The Fed, Banking, Interest Rates, The Market, And Mass Uncertainty

The economy is in a place right now in which we haven’t seen in over a decade. Between rising interest rates, the tumultuous period in the market, and mass uncertainty, many people are anxious about what is to come of their money. It is becoming a real possibility that we start to see some high unemployment numbers take hold of the job market. Banks, most recently of notable stature, Silicon Valley Bank, closed its doors over a week ago after going belly up. Banks with poor balance sheets due to long periods of fake economic boom as a result of quantitative easing are going to get hurt during this time. Although many won’t want to hear this, America has been due for something like this for a long time…

America: home of the expensive

Over the last decade, home prices have soared across the nation at record pace. With such a long period of low interest rates and fake money continuously being pumped into the economy over the last few years, prices have inflated like a balloon, and sooner or later, the balloon was sure to pop. In response to this, The Fed has been raising interest rates at record pace steadily over the last year. Just today, The Fed raised rates another 25 basis points and their plan is to continue to do so for the foreseeable future. The plan is to increase inventory on the market and bring home values down to a level more in line to what people can afford. Unlike home prices, the average salary of America has not had the same fortune of such large increases over such a short period of time. Inflation overall is the hallmark reason The Fed is doing what it is doing. Things in America are just too expensive for people to afford and the more money we print and the more quantitative easing we have imposed by the government, the worse off the American dollar and the entire economic system is long-term.

So, how do we make money under these circumstances

Something I’ve been a proponent of for a long time is investing in hard assets. In other words, investing in things you can see, feel, and touch. Although I do have some semblance of a stock/bond portfolio and have dabbled in crypto in the past, my main focus for holdings is in physical assets.

The first thing I will mention is real estate. I know what you might be thinking, “Didn’t you just explain before how home prices are going down and that interest rates are continuing the rise in the last section?” Yes, I did, but I believe in the asset class long-term. With the market being the way it is, the opportunity to utilize creative finance to acquire properties is a feeding frenzy. My partners and I have been acquiring properties during this turbulent time using the method “subject to” the existing mortgage real estate investing. What this means is we purchase the deed to a property with the current mortgage staying in place, and we, the buyers, make payments to that mortgage. This allows us to take over properties with interest rate debt as low as 2.5% and cash flow them in multiple different ways due to their low monthly payment. Whether home values increase or decrease is largely irrelevant to our strategy as we believe in the asset long-term and are holding for a 5+ year period in most instances. If you want to learn more about how I do this, I will be uploading an in-depth breakdown in the near future of how this works exactly!

One of the most obvious yet often overlooked investments that I think are a great choice for this economic environment is precious metals. The reason why I like this asset so much is for the obvious reason that it is a finite asset (something the United States government tends to forget when they keep printing more U.S. dollars). Along with a straight up investment in precious metals are other collectable items containing precious metals such as watches including but not limited to Rolex and Audemars Piguet. These collectors’ watches contain precious metal and are often purchased and traded at high values.

Another up and coming asset class that has been gaining traction as of late for the masses is physical artwork. In the past, physical artwork has been relegated to the uber wealthy who can afford hundreds of thousands and sometimes even millions for a high-end piece. These art pieces are often exchanged and large profits can be made depending on the duration of your holding period. Now, with the advent of exchanges such as Masterworks, people can invest in artwork as they would stocks on an online exchange and buy shares. This is a new and innovative way of getting into a growing asset class that is a great hedge for your money.

Pick something and stick to it

Shiny object syndrome, something that we’ve talked about on this blog in the past, is a real issue for people at any time during any sort of market circumstances. The overload of so many options and ideas to make money can make some people try to pursue a bunch all at once and ultimately end up failing altogether. It is crucial, especially during these times of uncertainty, that you steer clear of this issue. Pick one thing, see it through, master it, and then you can diversify. If you try to learn how to acquire creative real estate while learning about different types of collectible watches and studying the art market to see what the hottest art piece is to park your money into, you won’t be successful. All of these avenues will produce results for you and all of them have the ability to make big returns. Don’t succumb to shiny object syndrome. Develop a money making skill to make active revenue and pick an avenue or two you feel most comfortable parking your money. Be smart and be a leader not a follower and you will find success even during these times of uncertainty.