{"id":19906,"date":"2017-01-25T10:43:22","date_gmt":"2017-01-25T14:43:22","guid":{"rendered":"https:\/\/realestateguysradio.com\/?p=19906"},"modified":"2017-09-06T08:07:08","modified_gmt":"2017-09-06T12:07:08","slug":"prospering-road-to-ruin","status":"publish","type":"post","link":"https:\/\/realestateguysradio.com\/prospering-road-to-ruin\/","title":{"rendered":"Prospering on the road to ruin …"},"content":{"rendered":"

Social justice and equality, like their inverse, social injustice and inequality \u2026 can be polarizing political themes.<\/strong><\/span><\/h2>\n

But this isn\u2019t a political commentary, so keep an open mind!<\/p>\n

Robert Kiyosaki has been warning for many years the rich would get richer \u2026 the poor would get poorer \u2026 and the middle class would be squeezed.<\/p>\n

In the U.S., metrics like the historically low labor participation and home ownership rates, high levels of consumer debt, and stagnant-to-falling real wages are all indicators of where the middle class live.<\/p>\n

The reasons and blame for these results are debatable.\u00a0 There\u2019s plenty of both to go around.\u00a0 We have our ideas on the matter \u2026 and you may have yours \u2026 but the data just sits there.<\/p>\n

Meanwhile, stock and bond markets (notwithstanding the recent tick up in rates), have powered upward \u2026 making the rich much richer.<\/p>\n

So the financial condition and future of America FEELS very differently, depending on which side of the inequality divide you\u2019re on.<\/p>\n

A quick glance at the election map also illuminates the divide \u2026 as does social media and daily news.<\/p>\n

Today, the U.S. has President Trump (and might have had President Sanders) largely because people being squeezed out of the middle were looking for a non-establishment answer.<\/p>\n

But what if the problems \u2026 and the solutions \u2026 are more systemic and less political?<\/p>\n

If the Titanic is sinking, it doesn\u2019t matter who the captain is.<\/strong><\/span><\/h2>\n

And if it\u2019s not, then it still probably doesn\u2019t really matter.\u00a0 Sinking is caused by the ocean and weather \u2026 things outside the captain\u2019s control.<\/p>\n

Now before you tune out, this is NOT a doom and gloom piece.\u00a0 We\u2019re too optimistic for that.<\/p>\n

But it\u2019s smart to look at what\u2019s happening and ask what it means to real estate investors.<\/p>\n

So far, low home ownership rates have meant increased demand for rentals.<\/p>\n

That\u2019s GOOD for real estate investors \u2026 and rental growth and occupancies have proven this.<\/p>\n

High bond prices brought low interest rates, which decrease debt service costs, and improve cash flows.<\/p>\n

Also GOOD for real estate investors.<\/p>\n

High stock prices have created paper wealth in 401ks and stock portfolios.<\/p>\n

Ditto for home prices.<\/p>\n

Some of this equity has found its way into real estate private placements, which has been GOOD for\u00a0real estate syndicators<\/a>.<\/p>\n

Like\u00a0Peter Schiff<\/a>\u00a0says \u2026 \u201cGood economics is bad politics, and good politics is bad economics.\u201d<\/p>\n

So even if economic inequality is bad policy, there\u2019s still a lot of investing opportunity inside of it.<\/p>\n

Economic issues in the second Bush administration gave rise to the Obama administration.\u00a0 Issues during the Obama administration gave rise to the Trump administration.<\/p>\n

So again \u2026\u00a0MAYBE the issues aren\u2019t political, but systemic<\/strong>.\u00a0 And we should study, debate, and react to the\u00a0systemic\u00a0issues \u2026 perhaps more than the political issues.<\/p>\n

That\u2019s what James Rickards contends in his latest book,\u00a0The Road to Ruin.<\/strong><\/span><\/h2>\n

We\u2019re not all the way through it, but so far it\u2019s a REALLY interesting read \u2026 as are all Jim\u2019s books.<\/p>\n

Of course, with the Super Bowl fast approaching, no commentary this week would be complete without a football analogy.\u00a0 \ud83d\ude09<\/p>\n

So let\u2019s think about a game plan for approaching investing in any environment \u2026. even one where there are systemic problems and the potential for radical political change.<\/p>\n

A successful game plan addresses offense, defense, and special teams.\u00a0 And once in the game, it\u2019s about\u00a0focus, execution, and adjustments<\/strong>.<\/p>\n

Warren Buffet says rule No. 1 in investing is \u201cDon\u2019t lose money\u201d \u2026 and rule No. 2 is \u201cDon\u2019t forget rule No. 1.\u201d<\/p>\n

In other words,\u00a0defense is important<\/strong>.\u00a0 The old football adage is \u201cdefense wins championships.\u201d<\/p>\n

In Jim Collins\u2019 now classic book,\u00a0Good to Great, he says\u00a0you must confront the brutal facts<\/strong>.\u00a0 Yet, most people don\u2019t want to.<\/p>\n

Investors don\u2019t like listening to the bears. We like to think we\u2019re always going to come out on top, which pushes us to keeping investing.<\/p>\n

But you MUST.\u00a0 It\u2019s how you\u00a0prepare for the worst<\/strong>, even while you hope and\u00a0work for the best<\/strong>.<\/p>\n

Defensive investing means moving assets away from high risk environments into lower risk places \u2026 maintaining adequate liquidity stored in safe places \u2026 and being diligent in managing cash flow.<\/p>\n

Of course, while it\u2019s true, \u201cIf they don\u2019t score, we can\u2019t lose\u201d \u2026 if YOU don\u2019t score, you also can\u2019t win.\u00a0 So offense is important, too.<\/p>\n

The BEST offense is to take what the opposition gives you<\/strong>.\u00a0 That is, it\u2019s typically not a good idea to show up and just run your script.\u00a0 Conditions change.<\/p>\n

The best teams enhance their probabilities for success by creating match-ups \u2026 pitting their strengths against weaknesses in the opposition\u2019s defense.<\/p>\n

As we\u2019ve seen, economic weakness can create scoring opportunities.<\/strong><\/span><\/h2>\n

MANY real estate millionaires were born out of the 2008 financial crisis<\/strong>\u00a0\u2026the same crisis that wiped out those only playing offense when conditions changed.<\/p>\n

So trends in economics, demographics, geo and local politics, technology and other factors, all take something away and give something else.<\/p>\n

Your equity-building mission is to look for high probability match-ups and run some plays.<\/p>\n

Sometimes special opportunities arise that aren\u2019t directly part of your wealth preservation or wealth building game plan.\u00a0 It\u2019s more chaotic and free-form.<\/p>\n

Sometimes it\u2019s more about fast reactions and smart in-the-moment judgment.<\/p>\n

When unexpected situations arise, your ability to quickly assess and respond can prevent disaster or help you capitalize on rare opportunity.<\/p>\n

But you need to\u00a0be smart, decisive, and quick to act<\/strong>.<\/p>\n

We\u2019re in the final phases of selling out our\u00a015th\u00a0Annual Investor Summit at Sea\u2122<\/a>.\u00a0 This is where we gather each year with\u00a0thought leaders,\u00a0subject matter experts<\/strong>, and\u00a0active investors<\/strong>\u00a0from around the world.<\/p>\n

We talk about what\u2019s going on in the world, what the trends are, where the challenges and opportunities are \u2026 and how to\u00a0increase probabilities for success<\/strong>.<\/p>\n

When we arrive for the Summit, the world will be different than today.<\/p>\n

We\u2019ll be about 70 days into the Trump administration.\u00a0 We\u2019ll have a lot more visibility into what America will be doing over the next four years \u2026 and how the world is reacting.<\/p>\n

It\u2019s our annual \u201chalf-time\u201d intermission \u2026 a break from the day-to-day action \u2026to huddle with coaches and fellow players to analyze and adjust game plans.<\/p>\n

There\u2019s still room for you on the Summit and we\u2019d LOVE to have you.<\/a><\/p>\n

But whether you join us, or\u00a0find your tribe\u00a0elsewhere \u2026 we encourage you to\u00a0listen to great thinkers<\/strong>. Talk with them if you can \u2026 and\u00a0schedule intermissions\u00a0away from the daily game to\u00a0look at the big picture<\/strong>\u00a0and\u00a0adjust your game plan<\/strong>.<\/p>\n

If Rickards and Kiyosaki are right, there could be an iceberg on the horizon.<\/p>\n

But remember \u2026 some folks survived the Titanic.\u00a0 We\u2019re guessing they were the ones who saw the problem sooner, heeded warnings, and got into the lifeboats early.<\/p>\n

Until next time \u2026 good investing!<\/p>\n

More From The Real Estate Guys<\/em>\u2122\u2026<\/strong><\/p>\n