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August 2022 Monthly Market Update

Welcome everybody. This is the monthly market update. Here we go. What’s up everybody? It is August, 2022. Let’s get the monthly market update. If you haven’t checked out the podcast, simple passive cash flow is where you find it. ITunes, Google play Spotify. And check this out on YouTube. And we also record and put all these monthly market updates on the website and simple passive cash flow.com/investor letter every month for you guys to pull these reports and see if I’m lying or see if I’m right in my predictions.

But if you guys want to ask any questions throughout or leave any comments, feel free to type it into the chat box below from your perspective, the way you’re watching it. We go out, live on YouTube and our groups, looks like we got a wandering dot what’s up, man. And we also put this in the podcast form.

So let’s get started here. First article, there’s another one of wallet, hubs, top 10 places, and this is the best and worst places to rent in America. The best place was Maryland. Overland Park, Kansas Sioux city falls, South Dakota, Bismark Lincoln Chandler, Arizona Scotta Arizona, Gilbert, Arizona, El Paso, Texas, Casper, Wyoming, Cedar falls, Illinois and Fargo North Dakota.

How I, they came up with those top rental markets or best places to rent, I guess this is in the perspective of a renter. I have no idea, but you guys seem to like these top 10, which is why we do ’em. The markets with the best vacancy rates are the little rock Arkansas, Casper, Wyoming, Augusta, Georgia, Armillo, Texas.

And. Charleston Wyoming. Affordable rents are in Wyoming at Bismark, North Dakota, Cedar walls, Cedar rapids, Illinois, Sioux city falls, Sioux falls, South Dakota, Overland park, Kansas. Moving on. If you guys haven’t heard of it, it’s like the second crypto Wil winter, and this one’s a little bit different.

So what a lot of people were doing was putting their money into these crypto staking platforms, such as block fives or CELs, I wasn’t doing very many of these nor do I do. I don’t really do crypto. I don’t really believe in it. I believe in the whole idea of cryptocurrencies, getting away from governments controlling currency, which I’m all for, but I just don’t really I don’t know.

I think real estate’s just way better and it’s passive income, which you can typically defer the taxes on as opposed to this stuff, which the governments are gonna be coming after. Pretty heavily on, A little bit less because it all took a crap on everybody. And especially like that Luna thing, which I knew was a bad deal from the start.

But if you haven’t heard, Celsis is one of these big trading platforms where people would. They would state their coins or whatever it’s called. And they would get maybe like 9%, 15% on just staking it. But what people didn’t realize, what the heck that meant and what it meant is like putting your coin up and then, people borrowing it or you’re putting money up for the barring platform to happen.

And. It was, it’s like a house of cards is how I saw it. And eventually came down crumbling and Celia has had to restructure and a lot of people are asking you, Hey, am I gonna get my money back? And. I tell people, no, man, you’re not gonna get your money back because that’s why you don’t invest in this stuff.

Because in any investment you always ask how I am securitized? If shit happens, how am I gonna get some or all of my money back? And in these types of situations, you don’t because there’s no underlying asset value. There’s another deal going out, out there where people are like, you’re investing in like online businesses, but the online business is, there’s not really worth anything. If anything, there’s maybe some inventory, some useless junk that’s in a warehouse somewhere that you can sell pennies on for a dollar. But that’s why I like real estate because it’s always worth something, especially like the raw land portion of it.

Sorry. If you did this type of stuff I guess I should have told you, you should have done it. But, I don’t do this type of stuff. I maybe had $1,500 in blockFI that I took out last month just to learn it. But, I don’t put a substantial amount of my net worth, if you follow what the high net worth people over $10 million, do they typically don’t put anywhere.

They put one to 10% of their net worth into things like this. It’s all the lower net worth people that are dancing around with 10, 20% plus other net worth real estate, intelligent marketing reports that study finds that the US needs 4.3 million more apartments by the year 2035. And I put this in there and I think a lot of us are very well aware of which is why we invested in real estate, especially lower middle class workforce style housing.

Is because there’s a demand for it. It’s a commodity. And it’s something that you could forecast the need for, the reports that the US has tremendously difficult conditions that have fundamentally altered our nation’s demographics. But one thing remains certain. There is a need for more rental housing.

The US must build 3.7 million new apartments just to meet the future demand. On top of the 600,000 unit deficit and a loss of 4.7 million affordable apartment homes, a major driver of the apartment demand is immigration, which, you know if anything, immigration needs to occur more, especially if there’s a supply chain crunch in China, which isn’t supplying us with cheap labor.

We’ve gotta read. Domic a lot of these jobs, but anyway, that’s just my interject right there. The article ends and says California, Florida and Texas will require 1.5 million new apartments in 2035 accounting for 40% of the future demand,

Commercial property executive. Reports that why C R E, which is commercial real estate investors are rethinking refinancing. And I actually had a webinar for my investors a couple days ago. And, if you wanna get a copy, shoot us an email and team@simplepassivecashflow.com, where I went into some pretty heavy detail, but from a high level, just for the podcast audience and public investor.

Audience here, basically what’s happening is it’s really hard to get lending because the not, the interest rates went up, but I would probably argue that the thing to point to is like these rate caps that we normally will buy, usually buy something where. If we close that 5% interest rate, we wanna buy a cap.

So we don’t have to if the interest rates go up to five and a half, we cap out there. So it’s a way of being conservative, but it can be very expensive in the past. It’s cost us maybe half a percent or percent of the loan value to pay for one of these things. And now. I would say like triple or even more expensive than it once was, which really impacts closing costs and the deals.

So that’s just speaking from my own personal experience, but reading what the article is saying here during the first quarter, investors were eager to refinance in order to take advantage of high evaluations to get into the market. Now, many are hesitant to tap the debt markets because interest rates have risen so much since March and the lender underwriting is reflecting economic uncertainty and increased risk.

So we all know interest rates are gonna be going up to team inflation and you did the whole little diagram and chalkboard exercise on this whole dynamic alone. And another thing I would recommend for you guys is go back to the podcast. I did a couple great podcasts with Richard Duncan. You guys can check that out at simplepassivecashflow.com/duncan.

Get, multi-housing news reports, the growing cost of capital for multi-family development. This kind of piggybacking on, I just mentioned borrowing costs are 2% to two and a half percent higher than a year ago. The result is a situation not seen in years in which the caps have fallen, being below the cost of debt. But in fast growing Sunbelt hotspots, huge population growth has created demand for multifamily housing.

Far out shipping, supply, propelling, rent rates, and leaving many long time. Multifamily experts, slack jobs. The situation should keep cap rates slow. So in other words, rents are continually going up and up, which actually makes this a very good time to be buying real estate. This is a buyer’s market in a little bubble.

As the large institutional investors have paused they’re buying, but they gotta come back in. At some point I argued before the end of the. The only problem right now is in getting your lending set up or what we call capital markets, which has nothing to do with the cap rates. Guys, don’t get that confused.

So if you are an all cash buyer right now, this is an awesome time for you. Just, that’s just never a good way to invest. In my opinion, you always wanna be taking advantage of getting as much good debt as possible. The article ends with greater concern. Maybe whether the Fed will aggressively shrink its balance sheet yanking, a lot of liquidity out system, less cash will be available at any price available capital with insufficient funds to fund all development projects that are just talking about like a doom stage scenario.

Go back and check out that video we did, especially for you investors in our group. It is simple. And I think it, what it does is there’s a lot of noise out there. Like I mentioned, don’t watch these YouTube videos, these doin GLS of these guys who sell newsletters or the people trying to sell code, have them, you buy through their affiliate links and stuff like that, then get back to basics, and this is my book here. If you guys haven’t checked it out, Really trying to get over a hundred reviews. I think we’re up into the eighties or nineties right now. The journey of simple passive cash flow. I’ve been told it does a very good job in teaching the basics. And the basics is number one, investing in good deals, where you’re investing with people with reputation and a track record to get passive losses.

So you’re able to play different games on your taxes, essentially stop doing the stuff that your lame CPA is telling you, such as doing your 401k, or your deferred comp plan. That. Isn’t really any tax advice. It’s just deferring taxes instead, plate checkers, or instead of playing checkers, place chess with your taxes and pay little to taxes by changing your color, your money, or in their income to passive income.

So you can use your passive losses from your real estate to zero that out as best as you can. And maybe even if you wanna get jazzed up, do some rep status there. All to, and then, maybe do a little infinite banking. If you guys wanna get more information on infinite banking, you guys can get the infoPage at infoPage@simplepassivecashflow.com/banking, but help me out and buy the book.

Spread the good word folks. We’ll continue on multi-housing news, how the housing shortage became a crisis. So the US under produced 3.8 million of housing between 2012 and 2019. The shortfall is double what it was seven years ago. The problem is exasperating itself by crumbling infrastructure, ratio, inequality, climate change, and climate events.

And while under supply impacts residents at all income levels, lower and residents of color suffer the most. Three root causes for this is missing households that would have formed if units were available and affordable, insufficient availability and uninhabitable units, which is why we like to invest in this type of stuff, cuz there’s a growing demand for it. And it’s something that. As new inventory comes online, it doesn’t really directly compete with your class B or C asset.

The class stuff actually helps you because it pushes the price points up and up, which we have another article discussing later today. But it’s just that you don’t really have direct competition. This is why I don’t like self storage investing because. Even when you’re, you always wanna buy a type of storage because everybody wants to go to the 24 hour air condition, very highly secure using tech, lot of tech in their self storage.

But if somebody builds a new self storage facility next to yours, that’s why I’m not a big fan of that. That asset class I do like bolt storage though. RV storage. Multi-housing news also reports multi-family investing in a high inflation economy. So our economy has shifted to, from manufacturing to a service based one.

And we have a Fed that is very proactive with arsenal tools that have really deployed to manage economic growth. Again, if you, this is all new to you guys, check out the infoPage at simplepasscash.com/Duncan. Great primer, and feel free to share that with your friends. The current high inflation environment with the prospects of higher treasury rates have led both investors and lenders to reassess their underwriting assumptions along with feature valuations and cap rates combined with the uncertainty over exit cap rates in light of increasing treasury rates, multifamily investors are having to temper their pricing in order to achieve acceptable rate adjusted returns.

Here’s my quote here. I haven’t seen a lot of deals where they are still assuming that rents are gonna go up 3% every year. And their exit cap rates are still pretty high or pretty low. The importance of relationships, both on the debt and equity capital is Parabon in order to access capital to take advantage of this temporary market dislocation.

Talk about is right, Frank. Now it’s currently in a little bit of a bar market. Like I said, if you are somebody who isn’t the best investor out there, but Hey, you have a lot of money and you buy stuff, cash. This is the ideal situation for you still. I wouldn’t rec I wouldn’t do it, but, right now the prices are a little low it’s only problem is lending and there, you never have a time when things are always good and all signs clear.

and you’re always gonna have some kind of way to things where there’s always gonna be seemingly, headwinds in the way, if not, that’s when the prices start to go away and which it was getting there prior to, 20, late 20, 21, or, 2018, I would say, thankfully, we had that whole pandemic thing.

Re business online reports, Redfin US residential media and asking rates of 14.1% in June on annual basis. Redfin is the big real estate online real estate brokerage reported national rents in June. Went up 14.1% year over year. The June figure is a slight increase from. Which is what I’ve been telling everybody, rents are still aggressively going up and this is another reason why it’s a great time to be buying right now.

The rent growth is slowing because landlords are seeing demand start to ease as renters get pinched by inflation. But, I think this is the thing I always highlight for folks like, despite what you read the word recess. Rents are still going up. It’s just, it’s not going up at the crazy price it once was, which is a good thing.

I think that crazy pace was UN unsustainable. All I personally want is a little bit of growth. Like one to 3% rents are still climbing unprecedented rates in strong job markets like New York and Seattle and areas like San Antonio and Boston, that sort of popularity during the pandemic. And here are the top 10 markets that saw the biggest jump in June, Cincinnati, Seattle, Austin, Nashville, New York city, NASSAU county, New York, new Brunswick, New Jersey, New York, New Jersey, Portland and Sam Antonio

Yardi matrix, reports, multifamily rents rise again in June. Yardi made check reports. Average us multifamily rents roles, another $19 in June. Again, this is the same thing that we just mentioned. The increase was filled by strong demand and rent growth throughout the country. So this is a different type of environment.

This isn’t like 2008, lending is very different, at least on the residential side. You don’t have the ninja, no doc, no job, no income type of loans. There’s a lot of controls on lending and that’s what’s bogging down future investor mojo. Is that the lack of the capital market’s lack of lending availability?

Not that the deals are too expensive. The expectation for the remainder of 22 is for rents to increase at slower rates as the economy cools off. But that doesn’t mean that it’s going backwards. There’s always one thing I always say if I were to bet, if the rents don’t go down for very long, I would probably say what’s long, maybe longer than a six to 18 month period.

It. Unfortunately for people who rent, it’s always not gonna come outta your pocketbook at the end of the day, as gas prices rise, like the airlines just pass it off to their customers. And so things are going pretty well in, I don’t know about the economy, but as far as if you’re an investor getting your money working in real estate, and in rentals, And it’s going so well that like the class, a multifamily units are doing really right now, as wealth management.com reports rent growth will not maturity, slow down until demand cools, vacancy ticks up and will happen.

If, and when, afford becomes a headwind, if the job markets subsidy. This is what kind of my whole thesis is. If there’s any type of trouble in the economy, any type of recession who’s gonna get hurt. People who own their own houses, they’re gonna get foreclosed and where are they gonna go?

They’re gonna cascade down to class A apartments, class B apartments, class C apartments. This is right now. You’re seeing the class A apartments do really well because people can’t afford to buy houses because the cost of their lending, their interest rates have gone down. So it’s a cause and effect thing.

And I think it’s important to find those asset classes, those sectors, those, those wealth gaps where you want to participate based on your sec, your viewpoint of the economy and how things work. And in my opinion, only class C and B apartments in class B and areas are where it’s.

I know a lot of people like to buy these class a apartments, I’d say you might as well build them and sell them to suckers who wanna buy them and operate ’em. I just, I think it’s a sector that’s really performing really right now because people cannot afford houses and they are just gonna go rent.

They have a $1,500 a month, $2,500 a month class A apartment. But. I don’t see that really continuing, or I see that as a catch mode currently right now.

So here’s an example of a class A apartment right here. American capital group or committees real estate partners, diverse a blank apartments Kirkland, Washington for 242 million. So this is a class A apartment, and this is. Like a business plan that I would like to personally get into is like building these developments, scratch, creating a tremendous amount of value, add, and then selling it off to a mom and Paul syndicate, who have silly investors who really like these pretty pictures and that’s how they sell their deals.

But then, this is, to me, the risk of operating these high end apartments. Right now it’s doing really well because a lot of people in houses cannot afford to buy the loans, the higher interest rate and their affordability is backtracking. As of maybe a couple months ago, I just don’t see that shrink continuing.

And I think that there’s some leveling off of it. And I just think there’s just more long term stability in the B class asset, one level of this type of stuff. But yeah, I wanna do exactly what these guys do. Harper, who is a direct Fannie Mae. Freddie Mac lender says that Fannie Mae Freddie Mac expects a mission to deliver liquidity as stability and affordability. The agencies committed to enhance the ability and affordability of challenged markets by providing greater liquidity over the next three years.

Things tightened up in the capital markets and people aren’t able to afford their super expensive house simply because of the cost of. Interest rates went up a little bit and that directly impacts affordability. And that impacts a lot of people on the fringes. And that’s where the, Fannie Mae, Fred Mac are saying here where they’re redating and, changing up their targets for the future lending.

And this is always gonna happen. This has been happening since the beginning, when I’ve invested, they always make these micro adjustments. Take another run at it. Things just keep continuing and continuing. This is why I always tell investors, don’t really get too excited about any one thing . There’s always these small types of corrections here or there and at least how I’ve seen for the most part things typically work in a control band.

And I think people get too much into the headlines. Garbage headlines from your CNBCs, your yahoos that are placating out to the average consumer out there, trying to just sell headlines of fear, dooming blue. But this is what’s happening in the more industry newsletters like this, which I try to find for you guys.

They’re looking to do increased loan purchase activity at foster. Product innovation to enable the use of manufacturing houses and unique development scenarios. Fannie Mae is one of the leading sources, liquidity for manufacturing and affordable housing. They’re trying to work on the problem and so those of you guys don’t know Fannie Mae F Mac is your government arm, pseudo government arm to get that money out there to the people who need it the most.

To buy houses because some people still think that, everybody should buy a house to live in, even though that’s not really going to happen. They’re trying to get the people on the fringes that sort of deserve it to get ’em over the edge, which I think is a good thing. Bloomberg reports from billionaire Samal warns that the Fed needs to break the inflation mindset and says he doesn’t think that the US is currently in a recession.

I’ll try and I guess I’ll try and summarize what I talked about in my other hour-long, half long webinar with my insiders in our group. But basically you have inflation all the time. I don’t wanna say all time high, but a pretty, moving average of 9.1%. Last I checked it, which is three times what they want it to be at most.

They usually want it to be one to three. So what’s going on is that you’re seeing the Fed increase the amount of interest rate, which is called, quantitative tightening after quantitative easing is what they did previously, which is essentially creating fake money and creating all these government entitlement programs to basically lift us out of a pandemic created recess.

Which I think is a good thing to do. And this is coming from somebody who really doesn’t like too much government control, but I think that’s what the government is supposed to do. When the country shuts down for several months, we need a little bit of outside interjection that stabs to the heart of adrenaline to keep us going after a pandemic.

And that’s what happened. A whole bunch of money got pumped into the system, which is called quantitative easing. Then now it created a lot of it and made everybody’s stock market go up, easy come easy go. And everybody’s like house prices sort, which is obvious, this byproduct of all this printing of fake money.

And now we have to reverse a little bit because inflation is too high. Go figure. So this is exasperated by two things, which is. The Ukraine war and the COVID lockdowns in China. So I’ll dissect that a little bit. So, the Ukraine war, what that’s doing is putting some restrictions on the fuel.

I think you guys, Russian oil and stuff like that, and it’s gum things up there and the COVID in China, most of you guys are probably wondering. y’all are still playing COVID pandemic out there, yeah. We might be over it, mentally in America, but in China, they’re still doing that, with a zero COVID policy.

And even though it may be a little outdated and overboard at this point, it is what it is, political affiliations beside, and don’t matter, like it’s what China’s doing and the result is. That the people in China, aren’t in the factories, giving us Americans the cheap labor that we need to push our businesses forward, which is creating a lot of issues in terms of supply chain, which is also further exasperating, the inflation and the relation that’s happening there is if I’m a business owner and I typically.

Use China labor or outside Asian cheaper labor outside, that’s effectively in a way better technology. So I don’t have that at my disposal right now. And that dang Ukraine war is coming up my operations. So these are the damages at play. So until either the Ukraine war ends or COVID. In China lightens up a little bit.

We’re in this predicament where there’s not gonna be any outside relief. So that only the levers that the Fed has, the poll is to increase the interest rates, which is to take away money from the system in a way to lower the inflation. And what they want to do is they want to keep doing this UN until that unemployment starts to creep up.

And this is good news, unemployment really. Right now guys, like Google, it is unemployment in America. Look at the chart. We’re at all time lows right now. I dunno all time, but in our lifetime lows, what we want that thing that the Fed is likely doing is they’re planters probably gonna increase the interest rates half a percent, quarter percent watching.

They’re trying to get that inflation back down, but they don’t wanna do it too much. So that unemployment goes. Because unemployment goes up, that’s it’s a, that’s a harder, relation to fix at the end of, at the end of it. But that’s if you start injecting more in interest taking money away from the system, but don’t break it by having unemployment skyrocket over eight to 10%.

Now it’s a fine balance. And it’s also. Made a lot more difficult because there’s slack in the system and there’s more slack in the system than Norma, as there’s so much liquidity reserved. So it’s really hard to determine, if the fed increases the rates by point, seven, five tomorrow, it’s not it’s not like by next week, Wednesday, it’s gonna be, unemployment will be this and inflation be back down to 7% and we’re well, on our way, to getting it under 5%, it just doesn’t work like.

And that’s what makes it difficult for the Fed. It’s very simple relations, but, and I use this analogy and other things, but it’s like a cruise ship trying to turn back around. You obviously don’t want an overcorrection with too much government intervention and, in terms of too much interest rate hikes, we’ve still got a long way off till what, where we were in what, 1985.

And. We’ve got our Hawaii retreat that I’m planning in January and 2023. And I’m thinking of making it some kind of like a throwback to the 1985 era where we had 11% rates. Maybe, basically just give people an excuse to wear really ugly Hawaii Aloha shirts. But anyway, if you guys haven’t yet checked out our family office ohana mastermind.

Simple passive casual flow.com/journey. If you’re tired of these free meetup groups with low network investors who aren’t serious, we have over 90 members in this group. Of course, if you haven’t checked out what’s kind inside of our education platform, you can join for free at simplepassivecashflow.com/club.

And check out my book. You guys can download it for free at simplepassivecashflow.com/book. Help me out. Buy a book, leave me a review of trying to get over a hundred reviews there and we’ll see you guys next month. Bye.

U.S. Economy: Foundation of Today’s Crisis | Podcast With Richard Duncan Part 1

Hey, simple passive cash listeners today is going to be a foundational podcast for a lot of you folks. We’ve with a repeat guest, Richard Duncan who wrote four books, analyzing the causes and the effects of the economic crisis. Now we’ve had him on the podcast in the back, but I brought Richard back and the way we’re gonna run this today is we’re gonna split this up into a couple of podcasts.

So this first podcast you guys are gonna be hearing is a little bit more evergreen. It’s a lot of his understanding and a lot of the stuff I’ve adopted in my understanding of the economy. And I think it’s gonna be very important for a lot of you guys, maybe replay this podcast again and.

There’s just a very different thought process and like how sophisticated people see different news articles in the media talking about the economy and how things really work today stay tuned and the second half or the next podcast, we’re gonna be talking a little bit more timely, current events.

What I say is learn the foundations that we’re gonna be talking about here today, because whatever happens in the world last time we talked to Richard, it was 2019, and I’m sure we were talking about the Koreans bombing Hawaii at that time or something.

I think that was the black Swan event at the time today in Ukraine, but whatever it is in the future by knowing these fundamental ideas, I think it gives you a better way to take everything in and not just be paralyzed and take into the fear mongering of the news media.

Thanks for jumping on Richard. I appreciate it. Lane, thanks for having me back. It’s a pleasure to be here. Yeah. So for people who are not familiar with Richard he runs a paid newsletter called market watch, which I subscribe to along with a lot of the other founding office members in our community.

And, he’ll come up with a, it is about a video a week, or no, every yeah, every month, I think you come up with a new one and a lot of it’s very timely, but a lot of it is more foundational. So we’re gonna be just, hitting the tip of the iceberg today. Let’s get started Richard.

For a lot of the investors, they’re new to how the economy works, how the fed works. Where should we start out first. The most important thing I think for everyone to begin with to understand is that the economy no longer works the way it did in the past.

The big break came when the United States stopped backing dollars with gold. That happened between 1968 and 1971. And afterwards our economic system evolved in a very different way. So the economic theory that everyone is still taught in university, all of the classical economic theory that was developed in the 19th century and before that was all based on the initial foundation stone, the initial premise that gold was money.

And it was all built on that foundation stone gold was money and therefore the economy had to work in a certain way because the gold was money, but after gold stopped being money in 1968, then things started to evolve. And now our economic system works in a very different way than it did before. And so it requires a different kind of economic theory to understand the way it works.

Because after all, I think everyone’s pretty convinced now that the old theory just can’t explain the way things work in the modern world. That’s why there’s been so much confusion about what’s going on in the economy for the last several decades. So let me explain in a little bit more detail. Up until 1968 the US central bank was required to own gold.

To issue to back up all the dollars it issued. That’s the way it had been since the Fed was created in 1913, but by 1968, the Fed didn’t have enough gold left to allow it to issue any more dollars. So this was a huge problem because if the money supply couldn’t grow, the economy would have a crisis.

So Congress changed the law and they removed that requirement for the Fed to hold any gold backing for the dollar whatsoever. That happened in 1968. And then just a few years later, Richard Nixon destroyed the Brett and woods system because that was based on allowing other countries to convert their dollars into US gold.

But by 1971, the US just didn’t have enough gold left to allow other countries to convert all of their dollars into US gold. We would’ve completely had no gold left whatsoever had that occurred. So Nixon renewed that promise for the US to allow other countries to convert his dollars into gold.

And so afterwards there was no longer a link in Melink whatsoever between dollars or money and gold. And afterwards the economic system started to evolve in ways that no one had anticipated or planned on. It just evolved naturally once these gold golden feathers were removed, things started to change most obviously.

The one thing that changed was the Fed was suddenly free to create as much money as it wanted, as long as it didn’t create high rates of inflation. So the next thing that changed was because the fed was free to create a lot of money. This enabled the US government to run larger budget deficits than it could be before without pushing up interest rates.

In the olden days, since there was only a limited amount of money, if the government had very large budget deficits, then it would’ve had to borrow a lot of money. And there was only a fixed amount of money. So the government borrowing would push up interest rates and that would, they say, crowd out the private sector because the higher interest rates made a lot of investments unprofitable, and that was bad for the economy.

But once the Fed was freed to create a bunch of money, as it pleased, it enabled the government to have larger budget deficits because the Fed created money and bought a lot of this government debt and financed the government budget deficits at low interest rates. So more that allowed more fiscal stimulus and that allowed the government to direct the economy more by having larger budget deficits and spending more.

Now the next, very important thing that changed after dollars ceased to be backed by. Was the trade between countries no longer balanced? It seems odd to think that before 1971 trade between countries was balanced, we had such enormous US governments and such enormous US trade deficits. Now, for instance, this year, the US trade deficit is going to be something like 1 trillion.

And we’ve all grown up in this world over the last three or four decades where the US has run these extraordinarily large trade deficits. But before 1971, that just didn’t happen. Trade was in balance. And the reason it was in balance was because, for example, if the US had a big trade deficit, let’s say with China, as it does today, it would’ve had to send its gold over to China to pay for the trade deficit.

And so US gold, which was money. The money supply would’ve contracted, and that would’ve caused a very severe recession in the United States. So unemployment would’ve gone up and there would’ve been deflation. And pretty soon, the Americans wouldn’t have enough gold left to allow it to continue buying things from China or any other country.

So trade had to come back into balance. There was an automatic adjustment mechanism under the bread and wood system. And before that, under the gold standard that made sure that trade between countries had to balance, because if it didn’t balance, you had to pay for your deficit with gold and gold was money.

You’d run out of money. And so you’d stop having a trade deficit was very simple, but once gold was no longer money, it didn’t take the United States very long to discover that it could start running very large trade deficits with other countries and it no longer had to pay with gold. It could just pay with paper dollars or treasury bonds denominated in paper dollars.

And there was no limit as to how many of these the US government could create. So starting in the early 1980s, the US started having a very big trade deficit for the first time ever. And by the middle of the 1980s, it was equal to 3.5% of GDP. That was just something entirely unprecedented, unimaginable.

But that was just the beginning in 1990, around 1990, China entered the global economy. And so the US started having larger and larger trade deficits with China. And by 2006, the US trade deficit was 800 billion in that one year alone. That was 6% of US GDP. Now, of course, this was fantastic for global economic growth.

Because with the US having an $800 billion trade deficit in that one year, that meant the rest of the world could have an $800 billion trade surplus. In other words, it could, the rest of the world could produce $800 billion worth of goods, more than it would’ve otherwise been able to do and sell it all to the United States.

And so this was a thing that, you could say, was globalization as the US trade deficit exploded between 1980 in 2006. This globalization, this huge US trade deficit created a global economic boom that allowed one country after another, around the world to grow through export led growth.

This had really started a bit earlier after world war II with Japan and being able to industrialize by selling a lot of goods to the United States and then Korea and then Taiwan. Then later Thailand and Indonesia, Malaysia, and more recently Vietnam and China. So in particular, all of Asia has been able to industrialize largely because it’s been able to make manufactured goods and sell them to the United States.

So this was great for the developing countries in Asia. It, in fact, pooled hundreds of millions of people around the world out of poverty. But from the US perspective, why this was so important is because when the US started buying more and more goods from low wage countries like Thailand and Indonesia and later China and Vietnam.

This by buying goods from low wage countries, this pushed down the cost of manufactured goods in the United States. It was disinflationary. It drove down the inflation rate and it also drove down wages in the US or held wages down. And so this is the reason that the inflation rate came down so sharply from the early 1980s up until very recently, globalization was extremely deflationary and it kept the inflation rate very low and that allowed interest rates in the US to go to very low levels.

So for example, because the inflation was so low, that meant that the interest rates could be very low. Between the year 2000 and the time when COVID started roughly a 20 year period, the average rate of inflation in the United States was 1.7% in that 20 year period. So that was below the Fed’s 2% inflation target for two decades.

So the Fed’s biggest worry was preventing deflation during those decades, rather than worrying about inflation. So the reason this is so important is because back say in the 1960s and 1970s before, while trade was still in balance, if the us government ran very large budget deficits and over stimulated the economy, and if the fed created a lot of money to help finance those trade deficits, then that always led the very high rates of inflation.

And the reason that led to very high rates of inflation is because all of that government spending and stimulus and money creation, would’ve created such a strong economic growth in the United States that everyone would have a job. And also all of the factories would be working at full industrial capacity.

The car factories would be working flat out. The steel factories would be manufacturing all the steel that it could possibly manufacture. And so we hit domestic bottlenecks, and these domestic bottlenecks resulted in prices moving up, both wages and the cost of manufactured goods. And this led to a wage push inflation spiral that we experienced throughout the 1970s.

So then everything changed though in the 1980s, because we started running these very big trade deficits with the rest of the world and they were very deflationary. So the deflationary forces from globalization completely offset all of the inflationary forces that were being caused by the very large government budget deficits and all of the paper money that was being created by the fed.

And we still ended up in a situation where. The inflation rate was lower than the fed wanted. And interest rates were very low and the very low interest rates, then there were two results from low interest rates. One credit expanded very rapidly, and the credit growth started to drive economic growth.

And also the low interest rates meant that asset prices inflated when interest rates moved down, asset prices like property and also stocks and all the asset classes tend to move up. So our economic system started, it evolved over these past many decades after dollars ceased to be backed by gold. And we moved into an economic system where credit growth became the most important driver of economic growth.

This was something quite so Richard, let me, before we move to creditism, yeah, so check my understanding here of Globalization like globalization is like a disruptor in a way. The way I see it, to use it in a modern day analogy, it’s like the apple M one ship.

It’s like a disruptor technology. It runs cooler. It’s a lot quicker. This apple, silicone, I don’t know all the things, but like for the time being it’s a total game changer and that’s what globalization was. It was the ability to get cheaper labor elsewhere. And that helped both sides of the equation, which is why India and China the, they came up in terms of network or worth, and America was able to outsource a lot of these jobs.

But in a way, is it like the apple, one ship getting old, five years, 10 years in the future? Is that kind of what’s going on with globalization? It’s been around for a while. You’re right. So globalization really produced a paradigm shift. And I’ve written about this in my new book, which is called the money revolution.

So what I’ve been describing so far since we’ve been talking is this money revolution that has occurred since dollars used to be backed by gold. The catalyst for the revolution was when the US stopped backing dollars with gold. And now what we’re experiencing is a partial reversal of globalization.

And this has occurred over the last couple of years first because COVID resulted in global supply chain bottlenecks. And more recently Russia’s invasion of Ukraine has worsened the global supply chain bottleneck. And this has caused inflation to spike. So for all of this time, from the early 1980s, inflation moved lower and lower until COVID hit.

And then once COVID hit well at first prices actually fell for a while when everyone was locked down. But soon after that, because of the government stimulus and the supply chain bottlenecks. Now we’re experiencing very high rates of inflation and this is a, so this has been a double blow to globalization that has represented a partial reversal of this paradigm shift that we’ve lived through as a result of globalization and the higher inflation rate poses, a very dire threat to not only economic growth, but wealth as we’ve already seen.

A great deal of wealth has been destroyed. This year stock prices have fallen and cryptos have crumbled and other risky asset prices have crashed. That’s because the reversal of globalization has driven up the inflation rate and that’s forced the Fed to tighten monetary policy very aggressively or begin to tighten it policy very aggressively with much more tightening to come.

Yeah, so that it’s not so much, globalization is getting old. It’s just that globalization has dealt various severe blows and it’s reeling. It is on its back feet. And it’s not certain how long we’re going to suffer this reversal to globalization. We’d like to think that COVID is going to come to an end sometime soon, but we can’t be certain about that.

In fact, the headlines just today are that, COVID, once again, is spreading around China. China has a zero COVID policy. So they’re shutting down their factories again and imposing new lockdowns. And so this winter, we may have an even worse variant of COVID than we’ve had thus far.

We just don’t know how long COVID is going to last and how long it’s going to continue disrupting its supply chains and how long it’s going to continue to hammer globalization. And likewise, we don’t know how long the war in Ukraine is going to go on. Hopefully it will end tomorrow. But on the other hand, in a worst case scenario, it could spread to other countries in Europe or even become a world war.

So we just don’t know how this is going to play out. And that’s what makes it so frightening today for investors and for economists and analysts trying to forecast what’s going to happen with stock prices and other asset prices. And the outlook for the economy is very uncertain. Yeah. Those two headwinds, you just mentioned one would assume that it would go away in the next decade, let’s just to have there’s some point where it, the impact ends, but globalization, to me, I feel still feel like there’s that’s still gonna keep ticking for a lot, much longer than that. Maybe even several more decades, like how, we said at one time the United States has no more oil fossil fuel, but apparently there’s a boatload of it, right?

That’s right. If COVID goes away, I believe it will. Not that I’m qualified to discuss that, but I hope that war will end sometime soon and not become World War II. Those, it probably will. COVID probably will go away. The war probably will end and things probably will go back the way they were in 2019.

For example, the last time we spoke. And if that occurs, then we’ll be back in this world where globalization is exerting very strong, downward pressure on us prices. And we’ll, it probably won’t take very long to get back to the point where inflation in the US is once again, below the Fed’s 2% inflation target.

And if we move back in that position, that is ideal because it allows the government to manage the economy pretty effectively through large budget deficits when necessary and through quantitative easing with the Fed, creating money and buying government bonds to help finance the government spending at low interest rates.

And of course the low interest rate, environment’s very positive for asset prices. So hopefully we will return there before too many more years have passed. Let’s back up cuz I, some people, so we don’t leave anybody behind here. Some people slow down to absorb a lot of this, which is makes a lot of sense to me as you go over this and this is what a lot, a lot of this content is actually taught through, a large module in Richard’s market watch content on his website, but maybe probably go to creditism and quantitative, easing, quantitative, I think people hear about it, but maybe not all together.

They hear it spoken about in the news here or there, Okay. So again, once dollars cease to be backed by gold, our economic system evolved and it evolved into a system that requires credit growth. Our economic system, our economy became dependent on credit growth. For example, going back to 1952, every time total credit in the US grew by less than 2% adjusted for inflation.

The US went into recession and the recession didn’t end until there was another very big surge of credit expansion. So that tells us that the US economy requires at least 2% credit growth adjusted for inflation to stay out of recession. That happened nine times between 1952 and 2009. And every time that credit grew by less than 2%, there was a recession.

Now let me add this total credit has accelerated so radically during my lifetime, what I mean by total credit? Total credit is the same thing as total debt. Because one person’s debt is another person’s asset. A credit that they’ve extended is debt to someone else. So you can look at this as all the debt in the country, not just the government debt, but the household’s debt, the corporation’s debt, the financial sector’s debt, all the debt in the country.

First went through 1 trillion in 1964, by 2007, just on the Eve of the financial crisis. It has expanded to more than 50 trillion. So that was a 50 fold expansion of credit in just 43 years. And now total credit is 90 trillion. So 90 trillion of credit expansion in just 52 years and credit growth became the main driver of economic growth.

As I’ve said, anytime credit grew by less than 2%, the US went into recession. Then, the crisis of 2008 occurred because the private sector had taken on so much debt. The households in particular had taken on so much debt that they couldn’t repay it. They couldn’t continue paying interest on their mortgages.

And so they started defaulting and the private sector started defaulting and the banks started to fail, but the government intervened very aggressively with multi-trillion dollar budget deficits, and the Fed helped finance those budget deficits with money creation. So between 2008 and 2014, the US government dead increased by 7 trillion.

And the Fed created three and a half trillion dollars through quantitative easing. To finance that government debt at low interest rates and the combination of government fiscal stimulus and money creation by the Fed prevented a new, great depression. It reflected the global bubble that started to pop in 2008 and it carried on, it carried us on up until 2020 when COVID started.

So I described this news, the way the economy works now is driven by credit growth. So rather than calling this capitalism. I call it creditism. Capitalism was an economic system that was driven this way. Businessmen would invest. Some of them would make a profit. They would save their profits. Or in other words, accumulate capital, hence capitalism and repeat.

So it was driven by investment and saving and then more investment and more in saving. And that’s what drove economic growth under capitalism, but in recent decades, that’s not the way our economic system works at all anymore. The growth driver for our economic system for decades now has been credit growth and consumption and more credit growth and more consumption.

So our economy has become dependent on credit growth. And as long as credit keeps expanding, everything’s fine. But when credit slows down and grows by less than 2% adjusted for inflation, we have a recession. And if credit starts to contract, as it almost did in 2008, then we would go into a great depression.

The government understands this and it now manages the economy as best it can to make sure that credit keeps expanding one way or the other. So after 2008, the private sector really couldn’t take on a great deal of additional credit. So the government had to drive the economy by borrowing and spending, and even with the government borrowing and spending on a multi trillion dollar scale.

For the first four years after 2008, that still wasn’t enough to make credit grow a lot more. It wasn’t enough to get credit growing by 3%. In other words, adjusted for inflation. It was even with all the government stimulus and the government debt credit growth was still weak. It was just barely above the 2% recession threshold as I call it.

So the Fed stepped in and through very low interest rates and round after round of quantitative easing, the Fed drove up asset prices and this created a wealth effect. The wealth increased and that allowed the Americans to consume more. And this, so this wealth effect engineered by the Fed supplemented the weak credit growth and allowed the economy to keep expanding.

So from between 2009, the end of last year, total wealth in the United States expanded by 150%. Total wealth grew by 90 trillion in those 13 years from 60 trillion in 2009 to 150 trillion at the end of last year, 150% increase in household sector wealth in the us. And of course the creation of 90 trillion of wealth was very helpful in making the economy continue to grow.

It allowed people to spend more money, more consumption, and consumption’s 70% of GDPs. So that helped fuel the US economy and that made the economy grow. But the problem was that the wealth, the asset prices were moving up much more rapidly than income. So the asset prices became extremely inflated.

There’s a very good measure, a good index that I look at called. I call it the wealth to income ratio. And when the wealth to income ratio goes very high, that tells you that asset prices are too expensive and they’re likely to correct. So what this wealth income ratio actually is the household sector net worth, which I was just talking about.

Household sector, net worth, hit 150 trillion at the end of last year. This household sector net worth is divided by personal disposable income. So it’s wealth to income. Now, the average for this ratio, going back to 1950, this wealth income ratio has averaged. 550% since 1950. But during the NASDAQ bubble, it hit a record high of 620% because the NASDAQ stocks were so expensive and that bubble popped, and it went back to its average of 550%.

Then during the property bubble, the wealth income ratio shot up to a new record, high of six hundred and six hundred 70%. And then the property bubble popped in 2008. And this wealth income ratio went back to its average 550%. But by the end of last year, because of this extraordinary frenzy, in all of the asset markets, the wealth income ratio went up to 820%.

That was 23% and above its previous all time high at the peak of the property bubble. This was telling us that asset prices were extremely stretched. And very vulnerable to anything that could go wrong. And the thing that went wrong is inflation went up and the Fed had to start tightening barriers aggressively.

And so now we’ve had the first half of this year has been the worst year for stocks going back to what the 1960s and in the second quarter in particular was particularly harsh. So we’ve seen NASDAQ down more than 30%. The S and P’s have been down more than 20%, two thirds of all the value of crypto has been destroyed and other expensive asset prices are crashing as well.

But even after this, the wealth to income ratio based on my calculations is still 730%. So it’s still. 10% above its previous, all time peak in, at the peak of the property bubble. So this is telling us that asset prices are still very expensive and potentially have a lot more downside to go. For instance, if the wealth income ratio were to fall back to its 50 year average of 550%, a total of 50 trillion of wealth would have to be destroyed between the end of last year.

And by the time we hit the average at the end of last year, total wealth in the US was $150 trillion. It’s now down because the sell off in the stock market is now probably about 135 trillion. But to return to its average, it would have to fall to 100 and $100 trillion. And that suggests that up to another $35 trillion of wealth could be destroyed.

Before we return to the average. Now it’s not certain that we are going to return to the average, but much of that is going to depend on how high the Fed increases interest rates and how much money the Fed destroys through quantitative tightening, which just started last month. Yeah. I think that’s a kind of a fascinating ratio right there.

How, but I’m thinking that there’s a wealth gap, right? Part of that is taking in the average consumer out there, which is getting worse and worse than the top 1% or 0.1%. How does that factor in wouldn’t there be even wouldn’t their percentage getting less and less over time if that’s the case, that’s the overall trend?

You’re right. The income inequality has become very much worse and over the last few years, but over the last couple of decades as well, if a lot of wealth is destroyed, a lot of that wealth will be wealth belonging to people who have more than a billion dollars, but at the same time, if we see, so if that’s the case, then you know, it might not be so terrible because someone who has $15 billion, it’s probably not going to spend a lot less money than when he had 20 billion.

He’s still going to keep spending a lot of money, but whereas someone who’s at the bottom of the income distribution spectrum, if they lose a little wealth, they would have to probably spend much less money. But now of course, a lot of Americans own stocks and a lot of Americans own crypto as well recently.

And with stock prices down so far already, these people are probably going to feel less wealthy. They’re probably going to cut back on their spending. Of course, all of the government stimulus over the last few years has helped boost savings and has enabled the American public broadly to spend more money.

But of course, those stimulus programs are over. Now. The first one was in March, 2020, the second one was December, 2020. And the third one was in March, 2021. That was 15 months ago, so that there aren’t going to be any more big stimulus packages. So that source of consumer spending is going to dry it very quickly as well, that, combined with the big losses in their 401k plans.

And once they realize how much money they’ve lost in the stock market this year, that’s likely to deter them from spending as much. So it’s going to be a real drag on the economy and soon property prices are also likely to begin to fall. As interest rates keep moving higher. Of course the property markets enjoyed a wonderful run.

I think it’s up to something like a third. Property prices on average home prices are up something like a third over the last two years, and they’re still going higher on a year on year basis, but that’s likely to reverse before long. The Fed has just now started tightening interest rates and they’re going to keep tightening rates.

They increased the federal funds rate by 75 basis points last month. And they’re expected to increase another 75 basis points at the end of this month. And they’re likely to keep increasing the federal funds rate every time they meet through the middle of next year. So it’s not the federal funds rate now; it’s roughly in a range between 1.5% and 1.75%.

But by the middle of next year, it could move up to four and a half percent. And if it does, then the 10 year government bond yield is going to be at least four and a half percent and mortgage rates are going to be significantly higher than that. And so property prices are likely to begin falling and a lot.

And of course, most Americans are nearly most of all the Americans own their own homes or the majority at least. And so if they start feeling that their home prices are following, this is also going to curb their consumption, right? And with the fed increasing, the fed inflation rate now has shot up to 8.6%.

These are CPI headline numbers. The core numbers are lower, but they’re still well above the Fed’s 2% inflation target. So the Fed’s going to have to keep hiking the federal funds rate and pushing interest rates higher. The Fed’s mandate is stable prices and maximum employment. While employment’s extremely low, 3.6%, the Fed’s going to have to concentrate on bringing down the inflation rate.

Now, inflation is driven by supply and demand. If there’s too much demand and too little supply, then you get rising in prices. And the fed can’t do anything on the supply side, the fed can’t go out and drill more oil Wells or plant more wheat. They only can operate on the demand side. And so, what that means is they have to make demand go lower.

If they’re going to bring the inflation rate down. And the only way they can bring the demand side lower is by increasing interest rates so far that they throw millions of Americans out of work, and also destroy a lot of wealth by making the stock market and the property market fall. And by that makes demand lower by making demand lower, that makes inflation lower and so that’s what they’re intending to do now. They’re intending to drive up the unemployment rate, they’re intending to destroy wealth so that the inflation rate comes back down.

July 2022 Real Estate Braddahs Ep. 53

Hey folks, this is the 53rd episode of the real estate brothers. Welcome folks. In this episode, we’re gonna be talking all about rising interest rates, J Powell and rumors of the fed. And Dean’s gonna start us off with some June statistics, but before we do that, why don’t you guys take some time and take some questions and comments and we’ll, I’ll try and formulate it in our head.

We’ll try, incorporate it into this month’s episode. Okay, so that is that me? That’s you. Okay. Welcome everybody. Thank you for tuning in as always. What is this number? 53 episode number. That’s pretty cool. I think it shows our dedication to our craft. We’re not doing anything else other than doing this freaking thing every month. We should be in person soon.

Is that right? So as you guys know, I’m a real estate investor and realtor in Hawaii can catch me on my YouTube website real estate of Hawaii, or my website, real estate of Hawaii dot. But yeah. Before we jumped into the statistics, I wanted to share a couple things, summer activities here in Hawaii.

So one event that I tried, our venue was beyond Monet. That’s over in the convention center. I, the reason why I posted, I wanna talk about this one is that I wasn’t very cool. I guess you could say, but I wasn’t impressed very much and maybe I’m not an impressionist appreciator or an art appreciator, but it just was, the lack of, what I was able to see there, basically there was like two large rooms.

One room had a lot of. Words that you could read about Monique’s history, which that part was interesting, but keep in mind, I brought my 10 and my eight year old child and they went, we went on a playdate. So that was one room that after you read all the history, then you step into another room that had, it was like a big, I know it is just an empty hall that had four sides of Screens and the projectors just shot on all four sides.

Like just moving art, which is interesting too, but that was pretty much the end of it. And I think we paid, along the lines of maybe $30. So it went by really quickly. So just underneath that, I have this search for Snoopy the peanuts adventure at the experience. We didn’t do this, but the funny thing is after the beyond, Monnet.

event. We went over to AWA shopping center and to have the kids play on this playground right next to the target. And we saw this search for Snoopy, a popup adventure. So I, we didn’t go to, we didn’t have time, but I then went online, came to find out it’s the, it’s pretty much the same price as the BI money event.

And again, I haven’t gone through it yet, but it touted like eight different things. Areas to go and do, tour and adventure. So it depends like I’m sure if you’re a Mon fan or appreciated the beyond money must would probably be awesome. But, I didn’t find it very. Good bang for your buck.

And the one interesting thing too, was that someone was working, there was a basketball tournament down below at the convention center. So I was talking to the lady working that event. And she has mentioned to me that she was gonna go to beyond Mon and said, oh, And I asked her, there was a beyond van go event that happened probably six months ago.

So I had asked her, oh, what she thought about that one? She said she hadn’t been to that one. She missed it. But the interesting comment she made was that the beyond van go event had a lot, a really good turnout. And from my understanding, it was very similar with the two different areas.

And she said, surprisingly, she finds that this beyond Monet venue, isn’t getting as nearly as much attraction or pool as the beyond van goal came. So that made me think that people like that. Paid the money for the Vango event. Weren’t impressed enough to come back to the beyond money when they found out it was a very similar concept instead. Anyway, did you go to the one in Japan where there’s like

the immersive experience near you? Yes. So that one there’s two of those in Tokyo and we did go to that and oh yeah, maybe I’m comparing it to that, but. When blue this one’s out of water, because this one, I’m just looking at a picture, but it looks like they just like. Fired up four or four projectors and they just changed the USB file.

It’s not, I, there are transitions a little bit. It’s a little bit more fancy than that to your point. But yeah, in a nutshell versus the one in Japan, which is, comparing apples in oranges, but the technology that they had in the one in is, the kids, they would get a picture.

They would. Draw a sea creature, and then they would scan that sea creature in the computer, and then that would pop up and be animated. And. Going all over the walls in the virtual ocean and it would be moving. And that’s just one right there. There’s and maybe we were expecting that, but anyway, we are typical Hawaii, man.

If anybody can help me find a CPA that knows about passive losses and land conservation essence, please help me because apparently we are 20 years behind everybody on the mainland. And in terms of 3d, immersive art, we. A hundred years behind Japan. Anyway, getting off topic, let’s jump into the statistics for June.

And I’ve been tracking this as well as some other statistics because everyone is talking about the doom and glue and how there’s the correction and interest rates are making everything. Tank. And that may be the case on the stock market side, but glad to announce that it’s not quite happening in Hawaii. We are seeing a little bit of, I dunno, if you wanna call it softness, but as you can see, it’s not really evident in some of these numbers I’ll point out to you where it might be, but starting off with the single family meeting, single family home prices, we’re actually at 1 million we’re actually up 12% from the same time last year.

On the townhouse condo side, we actually. Broken all time, new record at five 30, 4,000. And that’s up 16% from last year where we do see maybe a potential. I dunno if you wanna call it softening, but it is on the Kohl sales, 357 for single family. That’s a 21% decrease from last year and 626 Kohl sales for townhouse condos.

That’s a 14% decrease. Last year, if you wanna say, that’s, if that’s a sign, the market, we’re still at 10 and 11% market, which is still a strong seller’s market by definition. So what I would like to do is like how we always do is dig a little bit further to see how things are going.

So closed sales. We see again, we’re just looking at the trend lines that, over the last. In 10 years, this is the closed sale trend. And if you look at it still looks relatively healthy, it’s not like it’s like a big drop, for new listings. This is where I think on the mainland.

Certain parts of the mainland they’re saying is softening up because sales are going down, listings are coming up. And then, inventory overall is on the rise, which is causing the prices then to soften. But as you can see here, new listings, we have, we, it’s not really going up. It’s actually going down.

And so what that does. Month supply of inventory. It’s not bumping that up as much as it is in certain parts of the United States. So if we look at, for June, we still have a single family, 1.6 months of inventory and condos, one not much different at 1.7, if you look at this historical chart, we were still really busy all time low still.

Until the inventory starts bumping up, I think that’s. We will actually get to see more softening of the prices I think. And, one thing different we have is our new construction rates. Aren’t nearly as high as they are at the mainland, being on the island as we are. So looking at days on market too, as a lagging indicator for a buyers or sellers market.

And we have, as you can see. As you mentioned earlier, it’s well under two weeks, so we’re still by definition in a seller’s market. And again, all of these statistics are lagging indicators, but these are six days old, right? As of June, interest rates again we talked about in the past.

I pulled this number yesterday, but the 30 year fixed is at 5.65. And I know I hear a lot of people freaking out and right, because everyone’s been spoiled for the last 10, 12 years. And what it does is yeah. When you, everyone is used to that 3% interest rate, it’s going. Almost double and now your buying power goes down.

So everyone has to adjust to that. Yeah. Okay. So now going onto some interesting news on the west side of wahoo, this is regarding the Makaha valley area. Once in a while, I get these calls . A lot of people like new construction and they’re looking for new construction popping up.

We always talk about Kaka ACO. We talk about Co Ridge having a whole ley, but there’s one small subdivision out in Makaha valley by cottage, by Stanford, Cara cottages at Mount Olu. It’s a gated community. The single family homes up to about 1.2 million and it is just out there in the middle of that valley and just stands out compared to everything else.

And part of the reason why is because we had this, a Canadian company that had bought the land in Makaha valley many years ago. And they were supposed to develop residential vacation homes, vacation rentals and golf courses. A few golf courses, I think two golf courses popped up over there.

Only one has survived, but besides that, there’s not much out there. In fact, one of the golf courses was supposed to be a tiger woods golf course. And so without that development coming through fruition that cottages of mono oil just stood out there. Oddly placed, but that developer actually went bankrupt in 2021, the one in Canada.

And so they, the bankruptcy courts have sold the property to K group, which is a Korean company. And hopefully they’re gonna start development in terms of getting that Makaha valley, developed in, having. Some neighbors and something to match the development of the cottages at MLU.

So that’s it depends how you look at some, some people think that’s great news. Other people are like, keep the, keep Hawaii, but is that a safe place out there? Is it. I just ask the question, everybody’s thinking. Yeah, no, and that’s a great question. And as a realtor, by, by definition, they, we have to watch out for what we say because of fair housing laws.

So when oh, selling properties, that kind of thing, but no, to your point, you go down the street. And you head towards the ocean and there’s a homeless camp off to the right, right on the beach. That’s not looking too good. And overall, you think of the, once you get outta Makaha valley, you look at the.

The condition in the neighborhood, the houses are really old. And so there is something to say it was gated, right? This thing, this, the cottage at mano is gated. Yeah. And there’s a guard. Like I said, it does, it is unique in terms of once you get out of the valley how the rest of the inventory and those new neighborhoods.

This is good for the mainland guys who don’t know anything about the island. And then they just, they don’t care being on the west side. Funny that you bring that up because that’s who’s the ones that are spotting this one and asking me about it. So yeah, that’s exactly the ones. And then, so then there’s a little bit of education too, and saying, okay come down and let’s go drive through the neighborhood. Let’s take a drive out. and let me know what you think. And so it is to your point that I am getting those inquiries about cottages. That’s why, when I see these articles like, oh, good to talk about because it’s all part of educating our friends, our clients, about our neighborhoods, where are the gated communities?

You get this one there’s. There’s actually a if you could see this picture out. Oh, lower Ridge. Oh, just in general. Yeah. There’s not many gay communities. Yeah. There, oh, there’s a townhouse in Milani Maka. There’s condo complexes that are easier to gate, right?

Yeah. But no houses. Yeah. You know what I mean? Yeah. Oh, there, there are ones I. Shoot. I think in Windward side, there are too. And in the Kahala side, there are a few, I think they’re small though. Yeah. But yeah. That’s why I like to talk about these kind of, articles too. Yeah. As always, I like to talk about the scam the month.

So now we’re talking about celebrity cryptocurrency scams and. Basically what these scammers are doing is they’re building the scam initially. Then the criminals will boost the scam with fake endorsements. So they will get, I guess they’ll impersonate public figures who previously promoted cryptocurrency to make the endorsements seem legitimate.

And then the endorsements are meant to influence you to invest in the scam. And if you fall further you’ll not see any return on your investment, obviously. So keep being aware of those. Always do you know, never trust a get rich quick scheme, if it sounds too good to be true, it probably is.

They’re the crypto currency scams are usually caught, and shut down quickly, but you never know. And remember that celebrities do get paid to endorse the. Cryptocurrency. You do your research and your due diligence in mighty people, although we are social creatures and we just follow, like lemmings one person that’s popular, right.

Happens since high. So that’s basically what this is. Yeah. So in this scenario, that celebrity isn’t truly promoting this scam, it’s just try to mimic that. Yeah. So the way this works is there’s like these discord channels. And then they’re usually put on by some kind of influencer, like a YouTuber or somebody like a podcaster that doesn’t know what they’re talking about.

But sometimes the influencer is like some actual tech founder that actually went full cycle with a company that’s where you gotta do due diligence, but most times it’s think, what’s that Jake Paul dude, or I don’t know who these guys are, that the one the brothers, the box. The pro boxer.

I don’t know. He, I don’t know. He’s got beach chairs like that, but he’s, there’s a lot of these like influencers, right? And so they get paid, not they’re dumb. They, I would, if I was the influencer, I would want equity, but they just get paid like a, just a quick sum of cash to shout out.

Just like all the Instagram influences out there. If you guys go to social blade.com, you can. Find all the local influencers and just pay people in certain categories where you want. It’s all paid for. It’s just a sham these days.

Like social media, waste of time. I dunno. I’ve been grumpy today. Cool, cool. No, that’s a good, very good point in terms of, you get. You very much do research, cuz there’s so many people and you think that it’s legit, they try to legitimize things. Anyway, moving on. So I have a client who is, this has happened a few times actually, where. . But right now I have a client who’s planning to sell their property.

They live 3000 miles away. They haven’t seen their property for quite a few years now it was tenanted. And again so yeah, they’re in the mainland and One thing and sorry they want me to sell their property. So one thing I asked them to consider you don’t need to, is to get what’s called a pre-marketing home inspection.

Typically in the buying process, the buyer is recommended on their own dollar to get a home inspection. And they use that as leverage, possibly to negotiate repairs. And our credits. So in the scenario that we’re in this for my clients, I had given them the option to get a pre-marketing home inspection.

And so one reason why this might be something for sellers to consider is it, it minimizes prices for the buyers as well. For the sellers in that manner, because they haven’t set it for net property for so many years. They don’t know what’s going on. A lot of times the property manager doesn’t let them know what happened.

The best thing they can do is go back to their accounting and see, oh, they had, they got billed for this. Okay. Okay. The toilet was repaired cuz or replaced. Cuz we see that in the bill, sometimes there’s a bill and there’s no detail. So the inspection helps. minimize those kinds of oopsies or like things they didn’t know about you.

And in theory it can reduce the buyer’s reason to cancel from the one inspection. So if providing, then with the buyers, with the information, if you want to at least be able to disclose things that popped up in this pre-marketing home inspection. It gives the buyers in theory, less outs because of, in things that they didn’t know, because they discovered it during their inspection, because we were able to let them know prior to getting into, to contract by right.

The buyer can opt out of the. contract based on for no reason for that matter in terms of if they’re still within that inspection period, but this just in theory mitigates the risk of them canceling on a, for a legitimate reason. It’s also in a pre-marketing home inspection is also a great marketing tool from the standpoint of being able to say to the buyers and the buyer’s agent in.

In good conscience that the seller is being upfront, honest and operating. Good in good fails in good faith without anything to hide. And it totally depends on the sellers because the sellers could take it two ways. They could go on the one side of the spectrum and be fully transparent to the point.

Oh here’s the pre-marketing home inspection report in. Take a look at it and you can see, or you could be on the opposite side of that spectrum and say, you know what, I haven’t set foot on this property. I’m gonna sell it as there are no credits, repairs, anything. So buyers now that you know, that you build in that, to your taking that to consideration in your offer, right?

So that’s theoretically you could be leaving meat on the bone though. So that’s why when you have that two ends of the spectrum, In theory, when you’re being more upfront and open you can hopefully get more for your property and pocket more. So it depends how you look at it again. Sometimes I have clients who are like, no, just as I take it.

I don’t wanna know anything. Just let them know. I don’t know anything. And that’s fine also. And again, situations where the owners haven’t seen their property in a long time is often when I. through that as a consideration for my sellers. So something for sellers to think about.

Yeah. See. So last I wanted to end with an update on the Kakaako neighborhood. So I went by today to take some clients over to the ward village. Area in the IBM building. And so I heard a few presentations. So quick update the Ali condo condominium that’s been completed already, but they still have some available studios that start at 660,000.

And there’s actually resale condos for Ali because it’s been done. I think some people are turning around and trying to sell them. Of course those are probably more. units that are, they were picked already. So the ones that are still sitting are not gonna be as, in good I guess part of the building, also co Ola is another complex similar to Ali, a little bit close, closer to the ocean and those studios start at seven 30.

They also have one bedroom at, in the nine hundreds and the two bedrooms at 1.2. So this one’s not gonna be actually done till I think. The fall quarter Q3 of this year. So those are for sale. A few units left. If you have, if you add to know anything, then P me, I have the pricing and the available units, but maybe for next month I’m gonna talk about the next building, that word villages or Howard Hughes is putting up and that complex is called Kalay.

And I’ll report next month. But lane, we talked about not Uru being on the ocean and having nothing to no views. So Kalia is one of those buildings that’s gonna be built right across from Aliana Boulevard. And it’s gonna have a view of the ocean in theory. They’re not building them similar to Naru where everyone has.

Ocean view, they’re doing it a little bit differently where I believe it’s, you’re either looking ever or diamond head. And then you have not a pick a peek, a Butte blue view, but you don’t get a straight shot view of the ocean so that everyone has some kind of view, but not the most gorgeous view, more information on KA coming soon. Those, when bedrooms start at 1.2. Just to let you focus on the downs, that could be for a while, but I’ll probably have a better, more comprehensive report with pictures and pricings. For next month, what’s the three bedroom, three bath costs. Because all these other ones are under like 1200 square feet.

Yeah. So, I think there’s gonna be like, I think that the highest would be like 5.3 fi in the 5 million. Oh, that’s probably this one, this three it’s at the corner unit three bedroom, three bath, 1457 square feet. So yeah, so Kale’s gonna be 330 units. 165 of those units are gonna be unrestricted, meaning, you can be an investor.

You don’t have to be living here. The remainder you have to be. It has to be owner occupied. Yeah. So what’s. oh, okay. So this Alii is not as good as Lua then. Yeah. Ali’s further towards the mountain. The unit sizes are a little bit smaller, the unit sizes. And then yeah, this interesting thing is Alii.

I have heard from a few buyers who stepped into the unit after cuz you’re buying off blueprints back then. And they’re like, oh my gosh, like this. This is so small. I can’t even believe how the engineers even, or the architectures they should be fired for coming. And man, you knew you should have known it’s gonna be tiny.

And, the thing is there weren’t any models to look at. Yeah. And I did see one of the Ali studios and it wasn’t that it seemed actually really big because of the way they made everything efficient and they had a Murphy bed and, but it reminded me of Murphy bed. You gotta live in the studios.

Yeah. Yes. If you’re, it reminded me of some of the Airbnbs, I stayed in Tokyo. If you are moving from, say Milani Maka from the four bedroom, three bath single family home, 2000 square feet, and you’re trying to. Squeeze yourself into a 350 square foot studio. Yeah. You’re gonna, you’re gonna be in a big bunch of shock.

Yeah. That’s the downgrade living with mom and dad. You get your living room and all the common air between the laundry room and you know that you get smaller quarters. You could, yeah, seriously. So I don’t know. It just depends how you look at it. Cuz the theory is that, you go back to your, so these micro apartment theories in these urban areas is you go up and you go to sleep there, but you’re gonna go down to the amenities that they have as well as the public amenities in terms of the restaurants and the shopping and the parks.

And know the interesting thing about transitioning back to Kalia is they’re gonna have these bungalows, it’s almost giant. I dunno like kitchens and the area. And one of the bongos has a pool where you can rent out. This area fits maybe 50 people and you have to pay a fee, but it’s almost like a miniature version of middle lane town association where you can rent out the big party room for your 300.

party, graduation, that kind of thing. It’ll be interesting, but yeah, Kala’s gonna be right on the, on Boulevard. So that should be an interesting one. I can, I’ll talk about that one and we can do even comparisons with the older inventory that has the video. Yeah. So that’s all I have for my section.

We’ll. If you guys wanna learn more about investing on the mainland, you guys can check out my podcast and we’ll pass it, cash flow, and the website simple pass it, cash flow.com, but let’s get to it here as this is a little chart that I put together where everybody’s complaining about the interest rates going up, but Hey, the interest rates go up, they cool off inflation and that’s just what the fed does.

And that’s, it’s kinda like your parents who told you couldn’t do something you wanted to do. That’s what the Fed is doing to make sure that we don’t go to hyper inflation and some con historical context of how long these times of cranking rates up, what did it go up? 70 per basis points last time.

It will probably go up half percent three quarter percent again next time, but you’re the last time it’s, it’s gone. 1.4 years, one and a half years. She lived 0.2 years from 2005 to 2008. The most recent one, 2017 to 2020, just before the pandemic was 2.6 years. So I would say, people say the interest rates are gonna go back down. I don’t think so, man. I think we’re looking at least another year of interest rates cranking up,

Best and worst places to raise a family. People like these for some strange injuries and, but Honolulu and Pearl city were like number one there. Oh, wow. Yeah.

Sanel is like a real estate guru staying away from Bitcoin. And if you guys are interested, I did a video called Crypto winter, which is upon us. I think it was live. Tomorrow on my YouTube channel, you guys can just Google it. Rich uncle is the YouTube channel. We try to keep things fun and light up there, but I’m not a huge fan of investing for sustainable returns, that type of stuff.

I do think it’s long term, so don’t get me wrong, but I just don’t. I took all my money, all that blocked by and all that type of stuff. Cuz there’s all this did. All the brokerages. I don’t know if that’s the right word to use, but of all the people on the exchanges there’s some turmoil happening on the staking side , but John Burns real estate consulting reports that demand is shifting from owning to renting with prices still pretty high.

There’s a bit of a. Home appreciation nationwide hit 20% in March of 2022. Making the largest jump in three decades. Mortgage payments went up about $600 with the latest increase in rents. If you live in Hawaii, that’s probably four times. Probably like two grand mortgage payments, right? Like most people used to pay three grand now it’s five GS right. Every month. Yep. Yep. Yep. In terms of new, the comparable new loan, right at the new lease, right?

Yeah, exactly. Should have done it yesterday. Yeah. Cause we all say, but I saw a picture the other day of some guy signing a noon loan. And I was like, really now’s the time to do it, but I guess, the rates are gonna go up more than likely in the next year. So I guess better now than later, but it’s a little too late to the party in a way.

Oh, I told you too. And that other slide that I showed, at, five, 6%, we’re still relatively low in the grand scheme of historical interest rates. You. Yeah. So exactly. So we’ve just been spoiled, when it, and it’s just shocking to us emotionally, as well as financially, when you look at how far down our buying part went, compared to when I was at 3% or below 3%, it’s very unnerving and it’s scary. It’s scary. . Yeah, but are you ready? That’s why I like your condos. Like your condos are, so I don’t wanna be offensive again. I always get that disclaimer, like one ha or 600 grand to 1.5 million, that’s all kind of semi middle class household house is like, to me, the people coming from the mainland are not middle class.

They’re all buying much larger or they can afford all charter, larger houses. Or more expensive houses. That’s 600 square feet here in Hawaii, apparently, but, yeah, like I, it’s binary. I think it’s like the low end folks, which is, most people in Hawaii are struggling and it’s the high end that can afford it.

And they are doing pretty well, all things pretty much it’s the elimination of the middle class, right? Yeah. The cation of the haves and the haves nots. Yeah. What do you wanna be? Dean? Do you wanna be, you can’t be middle class. You can’t stay in the middle and you have to go to one side, I wanna be on, I wanna be happy and I want my kids to be happy.

Yeah. Yeah. They’re not gonna be happy unless you pay $30 to see Snoopy and well, and not even bed an eye on it point us to the apartment market, nothing sign of slowing down rents. Road. Here are some apartment markets that are doing pretty well: Miami, New York, Fort LDO, Florida, Tempe, Orlando, San Diego, west Palm Nashville, Seattle, New York. Top smallest increases generally came in the Midwest and Northeast.

All the growth is in the Sunbelt. We keep talking about it again and again, and multi-housing news echoes that the rust belt and. Northeast, more people were leaving California, the rust belt and the Northeast heading to the Sunbelt and the Rocky mountain regions. This article they’re talking about out-of-state rental applications.

So people are moving out of their state. I know people are always moving out of Hawaii and the more affluent people are always moving back. Where are people relocating? Where are the magnets? Texas, Florida, Arizona, Georgia, and Tennessee. And this is what we’re talking about. The nation’s best renter retention rates for conventional apartments are occurring in the class B and the C units because of class B and C folks.

The middle class are not economically mobile and they cannot afford to buy houses, especially today. And this trend will fully continue on. Oh, here’s some places where they’re moving Class C are the apartments that aren’t raising rents as much as the high end, because the high end aren’t there, they have more money to spend, especially these days coming outta the pandemic.

Which is a little perplexing too, because you would think that maybe the people who are on the fringe or the bees move down to the seas, but right. So you just don’t have the ability to pay much more. Seems this one has some pertinent to Hawaii folks. But this is all the way in New York. This is a sort of anti rent control bill that got passed. Just one in a line of many I’m sure there’ll be more rent control, but I always look to you, you’re drawing us out with the paper. Oh my bet. All right. We’re always Looking at states like California and New York, where you are seeing this kind of precedent centering type of laws being passed because Hawaii is very progressive in terms of laws and equality.

In terms of financial equality, changes in my opinion, One time, Hawaii that comes up for discussion. Once in a while at the legislature rent control, it’s very scary. We don’t have rent control here. We do not, but it comes, it comes up every once in a while, every session. I dunno if it’s every session, but it becomes a topic of discussion because of the high cost of living there.

Affordability problem. Did you hear that Hawaii’s minimum wages can get raised, I don’t know, 10 years from now that was that a big thing or I just saw that article. Yeah. It’s see, I don’t even initially right on the fed side I think Obama was going, he was successful.

And I don’t know. I feel that I understand what they’re trying to do, but. I have a feeling it’s gonna backfire from the standpoint of, when we hear big, like on the federal side with that, I feel like now we saw McDonald’s a lot of those kiosks popping up in the cashiers.

Yeah. At the Safeways, we see the self checkout lines, more popping up, even Costco. So I feel like it might have a backward effect. you’re gonna actually displace the human resource. Yeah. I’ve never seen so many parking attendants. The guys who take your ticket.

There’s none of that. On the main night, everything is Automated, you don’t have some random person just staying in that little booth all day, making X dollars an hour. You don’t have any of that. I think El Elon Musk was watching an interview with him and he was saying that, with all of this technology, AI and everything, it’s gonna make a lot of this menial labor.

Positions that were handled in previously by, from, by humans, handled by technology and AI to the point where you know, people that don’t ha these, I, I guess for lack of better unskilled labor type positions are, might go away and who need to have, like a socialistic society where. Some people, the homeless, won’t be homeless, the jobless population will grow because there won’t be any jobs for a certain type of demographic or amount of education.

There, there won’t be any jobs for a big portion of the population. So the governments are gonna have to just pretty much just give them money and because they, there’s no way they’re gonna find a job. Go on Reddit and read the anti work thread. It’s funny. It’s made to be funny, but it is super sad because like people, you have to get into so much student debt to get a halfway decent job to make 50 cheese a year.

It’s ridiculous. And then one of there’s funny things and it’s okay, Make me do this bullshit application for a job that takes me like an hour. And then I have to upload all my job experience every single time. And then you’re not gonna tell me what the stupid pay is. That’s absurd, but that’s just how it is.

I don’t know. It just, yeah, like it, it is getting so separated. This is why I just wanna go to my gated community where when everybody gets so pissed off and everybody just fights in the streets, I will be away. And maybe, I know you’re not allowed to have guns, but maybe I’ll get a cannon or like a lightsaber and protect myself.

But yeah, like it just, yeah, it feels, feel sorry for a lot of folks out there. It’s just the system. Yeah. But yeah, I agree like the, raising the minimum wage is gonna get just passed down to the lower guys somehow. Yeah. Yeah. But let’s just keep focus on keeping the status quo for now.

But yeah, CNBC business, their opinion. It’s time to prepare for a recession. I’m not, I don’t really see this happening too much. We’re already, we’ve already had a negative 1.5% GDP. Last quarter and our recession is officially two quarters of that in a row. But like when the previous quarters passed were like 20% plus gains then you’re due for one of these once in a while.

You’re still net positive. yeah. You’re still net positive on one year moving average, these articles they need to sell, they need to sell doom and gloom. But I do think that the war in Ukraine is going longer, or the lockdowns in China, cuz that’s gonna make even more supply chain shocks. those are just two of them.

What they call the black Swan events that could potentially happen. That probably won’t, that is there’s always black swans events that could happen, but I don’t know. I don’t know. It’s why you buy stuff that makes sense in cash flows, as opposed to gambling on things. And don’t.

Any commentary there, Dean, I just was gonna say with that said, how, what, how are you getting ready for this? Or how are you? I think in a discussion I had with you, you folks, in, in a different setting, it was like, part of me, is getting caught up with all of this, these Domain gloom stories and taking my foot off of the gas in terms of.

My investing because I’m at where I’m at now. I’m still in the acquisition phase. So in theory, all things being the same, I should be pedaling to the metal and buying cash, flowing properties, but seeing this kind of thing in the media, in terms of the recession coming up and it’s maybe I’ll keep that cash for a little while.

And although I’m losing. Up, 8% keeping it in cash. If, and when there’s a big correction, then, I can put, be buying whatever real estate stocks. Yeah. Crypto at a discount and at the bottom waiting for everything to go up. So it’s what are you, how are you taking the, all of these kinds of articles since you’re reading them, just buy stuff that cash flows now.

But that whole thing that you said makes a lot of sense, but in practice it’s impossible. Do you remember 2008, right? That was your big moment. could you have picked the bottom and picked the right point? No, you probably are. So you could even do it in 2011, 12, 13, 14, 50.

Like you, you are not able to pick the bottom, just like again, 20, 20. The bottom fell out. But did you have the coho to go back in and summer of 20, 20 or 2021? No it’s impossible to catch, go in is, which is part of the practicality of that type of strategy. And I don’t claim that I’m that smart or have the clogs that do it either when it drops.

So I’m just gonna dollar cost average, and just, yeah, I was about to say the exact same term. So look what happened in 2020, like the bottom things dropped, right? I don’t have any of that type of stuff. That’s why I do real estate. But if you are already in you and you held onto real estate, you got that tremendous climb up.

There was no way you could have jumped into it. Hit that wave. If you are sitting on the sidelines or on shore, you have to be in the water in there holding onto the asset. Yeah. And by the time it’s all happening. You’re like oh no. Oh no. yeah. If you have enough man, like by all power to you, you can do what you want.

But most of the people saying this do Gloo and they’re gonna hold onto cash. Are. Guys are under half a million million dollars net worth. And to me, you can’t sit there with that. That’s just not enough on my own, for me. Yeah. But if you wanna do something, that’s what life, that’s what the cashier life insurance is.

It’s a way of pun. If that’s a really conservative way you wanna play it. That’s a good point too, in terms of getting like it’s you’re not going to. Kill it with the returns, but you’re, you have something better than sitting in, in cash in the bank, and then you have so many options in terms of, accessing the cash for, yeah.

For what investments in, and not applying that. Yeah. I’ll say on a recorded line, I will guarantee that people cannot time the bottle. Oh, I got a chopstick-like wrapper and I put it in front of my daughter. And trying to test her like reflexes just to troll her.

She cannot catch that thing. Just like how people cannot catch. They cannot, like, whenever this bottom comes in, you cannot catch it. It’s just not. You scared me when you said that, I’ll say this on, on, on the record. I was like, oh, what? Oh, should I have to press the pause or what? Okay. So why am I saying outlandish things?

My second thing that I will bet on is I don’t think rents ever go down for longer than one to three years. I’m willing to take that bet. Why? With that said too, saying the stock market in the long run always goes up real estate. Oh, I don’t know. I don’t know. In Japan, that’s not the case.

And people say we could be like that, but rents never go down. I don’t know. And gravity works but. Anyway, We had some of these other things. We hit our time limit here. And we are looking to change the show and how, where do you guys wanna talk about? So if you guys have any feedback, please reach out to myself or Dean and we’ll see you guys next time.