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00:00And today, they're gonna crash.
00:02It's gonna take people down.
00:03And now it's here.
00:04Office buildings will soon be homeless shelters.
00:07Oh, I took your advice.
00:09I bought a house.
00:10I'm gonna make some money.
00:11I said, at the top of the frickin' market,
00:14don't listen to your stupid real estate agent
00:16who tells you that, oh, the price of real estate
00:18always goes up because it doesn't.
00:20When I hear people coming up to me,
00:22oh, the price of real estate going up
00:24and they're jumping in to buy real estate right now,
00:26I don't say anything.
00:27And the reason is, is that people are just getting
00:30into the hype, all this credit, it's actually debt,
00:33credit and debt pumping into this economy,
00:36trying to prevent this crash.
00:38And if inflation keeps going, I get richer.
00:41I am extremely happy.
00:42He intentionally wants inflation.
00:45That's why he shut down the XL pipeline.
00:47That's why he stopped drilling to get oil prices up.
00:50When oil prices go up, you know all these truckers
00:52in Ottawa screaming, they can't get food to the table
00:55and all this, prices of food go up,
00:57inflation keeps going up regardless of what's going on,
01:00just because the policy is shutting down the XL pipeline,
01:03stopping drilling of oil.
01:05So the price of oil goes up.
01:06I watch all this.
01:08And meanwhile, these people are jumping out
01:09and buying real estate like there's no tomorrow
01:11and I can't even talk to them.
01:13We're on a turning point.
01:14But please understand, ladies and gentlemen,
01:16inflation makes the rich extremely rich.
01:20The middle class will pay higher taxes
01:23and the poor will get poor because they're the ones
01:25who can't afford that $25 Wagyu steak
01:29that my friends are selling.
01:31So that's why it's one of the biggest critical turning points.
01:34And that's why I don't know how many years ago
01:35when I walked past Rich's book and borders,
01:39and it says the dollar crisis.
01:41If you understand what's going on,
01:43the problem is the US dollar.
01:47Because in 1944, it stopped being money.
01:49It just became the reserve currency of the world.
01:52And then 71, Nixon took the dollar off the gold standard.
01:55We're being set up right now.
01:57One of the biggest changes in world history.
02:00And it's, oh, I bought a property.
02:02What do you think?
02:03I can't even talk to him.
02:04Because this to me is 2007 all over again.
02:08And then the repo market collapsed.
02:112008, the market collapsed, and back in 2008,
02:14this guy named Bernacki, I believe it was,
02:16could print money.
02:18And this is where we are today.
02:19You've got to wake up, ladies and gentlemen,
02:22because otherwise you're just this stupid little hog
02:25just driving to slaughter.
02:28So America is one of the, we're at, not just America,
02:30one of the biggest turning points in world history.
02:33And like, I think it was Rockefeller,
02:35one of those guys said is,
02:36when shoeshine boys are giving you stock tips,
02:40time to get out.
02:41And I was in Safeway the other night,
02:42and these people are coming up to me,
02:43I did what you said, I did what you said,
02:45I bought a rental property, I bought a rental property.
02:49And I came back home and I said to Kim, time to sell.
02:52It is so dangerous, but you can't talk somebody out of it
02:54because they drank the Kool-Aid.
02:56So that's why I'm really honored to have a dear friend,
02:58Richard Duncan, been friends for years.
03:01He helped Kim and I time the last turn back in 2008.
03:05We made fortunes because while everybody was selling,
03:07we were buying and that time has come again.
03:10And so that's why please listen
03:11to what Richard Duncan has to say.
03:13A few months ago, the Fed was still creating
03:16$120 billion every month.
03:19And then in November, they said they were gonna start
03:21tapering that, reducing that by $15 billion a month.
03:25But the very next month in December,
03:26they said they're going to double that,
03:28reduce it by $30 billion a month.
03:31And that meant that it's going to come to a complete stop.
03:33The money printing is going to end totally early next month.
03:37No more printing next month.
03:39No more printing.
03:39And then the real blow came.
03:42They started letting it be known
03:43that they were planning to do the opposite.
03:45Is it a printing a lot of money through quantitative easing?
03:48They're going to start destroying a lot of money
03:50through quantitative tightening.
03:52Now, when they print money, that pushes asset prices up.
03:56When they destroy money, that tends to make asset prices fall.
04:00How do they destroy money?
04:02Well, they destroy money because when they print money,
04:05they buy bonds with that money.
04:07And normally when the bonds mature,
04:09they just roll them over and buy a similar kind of bond.
04:13But they destroy money by essentially selling those bonds.
04:18And when the Fed, what happens is the bonds mature
04:21and the Fed doesn't roll them over.
04:23Someone else has to buy the bond.
04:25So the Fed gets its money back.
04:27And when the Fed gets money back, that money just evaporates.
04:30The Fed doesn't need to keep any money
04:32because it can make all the money it wants anytime it wants to.
04:34So it's a bit complicated to explain in just a few sentences.
04:38But the bottom line is, it's the opposite of quantitative easing.
04:41Quantitative tightening destroys money,
04:43and that tends to make the stock prices fall.
04:46And we're about to get a heavy dose of quantitative tightening
04:48coming into effect within the next couple of months.
04:51And it's going to make it harder and harder for mom and pop
04:53to go buy that house to expect they're going to flip.
04:56And isn't that going to drive inflation through the roof?
04:59Well, they think the opposite when they, instead of printing money,
05:02that's the thing that normally causes inflation.
05:04It stimulates the economy, it creates growth.
05:06But when they destroy the money,
05:09that tends to make asset prices fall like stocks and property.
05:13So people are less rich, so they spend less money.
05:16And if they spend less money, then prices tend to fall.
05:19So that's why they're doing this.
05:20They're worried now that the inflation rate has moved up to 7%.
05:24And they're taking steps to bring it back down.
05:26But what they may find is this could cause a significant stock market crash.
05:30And some of the high flying stocks got hit a whole lot harder than that.
05:33There goes your 401k, sweethearts.
05:36And that's why I spoke out against 401ks forever.
05:39You know, and all you guys who are going to,
05:41you're planning on renting your property.
05:42People won't be able to afford the rents.
05:44That's what it means.
05:45Well, so total credit is equal to total debt because one person's loan is another person's debt, right?
05:53So the two have to equal each other.
05:55So one way of thinking about this, the easiest way to think about it is all the debt in the country.
06:00Government debt, household sector debt, corporate debt, financial sector debt, all the debt.
06:05It first went through $1 trillion in 1964 when I was four years old.
06:11Now it's $90 trillion from $1 trillion to $90 trillion during my lifetime.
06:18And this credit explosion, which would not have been possible if we had remained on a gold system where dollars were backed by gold.
06:26But this explosion of credit has transformed the world.
06:29Wait, Richard, hang on, hang on.
06:30You're speaking like an economist again.
06:32Credit is what the Fed and the Treasury allow people to get to the big banks like Wells Fargo and all that.
06:38And that credit then allows people, the banks, to send out debt.
06:42So then corporations and individuals come in and they take credit and they turn it into debt.
06:46But it's the same thing.
06:48So by creating credit, debt could explode.
06:51Am I correct on that or incorrect?
06:53No, I think you put that exactly right.
06:55Yeah, credit's not a word people use.
06:56They use credit card.
06:57What they think about debt, their household debt.
07:00So that's what I'm saying.
07:00We don't teach economists.
07:02You know, we teach everyday mom and pop who is trying to speculate on their 401k or their house.
07:08The reason I tend to use credit is because I say this system that we have now is not capitalism.
07:13It's creditism.
07:14Yes.
07:15Creditism sounds better than debtism.
07:17I tried that.
07:18Debtism.
07:19Creditism works better.
07:21Capitalism to creditism.
07:22Because credit growth drives economic growth now.
07:25We're dependent on it.
07:26Yeah, what Richard is saying is the way America grew was because we produce products.
07:31Now we don't produce products when they create credit or debt.
07:34Am I correct on that one?
07:36That's right.
07:36Instead of our economy being driven by investment and savings as it used to be,
07:41it's now driven by credit creation and consumption.
07:44And more credit creation and consumption.
07:46And that's been great.
07:48The problem is it requires credit growth to survive.
07:51If credit contracts, we have a depression.
07:53And that has made us dependent now on government borrowing and government spending to keep us
07:58out of depression.
07:59So if you're going to buy, you know, I mean, I know how many people, oh, I took your advice.
08:04I bought a house.
08:05I'm going to make some money.
08:06I said, at the top of the fricking market.
08:09And what about all these guys in this 401 case?
08:12401 case came into existence in 1974.
08:15It was called Eressa.
08:17And I just speak out against 401 case because I would get censored with this one.
08:22But 401 case like a condom.
08:24It gives you a false sense of security while you're being screwed.
08:28Do you know what I mean?
08:28And if this market crashes, when they raise these interest rates, if they do,
08:32you know, your 401k turns to 201k.
08:36Just as you get ready to retire, all you old guys like me, hear what I'm saying?
08:40If they raise interest rates because they're going to stop inflation,
08:42your 401k may be toast.
08:45I'm not saying it's going to happen.
08:47Or if you're a millennial and you've got mom and dad who are living in la la land with their
08:51two 401ks, you might be in serious trouble.
08:55A very important subject.
08:57And the subject is real estate, basically.
08:59It's important simply because it's real estate.
09:01Parts of it are in serious, serious trouble right now.
09:03But when things are bad, also there's good opportunities for things.
09:06How many places in the world have we gone to?
09:09It's been all over the place.
09:10Yeah, we travel the world.
09:10We're talking about real estate because number one, real estate uses debt.
09:14And you may or may not know this, but the US dollar is debt.
09:17In other words, money cannot exist unless somebody borrows it.
09:21And so all these guys, our friend Dave Ramsey always says, live debt free.
09:24I go, you got to be crazy.
09:25But I want to back Dave up.
09:27If you don't know how to handle debt, definitely live debt free.
09:30Right, Kenny?
09:30Yes, that's right.
09:31I agree.
09:32If you don't know what money is and how to use it, then he's right on.
09:35I met Dave, a restaurant up the street here.
09:38And he's a great guy.
09:39And his advice for most people is cut up your credit cards, get out of debt and all this.
09:43But Kenny, what's happening in the real estate market?
09:45Today's interest rates go up and all this stuff.
09:47I just heard Richard Fisher, the Dallas Fed chairman.
09:50He said a unit, I could be wrong on the numbers, 3,500 units.
09:54One apartment complex went down.
09:56Wow, that's a lot of property.
09:58And Blackstone defaulted on debt in New York on a set of buildings.
10:01I call it, we're in the first inning.
10:02And I'm afraid it's going to get worse.
10:04You don't have to be afraid about that.
10:05It's happening already.
10:06It's definitely happening.
10:07The issue this year and next year is going to be what we call maturing debt, debt that's maturing.
10:12Another thing to understand is different types of real estate.
10:15Some of the worst properties are the darling is called office buildings.
10:17Everybody thought, oh, I'm going to own an office building in Manhattan and all this.
10:21And today, they're going to crash.
10:22It's going to take people down.
10:24I just read an article today, Robert, that the cities and counties are actually throwing
10:27money at developers to convert office buildings into apartments.
10:30They already know that those buildings, those office buildings are going to be eyesores at
10:35some point.
10:35I was a student at Dr. R. Buckminster Fuller.
10:37We call him the friendly genius.
10:39You know, John Denver called the grandfather of the future against the futurist.
10:42And years and years ago in the 80s, I heard him say office buildings will someday be homes
10:46for homeless people.
10:47I went, what?
10:48You know, that was sacrilegious for me back then.
10:50And now it's here.
10:51That's quite a prediction too.
10:52That was what, how long ago was that?
10:5350 years?
10:5450 years ago.
10:55I'm listening to this guy.
10:55He says office buildings will soon be homeless shelters.
10:59And you look at the number of homeless exploding.
11:01I don't want to be an owner of a homeless shelter, as you know,
11:03it's either going to be the worst of times for real estate or the best of times, right?
11:07The reason living debt-free makes no sense, simply because the fiat currency called the
11:11US dollar, the yen, the peso, the euro, they're debt, they're instruments of debt,
11:16like a bond instrument of debt.
11:18And that's why they say living debt-free kind of goes contraindicative.
11:22How can that be if it's debt?
11:24But the good thing about debt is it's debt.
11:26And on top of that, the more debt you use, the less tax you pay.
11:29It's not obvious to a lot of people.
11:30Just do what the Fed's doing.
11:32Yeah.
11:32It's the strangest markets.
11:33We're in serious, serious world.
11:35The economy is in serious trouble, but it's also a great opportunity time.
11:38We use debt all the time, 100% debt.
11:40And I tell you, it is a game of debt.
11:42We're borrowing at less than inflation.
11:44So that's when we talk about money.
11:46That's how you do it.
11:47Another good thing too is the amateurs are now floating to the surface, as they say.
11:51I feel terrible for people because people come up to me and they go,
11:54oh, I took your advice.
11:55I bought real estate.
11:56I'm going, holy moly.
11:57Real estate's not like a stock.
11:59You don't just buy real estate, you buy Apple.
12:00The difference is if you buy Apple stock, and let's say it's 10 bucks,
12:04and it goes down to six, you can get out of it really quickly.
12:06But with real estate, it's not that liquid.
12:08And that's why you've got to be smarter.
12:10And why I cringe when people say, oh, I just jumped into real estate.
12:12I go, oh my God.
12:13It's like jumping off a moving train or something.
12:15You know, so much is going on in real estate.
12:17What happens is guys like you, or I would say anybody over 50 has seen it.
12:23They've seen the cycles.
12:24They've felt the pain if they made it.
12:26But a lot of people are pretty delusional about, and it has been for years.
12:30Next year's going to be better than last year.
12:31It's just not the case.
12:33No.
12:33What happened since 2008, they kept lowering interest rates,
12:36and the whole world economy went into a bubble.
12:38Correct.
12:38It was a real estate bubble, a bond bubble, and a stock bubble.
12:41And so everything got inflated.
12:42But as they've started the lower interest rates in 2020, or high-raised interest rates in 2020,
12:47a lot of those bubbles are bursting.
12:48So it's good news and bad news.
12:50And all of us are old guys.
12:51The people I caution that you have a financial planner that's at 35, let's say.
12:55That financial planner is only known to boom market.
12:57You know, because as it dropped interest rates, the market kept going up.
13:00So I meet some of the young women and men, they go, oh yeah, yeah, yeah.
13:03All they know is a good market.
13:05But the biggest opportunities float when the bodies start floating.
13:08You know, when the bodies start floating to the surface, you go, oh my God.
13:11I can't believe that came up.
13:12Oh my God, look at that.
13:13You know, there were so many deals coming up when the fish start to float.
13:17And it goes to the saying, your profit is made when you buy, not when you sell.
13:22So the cash flow versus capital gain strategy that you laid out in Bridget Head Poor Dad,
13:26this is the time where you're going to start to realize that philosophy.
13:29That's been our philosophy all along.
13:31Everything I have, cash flows.
13:33And that's just not the case for a lot of people.
13:35A lot of people bought big, big assets on a capital gain strategy.
13:38And guess what?
13:38That gain is not there.
13:40So capital gain strategies, we call it flipping.
13:42When I first met Kenny 20 something years ago, everybody was into flipping.
13:46She'll flip this house and all this.
13:48So you buy a property for, let's say, 10,000.
13:50It goes up to 15,000.
13:52You flip it in net five, but you pay capital gains.
13:54And we don't do that.
13:55I'm chuckling because the world's full of real estate gurus.
13:58If you're a housewife or a house husband and you bought two real estate properties,
14:02you're now Donald Trump as far as you're concerned.
14:04Right.
14:05But there's some of these charlatans on YouTube.
14:07I've got into arguments with some of them.
14:09This guy says, the way you get rich, just go out and buy a 200 unit apartment house.
14:13And I said, you don't start with a 200 unit apartment house.
14:15That's suicide.
14:16But that's what he was selling.
14:18And I know the trick is called a bait and switch.
14:20So you go there.
14:21He shows you how you too can buy a 200 unit apartment house for like nothing down and all
14:24this other stuff, but you're on the hook for millions.
14:27And then you go roaring off and try to do it.
14:29His real gimmick is to sell you what he's selling.
14:31Oh, you can't do it.
14:32I can do it for you.
14:33Yes, exactly.
14:34It's frightening times, but it's also exciting times.
14:36Always remember your profit is made when you buy.
14:39And then one of the things I really get kind of sad about people, you know, when real estate
14:43started going up, everybody started jumping in.
14:45And that's not when you jump in, not when it's going up.
14:47You want to ride that roller coaster down and then buy.
14:50When there's a line out the door of people trying to buy the asset, that means it's over.
14:54As many of you know, the economy is on shaky grounds.
14:57You know, banks are failing all over the place.
14:59And the question is, what do you do about it?
15:01And I get really, really excited because your profits are made when you buy.
15:05And as prices of real estate crash, it's actually the best time to be a buyer.
15:09But as I say it again, I meet people who are amateurs at this business.
15:13They wait, you know, the price on the 100,000 went up 200,000.
15:15Oh, we've got buyers lined up for the property.
15:17And that's when people jump in.
15:19You should be getting out.
15:20Another thing, too, is that people say, well, I don't have money in all this.
15:23When the real estate market crashed, it's crashed several times.
15:25Yep.
15:26And I had no money.
15:27And I said, we're trying to put a deal together when interest rates were 12%.
15:30And people come, oh, you know, I would have killed back then for a 5% to 6% interest rate.
15:34It's always a good time, but you have to know what you're doing with real estate.
15:37My rich dad always said, only lazy people use their own money.
15:40I know.
15:41Gosh, that was such a great statement.
15:42It's true.
15:43Yeah.
15:43People don't realize like when you put your money with an insurance or a pension or even
15:47in a bank, it's a liability for those institutions, period.
15:50They owe you expense, you know, in the form of interest.
15:52That's a problem for them.
15:54So they have to lend it to guys like us.
15:55And that's called OPM or other people's money.
15:58And always remember this, the US dollar or the Euro and all these other currencies,
16:01they come into existence only by people borrowing it.
16:04Yes.
16:05And that's why our friend Dave Ramsey says live debt free.
16:08And that's good advice if you don't know what you're doing.
16:10Because I still remember putting deals together, interest rates were 12%.
16:13You have to get smarter.
16:14That's all it means.
16:15It's the bubble went up.
16:16Now it's coming down.
16:17Right.
16:17The people that are in trouble, the people who jumped in late, they were at the top of
16:20the market.
16:21It's going to keep going up.
16:22That's a big lie is that real estate always goes up.
16:24That's not true at all.
16:25No, my gosh, it's delusion.
16:27It's that herd mentality, right?
16:28Everybody's jumping on.
16:29You know, I'm going to miss out and next year is going to be better than last year.
16:31That's not how real estate works.
16:32No.
16:33We also practice what we preach.
16:34We study also.
16:35We were just in Dallas, outside of Dallas, and we call the place called The Ranch.
16:39And the instructor said that the reason people are poor is because they're farthest from the truth.
16:43Yeah, that really hit me.
16:44The truth is what the truth is, period.
16:47And then you've got people's realities, which is typically further from the truth.
16:51Not always, but the further from the truth you get, the poorer they are.
16:55Yeah.
16:56So ever since the last couple of weeks, I see a poor person.
16:58I said, I wonder what truth they're away from.
17:00There's something they've not seen.
17:02And when I wrote Rich Dad Poor Dad 25 years ago, he said, your house is not an asset.
17:05I nearly got crucified on the cross for that one.
17:07Yeah, now everybody says it way ahead of the game.
17:10Do you know what I mean?
17:10There's nothing worse than hanging out with a toad.
17:12No.
17:12Do you know what I mean?
17:13Like, oh, I told you real estate was bad.
17:15It crashed.
17:16Oh, I told you, you know, I don't want to buy real estate because you have to clean toilets
17:19and all this stuff.
17:20I hear all of that stuff.
17:20But that's what we learned last week in Dallas.
17:23The poorer you are is because you're furthest from the truth.
17:26And when they tell you get out of debt, that's really not the truth.
17:29Well, it was interesting because remember, we were down there with Dr. Nicole,
17:32and she said, you know, it's the same with health.
17:34The further you are from the truth around health, the worse condition you're in.
17:38So the truth, it's a very interesting thing in the reality or your perspective,
17:41or even your opinion can be very far away from the truth.
17:45Right.
17:45And some of the truths, the reason people are poor is as well.
17:48I don't have any money.
17:49I can't afford it.
17:50That is not true.
17:51That's your opinion of your measly little self.
17:53Yeah.
17:54You have the power to do what you want to do.
17:56I definitely don't think that we're going to be able to fix inflation for a while.
17:59No.
18:00So that's number one.
18:01You got to be really careful.
18:02You know, we never really had to think about that too much, right?
18:04Inflation has been low and it slowly eroded our purchasing power, but now it's different.
18:10The gloves are off.
18:11So you can't just put your head in the sand because if we're going to be at five,
18:15six percent inflation, I mean, you're talking about 15, 20,
18:1830 percent reduction of your purchasing power in just a few years.
18:21So you have to figure out how can I hedge myself against inflation?
18:24And that could be lots of things.
18:26You know, what's going to grow with inflation?
18:28It doesn't necessarily have to be real estate.
18:30It can be anything.
18:31That is certainly one of those things.
18:32I thought there was going to be a big problem in real estate,
18:34but Kim and I had a property and we're up for sale for 9.75 million.
18:38The realtor says it'll never sell.
18:39It's sold immediately.
18:41And the reason is, is what happens with inflation, your cash becomes trash.
18:45But also the reason the realtor finally said, oh, we misjudged this market,
18:48you know, $10 million, it's a residential property.
18:50It's a pretty nice one in Hawaii.
18:52And the reason the person bought it is they'd rather have their cash
18:55sitting in a piece of real estate than in the bank.
18:57You got it.
18:58What does that tell you?
18:59Yeah.
18:59The farther from the truth you are, the poorer you are.
19:01And the biggest lie ever told is it takes money to make money.
19:05That is not true.
19:07You know, don't worry about being the skipper of the Titanic.
19:09I've been the skipper a number of times, but it's always a good swimming experience.
19:12That's how you get smarter.
19:13Great.
19:14And I won't say this much.
19:14I've never lost money in real estate.
19:16I got in trouble.
19:17But when you scramble and you do what you have to do,
19:19you get smarter and smarter and smarter.
19:21And you go, man, I'm really glad I got into this trouble because I got smarter.
19:24The reason I say that, the average person is drinking the Kool-Aid.
19:27They just go to school, get a job, save money, get out of debt,
19:30and invest in a 401k or an IRA.
19:33You don't learn anything that way.
19:34You don't learn anything.
19:35So by jumping in as an idiot investor, you get smarter pretty quickly, right, Kenny?
19:40I love Buffett's quote.
19:41You know, he's like, when the tide goes out, you see who's swimming naked.
19:44And the tide is going out right now, my friends.
19:46And there's going to be a lot of opportunity.
19:48Yep.
19:49You actually said that you're currently $600 million in debt.
19:53No?
19:53$1.2 billion.
19:55So today I own about 12,000 rental units.
19:58But that's not the story.
19:59The real story is how did I acquire those property?
20:02I use debt.
20:03And that's what they don't teach you in school.
20:05You see, the more debt I use, the more property I own, the less tax I pay.
20:09And so then these communist school teachers tell you to get out of debt.
20:12Like what's his name, Dave Ramsey and all that live debt free.
20:16And that's good advice for the average person because debt will kill you.
20:20But debt is money today.
20:22And so when I acquire an asset, I use debt.
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