as long as the financial system supporting all this is sound.  But in a crisis, if the broker fails, you might end up a loser.

It’s not unlike what happened in the 2008 financial crisis …

In short, individual mortgages … which are great assets to own … were pooled into securities and made into gambling chips in the Wall Street casinos.

Because the “beneficial ownership” of the mortgages changed hands so quickly, it was all facilitated through a system called Mortgage Electronic Registration Systems (MERS).

When the financial system nearly collapsed in 2008, the flaws of MERS were exposed … as the legal documentation required to affirm clean title to the asset wasn’t properly maintained.

Some of the beneficial owners of the mortgages couldn’t prove legal ownership and lost when property owners challenged foreclosure in courts. Huge mess.

So there’s a BIG difference between “beneficial ownership” and actual ownership.  And the difference isn’t exposed until it matters.

Sometimes that’s ugly for investors.

The GREAT news for you and your investors is … it’s NOT necessary to play in the Wall Street casinos to get into a real estate fund.

In fact, we’d argue it’s better if you don’t.

If you’re following The Real Estate Guys™, you’re probably already a fan of real estate and may already be a successful individual property investor.

Maybe you’re considering, or have already started, putting together groups of investors to syndicate bigger deals.

Or maybe you’re tired of being an active investor … and now you’re looking to stay in real estate, but as a passive investor in another investor’s deal.

In any case, it’s important to understand the BIG differences between public and private real estate fund investing.

As an investor in a private offering, you directly own the entity which directly owns the asset.  There’s no counter-party who owes you the shares. YOU own them.

We think when you delve into the differences, you’ll agree private offerings are arguably a MUCH better way to go.

Of course, if you’re interested in starting your OWN real estate investment fund, the timing couldn’t be much better.

Headlines are telling the marketplace real estate funds are performing well.

And when you explain the important differences between public and private funds, we’re guessing you’ll get more than your fair share of investors interested in investing with YOU.

Main Street investing in Main Street … outside of the Wall Street casinos.  We like it.

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.

SWOT are you worried about …

A common adage is “treat your investing as a business”.  

Good advice!  And at first blush, you might think it means …

  • Figuring out your mission, vision, values …
  • Establishing clearly defined goals and objectives …
  • Developing strategies, tactics, processes, policies and procedures …
  • Recruiting, training, and leading a team …
  • Setting up communication and accountability rhythms, and processes for evaluating progress and making adjustments

All true.  But it’s also very important to pay attention to the economic environment you’re operating in.

A popular business planning tool is SWOT analysis … which stands for Strengths, Weaknesses, Opportunities, Threats.

SWOT helps you make better decisions about where to focus time, attention, and resources.

Most amateur investors focus only on opportunity.  They look for it.  They chase it.  They stretch their limits reaching for it.

And sometimes they end up in dangerous deals by not leveraging their strengths, acknowledging their weaknesses, or recognizing external threats.

In Am I Being Too Subtle?, multi-billionaire real estate investor Sam Zell says a big part of his success is the ability to understand the DOWNSIDE … and still proceed.

Most people ignore threats because they’re a downer.  It FEELS better to focus on sunshine.  It’s just not smart.

Risk is gloomy.  It doesn’t sell seminars, books, or video-courses.  And it can chase away an audience.

So investors are under-served by most gurus, media, and pundits because few talk candidly about threats.

Yet it can SAVE YOUR FINANCIAL LIFE.  So we do it anyway.

Besides, the flip-side of most risk is opportunity.  So when you frame looking at threats as searching for opportunities, it’s not so bad.

Part of SWOT is about assessing the environment you’re operating in.

We divide investing environments into four categories … Micro, Macro, Geo-Political, and Systemic.

Micro factors include …

  • The property, parties to the transaction; financing, etc.
  • The neighborhood, local economy; local laws, taxes, customs, etc.
  • The local team … property manager, on-site staff, etc.

Micro factors are where most investors start and finish … because micro factors are easiest to see and handle along the shortest path to getting the deal done.

Macro factors include …

  • Interest rates and factors which drive them
  • Federal taxes and laws
  • Policies affecting job creation, living costs, real wages, consumer and business confidence
  • Economic factors affecting energy, materials and commodities costs, currency strength, etc.

Sure … this is some heady stuff …

And if you’re only going to play small and VERY conservatively, maybe not worth all the effort to watch and interpret macro factors.

Then again … many small investors got killed when the Tax Reform Act of 1987 changed the tax treatment of rental properties.

They probably wish they’d been more aware and prepared.  When things are changing, a “wait and see” approach can be painful.

But if you plan to play big … and especially if you’re going to raise money from private investors … you’ll definitely want to invest in your macro education.

Remember … the 2008 crisis which crushed many unprepared investors started at the macro level … before crashing down on the micro level.

Most micro-players (including us), didn’t see the storm forming at the macro level until the monsoon hit.  Bad scene.

So … how much advance notice do YOU want when something major is lurking on the horizon?  More is probably better.

Geo-Political factors include …

  • Currency and trade wars
  • Oil and energy policies
  • International treaties (trade, land-use, etc.)

Most people hear about geo-political factors in the news all the time … but don’t consider or understand their impact on Main Street micro-investing.

Systemic factors include …

  • The financial system … currency, banking, bond market, etc.
  • The environment … energy, climate, water, etc.

We think systemic factors just might be the BIGGEST threat most investors aren’t paying any attention to.

Yes, it’s a lot to consider.  And maybe you doubt it really matters to your daily real estate investing.

That’s what we thought … before 2008.

Then we found out the VERY hard way these things DO affect Main Street investing … so thinking about them isn’t just for wonky paper asset pundits.

Let’s look at some recent headlines … how they might affect our Main Street investing … and let’s just focus on oil …

Is The Oil Industry Repeating A Critical Error – Oilprice.com 7/14/18

 “ … Wall Street has been subsidizing the consumption of oil on Main Street.”

“… the punishing price decline in oil from 2014 to 2016 … resulted in deep cuts in exploration and development throughout the industry …”

“… there isn’t an oil price … both low enough to avoid economic stagnation …  yet high enough … to prevent a decline in the overall rate of production worldwide.”

Let’s break it down …

Energy is essential to economic activity.  No energy, no growth. Restricted energy, restricted growth.  Expensive energy, expensive growth.  You get the idea.

Energy is a key input into the cost of EVERYTHING.  When subsidies mask rising costs, economic numbers look better than they really are.

Remember …  a strong economy is NOT the same thing as a strong financial system.

Investors make mistakes when they deploy capital based on false readings or temporary circumstances.

Remember what happened to real estate investors who flocked to North Dakota because of the oil boom … a boom only possible because of high oil prices.

When oil prices crashed, so did the North Dakota real estate boom.  Investors only watching micro-factors … and even macro-factors … didn’t see it coming.

Whether it was Saudi Arabia attacking U.S. frackers … or the U.S. directing an economic assault on Russia’s oil revenue … oil prices fell because of what was happening at the geo-political level.

So today, knowing oil prices affect economic growth, consider these recent headlines …

It takes cheap energy to grow an economy fast.  And with the Fed raising interest rates, Trump’s using tax cuts and cheap energy to goose the economy.

He’s got to out-run ballooning deficits and rising interest costs.  Cheap energy … even if only temporary … buys some time.

But cheap energy doesn’t fund the exploration necessary to replace oil being consumed.  Very few people on financial TV talk about this.

That’s why we hang out with brainiac Chris Martenson.  He’s a fun guy … a positive guy … but he’s a realist.  It’s sobering.  Brutal facts can be that way.

At some point, supply and demand take over and prices rise … slowing or reversing economic growth, driving up costs, and probably bankrupting marginal businesses.

Many billions in oil industry debt could go bad.  Remember when sub-prime mortgage debt went bad?

The financial system today is rife with counter-party risk, so bad debt can spread like wildfire through credit markets.

We’re not saying it’s going to happen, but we’re watching.  If something starts to break, we want to see it sooner rather than later.

Of course, we’re also watching oil, like gold, for its role in currency wars.  We remain convinced the dollar will be a major story in the next ten years… or less.

A little spooky.  But pulling the sheets over our heads doesn’t make it go away.

The good news is there are smart people watching all this … and thinking deeply about what it all means.

That’s why we get together with them regularly on our Investor Summit at Sea and the New Orleans Investment Conference.

These are voices mainstream sunshine-sellers don’t promote.  It’s bad for ratings.

But we put together nearly 14 hours of presentations and panels with all the big brains from our Future of Money and Wealth conference …

So if you missed the live event, you can still see and hear what everyone has to say. Click here to learn more.

Smart business people and investors practice SWOT… and invest in growing their education and network … so they can make better, faster investing decisions … in ANY economic environment.

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.

Real estate just got a BIG boost …

Something BIG is happening for real estate … and while it’s not a surprise, it’s a development every real estate investor should be aware of.

Here’s some context …

First, remember real estate investing is essentially a business of managing debt, equity, and cashflow.  

That’s YOUR job.  You can get your property managers and team to handle most everything else.

Equity (the difference between the value and the debt) comes from savings (down payment), the market (value increase), or amortization (pay down of loan).

Cashflow is a function of rental income, operating expenses, debt service, and taxes.

Debt is like the air in a jump house.  When it’s flowing in, it props everything up.  When it stops, everything deflates pretty fast.

That’s why real estate investors (should) pay close attention to debt markets.

The 2008 financial crisis devastated the supply chain of debt into real estate. Mortgage companies failed in droves. We know. We owned one.

Real estate went from too-easy-to-finance to nearly impossible.  Lack of lending crashed real estate prices and created a big mess.  The air came out.

It’s why we became such outspoken advocates for syndication.  There was (and still is) a huge need and opportunity to aggregate capital for real estate.

Banks and Wall Street had been the primary channels for capital aggregation and distribution.  But they were broken.  Main Street needed to be empowered.

The government agreed.

So in 2012, the JOBS Act passed. And since September 2013, regulations are in place which make raising private capital MUCH easier.  We like it.

But while the JOBS Act helps investors raise EQUITY …

… earlier legislation (the Dodd-Frank Wall Street Reform and Consumer Protection Act) actually impedes lending … especially at the local level.

But now that’s changing … and it’s an EXCITING development!

You may have seen this headline …

Trump signs bipartisan bill rolling back some Dodd-Frank bank regulations – Los Angeles Times, 5/24/18

“ … with the key support of some Senate Democrats, the legislation focuses relief on small and medium-sized banks …

 “‘This is a great day for Main Street in rural America, and a big testament to what’s possible when members of Congress put partisanship aside and work together to help our communities grow and thrive,’ [Sen. Heidi Heitkamp (D-N.D.)] said in a statement after the signing.” 

Community banks, which enjoy broad support among Republicans and Democrats, will be freed from Dodd-Frank’s mortgage rules if they make fewer than 500 mortgages a year.”

Even in today’s highly charged political environment, this bipartisan effort shows Main Street real estate is very important to politicians.

The Dodd-Frank rollback aims to improve the flow of money into real estate, which is awesome for real estate investors.

Of course, just because politicians aim at something, doesn’t mean they hit it.  Politicians are notoriously bad shots.

So what do LENDERS think of the Dodd-Frank rollback?

Local bankers say reforms to Dodd-Frank are welcome – Herald-Whig, 6/5/18

“Mark Field, president and chairman of Liberty Bank, said most of the benefits from the recent reforms … involve mortgages.”

“… allows banks to give automatic qualified mortgage status to customers they know if the banks are using their own money for loans.”

“‘Character and knowing people counts for something again,’ Field said.”

This is GREAT news … and although time will tell (after all, this is very recent) … we think it will open up capital flows into real estate.

Of course, as we’ve said before, we think more money will be finding its way into real estate lending.  It’s both inevitable and reassuring.

For individual investors and syndicators alike, this new playing field promises to open up new sources of lending … and terms.

Because even though lending has loosened since the depths of the recession …

… it’s remained tight for borrowers and projects that didn’t fit into the tightly-regulated box created by Dodd-Frank.

Not to get too far in the weeds, but the 2008 credit crisis had its roots in Wall Street’s casino mentality.

In its zeal to create more poker chips, Wall Street cast aside sound lending practices because they could bury the risk in complex securities and sell them to unsuspecting investors.

Wall Street didn’t really care if loans went bad … because they wouldn’t be holding them when it happened.

So Dodd-Frank created strict rules attempting to prevent the bad behavior of Wall Street and big banks.  (Good luck with that.)

We could go on … but the point is that Dodd-Frank took professional judgment out of lending … from EVERYONE … including community banks, credit unions, and other portfolio lenders (those who hold loans instead of flip them).

Even though the financial crisis had its roots in Wall Street, not Main Street … Dodd-Frank took many Main Street lenders off-line.

The Dodd-Frank rollback intends to take the shackles off local lenders.

There’s a HUGE difference dealing with a local lender on a PERSONAL basis … one who’s going to hold the loan … and can consider the many factors which don’t fit into some bureaucratic one-size-fits-all checklist.

And while we need to do more research, a side-benefit for syndicators may be that setting up lending funds might get easier too.

In any case, now that local lending laws are loosening, let’s take a look at moves you can make to take advantage of the changes …

Build relationships with community bankers.  If you’ve only been investing since 2008, this is a funding source you’ve probably ignored.  It’s time to fix that.

Open accounts with community banks in markets where you invest. Establish a personal relationship with the bankers.  It’s a VERY different experience than doing business with a too-big-to-jail bank.  You’ll like it.

Use professional selling skills to find out what the banker’s goals and objectives are.  What makes the relationship a win for the banker?

Present yourself as the IDEAL client for the banker.  Do some deals … even if you don’t really need the money.  SHOW the banker you’re a person of character and capability.  Build TRUST.

It’s even BETTER if you’re a syndicator because you can bring bigger deposits, bigger loans, more transaction volume, and maybe even more referrals.

In fact, one of the secrets of successful syndication is having your individual investors make deposits in the community bank you’re borrowing from.

Go with the flow …

When the rules change, so does the flow of money.  Sometimes it works against you.  Sometimes it works FOR you.

And while there are certainly some long term economic trends every investor … real estate or otherwise … should be concerned about …

… this is a development which should have real estate investors smiling.

We think these updates to Dodd-Frank will work FOR real estate investors … at least those careful to pay attention and take effective action.

Of course, you’ve read all the way to the bottom, so you’re already ahead of the game.

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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