The collective madness of crowds is a powerful force and can drive a group of individuals to behaviors and actions that normally wouldn’t be seen on an individual level. Once the madness takes over, it spares no one – rich, poor, old, young, male, female, etc. And those who dare question the crowd are often shouted down or shamed into silence.
 
As humans, we have primitive instincts that can be brought out in group situations that make us do things as a group we wouldn’t do as individuals.
 
“One dog may bark at you, but it’s more likely that a pack will attack you.” -Dr. Wendy James, The Psychology of Mob Mentality and Violence.
 
People lose control of their usual inhibitions when their mentality becomes that of the group.
 
In the past two years, we have seen the madness of the crowds on full display in the world of finance. Armed with stimulus money, investors have been seen throwing caution to the wind and investing irrationally in anything and everything with no thought of underlying economic fundamentals.
 
Meme stocks are one example where investors snatched up stocks of companies that were worthless on paper (i.e., companies like Hertz, who filed for bankruptcy) solely based on internet and social media hype.
 
Crypto is another example, with investors from all walks of life hopping on the bandwagon. Fueled by heavyweight endorsements by tech titans like Elon Musk and by celebrities like Tom Brady and Matt Damon, crypto raced to new highs in 2021. Even Dogecoin, a cryptocurrency that started as a practical joke, gained heavy attention.
 
Crowd behavior was in full force as the internet and social media drove the stock market and cryptocurrencies to new highs in 2021. “The sky was the limit,” shouted many talking heads. Critics and naysayers who dared sound the alarms were shouted down and criticized as ignorant or dangerous. Fast forward to today, and it’s a whole different story. The investors who refused to jump on the hype train are the ones who have avoided massive losses.
 
Since reaching record highs last November, the stock and crypto markets have crashed. In the one year since that time, Bitcoin is down 75%, and not counting the most recent post-election bump, the Dow was down more than 22% right before the election. As history has taught us, investors should expect that post-election bump to wear off soon.
 
The past year has been another lesson in avoiding the madness of the crowds. It’s just another example of when investors talked themselves into going along with the group because nobody thought the investment could fail. It’s the same thing investors thought about dotcoms and subprime mortgage-backed securities back in the day.
 
The thinking is if big time and famous investors jump on the bandwagon, how could it go wrong? The answer is it can go very wrong very fast.
 
Take crypto for example. When Blackstone, one of the biggest investment firms in the world, threw its weight behind crypto, it was hard for the average investor to talk themselves out of jumping into the fray. But, what was once thought of as “can’t miss” came crashing down in a hurry with prices slashed to a mere fraction of record highs with even high profile exchanges like FTX going out of business.
 
Thanks to the modern connected age, the madness of crowds is only compounding. And it’s not just finances in which crowd behavior is infecting behavior; it’s social behavior where crowds on social media gather to bully and cancel those with whom they disagree. Following the herd is reaching the point where it is becoming ill-advised and downright dangerous.
 
The madness of crowds is not a new phenomenon. Psychologists have been writing about it since the 19th century.
 
“Men, it has been well said, think in herds; it will be seen that they go mad in herds while they only recover their senses slowly and one by one.” -Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds, 1841.
 
Mackay’s observations of herd behavior touched on social and economic phenomena in his book. One such economic example was the Dutch tulip mania. According to Mackay, speculators from all walks of life bought and sold tulip bulbs and even futures contracts on them during this bubble. Allegedly, some tulip bulb varieties briefly became the most expensive objects in the world during 1637 for no rhyme or reason other than collective madness.
 
The mass delusion was the only explanation for the tulip bubble, but it wasn’t an isolated case, as this type of collective madness in the markets continues to this day. It was the case with the dotcoms, mortgage-backed securities, and most recently with meme stocks and crypto.
 
One of the interesting insights that Mackay offered into the tulip madness is that it spared nobody. People of every class and walk of life got suckered into the madness. Sounds like the recent crypto craze.
 
If even prominent business, technology, financial, and government leaders get swept up in the madness, it’s hard to fault the average investor. But here’s the sad reality. Crypto will not be the last bubble or example of collective madness we’ll see in the markets. Something shiny and new will come down the pipeline eventually.
 
So the question is, how do investors protect themselves from the madness of the crowds?
 
One way is to not be afraid to question the crowd. Don’t be afraid to resist the pressure of your peers, family, coworkers, etc. Don’t be afraid to question the viability of a trend.
 
Two, stick to tried and true investments. Two traits the most recent bubbles have all had in common are that they were all speculative and relatively new asset classes. Dotcoms, securities backed by subprime mortgages, and crypto were all speculative and new. So, in the future, if you see a relatively new and speculative asset class taking off because of the madness of the crowds, be very leery.
 
How do smart investors avoid the madness of the crowds?
 
They embrace the boring. Savvy investors stick to tried and true assets that have withstood the test of time – unlike dotcoms, mortgage-backed securities, and crypto. They embrace asset classes like commercial real estate uncorrelated to Wall Street and insulated from herd behavior because of its illiquidity.
 
The dramatic volatility that plagues stocks and crypto because of herd behavior enabled by ultra-liquidity doesn’t affect real estate values. Besides, CRE is uncorrelated to Wall Street and can generate cash flow that keeps up with or even exceeds inflation.
 
Don’t follow the crowds and stick to a bubble bound to burst. Now is the time to protect your portfolio; it all starts with ignoring the herd.

The economy is gripped by inflation and the fallout from the Fed’s moves to corral it. Inflation has been running near its highest levels since the early 1980s, and the Fed has been on a rampage to bring inflation down.
Billionaire investor Carl Icahn warns the U.S. economy has tough days ahead – and blames the Fed for painful inflation. -Business Insider.

In September, the Fed raised rates another three-quarter of a percentage point. This was on top of the two prior successive three-quarters of a percentage increases in June and July.

The Fed’s rate hikes started with a modest quarter of a percentage hike in March, followed by a half-percentage hike in May. Then, when inflation looked to be getting out of control, the Fed got more serious and aggressive. So far, the cure is worse than the disease because inflation hasn’t retreated anywhere near in proportion to the rate hikes and the pain the more expensive cost of borrowing has inflicted on the economy. One only has to look at the cooling residential real estate market to see what’s happening.

Carl Icahn has been around long enough to realize that there’s no quick fix to the inflation problem. The last time inflation was this high was in the late 70s and early 80s; inflation took two recessions to come back to earth. There’s no reason to believe we’re not in for the same pain ahead.
“A rising tide lifts all boats….”

That saying is an aphorism associated with the idea that an improved economy will benefit all participants. On the flip side, what about the receding tide that we’re experiencing now?

​​Investors who are not prepared for the receding tide and do nothing will be the ones who experience the most pain. Just like with boats in a receding tide, the ones that are anchored or beached will be stuck when the tide goes out.

When recession hits, you will be stranded if your fortunes are anchored to Wall Street. The investors who will weather the storm will be the ones paying attention and willing to adapt to avoid the low tide and will be the ones who benefit when the tide rises. Those in the wrong place at the wrong time (aka the wrong investment) will not benefit when the economy goes into rising tide mode.

Are you, as an investor paying attention?

​​Can you adapt to the receding and rising waters to not only weather the storm of inflation and recession but also prosper?

​​How does one prosper, you ask?

The first step is to untie your portfolio from the investments that will get stuck during a recession. This will be stocks and other liquid assets like crypto that investors unload as cash becomes king during hard times.

For some investors, it will be hard to unanchor and seek safe ground. They are so integrated into the Wall Street and financial machine that it is very hard for them to go against the grain to untie themselves and their portfolios from self-interested financial advisors, talking heads, family and social pressures, influencers, and paid endorsers.

The investors who will be in safe waters are the ones who have been paying attention. They’ll be in safe waters with the right vessels to take them to safety and prosperity. What do these investors and their vessels look like?

The ideal investment vehicle (i.e., vessel) is not tied to Wall Street. It generates cash flow that outpaces inflation. It’s the vessel that can avoid the low tide and continue fishing in safety. These assets that continue to cash flow during inflationary times at rates equal to or exceeding rising prices are the right vessels for keeping your portfolios not only safe but help you prosper.

In addition to cash flow that keeps pace with inflation, the ideal vessel will be backed by a hard asset like commercial real estate or tangible business with an underlying value that will also rise with inflation. Coupled with cash flow, this gives prepared investors a double-edged sword for combating inflation.

Smart ultra-wealthy investors have long been untying themselves from the bonds of Wall Street and allocating to cash-flowing tangible assets to counter the effects of inflation, particularly assets tied to essential goods and services. Consumers will always need shelter, food, fuel, and goods that thrive even in a downturn are ideal for combating inflation as these goods don’t lose demand even as prices surge.

​​Witness the current year’s cost of rent and fuel that has kept pace or outpaced inflation without diminished demand. Those are the types of vessels you want to be in to avoid the impending disaster that will strand many investor portfolios.

Inflation is a juggernaut that doesn’t look to be waning soon, and recession will come in its wake. Will you be ready when the waters recede, or will you get stuck like everyone else?

To survive the downturn, be ready and have the courage to break away and untie from the crowd to find calm waters.

Many investors vested in Wall Street are pondering how to recover from 2022 losses. Thanks to inflation, war, gas prices, and a recession, it’s been an ugly, bumpy ride on Wall Street this year. Year-to-date, the Dow is down more than 17%.



Traditionally, the 60/40 portfolio has been the most common portfolio allocation strategy, with 60% allocated to stocks and 40% allocated to bonds. The conventional wisdom was that fixed-income products like treasuries and corporate bonds would pick up the slack when stocks underperformed.

This strategy was fine and sound in the 80s, where bonds paid better than 12% during downturns, but those rates have been nowhere to be seen since the 80s. With the 10-year treasury currently hovering around 4.23% and corporate bonds on Wall Street from big issuers like Blackrock paying no better than 5%, fixed income during this downturn is a losing strategy, with inflation running around 8.1% (September).

That’s an annual loss of -3.1 based on the best-case scenario. So, the go-to Wall Street strategy of relying on bonds and fixed income during a downturn is a loser in the current environment.

What about sidelining your cash?

That’s an even worse idea. What some investors perceive as avoiding losses isn’t avoiding losses at all. Factoring in inflation, putting money under the mattress erodes your portfolio at -8.1% a year.

So fixed income and sidelining cash are out of the picture. Another option is to roll the dice and keep playing the Wall Street game. Wise decision? Not if some of the Wall Street naysayers are right. Some analysts believe the stock market could lose another 15%.

Factoring in the 17% losses year-to-date, another slide of 15% could dig investors a hole extremely tough to dig out of – bigger than investors think. Most investors would think that if their portfolios shed 32% of value, the market would only have to rebound 32% to get back to zero. Right? Wrong.

Here’s how:

Digging out of losses is not a one-to-one proposition. That’s because when you shed 32%, you start at a much lower base and will require gains exceeding the original loss to be made whole.

For example, if you started the year with $100k in your portfolio, and let’s say you stayed in the market and your portfolio ended up shedding 32%, you will need gains exceeding 32% to get back to ground zero. That’s because once you lose 32%, you now only have $68k to work with.
A 32% gain on $68k only puts you at $89,760. In order to get back to $100,000, your portfolio would have to gain 47%. That’s a tall order considering what happened in the aftermath of the Financial Crisis in 2008.

In 2008, it only took months for the stock market to shed 50% of its value following the whole debacle surrounding mortgage-backed securities and the real estate crash. It took seven years for the market to recover. Do you want to wait seven years to return to where you started?
Here’s another problem with recovering from losses. The steeper the loss, the more exponentially difficult it is to climb out of the loss, as illustrated by the following chart:



This chart provides a sliding scale of what your portfolio will need to gain to get back to ground zero after a certain percentage loss. Going from a 30% to 40% loss will require an additional 22% of the gains needed to recover, but if you let it go to a loss of 50%, you will need an additional 33% to recover, and it only gets worse from there. The lesson is that the longer you stay in, the deeper the hole will be for you to climb out.

Here’s a twist to the recovering from losses dilemma. During a downturn, investors often have to dip into their portfolios to make ends meet.

If you’re one of these investors, the road to recovery is even steeper, as illustrated by the chart below:



Suppose you withdraw a conservative average of 5% of your portfolio every year for five years. In that case, the chart above illustrates the pain of recovering from losses when taking withdrawals into account. Instead of needing to gain 43% to recover from a loss of 30%, it will now take 122% to recover from the same loss.

So far, none of the strategies for dealing with a downturn makes sense. Staying in and watching your portfolio continue to slide creates an exponentially bigger hole to dig out of. Fixed income and sidelining cash also don’t work. What if there was another option?
There is… and savvy investors have relied on this strategy for decades to insulate themselves from inflation and recession.

How do they do it?

Savvy investors don’t continue to take losses or sideline their cash. They tackle the problem head-on to profit from an uncertain economic environment. Instead of continuing a slide or sidelining their cash, they allocate to assets that thrive in this economic environment. Their assets of choice aren’t found on Wall Street but in the private markets – insulated from Wall Street volatility.

They seek long-term tangible and cash-flowing assets with a history of performing through recession and inflation. Certain segments of commercial real estate and income-producing businesses that provide essential goods and services are prime examples of inflation and recession-proof assets.

If you’re vested in Wall Street, rethink your recovery strategy.

Think outside the Wall Street box. In the process, you might avoid the painful road of recovering from losses and thriving in a downturn for private alternative assets.

When we speak of wealth and compare assets for building wealth, we often fixate on the return on investment. What’s the annual return? What’s the IRR? While the wealthy do focus on the return ON investment, they also focus on the return OF investment – the speed at which they can receive a return of their capital. Why is this important? Let me explain.
The secret is that the wealthy gravitate towards assets that not only offer above-market returns but are also insulated from Wall Street volatility. That’s why they favor private assets like commercial real estate (CRE) and private company investments (i.e., private equity) that not only appreciate over time but that generate cash flow during the hold period.

The wealthy are fixated on cash flow because it’s their key to wealth and financial independence. If they can generate enough passive income to replace their work income, they can never have to feel dependent or tied to their work again and have the freedom to walk away if they choose. That’s the definition of financial independence, which we all covet.

Because the wealthy are focused on cash flow, it’s logical that they would also be interested in accelerating the financial independence timeline by creating multiple streams of passive income. The sooner they can replace their work income, the sooner they can achieve financial independence. Who wouldn’t want that?

That’s where the concept of the velocity of money comes in. When investing, investors focus almost entirely on the return on investment and completely ignore the concept of the return of investment. According to Jay Vasantharajah – The Velocity of Money in Investing (June 13, 2021), a high ROI is great, but what if you could achieve the same ROI in half the time? You could double your total return by reinvesting the capital in the same investment.

This is the foundation of the concept of the velocity of money. With the velocity of money, you’re shifting the focus from how much of a return you’ll receive on investment to how soon you can receive a return on your investment.
Why is this important? Because once you receive a return of your original investment, you can immediately put it to work to generate a whole other stream of passive income and accelerate your timeline for achieving financial independence.

The velocity of money concept is the idea that the sooner you achieve a return on your investment, the sooner you can reinvest that money to compound your wealth to generate exponential returns. It’s taking the idea of compounding to a whole other level. By leveraging assets that offer the opportunity to receive a rapid capital return (high capital velocity), investors can accelerate exponential wealth.

Consider two investments with the same initial capital outlay of $100,000:

• Investment #1 offers a return of capital within 12 months.
• Investment #2 offers a return of capital within 24 months.

After 12 months, Investment #1 will have returned $100,000 of your original capital, which you can put into another investment similar to Investment #1 (Investment #1.5). Between months 12 and 24, Investment #1 is continuing to generate $100,000 per year, while Investment #1.5 is also now generating $100,000, which brings the total return from the original investment in Investment #1 to $300,000. Meanwhile, Investment #2 will have generated only $100,000 of returns. The gap between Investment #1 and Investment #2 will get exponentially wider as time goes on.

The velocity of capital is why commercial real estate (CRE) is valued by the wealthy – especially value-add CRE that facilitates cash-out refi’s that dramatically close the return of capital gap.
Here’s how the velocity of capital works:

Suppose you buy a commercial property for $1M with value-add opportunities. You put $200k of your own capital down and finance the rest. You put another $200k of your own cash into renovations, putting your total capital commitment at $400k. For simplicity, let’s assume a cap rate of 10%.

The expected average annual return on that rate would be $100,000, which means it would take four years to earn a return of your original capital of $400,000. Now, you could wait patiently to accumulate enough cash flow from operations to earn a return of your capital to put into another similar investment with $400,000, or you could do something else.

You could accelerate the timeline by leveraging the value-add in the property.

After renovations and implementing management efficiencies that improve rental rates and reduce vacancies, the property’s value has increased to $1.5M. What if you refinanced your original $800,000 mortgage to a $1.2M mortgage and cash out the difference of $400k?
You now have a return of your entire cash investment of $400k much quicker, and you still own the property. You can deploy that $400k to acquire another property, and you don’t have to wait four years in this refinance scenario.

To leverage the velocity of money principle and accelerate exponential wealth, investors should think of money as three-dimensional and not linear by focusing less on return ON investment and more on return OF investment. Instead of asking how much you can make from $100,000, you should be asking how fast you can make that $100,000 back to put it into another investment that will make you $100,000 while the first investment is still at work.

The velocity of money allows you to continue to enjoy the cash flow, appreciation, and tax benefits of your original investment while being free to reinvest your return of capital into another property. Instead of a straight line of returns, you can create multiple branches of return, creating a tree of wealth.

Nobody wants to wait until they’re too old to start enjoying life. The velocity of money will get you to your destination sooner and more securely.

Creating multiple income streams is the key to achieving financial independence, and the velocity of money is the engine that will get you there.

Which personality trait best describes you?

When faced with a situation where people depend on you to solve a problem because they have complete trust and confidence that you’ll solve it, you doubt you’ll be able to come through.

In the opposite scenario, imagine the same group of people seeking solutions to their problems. Still, they never asked for your help because they didn’t believe you had the skills or experience to solve it. However, you feel like you can easily solve the problem even though the odds say you’re likely not to help the situation.

Most of the population relates to the person in the first scenario, who feels self-doubt in situations even when they are capable enough to deal with them. This phenomenon is known as imposter syndrome.

The person in the second scenario, however, suffers from overconfidence. This person suffers from the Dunning-Kruger effect.

Named after psychologists David Dunning and Justin Kruger, who studied and termed the effect, the Dunning-Kruger effect is a distorted reality in which people with low ability overestimate their ability and underestimate those with higher abilities, wherein the people believe that they are more capable than they are. These people tend to overestimate their real competence.

The ultimate problem with the Dunning-Kruger effect is people fail to recognize their competence levels and strengths. Hence they believe they have more knowledge and are more capable than they are. Moreover, the least skilled people overestimate their abilities, while the most skilled people underestimate their abilities.

In their research, Dunning and Kruger found, for example, that college students who hand in exams that will earn them Ds and Fs tend to think their efforts will be worthy of far higher grades; low-performing chess players, bridges players, and medical students, and medical students, and elderly people applying for a renewed driver’s license, similarly overestimate their competence by a long shot.

According to Dunning, lacking skills and knowledge leads to two problems. First, the person won’t be able to perform well in the tasks, and the second is they will not be able to realize their mistakes and lack of skills, which Dunning proposed as a double burden. 9 Dunning-Kruger Effect Examples in Real Life, studiousguy.com.

It’s in the world of investing where the Dunning-Kruger effect can get people into the most trouble – especially in the stock market.

Everybody thinks they can outsmart the market, whereas the data clearly shows that the vast majority fail to do so. Everybody thinks they can do better than the average. This overconfidence makes people fail to see their deficiencies and often results in bad decisions. This overconfidence results in investors suffering significant losses because they’re usually out of their depth and don’t learn from their mistakes. They double down on their ability to dig themselves out of a hole when, in fact, they only dig a deeper and deeper one.

Here are typical mistakes of overconfident investors:

1. They think that the stock market is the only way to make money and are confident they can beat it. Investing for most folks is about timing – buying low and selling high or selling before the downturn. Investing is about speculating for most investors, and many are unwilling to consider any other form of investing – like in alternatives or private markets where it’s not merely about timing or speculating.

The typical investor has a short investment window. They buy individual stocks betting on their impeccable sense of timing. In reality, even the very best investors do a poor job of outperforming indexes. They may get lucky once in a while, but few investors can sustain success. Even 90% of professional brokers, advisors, and fund managers fail to beat an S&P index fund. What chance do average investors have?

2. They Speculate and Lose. The vast majority of investors fail at the timing game and fail to beat the market. Either they hold losing investments for too long or sell winners too soon. And because it’s difficult for overconfident investors to admit a mistake, they will continue their bad habits.

In investing, it’s better to have impostor’s syndrome instead of suffering from the Dunning-Kruger effect. With impostor’s syndrome, investors admit that they don’t know what they don’t know. By admitting this, they’re more willing to rely on experts or to seek out knowledge on their own to learn about the true nature of speculative stock investing and to seek out alternative investments that offer a different path. It’s how most smart, ultra-wealthy investors started – by gaining knowledge and leaning on mentors. Even Warren Buffett had a mentor in Benjamin Graham.

On the road to financial independence, it will serve investors to acknowledge their limitations and learn from others. Overconfident investors tend to bite off more than they can chew. Invest in sectors like FinTech, pharma, and crypto because they overestimate their abilities because of the Dunning-Kruger effect. The effect is investing failure and the failure to recognize incompetence. The ultimate result is losing money.

Do not let your confidence lose you money and keep you from seeking investments that will give you the best chance at financial freedom.

Make investments that you can understand or that you can learn from others. There’s nothing wrong with admitting your deficiencies and leveraging the expertise of others if doing so will help you achieve the financial freedom you covet.

How do you want your posterity to remember you? What kind of legacy do you want to leave? Financial and personal? Unfortunately, the average American is leaving a legacy of debt on the financial side.

A 2017 USA Today article states that Americans are dying with an average of $62K of debt. 73% of Americans had outstanding debt when they were reported as dead, according to December 2016 data provided to Credit.com by credit bureau Experian. Those consumers carried an average total balance of $61,554, including mortgage debt. Without home loans, the average balance was $12,875.

It’s easy to spend money and rack up debt, and unfortunately, that’s the legacy being left by most Americans. Their posterity isn’t being left empty-handed from a financial standpoint as well as a personal standpoint. That’s because the ultra-wealthy who are leaving their heirs with substantial financial resources are also leaving them with the tools to grow this resource. Otherwise, the family line will end up like that of the Vanderbilt’s.

At his death in 1877, Cornelius Vanderbilt was worth $100 million ($2.B in today’s dollars). By 1973, there was not a single millionaire among the bunch at a Vanderbilt family reunion – the fortune was completely squandered.

During Vanderbilt’s time, two other prominent families outside the U.S. left significant fortunes that have endured to this day. The Jardine family (who co-founded the Hong Kong-based conglomerate Jardine Matheson) and the Swire family (who founded the London-headquartered Swire Group conglomerate). Both family fortunes have endured to this day.

What is the difference between the Vanderbilt’s, Jardin’s, and Mathison’s? The Jardine’s and Matheson’s were heavily invested in commercial real estate (CRE), while Vanderbilt was not. Churchouse, Peter, How One of the Richest Dynasties in American History Lost its Fortune, businessinsider.com, (Dec 17, 2017)

The ultra-wealthy have long used CRE to create and grow multi-generational wealth. It’s the difference between leaving a legacy of debt and one of wealth and excellence. Americans have proven it’s easy to spend money and get into debt, but growing money is a different matter altogether. If you are not one of the lucky few who inherited a legacy like the Jardine’s and Matheson’s, it’s never too late to start one of your own through CRE. Why and how?

First, the why…

​​Why Commercial Real Estate For Building And Maintaining Multi-Generational Wealth?  

Passive Income.

​​Passive income is the key to wealth. Unless you put your money to work for you, you will always depend on a job to pay your bills. Passive income will let you pay your bills while lying on a beach. Passive income is a wealth autopilot. Done right; it can be low maintenance.

This is why cash-flowing CRE is the preferred asset class of the wealthy. Passive income can be generated 24-7, it can be reinvested to compound wealth, and you can create multiple streams of it to grow wealth exponentially.

Hard Assets Appreciate.

​​Hard assets like CRE have intrinsic value beyond what the investing public is willing to pay for them. Assets like crypto and most stocks have no underlying value. Crypto has no practical uses – its value is determined solely by what people are trading them at on the open market. It’s why the value of crypto like Bitcoin can rise and fall by double-digit percentages almost every month.

Hard assets don’t experience the same volatility because they have intrinsic value, which naturally appreciates over time, independent of what the public is willing to pay for them. That’s because of the ability of hard assets to generate income. CRE’s reliability and consistency enable fortunes to be sustained.

Insulated From Market Volatility.

​​CRE is insulated from market volatility – immune from drastic knee-jerk reactions to trivial stimuli in the broader markets. That’s because CRE is illiquid. The masses have no power to move the needle on the price of real estate in the short term as it does on stocks and crypto.

Long-Term Benefits.

​​The wealthy gravitate to CRE with long lockup periods because 1) time allows the asset to mature and maximize efficiency, and 2) time allows the investor to profit from the compounding effects of reinvestment of cash flow along with underlying appreciation.

Tax Benefits.

​​A penny saved is a penny earned. Avoiding $1 in taxes is just as valuable as adding $1 in revenue to the bottom line. Passive CRE investments structured as partnerships offer multiple tax benefits, including deductions, depreciation, long-term capital gains treatment, avoidance of self-employment taxes, etc.

Now the How…

How To Build Multi-Generational Wealth With CRE?

Leverage.

​​For most investors, the learning curve and substantial capital commitment are too high a barrier to do independently. It’s very hard to generate multiple income streams on your own – at least not the type of income that will create generational wealth. There aren’t enough hours in the day.

That’s why the wealthy leverage the expertise of others, whether it’s to manage the entire gambit of the investment or just the more labor-intensive ones. Either way, leveraging expertise is the most important tool in creating multiple passive income streams.

Don’t leave your heirs a legacy of debt and failure. Do what many successful families have done – build and maintain lasting wealth with CRE.

Inflation is a portfolio killer – well, for certain portfolios. Since the beginning of the year, inflation has been on a rampage, breaking decades-long records. In June, inflation hit another 40-year record when it hit 9.1%. Inflation has thrown some big punches since the beginning of the year, and the Fed hasn’t wasted time with counterpunches of its own.

Last week, the Fed raised interest rates for the fourth time this year, increasing the overnight interest rate by 0.75% for the second time in a row. So far, the higher interest rates haven’t made a dent as inflation continues to rage. And if government spending continues to be out of control, you can expect more of the same with inflation.

What could all of this mean for your portfolio?

Well, you only have to look to recent and remote history for a clue as to what to expect. As for recent history, the Dow is down more than 10% on inflation woes and recession fears. And if the distant past is any indication, a 10% drop is just the beginning of the pain investors with portfolios allocated to stocks can expect.

Why can we expect stocks to plunge even further?

It all starts with the Fed and rising interest rates. What’s the reasoning behind the Fed raising interest rates? The logic behind raising interest rates is that by raising the cost of borrowing, the Fed hopes to curb both consumer and business spending to cool demand. Cooling demand should lead to slowing inflation. As demand goes down, so should prices. The question is, how long will it take before prices respond?

If history is any indication, it could be quite a while before inflation gets under control. The late ’70s was the last time inflation was this high. Inflation wasn’t the only similarity. The nation experienced high fuel costs in the ’70s as well.

In late 1979, a new Fed chief was explicitly appointed to tackle inflation to get a handle on inflation. The full-scale war on inflation waged by the new chief was not without side effects. The Fed’s aggressive rate hikes resulted in not one but two recessions – one in 1980 and another from 1981-1982. During those recessions, unemployment reached as high as 11%. We could be in for more of the same with major corporations like Tesla and Walmart already announcing massive layoffs on the horizon.

What about the effect on stock portfolios in the ’80s? As interest rates rose and demand fell because of the high cost of borrowing, corporate bottom lines were hit by reduced consumer and business spending, negatively impacting stock prices. During the 1980 recession, the S&P 500 fell 19.83% from its highest point. During the 1981-1982 recession fell 28.39%.

Imagine planning to retire in the early 1980s and relying on retirement accounts heavily allocated to stocks at the time. A retiree with $100,000 in their stock portfolio at the beginning of the 1980s likely had ⅓ less for their retirement by the end of 1982. That’s a huge loss in a short amount of time – a loss that is impossible to recover, especially for a retiree who can no longer work.

Inflation is a portfolio killer; the knee-jerk reaction is to take your money out of the stock market and hide it. Don’t be fooled – this is not a sound strategy. Investors with the mistaken belief that hiding their money away in a CD, a Money Market Account (MMA), a high-yield savings account (HYSA), or in treasuries could be in for a rude awakening. The problem is that investors fail to consider the destructive nature of inflation.

Putting money in a CD, MMA, HYSA, or treasury that pays at best 3.35% (5-year CD) results in an annual loss of 5.57% when factoring in current inflation rates. That’s not exactly a sound strategy for surviving inflation.

So, what can you do to protect your portfolio from inflation?

Start by changing your mindset. Instead of merely asking yourself how to survive inflation, why not ask yourself how you can thrive in the face of inflation? How is that possible?

Just look back at the past year and the assets that have kept pace or even exceeded inflation. What about rents and home prices? Ring a bell? It should be because the rapid rise of rents and home prices have been all over the news in the past year. And there is your key to surviving inflation and thriving in the face of it.

Smart investors allocate to assets that leverage inflation – assets that keep pace or exceed inflation. How do they do this?

• They invest in goods and services that are certain always to have demand – goods like shelter, food, and fuel.
• They invest in alternative assets like commercial real estate and private companies (i.e., private equity) insulated from Wall Street volatility and uncertainty.
• They invest for the long-term, where short-term dips are ironed out over time.
• They invest for passive income to generate certain and reliable cash flow.
• They invest in assets that preserve capital and, in some cases, grow capital.

The ideal inflation-busting assets are assets tied to essential goods and services. As wallets get pinched, consumers prioritize their expenditures away from luxuries and more towards necessities. Allocating to assets that revolve around consumers’ essential needs, such as shelter, will best insulate a portfolio against the destructive effects of inflation by generating cash flow and underlying appreciation that keeps pace with or exceeds inflation.

Besides the financial benefits, the peace of mind that inflation-insulated cash flow offers to counter the fear of job loss is invaluable.

This is the blueprint for insulating your portfolio against inflation.