Alarm. Then Complacency.

Addison Wiggin, bestselling author and founder of Agora Financial 

At 2:20 EST on Wednesday, Oct. 4, every cellphone in America went off. Did you notice? It was a mass message from the Federal Emergency Management Agency (FEMA). The purpose, they claimed, was to be sure they can “effectively warn the public about emergencies, particularly those on the national level.”

“Spooky,” my friend Addison Wiggin’s son Henry wrote to his dad from his seat on an Amtrak train. “The government is tapped into all our devices!”

Henry described the experience on the train as mass concern and confusion, but just for a moment. “Then, within moments,” he said, “everyone settled back into a weird complacency.”

First confusion. Then complacency. That’s a pattern Addison sees happening in the financial markets today. Read his analysis here. 

Is Florida Real Estate – Any Real Estate – a Buy?

Real estate has always been my favorite investment category. That’s primarily because the long-term trend has always been up. But it’s also because, at base, real estate is not complicated. And if you do the kind of real estate investing I do (rental properties), it is reasonably easy to avoid stupid mistakes.

Recently, there has been a surge in property values across America, and especially in states like Florida and Texas. In fact, from the first quarter of 2021 to the first quarter of 2023, the appreciation rate in Florida stood at an impressive 44.36%. This growth far exceeded the national average (by 20.15%).

But unlike a steady two-year climb in other assets, this two-year-plus rise in real estate values doesn’t tempt me to buy more. That’s primarily because, unlike stocks and bonds and many other asset classes, real estate investing – the way I do it – is relatively straightforward. You don’t need to understand 100-line-item balance sheets or 40-page P&Ls to understand what a particular piece of property is worth. Nor what sort of income you can expect from it. That information, which is super-important, can be easily researched by looking at public records or speaking to local brokers. As for the value trends and price fluctuations, if you put your money in rentals, and follow a few very simple rules, you don’t have to worry about being caught with a highly overvalued piece of property. The ROI questions you will have will not be if and when profits will go up but simply by how much.

JH Gives Me the Inside Scoop of Self-Storage

After reading my post in the Aug. 15 issue, my friend Jon Herring sent this in. Good, useful information for anyone who, like me, is looking at the potential of self-storage as an option for growing assets and increasing income.

Self-Storage as an Investment

By Jon Herring

My initial interest in self-storage stemmed from conversations with a longtime family friend who owns facilities in Georgia. He described it as the ultimate semi-passive real estate investment. Much lower maintenance compared to traditional rentals. And lower complexity on the operations and human resources side.

In recent years, I have been following a guy named Nick Huber. He started with the purchase of one or two existing self-storage facilities, where he would go in and:

* Do a cosmetic facelift on everything.

* Perform any deferred maintenance.

* Add automation wherever possible to reduce human resource requirements, improve renter experience, and increase security.

* Implement the latest technology for accounting, billing, communications, and security systems and procedures.

* Outsource rote, repetitive computer tasks to virtual assistants in the Philippines to reduce labor costs.

* Roll up any operational and management roles that were not absolutely required by a person at the location to a central operations group, so that multiple facilities could be managed by one team.

* Raise rents, especially in facilities with 100% occupancy. He would raise rents until enough tenants moved out to reach a market equilibrium of about 90% occupancy. (The basic idea is that 100% occupancy means you are not charging enough.)

* Add buildings/ additional units on properties where the real estate footprint permitted expansion and add outdoor storage for boats and RVs where permissible.

These improvements led to revenue increases, greater operational efficiency, lower overhead, and increased profitability. Which in turn led to increased valuations. (A rising real estate market helped.) Then after a few years, he would refinance at the higher valuation, take out his original investment, reinvest in another property, and repeat. And now he takes on limited partners in his deals, so he’s expanding that way as well.

Self-storage flew under the radar for a long time because it’s not a sexy business. It doesn’t have the “cool factor” of vacation rentals or rehab-and-rent real estate, for example. However, it is a GREAT business. It can be very profitable, with reliable revenues, high occupancy, low complexity, and low maintenance.

But here’s the thing… the secret is out.

There are a LOT more investors getting into the market. They are building new and hitting up every aging existing property with offers, driving up valuations.

But there is a niche with significant demand that I believe is more overlooked: contractor garages.

I’m sure you’re familiar with these facilities. The units are larger than self-storage, but smaller than an industrial warehouse. The space is about 1,500 square feet per unit, with a main door, large overhead garage door, half bathroom, and sometimes a small office.

These spaces are rented by builders, plumbers, electricians, artists, e-commerce companies, car collectors, etc.

From what I understand, this asset class has five times the demand of self-storage and less competition from investors and operators.

You mentioned that you wanted to learn more about this business, so I wanted to pass this along. I hope it’s helpful.

Beware the Digital Dollar

A colleague recommended this blogger as someone with “above-average” knowledge of cryptos and the crypto market today. I watched this clip and several others. Probably because of sheer stupidity, I wasn’t able to find his name. But he is knowledgeable and a good communicator, so I’ve been following him for a few weeks.

Here, he talks about a general threat to the crypto market, one that I’ve been talking about since the beginning.

Check him out and let me know what you think.

What It Takes to Be Middle Class in America 

I’ve shared studies like this before. But I found this one from SmartAsset to be particularly useful.

Take a look at these facts, for example:

* It’s much harder to be middle class in the north than the south. Particularly along the coasts. You can be middle class in Florida with an income between $50,000 and $60,000. But in New York, Connecticut, and New Jersey, it will take between $80,000 and $100,000.

* New York is the worst. The middle class there don’t earn enough to keep up with the rising cost of living. While other notoriously pricey cities have a middle-class income that trends closely with the state’s general cost of living, NYC wages lag behind. Of all cities examined, the cost of living in Queens, Brooklyn, and Manhattan are 43%, 70%, and 138% higher than the national average, respectively.

* Incomes that put one in the middle of the middle class are highest in the West Coast tech cities. Three out of the top five cities with the highest income thresholds for the middle class are in the San Francisco Bay Area. To earn in the middle of the middle class there, you need to be making more than a hundred grand.

* The hardest place to earn more than a middle-class income? That award would go to Fremont, California, where $300,000 isn’t enough. (The middle-class income range there tops at $311,936 per year.)

Click here to read more of the study results.

$190,000 for Doing Nothing? 

When Musk fired so many twitter employees and nothing obviously bad happened to the business afterwards, I wondered, “What were all those fired people doing?”

It turns out that unproductive employees are a feature of many big tech companies. Example: Madelyn Machado, 33 years old, was hired in 2021 by Meta for $190,000 a year to work as a recruiter. But she was told not to expect to hire anyone in her first year, given that she would still be learning the recruiting ropes.

Click here.

Reporting on this in The Free Press, Nellie Bowles wrote, “I’m convinced that every big tech company is five really sweaty guys in a basement and then gleaming, open-plan offices of people like me: delightful humanities grads who have meetings about the best protein powder for our green smoothie (pea!) and the gender implications of unread messages being bold (masculine aggression). Every once in a while, one of the five tries to leave the basement and we quickly convene a series of meetings to get him fired.”

Hunter Biden for President in 2024

It’s unfair to accuse Hunter Biden of wrongdoing, my liberal friends and family members say. It’s all fake news. It doesn’t matter that there is now proof that he received tens of millions for “consulting services” from Russia, China, and Ukraine when his father was VP.

That doesn’t prove anything, they say. And his documented history as an alcoholic and drug addict? He’s bravely gotten beyond that, they say. He’s channeled the pain into his artwork, you see. And he’s a great artist. Which is demonstrated by the high prices various undisclosed patrons pay for his work.

But here are two facts that they can’t reconcile. Joe Biden has a net worth of $9 million, which makes him about the poorest president since Jimmy Carter. But Joe’s son, this kid that barely got through college, got kicked out of the Navy, and spent a large part of his life partying with hookers? He is worth $160 million!

I wonder – do the people that rationalize this, do they have any idea how much you must make to acquire a net worth of $160 million?
One guy is so impressed with what Hunter’s achieved that he is saying that Hunter, not Joe, should be the Democrat’s nominee for president in 2024. Click here.

Mexico Has a New Industry: Renting Wombs 

There is a new – well, not quite new, but an industry in Mexico that is growing really fast. It’s in the “health care” field. They call it surrogacy. It boils down to this: affluent but childless American couples paying poor Mexican women to grow babies for them from fertilized eggs.

The eggs are not the mothers’ eggs. They are from the “adoptive” mothers. Or, in the case of gay couples or adoptive mothers that can’t produce healthy eggs, from third-party donors. What it amounts to is a sort of womb rental program.

If that sounds weird, know this: According to the source below, it’s making a lot of couples happy, and conveying millions of dollars to poverty-stricken Mexican women.

Here’s how it works.

Americans Are Working Less

In one of the news feeds I read, an essay titled “Working hardly or hardly working” caught my eye. According to the author, burnout among American workers is “running rampant.” The reason? “The average American works 400 more hours a year than Germans do.” The good news, he says, is that “the trend is changing…. A University of Maryland study shows average US workweeks dipping 30+ minutes since 2019.”

Some key figures:

* High-earning young men were at the top of this trend. Their average reduction is the highest at 1.5 hours.

* Self-proclaimed workaholics are down, too. From 55 hours a week to 52.

The rise in virtual employees since the pandemic shutdown is obviously another important factor.

“The trend’s stickiness is hard to estimate,” the author says, “but it’s great news for the nation’s collective mental health as long as it lasts.”

True. Unless you believe that productive work is the cornerstone of wealth building, and that an essential component of mental health and happiness is working purposefully. (Which should include one’s job, since that takes up the largest share of one’s work time.)

Are Housing Prices Out of Whack? 

Housing prices have risen 40% since 2020. They peaked last autumn and have edged down since then, but only by a total of 5%. They are still, by long-term historical standards, very high. In 1971, as Bill Bonner points out in a recent edition of Bonner Private Research, it took the average American about 36 hours of labor each month to pay an average mortgage on an average house. Now, the figure is 110 hours.

“Things that are out of whack have a way of getting back into whack,” Bonner says. “Economists call it ‘regression to the mean’…. It’s one of the most powerful forces in finance…. A recession in [today’s] housing market would make it a lot easier for people to keep a roof over their heads.”

Bill’s been mostly right about real estate prices since I’ve been reading him. (About 30 years.) And I’m inclined to agree with him on this. If you are looking to sell, do it soon. If you are looking to buy, you might do better to wait.