Donald Trump, “New York Values”, Ted Cruz… and a BORING, Profitable Investment Strategy  |  Episode 186.

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Hello, SDI Nation!  Welcome to the podcast of record for savvy self-directed investors like you!  Get ready for another dose of Predictably Profitable thinking!

So, another Republican debate happened last night, and it was entertaining as ever.  Without commenting on anyone’s political views, I have an observation…

Ted Cruz is a brilliant, brilliant man… and a masterful debater.  His skill in that area is without peer.

But Donald Trump really got the best of him in a big moment last night… and I think that moment is instructive for all of us.

The context was simple:  Ted Cruz was making the point that Trump is from New York, and New York isn’t known as a place that’s particularly supportive of conservative, i.e. Republican, values.  The suggestion was that there’s something unattractive about New York values, from the conservative point of view.

It’s a reasonable thing Cruz was trying to do… to tie Trump to a label that wouldn’t be helpful for him in this campaign.

And again, I’ve got to tell you… I think Ted Cruz is just a brilliant, brilliant, brilliant man, and his debate skill is simply over the top.  But Trump ate his lunch in a very un-Trump-like way:  He talked about shared values of a community, he talked about coming together against a challenge as New York did in the aftermath of 911, he spoke as one proud of his community and as a leader among them.

So, Cruz really stepped in it… because the comment came off as him insulting New Yorkers, which I don’t think was the point at all.  But I was really shocked by Trump last night.  He took a solemn tone, spoke calmly and acted as a leader who is personally invested in the reputations and success of “his people”… New Yorkers.  I’ve got to admit… it might be nice to have a President who is PROUD of AMERICA… proud of it’s PEOPLE… and puts the values of America ahead of the values of every other country in the world… that would be a very, very nice change indeed.

No, this isn’t an endorsement of Trump.  I’m undecided still.  But it is a segue into a deeper topic that’s highly relevant to me and you as investors… particularly as self-directed investors.

Politics is an unsavory thing.  I suspect that politics used to be more noble – though I’m not entirely sure that’s true since political rivalries were settled with duels as recently as the late 1800’s.  On second thought… maybe dueling is a more elegant solution.  But I digress…

Still, politics matters to me and you in a REALLY REALLY big way.  Here’s just one recent example:

Last year, President Obama proposed drastically cutting the 1031 exchange, a tax deferral strategy strategy that’s almost exclusively used by real estate investors.  The government claims the impact of that would have been $18B more in tax collections.  But the impact of that is HORRENDOUS.  Here’s a point of comparison… in the entire 3rd quarter of last year, a TOTAL of about $7.9B was spent to buy houses that were flipped.  A lot of money for sure… but far less than HALF of the amount of money that would have been sucked out of the real estate market through Obama’s proposed changes.  With the stroke of a pen, he would have obliterated that capital.  Fortunately, he failed to achieve that goal… and that is to your benefit and mine… even if you’re not a user of 1031 exchanges.

So, as much as I hate it… you and I as self-directed investors MUST pay attention to these things.  It would be so much better if I could just steer clear of these things.  But being a leader sometimes means stepping into dangerous territory, and as your fearless leader of the Self Directed Investor movement in America, I gladly step into the line of fire.

This election happens in a very big year for America.  There’s every indication so far that this could be a very rough year for the stock market, and it COULD spill over into the broader economy.  But even more importantly, there’s a broad, pervading sense in America right now that the economic data we’re all being fed is a smokescreen… an accounting trick that would make the housing crisis look like child’s play.  There’s a WHOLE LOT of evidence to that effect.  As I say these words, it’s 9:57 am Eastern on January 15, and the Dow Jones Industrial Average is currently down by 390 points.

There are MILLIONS of people who are out of work, but are no longer counted as being unemployed because of some accounting shenanigans pulled in recent years that affect how the unemployment rate is calculated.  But the bottom line – the number of people in America who are gainfully employed is right at it’s lowest in MULTIPLE DECADES…

…and because of regulations connected with Obamacare, many millions who used to be employed full time now get to work less than 30 hours a week.

Again… there’s the intersection of politics with you and me as investors… fewer people who are fully employed leads to fewer buyers, fewer renters and bleaker prospects.

So… here’s the thing… wisdom as investors involves NOT JUST analyzing a particular asset and making decisions about capital deployment and exit strategies and tax consequences.  It’s not just about looking forward to profits.  It’s about looking forward to changing environments in which our investments will operate.

Remember:  If you’re buying rental property, for example, that’s typically a very long-term type of transaction… it could LITERALLY be decades long.  So your investment will be subject to the environment today, for sure… but it will be subject to everything that happens in the next 20 years…

...and that future is PROFOUNDLY and DEEPLY affected by politics.  I hate it.  I’ll bet you hate it.  But it’s just the way it is.

The best way to deal with it, I think, is to be informed… and rational.

Set aside names and parties.  Think about the ISSUES that are relevant to you as an investor.  For example:  Taxes are the single biggest killers of profit.  Therefore, it makes good sense to give preference to candidates who don’t default towards tax hikes as the solution to every problem.  Another good example is what’s called “tort reform”… or reform of the way lawsuits are handled.  In that way, it probably makes pretty good sense to support candidates who have a business background because businesspeople and investors – that’s you and me – are FAR AND AWAY the most likely people to be faced with silly, abusive and EXPENSIVE lawsuits… and a candidate who understands how that world works may be able to better represent your interests as a business person or investor.

Here’s my recommendation:  Forget the NAMES.  Forget the PERSONALITIES.  Just think, for a moment, about the real issues at stake… and decide what interests you think the various candidates will represent… and if those interests represent YOU and/or where you aspire to be.  If so, that candidate is worthy of your consideration.

So, in closing folks – in light of the chaos that’s happening in world financial markets, and the potential for that to spill over into the broader economy, Carole – my lovely wife and business partner – are launching an investment fund that will focus on one small town to begin with… and may expand from there.  That town?  Birmingham, Alabama.  Why Birmingham?  Well… it’s not sexy… you’re not going to brag about being an owner of real estate in Birmingham… but the numbers, and the environment, really work well there.  How well?  It’s pretty easy to collect rents equal to 15-20% of the property value… every single year.  That’s a slam dunk.  And because of the unique circumstances in which we can do this, I have profound confidence that that cash flow would be wholly unaffected, even if the U.S. economy was to take a hard dive.

So we’re going to form a fund and make it available to qualified investors.  And I promise you this:  For those of you who want all of the advantages of owning rental property without one single shred of the challenges… this is the answer.

But hey… there is an opportunity to which I’ll alert you.  I’ve got 3 REALLY GOOD rental properties available in Birmingham right now.  Now, in the near future, I’ll not be offering them to you on an individual basis because my fund will be buying them instead.  But for now, I’ve got exactly 3 really solid deals… strong cash flow, fully renovated, tenants already in place.  Total turnkey solutions.  And these houses ALL sell for $55,000 max… many around $50K.  Interested?  If so, stop by SDIRadio.com/consultation to set up a time to chat.

Have a great weekend, my friends, and…

Invest wisely today, and live well forever!

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