7 Investable Megatrends for the Next Decade

Hello, future billionaires. Welcome back to another episode of the Invest Like a Billionaire podcast. Today we've got something unique for you that we're really excited to share. So we actually did a live webinar just a week ago on investible megatrends. So this is a topic that we've been talking about really for the past year or so, identifying these kind of long-term trends. You know, what's inflation going to be doing? Are interest rates going to remain higher? And are we headed towards a recession? And what's causing all this? Right? So we've really unraveled a lot of it, but things are changing really fast this year and really over the past 18 months. Seen kind of an unprecedented speed of increased interest rates and just keeping track of all the data. So we actually did a fresh look. We've updated all of our charts, updated all of our research to provide the most up-to-date information for you of what's going on on inflation, you know, predictions on interest rates. And surprisingly, I mean, not surprisingly, you know, we've actually been pretty accurate on a lot of the predictions that we've been making up to this point. And so you can kind of see, you know, some of the things that we've been saying that have continued to hold true and then really where we're predicting things are going to keep going. So if you have any interest at all of the economy, where things are headed, just in investment megatrends overall, you definitely want to tune in. And really excited to share this as a, you know, recording of some of the webinar that we have. And if you want to actually watch this in person and actually, you know, get the full megatrends presentation, we'll have a link below in our show notes that you can go and sign in to grab those slides to review on your own. So with that, please enjoy the Investable Megatrends updated data. This is the Invest Like a Billionaire podcast, where we uncover the alternative investments and strategies that billionaires use to grow wealth. The tools and tactics you'll learn from this podcast will make you a better investor and help you build legacy wealth. Join us as we dive into the world of alternative investments, uncover strategies of the ultra-wealthy, discuss economics, and and interview successful investors. Looking for passive investments done for you? With Aspen Funds, we help accredited investors that are looking for higher yields and diversification from the stock market. As a passive investor, we do all the work for you, making sure your money is working hard for you in alternative investments. In fact, our team invests alongside you in every deal, so our interests are aligned. We focus on macro-driven alternative investments so your portfolio is best positioned for this economic environment. Get started and download your free economic report today. Welcome to today's webinar. And if you saw the title, we are talking about Investable Megatrends for the Next Decade. And this is the updated version. So we actually did this at the end of last year and really this whole year. We've both been speaking a lot of places and sharing a lot of this research. And one of the cool things which you'll see if you've watched this, you know, last year is a lot of these megatrends aren't actually that different from what they were before. And that's one of the beauties of— because they are mega, they're actually mega, which means they're not these kind of small short-term cycles. And really why we focus on these longer-term cycles is what we believe is you can actually identify sometimes pretty early directionally where certain markets are going to be going based on, you know, fundamental supply and demand data. And a lot of, a lot of people think or equate, you know, the economy with the stock market and the stock market's going up and down. It's hard to know where it's going to go, but to a large degree, looking at underlying data, you can have a pretty good idea of where directionally things are going to be headed over the long haul. And so that's really what we want to focus on today is, is we've got a lot of fresh updated data on some of these things we've been tracking with for a while now. And this is really important for investors to understand because these are the things that are going to shape the next decade of the investment landscape. And these are big things. And the more that we've been researching these and the more that we've been diving deeper into these things we're looking at, it's, it's only proving out. And in some of these, it's—

we've been very accurate so far. And, you know, there's so much noise out there, you know, I don't know, you know, there's always a reason why there's going to be— there's always a dozen reasons why there's high inflation or going to be low inflation. There's a dozen reasons why we can have a recession or not. So it's sorting through the data and there's so much opinion out there and you see one chart or one thing and it comes with a lot of opinion.

And what we're—

our goal here is to be 100% data-driven. You know, we hate— we hate opinions, including our own, and we just want to look at the data and let the data talk to us. Yeah.

And I think one last thing I'll say to you that I think is so important for people to understand with that in mind is, yeah, you'll see charts that are people throwing out all the different— all the time. We talk about on our podcast a lot. But one of the really important things to understand is, is the scale and impact that, you know, one, economic factor has against the whole, right? So you always have to be holding each data point kind of in tension with all the other data points and really look at the whole picture, right? Because it's really easy to focus in on, you know, savings rates is declining, right, of consumers. And that's— then they go on this whole long article of why this consumer is in terrible shape. But we'll show you the contrary, you know, to that, that point. It's actually the opposite. We're going to get into all the 7 megatrends that we've prepared today, and we may even have a bonus for you if you hang on to the, to the very end. A little bonus megatrend, and then we will open up to Q&A. So get your notepads out, get ready.

All right. I'm going to hit stimulus and QE. Now, this may seem kind of like yesterday's news, but pay attention. I'm going to give you a few surprising facts. And it's real important we pay attention to this because it tells us why we are where we are. So, you know, we talked about this a year ago and I made a bunch of predictions. This was almost 2 years ago.

Yeah.

And they've all been correct. Yep. And in spite of everyone else saying, no, this or that or the other is going to happen, what I actually said was going to happen actually happened. And, and the reason is because I took it, took a time to look at the underlying causes here. So we're going to look at it real, real quick. So we are still living in the shadow of the global stimulus and it was massive. Okay. This is— it was between $10 and $16 trillion. And I point out it's global. It wasn't just the U.S. that stimulated the economy. It was global. And there's two different ways. There was direct stimulus and there's also support. I'm not going to— I'm just going to summarize a lot of these stocks. You have a lot of data to cover. The central banks also monetized $11 trillion. So what they did is they bought debt to the tune of $11 trillion. Again, it wasn't just the Federal Reserve. It was, it was, it was the all the central banks. And you can see this little, this little rise right, right here of this massive purchase. This is the what the central banks own. This is their balance sheet. And then what the most important thing that happened is I want you to understand the, the innovation that happened amongst Federal Reserve bankers. Okay. You don't think of Federal Reserve bankers as being innovators. Well, they were massive innovators and this happened a couple of times. So in the past, when the economy slowed down, they would lower interest rates. They had kind of one button to push. Lower interest rates and, and well, that's kind of ineffective. Okay. Let's say you have a— you're making airplanes, you're in the airplane manufacturing business and no one is buying your airplanes. But I'm the Federal Reserve, I'm your bank. And I say, hey, Mr. Airplane Maker, you can borrow money for 0% and you can borrow millions of dollars. You're an airplane maker. No one's buying your planes. What are you going to do?

I'll still borrow.

No, you won't. You're not going to— you're not going to borrow anything because there's no one buying airplanes. Yeah. And so what happens is debt does not— just reducing the cost of debt does not increase demand. Okay. So it's a weak—

it's a weak thing.

Well, then what happened is the great financial crisis. And they— they— right here, what happened is they made direct equity injections into various stocks. They bailed out AIG. And they started this brand new mechanism called quantitative easing and, and debt monetization. And what they did is they actually had the Federal Reserve buy debt and they bought $3.6 trillion over 6 years. That was a huge amount of money, right? Okay. Well, that works so good during the great financial crisis. Now comes COVID. And we said, well, hey, if it's going to be— if $3.6 trillion over 6 years was good, You know what's going to be really good is $5 trillion in 2 years. And so they did monetization and then they said, you know, I'll tell you how you can really jumpstart the economy is we can make direct payments to individuals. We just send money to people. Well, it turns out that is extremely powerful. Where the first example of lower debt prices doesn't create demand, it turns out if you wire people money, it creates an incredible amount of demand. Well, what happens? And just to, just to, you know, I'll use a silly example just, just by way of illustration to explain what I'm talking about. So let's say the government wired to every man, woman, and child in the United States $1 million into their checking account just for free. What would happen? Well, people would probably start buying stuff, right? They go shopping. Get on Amazon, they'd go book a plane ticket, book an Airbnb. They would probably, you know, start investing in crypto. They would probably quit their job. A lot of people would quit their job. Not everybody, but a lot of people would do this. Hello.

Exactly what I'm saying.

So what we figured out is the direct payments to individuals is very, very different than every other kind of stimulus. It's extremely powerful. And very inflationary. Okay, so what happened? So back in the Great Financial Crisis, I'm looking at this giant, you know, you know, this giant easing that they did and all this money printing. And I really thought we were going to see hyperinflation through debt monetization. It didn't happen. In fact, if you recall, the next few years, the Obama years after the Great Financial Crisis, were really slow growth. Very low inflation in spite of all this massive stimulus. Well, what happened? I want you to look at these stimulus acts when they occurred. So this chart is actually the, the capacity utilization. This is how busy the factories are, how busy, for example, the, you know, so if you're operating at 50% capacity as a factory, you have this number will be 50. So you're operating at half capacity. Well, If you're running half capacity and I go say I create money, I print money and go order 10% more widgets, you're like, okay, I can pay my bills and pay my rent. I don't have to fire people. Is it inflationary? Not at all.

Okay.

But if you're at 100% capacity, you literally can't get parts. You're, you're at 100% capacity. You're making as many widgets. You're flat out making as many widgets as you can. Your factories are full, your workers are busy. And I order, I order 50% more widgets. What's going to happen? Well, now it's inflationary because now I have to buy new real estate, I have to buy new equipment, I have to hire more people. And those people are going to be, you know, they're going to be difficult to hire. So it's inflationary. And this is what I want to point out. This stimulus happened at a time when capacity was idle, a lot of idle capacity. And this here is what happened is the 2020 crisis. So you see, this stimulus happened at the bottom, very well-timed. This one was fairly well-timed. This one, the American Rescue Plan by Biden, $1.9 trillion. It was, it was one of the largest ones at a time when they, when the capacity was already maxed.

Right.

And supply chains were already stretched. There was supply chains were frozen because we couldn't get the parts we needed for existing demand. And then he creates artificial demand. Right on top of that government demand. And that's when, when inflation happened. So this is what exactly happened during the great financial crisis. So and I just, I just want to point out here the differences. The stimulus was created when the spending was created, when at a time when the economy was idle versus later stimulus packages pumped trillions into the economy when it was at capacity and direct payments encouraged people to quit the workforce. And to spend like crazy. Okay, so I'm making this up, right? This is all— this is all theory. Okay, well, this little chart should blow your mind. Okay. This is the households and nonprofit organizations checking deposits. This is checking deposits. Look at what happened. Look at how long this chart is. It was about $1 trillion until the great financial crisis, and now it's about $5 trillion.

What?

So there's $4 trillion excess sitting in people's checking accounts. That's exactly what there is.

Yep. And you can see it, the little tail there, that's the savings rate decline, but it's a tiny little thing there.

This is a mind-blowing chart. So all of a sudden, huge amounts of stimulus. Well, look at consumer spending. Again, I'm not making this up. This is retail sales, trade and food services. And you look, this is the Obama era and you see steady growth in retail growth. Here's the pandemic. And then we'll have post-pandemic. We get a hockey stick happen here. This thing just went bonkers, 30% above trendline. So if you've been to the stores recently, if you've been to airport recently, you can see this consumer spending is insane right now. And this is real. Well, why does this matter? This is 70% of the US economy is consumer spending. So if it turns out if you wire people money, they like to spend it. Here's another one.

People exiting the workforce.

This is the labor force participation rate. This is the percentage of the population that is working, considered part of the labor force. Here's the pandemic. And then it's been coming back, but people exited the workforce massively and, you know, have been coming back some. Wages spiked up. This is the growth in wages post-pandemic, again, because of the labor shortage. All right. So, so that's— so that really mattered right now. I'm going to hit this consumer real quick. This not so surprising strength of the consumer and 70% of the economy. And there's been a huge amount of talk amongst economists like, why is this economy so strong? And I've been saying it for, for, you know, a couple of years now. Why it's so, it's so strong. So we're not seeing— we haven't seen a recession yet. Just FYI, I'm not going to spend a lot of time on this. Inflation is cooling, but it's not cold. So we're, you know, we can see it's, you know, running right around the 4-ish percent range. And on the negative consumer side, you see, you know, tightening consumer credit and lower consumer sentiment. I'm not going to spend a lot of time on these again. And you, you can see savings. This is consumer savings boom during COVID People didn't leave and they saved. And you see right now it's much lower because of the inflation. So people are saving a lot less, but they still tons of excess savings. But here's the positive side of the consumer. Consumer debt. This is the delinquency rate. This is the amount of loan that's not being paid. Loans are not being paid. Well, it's, it's record-breakingly low right now. There's not a lot of distress, right? Household debt service is very low. And this may seem a little counterintuitive, but I'll explain it. So this is debt service payments. This is how much it costs you to service your debt as a percentage of your income. Right. Well, it's pretty low now. During the pandemic, it crushed down. Now it's a little bit higher, but people are carrying low interest rate mortgages. A lot of their debt is at lower interest rates.

Okay.

And this is, this is all total household financial obligations as a percentage of household income. That is still very positive. So, so look at these. They're quite, quite healthy. They are low. These things are low. So debt service is easy to do and total financial obligations are easy to do. By and large, real income. Now, any time economists use that word real, it means after adjusting for inflation. So yeah, there's been inflation, but after adjusting for inflation, income has been on a rip. And so consumers are feeling they're making a lot of money. A lot of raises have been given out, a lot of, a lot of, you know, in, you know, above inflation, it's beyond inflation. So inflation is taking its toll here a little bit, but we're still very, very high. The wealth effect. So what is the wealth effect? The wealth effect is if you, you got, you got, you know, hundreds of thousands of dollars in equity in your house and you got hundreds of thousands of gains in your stock market, you feel good. So this is the amount of wealth you feel, how wealthy value fields, primarily, you know, stock market, housing related. And the wealth effect is still in force. This is real household net worth. And you can see, you know, took a dip here with the recent housing, you know, issues and stock market. But it's continuing its way up. And real household net worth is on another hockey stick trend. So people are feeling— they feel wealthy. They feel like they have money to spend. Now, of course, this is not everybody. This isn't— this is for the entire United States.

Aggregate data.

Aggregate data. Jobs gap. And so we've seen, you know, unemployment is finally starting to, you know, tick up a teeny tiny bit. This is the unemployment level. It's, you know, in spite of what the Fed's doing, it has not affected unemployment. But check out the job openings. Job openings are still double the unemployment rate. So there's a skill gap, right? There's, there's skilled workers that are just not available. So again, all these things point to strength and I'm ready at any time to change my forecast. I just got to see the data to— right now, what the Fed has done has not changed the trajectory of our economy yet. Now, can it and will it? They certainly can. So here's the, here's the ones we've hit for, you know, that are for recession. Here's the, here's the reasons why I'm against recession. And, you know, it's much stronger. Strong consumer spending, high consumer savings, low debt service, strong job market, strong wealth effect, record real income and record cash. All those things are unchanged.

Yep.

And why I've been saying I think we're going to have a no recession or a soft landing for now. And by the way, this is what Goldman was saying for the year. I'm not going to read that. All right. So we're ready to hit megatrends.

Okay.

You ready for the megatrends? I'm going to hit the big ones now. Half of you, as soon as you saw my word demographics, you immediately went into a coma and fell asleep. And so wake up. Trust me, this is— this is something you'll want to know. Demographics are like glaciers. They're kind of boring to watch, You know, but they also shape the landscape more than anything. And we are about to see major, major demographic shifts. And I'm going to point out some things that are going to be very, very surprising to you. So tune in. I'm not going to hit this a ton, but here we go. This is the— this is the developed regions. We're seeing a population decline in developed regions. So we're— we're— we're— we're hitting right around peak population for the, for the globe. The biggest, the biggest surprise and the biggest takeaway— again, this is not a course on demographics, but, you know, I want to show you something that is, that is going to blow your mind here. And this is China. China's population has peaked and it is now dropping. And they are slated by the end of the century slated to lose 50% of their population. That is insane. And this is the— this is the— this is the workforce they're slated to lose 2/3 of their workforce. Now, if you don't think this matters, you're not paying attention. So GDP is— is what most economists talk about as the economy, right? The gross domestic product. This is the sum of all goods and services produced by the, by the entire country. Well, if I drop my population in half, my GDP stays the same. GDP is population times productivity per population. So if I drop my— if I have a country with half the people, it's going to have half the GDP. So in China, if they lose half their population, well, how many new apartment complexes do they need? How many iPhones? How many cars? How much food? Okay. And if they lose two-thirds of their workers, well, who is going to work? Who's going to produce all these cheap goods? And this is going to change absolutely everything about absolutely everything. And you're going to see it over the next several decades unfolding. It's, it's a slow-motion tsunami that is hitting, hitting China, and it's going to hit America. And I personally believe we're going to start to see some, some black swan events coming out of China because you can't do this and not have major, major disruptions happening. I think we're going to see a property bubble and/or a banking collapse, you know, beginning, and they may be able to fix it, but we'll see. Europe is not— is in super bad shape as well. I mean, Italy looks like a— looks like a retirement home. I mean, there's going to be no workers. It's all old people. U.S. surprisingly is strong. So these error bars, these shaded bars you're seeing here is what could be based on people's decisions.

Right.

So it could be any anywhere in there. China noticed there wasn't a lot of error bars because China doesn't have young people. They don't have enough young people and don't have enough young women. Yeah. So young women are the ones who have babies. I know that's maybe controversial, but they're the ones who have babies and And if you don't have enough young women, you will not have babies. And what's more is the birth rate per young woman is only about 1.09. It takes 2.1 births per woman to maintain a population. And they— they're, they're way— they're half that. And they don't have enough women to begin with. Even, even if they had 10 to 1, there's still not enough women right, to reverse this. That's why these error bars—

it's a— so this is pretty well set in stone. There's not a whole lot of recovery from getting out of this kind of reversal.

There's, there's— it's irreversible at this point. And it's through, you know, 350 million, uh, forced abortions, and they favor gender selection, favored males. Um, so, you know, they've, they've completely nuked their, their, their economy. All right. And by the way, I just want to point out, I showed you this worker shortage chart BlackRock put a chart together that showed how much of this was due to the decline in the— in the— it's due to, due to demographics. So this is, this is the decline predicted by the demographic change in America because the baby boomers are retiring. Yep. So, so there it is. And just a case in point, in China, we've seen a 15x wage increase since 1999. This is China right here. 15 times their wages have gone up since 1999. Fastest wage growth in human history. By the way, this one is Mexico. This green one, it's cheaper. Wages are cheaper in Mexico quite a bit. So you're going to see the end of China as a dominant, dominant place. I'm not going to hit a lot of this, but we're going to see higher wage growth because of fewer workers. We're going to see higher inflation. We're going to see higher taxes and pension costs. And an increased capital cost as boomers pull their money out of the markets. So, so there you go. So that's megatrend one, just demographics. Megatrend two is inflation. And I've been saying this and I was just on a panel of economists saying inflation is, is going to be higher for longer. And I'm the only guy saying it and I'm going to keep saying it because it's just what's going to happen. We've definitely seen the worst of inflation, but we've not seen the last. And here's, here's, here's the reason why we're going to continue to see inflation. So, so this little chart right here, this, this gold band is the Consumer Price Index. Okay. You can see it. And the black is oil. Do you notice anything? So what's happening is most of the rise in inflation throughout, you know, '21 and '22 was due— was, was, was— had an oil price underlying it. And most of the drop in inflation was because of oil prices dropping. So here's, here's the issue is we are going to continue to see higher inflation because energy prices are going to continue to remain high. And that's one of our next megatrends. And the other is because of worker shortage. So these are two big three inflation components that are structural, not cyclical. So what, what's true, what that means is they're built into the system, not based on a business cycle. There is actually a structural imbalance that is not easily fixed. And that's true in energy and it's true in workers. All because this is the, this is the wages and salaries cost index. So wages underlie everything, right? So that's your cost of your hamburger, the cost of your, your gasoline, the cost of housing, everything. Wages underlies all that, and so does energy. Both are, even though they're not exactly in the Consumer Price Index as components, they're kind of a part of every component, right?

Yep.

So inflation is going to be difficult to contain with moderate GDP growth as long as if they slam the, you know, the Fed really slams the brakes on, they can contain inflation, but it's going to keep bumping its head up. and it's going to keep being higher than people want it to be. Why does that matter? Well, because Jerome Powell said inflation under 2% is his, his main goal. And I'm not going to read this, but if you read his statements, it's 100% clear this is his only goal and he's not considering anything else. Well, if inflation is 2% and because of energy prices and worker shortages, you can't get there. What's going to happen?

Right. Higher for longer.

Higher for longer. And that's exactly what's going to happen. So inflation is your— is your friend or your enemy? It's the greatest— one of the greatest wealth creators and destroyers in the earth. How do we know how it destroys wealth? Right. Because it destroys the value of your currency, the value of your green money and the money in your checking, you know, your savings account go down, the value of that. But what if you are a borrower and you're on the other side of that inflation? Well, it creates wealth. If you're an apartment complex owner, for, for instance, and rents continue to inflate, you're the beneficiary of that. So at 8% inflation, you're— the value of the cost of stuff doubles in 10 years, and that includes your apartment complex, right? If you're— if you can. And the value of stuff drops by half in 10 years. So it's just to show you. So, you know, I say inflation is a transfer of wealth from savers to borrowers. So you want to be borrowers at this point, except, you know, right now borrowing is expensive. But generally you want to be— and you want to be on the supply side where you're benefiting from inflation rather than on the consumer side where you're only paying it. All right. Energy prices. This is a, this is a, this is a huge— we're getting into now really moneymaking trends. We're kind of transitioning here. And what's happened is we've had a false narrative that's produced 7 years of underinvestment in energy prices. So what's happened is this is actually the investment in oil and gas exploration and development globally, and it's dropped by 55% since 2014, meaning the dollars spent to develop, to, to explore and find and develop oil and gas reserves. Well, you think, okay, well, whatever. No, it's a big deal because we know that existing production from exist— from producing oil fields drops, let's say roughly 5 to 7% every year. So you're seeing existing production just continually dropping. Why? Because Depletion. Depletion. Yeah, that's normal. So you have to maintain— you have to be investing billions of billions of dollars every year just to keep supply flat. And if you're— no, you don't. It doesn't— it doesn't happen. And what happened is we saw basically the narrative came out that we were post-fossil fuels, the world was post-fossil fuels, which again, as a data guy and as a math guy, that is— that is silly. It's, it's really beyond, beyond silly. There's no math to support it. We are not post-fossil fuels by any means, and we're not going to be anytime soon in spite of what, you know, some of the ideologues are saying. And I appreciate the need to get off fossil fuels. We all want to do that. But there's also math and it's just not going to happen. So we've seen huge, huge— you know, I've been talking about inventories for a couple of years now. We've been seeing huge decline in inventories. And right, right now in Cushing, Oklahoma, you know, they're at the tank bottoms. Exactly what I've been saying is going to happen. And, and what's happening is because the oil fields haven't been developed, you can't just develop them in a day. Right. So there's only so many drills and they can only drill, you know, one at a time. And so it just takes years and years and years to develop an oil field. So it doesn't matter if oil prices go to $140 a barrel or $150 per barrel. We're not going to see an increase in the supply of oil. We might from marginal production in Saudi Arabia or Russia, but not from, from actual production of existing fields. So, so we're seeing a huge, you know, problem in global inventories right now, huge decline in global inventories that's, that is causing the current price spike. And this is, this is what's shocking to people. So I was just reading from the EIA, they just announced that they're going to see— we're going to see a 25% decline in fossil fuel demand by 2030. That's 7 years from now. 25% less oil and gas used. That is absolutely false. There is no way that's happening. Yep. And this is from JPMorgan. He's predicting a 7 million barrel per day shortfall by 2030, meaning the Earth has demand for 7 million barrels of oil per day, that there was no— there's no supply. And he mapped out where is the supply going to come from, and there isn't. And so we, because of this underinvestment that's happened in the past, we're going to have a pretty severe energy crisis across the world in the next few years. And it's really unavoidable. Unless they do what's called demand destruction by putting the world in a massive, massive recession, which I don't think they can do or will do. So we're going to see a big, big change there. This is a strategic petroleum reserve. And I can talk about these things, you know, and this is what I want to point out. I mean, I was, I was sharing some of this with one guy and he was saying, well, you know, what about EVs? I said electric vehicles and He said, yeah. And I said, well, last year they were 6% of vehicles sold in America. And by the way, use 65% of global lithium production. And I said, and where, where do those EVs get their power from? He says, from the wall. And I said, well, where does the wall get its power from? And he said, from a power plant. And I said, well, where do the power plants get their power from? He said, I don't know. And I said, from coal and natural gas. And he was like, what? Why don't they tell us this? You know? So here is the facts right now as we sit. All fuels, 83%, are carbon-based today, 17% non-carbon, wind, hydro, nuclear, solar, etc. So 17%. This is after 50 years since we started going renewable. In this from the '70s. Okay. And that just goes to show you we're a very long ways. Anybody who thinks this is going to suddenly drop in the next 7 years is ridiculous. It's simply not going to happen. This is a massive, massive ship moving in a, in one direction. It's simply not going to reverse tomorrow. They just, they can't support what they're doing with data. So the green, the what we want to be green, the green revolution is simply not ready yet. Right, to take all the energy. And as they said, we need 40 times the lithium, 40x more lithium, just to meet the goals by 2040. 40 times more lithium than we have today. Well, where do we get the lithium? Well, you know, it takes, it takes decades to build a mine. And by the way, those mines run diesel fuel. Deglobalization, megatrend number 4. Suddenly in 2020, supply chains had to be de-risked and now supply security is paramount. So we're seeing China is no longer the low-cost producer in the world. And what this is, is the trade as a percentage of GDP, global trade as a percentage of GDP. And look what's happened. The world has been globalizing since 1945. And it ended in 2008. And what that means is trade is because a percentage of the economy is becoming a less and less important factor. So we are, we are currently in a massive reshoring trend that you're going to talk about in a minute. And so we are seeing the world deglobalizing and it's a good, a good thing. Why, why should we, why should we not be able to ship trucks because one chip that we can't get from one factory in China? right? And you've, you know, you've got, you know, 200,000 parts with one missing and you can't ship a truck, right? Yeah. Is it worth it to bring that back? Yes. And what's happening is a lot of industry is moving back to the United States and to, to Europe as well. All right. Industrial boom change to Megatrend 5. All right.

Trend 5. Yeah. So I'll jump in on this one. So yeah, so we've already been saying a lot of these things, they all kind of, you know, flow together, but we are seeing a massive shift in reshoring. And, you know, industrial has had a great run and a lot of it was caused by e-commerce. And e-commerce kind of took the world by storm over the past several decades and growing as a percentage of retail sales and needing distribution and warehousing for, you know, shipping all these different products. And that has really caused industrial real estate to be this really hot area and super low vacancy. So a lot of people think, well, hey, that kind of ship has sailed. We are seeing e-commerce, you know, growth slowing down. It's kind of plateauing. And so the natural thought is, well, that kind of run in industrial is slowing down. Well, industrial real estate. But we think it's really the start of a second boom, really phase two. And the real reason is because of this reshoring trend. And so in COVID, we saw the supply chain disruptions really exacerbate and accelerate, you know, this, this deglobalization trend that was already kind of starting but has really now accelerated because of things like this is a great case in point with Ford. They were sitting on billions of dollars of inventory of one person called it the world's heaviest paperweights because they couldn't sell their trucks because of missing microchips. So how important is it for Ford to bring the manufacturing of those critical components back to where they have a lot more control and ability to scale up or down based on where they need? So we're seeing this, this trend be less driven by e-commerce and need for distribution, but more for manufacturing and more for bringing more inventory. So the sentiment has changed from, you know, just-in-time, which is kind of built the whole supply chain as it is. And when I was in school, that was the big thing.

You should learn high manufacturing. You only want the parts to arrive just when you need to put them in your assembly line.

Yeah. And now it's shifting to just in case you've got to have them there, you've got to have them sitting there for when, you know, capacity is high and you need to be able to meet the demand. And so this is something that is flying under the radar. A lot of people, you know, don't realize what's going on. But these charts are are incredible. These are, uh, reshoring of job announcements are up almost 50% year over year in 2022. This is the number of jobs that are being brought back to the U.S. in manufacturing. This is a very crazy reversal of a long time going up.

This is the deglobalization trend that's happening, and this is COVID. It's just post-COVID. It's like now a different a different trajectory.

Yeah, yeah. And you go to the next slide, you'll see here the, the, the trend for so long was this kind of downward trend of manufacturing. You know, the US has passed the manufacturing era. We've moved on from that. We're seeing a complete change of the trajectory of that curve. And this is only just getting started. Another big reason, which is also caused by the energy you know, early parts of this energy crisis that were going on is natural gas in European countries. So a lot of people don't realize, but Europe does not have their own supply of natural gas or Asian harvest or Asia. And so they have to import it. Well, it's about, you know, 5 to 7 times more expensive to, to use natural gas in Europe as it is in the U.S. And that's one of the largest input costs of these manufacturers.

Right.

Energy and labor are the two largest costs. And you think about Well, I'm strategically trying to make decisions for the next 10, 20 years, you know, because these are big decisions that are being made for manufacturers. Well, I want to be where there's going to be cheap energy and they're going to— they're seeing it more acutely than probably anywhere else because they are, you know, paying these higher prices right now. They don't have any way to fix it in the short term. And so a lot of companies are moving manufacturing back to the US because of these energy challenges.

And it's not just cheap energy, but it's energy security.

Yes.

We're the only manufacturing power in America, in the world that doesn't import energy, the only one. So, you know, I mean, it would be easy to shut down, you know, China as a manufacturer by just blockading their ports from, from oil imports. I mean, and they would be over. Yep. Yeah.

We're seeing here the next slide. These are the top reasons companies are reshoring. So, you know, a lot of them are social, social, ethical concerns, you know, wanting to de-risk from China, de-risk from Russia. Walmart, surprisingly, is one of the top ones there. Walmart is actually pushing their suppliers to move manufacturing back to the US or, you know, nearshoring inventory, just having inventory on hand. And then energy. This is really, really fascinating. So this, you know, kind of intuitively makes sense. But we're talking about, you know, this is the reshoring trend, but it's going to drive a lot of demand for industrial real estate. And this is something we've been talking about for a while. We've been investing in for a little while. But what's really interesting right now is because of the interest rate environment, we're seeing new construction starts just fall off a cliff. I mean, look at this chart here. So this is over the past few quarters we've seen new construction. This is announcement of new projects underway.

And so a lot of new construction. And by the way, it was fully absorbed. The demand is so hot, all this massive buildup has actually been absorbed and now there's nothing new being built.

Yeah. So we're seeing a huge drop-off and that basically creates a gap 9 to 18 months from now as these projects are started now are being kind of brought to the market. So you want to go to the next slide here. You can see. So this is a vacancy and the rent per square foot kind of graphed over each other. So we are seeing actually a large amount of product being brought to the market and kind of end of this year. It's, you know, very, very high deliveries. And so we may see a slight tick up in vacancy, you know, by kind of being projected here by this CoStar chart, but it's going to be absorbed very quickly. And when you have, you know, limited supply and you have strong demand, you know, pricing usually goes one direction. And so rent per square foot is expected to continue to go up. And what's interesting that the data that we just showed is really on an aggregate level, but just like any type of real estate investing, it's so market specific. And so you can see here I put a box around the markets here. We see a little dot above. That is the, the number of the absorption of new construction being absorbed by the market, what the market typically wants to absorb in new construction.

And this is what's actually being built.

So they're, they're well below what the markets actually need right now, not even in the future. So this is This is a real problem right now where we're again seeing these starts kind of fall off a cliff. So we're getting very, very bullish on industrial. It's going to continue to be a hotspot within the commercial real estate asset class. And, you know, there's, you know, certain estimates on values being impacted in different real estate asset classes. And industrial is one of the least impacted by the higher interest rates right now.

Right.

And the other one is the one about to talk to right now is neighborhood retail. Retail is actually the shining star in the midst of, you know, some—

remember our digital current retail spending, right? People are buying like crazy, shopping, right?

And so this has been getting a lot of attention. This is over the past few months. Wall Street Journal has been putting out a lot of articles. We're talking about on our podcast. So you can go in-depth and research some of the nuances here. But they're claiming that retail is the hottest real estate play is in your neighborhood. And we're seeing occupancy continue to go up. We're seeing because of, you know, post-COVID, a lot of people are now working from home kind of more permanently or at least hybrid. And so they're frequenting these neighborhood strip centers that are in residential areas, not your big shopping malls.

Yes.

Not even your big, big box.

This is not big box retail, which is very at risk for e-commerce. It's not even grocery-anchored retail, which we're not that bullish on because, one, the prices are usually double for grocery-anchored.

Yep.

It's not worth it. And especially groceries being disintermediated now by e-commerce. So we like the neighborhood, the strip centers that are non-grocery anchored, and they're just— they're incredible.

Right, right. And so you can go to the next slide here.

You can see occupancy is rising. And, and there's, you know, you talk about migration, but what's happening is people are migrating out of the city cores to the suburbs, suburbs areas.

And, you know, the absorption and the occupancy is going up, you know, partly because there's not been anything new being built. So here's, here's some other headlines here that we've talked about in our podcast. You go to the next slide and this, this shows you real estate space per capita. This has been a long secular decline of new or just total space, aggregate space of retail strip center.

Think about the last time you saw a strip center being built. Yeah, there's, there's none being built.

There's none being built and they haven't been built for 15 years.

So right now you can buy these things at 50% of replacement cost. Yeah. Half of what it costs to buy a new one.

Right.

And they're, they're in a, you know, they, you know, might get them as a 9% cap rate means you're getting without debt, you know, 9% yield on cash, which is insane.

Yeah. Yeah. And so this next chart, this is just an example from our market here because we're buying a lot here in this is a pretty crazy chart. You know, this is a— Kansas City is a top 10 retail market. And you can see the orange bar, that's vacancy rate. So we've seen that just fall off a cliff here, just super, super low. There's very, very little vacancy in the market. And hey, there's not anything else being built. So that's one thing to rent into prices, and that's going up. And you can see the forecasts continue to support those trends. So again, where there's limited supply but strong demand, it's going to be well supportive for these asset classes.

All right. Housing. So if you are a homeowner, you're going to like this one. 15 years of underbuilding. Again, very few new homes have been built in 15 years, single-family homes. So what this is, is the new privately owned housing units started and relative to total households. So the households being formed or population and look through the '60s and '70s, you know, this is right up here, but ever since the great financial crisis, new starts for housing went off a cliff and it's never really recovered to its normal level. So we have a housing shortage in all in all, especially single-family, but also multifamily. And so there remains a structural shortage of housing units relative to population and relative to households. So we think it's a, it's a great opportunity right now. This is the cost to buy a home. This is the cost to rent an apartment. So we've seen because of interest rates, we've seen a pretty big divergence which favors apartments. So we see apartment, you know, rents and home prices marching higher together, but it's going to favor apartments in the near, near term. And, and here's your bonus mega trend. I'm going to hit this. So we're going to, we're going to give you one more bonus mega trend.

You're getting 7, but you get 8 today.

We call this the multifamily meltdown. And there's a mini bubble popping which offers great short-term opportunities. And so what's happened, I just said there's a housing shortage, right?

Yep.

So there's a housing shortage. The same time there was a multifamily bubble that happened over the last 3 years where people overpaid for multifamily and they used, they used what's called bridge debt, which was, you know, they would go very high. They give you a lot of debt, a lot of debt, and they give it to you for very low prices. But it was floating interest rate. And only 3 years. And so what happens? Well, now all this stuff is coming due and, and there's a huge, huge issue, you know, with $435 billion potentially troubled multifamily debt.

Meanwhile, we have the highest number of new construction hitting the market right in the next 2.

So it's kind of a perfect storm in multifamily. And to us, it's a great buying opportunity because we believe there's a shortage long term. There is a shortage long term. And we have a short-term crisis. So what we're going to do is we want to go down the capital stack. So we go, this is safer where you're— if you're the senior debt holder on this, you're not going to lose a dime. Or you're— mezz debt, right? Gets, gets a little less safe, but super high yields, preferred equity. And these are the guys that are going to take, take the biggest, the biggest hit. So, so these guys have to lose everything before these guys lose a dime. That's the way it works. So these kind of deals. So So there's a great opportunity to, you know, there's going to be a lot of distressed multifamily, you know, and, and there's a great opportunity to go down the capital stack and go into distressed multifamily.

So.

Right. We're probably going to be starting a distressed fund here shortly because there's a lot of people knocking on our door asking for more distressed lending. And that's, that's kind of our, our, our bailiwick anyhow.

Yeah. And ultimately that the long-term trend, as you just pointed out, is in favor of housing and we need it. We have a shortage of it. But in the short term, there's all these factors that are putting a lot of pressure on operators. So with that, last little plug for the podcast, we talk about these kind of trends all the time on our podcast. We're not subscribed. Please do so. Leave us a review. Share with somebody. We love having you guys listen to the podcast. With that— oh, last thing, we have an investor club. You can scan this QR code. You can get on our list if you're not already. To get notified early of investment opportunities and other things we're doing for our investors. So we ran through a lot of information. I think let's take a few minutes and see if there are any questions out there. So let's see if we can pull up the Q&A. Oh, great question. How do we get a copy of the slides? It was a long time ago, but we are going to be sending a link out where you can download. I know we had a lot of slides. We kind of skipped through a lot and the data nerds are probably like, no, slow down. But we will be putting this out for people to download and you can get a copy of it. We'll be doing that when we send out the replay. So take a few minutes. Any, any questions? What, what are you thinking about? What are you reacting to? What's kind of hitting with you here? What do you want clarification on? So feel free to put it in the Q&A or in the chat and we'll keep an eye here for just a few.

While you're typing your question in, you know, I'll just make a comment. And, you know, I've been telling you, I've been, I've been doing this a long time, and I have rarely seen an opportunity like what I see in oil and gas right now. Yeah, I mean, we're seeing oil fields right now. You know, I don't know if you realize, but we just purchased an oil field with 143 operating wells at a— it's basically a, what, a 30% return, cash-on-cash return. It's, it's insane how cheap this stuff is right now. And in the midst of an energy crisis, You know, I remember— I remember in the great financial crisis watching Miami beachfront condos sell for $35,000. And, and you and, you know, and I'm thinking that is a generational opportunity. Well, this is a generational opportunity. So we're seeing incredible opportunities, you know, for you and— good.

Okay. We've got minimum entry point for our fund. We have a few different funds that are open right now. They vary between $50,000 and $100,000 for minimum. So you can go online and Look at those housing trends. Look great. What about buying a single-family home in San Diego market?

Yeah, I mean, I don't want to necessarily talk about a particular market, but single-family homes, there's just a huge shortage and you're probably going to be fine. I mean, the coasts are— the coasts are more problematic because they're seeing more migrations out from the coast as people are looking for lower cost of living and higher standards of living. But generally, if you buy a single-family home right now, you're going to be in really good shape.

Right. Chandor, how's it going? Thanks for putting a question in. Distressed multifamily fund. Yes, we're working on that this quarter. Hopefully we'll be launching that next quarter is our goal. We think there's going to be a very big opportunity.

What are your thoughts on that?

Yeah. So what we're seeing is, you know, great properties in great locations with good operators. That are finding they're having shortfalls, right? They have an interest rate cap that's expiring.

Just there's no debt, there's no way to lend. There's no fix the deals, there's no money.

And we're hearing stories of operators that are doing well, they're hitting their budgets, they're getting the rents that they need to be getting. But the banks have just shut off new capital coming in. Even what they committed to on their construction loans and say, no, we're not giving you any more. You got to find other sources. So there's there's going to be a lot of deals you can come in and you can come in at preferred terms. And so what we've been seeing is a lot of these deals, preferred equity, mezzanine debt, you're coming in at a lower part of the capital stack. So you have less risk that you're taking and you're earning the same or better returns on the equity as the next guy. You guys are taking more risk because you're a bigger checkwriter.

You just get that advantage.

Yep. Yep. So we're very interested in that.

Investments for non-accredited investors?

I would say get on our list, talk with our team. We periodically will open up funds for non-accredited investors. Usually it's only once a year. So you— we have to have a preexisting relationship. So be sure to talk with our team just so we can start that conversation and get to know you and your situation and see if it's a fit.

So we have to have a preexisting relationship. So the only way we can accept your money if we know you. And so what that means, if you want to do that, you need to get on our list. And talk with some of our investor relations guys and build a relationship. That's the only way. And so you need to do that now. And then when the next deal comes, you'll, you'll be primed for that.

Yeah. And then 1031 exchange, what recommendations do you have? Yeah, you know, talk with us. We have some deals that are kind of in the pipeline, so be sure to talk with us. We're always looking for working for working with TIC investors in different deals. So sometimes timing doesn't work out. It's sometimes a challenge in these situations. But, you know, reach out to us. Let us know how much you have in exchange, what your timeframe is. And, you know, we may be able to help. Do we invest these assets with our own money? Yes, we do. You might have missed the first few slides, but we invest in every single deal we put out to our investors.

So like our deals. Yeah, we— yeah, our best deals out there.

So last question here, it looks like with current market conditions, where do you think new, new operators stand in real estate? Yeah, I mean, as with any credit cycle, experience really matters. It matters with the relationships you have with your lenders, with your counterparties. It matters with understanding how to be conservative in your capital reserves. It's difficult to jump in, but this is a really good time to find out who the good operators are and the ones that have been through cycles, understand how to navigate them and can pivot and create agile models to, to find the best opportunity.

Yeah. In bull markets, it's less important because, you know, all the tide raises all boats, right? Including the guys that got a crappy boat. Yeah. But when you have troubled waters, you definitely want to go with experienced people that have been there before and know what they're doing. Yeah.

Thanks so much.

Take care, all.