Future Proofing Your Money In Uncertain Times

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By Fuquan Bilal

Do you know where the markets are headed now? How can you future proof your money, even if you aren’t sure?

Where is the World Headed?

The beginning of 2016 seemed to spur an extended run in real estate and the economy. Then in 2018 it seemed that the stock market and real estate market became exceedingly frothy. Stocks and properties in some sectors where trading at great highs. Predictions of a new crash and deep recession seemed almost certain to play out. Yet, while there are certainly some cracks in the markets, the doom and gloom has really taken the country by storm. How long will it last? Or is this just the new norm?

Certain, Uncertainty

There’s a lot of uncertainty out there. There is a lot of confidence too. Yet, if we can be sure of one thing, it is that there is likely to be even more uncertainty through the next election, and well into 2021, depending on who wins.

Asset prices of tech stocks, commercial properties, and some residential ones do seem historically high. There are many factors delicately holding that in balance. Global politics, big stock market influencers, new trends in how we do business, new technology, and housing costs are some of them.

History suggests that everything will keep going up over the long run, but that it is also inevitable that there will be dips and corrections in various asset classes along the way. Yet, even the most experienced analysts and those with the most data seem to be having a hard time timing these fluctuations.

Future Proofing Your Money

There are a lot of factors that seem to be at odds with each other on the current landscape:

  • Cryptocurrency investors betting against the dollar and stock market
  • Low unemployment versus new technology and robots replacing jobs
  • Low interest rates versus tightening lending
  • Rising housing costs versus rising numbers of properties with negative equity
  • High rents with institutional landlords eating up more of the housing market

All stocks won’t vaporize permanently. Housing will be a constant need. Whether the economy continues to perform great or not, housing will just be in more demand.

The individual tactics and strategies that work will fluctuate over time. Some months may be better for flipping houses and mortgage notes, others for income properties, or private lending, and so on.

The key to success is investing in solid assets that produce passive income, and being diversified.

The problem is that most individual investors and even small real estate businesses can only realistically expect to really be good at one or maybe two strategies. You’ve got to master many things just to be an expert in notes. The same applies to wholesaling. Trying to master too many things on your own normally leads to being mediocre in all of them.

Instead, master your own business, and hedge your bets and future proof your money (income and net worth) by outsourcing investments in other categories.

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund

Fuquan Bilal

Fuquan Bilal founded NNG in 2012 with the principal mission of capitalizing on the growing supply of mortgage notes in the interbank marketplace. Mr .Bilal utilizes his 17 years of residential and commercial real estate success to identify real estate opportunities and capitalize on them. To date, he has successfully managed three private mortgage note funds that primarily invest in singlefamily performing and non­performing mortgage notes. His financial acumen and proprietary set of investment criteria enable him to purchase underperforming real estate assets at a deep discount of face and market values, thereby increasing the value of the assets. This, coupled with his ability to maximize the use of leverage, enables him to build strong, secured portfolios with solid passive income flows.

Are Cryptocurrencies a Scam and a Bubble, or Are They The Future?

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By Jan B. Brzeski

We have reached a very interesting moment for those of us with a strong interest in finance and economics. In recent weeks, some of the leading minds in the investment and finance business have opined about Bitcoin and other cryptocurriences. Jamie Dimon of JP Morgan Chase called Bitcoin “a fraud” and Howard Marks has referred to it as a “speculative bubble” or “pyramid scheme”. He then revised his view, noting that it could be used legitimately as a medium of exchange, so long as enough people agree to accept it.

At the same time, if you ask a young person what he or she would do with $1 billion, don’t be surprised if the answer is to put a significant portion of it in Bitcoin and/or other cryptocurrencies. Silicon Valley is betting billions on the emergence of a sophisticated ecosystem centered around cryptocurrency. What is going on here?

I think the answer is a combination of three trends:

  • Decreasing trust in nation-states and in the U.S. in particular
  • Disillusionment with the established economy and today’s intergenerational bargain, and
  • Cynicism about banks and other financial companies

Many young people have good reason for their disillusionment and skepticism about traditional currencies and other trappings of our existing financial system. Given this backdrop, we may be witnessing a very historic moment where the smartest people in our current establishment just can’t see what is really happening–which explains why they are so out of synch with proponents of cryptocurrencies.

Lack of Trust in the U.S.

After World War II, the U.S. was widely viewed as both an economic superpower and a force for good in the world. When he left office, Franklin D. Roosevelt’s approval rating was 70%. By comparison, after his perceived positive handling of a string of hurricanes, Donald Trump’s approval rating has risen up from the high 30s to 40% as of September 2017. In the most recent Gallup poll, Congress enjoyed only a 16% approval rating, with 79% disapproving and 6% having no opinion.

Young people might reasonably ask, if the U.S. is one of the most democratic countries in the world, and the best we can do is to elect this President and Congress, why should I put any faith at all in government–or in the U.S. as a nation, or democracy as a system? And what about residents of other countries such as China, India, Russia, France, England, Brazil or Japan? In each case there is ample reason for younger people to feel very disillusioned about their parents’ generation and the outcomes wrought by their current political system.

Disillusionment with the Economy and Intergenerational Bargains

Today’s young people lost a lot of faith in our economic system during the last financial crisis. Millions saw their parents lose their homes to foreclosure. Today homeownership is totally out of reach for many urban coastal residents. Because a variety of factors, a small group of elites seems to be receiving a disproportionate share of the rewards that our economy produces, while the vast majority of people see stagnant income and rising health care and housing costs. With each passing year, one can feel the frustration building.

Furthermore, Moody’s has estimated that state’s unfunded pension liabilities stand at $1.75 trillion. This is the difference between the promises made to state public employees such as police and fire professionals, and the amount of money set aside to meet those promises. A further liability exists in the area of public infrastructure, where many highways, roads and bridges were built generations ago and have not been kept up. The American Society of Civil Engineers graded our infrastructure a “D+” with a cost of $4.6 trillion to bring it up to a “B”.

Together, these liabilities represent selfish behaviour by baby boomers and other older Americans at the expense of today’s younger Americans. Without knowing all the details, today’s teenagers and young adults understand what has happened. Their future has been mortgaged to support more consumption by their parents’ generation.

Cynicism About Banks and Other Financial Institutions

During the financial crisis, banks are widely perceived as having benefitted from originating and selling mortgages they knew were destined to fail. Bankers made huge amounts of money, and the world financial system came very close to collapsing. The public purse (taxpayers) had to bail out the entire banking system, and yet no bank executive was ever really punished. All of this is well-known and is resented a great deal by the average American, who makes a fraction of what bank executives get paid. One could argue that Donald Trump’s election was as much as anything a protest against elites who protected and coddled Wall Street and big banks, which banks in turn paid political elites large sums of money in the form of campaign contributions and speech fees.

While cynicism about banks and Wall Street has existed for a long time, we may have reached a tipping point. A recent Gallup poll noted American’s confidence in banks had dropped 22 percentage points in 10 years, from 49% in 2006 to only 27% in 2016.

Conclusion

So what are we to make of Bitcoin and other cryptocurrencies? Are Jamie Dimon and Howard Marks right to question their legitimacy? Or is Silicon Valley right to say, as one company CEO said recently, that the blockchain technology behind cryptocurrencies is the single most important innovation since the Internet?

It may be that both groups are right. The value of Bitcoin and Etherium may drop dramatically or even go to near zero. True, there is nothing behind these currencies–nothing “real”–other than an agreement and trust among a group of investors that they should have value.

The larger question is, what happened to the trust Americans had in the foundations of our current society and our world? What is the future of trust in national currencies, elected governments, democracy and our other institutions? And how much do young Chinese and Russian people trust their governments to act in their best interest?

Maybe cryptocurrencies are best seen as a revolt and a rejection of traditional institutions. Many young people are embracing the idea of system that is independent of any country or any elites. This seems like a trend that is likely to gather steam rather than peter out. Whether it is Bitcoin or Etherium or something else, there may be a real need for a new vessel for our trust and confidence, that is “outside the box” and outside the control of world leaders, elected officials and the traditional financial and economic system. Bitcoin and Etherium were designed specifically to bypass all of our current institutions, and at the moment, they seem to have arrived at the right place and the right time, to attract support from a generation that is largely unhappy with the way things work today.

Jan Brzeski
Managing Director and Chief Investment Officer, Crosswind Financial/Arixa Capital Advisors

Mr. Brzeski is the Managing Director and Chief Investment Officer of Crosswind Financial and Arixa Capital Advisors, LLC, which together are one of California’s leading private real estate lenders. Previously, Mr. Brzeski worked in commercial real estate acquisitions, lending and asset management for a leading Southern California real estate family office. He began his career working at Goldman Sachs & Co. as an investment banking analyst.  Mr. Brzeski holds a M.A. in philosophy, politics & economics from Oxford University, a B.A. in physics from Dartmouth College, and is a licensed California Real Estate Broker.