Wed, Jun 24, 2020|Corey McLaughlin

Why Real Estate Matters in a 'Fake Money' World

Steve Sjuggerud's big real estate event starts in two hours... A first for Stansberry Research... Why real estate matters in a 'fake money' world... Don't miss the 'gold train'... Gold is doing what John Doody said it would... A 49-year bull market...

We begin today's Digest with a housekeeping note...

We're just two hours away from the start of our colleague and True Wealth editor Dr. Steve Sjuggerud's exciting real estate event. It goes live at 8 p.m. Eastern time tonight... So if you haven't already, now is your last chance to reserve your spot right here.

For the past few days in the Digest, Steve has written to you about his experiences and lessons learned in real estate investing...

He described why – despite the fact that readers probably know him best for his stock advice – he has about 75% of his own investable net worth in real estate today... and he explained why real estate – like homes, rental properties, and commercial space – has a place in any investor's portfolio.

Tonight, Steve plans to give you even more detail about why...

Joined by a panel of experts, Steve will explore why real estate matters today... share the lucrative real estate investing opportunities he sees in the ongoing pandemic economy... and discuss why he believes the value of many properties will soar in a post-COVID-19 world (whenever that arrives).

We've fortunately had the pleasure of hearing what Steve and the panel of experts who will join him – including Kendra Todd, a former winner of The Apprentice, and noted investor Ronan McMahon – plan to discuss tonight. And we're excited to see how it all plays out.

This is something Stansberry Research has never covered in its 20-year history...

That's because it's hard to distill all the information out there about real estate into actionable, reliable analysis.

At the same time, though, this information – if it comes from trustworthy, credible sources – is critical for sophisticated investors to understand and consider.

In other words, this is something we've wanted to do for a while...

To hear Steve say it, there's a case for individual investors to have up to 50% of their investments in real estate today.

And one of the pieces of evidence is Federal Reserve-led rock-bottom mortgage rates. As Steve wrote in the Digest Masters Series on June 21, record-low rates are boosting the "relative value" of real estate.

He used a 30-year fixed-rate mortgage for $500,000 as an example. In today's low-rate environment, a monthly payment at 3% interest is just $2,100 (not including property taxes and insurance).

Compare that to way back in October 1981, when mortgage rates hit record highs – nearly 19%. At a 19% rate, you'd pay nearly $8,000 a month on your $500,000 loan. As Steve wrote...

When interest rates are 19%, that house is probably priced too high...

But when interest rates are at record lows (like they are now), you can probably afford that house... Its monthly payment is only $2,100.

The price of the asset – the house – is unchanged. It's the relative value of that asset that has completely changed – its value relative to interest rates.

The difference is incredible. And we can see this same idea at work in one of the housing market's main drivers... affordability.

Today, cheap money – call it "fake money" even – thrown into the economy by the Fed has made housing affordable... But this is just one of the tailwinds for Steve's thesis about why you want to own real estate today.

We urge you to watch Steve's event tonight to learn more. In addition to everything we've already said, Steve will share what he believes is the best way to invest in real estate today.

If you haven't signed up already for this FREE online broadcast, you can do so right here. Remember, the action starts promptly at 8 p.m. Eastern time.

Moving on, an alert – Please don't miss the 'gold train'...

This is another example of "relative value."

In the May 21 Digest, when noting the home-improvement boom during COVID-19 lockdowns, we detailed how the concept of making money by spotting relative value can be applied more obviously to certain assets during the Fed's printing times. As we wrote...

A pandemic-induced home-improvement boom fits in with a lot of what we've discussed in the Digest over the past month or so...

This is a good time to invest in so-called hard assets whose real value won't fluctuate if and when the U.S. dollar loses value as the trillions of central bank stimulus we've seen eventually filters through the economy...

These are things like gold... or bitcoin, as some of our editors suggest... or art (big-time museums are actually selling their works to get through the pandemic)... and real estate.

Regular Digest readers know many of our editors consider gold to be a "chaos hedge" that should make up at least a small percentage of your portfolio...

And many of our editors have been particularly bullish on gold since the Fed started digitally printing obscene amounts of money into the U.S. economy when COVID-19 struck.

Here's the thesis... As the U.S. dollar is eventually devalued by all the extra Benjamins floating around, gold – a proven store of value for thousands of years – figures to get relatively more valuable compared to the dollar.

In fact, legendary gold-stock investor and Gold Stock Analyst editor John Doody predicted a new all-time high of $3,000 or more for the price of gold in the years ahead.

He said as much almost two months ago during our "Gold Rally Kickoff Call." On the day of that event, April 27, we wrote in the Digest about his prediction...

John laid out the many reasons why... and explained how he has seen this post-crisis gold story before... and how he has made a lot of money from staying a few chapters ahead of everyone else.

"I've seen a few of these cycles before," John explained. It goes like this...

A major crisis happens... Stocks and the value of many other assets crash... The Federal Reserve or other global central banks step in with unprecedented stimulus or stabilization measures, flooding the world with dollars, yen, or euros in the process.

Then, John shared the smartest and the best way he knows how to invest in gold today... via fully vetted high-quality gold stocks like the ones he has recommended to subscribers for decades.

It's a cycle. And in the years after a crisis, the price of gold can soar...

Well, the price of gold is on its way higher...

The price of gold just recently crossed an important level last seen in September 2012 – $1,760 per ounce.

Since the recent March lows and "confusion stage" shakeout, as John calls it, the price of gold – in technical trading speak – has been trading in a range of about $1,690 to $1,760.

And as Stansberry NewsWire contributor Mark Putrino recently shared, $1,760 has been a clear "resistance" level where demand was topping out...

Earlier this week, the price of gold broke through this key level.

The next stop...

John says that gold crossing $1,760 per ounce means "the next marker to take out" is $1,900. The precious metal also last touched that level in Asia in September 2012.

In regard to timing, a final note...

Of course, when we last saw gold prices this high in 2012, that was three years after the financial crisis of 2008 and 2009 – our last massive period of turmoil in which the Fed spent its free time printing and buying assets.

Today, everything about the coronavirus outbreak and the market reaction – the March panic, the Fed stimulus, the rebound in U.S. stocks, and gold soaring – has happened at record speeds...

It's the same story this time around, only it's a quicker read.

When more dollars flood the economy, "hard" assets – like real estate, gold, and even art – become more valuable as inflation seeps into prices as a result of the fiscal policy.

As John wrote to subscribers in the June issue of Gold Stock Analyst, we've been in the next gold bull market for years – no, decades – already. The price of gold is up more than 50% since December 22, 2016... and there's way more room to run. As John wrote...

This gold bull market is about to enter its 49th year. It began on August 15, 1971, when President Richard Nixon decreed the U.S. would no longer buy or sell gold. We would no longer enforce a $35/oz price.

The metal closed Friday, June 5, 2020 at $1,684/oz, up 4,811% in the period.

Do you remember where you were in August 1971? Your editor was in graduate school, and $35 was a lot of money... much the same as $1,684 is now. If one had bought a one-ounce coin then, it would have appreciated to almost 50 times its cost.

We expect that the next 50 years, or sooner, will see a repeat. The current $1,684 price you would pay for a one-ounce gold coin will seem as cheap in the future as $35 does to us today.

Most important, the gold companies that John recommends make more money as the price of the metal goes up. So their share prices and the dividends they pay out can grow exponentially during massive "gold booms."

And it looks like blastoff for the next one is imminent.

For more expert insight drawn from his five decades of investing in gold and gold stocks, be sure to check out John's Gold Stock Analyst service if you haven't already.

New 52-week highs (as of 6/23/20): Alamos Gold (AGI), Amazon (AMZN), ProShares Ultra Nasdaq Biotechnology Fund (BIB), BlackLine (BL), Sprott Physical Gold and Silver Trust (CEF), Crispr Therapeutics (CRSP), DB Gold Double Long ETN (DGP), Electronic Arts (EA), Editas Medicine (EDIT), Equinox Gold (EQX), Fortuna Silver Mines (FSM), SPDR Gold Shares (GLD), KraneShares MSCI All China Health Care Index Fund (KURE), Lonza (LZAGY), Microsoft (MSFT), Match Group (MTCH), NetEase (NTES), Sprott Physical Gold Trust (PHYS), ResMed (RMD), Sandstorm Gold (SAND), Spotify Technology (SPOT), The Trade Desk (TTD), Vanguard Inflation-Protected Securities Fund (VIPSX), and Vanguard Short-Term Inflation-Protected Securities Index Fund (VTIP).

In today's mailbag, feedback on Steve's real estate investing lessons and thoughts on the market for properties today. Don't forget about Steve's real estate investing event, which starts in two hours. And as always, if you have any questions or comments, send them to feedback@stansberryresearch.com.

"Steve, looking forward to your webinar [tonight]. Took your advice earlier and bought a HUD repossessed 3 BR condo in Nov, 2011. Paid $70.000, rent it for $1200/mo. After expenses it paid for itself in 8 years. Same renter for over 8 years now.

"Bought one side of a 2 BR duplex in Sept, 2013 for $100,000. Rent it for $1325/mo. Haven't had as good renters but it is still making a significant profit.

"Both of these have HOA fees that take care of all exterior maintenance, lawn care and snow removal. We like that since we don't have to worry about that care even when vacant and the fact that I just turned 80.

"We just wish we had listened closer and bought more when the market was right. Keep up the good work." – Stansberry Alliance member Duke M.

"Regarding the housing topic in DailyWealth and the Stansberry Digest:

"I love the real estate insight. I work in real estate so naturally I feel much more comfortable putting my money there. I have very rarely put any money in stocks although I've been a subscriber for years because I enjoy your commentary and find it to be spot on very frequently. I hardly bother to read regular financial media because it's very surface level.

"For years I've been worried about an overheated housing market. You have convinced me that we are not close YET. I am a residential agent but I also hold 10 rental properties and have done some flipping. Every spring since I got licensed in 2012 I've seen the market get hotter and hotter. In my area the cost of owning has started crawling close to the cost of rent. However, you are correct that supply and demand is the primary driver. In our area supply is under 2 months! Builders just cannot keep up. Starter homes near 2007 levels. Trailers on permanent foundations are selling at very high prices.

"You are 100% correct that, when supply starts ticking upward that is when we will see a cool off. That metric along with foreclosure starts should be monitored very closely. 10% of mortgages are in forbearance after the coronavirus shutdown. Some of this will certainly become distressed inventory – particularly the loans that are not government insured as lump sum payments become due. I have seen first-hand banks that are 'motivated' to work a loan modification or even approve a short-sale end up foreclosing just before a sale closes. I've had short-sales under contract just to see them go to foreclosure and bought at the courthouse steps for LESS than the short-sale contract price. Sometimes this is to the benefit of my clients.

"What many don't know is that before the housing bust, there was a very high inventory of foreclosures years before anyone caught on. 2008 will likely never repeat because loans are better underwritten with lower fixed rates, but there is growing risk of distressed inventory coming back and cooling off the market (again not a bad thing for an investor).

"If you pay attention the warning signs will be clear and I would say that when they appear, if the market starts to cool it may be time to sell and use that initial cool off period as your 'stop-loss' for any real estate you do not want to hold long-term.

"In short, I agree now is still a time to buy – just keep your eye on the horizon, because a value drop 18 months from now is possible." – Paid-up subscriber Robert C.

"Steve's comment [in Tuesday's Digest] 'Don't pay too much' reminds me of something I used to teach my students.

'It doesn't matter what the investment is, if you buy poorly, you can lose your asset.'

"The way to avoid buying poorly is to have a good education about the market, the trends and the different investment gambits that can be used." – Paid-up subscriber Kurt S.

All the best,

Corey McLaughlin
Baltimore, Maryland
June 24, 2020