by | 21, Jun 2022

Sh*T Is Hitting The Fan, Let’s Breakdown The Economy

As many of you know, from the headlines, the news, economists, etc. things are not great right now for our economy. That might even be an understatement…

And as much as we would all like to put our heads in the sand, and pretend like everything is ok, it’s important to understand the issues we are facing right now. In fact, the more you understand, the less scary this might all be!

Dan and Anthony are going to look directly into the eye of Sauron, and break down what is happening in our economy currently. They cover everything from real estate to the crypto crash.

So… sh*t is hitting the fan. How do we clean it up?

Find out on this week’s episode of Multifamily Investing Made Simple.

Tweetable Quotes:

“You definitely don’t hear people talking about like buying the dip anymore.” – Anthony Vicino

“But if you’re gonna be dabbling, crypto, be looking out 10, 15 years, don’t try to double your money in a year.” – Dan Krueger

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five rules of investing

The Five Rules of Investing

** Transcripts

Sh*T Hitting The Fan

[00:00:00] Anthony: Hello in welcome

to multifamily invested, made simple podcast. It’s all about taking the complexity out of real estate investing so that you can take action today on your host Anthony oven, Victor’s capital joined as always by Dan fire retardant. Dan recruiter. Hey.

[00:00:28] Dan: Fire returns. So please don’t not try to, well,

[00:00:31] Anthony: I mean, you’re a little bit fire returned.


[00:00:33] Dan: not. I, I think people are pretty flamable aren’t they? Well,

[00:00:36] Anthony: you burn. Yeah. Um, but it doesn’t happen like instantaneously. You have a little bit of protection. I have no idea.

[00:00:41] Dan: Yeah. I have no idea. I’ve only seen in movies that it appears quite rapid and aggressive, so don’t want that. Okay.

[00:00:48] Anthony: Well, that’s not gonna be good then because we are.

Officially like the, everything is on fire. Mm. So you need to stay away from the flames, sir. I mean, it

[00:00:58] Dan: does smell like sulfur, but that’s more so [00:01:00] related to what’s going on outside our office right now. I got, I got some

[00:01:02] Anthony: brimstone smell, so someone’s

[00:01:04] Dan: drilling a well, literally it’s it’s

[00:01:06] Anthony: it’s funny cuz like literally and metaphorically, metaphorically, the market’s on fire.

Mm-hmm . But also literally outside of our office, they’re drilling some kinda hole in the ground some well. And so it smells also like fire. Yeah. So our reality currently is that, um, feels like the world ending just

[00:01:26] Dan: feels like what the apocalypse. Yep. The floors are rumbling. It smells like sulfur. That’s

[00:01:31] Anthony: the other, yeah, our, our floor is rumbling.

Isn’t it? Mm-hmm um, for the last couple of weeks, we had this buzzer outside of our office that was beeping incessantly. All that’s been more than a couple weeks. All that’s to say is since we moved in, I think if you’re out there and you’ve been stressed at all about what’s happening in the, in the world these days, um, we, we feel you, we feel you, but to Lia with Lia, but today what we’re gonna do actually is we’re gonna dive into it instead of putting our head into the sand and pretending like everything’s okay.

Like that meme of the dog in the fire room. Right. And he is [00:02:00] like sitting at a table drinking his tea. Everything’s fine. And yeah, everything’s fine. Okay. Everything’s fine. Yes. Don’t freak out. Don’t panic or anything. Don’t don’t push the panic button. It is so good. But, um, let’s also not turn a blind eye.

Let’s look directly into the eye of Saron and, and tackle. What are the things that are probably causing everybody the most stress? Like what are, when they say like the, the bleep? Is it the fan?

[00:02:24] Dan: Let. Is that happening now,

[00:02:26] Anthony: a lot of, a lot of bleep is sitting the fan. Yeah. So let’s most bleep let’s figure out what that bleep is and what we should do about cleaning it up and how we can maybe hopefully, uh, avoid getting splattered with the bleep.

Yuck. If you don’t know what the bleep that, what the bleep is, then I can’t help you. Um, but before we get to that, Dan, take me on am America. Uh, Mary. I was gonna say magical carpet ride. All right. Into the world of bad investing advice. Sure.

[00:02:52] Dan: Jasmine. Um, bad investing tip of the week. Um, I think this should be fairly apropo with [00:03:00] what, uh, our episode is gonna be on here.

Uh, but the bad investing tip of the week is gonna come straight out of our miles. Well, not technically, I think we hijack this quote from somebody. Um, but, uh, when the information changes, I change my mind. What do you do? Good, sir. Oh yeah. What was that?

[00:03:15] Anthony: Uh, I think that John Maynor

[00:03:16] Dan: Kanes that. Um, which is, uh, I think really good advice.

Uh, however, um, I’m gonna take a spin on it today and say that you don’t wanna change your thesis and you wanna make sure that if legitimately information is changing, that’s great. But if we take a look at what’s happening in the markets right now, if you take a look at crypto, pretty much everybody I’ve ever talked to has told me, oh yeah, my crypto, I don’t care.

I’m gonna hold it till I die. It could go to zero. I don’t care right now. It sure looks like a lot of people. And they’re selling it and they’re not holding it until, uh, you know, 20 years from now. So I think a lot of people have changed their thesis is when, in reality the information hasn’t changed.

It’s a all time market. This stuff happens. So I feel like there’s a lot of people that are going back on their word, uh, because [00:04:00] I think maybe information changed, but, uh, no, this is par for the course, for crypto in my opinion. But we’ll dive into that. We’ll get it. Yeah. I

[00:04:07] Anthony: think, I think crypto is a particular one.

I think, um, the. I can’t remember who we were talking about just a couple days ago, we were talking about somebody who like last week liked a thing. And now this week they stopped liking the thing and I can’t. If that was you, or if I was talking to somebody else, but I remember the conversation being really interesting, cuz I, I was like sitting there.

I was like, but what’s changed. Like what’s fundamentally changed. Um, before, like what was the investment thesis? And this wasn’t necessarily around crypto. I can’t even remember what it was about. So this is like, I don’t think I was honestly, so this is, this is so vague as to almost be unhelpful. All I know is like in the back of my head, I’m remembering this and I remember this conversation occurring where.

It, when you look at like the fundamental, the guy’s investment thesis and what he was doing, and like, why he no longer likes it? Like the, the core hadn’t changed. It was just all the, the appearances around [00:05:00] it, like the, the uncertainty of the discomfort. And I think crypto’s a really good example of that because like, fundamentally nothing’s really changed in the crypto environment.

Like this has always been the case. And if you guys don’t know, like crypto is just bleeding, I think it was. um, had a market capitalization of like one, maybe 1.2 trillion, and now it’s at like 500 billion. So like tons of value just wiped out, but like fundamentally it, if your belief in the system, and maybe this is where we start the conversation, like cuz crypto is a, is one of the, the, the beliefs that sit the fan for people.

And in the last two years, I think a lot of people got onto the crypto bandwagon thinking like this is gonna go to the moon because people were making ton of money and they didn’t appreciate. Crypto’s incredibly volatile. And the way I look at it is that there’s really. there’s two sectors within crypto.

There’s the, the currency side of things and, and banking on it being a store of value and a hedge against inflation and, and like all these things useful [00:06:00] too, right time. Yeah. So that’s one aspect of it. And I never liked cryptocurrency for that particular reason personally, but I really like in the companies that I invested in and actually like I’ve doubled down into them is the companies that serve as the base layer, the infrastructure, the platform, the technology upon which not just a cryptocurrency is built, but.

What the future of the, the web and the way that we compute things will be built. And so my th my thesis, there has not fundamentally changed, but I know that most of the companies I’m betting on now will not be around mm-hmm , uh, they will not win. And I know that because it’s highly speculative, which is why I have like, less than 1% of my net worth in crypto.

So if it goes to zero one, I’m okay with that. And, and from the very beginning, I put the money in saying, this is going, this is either going to zero, and I’m not gonna touch. Or it’s gonna go to the moon and I’m still not gonna touch it. Mm-hmm like, those are, those are the only contingencies. So the money’s gone.

You say that

[00:06:53] Dan: then it’s like really hard to execute that for a decade straight. That’s the problem I think people run into. Yeah, but that’s another interesting, [00:07:00] uh, talking point because I think that’s a, that’s a great way to play. Crypto or pretty much anything you have an interest in is betting on the things that are gonna do well, regardless of which thing wins.

Right? So instead of betting on your coin, which is like one use case of many in the blockchain space, instead of like putting all your bets into one specific thing, that’s, that’s gotta really, you know, low probability of being the one that wins out. Why don’t you bet on the thing that’s gonna support them regardless of.

Right. So it could be instead of betting on Microsoft or apple, uh, betting on Intel, right? Whoever actually makes the best computer is gonna need the chips or, you know, not the best example, but that the point is you don’t have to go buy the coins. You get exposure to the space. Uh, another interesting one is the, uh, the banking side.

You still do need some banks, uh, to facilitate all the transactions that are going on. I wanna say there’s only two banks that are crypto. and they’re doing really well and they have a business model that does great. Even if crypto doesn’t do well. So you’ve got a little bit of diversification, but you don’t need to be in the coins.

Um, and then the other issue with [00:08:00] crypto, I think is there’s so much damn leverage in there. Like a lot of people. Yeah. Like sailor included. I mean, he’s a bit more, um, Capable of, of taking on some risk, but a lot of people outside the us especially took out huge amounts of leverage. So even if they’d had their thesis intact and didn’t wanna sell, they’re getting forced out margin calls.

So it,

[00:08:16] Anthony: it is a poor idea to use leverage in a highly speculative investment. Opportunity like crypto, you don’t even need it. Yeah. And so, and here’s the other thing that we were talking about. So within crypto there in the defi space, a lot of people were staking coins and earning a good yield on it.

You’d see things like, oh, stake, your E, or your Bitcoin. And you can earn a 7% annualized return. And a lot of people looked at that and said, Hey, this is. Safe investment. This makes a lot of sense. And now what they’ve discovered with Celsius, suddenly putting a freeze and Celsius being like one of the largest defi, uh, platforms for this purpose, you know, putting a freeze on withdrawals because of how much terminal that has been in the system, suddenly people are realizing, okay.

I thought I was. [00:09:00] I, I thought I was putting my money into a savings account with the same security that I would get with a savings account, or if I was getting a bond mm-hmm, where the, the, the thesis is. Oh, I don’t want a sub 1% interest rate on my money saving savings. So I’ll go stake it over here for 7%.

That seems great. Not realizing that you really ended up betting the farm. That is the entire amount that you invested on about a 7% return mm-hmm right. That was your capped upside. And now people are realizing, oh crap. I, I might have made a really bad bet that I thought was very risk conservative in turn and, and it turns out it was really aggressive.

[00:09:35] Dan: And then say you borrowed money to do that. It’s even worse. It’s worse times 10.

[00:09:38] Anthony: So what should, I guess, what should people do right now if you’re in the crypto space and you’re you, and it sucks. Like if you have money, uh, significant sums of money sitting in CEL or these other accounts and you can’t get to it, or you just have all this value wiped out.

What, what, what do you do learn?

[00:09:54] Dan: Learn, definitely learn from it. I mean, that’s how you cut your teeth in investing as you lose money. And you remember [00:10:00] that when you lose it, cause you can read about what you’re supposed to do all the time, but until you actually feel some pain and discomfort, it’s not really gonna stick.

So take it as a very expensive tuition. Hopefully not a, uh, um, you know, like a bankruptcy, uh, level. Learning opportunity. Hopefully not, but it’s a, you went

[00:10:17] Anthony: too far payment. Yeah. You went too far. If that’s the case,

[00:10:19] Dan: was that Rob CLE? I think that says pace, tuition or something like that.

[00:10:24] Anthony: Uh, I don’t know. I always like to use the phrase, paying your tuition at the school of hard knocks.

Yeah. Um, and doing that on your own dime? Probably not with investors money or,

[00:10:32] Dan: yeah, just take that. I mean, with this take a long. Approach with it. You can try to trade it. You might get yourself chopped up. You probably will. But if you’re gonna be dabbling, crypto, be looking out 10, 15 years, don’t try to double your money in a year.


[00:10:46] Anthony: so yeah, I that’s my advice stay. Yeah. I, I, I don’t have much advice, um, play small in terms of what to do if you’re in that situation where like don’t bet the farm. Yeah. Shouldn’t have bet the farm. Yeah. That’s step [00:11:00] one. Um, okay. Let’s let’s, let’s move to another sad topic, I guess, um, inflation

[00:11:05] Dan: to this is gonna be the most uplifting episode we’ve ever done it.

Well, that’s why I’m talking

[00:11:08] Anthony: about inflation now. That’s like a, it’s going up. It’s going up. That’s a good thing. Haha. Up into the right baby. Hockey stick growth kind of good. Two straight months of north of what? 8% inflation. Yeah. That’s not good. Depends on how you do the math.

[00:11:23] Dan: It’s its gas and houses then.

Yes. 8%. Let’s let’s let’s

[00:11:27] Anthony: just go, let’s just go with what the feds, what we’re, what we’re hearing. Yeah. Which excludes houses. And we know that it’s, it’s more. Yeah, but, uh, but even at 8% it’s still like,

[00:11:37] Dan: whoa. Yeah. I mean, even at the. inaccurate, false number. It’s it’s still really high. Um, so I guess people, I, I think a lot of people don’t really know what it means, really.

I don’t think they, they really get it, uh, before, when it was, you know, closer to 2%, even though that wasn’t really accurate, you know, that’s a change that you don’t really notice. And now all of a sudden people are actually noticing, I don’t know if my parents had ever mentioned. [00:12:00] The price point at grocery stores or, or the gas, they, they complained about gas the whole time I was grown up.

But as far as grocery store prices, this is probably the first time I’ve, I’ve heard my parents actually comment on it, cuz it’s substantial 20% for eggs, chicken, beef, stuff like that. Um, you know, for people who are living on, uh, you know, medium to low income, um, even people who are right in the middle at the middle income are probably feeling a pinch with this.

But you know, if you don’t have much of a cushion and a lot of people don’t a lot of people don’t have more than about. A hundred bucks wiggle room in any given month when you see gas, double in price and, uh, the food go up substantially 20%. Um, that’s that hurts. So I think people are actually kind of noticing it for the first time, to be honest.

[00:12:44] Anthony: It’s yeah. It’s starting to get significant enough where the, the pain is hard to ignore. Mm-hmm um, I think for a lot of people, as well, within the last two years, there was a lot of stimulus money. And so we saw like historically high savings rates. People had higher nets than ever before, just because they had this money and they couldn’t really go [00:13:00] out.

They couldn’t spend it like every, everything was shut down. And I think we’re starting to see people actually have burned through that in a lot of cases. And now. They’re they’re feeling it. So like that whole great recession, not great recession. Great. Um, resignation of people saying, oh, I don’t want to go back to work because I don’t need to, I have all the savings.

Um, I’m not gonna, I’m not gonna say that’s the great resignation’s over. But, uh, I have a hard time imagining it’s it’s gonna last much longer. I have a feeling like people are gonna need to go back to work pretty soon. Yeah. Yeah. I

[00:13:30] Dan: think the labor force is gonna increase in size dramatically. Uh, and that artificially low unemployment rate is gonna start to pop here pretty soon.

Cuz I think you hit the nail on the head. I think a lot of people were feeling really great last year, thinking that this is just gonna keep happening. And they started making decisions, kinda like we touched on in crypto where, um, they’re like, this is never gonna end, you know, let’s go, let’s double down.

Let’s really get into this. And now they’re, they’re realizing that that’s not how the markets work. It’s cyclical things go up, they come back down. And if you [00:14:00] just jumped into the markets in 2020, which a lot of people did. Yeah. Like you haven’t seen a normal market. this is a normal market.

[00:14:08] Anthony: yeah. Here’s the other thing too.

It’s like, if you, if you’ve only started investing in, say, let’s say 2012, you also haven’t really very limited. You also haven’t really seen a normal

[00:14:19] Dan: market seen, slowing up to the right and then quick couple little dips and then up and way to the right. And now.

[00:14:25] Anthony: And that’s just, that’s, we’ve been talking about it, how we’ve been really spoiled for so many reasons over the last 10 ish years.

Where if, if you’re just, and we’re, we’re part of that generation, right? Like you graduated in 2008 from college. I was in college in eight. Okay. And I had just graduated a little bit before that, but we’re at a point in our life where like, it hadn’t didn’t really hit us per. At that moment, because I was aware

[00:14:49] Dan: of it happening and I was watching it cause I was studying finance.

Yeah. That’s the only reason I was watching it because other if I hadn’t had CNBC on, because that’s just what I was into. I probably would’ve been completely unaware. Yeah. I wanna say a lot [00:15:00] of people I went to school with were unaware other than maybe overhearing, uh, some people at school or at home talking about housing market.

It didn’t really impact anybody.

[00:15:09] Anthony: Yeah. So think about this. Like I’m nearly 40 and. I, I haven’t ever really gone through what I would call a really, this is the first for me, like truly like tumultuous patch. Mm-hmm two, because I wasn’t actively investing in that part that point,

[00:15:23] Dan: right? Yeah. You’re just not, you’re not, you’re barely even an economic participant.

You might have a part-time job if you’re in college or stuff like we were, so it’s like, you’d. You’re aware of things happening, but they don’t actually impact your bottom line. They don’t, you don’t feel the burden.

[00:15:35] Anthony: And, and all that’s to say is like that that’s a recognition that we are in a really freaky, weird time for the last, for a while now, because like, if you had REW then, okay.

We would’ve gone through a similar thing in early 2000, 2001 with the bubble, or I guess, uh, two, uh, nine 11. Would’ve been one. And then before that was a.com crash and then early nineties, and then, uh, late eighties with the, the savings. uh, savings bank. What is it? Savings

[00:15:59] Dan: and [00:16:00] loans. Yeah. Savings and loan credit.

Yeah. So I think the biggest thing, that’s probably a, a takeaway from all those things that you listed there is, this is the first time ever that the fed hasn’t had any bullets left in their clip to use every other time. They had, uh, you know, some really good tools, which were let’s let’s, uh, drop rates.

And let’s buy assets and they’re in the middle of rising rates because they can’t really go any lower and they’re in the middle of shrink, or they should be in the middle of trying to shrink their balance sheet, even though they’re probably gonna taper off of their taper pretty soon. But, um, that’s never been the case.

We’ve always had some ammo. We don’t really have any ammo this time. It’s gotta be an actually organic. Recession followed by an organic expansion. Yep. We’ve had juice versions of those and

[00:16:42] Anthony: it’s gonna suck, but it’s it’s medicine that we need and it’s inevitable. And so I think the takeaway here is this is life.

Um, we’ve been, we’ve been softened. And so ,

[00:16:55] Dan: it’s a great opportunity though. I mean, for people to position themselves, well, this is gonna be [00:17:00] probably the opportunity of the next several decades to, to build back up. Yeah. To, to jump in at a good time. Not today. So

[00:17:07] Anthony: not right now, not this, maybe not this exact instant.

Um, but it’s also not the time to put your head in the sand and just like start playing hard, hardcore defense, just like. Start looking and saying like, where’s the opportunity. So let’s, let’s talk about something else. So inflation’s going up. So you’re talking about how market cycles go up and then they come down.

So, um, first we started with crypto that went down. Then we talked about inflation that went up. Let’s talk about something that’s going down. Um, stock market I do not like looking at my brokerage accounts. I don’t have, I don’t have a ton of like, my net worth is not. Very deep into the stock market. It’s plenty, but I have enough in there where I, when I look at, I go O that hurts.

And I think we’re just over

[00:17:51] Dan: 22% down from the peaks, right on the mark. You look at, which I think is officially a couple points above what the, well, 20 percent’s usually the, the cutoff [00:18:00] for when you say bear market, and then recessions are usually, um, Called when there’s two negative GDP, uh, periods, which we’re about to get here pretty soon.

Um, but yeah, the big one that people feel kind of every day, it’s like death by a thousand cuts. And these days they’re like stab wounds is the stock market. That’s just been bleeding since the boat started to turn around February or March. And it’s just been pretty much consistently trending down into the right.

There’s been a couple little dead camp bounces on the way, but it’s, it’s pretty heavy in the down downward direction and it’s not anywhere near turning

[00:18:28] Anthony: around. It’s interesting because in the last two years like this, isn’t the first time that we dropped 20%. When you look back in COVID and we went to lockdown, there was like a huge drop.

Right. And that was interesting because a lot of people were like, this is when you buy, like, we dropped, like it’s gotta go back up because it happened. So suddenly people were able to, to, to look at this and be like, okay, this isn’t. This isn’t a forever thing. So people were, were bullish and like ran into the fire mm-hmm and doubled down and, and had a good buying spree.

That’s not gonna

[00:18:57] Dan: happen this time. That’s not gonna

[00:18:59] Anthony: work. Yeah. And [00:19:00] now, but what’s interesting. Know what’s interesting is like same things happen, right? We’ve dropped a ton of again yet. And theoretically are things that a discount versus what they should be. I don’t know. But you definitely don’t hear people talking about like buying the dip anymore.

Like there’s people that

[00:19:15] Dan: are gonna try all the way down. There’s people losing money doing it right now, guaranteed. Mm-hmm . And I think the big thing to call out here is that it’s not gonna have that V bottom shape that that 2020 had, cuz that was a very extreme, concentrated isolated event. Uh, that was a biological event.

This is an actual full on turning. Our economic paradigm and that doesn’t just, you know, go away with, uh, precautions and vaccines. It’s not curable like a virus is, this is something that we’ve gotta deal with. And like I said before, there’s no ammunition to, to juice it up and have the fed, just push it up.

Um, so we’ve actually gotta go through the big, long bottoming process that could last upwards of a year or more. Mm-hmm , um, where it’s just sideways into the right and just crummy. And [00:20:00] don’t expect to just dump all your money in and have things spring, spring. Give it good couple of years before there’s anything.

And it’s gonna take a long time to bottom. So don’t pick bottoms. Yep.

[00:20:10] Anthony: So this, this, what we’re going through right now is a systemic issue. Not an acute issue. COVID was an acute it’s like there was an instigating event. This is, this is systemic in a way that we’ve seen coming for a long time. Everybody like realizes, um, it should have happened a long time ago.

Yeah, it was artificially delayed. Yeah. You know, it’s like when you get sick and you can like mask the symptoms with powerful medications and whatnot, but the underlying sickness is still there. Um, it’s like, okay, here’s a really good example. You should be brushing your teeth, right. Otherwise you’re gonna RO outta your head.

Um, but it’s, it’s gonna take decades for that to, to realize. And in the short term, you could just be, you know, swinging mouthwash every day and you have good breath, right. So you can kind of hide the fact that there’s an issue. Um, Really weird technology. Okay. Let’s go back up. So we, we started [00:21:00] down, we went at crypto and then we went it up inflation.

Now stock market’s down and now let’s go to something that’s more uplifting. What’s uplifting interest rates.

[00:21:09] Dan: Oh yeah. Yep. Those are up. Those are up. Yeah. Anybody who’s even remotely curious and potentially selling or buying a house has probably been made aware of this. Good luck with that.

[00:21:20] Anthony: Yeah. I believe if you had a budget six months.

Uh, given where debt terms were at that point, you could buy, let’s say your budget was for a million dollar house. Well, now your budget can get you about $450,000 house. So you’re buying power.

[00:21:36] Dan: Yeah. Decreased a bit. Yeah. I mean, that’s aggressive. I don’t think it was that much, but it’s substantial. Um, I think I wanna say.

The difference was I did the math on this the other day, because I was listening to somebody talk about it in relation to if you bought this price house at this rate of interest and then this price house at this rate of interest. And I was playing around with that in a spreadsheet and goofing around with it.

But I think it was basically like 20 or [00:22:00] 30%

[00:22:00] Anthony: at least. Yeah. So effectively your mortgage pavement has doubled

[00:22:04] Dan: yeah. To get the same house damn near close to doubled your

[00:22:07] Anthony: mortgage, your cost to actually, yeah. So that’s why I’m going with, yeah. With about 400 5500. I’m just go mask off that that’s not, that’s not scientific numbers by any means people.


[00:22:15] Dan: Yeah. It’s really interesting to watch. Um, because this one’s, I think a lot of people are probably looking at what’s going on in the housing market now and thinking it’s another 2008, but actually I don’t think it is really strong. I, I think in good positions now,

[00:22:28] Anthony: there are some interesting things, like people are gonna get burned, right?

Like the single family market. Yeah. Some people can’t buy houses. Now.

[00:22:34] Dan: Some people got a shitty deal. Oh yeah. There’s I mean, there’s a lot of people getting priced out,

[00:22:37] Anthony: which is, which means there’s gonna be more renters, which is gonna increase rent demand.

[00:22:41] Dan: Yeah. For us. So that’s good. It sucks for them.

Cause there’s a lot of people that a year ago thought they could go and get their first house. And now it’s like, oh, we can’t. Well,

[00:22:47] Anthony: here’s another situation. There’s a lot of people maybe in the last year that went out and bought a single family home that. It’s gonna take a while to re it’s probably not worth what it was worth at that, right.

Like oh yeah. Unless what people can pay for it. So if you’re flipping, we told you if you’re, [00:23:00] yeah, don’t flip. If you’re thinking about staying there for five to 10 years, you’re gonna be fine. Yeah. But, um, you know, if you bought a house thinking, oh, we’ll stay here for two years, eh, man, maybe that wasn’t, you’re gonna wanna be there for a bit.

And also if you had locked in that, that good juicy, low, low 3%, 2% interest rate, maybe. Maybe don’t ever sell that. Mm. Maybe keep that until you die. Not sell

[00:23:20] Dan: the condo when we move. Yeah. We’ll try to keep that dip. That’s good. Um, Yeah, this one is it’s unfortunate because there’s a lot of factors about what’s going on in the real estate market that are really good for us.

And there’s some that are, are negative because again, lower end of the income spectrums getting, getting hosted, which always seems to be the case. Yeah. It helps our assets. Uh, we’re not even really talk about that, but there’s, there’s a lot of people that just can’t buy a house now. And that’s a pretty dramatic paradigm shift for a lot of people.

I think the big thing. We’re not gonna see a crash in the housing market, unless something fundamentally changes, um, or something happens in China, their housing market’s a mess. We don’t even have that on our list, but unless [00:24:00] something earth shattering changes, what we’re gonna see is probably just a softer market for a little bit, which is great.

And then some normal appreciation and hopefully some normal interest rates and people can start to get back in there. But, um, don’t expect like a crash in the housing market. It’s just, it’s not gonna happen. There’s nothing. Out there, whether it’s delinquencies or, or default rates or, or leverage levels, nothing out there is pointing towards, uh, any kind of risk in that

[00:24:25] Anthony: department.

Yeah. I wouldn’t really be concerned about that as much as the softening of cap rates and valuations, so that if you’re planning on, if you’re planning on going again, that refinance this year, it’s probably not gonna bring in as much as you think it’s going. And so, or if you’re gonna go sell it, like it’s maybe not gonna get it quite as much.

So it might just be a sit tight and wait situation. Yeah, I think

[00:24:48] Dan: by and large it’s like, especially in the multifamily investing space, we’re talking about that area of real estate. It’s it’s going from things were going really good to pretty good. , it’s not like we’re doing bad. I mean, unless somebody [00:25:00] got in really high leverage with a short term loan or something like that, like if we were planning on doing a refi, it’s like, okay, maybe we’ll get a little less.

Maybe we’ll just wait. That’s not that bad of a position to be in. As long as you got your debt sorted ahead of time.

[00:25:12] Anthony: Yeah. I think a lot of people are gonna find themselves. I, I think where, where we’re at right now is we’re standing in the water at about waist height. Mm-hmm so you can’t quite tell yet who’s naked.

And I don’t

[00:25:25] Dan: think there’s that many naked people out there. I think the lending standards have been so high for so long since oh eight that everyone’s sitting pretty good.

[00:25:34] Anthony: Honestly, I, I think what I am gonna predict isn’t that necessarily people are going, there’s gonna be a crash and people are just gonna be wiped out.

But I do think that there’s gonna be a lot of operators who are making projected returns that are not gonna be able to hit those projected returns. Mm-hmm so I. We’re gonna see a lot of that. Yeah. I don’t think we’re gonna see people having to give back buildings to the bank. I don’t think that’s gonna be the situation.

I [00:26:00] think we’re just gonna see a lot of operators coming short on expectations. Oh yeah. And I think that’ll shake out a lot actually in the

[00:26:07] Dan: industry. So yeah. So some guys might not do quite as well. So I see it going from, Hey, we project we’re gonna do 20% and actually, no, we’re, we’re kind of struggling for nine here.

That sucks. But um, nothing like 2000. With massive bankruptcies Lehman going out of business, the whole world exploding. So I, I, I think there’s a decent number of people that might think that something like that’s gonna happen because of what house prices have been doing, which was similar to 2007, 2006 and 2007.

But the underlying debt situation and general liquidity situation is a hell of a lot different

[00:26:44] Anthony: time will tell. We’ll see. I agree. I think we’re in agreement here. Um, I think. I think some people are gonna bleed. Yeah, those guys. I don’t think it’s gonna be. I think it’s gonna be, I think developers are kind of poised on a interesting knife blade right now, [00:27:00] depending on where they’re coming from.

They’re probably, I, I, I know in Minneapolis in particular, like the amount of, um, new product coming online is like stalling right now. Cuz as developers are looking like, we’re not gonna go break ground on anything right now. Uh let’s let’s sit and wait, but I. The developers who just kind of charge in, um, all bravely.

I think they, they might get kind of screwed, but we’ll see. I mean, this is all just pontificating about the future and who really knows it

[00:27:29] Dan: was something I was thinking about on the drive-in or knows it wasn’t this morning. It was either, I think it was yesterday. Um, so much construction going on around here.

Like we mentioned at the top of the show, there’s Wells being drilled right outside our, our office here. And it got me thinking, you know, I wanted to start to look up and I haven’t done it yet. It’s just kind of a general curiosity at this point. What are the developers doing? Who have the option to other either start a project now, are they holding back?

Because I have no data to point to on this yet. So I don’t know if you’ve looked at anything to queue you in to what those guys are actually doing. I [00:28:00] know a couple

[00:28:00] Anthony: of small boutique developers, so these are not the big, big, big players, but these are guys that are doing, you know, 30, 40 million developments.

And maybe they have like one or two going at a time. Um, they’ve pumped the brakes and if they, they weren’t already in the ground in building, they have paused the building process like entire. And they’re not bringing on new acquisitions at this point. They’re not looking for new projects. They just kind of sit and tight, but that’s like a, a data point of like three.

So it’s small.

[00:28:27] Dan: And is that due to interest rates or is that due to uncertainty of what the economic environment’s gonna look like in the next couple of

[00:28:34] Anthony: years? Uh, I think with developers, it’s a, it’s a combination of both because when it comes to developing you, can’t just look at the short term, like where are we now?

You have to, you have to make a. Educated bet on where we’re gonna be in two, three years. And so I think they’re looking at both down the road. I think they’re also looking at the prices of land and construction, all these things and how they’re so elevated that it’s making it really hard to get the yields that they need to, to move forward.

So for them, it’s just, it’s, it’s starting to [00:29:00] make a lot more sense. Just kind of sit on your hands and not do anything, wait and see mode the mode, whereas for pre, and it makes sense for that because. The time between when they break ground or when they break, they actually buy the plot and actually realize any profits.

It’s a long time. Right. So preexisting acquisitions, I that’s what we do still makes a lot of sense to me. Yeah. We get

[00:29:20] Dan: to choose what makes sense today and actually get it today. Yeah. Not buying on future cash flows, trying to figure out what makes sense a year from now. And that’s tough. Things change rapidly, you know?

[00:29:29] Anthony: All right. So let’s wrap it up. Uh, enough doom and gloom. Um, so we just, you know, pulled our head outta the. For a little bit, and I don’t know, maybe we stuck it up our butts and we just talked blindly about things that we have no concept about could mean that maybe,

[00:29:41] Dan: but hopefully, maybe at least like a happy book we can

[00:29:43] Anthony: recommend I do.

Okay. So, uh, the book that I will recommend this week, and I think you might have recommended it now that I think about it in the past, um, it’s called what it takes by, uh, Steven Schwartzman, founder of BlackRock Blackstone.

[00:29:56] Dan: Blackstone. I read it. I can’t remember if I recommended it.

[00:29:58] Anthony: It’s really good. I like it a [00:30:00] lot better than king of capital so far, actually.

Well, this was, yeah, it’s more of like his biography written from his perspective. Whereas king of capital is written from like a third party perspective. It’s really interesting. It has a lot of really good lessons in there. Um, something like, Hey, if you’re given the choice, uh, the amount of work to make a small idea and a big idea work is equal mm-hmm um, so you might as well go for the big.

Yeah. Or, you know, big ideas attract big people. And so it’s easier to attract great talent to big ideas. Um, so I thought like there’s just a lot in there that I thought was really interesting and it’s cool hearing about how they got started. Their first raise was like a billion dollar fund and they struggled.

And it’s really interesting to hear how badly they struggled at it. And it’s a completely different way of raising capital from institutions than what we do, but it was just really, it was interesting to hear, like it’s hard for every. When you first start.

[00:30:51] Dan: Yeah, I got comfort outta that. Like, oh, you struggle too.

[00:30:55] Anthony: So that’s the book, uh, what it takes by, I think it’s Steven Schwarzman. Yeah, that’s gonna do it for us guys. We [00:31:00] appreciate you taking some time outta your day to join us and. Hopefully, this brought a little bit of, uh, sunshine to your day. I don’t know. Uh, if you liked it, leave a review. That that’d be cool.

We like that. And if you don’t, we’ll see

[00:31:12] Dan: you in the next episode.

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