This week in Hidden Profits Report, I’m introducing a new feature. This is a topic I will revisit from time to time when I see the type of extraordinary opportunities I am going to talk about today.
This part of Hidden Profits is for investors who want to get rich.
I don’t mean “hitting the lottery rich” or “finding some super top-secret option trading system that will make you rich by 4:00 next Tuesday” rich.
Instead, this is the “do what history shows works time after time to make money” way to build wealth…
Look, the odds of hitting the Powerball are 1 in $292 million.
You have a better chance of being hit by space debris (1 in 10,000 according to scientists interviewed by the BBC recently) or being attacked by a bear (1 in 2.1 million) than you do of winning the lottery.
Odds may be better for the options trading systems but not by much.
I have seen just about every options trading scheme that can be imagined over the past thirty years.
To my misfortune, I have even tried a few.
I do know some folks who have done very well trading options.
Options trading did not make them rich overnight.
Most sold options far more frequently than they bought them.
Most of them know math at a level that would make a NASA engineer blush.
Options trading is a full-time job for them. They are grinding out fortunes, not hitting windfalls from highly speculative bets.
So, what I want to talk about is not a “get rich quick in the markets” scheme.
It’s the “quit trading and start buying businesses” approach to getting wealthy.
It’s not for the faint of heart. We will buy businesses in industries wildly out of favor with Wall Street and the investing public.
Your odds of success are good with this approach.
That does not mean it will be easy.
And it will not happen overnight.
At times the volatility will make you want to scream (or vomit).
You will probably see your account balance fall by 50% or more several times during the journey.
With all that in mind, let us start on the first part of the journey.
The first step is forgetting everything you learned in college. Forget what your broker told you about things like diversification and asset allocation.
That is all for protecting wealth and earning a decent rate of return, not building it.
If you are ready, let’s start out on the first steps of our journey to get as rich as possible as quickly as possible.
When you look at industries everyone thinks are on the verge of collapse, real estate must be at the top of the list.
I have read so many headlines about the coming real estate financial Armageddon that it is starting to be exhausting.
Real estate values are going to collapse, which will cause all the banks to fail.
According to financial media and the latest crop of instant experts, trillions of CRE-related debts are coming due, and it may well mean the end of the world.
Digging beyond the headlines and sound bites exposes this fascinating story as the load of “horse deposits” it is at heart.
The problem is with offices.
It’s not all offices. Just the big city downtown offices where people have embraced work from home and that has changed the need for office space for many companies.
I don’t see an issue when I look at residential-related real estate warehouses, logistic properties, self-storage assets, and data centers.
Demand is high, vacancies are low, and rents are stable.
The property owners in these segments of the CRE market may have to pay higher rates to roll over maturing debt, but there will be little of a problem passing at least some of the costs onto tenants.
Everyone is talking about the fact that Blackstone Inc. (BX) and Starwood Capital have had to limit withdrawals from their closed-end commercial real estate funds. It seems that high-net-worth investors and institutions wanted to take cash out.
Both funds have monthly and quarterly withdrawal limits to prevent selling properties at the wrong time.
It makes a statement of the opinion of investors about real estate but says nothing about valuations or the finances of real estate companies.
No one is talking about the fact that Blackstone just closed on one of its largest institutional real estate funds of more than $30 billion. The fund will be investing in CRE segments like logistics, rental housing, hospitality, lab office, and data centers.
Starwood just closed a $10 billion fund and has been investing in single-family homes and logistics properties, and hotels.
Increasingly publicly traded real estate-related investments reflect all the potential negatives and then some for real estate over the next year.
Let me be clear that it will get bumpy.
There will be a recession at some point. I have been saying that for over a year, and now even the Fed agrees with me.
The headlines will continue to be negative because negative sells.
The prices of real estate-related equities are going to be very volatile. I expect to see wild swings in both directions.
The swings create the opportunity.
Buying real estate securities on the down sings will plant the seeds of a fortune to be harvested several years down the road.
On Thursday, we will start to look at real estate companies that have the financial strength to survive the volatility and provide patient-aggressive investors with massive gains.