Robert Wiedemer on The Next Financial Crisis: The Real Danger of Fake Money – EP 314

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We’ve been talking about the economic consequences of the COVID crisis a lot these days, and with good reason. Some of the smartest people I know think our markets are on the verge of falling off a financial cliff.

And today’s guest is no different and he has a solid track record of predicting financial downturns to back it up.

Robert Wiedemer is the New York Times bestselling author of Aftershock, as well as America’s Bubble Economy, in which he accurately predicted the 2008 financial crisis and its gruesome aftermath. He’s also a money manager at Ark Financial Management and the portfolio manager of the Bull Bear Performance Fund, where he uses innovative, proprietary trading to outperform the S&P 500.

Today’s conversation is a dive into his newest book, Fake Money, Real Danger. We get into how our government’s plan to print and borrow tons of money has put our markets in an extraordinarily dangerous situation–and what you can do right now to protect yourself and grow your wealth.

Key Takeaways with Robert Wiedemer

  • Why the government’s decision to print huge sums of money has all but guaranteed a major financial event in our future.
  • The problems created by nonstop inflation–and what happens to our money markets when interest rates balloon out of control.
  • How a bond market entirely run by the Fed has the potential to trigger a full blown economic meltdown–and what makes this very different from the financial crisis of 2008.
  • Why Robert still thinks real estate and the markets have potential to do well in these times–and what not to invest in.
  • Economic red flags to look out for in the short and long-term.

Robert Wiedemer Tweetables

“One other change since 2007-2008, not only are we printing a lot of money to keep rates low but we pretty much made it clear, we'll bail out anything and everything.” – Robert Wiedemer

“Inflation is the reset and it takes care of everybody.” – Robert Wiedemer

“You could still make money in real estate as long as these interest rates are low, and there you have a huge incentive.” – Robert Wiedemer

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Josh Cantwell: So, hey, guys. Welcome back to Accelerated Investor. I’m Josh Cantwell. I’m your host. And today I have a great guest that you absolutely want to listen to. His name is Robert Wiedemer. He’s a New York Times bestselling author of the book, Aftershock. And he just released his newest book in January of 2022 called Fake Money, Real Danger. They wrote the landmark book called America’s Bubble Economy in 2006 that predicted the 2008 financial crisis and its aftermath. He holds a Series 65 and a master’s degree from the University of Wisconsin, and he manages Ark Financial Management, a Washington, D.C. area investment advisory firm, and he’s also the portfolio manager of the Bull Bear Performance Fund, which uses innovative proprietary trading designed to outperform the S&P 500. In Bob’s most recent book, Fake Money, Real Danger, we’re going to talk about how we’ve exposed the government’s massive money printing and enormous borrowing before, during, and after the COVID crisis and how it’s put the financial markets on the fast track to the coming financial cliff.

 

Look, Bob wrote the book on what’s coming, so you absolutely want to hear what he’s got to say and how to prepare yourself and protect yourself and grow your wealth while you still can. Here we go.

 

[INTERVIEW]

 

Josh Cantwell: Well, hey, Bob, listen, thanks for carving out a few minutes, and welcome to Accelerated Investor.

 

Robert Wiedemer: Well, thank you for inviting me, Josh.

 

Josh Cantwell: Listen, Bob, I’ve been looking forward to this interview for a long time, especially since you released your newest book, Fake Money, Real Danger. And my audience, right away, make sure you check out that website. That’s what we’re going to be talking about today, www.FakeMoneyRealDanger.com. As you heard in the intro, Bob has a tremendous amount of market experience, 20 to 25 plus years, and has operated and predicted the crash of 2006. And today, we’re going to talk about his most recent book, which was just released in January of 2022, and talk about this money printing that’s really happened and a lot of this possible financial cliff that we are going to be experiencing. So, Bob, first of all, let’s talk about Fake Money, Real Danger. What led you to writing your latest book? Tell me about your motivation and high-level why did you start to kind of find the desire to write your next book?

 

Robert Wiedemer: Well, that’s pretty easy. We’d written, as you know, a series of books called The Aftershock. We had four editions on that, sold about a million copies but the last was in 2015. And our publisher, John Wiley, kept saying, “Hey, we want an update. We want an update.” And we said, “We’re not going to do an update until the Fed starts printing money again. A lot of it.” Well, as you know, with COVID, the Fed started printing, well, more money in a month than it printed in years before, even when it was in high print mode. So, that kicked it off. As you know, once we started to print money again, our overall predictions are coming true. You know, we’re printing a lot of money. We’re borrowing a lot of money. We’re not going back. We’re not reducing the amount we borrow or reducing our debt. We’re not reducing the amount we print. And so, that was our kick-off to say, hey, it’s time to write the new book because we’ll have a better idea once the Fed’s printing so much money and kind of what the timeline will be when this thing starts to blow. And so, that was really the genesis of the new book was the COVID massive money printing operation.

 

Josh Cantwell: Yeah. And why was it that you knew after writing and delivering Aftershock and the success of that book, how did you know in advance that you weren’t going to write the book until the money printing began? What was it about the money printing that you knew that that was going to create the next real event? What was it about that that you knew based on your economic experience and your financial planning experience and these types of things you’re treating experience, why was that so important?

 

Robert Wiedemer: Because it’s really the key to keeping the economy, the bubbles going is printing money keeps our interest rates low. And that’s absolutely crucial to all of our investment markets, bonds, real estate, stocks, and it’s also crucial to keeping the government finance. The reason we can easily borrow $1 trillion a year or more is because we’re keeping interest rates low. In fact, I might add that there’s actually in a sense nothing wrong with all of that printing money and borrowing as long as we don’t get inflation from printing money. And so, what we said long ago in Aftershock is that ultimately, we’ll have to keep printing money to keep the markets going, to keep our economy going but also it will cause inflation. And that’s going to be the death of this little economic experiment of trying to go against everything we know probably can’t work meaning, “Really, can we borrow $30 trillion and never pay it back? Can we increase our money supply 1,000%, never get inflation?” Well, no. I mean, eventually, it will cause inflation and that will put an end to the whole thing.

 

But that’s why the printed money is really the key to all of it. I mean, it’s not even the borrowing. I mean, really as long as you can print money without getting inflation, our government could borrow trillions and trillions more, right, because it’s printed money. Essentially, they’re issuing bonds that the Fed buys and that could go on forever but it won’t because it will eventually create inflation.

 

Josh Cantwell: Right. And now that inflation is happening, help me understand again from your perspective and what’s your experience, why is it that the borrowing of money without inflation I understand why that could work and that could continue but now that inflation is at a 40-year high, what kind of issues and problems is that going to trigger and what’s the result from that? What’s the next step? Now, that the inflation we know is there, it’s been happening, it’s been happening every month, this 9%, 8.5% 40-year high, we see that that might be trickling down a little bit. It’s still at a 40-year high but the trend is going down because the cost of energy is going down, the cost of gas. But now that inflation is firmly here to stay for a while, what does that trigger that concerns you?

 

Robert Wiedemer: Okay. So, the key to inflation from an investment standpoint isn’t so much that it’s costing more to buy gas or bacon or whatever. The key is that it pushes interest rates up because, again, what did I say earlier? The key to keeping our bond, stock, real estate markets, and economy going is low-interest rates. And that’s really when we did analysis in Fake Money, what really caused the stock market to boom so much since the financial crisis and even before has been those low-interest rates. So, the only problem you can get from inflation that really causes all these problems is rising interest rates. And unfortunately, or fortunately, I should say, we’re not going to get that for a while. You’re going to have to have really high inflation like 10% to 15% before it’s going to affect interest rates. Now, you’d say, “Oh, wait, we’re raising interest rates right now. So, it’s having an effect.” No, no. As long as the Fed has control of interest rates and it’s raising or lowering rates, we’re still okay. As long as the Fed controls it. It’s when the Fed loses control and can’t keep interest rates down because nobody wants to buy a 3% bond when inflation’s at 15%, that’s when you have a problem.

 

So, it’s a ways off but it has been kicked off, the final problem. You said we’re now getting inflation, which is something, frankly, five years ago I could have very senior intelligent economists saying, “Hey, Bob, we don’t have inflation. It’s been solved all around the world.” To a large degree, it kind of was true. Now, we’re seeing it’s not true but we can still keep rates low. So, the next hurdle is really how long can the Fed keep control of rates? Right now, I know it’s raising them but ultimately, you’ve got to keep them low. You can’t raise them too high as the Fed will find out. How long can the Fed keep rates low before inflation sort of pushes it up to the point that the only person willing to buy bonds is the Fed? Because nobody will buy a 2% or 3% or 4% bond because inflation’s at 10 or 15. I think that’s a ways off but that’s the real problem with inflation. It’s not so much your pocketbook issue but your interest rate issue.

 

Josh Cantwell: Right. So, my audience is connecting the dots here, right? That important point that Bob just made is that when interest rates get out of control to the point where inflation is so high that they can no longer issue bonds, government bonds at 3% or 4%, nobody’s buying them, that creates the next problem, which is now the federal government can’t print any money or they have to print it at such a high-interest rate to attract investors. That becomes a major problem. Okay. So, Bob, let’s take it one step further. Let’s just say we end up with 12% and 15% inflation rate consistently. The Fed right now and even the interest rates right now, Bernie says, “Oh, my God, the interest rates are going up,” but in the history of our country, the Fed funds rate was typically somewhere, if I’m wrong, I’ve heard this many times, so correct me if I’m wrong but sort of 5.5% to 5.75%. Right now, we’re still way below that first historical average.

 

So, when you’re talking about moving the rates up now up into the fours, into the fives, into the sixes, and now that’s happening, now we’re going to see historically higher interest rates. Because right now, guys, listen, historically, they’re still very, very low. But let’s just say the Fed loses control of interest rates and now they start to spiral really high. Now, help me understand, Bob, what problem does that create when you can’t finance the government, can’t finance the debt?

 

Robert Wiedemer: Okay. So, what you do, what the Fed will do is as fewer and fewer people want to buy low-interest bonds, they’ll print more money to buy bonds. And this is where it will start to hit the markets is they’re kind of going, “Well, interest rates are low, still 3%, 4%, let’s say worst case, but the Fed’s buying all the bonds. They’re printing money.” Well, when you’ve got inflation at 10% and the Fed’s printing a ton of money, which again, they’re not doing right now but I’m saying this will happen in the future and they’ll have to print more money, ultimately, the markets start to panic because they realize that the Fed has lost control. In other words, all it can do is print money which is, frankly, all it’s ever been able to do is print money. That’s its only real power. But in this case, they’re printing money and it’s causing inflation. And they’re having to print more and more of it because they’re going to have to buy a lot of those bonds that are constantly being rotated, turned over in the system. It’s not just new bonds but anybody holds a bond can sell it any time and they could start selling in which case the Fed’s going to have to buy with printed money.

 

So, what you get is ultimately you get this sort of meltdown where the markets start to see that we’re headed for a bond market that’s entirely run by the Fed. This is sort of unsustainable and eventually people do panic. But, yeah, those low-interest rates are here and they are low. And you’re right, historically low. We’ve never seen anything like this before. And I might add, one of the great to look at because we’re talking about interest rates is very important to look at that ten-year rate. That’s the one that affects the stock market, the bond market, and so forth. The overnight rate which the Fed has been increasing isn’t really very important, honestly, because who borrows overnight? Well, some banks but it’s not investment time period, right? So, that ten-year bond rate actually has not gone up that much. In fact, in June, we raised rates three-quarters a percent. The ten-year bond rate fell almost three-quarters a percent.

 

Josh Cantwell: It went down. I remember that day. We, obviously, in the commercial sector, Bob, we look at the ten-year treasury yield all the time. This is a critical number. So, a lot of people, again, my audience, if you’ve listened to any of the trainings before, the podcast that we’ve done, as the Fed increases interest rates, that’s going to affect your regular cars, your credit cards, it’s going to affect your house payment. But it also affects bridge loans, which are based off the SOFR rate for commercial real estate. Okay. So, the cost of bridge money goes up. What does that do? Well, it makes money more expensive, especially in the short term for 2 to 4 to 5-year bridge loans, which now if the cost of that money is more expensive, it pulls back on what people are willing to pay for those commercial assets, like multi-family apartments. But that’s the SOFR rate. That’s the Fed funds rate. That’s the overnight rate that Bob’s talking about from a long-term rate, when we look at long-term financing, Fannie Mae, Freddie Mac, we look at bank financing for long-term commercial deals.

 

Bob just explained again the ten-year treasury yield. If you look at it, let’s say October of last year, it was 1.6%. It was extremely low, historically low. Now, it went up. It went up, up, up, up, up. It went up to actually 3.4% is the latest high that I’ve seen that was about 60 to 70 days ago. And then when the Fed raised the rates by that 75 bps last time they met, the ten-year treasury dropped back down to about 2.85 to 2.75. That’s kind of been floating around there lately. So, the cost of money still for commercial real estate’s usually going to be about 200 bps higher, maybe 225 bps higher than the ten-year treasury yield because banks want to get a spread, a yield, a difference between the ten-year treasury yield and what they put the money on the market for. So, if they give me the money for a commercial deal at 5% and the ten-year treasury is at 2.85, they’ve made the spread. They’ve made the yield that they want.

 

So, that’s why, as Bob is saying, if this stays historically low and the government can continue to print money and there is inflation but it’s under control, the markets should stay relatively calm. If inflation continues to happen, then the only way to keep the interest rates down is to print more money. Now, you have inflation with more money, which is going to cause more inflation and you could have a runaway. You, guys, see where we’re going? See what Bob’s explaining here? That’s the key. I just want to connect the dots, Bob, for our audience before we move any further.

 

Robert Wiedemer: No. Thank you. Because it’s a little bit counterintuitive what you hear in the news every day and so forth. It’s a little funny but you’ve got it. And in fact, I might say maybe our next book should come out when the Fed starts printing money again to keep rates low. But let’s just emphasize, yeah, it is a very funny bond market. When the Fed announces a rate increase that the ten-year rate goes down. And I might add, when they announced another one in July, the ten-year rate went down briefly even lower to 2.5%. And as you said, it’s gone back up. Let me just explain real quick. What controls the ten-year rate is not so much where the Fed sets the overnight rate. What controls the ten-year rate is buying and selling of bonds. And that’s how the Fed really controls rates is that they want interest rates to go down. They buy a lot of bonds, right? A lot of demand, that keeps rates low. And if they want rates to go up, they sell them. Well, they promised back in March…

 

Josh Cantwell: And that’s the term, the Fed clearing their balance sheet.

 

Robert Wiedemer: Clearing the balance sheet is what it’s called.

 

Josh Cantwell: It’s the money that they bought, that’s exactly what Bob’s explaining. If you guys have heard, they’ll go in the popular news, right?

 

Robert Wiedemer: That’s a popular news.

 

Josh Cantwell: The quantitative versus qualitative tightening.

 

Robert Wiedemer: Right. Tightening, which is the opposite of easing. And it means, yeah, reducing the balance sheet, basically selling off bonds that they choose printed money to buy. Remember, the Fed has no tax rights. It has nothing. All I could do is, well, all I can do is print money out of thin air, which it can do a lot of. And so, that’s what it’s sort of promised it would reverse but it didn’t. It was supposed to start selling 45 billion, which is not insignificant a month of their bonds in June. They didn’t. They’re hardly one through five or ten. Same in July. They’re picking up the pace a little in August but it’s still not 45. And in September they’re supposed to go to 90. Now, that will increase your long-term rates. So, a couple of things to look at will be that balance sheet. Are they finally starting to reduce it going forward or are they not? That’s going to tell you where that ten-year rate is going to go, that all-important ten-year rate, much more than whether the Fed raises the overnight rate, which will not be as important. And that really doesn’t affect the ten-year rate much at all. So, going forward, let’s look at that ten-year rate. That’s going to be critical. And I say that ultimately the Fed will not let that go too high.

 

Now, without the risk of a run-on, you might ask, “Well, why is the Fed raising rates, Bob? You keep telling me that lower rates are so important.” Okay. Because what the Fed thinks is that they’re going to be able to raise rates briefly to kill inflation, and then they can lower them again. Sort of like what happened with Volcker, right, in the early 1980s. The Volcker treatment was to get rid of inflation. You raise rates for a while. Inflation has gone any lower. What’s the big difference, though? Why can’t you do a Volcker thing now? Why is the Fed in fantasy land thinking it’s Volker time again? Because what was the Dow in 1980? Probably hard to remember.

 

Josh Cantwell: It’s hard to remember. I think I was eight or ten years old.

 

Robert Wiedemer: Exactly. And so, it was at a thousand, right? A thousand. Okay. And it wasn’t really in much of a bubble either because what was the Dow in 1970? About a thousand. So, for a whole decade, it hadn’t gone up. So, you didn’t have a big bubble to pop or big stock market bubble. And we all know real estate prices were certainly a lot lower back in 1980. So, what’s happened now is these low-interest rates have encouraged asset prices like real estate and stocks to go way up. So, you can’t bring the interest rates down any more like you could under Volcker because the prices of assets are so high. You bring those rates up and you will kill the values of real estate and stocks. So, that’s why the Fed is sort of in fantasy land is they don’t realize that raising rates will pop those markets pretty badly. They wouldn’t in 1980. They didn’t but now they will because they’re so high priced. And this is also why I suspect the Fed is not doing much on selling bonds and doing more of the talk on the overnight rate but look like they’re fighting inflation but, in fact, they really aren’t because they sort of know what I know is you raise those ten-year rates and you will kill stock and real estate markets so fast if you don’t.

 

Josh Cantwell: Yeah. So, when you and I were emailing and texting before this interview and we talked a little bit about the difference between the 2006, 2008, 2010 crash, back then it was overinflated house values, again, a lot of arm borrowing, a lot of no income, no asset borrowing. It made the banks sick and the banks were the cause of an illiquid market. What I’m hearing now is, in a similar way, if you raise rates too much, then you caused the crash. So, it’s not now about liquidity. It’s about the fact that these assets are so much higher valued. And if you raise rates and ultimately sell off these bonds, selling off the bonds is going to increase the ten-year treasury yield, which will increase the cost of money, increasing the Fed funds rate, it’s going to increase the SOFR rate, which is going to increase the cost of bridge money. Either one of those happening or both of them happening increases the cost of borrowing, which then will stop or reduce the value of the asset. So, now we’re just pulling a different lever. The lever in 2006, 2008 was the banks were sick. That was the lever. That caused no liquidity. That’s what caused prices to come down.

 

Now, you’re talking about interest rates going up to fight inflation. That would cause illiquidity because the cost of money would be more. So, now the Federal Reserve is just being much more slow, methodical, and strategic. They’d rather see runaway inflation or at least inflation at 8%, 9%, 10%. They’d rather see that than the market get completely hammered and everything come back and the economy tanking because they’ve learned from the 2006 through 2010 crash. Did I piece that together right?

 

Robert Wiedemer: You did. You did. You got it. And it’s important what you say is that 2006, 2007, 2008, 2009 was a little more of a subprime banking issue. Whereas what you’ve got now is a bubble that’s, in a sense, if you could keep rates this low forever or put them back to 1.5%, it’s maybe properly priced. I’m not saying it’s perfectly priced but better priced. And so, really, it’s low-interest rates that are keeping this bubble alive. And if you raise those rates, you pop it. So, you’ve got it. And that’s the big issue we’re facing. And that’s the difference between 2008, 2009, and now, which is also reason, frankly, this bubble could keep going on for a while because the Fed does have control of rates. It can keep them down if it wants to. So, it’s a whole different thing but it’s a lot bigger because back then you’re just involving the banks. Now, you’re involving the whole U.S. government’s financial system.

 

Josh Cantwell: And frankly, all the world governments. I mean, all of the governments on the world have been printing money like crazy because of COVID. The European Union, China, Russia, every large, major industrialized country, printed, printed, printed during COVID. Now, everybody’s experiencing worldwide inflation, and all the central banks have essentially adopted the same policy.

 

Robert Wiedemer: Yup. And that’s exactly right. So, we’re all in this together because we are all making mistakes, not just the US, but I will say the US is the leader. If it has trouble, if we have a cold, the world will catch pneumonia. And so, yeah, we’ve gone from a relatively contained bubble with the banking crisis to a much bigger and what will ultimately be an uncontained bubble when you start involving the US government’s fundamental finances and the world government’s finances. So, it’s a much bigger deal but that’s also why this could potentially last longer. And that’s what’s going to make it very interesting. The bad side is that means it will get bigger. When it pops, it’s far worse but you get it. That’s the big difference. I might add that one other change since 2007-2008, not only are we printing a lot of money to keep rates low but we pretty much made it clear, we’ll bail out anything and everything. Any major bank fails, we’ll bail them out. Insurance company, we’ll bail them out. And we’re going to be much quicker than 2008. We’re not going to hesitate to bail out Lehman Brothers. I mean, we wouldn’t even think about it. I mean, hell, we bail out McDonald’s bonds.

 

So, that’s another part that allows this bubble to get bigger is triggers like the subprime crisis are not going to really happen much anymore because we are in bailout mode across the financial spectrum.

 

Josh Cantwell: But you can only bail out for so long, right? I mean, there has to be a reckoning at some point or is it just because not only the United States but like, as I mentioned, all the other industrialized countries are also doing the same thing? This is ultimately going to come down to there’s going to have to be a monetary reset at some point. And the question is going to become, will all the world powers work together and manage it in a cooperative way and do it in a way where debts can be restructured, debts can be reduced or forgiven, some of these different types of strategies where these major world powers are doing it together? Or do they ultimately not do it together and this ultimately becomes somebody is going to want to be the winner, which really ends up meaning some sort of war? So, to me, that’s what’s going to come down to. It’s either going to become a cooperative way for all the countries to work together because all the countries are going to be sick financially at the same time or do we fight it out? Like, that’s how I see it. What do you think?

 

Robert Wiedemer: Well, there’s nothing to fight over in reality. I mean, what’s going to happen is different countries are going to have different rates of inflation. There’s no real reset you could do. I mean, what would a reset mean? And you don’t need it. Inflation will take care of it. So, the inflation in each country whether it be Japan or China or the U.S. or Europe will be at different rates. And those inflation rates will do all the work you need. Pretty quick, that’s not going to be there in the US really anymore. But that means that all those life insurance companies that have invested in our bonds, that means now the Social Security fund, it means you, me, who probably all still has the bonds, they’re all worthless. And that’s the reset. So, it’s not a reset. It’s just a loss of wealth. In a sense, maybe the wealth was never there but it’s the reckoning that you’re talking about is you keep bailing people out. What are we bailing companies out with? What are we bailing the economy out with? Credit money. And you might say, sure, it’s borrowed but the reason you borrow and keep interest rates low is because you’re printing a lot of money.

 

And so, that’s the real problem. At the heart of it is every country has started to put too much money. Right now, not much inflation and it’s not very continual. It’s just really started. But over time, the real reset is all accomplished through inflation. There’s nothing to fight over. Assets are all collapsing in value. Demand for commodities. You know, in fact, in a weird way, commodity price will actually be falling during this time. I mean, oil prices, all these because the economies are slowing down. Just as you’ll find Japan has these massive life insurance policies out. Well, they’ll all get crushed by inflation. But what’s it to take from them? Same for the US, nobody’s going to want to grab our bonds. They’re all fallen to pieces once you have high inflation. Inflation is the reset and it takes care of everybody.

 

Josh Cantwell: Got it. I love it. I have some friends of mine who have been very successful conspiracy theorists, I would say, who ultimately are projecting World War III is the reset instead of inflation. So, it’s actually a relief to hear you say, Bob, that inflation will take care of it because we’ll just have a new cost of everything, either inflation or deflation. Wealth will be wiped out. People will have to start over and hopefully, we can start over without any kind of fighting. That would be fantastic. Bob, let’s move on then now that we know what the symptoms are, the problem is, and kind of what we should expect going forward a little bit. You wrote in Fake Money, Real Danger about how to protect your wealth and even grow your wealth while you still can. So, what can we do? What did you put in the book? What are some high-level takeaways that we can give our audience today to kind of ease some of their anxiety and help them understand how they can protect their wealth and how they can grow it, even with a lot of these uncertainties?

 

Robert Wiedemer: Okay. Well, one thing is lean heavy and hard on typical growth stuff right now. I mean, just watch those interest rates. As long as interest rates stay reasonably low, the market’s going to do well. Real estate is going to do well as well. Now, I admit residential real estate is probably very high and obviously fairly high behind incomes and office real estate has COVID problems. But real estate, location, location, skill, investment knowledge. You could still make money in real estate as long as these interest rates are low, and there you have a huge incentive. The Fed has a huge incentive to keep them low and you can tell if they’re running out of dry powder by basically the rate of inflation. If inflation is still only, I know it sounds hard to me, but from a financial standpoint, it’s only 8%, 9%, you’re not going to have any immediate problems with the Fed keeping interest rates at 3% or 4%. So, run it hard. So, even on the stock market, I’ll give you my “pick of the day.” I’d run it hard with SPXL as a stock market pick. It’s a 3X-levered ETF on the S&P. You might say it’s risky. I say no.

 

If you actually look at the long-term returns the last 10, 20 years, you’ll be just absolutely floored. It does far better than 3X. It does have a lot more volatility but it’s still the Standard & Poor’s. It’s about a safe stock investment you can get. Five hundred companies, all blue chip, that’s what you’re investing in, you’re leveraged but there’s no margin calls. So, you could be 100% in this and never worry about a margin call. And that’s what I mean about riding hard this market while it’s still going, because you have a lot of confidence that the Fed has to keep things under control and the Fed can for a while, and I mean years. It could be five years. It could be ten years even. That I can’t say but there are going to be plenty of signs you can look out for when you need to move. And the obvious ones are your ten-year rate and in the rate of inflation. So, real estate’s a little trickier because it’s not as liquid as stocks but there’s still ways to get in some hot play real estate. Again, that takes real estate skills, which are not my way into the business. I’m giving you my stock advice but I’m saying real estate will benefit in the same way.

 

Wouldn’t it be careful if it was bonds? I know they say bonds always be part of your portfolio. They kind of will but the bond bull is over. We’re not going to go to negative interest rates probably. And that’s about what you’d have to do to make bonds a really great buy. So, I’d be careful of bonds. Real estate, you just got to pick it. And probably, Josh, you’d be the man to talk to what’s best right now and so forth.

 

Josh Cantwell: And honestly, Bob, my solution there, of course, like I was a fee-based financial planner, Series 6, 63, 65 licensed but that was 15 years ago. I let those licenses lapse when I was full-time got into real estate as an operator. And the difference between the resi stuff that you mentioned is that resi is a lot of speculation. It’s about the guy next door that got an appraisal at such and such a price, and people look at that as a way to place the park money. And there’s so much money out there because of all the money printing during the COVID era. Everybody had money. They could go pay cash for properties, not really even looking necessarily at any underlying debt or any underlying obligation like a PITI type of payment. They could just buy the asset. They can overpay for it, let’s say, in Naples, Florida, and they’d still get cash flow from the rent and they’d still get cash flow if they were doing Airbnb. They could do that as an operator. And a lot of people were buying heavily over-inflated residential assets in the boom-bust markets, which are mostly along the coastlines. And they’re booming and they’re booming and they’re booming. Great. People are liquid. They bought all cash.

 

If you’re going to make a long-term play, again, this is self-serving but this is my area of expertise, which is multifamily apartments, right? Because the residential market’s gone up, up, up so much, we have a major affordability problem in our country with affordable housing. And so, for us to buy B-class and even C-plus-class suburban apartments, these people have nowhere to go. They have good incomes. They have good jobs. They’re blue-collar. They’re white-collar. They’re B-class type of residents. They just have no house to buy. There’s no inventory. There’s no supply. So, they have to rent for longer and paying more rent than they otherwise would have. So, if you’re going to invest in the market and just you want to be a guy that cuts the check, writes the check, Bob has a lot of these type of opportunities and has different stock picks. Again, you can get his book at FakeMoneyRealDanger.com and you can get on to his email list and you can follow him for that type of advice.

 

The other option is if you’re going to buy real estate, not in an ETF or not in a REIT but actually buy the physical real estate, this is just another reason for me why B-class suburban multifamily apartments is going to be a winning asset for a long time because anybody can afford a $1,000 a month payment. You know, your housekeeper, the nurse, the teacher, the mechanic, they can all afford $1,000 to $1,200 a month house payment when it’s an apartment. So, that’s what we focus on because we appeal to the masses. Really, really good stuff there, Bob. So, growing your wealth, so you mentioned SPXL 3X-levered ETF. Any other ideas, places that we can grow and protect our wealth?

 

Robert Wiedemer: Yeah. I mean, I wouldn’t do a lot of stock picking. I would stick to the indexes. I know that’s all John Bogle and Vanguard Fund advice but I think it’s true. If you want to beat the market, use and there are other, you know, you can do a double levered S&P. You could, same thing, double levered on the Nasdaq. So, there’s plenty of ways to get involved in major indexes in a leveraged way that will outperform. And again, I want to emphasize I think we still have time for long-term investments. I think at least to me, five years plus is long-term. And just watch those interest rates. That’s going to be the key. It’s self-serving, if you want kind of quicker, closer to the month advice, yeah, take a look at my newsletters, my books. You know, we’ll keep you right up to date is when we think things are going to blow. But I think we’re still good for some long-term vets. But, yeah, I keep up with what I have to say and what Josh says on real estate. Again, there are short term and there’s certainly still long-term stuff left. Just know that eventually, as Josh says, the reckoning will hit. Let’s keep an eye out but that’s all I think you need to do right now. I don’t think it’s like big red flags out there.

 

Josh Cantwell: Fantastic stuff, Bob. Listen, I think some of the takeaways here are the specific things to watch, right? Inflation, interest rates, do they start to sell off, right? This would be a big key, which we talked about. If the Fed starts to finally sell off, do the quantitative tightening and they reduce their balance sheet, that’s going to make those cost of bonds go up. And you’re going to see at that point, you’re going to see the interest rates go up. So, they’ve been holding off on that for now. I think the market overreacted. That’s why the ten-year treasury went to 3.4%, 3.5% then they found out the Fed wasn’t going to sell. They weren’t going to do as much quantitative tightening, and then the rate went back down. So, there are some real tips here, guys, and some real data to follow in order to make great investment decisions. Okay. And as always, as we have mentioned a couple of times, grab Bob’s book. He wrote it just earlier this year, January of 2022 with all of these things in mind, COVID, the money printing, the Federal Reserve, what we learned from 2006, what we learned from the Volcker era in the 70s and 80s. Get the book right now at www.FakeMoneyRealDanger.com. Bob, listen, thanks so much for carving out some time for us on Accelerated Investor.

 

Robert Wiedemer: All right. Thank you, Josh.

 

[CLOSING]

 

Josh Cantwell: Well, there you have it, guys. Listen, I love having guys on who have a position that dig their heels in and really tell it like it is and what’s going to happen with the marketplace. Again, I think some real takeaways from this is what happens to inflation, what happens to interest rates, and also what happens to the Fed’s balance sheet if they start ultimately with the quantitative tightening that they talked about that will push interest rates up. Also, what will happen with the ability for them to continue to raise rates in the future, or are they going to let inflation kind of run away for a while? All right. We have a couple of quick tips on some investment strategies. Again, I love the fact that he said stick to the indexes. I’m a big fan of index investing. That’s what I do with my own money that’s in the stock market. I avoid individual stocks or stock picking, and I absolutely invest in the indexes. And also, I love the fact that he said, look, we’ve still got a 5 to 10-year time horizon. Even with the short-term inflation, we still got plenty of time to make good investment strategies.

 

All right. So, guys, listen, if you want to hear more guests like this, make sure you smash the subscribe button, leave us a five-star rating and a review right now, and don’t forget about our mastermind. If jumping into our mastermind and working with other seven and eight and nine-figure investors appeals to you and working directly with me, go visit www.FakeMoneyRealDanger.com. Opt-in there. We’ll set up an interview and we’ll talk to you to see if you’re a fit for the group. We’ll see you next time. Take care.

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