Doom and Gloom? I Read a Book by David Wiedemer &amp; Robert A. Wiedemer

Eric Black

Rental Property Investor · Where we are parked · Member since 2013 · 584 posts · 178 votes

12y

Hi Jason,

I watched a video recently that my parents sent me. According to the video the US Government is making preparations to declare "martial law" in the entire US. The entire banking industry will be mysteriously hit by a virus (even though they all use different technology) that will take down the banking system over a weekend. Once Monday rolls around, your money is gone.

I'm not oblivious to the fact the our economy is in the toilet and the current administration is doing all it can to make sure that continues, but the person writing this book is also in the business of making money. Unlike my parents, I don't have a bomb shelter, a 6 month supply of food from Costco, all of my wealth in precious metals or my mortgage paid off for fear that the government won't be able to take possession of a property owned "free and clear" as easily as a property that is financed. On the flip side, those people who have sold them all of these fears are making a killing!

Do your own (educated) research, come to your own conclusions and make decisions based on your comfort level.

Remember, a lot of people made a ton of money selling books, movies, etc because the world was going to end in December 2012.

Justin B.

Lakewood, OH · Member since 2013 · 193 posts · 60 votes

12y

Zerohedge is the best practical and calculated economic forecast site. Easy to read, definitely has quite a bit of technical analysis but its with whit so you know where they are going with it.

Some of the largest market players follow zerohedge...

OP

Investor · Hendersonville, NC · Member since 2013 · 757 posts · 282 votes

12y

Yah. One of the things that gets me is their talk of (paraphrasing) "why are all these so-called experts thinking and claiming that this is just another down cycle (it was written in 2011)? Because they are just cheerleaders for the current system, but the current system is sooner or later going to hit the fan. You can't print money like the Fed is doing and expect that when you stop inflation isn't going to head up, up, up." So, whereas I could engage a wealth manager and get their take on the future of the economy, the authors say that such folks are basically in denial because they are so psychologically and financially invested in the status quo, or the future being just like the past. I mean the authors noted that even in the Great Depression, deficit spending worked, whereas now, it will not. And let's face it, the debt is never going to go down significantly. Speaking of foreign investors, if enough stuff happens to our economy to spook them and they bolt, we are in trouble, and if the middle class disappears (it is close, right!?) our consumer-based economy is also in trouble. OK I'm droning on....

Eric M.

Flipper/Rehabber · Louisville, KY · Member since 2008 · 1k+ posts · 1k+ votes

12y

Jason, Your mind has been poisoned. These guys have been saying this stuff for years but it isn't happening.

They fool you with large trillion $ numbers that people can't comprehend and make it seem like it is unsustainable. Yet it continues to be sustained...and will continue. The whole foreign investors bolting is the typical refrain. They are not that large a % of our debt and where will they bolt to? The US is the place people bolt to , not from. Just look at the markets and you see where the money is flowing. Looks pretty good to me.

Who says inflation has to go up? The authors? Do some fact checking on them. It is just all BS to sell books.

Real Estate Investor · Member since 2013 · 866 posts · 487 votes

12y

Much of the macro economic theories behind Aftershock are sound. But, their interpretation leaves much to be desired.

There is a real danger we will see another down turn in real estate in this country. I honestly believe that and have adjusted based on my belief it will happen in 2014/2015.

There is certainty the US dollar will be fully replaced as the world's reserve currency within the next 10 years. It could happen sooner. Long before that happens our government's ability to borrow will disappear. That won't stop deficit spending because the Fed will continue to print money. But, we will see inflation spike. Those of us old enough to remember the late 1970s know how uncomfortable that can be but from a real estate investing point of view, it will be a non-issue. The next round of inflation will not drive up real estate prices like it has in the past.

I am not buying real estate here in this country right now. I expect to be buying like a wild man starting in late 2015 or early 2016. I expect many of my purchases will be from those who are over leveraged and under capitalized.

OP

Investor · Hendersonville, NC · Member since 2013 · 757 posts · 282 votes

12y

Wow, Eric and Duncan, I kind of read your responses as fairly opposite. That is part of what's bothering me - I don't have the sophistication to easily tease out what is likely going to happen vs. what is likely not going to.

I guess one thing that is certain is that the Fed is printing money like crazy, and we have an unmanageable debt. Another is that inflation is going to rise. I guess the question is, is there a chance that we will just rise to 4 or 5% inflation and stop there - or will the bubbles pop when we rise above the 1% inflation we are currently at?

Scott W.

Real Estate Investor · chicago, IL · Member since 2012 · 1k+ posts · 231 votes

12y

the bubble "pop" ain't happening. when you've got a decrease in home prices not seen since the depression, it's bound to come back up.

I find it comical where everybody fears a bubble yet at this time last year I was speaking of how we will see a double digit increase soon. all of the "BP nation" told me I was on drugs and that "the experts" don't expect that for some time.

I hear a lot about the govt being in debt & I agree - they're incompetent fools yet the value of this country - just based upon precious metals, oil, etc puts us at an infinite number. we ain't going anywhere.

and let's just say the housing market does crash. good! I can pick up some more deals!

Real Estate Investor · Member since 2013 · 866 posts · 487 votes

12y

Originally posted by @Jason Merchey:

Wow, Eric and Duncan, I kind of read your responses as fairly opposite. That is part of what's bothering me - I don't have the sophistication to easily tease out what is likely going to happen vs. what is likely not going to.

I guess one thing that is certain is that the Fed is printing money like crazy, and we have an unmanageable debt. Another is that inflation is going to rise. I guess the question is, is there a chance that we will just rise to 4 or 5% inflation and stop there - or will the bubbles pop when we rise above the 1% inflation we are currently at?

First, no one KNOWS what is going to happen. We all see the same signs, historical indicators and each draw very flawed conclusions based on our experiences up to this point.

Second, I don't see a bubble popping in real estate. What I do see is a completion of a revision to the mean. In the 1990's through 2007 we saw huge increases in home prices due to easy money. When the derivatives ponzi scheme collapsed, we saw huge drops, but there were no drops below the historical mean we would've had if the easy money were not there. In fact, we never got back to the mean before the feds stepped in and propped it up.

The market will complete its correction. It is a question of WHEN and HOW that happens, not if. We could have a sustained period of essentially flat prices until the historical mean is reached or we could have another lurch downward.

The thing to remember is, BUY THE CASH FLOW. Appreciation is not the play for the foreseeable future... at least in my opinion.

As for inflation, I don't pay attention to the government published numbers because we are not measuring inflation the same way we were 30 years ago. And, honestly, I'm not that worried about inflation because it too will correct over time. The only way inflation would be a huge worry is if your income were truly fixed. If inflation spikes, so will rents. If you have great properties in great areas, it will rise faster than inflation because in an inflationary market shelter costs become a leading indicator.

But, at the end of the day, as an investor we have to plan for the worst and hope for the best. That way, we always win.

OP

Investor · Hendersonville, NC · Member since 2013 · 757 posts · 282 votes

12y

By "buy the cash flow," do you mean put as much money as you can into a rental property, up to and including all-cash, to maximize the cash flow?

Real Estate Investor · Member since 2013 · 866 posts · 487 votes

12y

Originally posted by @Scott W.:

the bubble "pop" ain't happening. when you've got a decrease in home prices not seen since the depression, it's bound to come back up.

I find it comical where everybody fears a bubble yet at this time last year I was speaking of how we will see a double digit increase soon. all of the "BP nation" told me I was on drugs and that "the experts" don't expect that for some time.

I hear a lot about the govt being in debt & I agree - they're incompetent fools yet the value of this country - just based upon precious metals, oil, etc puts us at an infinite number. we ain't going anywhere.

and let's just say the housing market does crash. good! I can pick up some more deals!

There is no housing bubble to pop. The market WILL complete its revision to the historical mean. We have slowed the process down but it will complete its correction. You can plot the long term performance of any market and any time it has had the type of run up we saw before 2007/2008 it eventually reverts to its historical mean.

The current stock market will do the same. We are experiencing new historical highs, the trend line is above the historical mean and rising, it will correct. It always has and it always will.

Real Estate Investor · Member since 2013 · 866 posts · 487 votes

12y

Originally posted by @Jason Merchey:

By "buy the cash flow," do you mean put as much money as you can into a rental property, up to and including all-cash, to maximize the cash flow?

No, I mean the price you pay should be based on the value of the cash flow it will generate. Appreciation is not the play any more.

Scott W.

Real Estate Investor · chicago, IL · Member since 2012 · 1k+ posts · 231 votes

12y

I have paid a lot of attention to these hedge funds/REITS. In my area, they're buying like mad in all the counties. Blackstone/Invitation homes appears to only buy a select few now, as opposed to last year where they went nuts. Mostly, it's REIT's especially American Homes For Rent - & they sure don't like to lose the bids! They overpay.

They're obviously banking on appreciation & may be trying to manipulate the market (not sure how Wall Street can buy that many homes to manipulate the market, however, we will find out soon).

They plan on getting out in 2016 since they expect interest rates to greatly increase in 2017. Former foreclosure/short salers will be available to secure mortgages again and buy these homes again. Or the hedge funds' renters may just buy the things directly from them (after all, everybody hates to move).

I find it comical that the hedge funds throw up a "for rent" sign and the vast majority of the American public has no clue what they're trying to do and that this is investor $ funding the whole landlord thing.

Eric M.

Flipper/Rehabber · Louisville, KY · Member since 2008 · 1k+ posts · 1k+ votes

12y

It is just so funny to read all these posts and the number of times you guys say something is "Certain" to happen. If it is certain to happen there are easy ways to bet on it in the futures markets (and other places) with very high leverage and you can make more money than you will ever need if you are really certain and correct.

The fact is none of you guys can possibly be certain and none of you will make a killing on your certainties so forget about it and move on. It is no more than hot air.

Eric Black

Rental Property Investor · Where we are parked · Member since 2013 · 584 posts · 178 votes

12y

@Eric M. Couldn't agree more! We'll have to start keeping track of all of the "certainties" and following up with the posters after their predictions have passed, come to fruition or not.

On that note, I can guarantee you certainty on death and taxes! 100% accuracy. Boom!

Mary B.

Real Estate Investor · Lansdowne, PA · Member since 2013 · 1k+ posts · 656 votes

12y

I saw the video on Aftershock earlier this year. Its meant to cause awareness and focus (after the initial shock and panic) I feel. History does have a way of repeating itself. Those buying and holding(notes & properties) in particular have to be on point with how the housing cycles fluxuate moreso. However there is nothing new under the sun. Regardless of who comes out with panic induced literature & media regarding the housing market / economy; there will be those that make it out and the majority that will be caught in it. Make as much profit as you can and continue with business as usual. Yet be aware and stay informed on the economic happenings....

Kudos,

Mary

Real Estate Investor · Member since 2013 · 866 posts · 487 votes

12y

Originally posted by @Eric M.:

It is just so funny to read all these posts and the number of times you guys say something is "Certain" to happen. If it is certain to happen there are easy ways to bet on it in the futures markets (and other places) with very high leverage and you can make more money than you will ever need if you are really certain and correct.

The fact is none of you guys can possibly be certain and none of you will make a killing on your certainties so forget about it and move on. It is no more than hot air.

I'll have to go back and look but, I believe the certainty I stated was that the housing market will behave like every equity market man has ever created has behaved. The bubble DID form, the correction DID start, the correction WAS interfered with and the correction WILL complete. It is not a question of if the housing market at the macro level will complete the correction and revert to the mean, it is a question of when and how it will do it.

I'm confident of the timing and have put my investment money in the US where my mouth is.

I adjusted my strategy in 2005 for some of the same reasons when it became increasingly apparent we were headed to a recession. What I didn't see coming then, and I doubt few did, was that we would take the huge lurch to the left we did in 2009 and implement extremely destructive socialist polices.

OP

Investor · Hendersonville, NC · Member since 2013 · 757 posts · 282 votes

12y

I don't want to begin a debate that is fairly removed from the nature of this thread, but lest readers take your uncontested statement as true, I want to retort that the policies weren't as socialistic as they were fascist. Non-violent, not really oppressive, but nevertheless, a gross tie between government and those with money. That is, whereas Socialism has a "benefitting the people" flavor to it, the moves that Bush and Obama made in regard to the economy were a page out of the corporatist model of governing. You'd have to pin that to those on the political right my friend; progressives don't approve of a corporate take-over of the government, the Supreme Court defending such policies as Citizens United, the surveillance state, torturing or drone-killing, or the failure to separate church and state. I get that you may be a libertarian and that you don't approve of much of the recent changes to our country, but let's not let the record show that it was Socialists in the vein of Senator Bernie Sanders of Vermont kind of Socialists that are creating this Frankenstein of a government. And Leninists don't really exist in this country. Finally, the government MADE money on the GM bailout. The bailout was probably just government pandering to Wall St. and Detroit, but a financial mistake it wasn't.

Robert Piller

Austin, TX · Member since 2013 · 103 posts · 19 votes

12y

All of this talk of certainty make me both laugh and cringe at the same time. I read a book by Dan & Chip Heath called Decisive--which I recommend to every investor. It describes the decision-making process and ways to improve it.

One chapter was devoted to so-called "experts" in any field/industry (I'm thinking Mad Money's Jim Cramer, but you can fill in your own blanks)-- where they show that the correct advice from these "talking heads" is inversely proportional to the amount of airtime they get in the national media. That's right--INVERSELY.

Keep this in mind when listening to a so-called "pundit" that tells you which stock to buy, what is going to happen with the economy, which cities are most likely to appreciate, etc.

The more certain they are, the less correct they probably are.

Use your own formulas, do your own research, keep posting specific questions on Bigger Pockets about a particular deal--but there is no certainty in investments. Just ways to minimize risk and improve the chances for ROI.

For example, for every 10 people saying "no way" to Detroit, there are probably another four or five making money from select neighborhoods in Detroit.

Don't fall into the trap of connecting with people that share your same viewpoint --like the listeners of Fox News and MSNBC News.

Read, listen and familiarize yourself with all sides of an issue and then make your best educated guess. But don't think it is any more than a "guess".

Good luck and happy investing.

http://pragcap.com/how-the-economic-machine-works-by-ray-dalio

Kyle Hipp

Investor · Appleton, WI · Member since 2012 · 1k+ posts · 464 votes

12y

I have read Aftershock and several books like it. Aftershock has been around since 2008ish I believe. They keep claiming that the Dollar will crash any day and hyperinflstion is right around the corner but it just isn't. The reason for this is that they hab a flawed misunderstanding of how our monetary system operates. Like most people they compare the federal government to a household but they operate ccompletely differently. A balanced federal budget seems to be a goal of many but it is not logically as it completely ignores many other factors. Namely this is the fact that the private sector savings is equal to public sector deficit minus trade deficit. Thus if the private sector is to save $200 billion and the trade fdeficit is $500 billion, that requires the federal deficit to be $700 billion. This is a hard concept to understand at firsr but once we look back to our history we understand the big picture a lot better. There has been 7 instances in US history in which the US federal government ran a balanced budget or surplus and each time was directly followed by a recession or depression. Isn't it way way way past due if the federal government must operate as a household and have a balanced budget in order for the economy to prosper? I mean 95% of the 235+ year history of the US we have run a deficit. I believe this is how it was designed and I believe and in depth study of Alexander Hamilton would bear this out.

Please check out the video, it goes through an easy explanation of how our monetary system operates with emphasis on iur current situation.

Aaron Yates

Investor · Macomb, MI · Member since 2013 · 654 posts · 115 votes

12y

Originally posted by @Robert Piller:

All of this talk of certainty make me both laugh and cringe at the same time. I read a book by Dan & Chip Heath called Decisive--which I recommend to every investor. It describes the decision-making process and ways to improve it.
One chapter was devoted to so-called "experts" in any field/industry (I'm thinking Mad Money's Jim Cramer, but you can fill in your own blanks)-- where they show that the correct advice from these "talking heads" is inversely proportional to the amount of airtime they get in the national media. That's right--INVERSELY.

Keep this in mind when listening to a so-called "pundit" that tells you which stock to buy, what is going to happen with the economy, which cities are most likely to appreciate, etc.

The more certain they are, the less correct they probably are.

Use your own formulas, do your own research, keep posting specific questions on Bigger Pockets about a particular deal--but there is no certainty in investments. Just ways to minimize risk and improve the chances for ROI.

For example, for every 10 people saying "no way" to Detroit, there are probably another four or five making money from select neighborhoods in Detroit.

Don't fall into the trap of connecting with people that share your same viewpoint --like the listeners of Fox News and MSNBC News.

Read, listen and familiarize yourself with all sides of an issue and then make your best educated guess. But don't think it is any more than a "guess".

Good luck and happy investing.

Well put @Robert Piller . This is something even me as a newer investor has repeatedly said. Do what makes sense to you. Research yourself. Don't just believe everything everyone else tells you to do.

If we all did that then we would not be where we are today in the world. This relates to every aspect of life not just investing. But there are plenty of those people out there that insist their way is the only way if you want to succeed.

Maybe this quote will open people's eyes.. he is a perfect example of this

"If you want to succeed you should strike out on new paths, rather than travel the worn paths of accepted success." -John D. Rockefeller

Robert Piller

Austin, TX · Member since 2013 · 103 posts · 19 votes

12y

Thanks @Aaron Yates If people want to be spoon-fed all the answers and look for no-brainers, then perhaps real estate investing is not for them.

They need to calculate risks and opportunities for themselves and understand that real estate is just one way to secure their future - but not the only way.

Or, they should find a different way to make money in real estate without committing a significant portion of their own funds--such as wholesaling or partnerships or REITs. That way they can get their feet wet while determining their own personal risk tolerance.

Baby steps work for many - but the decision on whether or not to invest in a property should be theirs alone.

Aaron Yates

Investor · Macomb, MI · Member since 2013 · 654 posts · 115 votes

12y

Originally posted by @Robert Piller:

Thanks @Aaron Yates If people want to be spoon-fed all the answers and look for no-brainers, then perhaps real estate investing is not for them.

They need to calculate risks and opportunities for themselves and understand that real estate is just one way to secure their future - but not the only way.

Or, they should find a different way to make money in real estate without committing a significant portion of their own funds--such as wholesaling or partnerships or REITs. That way they can get their feet wet while determining their own personal risk tolerance.

Baby steps work for many - but the decision on whether or not to invest in a property should be theirs alone.

In my most recent blog I mentioned it specifically that if you can never make your own decisions then maybe Real Estate Investing isn't for you.

Lot's of opinions fly around on BP and can blemish the mind of a newbie investor.

Anyways, not sure if this is on topic with the thread and don't want to hijack it. So I will leave it at that. Just wanted to point out that you made a very good statement.

OP

Investor · Hendersonville, NC · Member since 2013 · 757 posts · 282 votes

12y

this is turning out to be a pithy thread

@Kyle Hipp thanks for that video link. It was illustrative. Obviously that guy has earned his stripes. He doesn't think anything worse than a slowing rate of return in stock pricing is in the queue. So that is optimistic compared to the book that I started this thread referencing. I guess I am just too economically immature to really see the forest for the trees in regard to synthesizing the conflicting views and predictions of various economists, including the Wiedemers who have made many unambiguous and harsh assessments and predictions, Dalio who produced that video and who is a successful hedge fund manager, this professor Fullenkamp I have been reading up on, and Krugman whom I am aligned with politically. I can barely understand what is going on and what is likely to occur. But if my slightly more advanced real estate skill and my soon to start stock and bond market investing don't get wrecked by our inflationary and bubble-bursting chickens coming home to roost, then it will be a good 2014. I appreciate everyone's feedback.

OP

Investor · Hendersonville, NC · Member since 2013 · 757 posts · 282 votes

12y

You gentlemen are correct, in a way. On the other hand, I should point out that understanding the macro economy is about as complex a topic as there is. Physics, statistics, philosophy and evolutionary psychology are easier.