The pension problem is about to get REAL …

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Pension problems also create opportunities for real estate investors.

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

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

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

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

… reasonably consistently achievable double-digit total returns 

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

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

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

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

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

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

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

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

… and we came across a couple of interesting articles …

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

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

Here’s a notable excerpt …

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This makes real estate investors who use mortgages double winners.

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

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

Until next time … good investing!

The BEST investment you can make …

We’re back from what Robert Kiyosaki described as our BEST Summit at Sea™ so far.  It’s hard to disagree.  And no, this isn’t a pitch for the Summit.

In fact, alumni already grabbed about 40% of the available spots … before we even got off the ship!

While there’s no way to describe the magic of the Summit, there are a few valuable ideas worthy of mention.

Developing social capital

New Summit faculty members Chris Martenson and Adam Taggart (The Crash Course and Peak Prosperity podcast) shared the importance of “social capital.”

After a compelling presentation about the inevitable collision between exponential growth and finite resources (a fascinating topic!), Martenson and Taggart suggested your prospects for prospering will rely heavily on your network of relationships.

That’s true whether a crisis strikes tomorrow or 100 years from now.

And it’s not just knowing a large quantity of people … it’s who those people are and how well you know them.

But even if a crisis NEVER hits, it’s wise to invest in quality relationships.

Surprise faculty member, Ken McElroy often says, “If you want to change your life, change the people you hang around with.”

This year, we had several young people take advantage of our Young Adult Program.  It allows a limited number of young adults ages 18-25 to get into the Summit for only $2,500.

More importantly, it gave these young people close personal access to many highly successful investors and thought leaders.

Our other surprise faculty member, Simon Black of SovereignMan.com joined Kiyosaki and McElroy for a one-hour private session with these young adults.

Simon said it was the most powerful experience in his four years of being a part of the Summit.

Going forward, we’re dedicating up to 30 seats on next year’s Summit to our Young Adult Program.

We believe investing in young people is one of the BEST investment we can make.  And we’re thrilled our super-star faculty agrees!

But whether you’re young or not-so-young, if you’re interested in taking your education, business and investing to the next level, it’s wise to put concerted effort into developing good relationships with great people.

Summit faculty member and legendary sales trainer Tom Hopkins (How to Master the Art of Selling) reminded us the key is being of service to others.

So it’s not what you GET that matters most … it’s what you GIVE.

That’s easy to say, but often hard to do when our own urgent needs are clamoring for attention.

Tom says always remember, “Use money and serve people.  Don’t use people and serve money.”

A billion-dollar boo-boo

Consider the recent flap over United Airlines handling of an overbooked flight.
It’s a case study in forgetting the MAIN thing.

Unless you’ve been off-planet for the last few days, you know a ticketed customer was forcibly removed … literally dragged … from a plane because the airline wanted his seat to reposition their own staff.

The details are all over the news, but the bottom line is the airline decided to “save” money by not raising the bid to buy people off the plane, or making other (presumably more expensive) arrangements to get their staff where they needed them.

In short, they served money and used people.  Oops.

Of course, the horrific decision and resulting disastrous PR resulted in a nearly BILLION dollar loss of market value.

And that’s probably just the beginning of losses which will include customers, employees … plus money spent on public relations, training, and let’s not forget … LEGAL.

It’s shocking a mature business could be so short-sighted.

Relationships are the REAL asset

The beauty and danger of real estate is it’s not traded in impersonal, highly automated exchanges.  It’s a very PERSONAL business.

If you’ve got a good reputation and great relationships, real estate is actually pretty easy.

If your reputation is poor and your relationships are weak, you’re almost always looking at leftovers.

But it’s not just about deal flow … or even raising money.

Relationships provide access to ideas, perspectives, wisdom, encouragement, and inspiration.

Relationships change who you are, how you see yourself, what you reach for, and what you believe you can achieve.

We spoke on the Summit about Roger Bannister, the first human to run a mile in less than four minutes.

Until he did it, it was commonly believed it wasn’t physically possible.

But once he did it, others soon followed … because he broke the mental barrier holding so many people back.

If this can be done in the world of athletics, where a certain level of physical skill is required … imagine what can be done in a less demanding arena like real estate investing.

During the course of the Summit, we heard from investors who started with next to nothing … and grew portfolios of THOUSANDS of rental units in just a few years.

Until you’re around them, it SEEMS impossible.  But when you meet them and hear their stories, it opens your mind to the possibilities.  It EXPANDS your dreams and beliefs.

An epic experience

There were so many GREAT sessions including Peter Schiff on navigating the Trump economy, G. Edward Griffin on how the Fed affects everyone, Fannie Mae’s chief economist Doug Duncan on the state of the U.S. economy and housing … and MANY more.

We had nearly 25 faculty members … our biggest ever!

Perhaps one of the best parts of the Summit were the eight expert panels featuring some of the biggest brains on banking, precious metals, marketing, real estate niches, the next crash, and more.

In the information age, panels are really powerful.

It’s one thing to HEAR a great mind share big ideas.  But you can do that online.

It takes you to a whole new level when you watch several great minds DISCUSS big ideas. And to be a part of the conversation yourself?  Priceless!

With limited space on each year’s Summit, we realize it’s not possible for everyone to be there.  Hopefully someday, YOU can join us!

But in the meantime, we encourage you to seek out the smartest, most accomplished people you can … and find a way to get into high quality, win-win relationships.

They’ll expand your thinking, show you possibilities you didn’t know existed, open doors and make introductions to people and places you might otherwise take months or years to get to.

There’s nothing we know of that can help you accelerate your success faster than smart investments in building social capital.

Until next time … good investing!


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