July 30th Update; Important Real Estate and Housing Update – A background to the future

I have uploaded a new Real Estate and Housing update podcast for July 30, 2018. Click here to go to the show archives page to listen or you can listen on the link below.

-Do a Google news search of “housing market” and every story on the first page paints a picture of doom. MSM is pointing us in a certain direction. The market is turning now.
-Sales are dropping off as predicted and it is not because sellers are few. Supply will emerge as investors begin to unwind. The percentage of units owned by investors will always be greater than reported.
-Despite what many in the alt-financial media proclaim, money is hard to come by. Many of my properties can no longer be used as collateral. Hard-money lenders are becoming much more discerning. What was collateral 2-3 years ago can no longer be used.
-Higher interest rates do not necessarily mean lower prices. We must analyze why rates are rising in the first place. Rates rose profoundly in the late 70’s yet prices still rose.
-Tax policies profoundly impact real estate prices.
1986 Tax Reform Act
1997 Taxpayer Relief Act
Tax Cuts and Jobs Act of 2017
-The latest round of tax changes is beginning to put a dent in higher-priced, owner-occupied housing. This will trickle down to working class areas. It already has begun.
-The 1997 Taxpayer Relief Act created a huge economic sector (home improvement and residential RE speculation). Home Depot would only be a mid-sized retailer, not a Dow Blue-Chip, but the cap gain exclusions created a huge economic sector that did not exist prior. Homeowners have become home-flippers, because of the cap-gains exclusions.
-The Bush Sr. Cabal (e.g. Carlyle Group and Blackstone) made billions buying up real estate in the wake of the TRA of 1986 inspired bust. It almost brought down Prudential Securities.
-Next downturn could be more like the late 80’s-early 90s, than last decade. But, the opportunities will flesh out and will be many.
-Real Estate management takes a lot of knowledge and since time is our most precious commodity it is always a good time to begin investing in real estate. However, now is not the time to invest in a big way. Learn from hands-on experience and when the cycle turns we must be ready. Get your feet wet now.
-I have not bought a new property since Spring 2016. I was buying in 2011-2015. I had two fallouts in the past year as I decided the market dynamics were changing. Many new investors are currently bidding up investment properties. This was just like in 2005.

Real estate deals; They are still out there, but we need to be flexible

It still pays to be a real estate investor and landlord

As a real estate investor and licensed Realtor, I get people asking me for advice all the time about investing in real estate and becoming a residential landlord.

First, the bad news; Despite what most have seen on the late night TV infomercials (I don’t have cable, so I do not know what’s on late night TV anymore) being a landlord takes a lot of knowledge and understanding of the marketplace. Moreover, real estate prices have had a nice run, so finding potential investments is tougher and more competitive.

Now, the good news; Anyone can become a successful landlord. All it takes is a lot of upfront work and common sense, but it gets easier over time. There are still deals available if you truly look for them. Moreover, there are a number of tools that did not exist a few years ago that make finding potential properties and tenants much easier. For instance, I do not use the local MLS to find tenants as my fellow Realtors usually do not present acceptable candidates. I advertise on Zillow and Trulia, and use www.mysmartmove.com to screen tenants. It’s all free!

I always recommend real estate investing and property management over the flipping stuff as the IRS has given ample tax benefits to long-term property managers and investors. As your portfolio builds over the years you will find yourself doing much less work overall as you will have more money to pay others to fix things and rehab.

Why bother buying life insurance when rental properties can provide you better protection? Here in the U.S., if you ever want to leave a sizable estate to your heirs, there is nothing more powerful than a portfolio of rental properties. For example, if you die and your children get your properties, they receive them with a stepped-up cost basis; their cost basis is based on the value of the properties on the day of your death.

You will never get rich buying rental REITs; the managers of the REITs get rich.  So, invest directly. There is nothing more satisfying than controlling our investments.

There are still good deals out there if we are flexible

The real estate collapse destroyed condo prices in Suburban MD, and many developments lost FHA certification, meaning that owner-occupied buyers could no longer get FHA and HUD mortgages. So, cash and conventional loans were the only ways to buy. Prices dropped from 275k to as low as 60k in 2012.

Yes, that is correct. It was a self-feeding loop, and the carnage was unprecedented. It still lasts today. Common charge delinquencies and large investor ownership were the primary causes of loss of FHA certification.

Chris Pirnak; Real Estate Deals to Be Made – Don’t Be Picky

Those numbers sound crazy, and indeed, they are heartbreaking to many owners (who were then foreclosed upon). But, life goes on. Investors then came in and cleaned up the excess supply. I was one of these people. In one instance, I bought a HUD-owned condo for 61k in which the bank sold back the note to HUD for 235k.

I always recommend concentrating on particular geographic areas as it pays to become an expert in a limited number of zip codes. This makes the up-front work much easier and will make finding properties more simple. Moreover, do not buy where you would want to live. Buy where you can get good deals and find good tenants. I prefer working class neighborhoods. Many of my tenants make $100k and more a year. That may sound like a lot of money, but here in the DC area that is normal.

As I will now show there are still opportunities to find decent deals that provide landlords with satisfactory Capitalization Rates (Cap Rates) and Internal Rates of Return (IRR).

My latest deal; a small price to pay for a big cash flow

I am currently working with the executor of an estate to finalize the purchase a condo. This property is in a well-funded development, but no longer qualifies for FHA financing as the number of investor-owned units swelled in the wake of the real estate collapse. Here are the details:

This is a 2 bed/2 bath condo, built in the mid 1970s. The contract price is $80,000, in an all-cash deal.  At that price it pays to use cash and try a cash-out deal after close.  I will not cash out. I own other units in the development. (Keep in mind that investors cannot bid up these prices as it may be tough to cash out; many hard money lenders want FHA- and FNMA- eligible properties as collateral)

Bank REOs – 80,000-90,000
Standard – 98,000-120,000

The rents for 2 bed/2 bath units are 1,550-1,600/mo.

The amount of money I will need to rehab the unit should be no more than $8,500 and two months of my time. So, my cost basis is about $90,000.

Here are the income and rates of return calculations:

Rent – $1,575/mo
Common charge – 344/mo
Tax and insurance – 140/mo

Rental income – $1,091/mo
Annual NET rental income – $11,782 (1,091 x 12 x.9) [deduct 10% for vacancy and expenses]

Purchase price + rehab – $90,000

Capitalization Rate – 13.1%

Five year IRR – 17.9%

The assumptions of the IRR calculation are as follows;
Holding period is five years.
Rents increase 2% annually.
10% of rental income is deducted for vacancy and expenses
The disposition price at the end of year five equals the current standard transaction price of $120,000.

If you are truly interested in building long-term wealth just start with the first property and build from there.  Just learn how to do the work and understand the carpentry and rehabbing stuff. I did not know much about these things when I first started, but the expertise came naturally as I had fun in the process.

 

Bitcoin Update – Learning from the past year’s market action; what does the future hold?

I have uploaded a new bitcoin update podcast for June 4, 2018. Click here to go to the show archives page to listen or you can listen on the link below.

-I hope to present a balanced assessment of bitcoin’s prospects, based on its origins. I am not as sanguine with the alt-coins.
-Bitcoin’s chart and market action mimicked that price and market action of oil in 2008 & 2014, gold and especially silver from 2005 to the present, tech stocks in the late 1990s-2003, and real estate from 2002-2011.
-No one can ever tell where the top will be, but we can gauge the market action to determine when to start unwinding a position. There are usually dead-cat bounces that provide second opportunities to unload.
-We were able to profitably trade bitcoin last year and early this year, because of our experience with prior asset bubbles.
-Don’t believe the crypto shilling of unprofitable mining. The same disinfo was put forth with the gold miners and oil producers. They all adjust to lower prices or are sold in bankruptcy.
-Bitcoin traders and regulators are developing a liquid pool of derivatives against the underlying asset. This shows that the globalists are supporting bitcoin. I cannot make this assumption about any of the alt-coins.

Market Update – Is it just a show? Are the elites losing control?

I have uploaded a new market update podcast for June 2, 2018. Click here to go to the show archives page to listen or you can listen on the link below.  I have included links to relevant articles and media on the Show Archives page.  The latest show is on the top of the page.

-Gold holding up as expected, given the rise in the USDX. Commercials were net shorters for the week, however, despite the drop in price.
-The 10-year Treasury continues to hold up. The Commercial longs are at historic highs and the spec shorts are at historic levels, too. Something has to give and the commercials are usually right. This is why longer-dated treasury yields fell this week. More of the same next week?
-The US economy is holding up well, especially when compared to the other developed economies. The USDX is well supported here, but the dollar shorts have largely covered. Perhaps we take a break from further dollar rallies
-Brexit vote took place in June 2016. Nothing has happened as the British politicians have all been co-opted. The Brexit campaign reminds me of the Tea Party movement of last decade. That reminds me of Trump’s America-first campaign. That reminds me of this current Italian political situation. It gets taken over and diffused. The power gets more centralized.
-As long as Trump gives in to the globalists’ demands things will hold up domestically. My thoughts of Trump taking the blame for economic calamity may be misguided as he is giving in to every demand the globalists ask.
-The fact that the EU is being held together is testament to their power.
-Every time we experience a rise in the collapse chatter things go back to normal. Collapse chatter demonstrates the elite’s control and are just opportunities to buy the dips.
-Perhaps I have seen a few too many collapse scenarios from the alt-financial media, but their prediction success is dismal. Count Armstrong as one of those Cassandras. He’s just selling fear.

May 30th Show; A conversation on what a systemic “collapse” means to us

I have uploaded a new show podcast for May 30, 2018. Click here to go to the show archives page to listen or you can listen on the link below.

-My hope is to help people understand that economic and monetary system problems present opportunities.
-Recall that QE was a novel program last decade. If there is another calamity perhaps there are other programs available. Are there any programs the governments and central banks can conjure up to address monetary and economic system problems in the future?
-Will there be a collapse? Who will be blamed for it?
-What is the goal of these elites? Is it to reform or is it to string it along until a force majeure presents itself? Never underestimate their ability to hold it all together.
-Do the patriots and alt-media followers and bloggers even know what “collapse” means?
-Are there untapped pools of liquidity that the nations can tap into to stave off debt collapse?
-The disinfo in the alt-financial media comes from the top and is filtered down. It ensnares well-meaning writers who really aren’t experts.
-George Bush, Sr. called the patriots and alt-media followers of his day as “the BUDsters.”
-Beware of the hard-sellers who rely on fear to sell their garbage. They appear in places we don’t think to look.

New World Order Economics; beware of the hard-sell collapse promoters

Beware of the hard sell, it can cost more than any losses

I came across this blog post from Martin Armstrong this morning titled, [a] Global Systemic Collapse – Opportunity & Risk, and immediately I was confronted with his perfunctory self-promotion. However, what interested me was the title. So, I read the post. As usual, it was a waste of time.

Yes, when I say we can see a monetary reset as soon as 2021, this is no joke. There are critical points in a number of markets that I will reveal in Singapore. These are the lines in the sand. Once we cross them, there is no going back. This is a global systemic collapse. I cannot emphasize how serious this is going to be.

This is NOT some new age of KNOWLEDGE or Artificial Intelligence ruling the world. Those are complete nonsense. We have to crash and burn before we every (sic) reach some new age of reform.

Martin Armstrong – A Global Systemic Collapse – Opportunity & Risk (May 29th)

I have been a regular reader of Mr. Armstong’s blog for at least five years, but he hasn’t been revealing anything new lately. I was intrigued with his concept of the 2015 financial big bang, so I paid $3,500 in 2015 to attend Mr. Armstrong’s WEC conference in Princeton. I figured it was close enough to home that I could drive, so the hassle of getting there was minimal. Once at the conference he did reveal a number of predictions for 2016-2017, but the event was nothing more than a boot camp type of seminar, where if you wished to learn more he had a number of services you could subscribe to. A person could easily spend $10,000 a year and more for his stuff and I felt short-changed by his WEC conference. I used his Socrates trading platform for several months and found it unrevealing. I went back to my methods and began making money again.

I met a number of individuals at the conference. From what I could tell, I did not come across any institutional investors. I spoke with about 20-25 attendees and they were in my position. I would estimate that at least half the people were retired and just managing their own money. I have to admit, we were taken.

In other words, Mr. Armstrong is a self promoter and his predictions are average, at best, though he will tell you otherwise.

In 1999, Japanese fraud investigators accused Armstrong of collecting money from Japanese investors, improperly commingling these funds with funds from other investors, and using the fresh money to cover losses he had incurred while trading. US prosecutors called it a $3 billion Ponzi scheme. Allegedly assisting Armstrong in his scheme was the Republic New York Corporation, which produced false account statements to reassure Armstrong’s investors. In 2001, the bank agreed to pay US$606 million as restitution for its part in the scandal.

Martin Armstrong – Wikipedia

Despite what Mr. Armstrong tells you, in the 1990s, he incurred substantial trading losses. So, whatever his computers say, he is often incorrect.

His predictions at the 2015 WEC conference were off as well. But he would tell his subscribers that the changes are demonstrated in his Socrates computer model. Though he correctly predicted the rise in the stock market, he incorrectly predicted the bond markets, the real estate market, precious metals, and most of the currencies markets. Despite the recent strength in the US dollar it has been down slightly since that 2015 conference. He was estimating 120 on the USDX by 2017.

He discounted bitcoin out of hand as it was rising. He refused to analyze it until it collapsed and then told his readers that he predicted it to the day.

Have faith in your abilities; don’t rely on “superstars” and “gurus”

Now, I am not here to bash and malign a fellow trader and investor; I do not try to make myself look good by denigrating others. But, if someone is going to put himself out there as an expert and superstar, he needs to back it up with results.

This is NOT some new age of KNOWLEDGE or Artificial Intelligence ruling the world. Those are complete nonsense. We have to crash and burn before we every reach some new age of reform.

Martin Armstrong – A Global Systemic Collapse – Opportunity & Risk (May 29th)

Mr. Armstrong has been preaching calamity for at least the five years I have been reading his posts. Notice that he always gives himself wiggle room, yet giving the collapse prognosticators enough ammunition to use his posts as proof that collapse is around the corner.

Notice the excerpt; he says we have to crash and burn before we see serious reform. He doesn’t say we will crash and burn. Ask yourself this question; what if the elites do not want serious reform? What if these elites want to string this along until war comes?

I submit to you that there will not be any serious reform until a force majeure presents itself. I say it can only be war. Mr. Armstrong, however, refuses to believe that there is any real conspiracy for global government and that this world is running in cycles. If you believe him you will be running in circles and will most likely be poorer, too.

Have faith in your ability to discern fact from fiction and to know when you are being played.

The new world order’s financial system; what’s bad for you is good for the economy

To grow the economy, the New World Order promotes predatory industries

It is obvious to those who follow the alt-financial media that our current monetary system is ostensibly flawed, since the vast majority of humanity does not benefit from its structure.  But to its developers and promoters,  it is a system used to exploit others. To these elite, it is a wonderful wealth extraction system. Only a small part of humanity does not end up on the losing end.

As society devolves and humanity degrades morally we can observe how the economy and the financial system transform along with it to reflect this harsh reality. So, we should not look at our new economy and lament of imminent collapse. Rather, we should soberly view this transformation of the economy as a logical evolution. Moral restraint precluded us from giving in to our indulgences and thus, kept many sectors of our current economic system from growing too large. This is no longer the case.

I am not here to judge whether I condone certain activities or behaviors, but a simple analysis of these matters can easily show to the objective person that what is good for you and me is bad for the economy. Conversely, what is bad for you and me is good for the economy.

Let’s take a look a some of the new and growing industry sectors in this new world economy.

Gambling and games of chance

When I was an undergraduate Economics student back in the 1980’s my professors taught that gambling and games of chance, in game theory, were examples of “minus-sum” or “negaitve-sum” propositions. Essentially, it was viewed that the negative externalities of gambling and games of chance (e.g. higher crime, gambling addiction, regressive wealth extraction, broken homes, personal bankruptcy) outweighed the positive externalities (e.g. higher tax revenue, casino shareholder profits, and casino jobs).

Indeed, society was much different back 30-40 years ago. There were tight restrictions on gambling, casino construction, and lotteries. This was done ostensibly to be less injurious to society as a whole. A large percentage of the population were concerned with the adverse consequences of gambling and it was reflected in the nation’s legislation at the time.

Americans who made bets with gaming, lotteries and offshore regulated betting firms lost approximately $107 billion in 2017, an increase of 1.5% on the previous year, and that’s expected to increase to $118.5 billion this year, according to H2 Gambling Capital, a data and market intelligence firm based in the U.K. That does not include unlicensed or “black market” activities.

Marketwatch – This is how much Americans lost on state-sanctioned gambling last year (May 15th)

 

“There’s an underground gigantic pool of revenue and now it moves into the sunshine,” said Ted Leonsis, owner of basketball’s Washington Wizards and hockey’s Washington Capitals. “It’ll make sports betting for the next generation of sports fans as mainstream as buying stock in Fortune 1000 companies.”

The American sports-betting market is projected to be one of the biggest in the world. Research firm Eilers & Krejcik Gaming estimates that as many as 44 million people could place $245 billion in bets each year if all 50 states were to allow widespread betting. The more likely scenario, according to Eilers, is that 32 states would allow betting by 2023, with $120 billion in total bets creating some $6 billion in annual revenue for the sports book operators.

Bloomberg – ‘Gigantic Pool’ of Cash Awaits Teams in Dawn of Legal Betting (May 15th)

It is clear that the gambling industry is going to continue to grow and there is nothing that can be done to reverse its course. The toothpaste is out of the tube and the people demand it. Moreover, the moral stigma that kept it under wraps is no longer present.

The U.S. Supreme Court recently struck down a federal ban on sports gambling. My first thought was what took so long?

Americans can legally bet on soybean futures, the rise and fall of stocks, horse races, dog races, state lotteries, real estate investments, church bingo games, the roll of dice and various card games.

But not sporting events?

Americans love sports and a significant percentage of them like to bet on sporting events. Nearly two-thirds of Americans and almost three-fourths of sports fans think sports wagering should be legal.

Troy Media Legalized U.S. sports gambling? It’s about time (May 25th)

As we can see, the rationalization is overwhelming. So, I say, let’s make it legal. Society wants it. Notice what the author opines; “Now the trick is to put the revenue to the best use: on public fitness and activity initiatives.”

Gambling and games of chance are regressive forms of taxation, and those least able to deal with the negative externalities of gambling are usually the ones most affected by it (the working class poor). However, it is clear that the tax jurisdictions are eyeing the potential windfall from gambling. If you and I are to benefit from this tax windfall potential we need to make certain that we never gamble.

In other words, in this economic system you and I benefit when everyone else gambles and we do not.

Marijuana and alcohol consumption

It is clear that the marijuana industry in the U.S. has exploded in size over the past decade.

From fashion to fragrance, to beverages both hard and soft, celebrity sells. And with marijuana sales expected to reach $8-10 billion by the end of this year, and projected to double to $20 billion by 2022, more celebs are investing money and lending their names to get a foothold in this growing market.

Chris Walsh, founding editor of Marijuana Business Daily (yes, there is such a thing), said, “This was an industry in the shadows. It was all around on the black market for many decades. It kind of rose up very quickly. A lot of people were shocked by how fast it materialized.

CBS News – Seeing green: Celebrities selling marijuana (May 27th)

Once again, I am not here to judge whether one should smoke or consume cannabis. My opinion is irrelevant. With this said, the NWO elite want us to smoke marijuana all day. They understand its characteristics on the human mind and body. It makes many of the users less healthy, less willing, cognitively-dulled, and more docile. If marijuana empowered the population its use would be strictly banned and would never be shown in the media, especially in comedic and casual form.

So, with my understanding of the predatory economic system we are enslaved under, it is in my best selfish interest for everyone else to smoke as much marijuana and drink as much alcohol as they can. I have less competition in business and a larger potential rental pool for my properties. Moreover, the tax revenue generation is going to expand greatly as a larger part of the population embraces mind-alterer usage.

In other words, in this economic system you and I benefit when everyone else consumes marjuana and alcohol and we do not.

Predatory lending and all forms of debt

In a debt-backed currency system, all the debt outstanding by all the participants of an economy largely help to support the monetary framework. By definition, those who do not possess income generating assets and can stay ahead of this money growth end up on the losing end. It is a predatory system. The debt is essentially a guarantee on the future labor of the worker, or as in the case of the U.S. government, its ability to tax us. As the debt grows over time, so does the size of the monetary system.

In a predatory lending scenario, the borrower is usually more desperate and is often more willing to give up a lot in the process. Imagine a predatory payday loan; the borrower is essentially promising a huge chunk of her future labor potential. Who said the U.S. abolished slavery? Debt slavery is alive and well today.

Even if we borrow for a house and pay 3.5% interest, we are promising the lender a piece of our future labor potential. As we can see, a debt-backed, fractional reserve monetary system is predatory, by nature, as those with the money to lend can extract the future productivity of society.

Imagine a scenario where everyone in an economy decided to pay off all their debt; the economy would instantly collapse and asset prices across the board would plummet.

Thus, the only form of debt we should take on is under a situation where we have offsetting income (e.g. rental property, profitable business, etc.) and not to use debt to finance personal consumption. Moreover, it is in our best selfish interest to make certain that everyone else is in as much debt as possible while we are debt-free.

In other words, in this economic system you and I benefit when everyone else is in debt and we are debt-free (unless you use debt to finance a profitable investment).

Conclusion – Society gets the monetary system it deserves

We need to contemplate how society has evolved over the past 40-50 years. Why should the monetary system collapse? I submit to you that this monetary system is just a reflection of its willing participants. It is an ungodly system and it is meant to be used by amoral people. These people prefer games of chance, embrace socialism (the concept of something for nothing), partake in marijuana consumption and other mind-alterers, are in perpetual debt servitude, and are much less healthy than their ancestors. In the new world economy if everyone stopped going to the doctors and were no longer getting sick the economy would collapse.

Don’t worry, the economy is growing, thanks to an amoral social class that is being served by a bunch of growing industries. We should be thankful that these growing predatory industries will help the economy to grow. The best part is that you and I can benefit, but we can’t become its victim.

Our monetary system is supported when everyone is sick. Asset prices are supported when everyone is in debt. The national citizenry is docile when everyone is smoking. People cannot rise up and rebel when everyone is losing money from gambling. It may be a predatory system, but if all we cared for was ourselves it would be in our best interest interest to grow these predatory industries, so that the government can raise as much tax revenue as possible and we can weed out our competition.

Welcome to the new world order. Look around, we are already here.

Why we should own gold and the disingenuous gold promoting and dollar bashing

Own gold for the right reasons

If you are familiar with my blog and research then you know how I approach gold as an investment. Gold should comprise a small percentage (10-15%) of our asset portfolio and we need to appreciate why we hold it. This understanding is important, because if we own it for the wrong reasons (e.g. inflation hedge, currency converting to gold-backing, market collapse, China acquiring gold in size, etc.) we will be disappointed and become disillusioned when it doesn’t perform as we were told. Moreover, we run the risk of misallocating our personal investment capital if we devote working funds to physical gold and expect imminent capital gains.

There are two reasons why we should own gold:

  1. We should own gold as an asset shield against potential lawsuits and liability that arise from daily life. Imagine having to go through a contentious divorce or being exposed to a catastrophic civil suit. Imagine if your balance sheet was in the cross hairs of a prosecuting attorney? If we held gold out of the system who would know? If you keep your gold buying and holdings discreet, you will always have unencumbered net worth.
  2. Gold is an insurance policy against unstable and corrupt governments that have a proclivity to abscond with their citizens’ wealth. This is especially true if a person lives in an unstable jurisdiction with a poorly performing currency. (e.g. India, Iran, Russia, Turkey, South Africa, Venezuela, Argentina, etc.).

By the way, notice this list of nations; they have unstable currencies and their leaders always seem to run cover for their corrupt governments. They tend to bash the US dollar, as it is easy to blame others for their own problems. If gold was the world’s currency, these nations would publicly denounce gold, since their balance of payments would be in even worse shape.

Beware of the gold “experts”

This is why I continually take exception to the gold promoters, shills, and the copywriters who promote the disinformation we read daily.

Case in point; this morning, I came across this article from Jim Rickards, titled, [T]he “Axis of Gold” Will Drive Gold Higher by the End of 2018. It appeared on the copywriting website, The Daily Reckoning.

The whole premise of the article provides nothing new from the gold shill perspective. Indeed, I can spend hours refuting much of what Mr. Rickards said, as there are instances in the article in which he makes sweeping generalizations that have no basis in fact.

This gold-based payments system will dilute and ultimately eliminate the impact of U.S. dollar-based sanctions.

Jim Rickards – The “Axis of Gold” Will Drive Gold Higher by the End of 2018 (May 24)

Is this true? There is no country in existence that wants to move to a gold-backed currency. If any nation wished to transact in gold and/or wanted to back their currency with gold their economic woes would mount and their debt would quickly become untenable. Gold, by definition is deflationary and any tax jurisdiction would suffocate under a gold-backed transaction system.

Iran also has an enormous amount of gold….  Iran has also received gold imported from Europe via Turkey, but the exact amount is unknown.

We don’t have any insight into how much it has because it’s also highly nontransparent. But in the first quarter of 2018, Iranian gold bar and coin purchases more than tripled.

Turkey is also acquiring enormous amounts of gold, which should not be surprising given Turkish president Recep Erdogan’s recent comments questioning the role of the dollar in global trade.

The Turkish central bank has almost doubled its gold holdings since last May, according to the World Gold Council. And it was the second largest buyer of gold among central banks for the first quarter of 2018.

So that’s the Axis of Gold. Again, evidence for this Axis of Gold is overwhelming.

Jim Rickards – The “Axis of Gold” Will Drive Gold Higher by the End of 2018 (May 24)

So what? These nations claiming to support gold are hemorrhaging foreign currency reserves in a futile attempt to support their own corrupt currency systems. Going to gold-backing would just hasten the process. With respect to Turkey, if this nation was about to flex its muscle and begin using gold for international settlements why is the lira continuing to collapse? I thought their intention to go to gold would help the lira.

The tumble of two Middle Eastern currencies – the Turkish lira and Iranian rial – which are among the world’s worst performers this year, is predicted to continue as regulators fail to arrest their tailspin.

The lira, which has weakened by about 20 per cent this year, and lost around 70 per cent of its value over the past five years, continued its free-fall even on Thursday despite a central bank intervention by boosting interest rates.

“The reasons for lira’s woes are deep-rooted and cannot be overcome with a rate cut or other drastic measures,” a currency analyst pointed out, hinting that Turkey might be entering the grips of a full-blown currency crisis.

The plunge of the lira against the US dollar and other currencies is unstoppable given Turkey’s double-digit inflation and large external financing needs as the country grapples with widening current-account deficit, consistent rise in oil prices, and a pullout by Japanese investors, analysts said.

Khaleej Times – Woes of lira and Iran rial to persist (May 24)

Turkey and President Erdoğan can denigrate the US dollar as the reserve currency and may wish to navigate around its usage, but there is no replacement for poor economic policies, reckless social spending, and a corrupt government.

Just because a nation is building a gold stockpile does not mean it intends to go to some sort of gold backing. Moreover, the last thing Turkey and Iran wish to do is to go to a gold backing. Turkey’s huge external debt load precludes it going to any gold backing. Its debt burden would immediately become unsustainable. They would no longer be able to print lira to spend.

China does not wish to go to any form of gold backing. The Chicom government has built its economic powerhouse entirely on a fiat-based, centrally-managed, fractional reserve monetary system. The usage of fiat money was the centerpiece of this economic miracle and the People’s Bank of China is a privately-run central bank. China would only lose with gold-backing. It wants nothing to do with having the yuan as a primary reserve currency as there are too many requirements that would run counter to its internal growth agenda into making China a formidable military opponent to the U.S.

Where there’s smoke….

I find it peculiar that the anti-dollar, gold-promoting rhetoric of the alt-financial media dovetails perfectly with the propaganda emanating out of the media outlets in the Russian-Sino sphere of influence. This one aspect alone should force us to take pause as Russia and China are not our friends. We should not fall victim to the fallacy of opposition; the enemy of our enemy is not our friend.

Obviously, I cannot conclude definitively that there is a relationship with some of the alt-financial media and foreign propaganda outfits like RT, Sputnik News, and PressTV. But, if the popular personalities in the alt-financial media are gaining exposure on these propaganda channels that’s a clue that we should stay away from much of what they have to say.  Where there’s smoke, there’s usually fire. These outlets are preying on our predisposition to embrace the anti-US Fed confirmation bias. But remember, China and Russia’s central banks are privately-run as well. This conspiracy is much larger than most are saying.

Own gold for the right reasons….

May 23rd Show – Is there an “Area 51” of economic and monetary policy research?

I have uploaded a new show podcast for May 23, 2018. Click here to go to the show archives page to listen or you can listen on the link below.

-There are currently no viable solutions to the monetary system problems being discussed. I find it curious that there is a lock-down with respect to any practical and public discussion
-Cryptos and blockchain still need at least 10-15 years of technological advancement to make them viable
-The euro, yuan, and yen offer no alternative to the dollar
-The SDR is almost 50 years old and provides no practical solution
-Gold backing to currencies would collapse the fiat system overnight as monetary growth would grind to a halt. Not one nation wants to see gold backing
-The collective oligarchy must be developing a new system behind closed doors. They are long-term planners and it is impossible that they are not developing one right now. They must have built an “Area 51” of economic research to develop new monetary system theories and technologies that can be employed on a mass, global scale.
-Never underestimate the elites’ ability to keep their system going for longer than we have patience for. The patriots were crying collapse 25 years ago. William Cooper was warning his listeners in the early ’90s of impending calamity.
-The boom/bust cycles provided by the current monetary system will continue to provide the wealth extraction necessary for the elites to consolidate the world’s wealth.
-All this collapse talk creates the learned helplessness that makes the transition easier when the time comes. We need to be patient and learn to work with this broken system for now.

Private equity residential landlords drive up prices; How we can compete and succeed

My concern is that the single-family home will always be more expensive
The typical home that would interest private equity investment

I came across a Bloomberg article titled,  [T]he $1,300 U.S. Rental Home Is So Hot the Canadians Are Bidding for It. In the article it discusses how Tricon Capital Group Inc., a Canadian firm, has quickly become the third-largest publicly listed landlord of U.S. single-family rentals by snapping up homes from Arizona to Florida. It now ranks behind Invitation Homes Inc., backed by Blackstone Group LP, and American Homes 4 Rent in a market it says is valued at about $3 trillion and is still largely owned by individual investors.

The demand “feels like it’s insatiable,” Tricon Chief Executive Officer Gary Berman said in an interview in Bloomberg’s Toronto office. “Sixteen million American households rent single-family homes. So put that into perspective. That’s bigger than the entire Canadian housing market.”

Tricon is aiming to double its assets under management to $10 billion by 2023, attracting capital from institutional investors and bringing corporate efficiency to the market. The Toronto-based company owns 15,500 rental homes in the U.S., with a value of about $2.9 billion. That compares with more than 80,000 for Invitation Homes and about 52,000 for American Homes 4 Rent.

Bloomberg – The $1,300 U.S. Rental Home Is So Hot the Canadians Are Bidding for It. (May 16th)

A permanent force in real estate
Home prices continue to rise and  coincides with the entrance of private equity in 2012

My concern with regards to private equity firms and single family homes is that the operation of a large portfolio of single family properties can become very expensive.  However, the article mentions how these firms have streamlined their processes to save a lot of money in unnecessary operating cost. Tricon is also building out its maintenance capabilities, with a fleet of trucks Berman calls a “Home Depot store on wheels.” That helped the company push repair and maintenance costs down to 9.7 percent of revenues in the first quarter from 11 percent a year earlier.

Owner of 80,000 single family homes in desirable areas and a publicly-traded subsidiary of Blackstone

The numbers are staggering; In my July 22, 2017 article, [L]ocals Priced Out of Buying Homes (Part 2) – Wall Street Destroys Housing Again, I list the number of homes owned by these institutional landlords. The growth in the past 18 months has been nothing short of breathtaking. For instance, Invitation Homes, the publicly-traded Blackstone subsidiary, now owns 80,000 single-family homes. This is up from 50,000 at the end of 2016. In many areas of the country it is clear that these firms have been primarily responsible for the marked increase in house prices since the 2012 nadir.

As long as these firms continue to consolidate their power within the rental sector they will continue to place a floor in house prices. As their cost structures continue to fall their profit margins will increase and will thus be able to pay more for houses. My concern is that they will be able to outbid many potential homeowners.

Don’t look to the Feds for help. As I have mentioned in the past, Fannie Mae and other federal agencies have been guaranteeing these private equity loans, which allows them to borrow much more cheaply to grow their business. This provides these firms with even more ammunition to compete with homeowners.

Institutional money is our competitor; we need to change our investment mindset
Private equity offers less competition with town homes

Individual real estate investors need to accept this new reality. There are many areas of the nation that have been overwhelmed with private equity money. It is helping to permanently reprice real estate. Moreover, we cannot contemplate the gloom portrayed by the alt-financial media that warns of impending private equity ownership distortions and potential collapse. I believe this phenomenon to be a permanent structural feature in residential real estate. Welcome to the new world order.

As investors, it is becoming apparent that we cannot compete head-on with this large force. There are some areas that these private equity firms do not consider. Our goal is to raise our capitalization rates. Savvy individual owners will always have an advantage in this regard.

  • Condominiums: The condominium market is still largely untapped and will probably remain this way. If we analyze sale and price data around the country we can see that many condominiums projects have units selling for 50% below last decade’s top. I have been scooping up condominiums since 2012.
  • Town homes: Although these properties are sold-fee simple, like detached single-family homes, there are special considerations with respect to town home ownership. There is less management autonomy, and much of the institutional money has shied away from these properties.
  • Older homes: These private equity firms only purchase and manage properties no more than 10-12 years old. I have observed in many instances that the price breaks between old and new homes have widened in recent years and believe this may be due to institutional money. The older homes still offer opportunity to the small investor.

It is clear that the institutional money is here to stay as the financial rewards are too great for them to ignore. As their operating costs decline as a percent of rental revenue their existing portfolios of homes will offer more profit potential going forward. The institutional ownership of residential real estate is another reason why I think home ownership will continue to be more expensive as we go forward. Any real estate bust will be ameliorated with a sea of private equity money.

We need to adjust to a new reality

Think about it; the globalists are sponsoring these private equity firms and are using them to buy up properties the former middle class used to own. If we consider our ongoing discussions with respect to the conspiracy against humanity, institutional home ownership only makes life tougher for the average worker. I believe the whole real estate market dynamic will be forever altered and many will not be able to benefit. Let’s hope that our understanding of this can help us overcome.