Smart Money Hedges Bets In Tough Times

We’ve had quite a few very good years, economically speaking, and we may very well have a few more to come. There are, however, some warning signs that things are starting to change but it’s a slow change. Here are few things the so-called experts are predicting that, in my opinion, are very likely to happen:

1. European expansion will slow down.
2. Japan’s recovery will remain weak.
3. China’s economy will keep decelerating.
4. The rate of inflation will stay around 3%.
5. The Feds will raise interest rates 3 times in 2019.

The experts, however, are predicting that changes will take maybe 2 or 3 more years, and will no doubt happen slowly. Regardless, many of us investors are thinking about hedging our financials that’s right now. You might ask why wouldn’t anybody or everybody hedge their bets if they knew tough times were coming? Of course, many people would, but the average person doesn’t know that tough times are ahead.

Smart money –money that is invested by people with expert knowledge – does not always do well either, but there are indications that give the smart money people a head start on everyone else. No, they are not always right, but they are more often than not.

A very important part of the formula is to be an independent thinker. The overall economy is like a gigantic river. Sure, you can swim upstream, but it is very difficult. What smart money does is watch the general direction of the flow of that giant stream. Smart money people know that the flow doesn’t suddenly turn around and run the over way.

So even though some of the experts are saying our markets and economy is ready to turn around and go down, it most likely will not happen fast. So, these days, I am advising people to do two things to hedge their money and investment bets:

#1 – Save cash. Build up a cash reserve to be invested after the economic pull back.

#2 – Even though you are building your cash reserves, keep making low ball offers to highly motivated sellers. Granted, there are not a lot of motivated sellers right now because the economy has been in an uptrend for quite a while and many people think it will continue. Still, there are always some motivated sellers out there that need to sell for various reason and some of these people need to do it now at under market prices.

Finding those motivated sellers and making those lowball offers is still smart money, especially if you can do so while building up your cash reserve. So, you might as well keep throwing you net out there and see what you can find. That kind of smart investing and saving is the kind of thing that will get you through the tough times, whenever it is they get here.

 

 

MONEY MONEY MONEY

We all want it and we all need it—and some people will do most anything to get it. Right now there are a few things you can do to really cash in big time. I don’t mean to say that money is the most important thing in the world but if you don’t have any, or not very much, it certainly makes life pretty darn rough!

What many, if not most people, don’t fully realize is that there are some critical choices and critical timing of those choices that can make all the difference in the world. It should be obvious that the “choice” of making the most income that you can and at the same time keeping spending lower than your level of income is a very good thing. By doing that you create savings and with enough savings you can make investments that, if you do it right, can give you passive income that makes your life smoother, more pleasant and rather easy. But … what about those investment choices and, maybe even more important, that thing called “timing”.

My advice to most everyone, at least here in the USA, has to do with what you could and should be doing RIGHT NOW!! Recently I said to my adult children, “You know, if you are financially wise and want to make some huge strides in your financial situation right now is the time to act! And, acting right now will pay huge dividends in the near and distant future.” What are those actions that I encouraged them to take and they are doing even as I write this blog?

Ok, here’s the simple advice which could easily be called “Million Dollar Advice”! Go buy a house or maybe 2 houses or a duplex or even more. That’s pretty simple but it’s almost sure to make my children or you a ton of money. You may be saying “Wait a minute. Prices have already bottomed out and have moved up in the last year or so and more in the last few months. You’re right but that’s OK because the big if not the huge reason to buy now is not because the possible continuing rise in values (and it might well slow down a bit) but because of a thing called “Interest Rates” or should I say ”Super Duper Low Interest Rates!” Just take a look at where we are now and where we used to be and very likely will return.

Monthly Payment on a $400,000 Loan for 30 years

Today’s interest rates are:		Rates in past years & probable future years:
3.5%	4.0%	7.0%
Monthly payment
$1796.18	$1909.16	$2661.21

Now at first glance that may not seem like a huge difference but … over the life of the 30 year loan–the difference between the 7% loan and the 3.5% loan is almost a third of a million dollars ($958,035.60 on the 7% loan and $646,624.80 on the 3.5% loan.) The big bonus is that today’s rental rates are going up and up, so you can rent those houses or a duplex’s out for more and more. Just think … 3 properties could make you almost a million bucks over the life of the loan not counting the cash flow that is possible. And what if you had more than that? At the top of my “rental property career” I owned more than 1,000 units! How does that sound to you?

I hope I have inspired you to go out and take advantage of these super low interest rates. They won’t last more than maybe one or two years longer and maybe even shorter than that. In other words, this is not the time to hesitate. It is the time to buy!