Hello my friends, and welcome to another episode of Passive Real Estate Investing. I’m your host, Marco Santarelli. Now, even though this show is titled Passive Real Estate Investing, that’s the name I gave the podcast in 2015. We really talk about all kinds of things. It’s not just about real estate, it’s about mindset and wealth creation and preservation, and even topics on the economy and housing inflation, interest rates and, and even other opportunities. So with that, you know, I wanted to bring one of my business partners and friends, Eddie Wilson, onto the show. It’s something we’ve been talking about for a number of years, actually, never really got around to it for whatever reason. But, you know, I, I decided to have him on today as my guest. And so we had a great conversation. I’m recording this intro after my interview with him, which I just finished.
But yeah, we had a great conversation about all kinds of things, and we went, you know, kind of down a few rabbit holes ever so briefly as it relates to the economy and housing and even inflation. So I think this is a great episode to listen to through, to the end, because there’s a lot of good nuggets and some deep thinking involved in, you know, some of the things we did talk about. So I, I know you’ll enjoy the episode. It was about 45 minutes in length. I think this is great to listen to and, and possibly even listen to a second time. So without any further ado, let’s get to that interview and I hope you enjoy it. And if you have any comments or questions about it, shoot that over to me or my team and we will talk to you soon.
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If you missed our last episode, be sure to listen to Ask Marco – The Mindful Millionaire: Creating the Life You Really Want
Well, it is my pleasure to welcome a good friend and business partner on the show. His name is Eddie Wilson. Eddie is a husband, father Avid real estate investor. He’s a CEO of multiple companies, a national speaker, and he has a passion for business growth. Over the course of his career, he has built and run more than 100 different businesses, which is just amazing to me. Managed 4,000 employees, traveled around the world, speaking about business and leadership. He was also one of my business partners in a number of ventures, and he’s a good friend. Eddie, welcome to the show.
Thanks for having me.
Well, it’s great having you on. We’ve been talking about this for a while and finally pulled the trigger to get you on <laugh>.
I know, I think you’re invited me on your, on your show in 2016 in my office in Kansas City, and this is how long it took us to make it happen. But you know, today’s the day.
Today’s the day. We’ll leave it at that. Well, it’s good having you on. It’s long overdue for those people who don’t really know who you are, much about you, because obviously a lot of people do. Tell us a little bit about yourself. You could highlight whatever you want.
Sure, yeah, I think I really put my life into three buckets. One’s corporate leader. I love business growth. I love the operational side of business. So that corporate leader, like no matter how many companies I sell or exit from, I always find more to run. Tried to retire twice and it just never works. I find a new company within, you know, 30 days to purchase or start. And I think we’re similar in that fashion. I, I really do enjoy business. The second thing is I’m an avid investor. And so it’s, it’s not just related to real estate only. While real estate is my largest investment, you know, kind of class or bucket investing is a, is not just a pastime or a hobby, an investment, kinda that investment path has an entire vehicle inside of my company, underwriting processes, so on and so forth.
And I invest in a lot of different things. And then lastly, altruist you know, you get to a place in life where you make enough money, you have enough things, and you realize that life isn’t about that, it’s about purpose. And so the organization called Impact Others is a huge organization that we’ve been pushing. I know you’ve been giving to it and I appreciate all of your donations to it, but it’s been kind of the end of the journey, right? It’s like the full circle to bring it all back together to be able to create, you know, as Andrew Cordell, our, our other business partners says, create, keep, and protect. But then ultimately it’s like I want to give back and purposes that last part of the circle.
Yeah. And that’s something you’ve talked about a lot. You’ve always been about purpose. You talk about it. You even wrote a small book with purpose in the title. You’ve got different business ventures, including, you know, your coffee venture, which I think is brilliant because coffee, great title. So I love that part. And, and for me, that’s the big picture. That’s the ultimate end goal, is just to be able to give back to, you know, people in need around the world. In fact, if you can see here, I’m also drinking from my Impact others coffee mug. It’s always in front of me. So cool. It’s all fun. Well let you know. What, let’s talk about the economy, maybe housing inflation interest rates. Let’s just see where the conversation goes. This is for those listing right now. This is not, you know, a a canned interview or or scripted interview. It’s just whatever we want to talk about. Cuz you and I can talk about many things. And the thing I appreciate about you is you have a very wide range of knowledge and experience. So you can touch on so many different things. But I think one thing that’s on people’s minds a lot today is, is the economy, the state of the economy and where we’re headed. What is your take on the state of the economy today?
Sure. I think there’s really two classes of people that are existing in the economy today. You know, one kind of exists in this consumer bucket where they are operating out of fear. They’re listening to mass media. They’re being really heavily influenced by all of these kind of economic down pressures that some they may be feeling, some they may not even be feeling, but they’re just hearing about it. And then I think there’s this other class of people that I would just re reference as investors. And the way that we kind of fall into either one of those categories really shapes our activity today. For the person who is a consumer, they’re beginning to hoard their goods. They’re beginning to try to put some cash away. They’ve stopped maybe purchasing big purchases like new homes or cars, and they’re really kind of following this path that the mass media’s kind of pushing them down.
However, like the, the group that I exist in, I know that you exist in and a lot of your listeners exist in, is this investor bucket, which in downtimes, and this is a, a stat that my CFO has verified in every economic downturn, I’ve been able to not only grow my net worth, but double my net worth. So I started investing in the.com, you know, boom or.com bus, kind of back in the day, early two thousands. That was my first real estate I was purchasing. Then you get to 2008 through 2010, I double my net worth again. Then during the covid period, I’ve doubled my net worth again, which really was a downturn. It wasn’t necessarily a recession, but it was a downturn. And now we’re seeing another, you know, kind of slide. And I have full intention to double my net worth over the next two years as well.
There’s a reason why people like Warren Buffett have 80 billion sitting in liquidity today. And it’s not because he is afraid. You know, this New York Times editor and I got into it over Twitter, which is one of my favorite pastimes just to ar argue with people on Twitter, you know, and we’re arguing because what she said to me was so, it, it was so absurd. She said, Warren Buffet is holding $80 million in cash because he’s afraid of the economic climate of our country. And I wrote back, you obviously haven’t watched Warren Buffet for the past 60 years. You know, like, and by the way, if you had 80 billion in cash, what would you be afraid of? Death maybe, I don’t know what else you’d be afraid of. It’s 80 billion. So he is not afraid. Like he’s, he’s a shark. He’s looking for the opportunity. And that’s what happens in, in kind of economic situations we’re in right now, is the, the investor looks for the opportunity. They don’t get heavily swayed by the negativity. And so yes, interest rates are rising, yes. Inflation, you know, to a degree is finally starting to come into control, but still very high. But all that does is create massive opportunity for those that are willing to, you know, run in when others are running out.
That’s a very, very good point. I think it’s true that if you’re an an entrepreneur or you’re investor minded, you’re always gonna be looking for opportunity. And good times are bad, but in, in bad times people are running away thinking that the sky is falling. But we’re out there looking for those opportunities to pick up when other people are walking away. So if people are walking away, demand has dropped, which means that there may be better buys or better opportunities on the table for you to pick up. And that’s exactly what we’ve done in the aftermath of 2008 and, you know, in other periods in the past, especially recessionary.
So, yeah. And it’s like you look at where we are today and we still have high demand on, on housing in the United States. We’re still six and a half, 7 million homes, underbuilt, whatever this the number is. Yep. You know, we’re not pacing all of the business permits being pulled this year, or building permits being pulled this year are still not gonna pace with the 1.6 to 1.8 new homes we need built just to keep up with population growth, you know, all those stats. But the reality of it is, is that that kind of economic, like up pressure, like this demand that we have should be creating an environment where you and I are having a hard time finding deals. Mm-Hmm. <affirmative>, well now you have economic down pressure, inflation, high interest rates, all of that type of stuff. And so you have people that are just like walking away from stuff like they, they’re struggling to get the liquidity requirements for their multi-family deals.
They’re struggling to get they’ve got, you know, build to rent communities where they’re walking away from them for pennies on the dollar cuz they’re afraid. And so even though there’s still massive demand now, like there’s this new opportunity and so, you know, I think it’s actually a quicker path to correction in the marketplace that I think we double our net worth actually twice as fast as somebody did if they were heavily investing in the 2008 through 2000 10 recession because it took another two to three years for the market to come back. So like, if we can hit this p this kind of trough for this downturn right now, I think the upswing is so much faster this time, which actually allows us to, as an investor, get to a place where we actually feel our investments faster. Mm-Hmm. <Affirmative> with a return on either appreciation or cash,
Do you still believe that in the context of higher interest rates, where we went from about three and a half percent in January of last year to about six and a half percent right now, is that, is that still true in your mind?
I do. Interest rates are a variable that a, an investor should not be afraid of, right? Again, if, if the deals are coming on the market and, and they’re kind of sliding, you know, and interest rates are rising, they’re still a sweet spot in the middle for either appreciation or cash on cash return. And so, you know, I know that you, you know, are one of the largest turnkey providers in the nation. I still fully believe in turnkey real estate. You know, like I look at this and I go, all I have to do is make the equation work. If the equation works, I still get my, you know, a, a turnkey rental property is not something that I’m buying to win in the next two years. It’s something I’m trying to win in the next seven to 10 years. And so what I know about real estate in the US over any given period of time since 1897, where all the data exists from, is that there’s never been a seven year period in our nation’s history where we haven’t seen double digit rates of appreciation even in our slowest markets.
And so I can actually trust and hold fast on the fact that as long as my cash flow is commensurate with my desire for my capital outgo, that the appreciation will ultimately show up. Mm-Hmm. <affirmative> will be slow over the next year maybe because of interest rates. But will it show up over the next five to seven years? 10 years? Yeah, sure. Absolutely. It’ll, yeah. And so there’s no data that would ever point, it would’ve to be some catastrophic meltdown of our economy over a long elongated period of time for us not to realize that. Again, so I say interest rates are really just a barometer for how to negotiate my deals. I think interest rates actually give me, as the investor more leverage today. Right? Like, I can offer less because I tell them I have to pay more. And so I’d love to buy your deal. I’m gonna have to come in and bid, you know, come in at a little bit lower rate because in the end, the, the government’s getting a larger piece now, right? That piece used to be yours. Now that piece is theirs. But in the end, as an investor, I still have to make my money work for
Me. Sure. Yeah. Interest rates are just a lever that we use, just like the Federal Reserve uses interest rates as a lever to control, you know, the speed of the economy. Before I get off the topic of the economy, by the way, just a comment, like I’ve always said that, well, two comments. One, real estate has been the most historically proven asset class in history. You can’t argue it. It’s, it’s there. It’s a, it’s a hard asset. It works and we know it works. And so many people store their wealth in real estate and make wealth or create wealth in real estate. So it’s really hard to poke a hole in that. The other thing too is I’ve always said real estate is like a pendulum swings one way or the other. You either have more inventory than you have demand, or you have more demand than you have inventory.
And that’s been the case where I sit with Norada Real Estate. You know, for the last two and a half years, three years, there’s just been a lack of inventory and so much demand. Now for the last year or so, we’ve seen inventory increase and demand kind of curb because of mortgage rates going up. Cuz people are kind of stepping back and saying, well, I’m gonna see what happens or I’m gonna wait. The thing is is, you know, if you’re on the fence right now thinking about investing in real estate, it’s great time. There’s a lot of inventory to choose from right now, at least from where I sit to pick and choose a good deal. And there are a lot of good deals out there. Mm-Hmm. So it’s kind of crazy to, to kind of hold back, especially now it’s what you were saying at the very beginning, you know, these are the times when you can double your net worth if, you know, if you take action and you know what to look for. Right. Just kind of wrapping up on the economy piece of it, there’s a lot of talk in the media about recession right now, and if we’re headed for a recession, how deep it might be. What are your feelings about whether we’re headed to a recession and how deep that might be?
Yeah, I mean, I think the nation, if we kind of took all the pundits and all the data that they throw at us and trying to determine are we in a recession? Are we not in a recession? Are we headed towards a recession? I think the average person in America feels like we’re in recession. If they look at their bank account, you know, it’s like, that’s what a recession feels like, you know? Mm-Hmm. <Affirmative> diminishing, you know, incomes increasing, outgo, higher expensive goods. That’s what recession feels like. However, I think the pinch that we haven’t felt yet is, and the reason that we haven’t been able to actually term this a recession is that it’s, it’s about job growth and employment rates like that. If employment rates were lower, we would technically be in a recession. And I think that there are a lot of companies today that are now finally getting to layoffs, right?
Like Facebook and Amazon and these, you know, bigger companies that, you know, just in the last few days, last few weeks have begun to announce layoffs. Not like a hundred people, but 9,000 people. We haven’t felt that yet. And so that’s the one thing that I’m not sure how that plays out. You know, I feel like we’re close to the bottom, but if we keep having kind of these big, massive companies that are laying off 10,000 people at a time in these macro economies, like a, a big, you know, city, we could see further decline. I do know this though, that inflation, you know, I know that we know that the Federal Reserve, you know, has the lever for inflation with our interest rates. But I also know that the Federal Reserve is really, really cautious about unemployment. And so what I do know is that if we keep seeing declining unemployment rates big companies doing massive layoffs, I believe that that’ll actually sway the opinion of the Federal Reserve as much as anything to stop the increasing of the interest rates. Consumer goods will begin to decrease if there’s less capital inside of the American’s, you know, public’s pocket. And and we’ll stop raising prices if the people don’t have the money to spend, right? Like, so there’s all these like microeconomic factors that are like kind of finding their way into the, the cereal right now. And it’s like all these little finding minute pieces haven’t really played out yet. And I think the big giant one that’s gonna change the whole flavor of the economy is, you know, if these bigger companies keep laying people off,
Do you not think that those layoffs, even though they’re numbered in the thousands, represent a very small percentage of the overall employment pool?
They do. It’s not about who is actually being laid off. It’s about the fear that the layoffs, you know, and they say, you know, Amazon just laid off 9,000 people or, you know, Delta or some of these bigger companies. And so what it does, it creates fear because if you go out on Main Street, there’s still help wanted signs in every little cafe, every co in my coffee shop, we, we, it’s, it’s hard to hire. So, you know, it’s the fear that it creates more than the actual reality of the American economy, of the dollars in the, in people’s pockets.
Yeah. Yeah. There’s no question the Fed’s walking a tightrope right now to control interest rates, consumer demand and employment and, and preventing the economy from going into a deep recession.
You know, and then you have this, you have this other piece, which is you move fully into a, a cycle, a political cycle that probably starts this fall, right? That political cycle will have a massive effect on the economy as well. It always does.
And I assume what you mean by that is that we’re gonna start seeing some quantitative easing rates will come down, liquidity will increase, and again, we’re back to boom times.
I believe so. I, I hope so. I hope that I’ve had enough opportunity to find the deals that I want before all of that happens. Yeah. But you know, I think that I, I really think that political cycle, that election cycle is going to change the economy
As well. Yeah, yeah. Yeah. I, I would, I would agree with you. And then we go back to a risk on environment and you know, that now that will be opportune for housing as, as well as the stock market. So, so speaking of housing, how would you describe the current state of the housing market today?
Well, you have, you know, out of the top 10 builders in America, especially the publicly traded builders, the Dr. Hortons, the lgi you know, they have gone to models of either still build to rent. They’re still doing build to rent communities mm-hmm. <Affirmative> or deposit only built, right. So you’ve, you’ve seen massive decline in speculative building, like the speculation building of I’m gonna build 50 houses and then we’re gonna sell ’em as we go, have really gone away. Which is gonna cause a massive pinch inside of this desire for an American person who has the ability to, you know, buy new, buy more to not be able to find the, the asset and property they want. And so, you know, I, I was reading Dr. Horton and a few others, and they really have just, they, they, they’re sitting on land that’s developed, or they were doing a lot of land option deals where they’re letting their partners that are developing this land really sit with that land today.
So it’s not on their balance sheet. And until they can get a deposit on that house, they’re not beginning to build. And so you’ve got more of a demand based building system right now with all of our, our national home builders all while then on the other side, the Build Duran communities are still full on, you know, like being developed by the thousands across our nation by the hedge funds and people that have liquidity. So the factor that we just don’t know is how much, and I’m, I’m actually all for Wall Street coming into help with our housing issues. You know, I know that people have mixed opinions on that should they be allowed to buy whole communities for the purpose. And the reality of it is, is we, we are six and a half million homes, underbuilt, in order to keep a stable economy, we need six months worth of real estate on the market.
Mm-Hmm. <Affirmative>, we have what, like two and a half or something like that. And so not even, yeah. And so it’s like you’ve, you need housing. Like that’s a fundamental need in our nation. And we may look a lot more like Europe in the next five to seven years where, you know, 40, 50% of all real estate’s owned by a corporation versus an individual. But the fact of the matter is, is people still need places to live, they need places to have families. Like what would be worse? And this is what I always look at, is like, what would be worse? These couples, they decide to get married, they live an apartment, and they decide, I don’t want any more, you know, I can’t afford to have children. I, I can’t afford to raise children. I don’t, I can’t go buy a house versus building enough that it actually keeps our building inventory at a steady state where these people that do decide to grow and build families and create more jobs, like have this like upward growth.
I would much rather have more housing inventory because I think it sets a mental success inside of our, of, of the kind of economic climate of the US rather than making them feel stifled and stuck. You know, when we say this is the land of opportunity, it’s the land of the free, but then you’re stuck in a one bedroom apartment, that’s all you can afford with you and your wife, and you can’t make enough money to ever get out of it. It really doesn’t feel like the land of opportunity anymore. So housing is that fundamental basis for all of who we are, our way of life and the American dream. Yeah.
Yeah. I would would agree. The challenge today is that there are, there’s low supply and a high mortgage rate environment making affordability at near all time highs in terms of unaffordability. And so that’s the challenge. I mean, and that’s the challenge that we face as investors. We face as people in the country and you know, what the government and the Fed are facing in order to try and control that affordability. Funny thing is, is we want to have a free market, but we really don’t because, you know, we’re, we’re adjusting all the time and, and creating an environment that ultimately leads to a short-term solution, but has unintended consequences down the road. <Laugh>. Yeah. You know, so what do you do?
We desire a free market, but we really don’t exist in a free market. We desire capitalism, but capitalism scares us, right? Like, it’s like, it’s this dichotomy. And so, you know, I believe that what’s going to happen if I kind of had the crystal ball out, I think we look in 5, 7, 10 years, a lot more like Europe. I think we’ve got 40 to 50% ownership by corporations. But what that happens is, is now people can go live where they wanna live, they can’t get a mortgage, they can’t get a down payment, but they still get to live in the new house. They still get to have the kids they want. Like, you know, because now corporate America has now infused our economy with new housing. What we do though is we stifle wealth growth because we know that the fundamental basis for growth and wealth in the American middle class is real estate and housing. Mm-Hmm. <Affirmative>, they don’t make their wealth off the stock market or their 401ks. They make it based off of their acquiring of hard assets. And that’s what will begin to eliminate. If there’s anything that I feel negative towards Wall Street owning housing is that I feel like my kids won’t have the same opportunity to grow wealth like I did.
Yeah. Yeah. That may be true. There’s just so many questions I could ask you, but for the sake of time, we, you know, we can’t do that when it comes to housing and, and actually the, even the economy, we could probably talk for hours about both of those. May maybe a question, a good question for our listeners to hear your answer to is how can someone determine whether it’s a good time or not to buy or sell a home or a property? Now, before you answer that, I want to tell you what my answer to that is. Whenever someone asks me, is it a good time to, to invest in real estate or buy a property? And I always say that it’s not a question of when it’s a question of where there’s always an opportunity. There are always deals out there. So, you know, that’s just kind of my hand answer to the question. Yeah. But now I’m curious to know, you know, how you measure that. What is a good time for you?
I’ve heard you speak many times both on your podcast and, you know, at real estate conferences. And you always say this, you say, you get asked, when’s the best time to buy? It was like yesterday, right? Is it a good time to buy? It’s not a matter of, you know, when, it’s a matter of where I a hundred percent agree with you. Like I just, I as a real estate guy, a guy that has thousands of real estate doors, there’s no arguing that like, I would not be where I am if it weren’t for my father, who was a real estate investor, instilling that in me and giving me the courage to take action. You know, I watched him and I that a fear, that fear came out of my life. Cause like, oh, my dad can do it. I can do it too.
And so for me, like I agree a hundred percent, is it the best time to buy in Boise, Idaho that’s seen a 40% drop? Or is it a great time to buy in San Francisco? Yeah, maybe not, you know, but then I look at it and I go, well, maybe they’re at the bottom. You know, like, maybe it’s the perfect time to buy in San Francisco or Boise, Idaho, you know? And that’s where I go back and forth with is I think that what we wanna be careful of is getting away from those speculative markets. If you live in a speculative market, I wouldn’t suggest investing in a speculative, you know, undulating moving market. However, you know, if you look at just population movement between Florida, Texas, Arizona, Tennessee, you’ve got massive, massive movement. But then you can’t take away, I still invest in the Rust Belt, and most people are like, ah, the rust belt is really an area that we should be very careful about.
Well, the problem is, is their population and demand on housing is just as strong as most places in the United States, because that’s where the blue collar workforce of our nation exists. Right? That’s where the railways are. That’s where the steel plants are. That’s where oil and gas and rubber and you know, all of that, that’s where it is. And you can’t just all of a sudden up and move a massive steel plant, you know, from the shores of, you know, lake Michigan, outside of Chicago and Lake Station, Indiana. You can’t just move that to some other place in the country. And so there’s all these economic drivers, and I still look at, the way that I determine it is I look at the demand of the market, and I look at my cash flow based on the asset I’m purchasing. I will buy real estate in just about any market, as long as I understand that there’s an economic driver, jobs, security, you know, people that are, you know, growing families as well as a, a historical look at what their real estate has done in appreciation and cash flow. It, it, it’s, it’s not a matter of, like you said, when it’s a matter of where I would buy today, anywhere, if the numbers made sense, if the interest rate was 10% today and the number still made sense, I would still buy, you know, today.
Yeah, that was very well said. The two things I always like to say in underwriting a real estate deal is one, do the fundamentals make sense? Which is what you just talked about. You know, there’s jobs, there’s stability, nobody’s moving out, people are moving in. These large employers are not gonna move out. So there are gonna be people there today and five years and 10 years down the road. So the fundamentals are strong. And then the other thing I ask myself is, does the deal make sense today? Does the deal make sense the day you buy it? Yeah. And so if it pencils out and it carries itself, well then then it’s probably a good deal. And real estate is slow moving, moving, which is an advantage. And it’s also a very forgiving asset class. It’s almost like it’s self-healing if you just buy right. Buy in the right markets that have strong fundamentals, and then you focus primarily, in my opinion, in the neighborhoods, neighborhoods that are desirable and will be desirable for, you know, decades to come. It’s hard to go wrong. And even if you make a small mistake, you know, real estate is pretty much forgiving long term. So it is very forgiving.
One last thing I’ll, I would insert in there. Yeah. I don’t sell real estate unless the deal makes sense to sell. And my C f O and I, Dave, we look at some of these assets and we look at the cash flow it’s gonna have as well as the appreciation. And if it can’t return cash flow or appreciation for what I can get out of it today, and it’s gonna take it 50 years to produce that for me, I would rather have that cash today and then I’m gonna go buy more real estate. So we don’t sell unless there’s like this massive delta of like, boy, it’s gonna take me 50 years worth of rents and appreciation to get to the place where I can get out of it, what I could sell it for today. And there’s some markets where, you know, I’ve got, you know, Cape Coral, Florida, I love Cape Coral, you know, and that’s a huge market for me.
But I could sell houses at seven or 800,000 that I only have 350,000 in. And you go, why don’t you just you know, why don’t you just refinance and pull the cash out? Well, because the rents aren’t big enough yet in that market that it can sustain a $700,000 mortgage. But if I can sell it for seven or 800,000, pull out three or 400,000 if I can 10 31, move it into something else that I don’t have that tax liability, then we actually sell. I don’t sell very many, but there are times when I do sell based on the values of the home.
Yeah. Yep. That, and, and that, that was a major golden nugget for anybody who really paid attention, listened to what you just said. That’s a huge way to leverage up your ability to create wealth in a, a relatively short period of time. Mm-Hmm. <affirmative>. So that’s brilliant. Let’s touch on inflation for a few minutes before we start wrapping things up here. Do you, <laugh>, I don’t get political, but do you think the Fed is doing a good job in controlling inflation?
Yeah. I, I do get political sometimes. That’s, that’s, I know <laugh> I, I think the Fed is doing the best that they know how. The one thing that I never take for granted is some of the most brilliant minds and some of the deepest amounts of data actually sit inside of the Federal Reserve that you and I will never have access to. So I have a hard time second guessing them because whether I like them politically, they’re a pretty smart group of guys and ladies that have a lot of data that I don’t have. So I kind of fundamentally look at ’em and go, they probably know more than I know. However, what I see though is a political undertone to some of the activity that they’ve been engaging in. Powell wanted to leave the Federal Reserve, what, two years ago. He stays on under Biden.
Seems to be, you know, kind of getting some pressure from the White House or from kind of political structures at large for some of the activities doing. And honestly, I look at where we are today and, and I think, I don’t know if he could have, if Powell could have done a better job, you know, like he kept turning the dial and inflation numbers just weren’t coming in into, you know, into check. I’m really, really hoping that this last one, this last quarter percent really puts our inflation numbers into check. The big question mark in my head though, like I haven’t questioned them at all, because I think they’re smart people. They’ve got a lot of data we need to get inflation under control. The question mark I have in my head right now is, is why when banks are getting, you know, an SVB and those, or there’s a run on these banks that within literally 48 hours of massive potential banking crisis mm-hmm.
<Affirmative>, we would go ahead and raise interest rates. Like that’s the big question mark in my head. Like, what did we have to gain by doing it then? Did we have to raise interest rates? Was it that detrimental? Was it worth risking? Because we know that if you take a banks as a whole, about a third of the banks’s profit is tied to lending. And so if a bank begins to get their lending stifled, they’re gonna project lower returns, they project lower returns. There’s already this like super high awareness about is my money safe in the bank? And all of a sudden they project some, you know, low dividends or low returns or whatever their mechanism is that they’re projecting that causes fear in the consumer. You may cause more runs on the bank. And that’s where I, that was the first time I went, ah, man, that, that one is a really, really risky move. Why didn’t we push it back a quarter and watch how the banking situation and climate plays out before we just dump another quarter percent on there? That’s the first time that I really went like, scratch my head going, I think I completely disagree. However, again, I go back to, I fundamentally don’t understand every piece of data they have. And I probably am not as smart as every guy sitting in that room. They
Did step in with some sort of new program where they guaranteed virtually every dollar that is held by the bank. I mean the F D I C $250,000 limit went out the window and they came in with this new four letter acronym program that essentially said everything’s guaranteed.
Yeah. So, which I, I don’t, the economics of that does not work. The an American person that’s sitting there looking and going, is my dollar safe? And you have this new guarantee from the government that every dollar is safe. And I guess, well, I mean, if we can print trillions of dollars, then all you do is just go print trillions more, right? Like, you know, if every it, it just, it doesn’t even make sense. You know, like we know that the way that the banking system works is they have to deploy that capital to make money on your capital. That’s how banks work, right? And if every dollar is actually guaranteed, there’s a fundamental math problem with that equation.
Yeah. I think there was a fundamental math problem even at the $250,000. So now they just said, well, we’ll just have, we’ll open up the printing presses and cover anything. You know, even if that means, you know, creating, you know, hundreds of billions of dollars of additional currency and therefore, you know, more monetary inflation.
With every action that gives some sort of relief, there’s an, you know, it’s, it’s kind of like Einstein, right? There’s an equal and opposite reaction when we are willing to leverage the economic ability of the US to cause more debt, there should be pain on the other side of that debt, right? Like, yeah, we got trillions of dollars, we should have to experience some pain with that, right? Covid, well, we’ve gotta shut down and we need to print dollars. Maybe put ’em in the American population’s hand. I was much happier. They put it into the, to the population’s hand versus the big banks and big car manufacturers. This time, however, there is equal pain that has to come with that benefit. And that’s where I think that now we’re just trying to like tweak the dials so we don’t feel the pain. Like that pain’s coming somewhere, right? It might come in the form of a recession, it might come in the form of your milk goes from $4 to $7 and your eggs go from two to eight. You know, there is pain. I just think that we’re turning dials so that the American public doesn’t understand the pain they feel
Mm-Hmm. <Affirmative>, that’s the magic of inflation. It affects us all slowly. It’s, it’s, I don’t know what the analogy would be, but it’s definitely, but…
Everybody’s gonna paper cuts, right? It’s like…
Yeah, yeah. Everybody’s gonna pay for it over time, however fast or slow that might be, or however deep that cut might be. But you know, who, who knows? I mean, it could be a lot more than that could be loss of the you know, the dominant status of the US dollar has the world reserve currency. It could be, you know, a borderline hyperinflation scenario. Who knows, you know, it could be a lot of things. So on that note, where do you see inflation headed? I mean, if you had a crystal ball, where do you see inflation a year from now?
I think that inflation will come into control in the very near future. I think this last quarter percent is gonna have the effect that they want it to have. If it doesn’t, I think it turns into an a political thing. You know, like your friend and my friend Aaron Chapman, I believe more in the shadow stats, you know, than I do the actual indexes Yeah. That we watch. And so even if it doesn’t show up on the index, I think there’s still gonna be inflationary issues. Again, it goes to, I think that we’re actually playing a shell game. I think that it’s gonna come down by all stats, but I think when you still go to the grocery store, your groceries are still gonna be just as expensive. I think gas is just gonna be as high, right? And it’s like we’re gonna be told like, okay, inflation is under control.
And then you’re like, well, wait a minute. I didn’t gain any more money back in my, my bank account. Because I think there’s kind of this underlying thing. And that is, we still, I still believe fundamentally that for every relief that wasn’t worked for, right? Which is the stimulus there is equal pain. And I think all we’re really doing is, is paying back every dollar of the stimulus and the price of gas and the price of eggs and the price of like, we’re just paying that back. And so until that is repaid and that begins to, you know, subside or equalize, I don’t know that you’ll actually feel it, but I think that the, I think the economy, you know, in the news is gonna be, it’s under control and it’s under control by June. They need consumer spending to return by summer.
Yeah, I agree. A short question. Are you a fan of inflation or not a fan?
<Laugh>? Am I a fan of inflation? I’ve never been asked that question before.
It’s a loaded question. Actually. There’s a reason I’m asking you that.
Yeah. Because I mean, I hate that it cost me, you know, more to go to the barbershop today because they just decided that they would raise their rates like everybody else did. However, it brings some of the greatest opportunities that I’ve ever received and high inflationary activity as an investor, it actually brings greater opportunity. So there’s one part of me that goes, you know, as a, you know, I have this like desire for everybody to have equality. Like, I find myself to be very much like, I want people to, you know, have the all, everybody to have the chance of success. I think it’s, I think inflation is not a good equalizer. I think inflation actually separates the upper class and the middle class and the middle class begins to erode. Yeah. That’s the part of inflation I hate. However, as an investor, the inflation brings the greatest opportunity. So that’s a really, really tough question.
It is a tough question. And like I said, it’s, it was a loaded question. The reason I’m asking is because if you are an investor, if you are somebody who has assets that is tied to debt, that debt is being destroyed by inflation, inflation is reducing the value of that, that debt take real investment, real estate as an example. You, you have a, a rental property, you have a mortgage on it, you make that same fixed monthly mortgage payment for 30 years. It doesn’t change $500 today in 30 years, it’ll still be $500, you know, a month. But Right. Just, just think of what that $500 is gonna be worth in 10, 15, 20, 30 years from now relative to today. So inflation is your friend as an asset holder or as an investor, especially a real estate investor, because your debt is being eliminated, eroded away. And that in, if you really think about it, is a rate of return in and of itself. Mm-Hmm. <affirmative>. So inflation is your friend as an investor.
Yeah. That’s an interesting point, is that eroding at it quicker actually becomes a benefit and there is a true rate of return that we could figure out based on that inflation. I know I’ve, I’ve heard a lot about that. I don’t know if you’ve ever seen anything, anybody actually play that out from a calculated perspective, but I get it because I mean, like you said, my rental properties that I still have it three and a half percent now look radically different from the ones I’m buying at six and a half to 7%.
Well, well let, let’s just do a very quick, simple example just since we’re on this topic. You have a hundred thousand dollars mortgage on a property today. If inflations 6%, you know, let’s call, call it the C P I A year from now that a hundred thousand dollars mortgage inflation adjusted is actually worth $94,000.
Right.
So you just gained $6,000 or 6% on that debt.
Yeah. That’s, and then you play that out over, you know, a true 30 year mortgage. That actually is interesting. I wonder what the, I betcha we could figure out the percentage of that, but that’s fascinating.
Yeah, you can, I started penciling it out in a spreadsheet, you know, years ago and it’s just, it’s like, wow, there’s, there’s multiple rates of return in real estate. It’s not just your cash on cash,
So, right. Sure.
Yeah. Very cool. So let’s start to wind things down here, cuz you, you and I could talk for days. Just a quick question about interest rates to wrap this up. Where do you see interest rates or even mortgage rates going over the next 12 months?
I don’t see ’em raising much more, like we talked about before, like quantitative easing, all these other factors, things that are gonna be, I believe, evident in an election cycle. I think that they probably, I think we’re close to the top of what we’ll see for at least a while. I could see us leveling out and then trying to do something additional next year if they can’t get inflation under control. Yeah. But I really do believe that a lot of the, the next bumps that potentially could happen will actually be looked at through eco econom or through election pressure or electoral pressure versus economic pressure. Yeah.
Yeah. I tend to agree. I think we’re gonna see a year of, of flat rates plus or minus, but pretty much flat and then tapering off over the next two years coming down because we need to start restimulating the economy.
Yeah, I feel the same.
So a lot of things that we talked about today, Eddie, in addition to so many other things are topics that come up in conversation at our, at our Mastermind Power Room. You and I are both founding members and you know, and principals in Power Room, you know, it’s high level CEO type based mastermind. People are listening to us and enjoy this kind of conversation. You know, we get a lot more of that at Power Room and I’ve mentioned it on the podcast multiple times and invited people who think that, you know, they fit, you know, fit that box to come as my guest. So I’m gonna throw it out to you, you know, maybe share your perspective on what Power Room is and who it’s for, because for the right people, I think it’s good for them to come as a guest and, and check it out because we want to grow our membership with the right kind of people, like-minded people that can, you know, add to our membership.
Yeah, I mean, Power Room, like you said, it is a group for CEOs, for entrepreneurs, for, for investors, and it’s for high level people. Like, I don’t get the conversation you and I are having today. Probably won’t happen unless I’m on another podcast, you know, in the near future. Or we meet up at Power Room and we have dinner and we talk, or it happens from stage. Like these conversations are really hard to have with the common person who is not interested in something like this or doesn’t have the same focus or desire. So Power Room was really created to get us together, you know, high level, you know, business operators, CEOs, leaders and investors four times a year so that we could spend time together, we could develop ourselves, we could find opportunity. And so that’s what it’s about. It is about talking about the economy and where we’re all investing, but also it’s about finding investment opportunities.
I’ve invested probably a half a dozen power members I know you have as well. And you know, and then, then we bring in obviously tons of great speakers like Mike Tyson and Tim Tebow and we’ve got my favorite coming up at Scottsdale, Marco, I don’t know if you know this or not, but we signed Eddie George the greatest running back of all time the Ohio State University coming to Scottsdale. I know you probably could care less, I’m like about this. Tim story is coming to speak. Tim Story’s a a California guy who’s awesome on mindset and business growth. And then we have a guy one of the leaders of Predictive Index, which actually from their corporate vice President Predictive Index gonna come in and talk to us about, you know, kind of the structure of drive. So we got really cool speakers coming up for Scottsdale in June, and if somebody’s interested, they can just go to powerroom.com or look up Power Room mastermind at all of our socials and they can request the opportunity, you know, to be a part. Now there is some qualifications for people and we want the, to keep the room very, very high level, but if somebody that’s a listener of yours that feels like they, you know, that would be a room they want to be in, we’d love for them to at least apply and see if that’s something that makes sense for all of us.
Yeah, yeah. Well said. Just the specific dates on Scottsdale’s, June 4th to sixth and you could just go to powerroom.com and the information’s there. Good stuff. Eddie, tell our listeners how they can follow you and learn more about you and what you do.
Yeah, absolutely. You can follow me at Eddie Wilson official, Eddie Wilson official. All the social channels, I’m probably most active on Instagram and LinkedIn and I respond like crazy. I’m very, very active responding to people to have questions. And then one thing I’d love for your listeners to consider following, and that’s impact others. That’s the nonprofit, that’s my heartbeat, that’s my passion. It’s, it’s feeding centers and orphanages. It’s clean water projects and building sustainable businesses around the world. Those are our four pillars and I’d love for your audience to check it out. You can go to impact others on social. You can go to impactothers.com to see it. But to me, that’s the impact I wanna make around the world is in improving and changing people’s lives so that yes, I can, you know, maybe change my family’s life by all the investing I do, but I want that investing to ultimately ladder up into making massive impact around the world. And so quick plug for that. I know you’re a big fan of it and we’d love for your investors and all of your followers and viewers and listeners to all take part in that as well.
Yeah, I’m glad you mentioned it. We’ll put all that in the show notes. So there, there’ll be links and descriptions and all that so people can find it pretty easily. Right on. Well, Eddie, thank you for coming on. It’s long overdue, but this has been a great conversation and I’ll be talking to you again in 15 minutes.
All right, thanks Marco.
Thanks Eddie.
Well, I hope you enjoyed today’s episode with Eddie Wilson. He’s a great guy, very knowledgeable and very, very experienced in so many areas, especially in business.
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