Where’s The Best Place To Invest $100K? Interview With Hunter Thompson

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. Welcome to the Invest Like a Billionaire podcast. I am your co-host Ben Fraser, joined by fellow co-host Bob Fraser. And today we are joined again by Hunter Thompson. Yes, our first repeat guest on the show. And, you know, very excited to have him back. Hunter is the managing principal at Asim Capital. He's raised over $50 million from accredited investors. And he is the host of the Cashflow Connections podcast, which has received over a million downloads, which is amazing, incredible, great show. And Hunter, we're super excited to have you back on. And, uh, just really a few weeks ago, probably a month ago, you and Bob were on a panel at the Best Ever conference and on the kind of main, uh, attraction of the conference, this kind of economics panel, which was really, really fun. The debate. So, um, We just wanted to kind of, you know, keep that conversation going. And we talk about it here at the— later in the podcast. But Hunter is putting on a really cool event, virtual event called $100K to Invest. And really the whole point is looking for the areas in this kind of unique economic environment. Where should we be investing?

So your focus is on like right now, what do I do?

Yep, that's right. The 2022 outlook. Everyone's asking the same questions. We're all seeing the same data. And so it's a really interesting time to invest. Based on the lens of economics.

I mean, there's, there's a just a wide range of opinions out there, right? I mean, all of a sudden the yield curve— and Frank, quote, the yield curve, as if there is one yield curve— but it inverted, and therefore everybody's like, well, now flip the switch, you know, let's all— let's, you know, market's over. And then you've got the, the uber bulls, and, and everybody's just— there's so much noise. So So really, it's a good time to kind of see if we can cut through some of that noise and, and, you know, really figure out, you know, how to make clear-minded, clear-vision choices right now. Because really, in my book, it's just incredible opportunity, you know. And so you don't want to have fear keep you out of the effort from playing the game.

Absolutely. Hunter, talk a little bit about kind of some of the things you shared at the conference, your perspective on where we're at in this economic cycle. Are we headed for a recession? Should we be investing? Should we just keep cash on the sidelines? What's your perspective right now in a macro way?

Okay. First of all, I know that most of the listeners of this show are sympathetic to this view, but I try to view the world of investing through the lens of economics because if you don't take economic data as part of your view, you can get slapped and be like, "What happened? My whole business was working perfectly, and all of a sudden something took place that was totally out of my purview." It's challenging because As an entrepreneur, I mean, we want to put our head down and just do the thing in front of us. If the thing in front of us is working, we want to do more and more and more of it. What we saw in 2008, I think that's an example that's used all the time. For me, I mean, what we saw in 2010 was equally pronounced for a lot of people in the United States where the European debt crisis was there. That's something that no one was paying attention to. I've talked about this before, Greece bond yields, the European bonds. It's like, how is this something that's going to play a role in my financial future? I'm always I'm trying to keep my eye on economic data points that may do that. At the same time, though, I don't want to be crippled by economic fearmongering, because especially in an inflationary environment, if I'm sitting on the sidelines, even for a couple of years, waiting for this once-a-generation type of correction, I can get beaten up by my competitors who are just simply going along doing their business, making risk-adjusted decisions. So that's why I wanted to talk to you guys about this. And also, I mean, big fan of both of you, but obviously Bob's articles that he writes on your website. I mean, if listeners of the show haven't checked it out, you did a very good job of just kind of outlining the economic data leading up into COVID and afterwards. So I'm here as part of the fanfare to kind of discuss some of the data points that we talked about at the conference, but that's kind of setting the stage for the conversation.

Perfect.

And one of the things I love you do on your show is you bring in a lot of economists and people that have opinions that are, be different than yours, and you really want to assimilate kind of a vast, you know, uh, you know, breadth of knowledge and different opinions because no one person has all the right answers. And it is challenging to navigate all these things that are going on and to kind of assimilate all this information. So, you know, what— talk to us about some of the kind of key indicators you're looking at right now and maybe start diving into some of the things that you discussed on that panel, um, at the Best Ever Conference.

So the questions that are coming up right now, you mentioned the discussion around the yield curve, and there is one yield curve that a lot of people look at. Technically, there'd be several, but the 2s-10s— say one more time—

the, the, the 2s-10s yield curve, right?

That's exactly right, the 2s and the 10s. When that starts to happen, you know, it's typically thought of as a predictor of recessions. Historically speaking, uh, recessions, you know All recessions basically have had— in modern era, have taken place after a yield curve inversion. However, there have been several yield curve inversions that have not resulted in a recession. So it certainly calls for concern, generally speaking, because it is a weird phenomenon in the market. You would think that longer-term investments, 10-year holds, for example, would yield you higher returns than a 2-year hold. And so that's why people start to go, whoa, It's like a neck snapback moment, what's going on in the market? However, there's a couple reasons that I think we should take a second look at this. Number 1, just in the last 10 years or 20 years, this introduction of just incredible monetary policy has resulted in the negative interest rate-bearing bond market is $15 trillion. That puts downward pressure on these curves. And so that data point may not be exactly what it once was. Something else I think about is just the overall state of the economy. Looking into 2020, I think very few people anticipated that we would see massive, historically significant rental growth during that period, but this might in fact be a purview into what the future of potential recessions look like, or even, like I said, potential recessions. So I think that really what's going on is that there is a commitment, though it may not always be lived out. It seems to be the case that there's a commitment. If the market sneezes, if there's a potential challenge, if there is a pandemic, uh, the Fed— and not just the Fed, but globally speaking— the multi-trillion dollar button is there, and they've proven that they're willing to smash it. And when they smash it a couple of things happen. Inflation likely increases, the job market tightens up, which further increases inflation. These are things that are really favorable for investors. Net worth increases, income increases, savings increases, etc. These are some of the things that people are interested in. We can dive into more detail, but that's what I'm looking at right now in terms of the topics people are most paying attention to.

Let's hit on the topic of recession real quick. And, um, so as you point out, the, the 2s-10s inverted. Well, there was a Wall Street Journal article, I'm not sure if you saw it, it was maybe, uh, 2 or 3 days ago. And they're, they're basically— the analysis that they did showed that the, the shorter yield curves, which has not yet inverted, shorter duration yield curves, are the— is far more predictive than the 2s-10s yield curve. So, so that's for, for one, I, I think we need to question it. But, but for two, you know, you've, you've seen the charts, and if any listeners have not seen the charts, go to aspenfunds.us, click on the Resources tab and look at my latest charts. For the— there's an article on inflation. But here's, here's what's happened is, is you're seeing since 2020, the household net worth per capita has gone up 20%. Literally, Americans are richer, 20% richer. If you look at since 2020, just, just 2 years, their net income per capita is up 15%. The Americans are making 15% more money than they made just 2 years ago. And then if you look at debt service, it's hit an all-time low— the debt service as a percentage of disposable income. And that's because they paid down debt. So you're looking at consumers that have extremely low debt service very high income and high net worth. Okay, so let's call that the coiled spring. Okay, now why does that matter? Well, it matters because 70% of the U.S. economy is consumer spending. 70%. So if the consumers are flush and they go spend, our economy goes into high flipping gear. Okay. And the only thing that's keeping this spring from unloading right now is consumer sentiment. So if consumers are happy and they feel positive and they like what's going on, they feel confident, then they go spend. If they don't, they don't. And so right now, consumer confidence is low. And so as soon as that changes, let's say we have an election result people like, or we have the war in Ukraine resolved, or we have COVID kind of, you know, the restraints and the difficulties disappearing, and we have any kind of anything happens that kind of makes people feel better. You're going to see a massive jolt in GDP growth. So it's so hard for me to see, you know, and I've gone out on a limb and said, you know, we're not going to see recession in the next 2 years. So I'm going to— I stand by that. I mean, you know, you know, hey, we can all be wrong, but I can't see it in the face of the extremely healthy, healthy, healthy consumer, you know. So your thoughts on that?

Let's dive into that. So I think when I was looking at that data and other similar data, when you talk about net worth at all-time highs increasing 20% over a very short period of time, when you think about income, which is a really fundamental— it's very difficult to tamper with income because with net worth you can see very small percentage of the population, there's a lot of money printing, stock market shoots up, that can give you kind of a distorted view. But income isn't so much the case. Savings, for example, a more fundamental kind of data point, All of that also could be tampered with if the consumer was leveraged to the moon. So that's the first thing I started thinking when I saw that data point, but it's actually the opposite. Debt-to-income on a household basis, like you mentioned, it's a 40-year low. So the combination of, you know, peak income, peak net worth, and all-time or 40-year low in terms of debt-to-income, this is a really interesting point. Now that's at a household level. But what about an institutional level or from a private equity level? I mean, we're seeing a record cash on hand because a lot of people are doing what a lot of people at that conference are doing, which is waiting for this massive buying opportunity that I think Bob and I weren't saying, "Oh, it's never going to happen." We're saying it is happening. It's happening right now.

This is the buying opportunity. It just looks different than you expect.

This is it.

Exactly. So, so let's—

yeah, so go ahead.

Just one thing about consumer sentiment. So I do agree that that is creating a lot of opportunity where people are saying, hey, like, this is a good time to wait, we can hold these reserves and see how this plays out, whether it means international entanglements, election results, or something like that. But I think energy prices in particular really do impact consumers.

Definitely.

And so if that likely does work itself through and we're able to kind of get some relaxation in that particular data point, I think a lot of that sentiment will likely be relaxed to a large degree.

Yeah. So let's roll forward. So let's say, let's say we're wrong and there is recession. So how, how might it play out? Well, let's look at, you know, I think about multifamily or, or self-storage and is just a couple industries and the job market. Is, is it likely to see massive rounds of layoffs in the job market suddenly become an employer's market? You know, it's pretty unlikely given, given that, you know, the sheer number of job openings right, right now and the fact that we are— I mean, the job market is in an incredible squeeze right now. It's really hard to see that being alleviated in the short term for sure. Or, you know, you know, we can look at a couple of other data points. What's really going to happen? Are we going to see— let's, let's look at household You know, look at vacancy rates, for instance. Are we going to see people suddenly say, yeah, we're not, we're not going to rent anymore, we don't need that extra space or whatever, we're going to downsize?

Right.

Again, it's— we're in one of the tightest markets we have ever seen as far as sheer demand because of household formation. And the millennials basically are forming households today. You look at industrial space, it's the same thing. You've got, you've got incredible demand because of the rise of e-commerce over the last couple of decades. And now the basically the need to build inventory to protect against COVID and the idea of reshoring, bringing manufacturing and things to America again to eliminate risk. Is either of those going to alleviate? We're going to— people— is e-commerce going to go down? Is people going to stop reshoring? People are going to say, no, we'd rather have inventory shipped from China every day. You know, it's just— it's so inconceivable to think about these things reversing because the trends are so pronounced and, and so powerful right now. So do we— can we really see into that reversing? It's just very hard. Even if there is a recession, it's, it's unlikely to be, to be extreme, a devastating kind of recession.

Um, I think that, that, that's worth talking about because a lot of people, when they hear the word recession, immediately hearken back to the Great Recession, you know, of 2008-2009, which was You know, to your point earlier, Hunter, you know, a once in a generation recession, but not every recession is that deep and that broad in its impact. And, you know, we technically, you know, if you look at, you know, the technical definition of a recession is two quarters of GDP, negative GDP growth. We actually had a recession in, I think, April of 2020, you know, as a result of, you know, lockdowns from COVID And we had the big unemployment spike and all those things. But it was actually the shortest recession ever recorded. You know, I think it's like 2 months. Um, and you know, very quickly all the stimulus came in. And so, you know, we, we can talk about recession and that maybe there's some impending things and the yield curve is, you know, a potential indicator of that. But it's also, we have to realize what is it, what does that actually mean? And what's maybe the severity of that? Even if there was a recession, you know, there's a lot of other factors that play into that.

Well, I think that you just touched on something, and I don't have the exact data point in front of me, but I remember the annualized GDP loss was an all-time high if you simply took that Q1, right, multiplied it by 4. It was like 30% or something like that. So that of course didn't happen. It wasn't annualized. There was a massive money, you know, multi-trillion dollar United States. And again, almost double that as well, globally speaking. I think the United States printed about $6 trillion or functionally printed $6 trillion during that period. The rest of the countries in the world printed an additional $4 trillion. I'm thinking about this as this massive tsunami of liquidity that's heading around the capital markets. Now, in the US, really quickly, the job market is very, very tight. Now, you have a couple different data points you're looking at. You have a very tight job market, which creates inflation in terms of wages. You have a $10 trillion tsunami of liquidity looking for yield that, from my perspective, is about to crash on the US housing market to a large degree. First of all, when you have trillions of dollars, the place that goes typically is bonds because it's the only place you can really allocate trillions of dollars quickly, but searching for yield, Where can I find favorable risk-adjusted returns? Well, there's an affordable housing crisis in the United States, and there is no clear way to alleviate that crisis. In fact, when we had this debate, my first statement was, if our debaters on the other side of this aisle have an answer for that question, I will just cede the rest of my time. I just don't see it. It's a supply and demand imbalance, and it's not just of housing. It's a supply-demand imbalance of also favorable risk-adjusted returns. So from my perspective, I think that multifamily real estate, cash-flowing assets, risk-adjusted— I mean, excuse me, recession-resistant assets are well positioned to be the benefactor of that trillion-dollar printing spree.

Let's just look at some of the top risks right now. To me is inflation. So So literally, and your worst— so the worst investment you could possibly make in an inflationary environment is what? Cash. Cash. Okay. So if you have a savings account and you got a million bucks in there, well, that's worth 8% less in a year. And then it actually in 10 years, it's actually worth 50% less. So, you know, on a buying power basis. So, so that's your risk.

Can you dive into that really quickly? Because what you're just outlining is compounding interest the wrong direction.

Exactly. You're on the, you're on the wrong side of this. And so, so one of the things our government has figured out, that the best way to get rich in an inflationary environment is actually to borrow money. Okay. Because what you owe decreases in value. Right. So borrow money as long as, of course, you can get good terms on your debt. You want to have good fixed rate debt, you know, and, and right, right now to borrow money. And if I can borrow money at 4% for, say, a house, and inflation is really at 8%, well, they're in fact paying me 4% to borrow money. They literally borrow money, we pay you 4% to do that. Well, heck, I'm gonna do that all day long. And so this is one of the reasons, by the way, the US government has not defaulted ever on its debt. They don't need to default. They simply let it inflate away, and in 10 years, the debt is half, worth half what it was before. And at just 8% inflation in just 10 years. So inflation is actually a massive transfer of wealth from savers to borrowers. So you just want to make sure you're on the right side of that equation. Again, I'm, you know, you know, I can have an opinion about whether that's right or wrong, but the reality is it is. So let's just, let's just figure out which way the winds are blowing and we're going to put our sail up. So, so, so not only is it huge risk to be in cash, but it's huge opportunity to be in negative cash, be short cash. Okay. And then the other opportunity is to get your wind up in this. You got this 20-knot breeze blowing, put your sail up in that puppy and let it take you for a high-speed ride across the top of the waves here. And that's— inflation can be your friend. Example is multifamily. So top example. So then multifamily is priced on net operating income and net operating income is going to go up with inflation as long as it's well managed. Well, there you go. So you're going to double that for the price of that in 10 years. And if you're leveraged, well, then you get way more than double. So, you know, and what's the risk? The risk, the risk is we have, we have a recession. But all right, how is that likely to affect you? Higher vacancy rates. It's just super safe because we have a vacancy problem. We have a shortage problem right now. To me, it's, it's actually a once in a lifetime opportunity to invest. As long as, as long as inflation continues, as long as inflation continues, this is going to be an absolute win. It kills— it cures all ills in, in real estate.

So let's dive into that because this is a really important point. I think that a lot of people are concerned about rising interest rates. And if you look at typical agency debt right now, let's call it 4%. If you anticipate that we are experiencing, let's say, 7, 8% inflation like you said, you've got functionally negative rates. The discussion around rising interest rates, which I do think that they will rise, and perhaps I did talk about this topic previously where I was making a more bullish claim on the fact that I do think interest rates will go down into the right for the foreseeable future forever. I personally do think we're going to see negative rates over an infinite time horizon. Now, as an investor, an infinite time horizon is not really helpful, but I see the trend over the last 40 years, and I extrapolate that out into the future. My point is, we are prepared for rising rates, as in we're still in a negative interest rate environment on real terms, adjusted for inflation. But the other piece of this, not only does it eat into debt in the sense that inflation erodes the purchasing power of the debt that you're borrowing, right? So to your point, over a 10-year period at 7% or 8%, the purchasing power is half of what you borrowed, you also have this phenomenon taking place regarding NOI. So if everything's being equal, let's say a typical multifamily apartment, for example, you implement your value add, you bring it up to market rates, and now you're basically, if you're being conservative, you should clip along at the same rate as inflation clips along. Let's call it 4% across the board, meaning that your income will increase, your gross income, will increase at 4% per year, and your expenses will also increase at 4% per year. These things take place on a one-to-one basis, generally speaking. But if you look at the balance sheet and the financial statements, though income and expenses do increase on a one-to-one basis, there isn't a one-to-one ratio between income and expenses. Most multifamily, for example, is, you know, 40% operating expense ratio. Self-storage, you can see low 30s or even 20s. Meaning that only 20 to 30% is going towards expenses, meaning that every year, even if you do continue at a 1-to-1 ratio of expenses increases and income increases, you're getting the favorable end of that from a net NOI perspective. This is an ATM machine with leverage, right? So I'm super, super excited about the opportunity in buying quality assets with quality sponsors with inexpensive leverage. And, you know, that's what, that's what I want to talk about, you know, here today. And that's what we're going to talk about, that summit that's coming up.

Yeah, it's perfect. And, you know, caveat being, right, again, if there's a few caveats, so you've got to get good debt, right? So we're actually avoiding, for example, you know, uh, the, uh, you know, some of the debt that's, that's being very, you know, the bridge debt that's being used out there. I think it's, I think it's very dangerous. So I, I think you want to get get, you know, multifamily deals and other kind of self-storage deals that are not using this bridge debt because bridge debt, they have short caps in interest rate caps. They're, they're variable interest rates and they have typically higher LTVs. So they're less— they're a lot more risky. You're really dramatically increasing the risk profile. A lot of, a lot of borrowers are having even multiple debt stacks. You have pref equity ahead and these kind of things. So, so there I do think you want to be careful to pick very well-structured deals. At this time. Yeah, absolutely.

Completely agree. I've been super bullish during this conversation, and it's mostly because I don't want my audience, my investors to get stuck where I was for many years, just waiting for— because I was born in the wake of the Great Recession, my career was born. I'm not 8 years old, by the way. My career was born in the wake of the Great Recession. I was always thinking, How can you not be deeply impacted as a young entrepreneur and see that happen and think, when's the next one? I mean, it's— that was an impactful moment for all of us. But the reality is, um, it's just very difficult to overcome the supply and demand imbalance, both of liquidity and also affordable housing, and, you know, the related kind of asset classes to that. But what I do want to say here on the other side of this is that We're not praying and spraying with our investment thesis. We want to find quality operators that have a significant market advantage. I'll use Aspen Funds as an example. This is not your first time pulling investors together and buying notes. You've purchased tens of millions of dollars, you've put tens of millions of dollars in, you've bought hundreds of millions of dollars of debt. And what happens there, it's not just that you know what you're doing, you've got strategic partners that you rely on over and over again. You've got providers, servicers, you've got the whole thing where it's a rinse and repeat. And that's, as an investor, I can quantify the risk based more on the pro forma than my gut feel, because gut feel is very difficult to underwrite objectively. But if it's a rinse and repeat, the predictability of outcome is much, much more high. So those are the types of opportunities I'm looking for where if the person's done the same thing over and over again for the last 10 years, What's the likelihood that they can do it correctly for the 11th year versus pursuing some new venture with new technology, new venture, new venture partners, new market, etc.? That's the stuff I'm continuing to stay away from during this economic climate.

Yeah. So I've been through, you know, 4 cycles really. And, and, you know, they all are very similar. They're all completely different. It's kind of funny because everybody's always worried about the last one. And the next one that you're going to experience is going to be nothing like the last one, but they will share some characteristics. And one of the things you see typically is when the shaking happens, it shakes out the weaker players, right? It always shakes out the weaker players. So every bank didn't fail in '08, just the weak banks failed. And, you know, the same in the S&L crisis and same with, you know, the dot-com crisis. You know, Amazon's still here. You know, they made it through the dot-com crisis.

And we should make the point, like in mortgage notes, for example, at the peak of the recession, you know, in 2009, the peak default rate of mortgages, people think it would be, you know, 30, 40, 50% because, you know, it seemed like everyone was being foreclosed on. It was only 5%.

Exactly.

5%. And so, you know, obviously that's very impactful for banks that have very small net interest margin that they operate on in a 5% default rate is very impactful, but it wasn't what a lot of people think of. You know, it wasn't everyone was impacted by this in the same degree.

And in fact, so these, these cycle turns are actually really good times to be opportunistic.

Yes.

Okay. In fact, the dot-coms, all the, the successful dot-coms bought up the failed dot-coms. Okay. And took their market share. And, and, and, and you see all the, the good banks bought up the weak banks at a at a fraction of their value. So you see it's actually opportunistic time. So again, it's just, you just have to, it's to your point, Hunter, you have to pay attention. You have to pay attention to your sponsors, your vendors, to know that they know what they're doing and that they've structured things to be bulletproof and that they've thought about this and they're ready. They're not on the cutting edge of of risk and risk-taking and, um, you know, living at the ragged edge, right?

Yeah. Um, so Hunter, how, how do you position your portfolio and how are you thinking about, you know, interest rate risk going forward? Because obviously that's, inflation's the elephant in the room, but you know, interest rates and rising interest rates is the other side of that equation. And, you know, talk a little bit about, you know, your perspective there.

Yeah. So, My ideas are not 100% formed on this topic, but let me give you some of the things that I'm currently thinking. One thing that is clear is that right now, in the media, this discussion around inflation is front and center. What happens when that happens is that there's a lot of discussion around that, and that creates political pressure. Now, on the other side of that political pressure, though, is that this conversation that we're having, meaning that people who disproportionately control both the media and the political class stand to gain from inflation, meaning that the rich get richer and the poor get poorer. That's kind of the name of the game. So I don't really know how this is going to play out, because if you have the majority of a democracy, you know, being hurt by inflation, but you have a very small percentage of people who tend to control Congress that have stocks, bonds, and mutual funds where there's quite a lot of people that are on fixed income that are losing this argument, the number of people is large, but the amount of control they may have is smaller. So that's just kind of something to think about. Um, similarly, you know, there's something called the Misery Index that I was kind of contemplating before our discussion at Best Ever Conference, where that number is, is significantly high right now, which is basically a combination of unemployment and inflation. Now, unemployment is low, but inflation numbers are so high that it's kind of creating this squeeze. That creates political pressure and that creates discussion. So someone that was on the stage at my conference, Mark Moss, was talking about the discussions around price fixing, and we're hearing rumblings regarding rental controls and such. I think that unfortunately is something that investors should be very concerned about if you're in those states that are very sympathetic to basically price controls, with the most common example being rent controls. So, but interested to get your thoughts on that.

Yeah, I mean, there's definitely, there's definitely, there's always reasons to stay on the sidelines, you know. I mean, you know, I think, I think we might see high oil prices for— we might, we might see, you know, interest rates continue to rise. We might see, you know, Powell continue to channel Paul Volcker. And, you know, it's still a little unlikely to me, but, you know, he seems to be doing it so far. You know, yeah, I think rent controls are a real possibility. And this wealth divide, as you point out, which has been happening since the '80s and since the '70s, really. And it's because of inflation and it's because, you know, stocks go up and everybody loves when stocks go up and housing prices go up, but only a certain percentage of the population, you know, has houses and has stocks. And so—

That's right.

So it really definitely hurts the poor for sure. And that— so there's a huge amount of political risk and political backlash that is likely to happen. And, you know, but even those things, you know, we'll navigate, we'll navigate those things.

And I think it'll be a very, you know, haphazard thing as well. I don't foresee rent controls being implemented at a federal level because, you know, real estate is so localized and maybe at a state level you could see that. But a lot of times, especially in the Sunbelt where you're seeing really high rent growth, you're also seeing really high wage growth. Right.

And so population—

population growth. And so there's these other compensating factors to where, you know, if you have really high inflation but really, you know, poor wage growth, you know, people are going to feel that more because they can't keep up with the rent increases and other things. So yeah, I think we'll, you know, we probably will see it more, but I think it'll be more in kind of a sporadic way and not at a global way.

Let's, let's do something fun here. So, all right, we have $100K to invest. What is going to be literally the top choice? What do we want to— let's, let's rank them. Let's, let's rack them and stack them. What are the best things you can, you know, put your money in, you know, theoretically, and the worst things? What do you want to— what do you want to avoid? What's a, you know, so, so let's, let's go with our best choices now. What would you say, Hunter? And we can do this together, all of us.

Cool.

So this is how I came up with the idea of the summit. This was a question at our conference. It's called the Intelligent Investors Real Estate Conference. And basically someone asked, you know, if you had $100,000 to invest and investment minimums weren't applied, right? So you can think of it as a $100,000 portfolio. How would you allocate your capital? And so this is how I got the idea, and I interviewed a bunch of people about this topic. I would say that, man, this is so interesting. So—

What's number one?

Someone asked me. Number one, I got to say, if I were to say, and I'll say it this way to be a little bit inflammatory, I think multifamily might be the most undervalued asset class in the country right now.

Okay, and I know that I would actually agree, but I would probably put it number 2.

Okay, okay. Um, I am a big proponent of self-storage because of the recession-resistant component, especially in this climate. People tend to downsize, use the— I'm sure you guys are familiar with the thesis. We can go on to number 3 just to run through them.

Keep going. So wait, let me just let me just comment. So my number one is self-storage. And the reason is because it tracks inflation with very little delay. So you probably have— if you're aggressive, you have a 90-day delay. So it'll track with inflation like within 90 days. So multifamily has— has tracks probably on a 6 to 9 month basis. So it's— there's a— there's more of a lag. But on the other hand, and both are— I mean, self-storage is surprisingly recession resistant. You know, I would not expect that, but it just is.

Yeah.

And, and multifamily to me is just incredibly safe because these are people's homes. Right. And, you know, so those would be, those would be my top two.

Yeah. One of the things I'd like to say on the self-storage is it has pretty high price elasticity even relative to multifamily, to where if you have a 10% increase someone's paying $1,500 a month, you know, that's $150 that they're going to feel that, you know, but a 10% increase if you're paying $75 a month is, you know, $8 a month higher, but you still getting that, that spread. People are willing to pay that for their teeth.

So those are, those are my top 2. So that's interesting. So, well, okay, what's number 3?

I like in terms of getting outside of real estate, I'm a big proponent of Bitcoin mining. Just generally speaking, I think it's a good way to kind of decouple from the overall economy in general. Yes, the price of Bitcoin is usually focused— they don't want to admit it, but it is the truth. It is tied, but Bitcoin mining is a cool way to get some depreciation cash flow, and especially if you can receive your distributions in cash versus Bitcoin or a combination of both, big proponent of that asset class. Here's one that a lot of people aren't thinking about, but I think I talked about last time I was on your show, which is the ATM sector. This is such a cool recession-resistant play where the more pronounced a recession is, the more people are there are with low credit, low balance sheet, low income, and can't get bank accounts, and are forced to use ATMs to transact. By the way, we don't anticipate selling the ATMs later down the road, so it's not value dependent. There's no multiple of income that we sell it for, so the multiple at which ATMs trades is irrelevant. So it's a very cool cash flow-focused play as well. And then I'll also mention, you know, if I were to say one more, I think some sort of quasi-real estate, maybe an RV space, something like that, mobile home park, I think would be something that's always going to be up there for me.

I might add a little bit of just, you know, twist the question a little bit because I love that you're kind of contrarian by nature and you like to look for opportunities and the whole point of your company, ASIM, is asymmetric, right? So where are you going to find, you know, the opportunities that have a much higher risk-adjusted return than others? You know, what, what would you say would be the best contrarian investment to make that you're going to have a high likelihood of winning in, where maybe it's been undervalued in the market, maybe it's, um, you know, sentiment is, is against it? Or what, do you have anything that is, comes top of mind to you that you're thinking about or looking at? As you know, I think there might be an opportunity being created here?

In this audience, maybe they're more sympathetic to this, but I think the senior living business is— when I measure tailwinds versus headwinds, the headwinds are in the media, the questions around COVID, the fact that the tenants were really susceptible to that risk far more so than any other population. That has put a pause on that space, and there have been significant distressed assets in that space. That's pretty much the only real estate asset other than hotels that has had legitimate and potentially longer-term distress than hotels, but if you can attach favorable debt financing in favorable markets and quality areas, I think that asset class— I mean, look, if they're trading at 9 caps right now and what I'm saying is true about this trillion-dollar tsunami, how smart are you going to look in 10 years when they're trading at sub-5? I think that's a total possibility.

Let's add let's add our list because, you know, I, I'm not going to go with you on the Bitcoin mining. I, I think, I think it really could, you know, I think it could. It's got, you know, but it's really speculative, right? It's who knows what Bitcoin is going to do. There could be, you know, you know, a new coin come out that becomes the coin and all of a sudden no one cares about Bitcoin. Who knows? I mean, so it could go up, but is it core holding? I wouldn't put it there. ATMs I do think are recession-proof. Great cash flow investment. But I'll tell you, so I would put very high would be industrial, industrial real estate. It doesn't track as, as closely with, with inflation, but the demand characteristics are just off the chain right now. It's just huge shortages and massive demand. I don't see it changing. The other thing I would, I would add is retail. So, so we, we saw, you know, this has super contrarian. And I would, I would put this in the contrarian. So we're seeing retail, good cash-flowing retail trading at, you know, 9 to 10 cap rates right now. And if you look at retail, there's a resilience that's happening. There's, there's a lot of the, a lot of retail has been reinvented and, and shows that they're meeting consumer demand. And so I think, I think it's, it's ripe for, for opportunity, for resurgence. But on a risk-adjusted basis, I mean, I think multifamily has to take the cake, right? Because retail is definitely more of a risk. But, but if something goes from a 10-cap to a 5-cap, you're going to make a lot of money, you know? So, so, yeah. Okay. So, okay. What are the worst investments right, right now? What are they literally the place? Oh, no. You want to avoid no matter what. And I already said my number one.

Okay, so I will say, I mean, obviously, I've interviewed 400 people on my show, and all of them have been really wealthy and really successful, and they've all pursued different strategies, some of which I would never do, some of which I'm super bullish on. But something that I personally have stayed away from is the hotel business. The cyclicality, anything in hospitality just gets hammered during recessions. The counterpoint to that, though, is that hotels are probably the most inflation-resistant asset class because they're priced basically daily. As opposed to self-storage, which is 30 days, and retail, which is 5 years or so. But that's something that I've always stayed away from. Similarly, I actually have stayed away from development as well, and I'm not even sure that it's about the risk-adjusted return. It's just more about the lack of predictability of the cash flow. And so as an example, someone said, I have a pretty reasonable degree of certainty that this development deal will produce a 40% IRR, which is indicative of maybe a startup type of investment, I would probably still pass just because of the nature of the investment as opposed to the risk-adjusted return. So those are a couple. I don't want to throw anybody under the bus. I'm not going to go too far. But you can make— I mean, look, the nicest house I've ever been in was a real estate developer. So there you go. And by the way, thank you for inviting me to that house. By the way, it was beautiful.

Worst place to be right now is cash.

Yeah.

Second worst place to be right now is bonds, which are basically negative yielding. It's a way to lock in your negative yields, you know, negative real yields. Right. Let's lock those puppies in, you know. So that's, that's the worst place to be. Don't go there.

Well, one of the kind of last thing I wanted just to discuss kind of before we kind of round this out is so we talked about NOIs and how those can track inflation. Right. But the other kind of piece to the equation of values, you know, is cap rates. Right. So generally, you know, the sentiment or at least the belief is that as interest rates increase, that's going to increase cap rates as well because the overall cost of financing is going to go up for purchasers. So obviously increasing cap rates hurt values, reduce values. How do you kind of think about, you know, one, do you see cap rates reverting, meaning going back up? And two, you know, even if they do, how do you kind of navigate that, you know, and how do you think about that? Do you hold on longer? Do you make sure you have good cash flow? What are the things you think about?

Man, it's really tough not to. I mean, like I said, my view of a lot of the space was deeply impacted by 2008. So going in through 2012, '13, '14, I was constantly thinking about the pendulum. I was thinking about cap rates like a pendulum. Like, when are they going to snap back to 2010 levels? How can you not think like that as an investor? But eventually, I came to the realization that that might not be a reality. And if that's not a reality, I should be investing through a different lens. So I personally don't see a snapback to 2008 levels in this market. And by the way, even if I'm wrong, even if it takes a couple of years to happen, I can probably build a business, grow my investors' portfolios significantly so much that we can overcome some potential change in cap rates. Exactly. So I mean, I'll give you an example. This predictor of recessions, which is the inversion of the yield curve, that usually is 18 to 22 months months prior to a recession if there is a recession. So now we're thinking, okay, it's 18 to 22 months. Most recessions don't really deeply impact real estate. I just saw a deal in Phoenix that we did with a sponsor go full cycle that produced a 29% IRR over a 22-month hold. I mean, net to investors. So like, I've got to be intelligently participating. Well, I have to participate in that market. Yeah. As opposed to worry about interest rates and cap rates.

And let me answer that question.

Sure.

So, so cap rates track real interest rates. Okay. And the reason is, the reason is because cap rates— so, so real interest rates track inflation and so does real estate. Tracks inflation. So both are adjusted for inflation. So, so basically cap rates do not track real interest or nominal interest rates, they track real interest rates, which is inflation-adjusted interest rates, because both are inflation-adjusted. So worst case and worst case scenario. So let's say cap rates, which really speaks to investor appetite, right? So cap rates, let's say they just make it go way up suddenly. Well, that means investors think it's a really bad idea to invest in this stuff. Well, NOI fixes all things. Inflation is that inflation keeps going and your NOI just keeps going up. Ultimately, you're going to— even if cap rates double, unbelievable. I mean, hard to think about, but your NOI doubles, you're still making money, you know, over— you just do a long hold. So long holds, that's why I say inflation fixes all ills, right? You know, so I think cap rates are, you know, are unlikely to reverse like that. Furthermore, I would say, I would say, you know, the market's always emphasized growth, right? You know, you had the— why is Amazon priced as high as it is? Well, because it's price-to-earnings per growth, right? It's PEG. Well, what's the high-growth stocks today? I'll say it's inflation-protected real estate. So there's, there's, there should be a growth premium on our cap rate. Cap rates. Investors want to get— if you're looking to protect inflation, you want to invest in multifamily and you're willing to pay more for that because it is the growth stock or the growth investment. So I would argue it would have premiums, meaning driving cap rates lower. So it's hard to see— I'm agreeing with you. It's hard to see cap rates really taking a header. And if they did, we'll just hold for the long term and let inflation fix all else. Agreed.

Awesome. Hunter, what's the best way for folks to get information on this really cool virtual summit that's going to be coming here really soon?

Awesome. Well, thanks for the opportunity. So you can actually get it at 100k2invest.com. So it's a free summit. It's awesome. You should totally do the VIP upgrade though, because you can get the recordings for life, but the summit is 100, the number 100, then the letter K, 2, T-O, invest.com. And we have some awesome all-stars, 22 people talk about their various niches. Some people talk about all the asset classes we talked about today. Ben came and talked about non-performing notes. We also had some people talk about life insurance and tax savings and deferred sales trust, all these cool things that passive investors need to know about, especially if you have $100,000 to invest. So again, it's 100k2invest.com. And if you're interested in learning more about our private equity company, you can take a look at ASYMcapital.com.

Awesome. And if you want to raise capital for real estate, Hunter wrote the number one book on Amazon about that. It's Raising Capital for Real Estate, right? Which I—

that's right. RaisingCapitalForRealEstate.com.

Yes.

Sorry, it's RaisingCapitalForRealEstate.com. And it's pretty much everything I know about the topic. It's $7. So have fun.

Everything you know for $7. What a bargain.

Hunter, thanks so much.

You pay for it.

Well, this has been fun, Hunter. Always a pleasure to have you on, and, uh, definitely looking forward to that summit. And thanks so much again.