I titled this presentation Invent Your Future,
because while we cannot completely predict the future, what we can do is
we can make choices today in the present.
Just like Gandhi said, that actually produces a better outcome in the future.
So we can invent your future by making great choices of the things we do today.
So I want to start off with the difference between reality and truth,
because I think this is happening right now all over the place.
Most people have biases.
Even I have my own biases.
And one of my great friends who played as a center in the NBA
once told me he's like art genetics, a bitch, basically telling me
because I was so sure I would never be able to play in the NBA.
Now, of course, that is an Inconvenient Truth,
but in some cases, many people would call it a reassuring lie.
If they believe that one day they would be able to do that.
The truth is, my genetics prevented me from being an NBA athlete.
The reason I tell you that stories, because a lot of people
are not paying attention to the facts of what's happening today
and they're stuck in their own software and their own reality.
And they're working through what I would call a reassuring lie.
So you can actually apply this logic to your relationship,
to your health or even just to your financial state.
So let's take a look at the inconvenient truth.
Inflation is the highest in 20 years.
It hasn't been this high since 1990.
Interest rates are also the highest in 20 years, which are in the early 2000.
Unemployment is at a 50 year all time low, which hasn't been this low since 1969.
Credit card debt is at an all time high.
We just hit $1 trillion and personal savings is at an all time low.
These statements are the truth.
Unfortunately, many people are looking at this
and saying, I wonder what that's going to mean for me.
They're stuck in these reassuring lives like inflation.
How does that really affect me?
Although they might be upset as their rent goes up
or the cost of food goes up or the price of gas,
they don't actually equate it to anything more than that.
Interest rates will go down soon.
We've all heard this.
This is your typical syndicator or anybody
that's hopeful is all hoping that interest rates will get out soon.
Well, I hope so, too.
But the fact is the Fed is just not positioned
to do that over the next 18 months.
Low unemployment is good for me.
Well, I might be if you're an employee, but it's not if you're employer
because wages are actually growing, which is inflationary,
and the Fed is actually tackling that right now.
They're actually predicting to increase employment
by another 2 million people over the next year and a half.
Your credit card debt, which is now probably paying at least 20%,
means that you have to work more or work less time or stress more anxiety.
Same thing with personal savings as people are using their credit cards
more for their personal savings. This is going down.
They're also having to work more and more and make sacrifices on
some of the things that they were doing freely just a couple of years ago.
Some of you may have seen the analogy of the frog in the pot, where
there's a frog in a pot of water and the temperature gets turned up
and eventually the frog dies because it doesn't notice
the gradual temperature increases over a period of time.
That's exactly what's happening here.
Most of these people are the frog in the pot.
So what can we do in the present?
Wages and fixed incomes are not going to keep up with inflation.
So you're going to continue to get further eroded
and you're going to have to get that side hustle, too.
You're going to have to use low rate fixed debt to your advantage.
Be the Fed.
The Fed is going to continue to print.
They're going to continue to raise interest rate.
So you have to understand that this is happening and create
a strategy to be on the other side of it, just like the factory jobs will be
lost and wages will slow down, which will reduce inflation.
But it's going to create a lot of stress on the social services.
We're going to see more and more unemployment.
We're going to see rent controls and price controls as this gets worse.
So this is a debt crisis.
And so one of the biggest problem
people are going to have is they need to pay off all that over 8%
because the cost of debt is going to far exceed any wage growth that anybody has.
And they're going to get further, further and further behind.
And of course, unfortunately, personal savings will be further
eroded due to continued inflation.
If you think about it, if we have inflation at 4 to
6% in the next ten years, which is entirely possible,
then your dollars going to be worth 50% less in ten years.
Or set another way, your buying power will be reduced by 50%.
So now let's take a look at this chart.
So the reason I picked this chart is because real estate exists
where people go, it's much easier to go where people are going.
What this represents are the top cities in the United States
and where the population has migrated or trended over the last 12 months.
So this is the net population change, as you can see.
Dallas, Fort Worth, Houston, Atlanta, all are in the top three
and the red dashes are the percent.
Population change in Texas, not Texas markets.
The reason I picked this chart is because if we still want to invest
in real estate, you should focus on where people are going
because that's where you're going to have rent growth.
Home price growth.
And there's going to be all kinds of opportunities in these market.
As we all know, things have changed a lot in the last few years,
but you can take an active role in your future and in your investment
by concentrating on where people are going invest, where people are going,
work and live, where people are going and create new sources of income
or people are going.
It's really that simple.
As many of you know, Dallas and Houston are two areas
where we have been focusing on our acquisitions for multifamily.
The second Inconvenient Truth on this chart is what's going on
with the office building market.
So this chart is very interesting because what it shows
is that many live for one K and pension funds are going to be in big trouble.
This is a source of money
that I use to go out and buy multifamily and office buildings and retail.
As you can see here, the red line
depicts the actual vacancy rate and the blue are the total U.S.
Office square foot and millions by life company.
What this means
is that the valuations of these buildings that are held in these life
policies are actually going to be the valuing over the next several years.
These will eventually make it to your quarterly state.
And in the commercial real estate market, things are more expensive.
More stimulus is going to be coming and those on fixed incomes
are going to continue to be stressed.
The Next Inconvenient Truth.
So this is the biggest jump in office availability.
Now, a lot of times you're going to find these vacancies all across America.
But Seattle, Chicago, Boston, San Francisco,
Atlanta are the ones in the biggest trouble.
What's important to note is that this is a year over year change.
So Seattle has somewhere between a seven and 8 million square foot difference
in one year.
So you've heard me talk about procession.
This is processional because these vacancies
turn into nonpayment of the loans which turn into loan defaults.
So commercial banks are going to continue to take on toxic commercial real estate.
That property taxes are going to go up in these markets because downtowns are
o bank bailouts will be coming, which is, of course going to create more inflation
and workforce
participation is at an all time low, almost a 2 million person difference.
There's many predictions that say that commercial real estate,
specifically office, is not going to come back till after 2040.
So this, my friends, could be potentially a 20 year problem.
And if there's no revenue in these
downtown areas, things like property taxes are going to have to go up
to support the services and the needs for those downtown areas.
I love this chart because it's the passenger trips on public transit
every single month.
As you can see, it's way down.
So it really drop,
of course, during COVID and the pandemic, but it continues to stay down.
So what does all this mean?
What it means is that this great rising nation is here to stay.
There's more jobs than there are people for those jobs.
Work from home is not going anywhere, and the commute to
and from work is more expensive.
So this is a prediction
that many of these downtown areas are going to continue to suffer.
All the small retailers, all the small restaurants,
all the small coffee shop, in addition to that, all the sales tax revenues
from all the people, what they buy when they're there, of course,
all evaporate and continued for more and more pressure on these downtown area.
One of the things you might know from watching Dateline
or some of these other crime stories is that when a cell phone pings,
it's a data point.
So these are percentages of cell phone activities in each city after COVID.
What this means that only a little over 25% of people are actually going back
into San Francisco and less than 50% in Philadelphia, Lanta, Boston, etc..
You get the point.
So downtowns are toast.
Revenues are going to be way down.
Jobs, of course, are going to be relocated and they already have been homeless.
Less and crime will continue to grow up.
So you see it now.
You see these big homeless encampments.
It's going to get worse, folks.
There's going to be many political changes
because this got to have to get really bad before change is made.
And of course, property taxes are going to have to go up to pay for all this.
So the question is, what are you going to do about it
and how do you predict the future?
How do you invent the future?
Well, of course, it's
what can I do in the present to take advantage of all of those things.
So like I said in the last video review, your asset exposure, like the banks
sell off your marginal assets or negative or no cash for
even if a means to write a check, fix your debt.
You can heads the up and refinance the down, build your cash reserves.
Cash is going to be king.
It's going to be king for buying new properties.
It's also going to be king
or reserve for any financing that you need from your banks.
Expect more stimulus and money to basement because banks are going to fail
and there's going to be bail ends and there's be all kinds of money
thrown at this problem, which is going to create more inflation
and then use inflation as of 2023
and 2024 strategy invest in things that move with inflation.
Expect more loan defaults
due to commercial real estate exposure, and expect more bank instability
and failures because of the toxic debt and all these issues and more.
Partly just be patient.
Wait 1 to 2 years.
Like anything, there's lag.
You got to wait and then be in a position to strike below.
All sell high.
It can be never more important than right now today.