All Forum Posts by: Michael Wooldridge

I'm not thirsty for Thiel like Nathan is but it's a free market. If a corporation is fragile then shorting it or pulling money accelerates its collapse and speeds up the recovery. The whole point of a recession is to eliminate the inefficiencies in the system. Survivors create a floor for greater growth in the future.

if we continue to enable perpetual growth of inefficient systems then it means we build bigger houses of cards.

Except that we are reaching a point where individuals could in theory crash US system. And two part of thiel’s bets come down to the fed stepping in. Sorry but this is just something like SEC oversight to me - that is needed. Individuals with this power can’t be allowed to play with fire in our banking system. Some here seem to think we could survive a Wells or BOA crash but we can’t and the entire economy depends on the banking/credit market system.

I’m just a believer this shouldn’t be allowed because it’s unhealthy for the economy at a massive scale. And I’m specifically speaking to SVB not signature. Thiel rounded up a bunch of VC/PE and essentially did a hostile take over. Problem is folks could do stuff at the big banks like that and it has system risks to the country. And truthfully the globe as if we crash the world crashes

But individuals had this kind of power over 100 years ago. The early 1900s had a number of powerful people monopolize a commodity market or were in position to force a government hand.

If we want it to stop then you need to ask yourself why did the banking system put itself into a position where it could fail. If the financial markets have the ability to devastate like a nuclear meltdown then they should treat their instruments like they are radioactive. They should have more failsafe and contingencies. Until they learn to do that then they will continue to be susceptible to people like Thiel. Live and learn, bankrupt and reset.

Big difference is scale and importantly of liquidity. 100 years ago eh. Most of us would not own properties then. And I say that as a 1% even before my investment/re income. The world thrives off liquidity and credit in a way that 100 years ago never happened. And you know what happens now? We have home ownership and wealth because of it. We have 30 year products.

The scenario you are describing would devastate most of the folks on BiggerPockets. Even those that are approaching 20million in network and 1million in annual income post tax…

I will just say there is relative wealth as there is relative poverty. You may compare yourself as wealthy relative to others in modern society but other than a few outlier periods and regions the stratification of society has largely stayed the same through our history.

Also credit is older than you think, goes back at least 5000 years and used by all manner of people. We keep inventing new instruments and givong them fun names but their use is basically the same And we keep repeating the same cycles. Hopefully most people here aren't overleveraged and maintaining maybe 50 to 70% equity. Maybe they spent the last 2 years defensively investing. Who knows. I hope it doesn't become a repeat of 2000s or 1970s but so far it's happening. If it doesn't then we start heading down the road of hyperinflation.

Credit has been around but not like it has been since the post war era. Home ownership became a big thing - almost a national right. All of our values and benefits are derived from that.

And until modern history you are right - we had servs and we had the ruling class. Which sort of proves my point. What I’m saying is even as a 1% I wouldn’t have fit in the upper class. That’s more like the .2%.

Which brings me back around to my point that if we let this get to far out of control 99.95% here would be hurt.

You should read up on history it's not all feudal middle ages. Society has taken many forms that don't include 1 ruler and a bunch of serve.

As far as US home ownership yes the US incentivized ownership because they needed to expand because of the demand for resources and the need to displace what they saw as a threat on their wester borders. But homeownership isn't exclusive the the US its been there for centuries.

I'm not really sure what you think you mean about letting this get out of control. The Fed is doing just that. They put the brakes on heavy risk taking. They are keeping the bubble from getting bigger and causing an economy catastrophe. If a bunch of people took on too much risk then they need to start unwinding it.

It’s a word but a lot of versions of it match feudal or even the 1800’s with railroad barons etc… It’s all the same just a different word.

As to the out of hand. Simple you have to punish fools like Thiel or they will do it again. No pain and they will just do it. And if they do it to a meaningful bank? not just little SVB? That’s my concern.

I’ll make my money either way but returning to the land barrons, or railroad barons, or feudal times. Not a good thing in my book. Or good for the future of this country. Between Musk and his twitter bs and moves like this - I think we are overdue to slap down a few.

Then go for it. Use your money as a power for good and smack down those evil doers you feel are plaguing society. If you win you will be rich beyond belief. I wish you luck. For what ever his agenda is he is only riding the wave and capitalizing on it. The banks were going to systemically fail he's just taking a few down a little faster.

So SVB was a poory run bank that has assets to be positive in 9-12 months. Have you looked at how much cash on hand banks have? Any of them. Any single bank can fail with the right pressure. Furthermore it can become systemic because if a big one fails the all fail.

I’ll continue on my own path because we are talking SEC level oversight But I’m well aware of the risks these folks can have in the system. And this is NOT the same thing as shorting stock. Not by a long shot. A bank run can take down any bank - in a blink of an eye.

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Quote from @Andrzej Lipski:

Quote from @Michael Wooldridge:

Quote from @Andrzej Lipski:

Quote from @Michael Wooldridge:

Quote from @Andrzej Lipski:

Quote from @Michael Wooldridge:

Quote from @Andrzej Lipski:

if we continue to enable perpetual growth of inefficient systems then it means we build bigger houses of cards.

But individuals had this kind of power over 100 years ago. The early 1900s had a number of powerful people monopolize a commodity market or were in position to force a government hand.

The scenario you are describing would devastate most of the folks on BiggerPockets. Even those that are approaching 20million in network and 1million in annual income post tax…

Credit has been around but not like it has been since the post war era. Home ownership became a big thing - almost a national right. All of our values and benefits are derived from that.

Which brings me back around to my point that if we let this get to far out of control 99.95% here would be hurt.

It’s a word but a lot of versions of it match feudal or even the 1800’s with railroad barons etc… It’s all the same just a different word.

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Quote from @Andrzej Lipski:

Quote from @Michael Wooldridge:

Quote from @Andrzej Lipski:

Quote from @Michael Wooldridge:

Quote from @Andrzej Lipski:

if we continue to enable perpetual growth of inefficient systems then it means we build bigger houses of cards.

But individuals had this kind of power over 100 years ago. The early 1900s had a number of powerful people monopolize a commodity market or were in position to force a government hand.

The scenario you are describing would devastate most of the folks on BiggerPockets. Even those that are approaching 20million in network and 1million in annual income post tax…

Credit has been around but not like it has been since the post war era. Home ownership became a big thing - almost a national right. All of our values and benefits are derived from that.

Which brings me back around to my point that if we let this get to far out of control 99.95% here would be hurt.

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Quote from @Andrzej Lipski:

Quote from @Michael Wooldridge:

Quote from @Andrzej Lipski:

if we continue to enable perpetual growth of inefficient systems then it means we build bigger houses of cards.

But individuals had this kind of power over 100 years ago. The early 1900s had a number of powerful people monopolize a commodity market or were in position to force a government hand.

The scenario you are describing would devastate most of the folks on BiggerPockets. Even those that are approaching 20million in network and 1million in annual income post tax…

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Quote from @Andrzej Lipski:

if we continue to enable perpetual growth of inefficient systems then it means we build bigger houses of cards.

1 Vote

Quote from @Dan H.:

Quote from @Michael Wooldridge:

Quote from @Dan H.:

I see agent say buy now. I see investors say never buy a bad deal, cash flow is hard to find, etc.

Here is the reality. On high LTV properties the month P&I has almost doubled since the start of 2022. This is without an associated increase in the RE value. I would argue that in some ways it would be better if the RE had doubled in value and rate was the same as a year ago as at least you would be purchasing a higher valued asset.

The reality is I have been in RE a long time and have never found it harder to find RE that meets my current purchase criteria. This is 1) because I am a big fan of leverage 2) I do not forecast rates declining 3) I am conservative in any appreciation or rent increase forecast 4) I am cognizant of the level of effort and risk involved with residential RE 5) I am cognizant of other investment options.

If I can effortlessly and with virtually no risk have money market or CD return near 5%, what sort of return do I need from residential RE to make it worth the effort and risk. Note money market/CDs are not the only choice but I use them as a single reference point. 10% is not nearly sufficient. I need approaching 20%.

If you can find an RE that with conservative underwriting projects the return that justifies the effort and risk compared to other investment options, it could be worth pursuing. My issue is that I have not and therefore I have not purchased since Dec 2021 (but I did purchase $4M that month). In fact, I have only offered on a single property since then and my offer was not close to the accepted offer (the accepted offer was apparently willing to accept a much lower return than I was willing to accept).

Good luck

Interesting comment. My last purchase was October 22. Interesting enough even in year 1 (STR) we are on track to do 22% CoC and judging by bookings for next year wouldn't be surprised if closer than 30%. So I would say deals are out there but like you I've gone more conservative - and I absolutely have to have a decent return up front in cash flow - I don't buy just for appreciation because it's too risky.

That said while I lean more towards RE vs liquid - I'm curious about your needing 20%. Are you talking CoC? Or are you talking about overall? 10% CoC between tax write offs, appreciation, and long term value - in my experience it's hard to even beat that in the market when you factor in all benefits.

or are you just deeming the investment not worth the risk at that point?

I expect 20% total projected return but remember I am conservative on my appreciation and rent increases in my underwriting. My underwriting currently has 5 years of no appreciation and 2%/year rent increase. I do not include tax write offs in my return. So, to get 20% total return when projecting no appreciation implies the COC is fairly close to 20%.

Why so high? It is in part because of other returns I can achieve from other sources. I have done exceptional with syndicators (often better than the 20% return with very little effort). As indicated Money market is ~5%. Rolling T-Bills last I heard were over 6%. Safe and no effort. if I can get 6% guaranteed with no work, there is no way I would consider residential RE at 10% with the associated risks and effort (I have many units for quite a few years and do not consider residential RE to be passive).

how long have you owned STRs? I have owned STRs since 1999. I have experienced the great Recession, the Covid restrictions, and, the most recent, changing STR regulations (one of my STRs that has operated legally since 1999 is getting shutdown May 1). There is a lot of risk with STRs. Management is either expensive or takes a fair amount of time/effort. They should out produce LTR COC as in my opinion both the risk and effort are higher than LTR (the effort required justifies the high PM fees).

LTRs also involve risk and effort. Less effort and less risk than STRs, but typically produce lower COC. In my market, with the recent rate increases, it is tough to find cash flow positive when using realistic expense projections (realistic approach the 50% rule even in my high rent market) for high LTV RE.

Good luck

Makes sense. Was just curious because 10% coc usually ends up returning much more in my experience than just the 10% (appreciation, depreciation etc…).

STR is newer for more my portfolio but I knew the house I could sell easily enough. At this point I'd break even if it happened tomorrow. As to the PM part I have a stake in the group doing it and have known the owner for decades. So no brainer.

I’m 38 so only owned since the fun 08 Great Recession. My traditional rentals don’t cash flow near as much (well one paid off when I started my journey) obviously but safe and more than pay the bills - and actually appreciated rather well for cheap 2-2.

But it was more of the comment around 10% caught my interest. If I throw the money into stocks and/equities I can certainly earn 9% for no work (obviously risk but negated over 20 years). but it's just with at least 10% CoC, with all the other benefits I was curious what you considered better/easier.

Always looking to diversify where I can but I just haven’t found much to compare to RE in the long run (cash flow today buying more being the big win). So was very curious/interested in the alternative.

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Columbus, Ohio

Quote from @Carlos Ptriawan:

Quote from @Michael Hutchinson:

Quote from @John Carbone:

Quote from @Carlos Ptriawan:

Quote from @Jason Malabute:

The following are my thoughts on the collapse of Silicon Valley Bank and any thoughts of upcoming bailouts. As an advocate for responsible financial practices, I believe that the government should not bail out banks that collapse due to their own risky investments. Such bailouts not only create moral hazard but also set a dangerous precedent that banks can engage in reckless behavior with little or no consequences.

Depositors should not be bailed out for savings over the $250,000 FDIC limit because they should share the risk of banking with a particular institution. When depositors place all their cash in one bank, they are essentially placing all their eggs in one basket, which can be risky. Therefore, it is important for depositors to diversify their savings across multiple institutions to mitigate risk. Additionally, depositors should consider investing their money in assets like real estate, which can provide long-term returns and mitigate the risks that come with being too liquid. Ultimately, depositors should take responsibility for their financial decisions and not rely on the government to bail them out in the event of a bank failure.

When the government bails out a bank, it sends a message that the bank's risky investments were acceptable and that taxpayers should bear the cost of the bank's mistakes. This creates a moral hazard, where banks are encouraged to engage in risky behavior with the knowledge that the government will bail them out if things go wrong. This, in turn, puts taxpayers at risk and undermines the integrity of the financial system.

Moreover, when the government bails out a bank, it effectively rewards poor financial management and risk-taking. This sends the message that there are no consequences for engaging in such behavior, which can ultimately lead to a culture of complacency and a lack of accountability in the banking sector.

In addition to the moral hazard, bailing out banks can also be costly for taxpayers. The funds used to bail out a failing bank are typically drawn from the public coffers, meaning that taxpayers foot the bill.

As a real estate investor, I am aware that financial distress in the market can create great buying opportunities. An economic downturn can create great buying opportunities in commercial real estate for savvy investors. When the market is down, sellers are more flexible on price and terms, and may be more willing to negotiate seller financing or other creative financing options. Additionally, there is likely to be less competition from other buyers as money may be less accessible. This can be particularly beneficial for real estate investors who have preexisting relationships with investors who have cash, creativity, and resourcefulness, allowing them to take advantage of market opportunities that others may miss. Ultimately, an economic downturn can be a great time for investors to acquire high-quality assets at a discount and position themselves for long-term success in the real estate market. With that said, as a real estate investor I would be extra careful with what banking institution I do business with and put my reserve money in moving forward.

In conclusion, I strongly believe that banks and depositors should not be bailed out over the FDIC amount. Bailing out banks creates moral hazard, sets a dangerous precedent, and can be costly for taxpayers. As a society, we should encourage responsible financial practices and hold banks accountable for their actions, rather than rewarding them for their mistakes.

Hello, the SVB doesnt make risky investment, they only purchase MBS bonds in 2020, but the gov. choose to crash those bonds.
I bet it's Powell intended consequence to rise the rate that high that fast for nothing.

nobody questioning powell LOL

But they did make risky bets. They were heavily invested in longer dated maturities which forced them in a box they could not get out of. If they were Investing in 3 months instead of 5-10 year tbills they wouldn’t have had so much exposure. They were gambling that the yield curve wouldn’t invert like it did, but then it did, and hard. Can’t blame Powell for bad risk management by the banks when he telegraphed what he was going to do in advance. This is like a patient eating fast food every day and a doctor telling them they will get diabetes, then it finally happens.

SVB had no Chief Risk officer from April 2022 - January 2023 ... the role was not backfilled until 2 months ago. No one was managing the systemic risk created by rising rates and their asset allocations. People that say they weren't managing their asset portfolio in a risky way many not understand what they were doing. No Chief Risk Officer Backfill

- Heavily weighted asset portfolio on long term debt
- As interest rates rose, these because unrealized losses if they had to be sold. Dodd Frank let them hide the losses in a footnote as they didn't have to be realized unless sold.
- Poor liquidity made them realize the losses and created the run

SVB had an extremely risky set of positions in a rising rate environment and had no one at the wheel to manage it for them. They built a poor business trying to capture slightly higher yield and got burned.

Now ... did the Fed pack barrels full of gun powder, roll it under them and light it on fire? Sure. However, if they managed their asset allocation better they would have been able to manage it better. Eventually the Fed was going to wreck the economy again with their policies, but SVB built a house of cards to be blown over.

next is Schwabb, Ally Bank, First Republic , Signature Bank and what else, it's just the circumstances would be slightly different.

but theoretically, a country can't have 30 Y Fixed Mortgage products and then the private banking sector is the baggage holder....

it's known in any country, any gov. action could make a bank/lender gone in second if the gov. changes the interest rate in another way around. Bank run in other countries happened because of currency devaluation and/or tightening monetary condition as well, so it's not really a unique issue but a well predictable outcome.

The fact that Fed is able to save CreditSuisse but not SiliconValley bank (and Ukrainian people) , that's beyond me LOL

And this right here is the problem. People hoping for the crash of Citi, Wells, BOA, JPMC - are crazy. Any of those banks would pull the entire financial system down.

Now on top of the banks crashing all the systemic issues from SMB (people seem to forget it’s half of employers in this country and believe me they need credit) to insurance industry and other products. It’s not just the US that would fall apart but the globe.

On top of that. Where do people think housing values are going to go? Every single one of us on this board would be devastatingly impacted.

It might be fun to ask for it (i guess although odd) but nobody here would like the results.

On top of that people are little Thiel off too easy. Already PE / VC are jumping to buy up SVB. Why? Well one reason govt was so happy to jump in is because they actually have the assets to cover everythign. It might take 9-15 months but the money is there.

Which begs the question why everybody is ok with Thiel. BTW it wasn’t just his companies to pull out he told more than a few of the big PE/VC in tech. I know of more than a few that got phone calls and Wed/Thursday money got out.

Sorry but I’m not cool with playing with fire like this. It’s one thing to short stocks but this is downright dangerous. Schwab is actually fairly conservative / well capitalized. Meanwhile massive hit initially to their stock. Was nice buying at the 18% drop though…..

1 Vote

Quote from @Eric Bilderback:

Quote from @Michael Wooldridge:

Quote from @Eric Bilderback:

I would imagine the good folks of East Palestine, OH could only dream of the red carpet being rolled out for Silicon Valley depositors.

This might be checkmate for Chairman Powell. It will be very interesting to see how he navigates this especially if this metastasizes into a crisis.

Or checkmate for the economy.IF Powell doesn’t care. I’m not sure he doesn’t to be honest.

But I agree no idea how he can’t back down. I wish - think it was Goldman - didn’t say over the weekend that he won’t be raising rates now in March. No need to goad him.

I think Powell is a good guy (certainly not my cup of tea) but he is trying to serve his country honorably in an impossible spot, albeit much of it his own making.

We may be at the beginning of what the yield curve has been forecasting events will make interest rates hikes improbable.

No argument on the honorable piece. I do think his ego gets best of him from the whole transitory to the back and forth language the last few months on inflation.

I just hope they hold flat. We will inflate are way out of this. Frankly inflation should get a big relief in May when we hit peak housing/rents.

1 Vote

Quote from @Eric Bilderback:

I would imagine the good folks of East Palestine, OH could only dream of the red carpet being rolled out for Silicon Valley depositors.

This might be checkmate for Chairman Powell. It will be very interesting to see how he navigates this especially if this metastasizes into a crisis.

Or checkmate for the economy.IF Powell doesn’t care. I’m not sure he doesn’t to be honest.

But I agree no idea how he can’t back down. I wish - think it was Goldman - didn’t say over the weekend that he won’t be raising rates now in March. No need to goad him.

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Quote from @Nate Marshall:

Quote from @Michael Wooldridge:

Quote from @Nate Marshall:

I am a supporter and fan of Peter Thiel. If he has invested his firms funds he does have the right IMO to ask his founders to pull and/or move their money.

I didn’t say he didn’t have the right just that it’s concerning when these guys start “shorting” banks effectively. Our own VC had us pull out and it was the talk of tech companies.

That kind of influence is dangerous. It’s essentially yelling fire in a movie theater type piece.

It is good that he did that. He will be attacked by the left for anything he does. He wasn't like Tim Draper's daughter Jesse whining about needing her funds. If not for them Elizabeth Holmes never can start Theranos.

I don’t care about politics I care about money.

You still haven’t said why it’s good. BTW the way you are talking you are given open permission for billionaires to do whatever they want to the system. And any of the big ones are capable of massive destruction. Which could easily catch up even millionaires in the crossfire. Sorry but at a certain point you can’t allow crap like that. It’s no different than why c-suite has to handle stock sales differently.

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All Forum Posts by: Michael Wooldridge

Michael Wooldridge has started 0 posts and replied 481 times.

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