How I’ve Financially Repositioned, The Last 2.5 Years

Part 3 of 3

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In Part I of this series, I reviewed 14 economic experts whose work I highly value, whom you may wish to follow on YouTube, as well.

In Part II, I talk about two categories of influencers and economic experts whose content I don’t value much, after spending quite a bit of time in both camps.

Today, I’m sharing my own financial repositioning, which involves a radical shift from growth-and-income (risk-on) investing, to capital-preserving (risk-off) assets.

Investing in real estate rental properties was my exit strategy as I looked down the road, at “retirement” (which for me would probably be something like working 20-30 hours a week, rather than 50-60).

I owned about 25 doors in three states, and that was a fine idea while assets like real estate were hyperinflating, especially between 2020 and the beginning of 2022. And before “rent controls” and “rent moratoriums” became part of American vocabulary, since 2020.

Every homeowner was gloating that their house was worth 25% or 50% more than it was, just a year or two before I sold most of my real estate that I don’t live in.

(Though I’m not sure what good that does you, unless you downsize, because you’ll have to buy another home at similarly inflated prices. Or another good idea would have been if you peered into your crystal ball and knew that selling in January of 2022 and holding the cash, until deflating values and increasing inventory made it a good idea to buy a smaller property, perhaps without debt.) 

I do know a number of people who have been downsizing this year, as they realize their debt is too big, in an environment where they could end up “upside down” inside a home loan that is higher than the price you could get, if you sold the home. For those who bought, highly leveraged, between 2020 and Q1 2022, going “upside down” is a very real possibility.

Lots of people write me about their plans, asking my opinion. One of the smartest things I read, was a couple who sold their house in 2021, and live with their small children in a trailer, visiting places while waiting for the real estate market to take a haircut, where they can buy a smaller or less expensive home.

Now this could backfire with increasing inflation rates, though I think Jerome Powell will move out of “quantitative tightening” (raising rates, to bring inflation down) to “quantitative easing” (creating money out of thin air, as “stimulus,” and decreasing interest rates) probably before the end of this year--so eventually, there may be a way to buy back in, especially if this buyer is able to pay cash, if they were able to cash out, at the “all-time highs” and come back into the market after a correction or a crash.

Let’s face it, that’s very hard to do, though. You’ve probably already missed that window, reading this in July of 2022 and beyond.

Being “upside down” in a loan is fine only if you have no equity in the house, and just got into the loan–or if you are willing to wait it out. Between my husband and me, that has happened to both of us, in our first marriages.

John’s wife insisted they buy a house he didn’t feel they could afford, right before the “bubble” burst in 2008, and they ended up in a “short sale,” where the bank takes the property back, and takes the hit on selling it for less than the mortgage, and the buyer walks away from it. This didn’t really hurt John and his first wife, except probably in their credit rating, because they hadn’t earned any equity anyway.

My first husband and I built a 7,000 sq. ft. home in 2007, and just stayed in it, paying it off eventually. When I sold it, I made approximately $0, after 12 years. Because I paid an all-time high price, for a custom build, right before the bubble burst. And it took 12 years for values to rise back up to the level I’d paid originally.

One way to write that idea off, in your mind, the loss of value in real estate all homeowners are likely to experience, is to remind yourself that none of us “earned” that hyperinflation. Most of the world owns no assets at all, and we can’t really in good conscience be too upset, that the law of physics “what goes up, must come down” applies in real estate, too, especially if “what goes up” goes up too much and too fast.

I got out of all but 5 doors, in 2021. I reinvested in a handful of cryptocurrencies, mostly BTC and ETH, as well as gold and silver. The first things I would do, though, in most people’s cases, are (a) purchase basic preparedness items, and (b) get out of debt as much as possible, especially consumer debt and car loans, with their high interest rates.

I’m not bailing on real estate entirely, and still own my two homes in Florida as well. (Selling at the peak, in Park City Utah, allowed us to buy two smaller homes in less-expensive Florida, so that we have a ranchette with a well and high security [fenced/gated] that we can plant fruit trees and garden on, install solar, and we have a small home on the beach, as well. Those two smaller homes, combined, cost significantly less than the Park City home sold for.)

One home is for Florida beach life–and the other is for preparedness and and self-sufficiency, as we ride into the economy’s storm. Additionally, I have been preparing with the sense that we may need to host family members, since I notice that nearly everyone in my life is carrying on as if it’s “business as usual.”

It was hard to let go of “the dream.” I was planning to semi-retire, and work mostly in content development, and much less in operations and “running the business,” starting in 2020.

(I intended to delegate more ops to my wonderful staff; instead, my 35 years of experience in pivoting and strategy is more necessary than ever, in my business.)

It was hard to realize that I’d have to work harder, in what’s left of the “free market system,” to make half as much. And it was hard to let go of rental properties as my off-ramp, or the way I could free up time from working, and give more time to service and other things I enjoy. Hardest of all has been watching almost everyone I care about do nothing to reposition themselves or prepare for what’s coming.

It felt entirely necessary to me, to pivot. The changes I’ve made are not minor; they are massive changes strategically, tactically, and technically. Biden quickly told Americans, upon taking office, that by presenting their landlords a letter saying the word “COVID,” they could simply stop paying rent, if the plandemic had affected them at all.

Two Supreme Court decisions invalidated that action by the Executive Branch, but in late 2020, 20% of Americans were behind on rent, and 10M Americans were behind on mortgage payments. Many parts of the country refuse to enforce evictions. Some like New York imposed rent controls (so a landlord could end up having higher expenses, than s/he can collect in rents. And many states protect squatters’ rights.)

An Oregon couple I met recently, who just moved to Florida, told me that Governor Brown signed into a law that if you’ve been in a property for 72 hours for any reason, you have squatters’ rights to it. The real estate rental market is beginning to look like a game of musical chairs.

I find that most landlords I talked to in 2021 were completely unaware of how Marxism coming to roost in the USA would affect them. (Mao pitted tenants against landlords in an even darker way than Biden did, telling them to actually kill their landlords and take possession of properties, which many people did in the 1960’s and 1970’s.) I wrote a recent post called Why Real Estate Is No Longer A Good Investment.

But in 2022, it’s very few landlords I talk to, who aren’t aware, since they’re having to navigate tenants who cannot pay their rent, some of whom won’t move out–or they at least know other landlords who can’t get a tenant out or get rent from them.

If I post about this on Facebook, people write angry reactions, since we’ve been so conditioned by socialist-think that we believe that “housing is an essential civil right,” and it’s the government, or someone who has money, who must be responsible to pay for the housing for those who do not have money.

Of course, the obvious Conservative or Libertarian argument against all that would be that in such a system (a) those who have money, have no motivation to earn it anymore, when the government takes and redistributes it; and (b) those who do not have money, have no motivation to earn any, when their rent is provided free of charge.

I believe that most Americans highly prioritize paying their rent, given a lifetime of that being a requirement, plus a lack of awareness of how many rights a tenant “squatter” has. Those rights vary by state, but are dramatic, and a major reason I got out of most of my real estate.

In 2021, I had to bribe a tenant to leave, paying his deposit on the next place and even finding a place for him and driving him there, since he was incapable of doing so, due to a substance-abuse problem. That was a significant motivator to sell that and several other properties, as having non-paying or otherwise problematic tenants felt more stressful than not having equity “safely” stashed in real estate.

In 2020, I offered all of my tenants a discount if they could pay 6 to 12 months up front. All of them did so. In 2021, I did an experiment, offering all of them a locked-in year of the same rent, plus a discount, for 6 or more months of rent upfront, and not one of them could afford it.

That experiment did not bode well for my wanting to stay highly invested in real estate.

Besides “sound money” that is primarily a good “store of value,” unattached to the dollar–namely, gold, silver, and Bitcoin–I am interested in commodities.

I have not invested in any yet, however. The problem, there, is best summarized by saying that I just don’t know enough about it, to invest–not yet. I’m getting close, to being ready to start investing.

As I write this, the only way I’m invested in the stock market, is betting against it, shorting it–in a fund called SPSX, in which you receive triple the losses of the S&P 500.

As I write this, I’ve already made 25% above my investment, enough to pay for the new air conditioner I just bought; but I’m letting it ride, betting on much deeper losses in the market as Powell continues to raise interest rates.

I’m not advising YOU do this investing strategy; I’m not a financial advisor and this is not financial advice; shorting the stock market is risky, but it’s just a little game I’m playing.

I would very much like to invest in strong funds in copper, lithium, uranium, and other metals. These funds’ prices are way down, with the rest of the stock market, while there’s also a desperate shortage of those metals worldwide. For instance, lithium shortages are holding up completion of 95,000 GM cars in the US, and GM is looking for a place to hold those cars until (they hope) chips are available, in 2023.

And gold and silver are expected to go up meteorically in the event of a major economic crash–or at least, they always have, to date.

But natural-resource mining is fraught with moral problems, like taking advantage of people and resources in third-world countries, as well as other issues like first-world heavy regulations.

For instance, there is a copper mine in Arizona that Rick Rule talks about, because it apparently has half a billion tons of the highest quality copper in the world.

But it has been in the process of obtaining permits and getting ready to dig–for well over 20 years now. (I would imagine the reason it’s so much easier to go take advantage of Africa and South America is that they’re more disorganized and welcome the jobs and capital into their countries in any form, whereas in the USA, we are very punitive towards companies who want to extract metals from the Earth.)

Oil and gas seem like they’d be a great place to invest, and Rule thinks Shell and Exxon-Mobil are well-run companies. But they’re up against heavy disapproval in North America from executive and legislative branches, who do things like cancel the Keystone Pipeline, like Biden did, his first week in office, terminating 65,000 American and Canadian jobs, plus stopping the development of an important energy-independent effort that Trump famously championed.

Trudeau has been even heavier-handed in his efforts to sabotage oil and gas production within his borders.

Of course, there are broader funds where you can diversify your risks across many companies. I haven’t come to any conclusions yet, but besides physical gold and silver, Bitcoin, and the real estate I live in, but I think commodities would be the next-safest “store of value” as we move forward into the most uncertain and fraught economic climate of our lives.

And I can’t wrap up this last episode in this series, without emphasizing that the most important thing I’ve done, which I have said ad nauseum since March of 2020, is to invest in preparedness. I stand by my position that there are many things you can buy, that will be worth far more than what you paid for them, if you can even get them as we move into the future.

Things like the diesel gas we put in a tank, and the 2006 Jetta we bought, with low mileage. (If they try to squeeze us out of being able to use our electric car, for instance, or cap the number of miles we can drive in the app, we can do necessary driving with a car built the year before they began putting chips in cars, which could allow the government to stop you from driving.)

Commodities you personally invest in might include an extra washer and dryer, not just for if yours goes out, and you cannot get a replacement (due to supply issues or exorbitant cost), but also because they’ll be worth a lot, to someone else who wants it.

Another example is cases of booze. (I’m not referring to the fact that you might want to drink yourself stupid, in Armageddon, though that may also apply–but rather, that even in third-world countries where people have next-to-nothing, they’ll give you their left arm for a fifth of vodka. It’s good for barter.)

I used to store a case of cigarettes. When that case was stolen in one of my moves, I didn’t replace it, as I learned that cigarettes (I’ve never smoked) have a one-year expiration date.

So, my 5 best bets are, in this order, (a) preparedness supplies and commodities I can store; (b) getting out of debt, even paying off your house; (c) physical (rather than “on paper”) gold and silver; ( d) Bitcoin; and (e) commodities. The investments I’ve dumped are real estate rentals, though real estate may recover and continue to go up eventually; and the stock and bond markets.

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