You probably heard that President Trump gave a speech last night.  Looks like the stock markets liked it.

So what’s all the excitement about?  And what does it mean to real estate investors?

First, forget about whether you like or agree with President Trump … or think he’s a chump.  He’s going to do what he’s going to do whether you like it or not.

The big deal is a TRILLION dollars of infrastructure spending and a big boost in military spending.  That’s a lot of cash flow … right into the economy.

Forget about how he’s going to pay for it.  That’s a policy problem … and maybe a fiscal problem.  We’re sure Peter Schiff and the rest of our faculty will have something to say about all that in a few weeks on our Summit at Sea™.

And no one’s really talking about the looming debt ceiling showdown March 15.  Something else we’re sure to discuss on the Summit.

According to this Reuters article, “Treasury Secretary Mnuchin said … he would like to see an increase in the debt ceiling ‘sooner rather than later’.”

We’re guessing he’s going to get it … and the “big” showdown will pass quietly.

It’s same thing we thought back in 2011 and again in 2013… just two of the debt ceiling showdowns in recent history.  Huge debt and deficits are the American financial system … for now.

So it seems the stock markets are pretty sure all this spending is going to happen.  And maybe President Trump will figure out a way to pay for it with help from private industry and NATO partners.  Maybe he won’t.

But we think the odds Uncle Sam’s about to open the checkbook are pretty high.  Like it or not.

So … if it happens, where’s the opportunity for real estate investors?

Here are some things to think about …

Infrastructure projects require huge amounts of planning.  If you’re paying attention, you’ll probably be able to figure out which communities and industries will be the winners.

Common sense says go snooping around for the kinds of real estate the people who live and work in those communities and industries will want … and you’ll probably be in the path of cash flow.

Less obvious, is to think about the supply chain for those projects.

Way back when China first started its economic ascent, it spent zillions on infrastructure … including all those ghost towns you read about.  So again, the spending doesn’t have to be smart or responsible for the cash to flow.

But guess which real estate was the big beneficiary of China’s big spending?

Australia … because that’s where a lot of the raw materials came from to build China’s infrastructure.

So understanding China’s supply chain allowed investors who were not interested in owning Chinese real estate to make real estate profits because of China’s spending.

But Australia also benefitted from all the Chinese who became rich on government spending used their new-found riches to go on vacation … to Australia.

The point is there’s a ripple effect of spending.  And sometimes those ripples carry out through supply chains and consumer behavior to drive real estate demand in peripheral areas.

The same can be said for military spending.

We already know from President Trump’s rhetoric he’s likely to focus the vast majority of his spending on American companies.

So a savvy investor might start to really pay attention to what kinds of military contracts are being awarded and where those companies are doing the work.

Those are working class manufacturing jobs.  Great tenants!

And taking a page from the infrastructure spending supply chain model, those primary military contracts have out of area sub-contractors and suppliers.

If Trump’s trillions come with the condition those military suppliers “buy American and hire American”, the odds are good the money won’t end up in China.  So it could well push real estate demand in those American markets in the food chain.

This is the same kind of strategic investing paper asset investors are doing. 

Except they’re buying up the stocks they think will win and are speculating on the price.  They want to buy low and sell high.

Of course, there’s LOTS of competition.  If you feel smart AND lucky … go for it.

A strategic real estate investor … that’s you … can take the same approach, but you’re looking to take a slice of the paychecks of all those workers and companies who are feeding off the Trump spending initiatives.

And because real estate is more esoteric … and messy … it’s nowhere near as crowded as the stock markets.  Nor is it as easily gamed, as we’ve discussed in a prior commentary.

So whether for your own portfolio, or if you’re investing money for others, there’s opportunity developing as the Trump administration roles out its agenda.

Until next time … good investing!

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