The 10th Man

Buying Real Estate in 2006

September 26, 2019

Pretend the year is 2006, and I am writing The 10th Man at Mauldin Economics.

I tell you that I am publishing a how-to guide on investing in Real Estate. It’s not a guide that offers any sort of opinion on the direction of housing prices—it’s just basic stuff so you can be informed if you really do want to invest in real estate.

This $5 Trillion Market Is Just Getting Started.

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Commence the subscriber freakout: hey Jared, why the hell are you shilling real estate in the middle of what is obviously a bubble?

Well, that guide would have come in handy a few years later, when there were generational opportunities in commercial and residential real estate. If you had the cash, the courage, and the know-how you could have cleaned up on real estate in the last ten years.

The best time to learn about investing in real estate is when prices are high, not when prices are low—so you can be ready when the correction comes.

Lots of People Don’t Take That Advice, Apparently

Last week we launched my Bond Masterclass. I put a lot of work into that thing. The launch has actually been pretty great—we’re now in four figures in terms of people who joined—but there has been some pushback, mostly along the lines of: are you freaking nuts?

Two things.

  1. You, however smart you are, do not have perfect knowledge on the direction of interest rates. They are equally as likely to go down as well as up. TRUST ME. There are negative rates all over the globe. It could happen here.

The long bond is currently around 2.2%. If 30-year interest rates were to drop to zero, the price of that bond would increase about 45%. I don’t know about you, but a 45 percent return sounds pretty good to me. If you want to know how that is mathematically possible, buy the bond masterclass. (And if you have already, it’s in Module 1, Chapter 4.)

We don’t have perfect knowledge that there is a bond bubble. It could go higher. People thought stocks were expensive in 1997—and that turned out to be an expensive point of view.

  1. Even if bonds were in a bubble <catches breath> there are still reasons you want them in your portfolio, namely, for their risk-reducing characteristics. Nobody listens to this either.

In the past, I have written about the 35/65 portfolio and even the 35/55/3/3/4 portfolio. There are other variations. You can include real estate and even cryptocurrencies in an optimal portfolio. I can tell you what a bad portfolio is: 100% stocks. I can tell you what a still bad portfolio is: 80% stocks.

The main reason people don’t invest in bonds is because they don’t understand them. This is your opportunity to understand them, without spending $3,000 in tuition or getting Bonds For Dummies (I don’t even know if there is such a thing).

     
 

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Here’s What We’re Going to Do

The feedback I’ve been getting isn’t just “are you freaking nuts?” My inbox has been under siege with questions about bonds, bond investing, bond investing right now, the Masterclass, and other stuff. Because, like I said, people don’t understand bonds.

There are too many questions flying in for me to answer by email. So here’s what we’re going to do.

First, I’m extending the special, Mauldin Economics readers only offer of $99 until October 3.

And the reason I’m doing that is because I’m going to do a call on bonds, where I answer as many of your questions as I can in 30-40 minutes.

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I’m going to give you access to this call on Tuesday October 1, and you have until Saturday, September 28 to send your question in. Please do so through this link.

I’m looking forward to this call. It’ll be good to clear up some of the misconceptions around bonds, as well as help you guys out with your questions. Because now really is the time to be learning about this. Why? Well, if you don’t:

One of Two Things Is Going to Happen

One of two things is going to happen:

  1. Interest rates fall another 2% into negative territory, and you really wish you had spent some time learning about bonds and the math behind them.
  1. Interest rates rise 2%, and you are unprepared to take advantage of a compelling investment opportunity.

Here is the weird thing about bonds: if bonds were a bubble, everyone would love them. But they don’t. In fact, the opposite is true: everyone hates them, which probably means it’s not a bubble yet. Bubbles don’t peak when everyone hates the asset class in question.

In any event, neither of those are a good reason to buy the Bond Masterclass. The reason to buy the Bond Masterclass is: so you learn something.

Let me tell you a quick story.

I was teaching an upper-level class on investments at Coastal Carolina university last year. We got to the section on bonds. Not super exciting for the kids.

I was going through duration up on the board, and one of the students smacks himself on the forehead like I-should-have-had-a-V8. “What?” I asked him.

He said, “This is the third time I’ve had duration in a class at this school, and now I finally understand it.”

YES

I have the ability to take complex financial topics and break them down into pieces that people can easily understand. If the bond market is some great mystery beyond the realm of human understanding to you, you should try it out. (And if you get it before the Q&A call, you’ll be able to ask any questions you have on the Masterclass, too.)

And that, as they say, is that.

P.S. – Don’t forget to submit your question through this link by Saturday, September 28 at 5 pm ET. You’ll get access to the call on Tuesday (and you can listen any time).


Jared Dillian

 

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