A Trillion-Dollar Capital Rotation Is Happening Right Now

The real question right now are where are investors putting their money because you have crypto down, stocks on thin ice, and real estate is also frozen. Yeah, the well the S&P well you guys know is down 19% just in the last month. Uh Bitcoin, who knows where that's going. I I keep hearing buy the dip, buy the dip, buy the dip. It's down 22%. And and it's it's tough to cash flow. Yeah. Yeah. It's crypto is I think down over 30% right now. Yeah. Yeah. Last I looked, you know, and and it's it's really really hard to find real real estate that's cash flows, right? And I think uh you welcome guys to to an economy that that I'm used to like this is like what what we just came out of is just made us all soft, right? And so, you know, the the the reality is is where you know where are people alternatively putting their money? What should we be doing in this last couple months? What should we be doing in 2026? Uh we got a lot to talk about. Yeah, let's start with crypto. So, crypto's kind of been all over the place, you know, right down right now it's down, you know, 30 to 40%. And everyday investors are pulling back because most people can't afford to lose 30 to 40% of their investment, especially if they're older, which is leaving, you know, the hardcore traders left there. As we said with real estate, you know, mortgage rates are at six to 7%. Sellers don't want to give up their two to three% loans and buyer like an average home buyer can't afford payments at this price. So that's going to give you just a record low transaction volume. And with the stocks, you know, the stock market's down and a lot of people are betting on certain stocks like tech stocks, but other than that, the rest of the market is is pretty down. Well, even that's volatile, right? like so um I just the one thing that's up which is interesting is silver and gold and silver hit 50 and gold's over 4,000 as you guys know and gold was at uh 3,000 in March so this year and uh I went to the gold conference which uh was very very interesting. There's nobody from real estate there at all. So it was all these mining people and gold people and you know oil and gas. It was pretty cool. It was a New Orleans investment conference. Um, and obviously it's a gold conference, so it's like, uh, you know, take this for what it's worth. But, um, I talked to multiple people and they all think that gold is going to get over 5,000, somewhere between five and seven, and just kind of settle in in that. Where is it at right now? It's at four. Now, I'm not pitching gold. I'm just trying to tell you that we're all trying to figure out what's, you know, where should we be putting our money now? You know, what what is going to run? Um it's really really hard to find cash flowing real estate that's for sure. We we have been able to do it but um it's much much more difficult and and it does not look like uh you know rents are soft um inflation um who knows uh but and and loan to values uh we're only getting in the in the 50 55 at the most 60% LTV on any of that stuff. So you got to put a lot of money down. um you know so the economyy's a bit in flux and we're heading into into the end of the year and another potential rate cut. Yeah. Yeah. So, you know, basically the three major investment pillars are shaky right now. And the main question is where is capital going? And I went to an investor event last week and that was everyone's uh sentiment, right? I mean, people a lot of the people had rentals and they weren't getting the returns they wanted on the rentals and they were considering selling them. But then the question is is okay, you sell them, where do you put the money? You know, like you can't just sell them for cash, you know, and do nothing with it. that's even worse than having the rental property. So, that is kind of the big question and that's a lot of what we're hearing in our investor community and what we wanted to talk about today. Yeah. And I think we got to take a look at what you know what are the top risks. So, if I'm looking at risk, I'm looking at certainly you've got market risk, right? Um that's number one. Now, market risk would be like um you know, Detroit, I guess, or uh Portland or Seattle or San Francisco. That that would be in from a real estate standpoint, market risk. Um um conversely, it could go the other direction as as you guys know. Um interest rates, another obvious risk there. Now, the one thing that you do have with interest rates is you can control them. you can actually do fixed rate instead of variable. So there is a little control that you have with interest rates. Uh another one is inflation. We don't know where that's going to go, but if inflation is going up, I don't think it's going down. Um certainly u you know the Fed wants to bring it down to two. It hasn't been there for some time. Uh I think it's right around three at the moment. So that's something that you need to consider. And if if you are considering then that then you need to be in a in what would be considered a hard asset something that would rise with inflation. Um then there's business risk which is if you're investing in a company that could get disrupted right like whatever whatever that kind of business is like um I was uh watching this video with Gary Vee talking about Google. Now, obviously, Google's huge. Don't get me wrong. I'm not saying that they're at risk. But what I'm saying is you're talking about Google ads versus uh chat GPT and and how Google ads aren't going to be a thing. That entire division is going to go away. Um, so you start to look at business risk and and uh and and then of course you got the economic risk because those are all the risks I think and and so you know you just have to from there figure out what are your controllables inside of those things and there are controllables there are things that you could pay attention to and actually direct your money toward yeah so let's look at the data and where the money is actually going. So if you look at you know the stock market AI remains strong even though there is volatility there has been 4 billion in inflows um and this tells us that people are you know being very selective you know in the stock market what they're investing in but the biggest thing is cash balances are at an all-time high. So your money market funds have 7.48 48 trillion and that's up from 6.5 trillion just last year and T bills are also up uh as well for investment purposes and their rate is 3.7% right now. So what you have to look at with that there's a lot of money sitting. That is the biggest takeaway from this is people don't know what to do with their money and it's just sitting. Yeah. And I think I think things are it's there's nothing wrong with being a neutral, right? like uh this is a time where I I think it's probably good to figure out if you have any cash leaks, right? Like fix those uh and and sit back because the one the one thing we were talking about before is that the Fed is meeting next month, actually just in a couple weeks and the they don't have the data that they used to have because of the government shutdown. And so they could be this could be neutral for them too. We could roll into next year potentially with the the rate where we are which is in my opinion not not a big deal but um I don't know uh you know the sentiment has been all over the place below 50%. That there there's going to be a rate cut. Uh I think last I looked at was actually a little bit above 50%. Uh but the reality is is they they don't have have that data. So, so but we are moving into quite a consumer time, right? There's a lot of year-end tax moves that people will make. Um, uh, certainly there there's a lot of things businesses do right now to that they can do legally to mitigate tax. Um, things like bonus depreciation, as an example, where you can buy things in Q4 and write them off in that year and then get to use them next year. So that that could happen. Also, the holidays um and and all of those things. You know, there's some kind of a temporary employment boost during this last quarter uh that we always see historically. Uh albe it temporary, it's not u it's not a guiding line for sure. But I I think while this is all going on the it's probably not a bad thing to to just hit neutral. I think just got to mo and just keep looking for that cash flowing deal if you could find it. Well, and that's why you're seeing a big play on metal, right, on gold and silver is because really that's just an inflation hedge, too. It's no different than, you know, putting your money in a savings account or anything else. It's just parking it and then being able to use it later. And, you know, we have people commenting on the YouTube that they are small investors that own single families and they're in the same issue. It's like my single family is really not cash flowing that great, but like what would I do with the money? And so, um, you know, let's talk about why investors are parking right now, why they're not investing in in things currently. Well, I I think the you know, you can bank on the government right now, right? So, you can go into the one month T bill for example, that's easy. U you know, some of those kinds of things, but even even the S&P is down. I I looked in just one month 19%. Um, not that that's government, but I'm just saying that, you know, I think you can be okay there. But going in going into cash right now, u with uncertainty is is a good thing, right? There's there's a lot of unknowns. Um, and and I think I think waiting it out. Um, the surprising thing has been gold and silver, right? And and that's actually a surprise to everyone, even people that are in the space, they are like, "We've been waiting for this forever." Uh, you know, and and and now it's here, you know, and in fact, it might be a good time to uh roll into our our video sponsor, Monetary Metals, which is our u our paid partner for this video. Gold is near all-time highs, but appreciation isn't the only way to benefit. Monetary Metals, you could potentially earn a yield on your gold, paid in physical gold, without selling it. Here's how it works. When you lease your gold through their platform, pre-qualified companies pay to use it under strict guidelines, like renting out real estate, but with gold. Instead of paying to store your metal, you may earn up to 4% annually in gold. You stay in control, and you can choose which leases to participate in. Monetary Metals handles the due diligence, lease terms, and all the administration. Thousands of investors use this approach to grow their gold, not just sit on it. Visit monetary-medals.com/ken to learn more. Leasing gold involves risk and returns are not guaranteed. This is not an offer to buy or sell securities. Please review all risk disclosures at monetary-metals.com. Visit monetary-metals.com/ken to learn more. So, let's look at why investors are shifting this way. And we should probably start with the real estate, you know, affordability issue. Yeah, for sure. I mean, it's a, you guys already know, but we are heading into the year of the renter, right? Maybe two, right? What happened was we had a lot of new construction that got started a couple years ago when rates were lower. And and what you're seeing now are the fruits of that. You you're seeing that these projects are getting completed. They're being delivered to the marketplace. It's creating a lot of supply and supply is what lowers prices. So right now you are going to see an affordability change a little bit at least for the renter. Um and and you know that actually if you think about it is is going to be a little more stressful for that Airbnb market for that single family market. you you you are going to see soft rents I think through 2026 at least that's what we're banking on we just had an annual conference for my entire company and Ross and I got on stage I said I don't think that 26 is going to be a better year than 25 um and the the reason is is you know we're we're we're wrestling with our expenses uh every single day it seems like with uh with insurance and property taxes and utilities and all the all the things that that that we do there. Uh but then on on the other side of it, we're starting to keep see concessions in the marketplace. And so from that standpoint, from a housing affordability, I think if they're renting uh the the renters are going to see a a little bit of a pause there, but I don't know if they're going to see it on the other stuff that you know that they also use as well. What do you think? Yeah, I mean I think you know people in you know the average home buyer still can't afford to buy and you have to put a lot down to make a deal cash flow in most situations and that's fine for people that are sitting on a bunch of cash and they want to utilize it but that's harder for the person that you know wants to just put down a little bit of money 20% and make it cash flow. It's very hard to find that um in today's market. Uh and even last night we ran into a listener, believe his name was Paul, but you know, he said he used to buy a house in the summer, flip it, and then sell it and then that money paid for his school for the year, you know, and like those kind of days are just done, right? You can't flip homes that easy. Things don't cash flow that easy. You need a significant amount of money to get into the market in most situations through traditional financing. So, I just think that, you know, it's a tough place for people to to have money. I think people that are already in it that bought for good prices, you're fine. But the people that are trying to get into it, it's harder. And then if you go look at crypto, it's down 30%. Most people can't deal with that much volatility in their portfolio. So, that people are kind of backing away from that to an extent unless they're super knowledgeable uh on, you know, on crypto. Your stock market is stretched. You know, they keep talking about a stock market crash. Don't know if that'll happen, but at the same time, the stock market is highly leveraged on tech. And so, if tech doesn't perform, that could create waves in the stock market. So, everybody's just very like, what do I want to do? So, they're just putting money into gold and silver, and they're putting money into um, you know, savings, basically, money markets, and tea bills. Well, I and I I think that for for for some of you that are, you know, beginners, uh, or or are active, um, you know, this is a time for you to sit back and, um, and look at diversification and and I think that's that could be the point of this kind of neutral spot, right? Like, all right, where am I too heavy in one spot? like there was a time where I was extremely heavy in real estate. Um, and I I didn't want to be. So then I moved into oil and gas. I moved into gold and silver and I moved into things that I didn't understand to the point that I knew real estate. Um, obviously Bitcoin stocks, you know, we're not we're not against those things. So what happens is you know when you do diversify into those other things and you got to figure out your own allocations but um then at least you got something right like like you know there are certain things that we're doing really really well on right and uh there are other things that that we're not and and I I think that um in times where the traditional these these kinds of items aren't doing so well this is the time to embrace face the alternatives, right? Uh- if they're predictable and you can and mitigate some of the risk. So, I would love to see your comments here in in the chats of what maybe some of the things that you guys are are looking at. You know, one of the things that that we're doing is you guys we've talked about before is we're we're starting to look at the the billboard space, right? The billboard space is relatively new to us, but it's um uh you know, the counties hate them, the cities hate them, the states hate them because they consider them, you know, taking away from the the beautiful landscape, which I guess that they got a point there. But what it does is it it kind of brings scarcity uh to that space. And so if you can get one uh you know, and uh therefore there's there's less and and the advertisers want them. So, so those are the kinds of things that we look at. You know, they're cash flow. We get some tax benefits. So, there are things that are, you know, can look good during this period of time. And I and and I think that's precisely what we should be looking at is u so you know, maybe this would be a great forum for people to put that in the in the chats here, right? What are you seeing? Yeah, exactly. And also, let's let's talk about what this tells us about the market. So, because there's so much savings right now, there's a massive pent up demand, demand for everything. There's a massive demand for crypto if it goes down, for real estate if it goes down, for the stock market if it goes down. And, you know, people feel comfortable entering in at these lower prices. There's so much demand there. So, investors aren't not investing. They're just trying to get into a better, you know, entry point and holding their money until they can do that. So that is very different from you know other times of softness right like in '08 a lot of people didn't have any money to invest I mean properties were a fire sale but nobody could get a loan and afford them right now investors have a ton of money they just aren't entering the market with it yeah and I I think a lot of them do know that saving cash uh well if you're if you're an investor a A lot of real estate investors are traditionally historically poor cashwise, right? Because they like to keep the money moving, right? And and um I learned long ago, you got to have some healthy reserves, right? And Ross and I are in what we call the dry powder phase, which is to your point, we're, you know, we're accumulating cash right now to try to take advantage of, you know, whatever whatever's next. Um and and um and and I think that that's a prudent strategy. I have I absolutely believe in in the neutral spot right now based on all the things that are happening and and uh you know just but you got to c you know you don't also want to be careful you don't catch a falling knife right like who knows how far things are going to slide right I will I will say this the majority of the wealth in America is is sitting in the stock market I can't imagine the powers that we are going to let that thing slide too far, right? Like right that would just that would set the whole economy sideways. Um and and so I if that that is one thing I'm not advocating you invest in the stock market, but I'm just saying I'd be very very supply surprised if if they let that slide too far. Yep. Yep. So let's give some practical advice for you know the audience, right? So, you know, it's not a bad time to hold cash right now and to wait, right? It's not a bad time to wait until, you know, to kind of see what happens. The next few months are going to be interesting because what the Fed does will be interesting. Trump getting his new um Fed chair in there will be interesting. The announcement of a potential 50-year mortgage could be interesting. There's a lot of the job market could be interesting. There's a lot of unknowns right now in the next six months. Yeah, we have. So, build cash reserves, park some money into, you know, into some government sponsored tea bills or or some money markets or something like that where where you're just comfortable and and you know, don't don't go crazy trying to trying to figure this out. And the other thing that you could kind of watch and learn your local markets, right? That's one thing as I was actually just emailing this morning uh some folks um the where do people move in 24 and 25 uh and and that's was really really quite interesting. You know who what what's going on? What states are losing people? What states are gaining people? Where are they moving inside of those cities? That all creates um issues, right? If a lot of people move, it creates vacancy. If a lot of people move in, it it creates demand. So you you you know, so I I think learning your local markets and and and and then just start underwriting deals, start looking at deals, start looking at market trends, right? And and uh you know, even if you're not buying because it's practice, that's what we should be doing right now is practice. That's certainly what we're doing. Um, you know, in the multif family space, we have this huge conference in January called the multih multi-ousing uh multi uh multi-ousing council. Oh boy, I should know the name of that, but I don't. Mnhc um anyway, so that's uh and there the what happens is there's a lot of people that don't like to list stuff at the end of the year. And so that's one of those forums where there's a lot of deal flow just rolling through that. I mean, there's last last year was like eight or 10 thousand people or something like it's crazy. Um, and there's all these brokers bring all these deals to that to that conference. We go it's great and it's like speed dating, you know, you sit down and you talk to these brokers for 15 minutes at a time and they they have like 15 minute slots and you sit down and you look at whatever they're working on in their markets. Uh, and and then there's a whole bunch of multif family deals that roll out in Q1. I think the same thing's going to happen with single family where you got a lot of things being delisted right now because the the holidays a lot of people if they just don't want the hassle of dealing with something during the holidays they're with family or whatever they got all these other issues and so uh Q1 I think things will fire back up you know just park it in the garage and then pull it out mid mid January. So, I have to ask you about the billboards because everyone on YouTube is asking me about the billboards. So, why don't you explain how a billboard deal works and gross value? Sure. Um, so the the billboards typically have a lease. So, this is important. So, you're not actually you don't actually own the land. So, you there's a lease on somebody else's land. So, it could be it could be a car dealer, let's say. Well, what you do, you approach a car dealer and you say, "I'll do a ref share with you." And you do a 25, 30, 40, uh, I've even seen longer leases. These are long-term leases. And you negotiate some kind of price for the lease, for a long-term lease. That's the first piece. The second piece, you got to go to the local city, council, whatever, um, the county, um, and you have to get the permits because not they're not going to just let you put a billboard up, right? And um there's two kinds of billboards. There's there's a two-sided billboard, which is called a static, and then there's a digital. And the digital typically does eight ads per side. So 16 ads versus two ads. Big difference. So one's basically like a flat screen in the sky. The other one's essentially two-sided ad. Uh you guys have probably driven by these aundred times. You see them along freeways. They're all they're owned by people. They're owned. Trust me, they're they're they're uh it's a sneaky little business, but uh they're really really hard to put up. They're really really hard to find. Uh a lot of people don't like to sell them because they're these great long-term cash flowers. What I like is that um you can completely outsource the management and the occupancy of of a billboard to a third party. There's a lot of these thirdparty companies out there that do this. The big companies, of course, Clear Channel and Lamar are some of the big ones. Just go on their websites, you'll see. And so, if you want to advertise, uh, you you pick them and there's an ad rate and you pay and and that's it. There's a whole there's a whole bunch of salespeople that go fill them. U, but the reason I like them is u it it's actually quite low on the uh personnel side. You don't have a lot of staff. Uh, it's a it's an investment. Um, they can be half a million to several million depending on the location. Uh, I've looked at one with a buddy in in uh in LA off off the freeway right off in Orange County that was extremely expensive one. Um, and so, but the ad rates are higher on those two. So, so it's just math at that point. But, uh, uh, I like them. the they're also they fall in the category of a land improvement which means that there are uh you can write them off in the current year under the bonus depreciation. So uh that that's also good if you're a real estate professional. So, so for us, you know, you buy one, let's say half a million bucks, uh you can write off uh nearly the whole amount in that particular year. Uh and uh you get that back as a as a deduction and against your ordinary income and and then they cash flow uh they're actually they cash flow extremely well. So Eli asked, are cell towers kind of in that same category? Yeah, so it's a great question. Very similar. Yeah, we looked at cell towers doing them on our self stoages. Uh we used to do self stoages. We'd put a cell tower on there. Same exact same concept. The cool part about cell tower, oddly enough, is that once you build the tower, you actually have like AT&T and mobile or T-Mobile and Verizon, you know, all in the same tower. And you cut long-term leases for that. So, exactly the same thing. Uh a little bit different. But now, oddly enough, listen to this. I told you first they're actually doing cell towers in billboards. Now that should go. So yeah, imagine that you're driving by these billboards and you can stick up a cell tower in them. Um and uh you know so so that's that's also kind of something that's happening to that industry now. So so that means you could potentially get ad revenue but then also u the cell tower revenue as well. So very interesting business. Awesome. Well, thank you guys for joining and we will see you next week. Make sure to check out our podcast on Thursday. It's the Ken Mroy Show and we're going to discuss the Fed's decision and how, you know, what we think they're going to decide in December if they're going to cut rates or not and how that's going to affect everything. See you guys.