Published April 28, 2017

“The Great Post-WW2 Real Estate Bull Market Is Over”—Part I

Justin's note: Today and tomorrow, we're sharing a special two-part series from Casey Research founder Doug Casey and Casey Report editor E.B. Tucker. They both share an alarming insight on the U.S. real estate market. As you'll see, things are about to get a lot worse from here...


By Doug Casey and E.B. Tucker

He answers to Mr. Worldwide or Mr. 305, but you may know him as Pitbull.

Pitbull is bullish on real estate right now… We’re not.

The Cuban-American rap star’s real name is Armando Pérez. He has a touching raft-to-riches success story. His parents barely made it out of Cuba. He came up on the tough side of Miami in the ‘80s.

Pitbull was one of the inspirational speakers at a Real Estate Wealth Expo I (E.B.) recently attended in Chicago. I was one of around 8,000 attendees.

The seminar went like this. Pitbull wowed attendees during a 20-minute interview with soft questions. Then, a guy with a shaved head and a $3,000 Italian suit came out. He asked the crowd, “Isn’t Pitbull great!” before jumping into a 90-minute sales pitch.

His pitch promised to divulge the secrets of flipping real estate. Not today, of course…next weekend, for just $995. That’s in addition to the entry price to this event. Tickets ranged in price from $149 to $2,495.

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Doug Casey: I applaud EB taking the time to go to this conference. It’s important to keep your finger on the pulse of what the Romans called the capita censi. Personally, I’m not a big fan of mass gatherings, mob scenes, conventions, and the like.

Of course I understand that many people prefer to absorb information by listening, not reading. But the fact is that there is much, much more information in a book than in a speech. Plus, you can reread the book if there’s something that’s unclear. Plus, the book isn’t likely to make an emotional pitch, and try to sell you something else. Plus, the book will likely only cost around $20.

Some conferences are worth going to for unique information. But those are generally not the ones with headline speakers that aren’t expert in the subject area. Of course there’s always the prospect of networking with other attendees—which makes sense if they’re other experts. But not if they think Pitbull and Tony Robbins (n.b., whom I’m sure are nice people, enjoyable company, and definitely experts in some things) are going to give them the keys to Fort Knox.


This well-choreographed lineup went on for 14 hours. The final headline act was famous entrepreneur and best-selling author Tony Robbins. His sales pitch for a future conference capped his nearly four hours on stage.


Tony Robbins is a force of nature

I did some research on the conference’s organizer, Bill Zanker. His company, The Learning Annex, puts these events on. They are a huge moneymaker.

What Zanker knows is the conference theme can be anything that’s hot. Calling it “The Real Estate Wealth Expo” is smart right now…because real estate is hot.

The way I’m describing this event might seem unappealing. Keep in mind, if you’re reading this, you’re a cut above average.

Each time a sales presenter finished, he’d direct people to five bullpens scattered around the seating area. That’s where, with a credit card, you could secure your seat at another special event.

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House flipping, tax lien buying, working from home, buying foreclosed property…one by one, all day long, people bought and bought and bought.

All of the offerings build on each other. The house-flipping workshop puts you in front of a captive group of lenders who will “help” you flip a house. I’m always skeptical when people I don’t know want to help me.

The tax lien workshop puts you into a tax lien buying club. Each week they’ll send you a list of liens they’re willing to unload onto you. On and on, it’s clear everything results in another sale for the promoter.

I sat in the second row next to Sue, a single, 69-year-old retired teacher. She goes to a lot of these seminars. She told me, “They’re very informative.”

A few years back, she attended so many she got into a little credit card trouble. She got a high-interest mortgage to clear up the credit card debt. I sat, stunned, as she spent another $1,500 on additional training. I watched her fiddle with TurboTax on her smartphone trying to make sure her refund was on the way so she could sign up for one more towards the end.

Doug Casey: I know the type. Sue is an information junkie. It’s good, of course, to have as much information as possible about everything. But, unless you’re very skilled in analyzing, assessing, integrating, and using it, it’s just useless information. Of strictly academic interest. A day at a seminar like this is about as useful as a day randomly cruising the Internet or reading magazines. But perhaps that’s an attraction of Pitbull and Tony Robbins. They get the audience motivated—is hyped-up a better word?—about putting all the facts and tips into practice. Just excited enough to do something impetuous. A bit like going to a tent show religious revival gets some people to convert to holy rolling. At least until the next revival has them handling snakes and speaking in tongues.


Sue doesn’t get around well. My guess is she will never use anything she signed up for at the expo.

In 2009, I bought close to a dozen tax liens in my county. I didn’t pay a dime for the knowledge.

At the time, my county had $140 million in unpaid property taxes. My banker told me about the online sale a month in advance. Blown away by the county’s deficit, it was all he could talk about one day when I was in the bank.

Just to clarify, you don’t have to be a decamillionaire to have a banker. If you bank at a national bank, I bet the capacity of branch employees you interface with is zero. If that’s the case, consider switching to a local bank.

A friend of mine introduced me to the vice president of an upstart local bank back in 2009. I moved some accounts to the bank to support its growth. In addition to tipping me off to the tax lien sale, he also introduced me to a local company needing an investment. He turned them down for a loan, reluctantly.

I met with the firm myself. I bought shares in 2009. They still pay a 20% preferred dividend. The deal didn’t work for the bank, yet my banker thought it was interesting. He was right.

I also bought several rental homes in 2009 and 2010. I didn’t need to sign up for a real estate investing seminar. In fact, nobody was buying real estate back then. Nobody had any money. I didn’t have much.

Some people say I was smart to cobble together a portfolio of homes at that time. Today, I rake in 20% after paying all expenses, including my manager. I appreciate the compliment, but it’s not true. At the time, I didn’t feel smart at all. I was actually terrified.

You see, when absolutely nobody is buying rental houses…when you’re the only buyer, you don’t feel smart. You actually stay up all night wondering if you’re the biggest idiot out there.

Doug Casey: Absolutely true. At the bottom of a market, you might be intellectually aware something is cheap. But it’s not an intellectual problem, it’s an emotional problem. At a major market bottom, you might actually know something is at bargain levels, but you don’t actually care. Because that’s exactly when all kinds of other things are probably happening—maybe a serious war starting, maybe your employer going bust, maybe your investment portfolio melting down, maybe any of a dozen other similar things—so that your attention isn’t on the potentially important. Instead, quite understandably, your attention is on the right now urgent.

There have been lots of major bottoms (and tops) in lots of markets throughout our lives. I promise there will be many more in the future. I also promise that (assuming we recognize them at the time, rather than in the rear-view mirror) that we (meaning you, me, and E.B.) will be very afraid to act. But, one more promise, we (meaning me and E.B.) will be actively on the lookout for tops and bottoms. And will tell you when we think we’re there.

Hint: There’s definitely a top forming in many sectors of the property markets.


The same thing happens when you buy a great stock after the market tanks. Not many people bought Silver Wheaton (SLW) at its November 20, 2008, low of $2.57 a share. In fact, it only traded a paltry 4.7 million shares that day.

Two and a half years later, SLW hit an all-time closing high of $46.91. That day, 17.5 million shares changed hands. That means four times as many shares traded at the top compared to the bottom.

In sum, we're still a long way from the bottom in the real estate market.

Today is not a once-in-a-lifetime opportunity to buy property. In fact, if you think you might need to unload property in the next few years, today might be a good time to do it.

We'll have more to say about this tomorrow…

Regards,

Doug Casey and E.B. Tucker

P.S. I realize my advice above might be a bit alarming, especially if you rely on rental properties for income and are now thinking about selling. That's why I want you to know about another income-generating idea. This idea has nothing to do with real estate, but it's something you should know about regardless.

Doug and I just released a brand-new video presentation that explains all the details. This is a unique way to get paid every month for the rest of 2017 and beyond. Depending on your financial circumstances, it could amount to an extra $10,000 to $40,000 over the next three years. To learn more, click here.