Navigating the Housing Market: Inflation, Policies, and Future Opportunities with Russ Gray

[00:00:00] Welcome to the Real Estate Strategies Podcast. Let's get right into this episode. So today we have Russ Gray back, who's an awesome guest that we've had on before. Yeah, he's an economist, basically self-trained, but really speaks on a lot of panels about

[00:00:16] inflation, immigration, interest rates, where the economy is heading, gold, Bitcoin, oil, gas, he's going to really talk about today how it all impacts real estate. And like he said, it might seem like we're getting a little political on this episode,

[00:00:29] but we're not getting political, we're just talking about policy. Yep. Hope you guys enjoy. Welcome to the Real Estate Strategies Podcast with Ken and Danielle. Hello. What's going on Russ Gray today? We are excited to have you Russ. The last show that you had blew up.

[00:00:52] I don't know if you realize, but with the analytics, everybody downloaded your episode specifically. You're one of the most popular episodes based on how you look at where the economy's going, where the inflation's going, where interest rates are going. So we're excited to have you back.

[00:01:11] Well I'm excited to be here and congratulations on the growth of the channel. That's epic. Yeah, it's great. So what we want to talk about today is, one, what do you see? But we all are seeing, we have this big administration change obviously coming.

[00:01:27] We should talk about which president supports housing policies. And then also we should talk about where we think the rental market's headed, where we think the single family market's headed, because this all revolves around ... Housing is a

[00:01:41] huge issue and we're starting to see more homelessness, more crime, more immigration. So I know that's a lot of stuff, but I think it's all related to real estate. Yeah, and maybe let's start with the last four years. What happened to housing?

[00:01:57] Rental prices are skyrocketing and home prices are skyrocketing. And maybe let's just dive into why. Well I think everybody who is trying to reach a broad audience always has to dance around politics. And I make a distinction between policy and politics.

[00:02:16] To me, if you're going to have a political discussion, it's about what you think it should be, how you think it should go, who you want to win, what you think is right. And besides your vote, nobody really cares what you think.

[00:02:29] In other words, it doesn't really matter. What you've got to do is just look at what the policy is and what the consequences of that policy is. And some people honestly are willing to endure some pain, to inflict some pain into the economy

[00:02:43] in order to create a target outcome. You may agree or disagree. It really doesn't matter when those people are in power. And both sides do it because they're trying to create an agenda. And so the big thing is which constituency are the policies aimed at and who's going

[00:02:59] to get helped? It's hard to say what's going to happen now going forward, but if you look back on what happened in COVID, it's pretty straightforward. We had what I described back then as a four-phase cascading crisis.

[00:03:12] We had a health crisis, which nobody was really qualified, at least not at our level, to understand is it real? Is it not real? I think in the fullness of time, it's fair to say it was exaggerated. We can talk about the motives, but it really doesn't matter.

[00:03:25] At the end of the day, the policies that were put in place to attempt to contain the perceived threat were extreme, very, very extreme. And when you have people who don't understand the dynamic of the way economies work, sometimes

[00:03:42] they don't realize that when you introduce or play with the supply and demand dynamic, you can really unleash some powerful forces. And so specifically, we shut the economy down with lockdowns, and then we stimulated it with money, stimulus checks. And so we goosed purchasing power.

[00:04:00] At the same time, we constrained supply. Well, anybody with an economic 101 education understands that that's going to create inflation. And that's exactly what happened. And the policy response to inflation was aggressive interest rates. And because the people who were making those decisions, in my opinion, don't really have

[00:04:19] a whole lot of real world experience, very insulated, I think they thought they could just shut the economy down and then turn it right back on. And all those businesses that had failed would just reignite.

[00:04:30] All those people that had relocated from one industry to another would suddenly go back to their original industry and everything would snap back. And of course, that didn't happen. And so now what we thought was going to be transitory inflation became a lot stickier.

[00:04:44] Now there was some benefit to that, right? Some people owned real estate. So there were a lot of people who win when inflation occurs. And obviously, real estate investors are on that list. There's a lot of people who lose. And that's why there's a lot of resentment.

[00:04:58] And that's why these policies and politicians can be so polarizing, depending on which camp you're at. Of course, we do what we do because we would like everybody to be in the camp that wins. That's the whole point of these shows, right?

[00:05:10] I mean, I know Ken, you're not doing this for the money. You're doing it for the mission. And the mission is to help people understand the way all this works and how to be on the right end of it. That's right.

[00:05:20] And I do want to just go back because obviously we're a real estate channel and by the way, that was fabulous. What was going on 20 years ago, which a lot of you might not have been in the game at

[00:05:35] that point, but 20 years ago and almost 20 years ago, the economy just went sideways with that great financial crisis, right? And 2008, 2009, 2010, which wasn't that long ago, really what it did is it shut down the banks, the lending, the investing, and all that stuff.

[00:05:57] So I think people really need to understand what happens when all that money pulls back, supply goes down, period. Just like we're starting to see now, supply is going down. Now what's not going down are people coming into this country illegally or legally through immigration.

[00:06:17] What's not going down is people are still being born. And so when you look at births minus death plus immigration, we have a steady population growth in this country over the last 20 years and the housing has never really met that growth.

[00:06:34] And that's really the primary issue that I always try to tell people is we were getting there, like 2008, 9, 10, we were getting there and then all of a sudden pop. And then we went through almost a seven or eight year period where there wasn't a lot

[00:06:48] of new financing and a lot of new people building. There was some being done, but not to the magnitude that there are some studies that say we're 3 million housing units short and there are some that say we're seven.

[00:07:00] Regardless of who's right, I think that on the seven, by the way, it's really the low income housing coalition. That's what they're saying. And so they're looking at it from an affordability standpoint, which is where I know we're going to get into.

[00:07:15] But I just wanted to set the stage because as you know, Ross, the population has grown, the housing has not, and therefore we have these affordability issues, which is also going to play into inflation and interest rates and all those kinds of things. Right? Limitless is coming up.

[00:07:35] I'm so excited. Yeah, it's, I cannot wait. It's going to be the end of August 29th, 30th, 31st at the Gaylord Palms in Dallas, Texas. It's sold out the last two years.

[00:07:45] We expect thousands of people as you guys know, this is an event that you do not want to miss. We have over 50 speakers. We have over 80 booths and presenters and sponsors, and this is an event.

[00:07:58] If you guys are uncertain about what the future of the economy is, this is something that you are definitely not going to want to miss. And what's that link one more time? www.limitlessexpo.com. Use code NOLIMITS, that's N-O-L-I-M-I-T-S to get 10% off any ticket. That's no limits.

[00:08:19] See you all there. Yeah. You talk about when you see inflation and the way people who sell goods and services try to absorb or hide that inflation, it's a thing called shrinkflation. So you buy a box of cereal and it's got 10% less cereal.

[00:08:35] Looks like the same box, but it's got less. And there's lots and lots of examples of that. I think the move towards tiny homes is that type of a move where these houses are selling out.

[00:08:46] I just read an article about a big development where they built a bunch of little tiny homes and they sold out right away. These houses are no bigger than a two car garage.

[00:08:57] And so I always break out when I look at supply and demand, I always break out from the demand category capacity to pay. Because if you've got only one bottle of water in the Mojave desert in the middle of the summer,

[00:09:11] it doesn't matter how much money you have or how badly you want that water. If you don't have any money, you can't buy it. It's not possible. So demand of needing a home, I mean, there's homeless people, they need a home, but they

[00:09:25] don't have the capacity to pay. And so I think when you look at an economy and you really want to understand supply, you have to take into consideration capacity to pay. And for a lot of real estate investors, they're very mono. They just look at interest rates.

[00:09:36] Hey, if interest rates are up, it's harder. If interest rates are less, it's easier. But I think it's bigger than that. It's real wages. It's not just wages going up, but it's real wages. And that's whatever the wages went up by versus how much inflation went up by.

[00:09:48] And if wages went up faster than inflation, real wages grew. If it's the other way around, then even though people are making more money, they have less spending power. And I think we've seen some of that.

[00:09:59] And then the other part of capacity to pay is the lending environment. As our mutual friend George Gammon says, it doesn't matter what interest rates are if banks aren't lending. And so you have to look at the credit markets and ask yourself, are the credit markets risk

[00:10:11] on or are they risk off? What are the credit markets? Well, they're the bond markets. Well, if people are unwilling to buy bonds, which is what fuels the credit market because they're afraid interest rates are going to go up further and which would erode the value

[00:10:24] of their current bonds, then that money is not flowing into the bond market. If banks are absorbing unrealized or beginning to realize unrealized losses because their bond portfolio, this is what happened to Silicon Valley Bank.

[00:10:35] It's happened in a lot of places where people are holding bonds in a rising interest rate environment. And so when you have bond values, just like apartment buildings in a rising cap rate environment, the equity is coming out of those balance sheets.

[00:10:48] And so the banks aren't willing to lend because they're increasing their loan loss reserves. And we still haven't seen the other shoe drop, and you probably know this way better than me, on the commercial real estate mortgage securities.

[00:11:02] That market is still, a lot of those companies had the ability to pay for those office buildings and keep paying the rent even though they're sitting empty. And at some point when it's time to refinance those properties or those leases expire, there's

[00:11:14] not people lining up to renew them and the rates to redo the financing are going to be higher. And the people who are holding the paper on those properties are going to end up feeling it on their balance sheet.

[00:11:27] And that could have an impact, especially on community banks that hold a lot more of that kind of paper. So the thing is there's a lag. When these things, when the Fed jacked up all the interest rates to try to mitigate the

[00:11:37] inflation that was created by the response to COVID, going back to the top of the conversation, the ramifications of those decisions don't just happen like that. They kind of roll out. And sometimes you can get lost in that lag and not recognize a policy decision from years

[00:11:55] ago creates a shortage of inventory. A policy decision from four years ago creates a situation where now all kinds of existing homeowners are trapped in interest rates. They can't sell their house. They're captive to their low interest rate. Our friend Jason Hartman talks about that all the time.

[00:12:13] And that's probably the most complicated part of being a strategic investor is trying to understand the cause and effect, and then the lag about these decisions and understand where you're really at in the flow. And that's why we have conversations like this to try to figure that out.

[00:12:29] I'll tell you, if people might not remember this, because you and I, we've been in this business a long time. But I remember when Bush said, everyone needs to own a home. And he created all these programs and these low interest programs.

[00:12:46] And he's like, everyone needs to own a home because they're going to build equity, et cetera. Well, what happened was, as you know, you could fog a mirror and buy a house, but you couldn't pay the mortgage. So that eventually busted in 08.

[00:12:59] And Obama actually took the brunt of that. He didn't create the problem, believe it or not. It started in the administration before him. And that was a policy decision. And then that just kept unwinding all the way through the other administrations.

[00:13:15] And now we're in that situation as a result of that because there was a big pullback from the lenders and let George Gammon's ride on. You could do whatever you want with the rates, but if the banks aren't lending, and that commercial

[00:13:29] real estate is a ticking time bomb. That's just moving its way. As he also likes to say, that's the pig through the python. It's going to do its thing and it's going to make its way into people's statements in

[00:13:42] their retirement plans or pension plans or life insurance returns and all those kinds of things because those are the groups that are investing in those big assets. So now here we are with obviously Biden stepped down as running and now we have Kamala coming

[00:14:02] in, we have Trump, we got RFK, who's by the way is going to be at Limitless, which we're super excited about at the end of August. And each president tries to do their thing around affordability.

[00:14:17] And if I'm just looking at everyone equally personally, and what's been best for the housing industry, it's very clear. You can go back and see who they are. One of the things, whether you like Trump or not, him rolling out that Opportunity Zone

[00:14:37] program was remarkable because what- and for those of you might not know what that is, it just takes really bad areas that maybe you wouldn't even want to drive to. And it says, if you invest here, we'll defer your tax essentially. It's more complicated than that.

[00:14:55] And so what it's done is it's put some wind behind some of these areas that maybe were not that desirable and it just created housing and created vibrancy in areas. But beyond that, most of the presidents that I've seen have been playing defense.

[00:15:16] The Opportunity Zone was an offensive move, but most of them are playing defense. They're limiting rate increases and they're doing all these things to try to rent control and rent caps and they're just doing things because they don't understand the business. 1,000%.

[00:15:36] I'm going to comment on that in just a minute, but I do want to set the record straight. The housing boom that George Bush got credit for was actually triggered by a policy decision

[00:15:48] in the Clinton administration in 1999 when they put a lot of pressure on FHA to lower their guidelines in order to make more loans for people. That was really the essence of the subprime crisis because what it did by introducing a

[00:16:03] subsidized player into a for-profit market, the people who were in the business for profit had to go further out the risk curve and they started making very aggressive loans to create market share because they were losing to government sponsored.

[00:16:15] So this is the problem when you get big players involved in manipulating a market where they don't need to make a profit. Of course, all of that boom occurred under the Bush administration and he was happy to take credit for it right up until it blew up.

[00:16:27] And then to your point, Obama ended up having to come in and deal with the ramifications of all that. I didn't understand that when it was happening. It was after I got crushed because I was in the mortgage business and heavily invested, over leveraged at that time.

[00:16:42] And after 2008 cleaned me out, I went back and really studied hard to figure out what had happened. But I think your point is well made. And I think the difference is when you have people who, and it's why we're having these

[00:16:54] conversations when you don't understand what I call the mousetrap, the sequence of events that happens way above your head and eventually rolls down and hits you on main street, then you don't have as much advance notice to respond.

[00:17:09] The reason I understand today, the kind of this cause and effect that a trigger event occurs and then this happens and that happens. When I saw the COVID shutdown, like, okay, we've got a health crisis that's going to

[00:17:21] lead to an economic crisis, which is going to lead to a financial crisis. And then the Fed is going to have to make a decision, save the financial system, ensure balance sheets or sacrifice the dollar. And my bet's always been that they would sacrifice the dollar.

[00:17:36] And I think precious metals prices, gold and even Bitcoin have shown in fact, that people are trying to get out of the dollar. But coming back to the policy administration with Trump, I had a chance actually to ask

[00:17:48] Donald Trump before he was, just after he had announced, before he'd been elected in July of 2015. And I asked him what a healthy housing market looked like in a Trump administration. And he just gave me a one word answer because he wanted to talk about immigration.

[00:18:03] I mean, he didn't want to talk about real estate, but he just said jobs, jobs. And then what he did in his administration was he approached it the way a developer would. He went and began to attack the components of cost.

[00:18:16] He had a very aggressive energy policy because he understood that energy drove the costs of everything else. So let's produce a lot of energy supply. He hit the supply side. And so by hitting the supply side, he brought energy costs down.

[00:18:30] He went after taxes because as a businessman, he knew if you left the money in the hands of the business people, they would continue to create jobs, build things and stimulate production. So it was a better use of money than taking it and redistributing it.

[00:18:43] This was his philosophy. So he went after those tax breaks and he didn't just give them willy nilly. He gave them very specifically. And to your point, the opportunity zones was one of those very specific areas where they

[00:18:54] use tax breaks to incentivize capital to move in where it could do the most good. It was a very strategic, very forward thinking. He went after regulations. He doesn't get to make the laws, but he gets to execute them as the chief executive officer.

[00:19:10] And he told his bureaucracy, look, if you guys want to create a new regulation, that's fine. Do what you got to do. But you've got to net two or three off the books every time you add a new one. And little by little, it became easier.

[00:19:20] There was less friction for business people. And he understood all that just because he was a business person. You know, people say, oh, Donald Trump's brilliant. Well, maybe some people think he's an idiot. I don't know. He doesn't understand politics.

[00:19:32] But at the end of the day, he understands what it takes to create jobs and build things and what incentivizes capital to move. And so you could see him make those moves. I don't know what Kamala Harris is going to do.

[00:19:42] When you see somebody that's a career politician, I'm not going to fault them for not understanding the way Main Street works. They haven't lived in Main Street. They don't get it. Doesn't mean that they can't do things.

[00:19:53] But to your point, usually what they're doing is they're trying to deal with things after the fact. The way I liken it is like if I know that a healthy body is 98.6 degrees and I know

[00:20:04] that metric and I feel like it's my job to make that body healthy, I may stumble across a dead body and throw it in an oven and heat it up to 98.6 because I think if you get this body to 98.6, it's going to be alive.

[00:20:19] But changing a number in an economy when you're manipulating an outcome instead of the causes, sometimes you end up creating effects you don't understand. And I see a lot of that in policymakers. And it isn't because Trump is a Republican or because he's not a Democrat or whatever.

[00:20:36] I don't think it has to do with political party or affiliation. I just think it has to do with coming from an understanding of the way the world works, the way business people think, the way decision makers who deploy capital and take risks think.

[00:20:49] And I think he has a better understanding of that than almost everybody else that's come before him. I would like to see more business people actually get into politics on both sides of the aisle just because I think they have a... It's where our system was designed, right?

[00:21:03] Our founders said, hey, this is a government for the people. And so we're going to send our representatives out of the real world into Washington or into government. And we're going to make policies that they're going to have to come back and live in.

[00:21:15] And when they get to go into that bubble and they've never been in the real world and they never have to come back and live in the real world, it's no surprise sometimes the things they do don't actually work in the real world. Do you...

[00:21:26] What do you think that the Biden administration over the last four years has done for housing? I don't really want to cast shade. I think that from a housing perspective, and again, people are not going to...

[00:21:42] Some people aren't going to like this, but Kenny, you've said this many times and you put up the border and flood the marketplace with a bunch of people that need housing. You're going to create demand.

[00:21:53] When you create a lot of stimulus, the idea is that you're going to create some purchasing power. The problem was you didn't... The inflation that was created with that stimulus, which a lot of it came out of the treasury. You do have to put that on the administration.

[00:22:12] It wasn't the Federal Reserve, just to be clear so people understand. The Federal Reserve is ostensibly independent. It is, call it the banks. So they make monetary policy. They make decisions about target interest rates and how they're going to intervene and

[00:22:27] manipulate the price of money in the bond markets. The government, the federal government, which is the Congress and the executive branch, they make decisions about spending money, and that's fiscal policy. So the treasury department is underneath the executive branch.

[00:22:46] When Janet Yellen left the Federal Reserve and came into leaving the banking system into the treasury, she had inherited a lot, a very flush bank account. There was over a trillion dollars in it.

[00:22:57] It systematically began to empty that into the economy and it created a lot of stimulus. The idea was it's going to stimulate the economy and offset the burden of the lockdowns. But without that firm understanding of supply and demand, it unleashed inflation, as I mentioned

[00:23:12] earlier, and then the response to that is really what created some issues in housing. We saw lumber go way up. Energy costs went way up. Ultimately, because people were getting stimulus checks not to work, labor costs went way up.

[00:23:27] If you could get somebody to come off of the government dole to actually do real work, you had to pay them more. That's just the way it worked. I knew people, and Kenny, you know more about this than me, that were in the building business

[00:23:38] and they had to slow down the production. They went risk off. They weren't feeling bullish. So now you've got this situation where you've got high interest rates, which make housing more expensive for the people who can afford it and take a lot of people off the table

[00:23:53] who can afford it. You've got the costs to build from taxes to energy to interest rates, all the components of costs that Trump had attacked and driven down went up. And then you've got the inventory issue with all the people, as I mentioned earlier, sitting

[00:24:08] on these low interest rate loans that are unwilling to put existing inventory into play. So all of those policies had a profound effect on housing. And for people who owned housing, they made a lot of equity. So people on that side are like, wow, this is fantastic.

[00:24:25] But a lot of people also got locked out of playing, and that's somewhat unfortunate. And that's where you get this class envy, this class warfare, where you get this really polarized demographic. Kiyosaki has been talking about it forever, right?

[00:24:38] You have the rich and the poor, the middle class just keeps getting hollowed out. And these are the kind of things that cause that. No, and I want to touch on something. I think everyone thinks there's this grand agenda, right?

[00:24:49] Like they're doing all this on purpose, but you keep mentioning incompetence. So do you feel like it's more incompetence than an agenda overall? Well, I think motives matter, but I have no way of knowing what the motives are. So either they're incompetent or they're doing it on purpose.

[00:25:07] At the end of the day, that's more of a political conversation and it doesn't really matter. I think what we have to do as Main Street investors is we have to read and react like a linebacker.

[00:25:19] We're going to look at what is going on and whatever the opposing team does, whatever the regulators do, whatever the policy makers do, we've got to quickly assess cause and effect and what might happen.

[00:25:33] And because there's so many factors to consider, that's why we do things like Limitless. That's why we have the collective inner circle. That's why we have conversations like this and we interview people and try to figure

[00:25:46] it out because there's always a nuance, an angle that somebody hasn't thought of. If that's happening with us, it's happening in the policymaker rooms too. These guys have echo chambers they live in. I sat on a panel with Daniel DiMartino Booth a couple times now, well actually several

[00:26:06] times between the summit and the New Orleans Investment Conference. But from what she's told me, these guys are in there and they have access to all these PhD economists and all these people with all this data, but they live in an echo chamber.

[00:26:20] Prior to 2008, I lived in an echo chamber. I only listened to real estate people. Everybody had an agenda for real estate to be good all the time. We were all looking for sunshine. We didn't want to hear about evidence of rain.

[00:26:31] Kiyosaki was one of those rare voices, a very pro real estate guy that was coming out and goes, guys, I see trouble on the horizon. Nobody wanted to hear it. People quit booking him to speak because all the people that were bringing him in to sell

[00:26:45] real estate, all of a sudden he's like, oh, stay away from real estate. Then after a few years, he came out in 2015 and did that real book of real estate. I think, Kenny, that's where you and I got a really chance to meet because you were one

[00:26:55] of the coauthors of that book. He was ahead of the curve there. He began to see the recovery coming before it came. The other thing I just want to point out is one of the reasons why I think Trump was effective

[00:27:07] for housing was because he was a developer, he's in the real estate game. Like me and like you, Ross, there's a tremendous amount of red tape to get anything across the finish line. There's a tremendous amount of not in my backyard or NIMBY, like people don't want housing.

[00:27:27] At the main street level, at the grassroots level, it's needed, it's not affordable, but it's super hard to build. Then sometimes, depending on where you are, the cost to build is actually outweighs being able to build it at all, because you're like, this is just too expensive.

[00:27:50] Then they don't. That's what people need to realize is that when you take your land, plus your entitlements, plus your impact fees, plus all the other things that it costs, plus the construction, plus the labor, plus every single component and every single piece at today's prices to

[00:28:08] be able to put one house somewhere. Now that's all of a sudden significantly above what you can buy it for, you're not going to actually do very well because your replacement cost is far below by being able to buy something that to build something.

[00:28:25] That's what's going on now. That's what happened in 08, 09, 10 is that the pricing, that's why there wasn't a lot of new construction too, is that there was a real repricing done with real estate and so there were deals. We were buying at 50 cents on the dollar in 08, 09, 10, 11, 12.

[00:28:44] We still own those properties, but then they've now gone up way past what they were at full market price and now we're starting to see that again. I think what we'll see if we end up in another Trump administration, which according to

[00:29:02] the polls is a distinct possibility if not a probability, is more of the same. I think what he'll do is mute inflation, not by suppressing purchasing power. He's going to advocate for cheaper energy. He's going to advocate for cheaper interest rate. He's going to advocate for less regulation.

[00:29:23] He's going to do everything he can to stimulate the economy, but he's going to stimulate it not towards consumption, but towards production. If we do that, if we increase supply, then that absorbs inflation. Then if you combine that with ... Again, we're not speculating because he did the opportunity

[00:29:42] zones the first time, but if you need to build affordable housing, that's the challenge. It's very difficult to build affordable housing because the costs, you're competing against existing housing that was built on costs from 20, 30, 40 years ago. You know what makes affordable housing? More housing. That's right. That's it.

[00:30:02] But you still got to build it. You got to get it out of the ground. You're right. If the consumer have lots of choices- If you target the new supply in areas that have lower costs of land, lower labor costs,

[00:30:17] I think ... And you combine that with the idea that we want to repatriate manufacturing. I think, and this is what I'm going to be watching for, there is going to come a lot of incentives to bring manufacturing back to areas of the country that nobody pays

[00:30:31] attention to today. Very inexpensive markets. And then I think people will move there in order to get that work because we do know people will move around to go where there's work.

[00:30:43] And so, the minute I begin to see if in fact this happens, then you want to be that guy or gal that runs to get to the front of the line. Very first investor summit at Seawee ever did before we had all the entertainment and all that stuff.

[00:30:57] We were just doing the ship entertainment. I ended up sitting next to a woman and I asked her, I said, do you cruise often? And she goes, or I said, what do you do? And she goes, I cruise.

[00:31:07] I go, well, how did you get yourself to be in a position where you just get to cruise for a living? She goes, well, I heard that the Denver Broncos were going to be moving their stadium out into the middle of nowhere.

[00:31:17] And so I went out there and I bought up as much land as I could. And today I run parking lots. And I thought, that's just so brilliant. You don't have to overthink. So I think if we get an administration, any administration that is serious about repatriating

[00:31:33] manufacturing and serious about stimulating or dealing with inflation on the supply side, not by suppressing demand, then I think that you're going to look for these underdeveloped areas to be developed.

[00:31:45] And if you can get ahead of that line and see it coming and be in tune with the local business journal, the chamber of commerce, and even the politicians who are part of those processes, you don't have to be that far ahead of the line.

[00:31:59] Just a little bit ahead of the line. I'm actually looking forward to it just because he's almost running like an incumbent. It's not like he's just saying, oh, this is what I'm going to do. But we know what he did the last time.

[00:32:12] I think we understand by actions how the guy thinks. And if he comes in with a similar agenda and really addresses the supply side, it could be good for the economy, but it could also be really good for people to understand where that activity is going to happen.

[00:32:26] Because real estate is local. It's geographic. And a lot of times the people who are in Washington, who are policy makers, even the talking heads on TV, they deal in financial markets. They deal in commodities. They deal in stocks and bonds and currencies and commodities.

[00:32:44] These things are the same price anywhere in the world. Real estate is not like that at all, and they don't get it. Even our friend Peter Schiff, when he talks about housing, he talks about it in the macro, in the aggregate.

[00:32:56] But there's no such thing as an average house or an average market. It's a theoretical construct. You go into a market and there's high prices, low prices, good neighborhood, bad neighborhood. There's opportunity, there's not.

[00:33:09] And I think that for real estate investors, the types of people who watch this channel that understand that and really start to pay attention to the policies that roll out, I think there are going to be geographies that are going to be winners and others that are not.

[00:33:23] And we've already seen some of that based on policy and where people move and why they move and where businesses set up and where they don't. But I think there's really going to be some great opportunity going forward because somebody's going to have to do something.

[00:33:36] You cannot continue to crush supply or demand and expect the voters to be happy. So I do have to bring up, though, what like what if Trump doesn't win, though? Like what do you see if the Democrats, whoever their nominee is, is elected?

[00:33:53] I mean, where are the opportunities there? Well, you know, it's hard to say because we don't even really know who the nominee is as we're recording today. Technically Biden is out and Umballa Harris is the presumptive nominee based on pledges

[00:34:10] of delegates, but they haven't had the convention yet. So we don't know what the actual vote's going to be. We don't know who the vice president is going to be, the nominee vice president is

[00:34:20] going to be. So and I haven't really heard that much about what she believes in at the head of the ticket. Vice president is a dutiful lieutenant and is going to support whatever. So I think that I really can't say until at least we get through the Democratic

[00:34:36] National Convention and we get a chance to see what kind of a platform they put out. It's a much more unknown scenario. Again, I go back to even though Trump isn't technically the incumbent, he's running with the incumbent advantage because he's a known commodity.

[00:34:53] He's got an administration he can point to. Now, Kamala Harris can only point to the future and she may try to distance herself from Biden's track record or she may want to take credit for it depending on how she feels

[00:35:06] about it and how she thinks the voters feel about it. But we don't really know who she is or what she stands for or what kind of a Congress she's going to have to work with. So it's just really, really hard to say.

[00:35:19] All I can say, generally speaking, irrespective of personality or party affiliation, if somebody is going to be about increasing taxes, if somebody is going to have a constrictive energy policy that's going to cause energy prices to rise, if people are

[00:35:35] going to depend upon stimulus and government spending in non-productive areas, meaning giving money away to people that aren't producing, then the result is going to be inflation, higher interest rates. There's going to be a lot of friction on the ability of supply to rise to the

[00:35:56] occasion. And I would consider that to be a negative no matter who did it. So I hope that people realize from whatever party that if you want to help Main Street, you're going to have to stimulate the supply side.

[00:36:13] You're going to have to make it easier for businesses to produce, to create jobs. And they may think that if we tax from one group of people and hand it to people, we think we'll do the things we want them to do, whether it's green energy or whatever

[00:36:28] agenda. And I'm not opposed to any of those things. But it's just got to be a good ROI. Otherwise, what you end up with is more debt. We're already, I think, at a bit of a tipping point. And government spending is the root of all inflation.

[00:36:45] And so I'm not saying that you can't spend, but you've got to spend smart, just like you got some people out there that are, you know, debt is the devil. If you use debt, you know, it's horrible and debt is cancer.

[00:36:59] Of course, you know, you make a fortune on debt. So it's not the debt that's bad. It's just like not government spending isn't bad. It's where it gets spent. And that's what you have to look at.

[00:37:11] And I just don't know what, what, you know, what a Kamala Harris administration or whatever Congress she get would do. I can't really comment. Well, I think it's interesting. There's a lot of uncertainty in the right now. Like people are like, what's going to happen?

[00:37:25] You know, we've got potential war issues. We've got obviously the inflation looks like it might be under control. Rates are high, you know, real estate is going crazy. It's a single family. It's going up and commercial it's going down and there's defaults happening, but

[00:37:41] people, you know, aren't really feeling it yet because that lag you said. And I know, you know, one of the coolest things that we did was we formed this collective inner circle with, with you and George and Jason Robert, that is.

[00:37:55] You know, for me personally, just being able to go to somewhere once a quarter and talk to what do we have? 50, 60 people, um, in a closed room. I'd be really transparent. It's like, what are you seeing? What are you doing?

[00:38:08] Um, you know, that, that, that's been a huge piece. And I think whatever, whatever people decide to go do, they have to go figure out and they have to get themselves into a community because you have to go, uh,

[00:38:21] where collective minds are all together, try to solve things together. Um, and, and, and also be open-minded and try not to be so biased about where you are or where you've come from. Right. Wouldn't you agree with that? Oh yeah. 1000%.

[00:38:38] You know, I ended up on a panel where I was debating with Mark Moss who came to our last mastermind group and he's kind of developed reputation as Mr. Bitcoin, Mr. Pro Bitcoin. And the moderator of the panel asked me to take the gold position and

[00:38:53] he wanted us to go at each other. So, uh, it was a lot of fun, but you know, it sharpens you to have even disagreements as long as they're intellectual disagreements and you don't

[00:39:03] get into name calling, although he, he, he did get after me a little bit for being a boomer, but that was okay. It was all in fun. But I, you know, I think you do have to have that because the minute you

[00:39:12] think you've got it all figured out, the minute you go seeking to be in an echo chamber and only hear what reinforces your bias is the minute you develop big blind spots. That's what happened to me in 2008.

[00:39:25] And that's why I'm really adamant about trying to set aside my proclivities and what I think should be done and try to read what is really happening. And then to get around other people who have different perspectives, you see things I don't see.

[00:39:38] You attend conferences I don't attend. You have people on speed dial that I may never be able to talk to except maybe through you. And, uh, you know, Robert Kiyosaki can open doors. He's a member of our collective inner circle.

[00:39:51] That's just humbling to think about a guy like that wants to be part of our group. It's amazing. And so I think you, you have to do that and, and you have to really put the time in, you know, people just.

[00:40:04] I understand you want to mind your own business. You want to do whatever you're doing and you want to turn your money over to a professional money manager. But now I've talked to a lot of those guys, they live in echo chambers

[00:40:13] and you know, you want to test an asset manager, you know, talk to them about things like counterparty risk and currency risk, they don't even, they don't need, they can't talk about it. They have no concept of it because everything they do is steeped in it.

[00:40:27] I think whatever happens, whatever political party, whatever's going on in the economy, the closer to real you stay, the safer you're going to be. But if you're, if you're buying things that are real and you're structuring them in a real way, like I believe real estate equity

[00:40:42] is very fickle, it's fake because it comes from the credit markets. It's great when it occurs, but what's real is the income. Cause those people get up every day and they go to work at a real job

[00:40:51] and they earn real money and they pay you a percentage of it to live in your property. That's real. The price can be whatever the price is, but that rent just keeps coming in. So if you've invested for the rent, you're going to have stability in your life.

[00:41:01] If you're trying to ride this wave, you know, you, you, you're going to be wrong probably as often as you're right. And that, that makes it very difficult. So, so we got a limitless coming up. Um, and you know that we have, uh, Robert, uh, Kennedy jr.

[00:41:15] Coming to speak and, uh, we're going to put them on a, on a panel with Kiyosaki who has written books with Trump and, uh, it's going to be the 29th, 30th, 31st in, in, um, in grapevine, Texas, just outside of Dallas, uh, to Gaylord.

[00:41:31] So, uh, what if you were me, what would, cause I get to moderate, what, what would you want me to ask them? Wow. I think, you know, Kiyosaki is an older guy and so he's seen a lot. Kennedy is about our age, I believe, but he comes from

[00:41:53] this family with a deep history. I think everybody wants to hear about what's going on here and now and what the future brings. But I am always really interested in hearing people who understand the

[00:42:09] history of how we got from where we came from to where we are, because if you can take where we were to where we are, you have now a better ability to extrapolate into where we might go. I think modern society has, um, doesn't put enough

[00:42:27] emphasis on the study of history. And I love studying history. I read old books to try to understand what the thought leaders, I read, had, uh, Theodore Roosevelt's autobiography. And he was talking about election integrity and corruption in the early 1900s.

[00:42:46] You know, we think these things that we experience in these controversies that we have, you know, oh my God, it's never happened before. But it really, it has. And then you see that the world survived. You see that there were winners and losers.

[00:42:59] You see the lessons that were learned if you care to go back and see them and that it calms you down in the present. You became a lot less frenetic. You know, our friend Blair Singer says when emotions run high, intelligence runs low.

[00:43:13] And we get all weirded out because this crazy stuff is going on in the world and we just want to hunker down and not do anything and that's a mistake. But how do you engage intelligently with perspective?

[00:43:25] And we all want to hear what the new young influencers and all the, the new up and coming guys have to say, but I think there's a lot to be gained from people that have some real history. Kiyosaki's a historian, love talking with him.

[00:43:39] I would let the two of them just go at it. But Kennedy is, Kennedy is going to know things that the average Joe just doesn't know because of the family that he's been a part of and the history that he has. Yeah. Now, I think it's interesting.

[00:43:54] I spoke to Kiyosaki and I said, Hey, you know, are you willing to do this? And he's like, that would be the most amazing conversation. Cause you know, Robert, Robert, when he asked questions, he's trying to figure out what you know, he's not actually challenging you at all.

[00:44:09] And he's not actually trying to take a position largely what, even though people might think he is, he really is trying to discount his own or hone his own and I, so I think it's going to be an incredible conversation of really deep.

[00:44:26] Really deep, deep, great questions that you know, Robert's got a month to figure this out, they both do, and I think it's just going to be a fabulous conversation. Yeah. It's amazing. And congratulations. I think right now it's a conversation probably couldn't come at a better time.

[00:44:45] So, um, I'm super excited about it. Just privileged to be able to be in the room. Um, can't wait. Yeah. And if you guys are interested in, in the collective inner circle, we'll, we'll all be there, but we're going to have a mastermind right before limitless.

[00:44:57] Uh, limitless is, uh, www dot limitless expo.com. If you guys are interested, uh, we are almost sold out. We've sold out the first two years as our third year. And, uh, it's just going to be a bunch of like-minded people, entrepreneurs,

[00:45:12] business owners, trying to figure out where, where is this whole thing headed? Right. Right. Russ. You got a big lineup too. I mean, you got, it's, it's one of the things that I love, what I've seen

[00:45:23] happen is a real estate conferences for a long time were only, um, more real estate people buy real estate people. And I think what I've seen evolve, especially post 2008, and I'd like to believe that, you know, I was kind of part of that movement is people wanting

[00:45:39] to be a lot more interested in the macro and understanding how that stuff rolls downhill and being willing to have some discussions about policy, because it does matter. And when you have those policies, uh, that people are making that affect

[00:45:54] main street, um, you know, where people get wiped out is when they get blindsided. You know, when, when they're there, they don't see something coming. And I know, and I mean, I, it happened to my father, uh, 1987.

[00:46:06] He didn't see, uh, the stock market crash coming and it wiped out an eight figure fortune almost overnight. Uh, I got wiped out in 2008 because I didn't see the crisis forming in the bond market. Uh, and so I, I think that these conferences like limitless where you're

[00:46:23] bringing in people that are really seeing the big picture, they're looking at financial markets or looking at commodities and globalized economy. We got geopolitics at factors in, uh, used to be, they would say if the

[00:46:35] United States, uh, you know, gets a cold, the rest of the world gets the flu or something like that. And I think, you know, China is now a big, big component in the geopolitical scene and even further, the BRICS alliance with China and Russia driving

[00:46:50] that, uh, this is much bigger than the Euro and they're making an overt charge at undermining, uh, dollar hegemony. You know, 12 years ago, I didn't even know what that meant. And today, today I'm watching it very carefully because I understand now if

[00:47:08] the dollar loses, uh, its utility or a significant percentage of its utility in global trade, then people are going to unload the dollars that we've printed and exported all around the world. And they're going to come back to the United States.

[00:47:22] And when that happens, the net net result of that is going to be really stimulating to prices the same way the semi-checks were except on steroids. And that, that could happen, you know, it can happen quickly.

[00:47:36] It's, it's a trend that China and Russia have been working on since 2010. And, you know, so it's 14 years in and people say, well, it hasn't happened yet. You know, Brent Johnson, who we have had many times at the collective. He's Mr. Milkshake Theory, Mr. Strong dollar.

[00:47:52] Uh, and I agree with him in the short term, but I think the long term trend is that there is a concerted effort to dethrone the dollar, uh, and just saying, Hey, it's a clean shirt. And the dirty laundry is interesting.

[00:48:04] But what if these guys succeed at some point? I mean, anybody not paying attention to that, they may not think it's that serious today. But I think you got to pay attention to it because it's like that old, uh, uh, Ernest Hemingway book. And the sun also rises.

[00:48:17] Uh, I think this was called, uh, it talks about how, how did you go broke? Well, kind of slowly and then all at once. Yeah. Yeah. And I think you're right. I think, you know, when you're in these echo chambers, um, you know,

[00:48:30] you're just following along and assuming those kinds of things can't happen. And to your point, maybe not in the short term, but you don't want to get blindsided by anything. So that's why it's important to, you know, listen to people that

[00:48:42] maybe you don't agree with because they might, you might open your eyes to something. Yeah. Well, I mean, we'd learn that from Kiyosaki says there's three sides to a coin. There's the front, the back or the heads and the tails and the side, the edge.

[00:48:54] And the goal is to try to stand on the edge. Uh, and anytime I get a chance to be around Robert, uh, to, to Kenny's point earlier and get a chance to hear, um, how Robert thinks and the types

[00:49:05] of questions he asks, asks and how, how hard he works to understand what the other person is saying before he interjects his own opinion. Uh, that, that takes a lot of skill, takes a lot of discipline and a real desire to learn. He's a great teacher.

[00:49:21] He's a great student. Um, I always enjoy my time with him. Yeah, absolutely. Russ as always, man. Thank you. This has been great. I can't wait to see you at the collective and, and a limitless. And, um, you know, let's, uh, let's start to figure this out. Yep.

[00:49:39] Yep. I love what you're doing. Uh, I love the fact that you could just take the rest of your life off and do nothing and you've decided to pour yourself into educating main street. I think that's amazing. Love working with you. I love what you guys are doing.

[00:49:52] So happy to come in and talk with you anytime you'll have me. Yeah. I appreciate it. Enjoy your day, Russ. Thank you so much. Okay. All right. You guys take care. Thank you for listening to this episode of the real estate strategies podcast.

[00:50:05] If you liked what you heard, please give us a five-star review on iTunes and let us know what you thought of today's episode. Thank you. And we'll see you next week.