Jen: (00:00:01) - Welcome to episode eight of season 16 of The Growing Empires Show. Today I'm here with my special guest, Nic D'Angelo, and we're going to talk all about inflation and how that affects your investment properties. So make sure you stay tuned.

Speaker (00:00:16) - Welcome to Growing Empires, hosted by real estate entrepreneur and trusted investment advisor Jennifer DeJesus. Growing empires provides insight to building wealth through passive income, producing real estate investments for those who want to build and manage a more profitable real estate portfolio.

Jen: (00:00:36) - So welcome, Nic, to the Growing Empire show. I'm so glad that you're here.

Nic (00:00:40) - Jennifer. Great to be here today. Excited to, uh, chat with you and jump into some fun stuff.

Jen: (00:00:46) - Oh, I'm excited as well. So why don't we start out by you giving a little bit of background about where you are in the industry and what you're doing now.

Nic (00:00:53) - Sure. So I'm with Saint Investment Group. I sit as president and founder of Saint Investment Group. We focus today with how the market is and the current environment on income, uh, investing.

Nic (00:01:05) - So we have an income fund that pays, set rates, return and has some unique items behind it that is 100% real estate backed. So we're still 100% middle of the fairway real estate guys. And our background is just this year, 20 years in real estate. And we just passed 206 million in assets under management with what we're working on today. So exciting times at Saint.

Jen: (00:01:30) - Wow for sure. That sounds amazing. So today we're going to talk about how to generate profits during inflation and the impact that inflation has on investing. And I've asked Nic to join me to share his wealth of knowledge that he's picked up over the years. So let's just jump right in, Nic, if you don't mind. And, um, question number one for you, what actually is inflation? And can you give me a description of how that relates to investing?

Nic (00:01:57) - Oh, I love it I love it. Yeah. So starting out the absolute basics of the inflation discussion. What is inflation. Inflation simply put is the increase in goods and services that we the consumers, you, Jennifer, me, listeners, the audience.

Nic (00:02:15) - It's what we experience in our lives. Right. So the most common tracker of inflation based on that uh, definition is the CPI, the consumer price index. So us as consumers, as we live our lives, what price increases do we experience? Simply put. So when we buy a banana at the store or gas at the pump, or hire somebody to, you know, do a service for us along the way, what's the change that goes along? Uh, our lives, you know, or our lives? And what do we experience as those increase?

Jen: (00:02:51) - Okay. And how does inflation impact investments and why should an investor be thinking about that?

Nic (00:02:59) - Oh, so yeah, the if you put the investor hat on, you're balancing a lot, especially in normal times. So when we say quote unquote normal times for inflation, let's define that historically the Federal Reserve has a mandate, meaning 100%. They're focused unquestionably they're focused to achieve a 2% inflation rate. That's what they're going for. So all efforts at the fed are to get as close to 2% and a stabilized fashion as they can, right? So when we're in positions where historically there was a, you know, periods of time where there was deflation, it wasn't, you know, it was just about, you know, the last decade or so, there were questions of, can we even achieve 2% inflation because there was so much money.

Nic (00:03:47) - There was this huge baby boomer workforce that was driving down labor costs. They were getting very wealthy baby boomers, wealthiest generation we've ever had in the US. So now their money's going to work, right? And then that's driving the cost of capital that we have the cheapest money that we had seen in generations during that last decade period. Right. So there was a literal discussion, which sounds insane today, but there was a discussion of if we could even achieve enough inflation. Now we've overspent during Covid, right? We have the baby boomers stepping out of the workforce. They're taking their money with them. So that money is not looking for higher return yield. So it's not as competitive. Now we have a lot of concerns about overheating and overspending and less employment, which all those things coalesce into a peak in the middle of two, 2022, the summer of 2022, we experienced over 9% inflation. So if you're Jerome Powell, the Federal Reserve chair, and the, uh, you know, the group there that's making that decision, you're saying, well, we're supposed to be on track for 2% now.

Nic (00:04:56) - We're having discussions at 9%. This is to be understated, a huge effing problem, right? So what do they do? The fed only has a couple levers that they can pull to get this back on track. The biggest lever and what you see most commonly, and it's most talked about, is to increase the federal funds rate and not to get too inside baseball. But what that does is it affects rates for all of us, the interest rate that we pay for anything. So if you go buy a car, even a used car, and you finance that, your rate is through the roof right now compared to what it was a handful of years ago. Right. And then most, most. To us as investors having an investor discussion for your audience. What that means is that that compresses deal returns in the short term, especially at a time where sellers held the keys to the kingdom for so many years. So where we're at today is sellers really like the pricing. And, you know, 2019, 2020, even 2021, right? Those prices were fantastic, especially for multifamily.

Nic (00:06:03) - We certainly saw that in industrial. And nearly every asset class they really like, you know, we heard, uh, rumors of 3.3 caps being purchased, right. That that's insane. But where we're at today, where rates are now much, much higher, is that those deals don't exist anymore at the pricing doesn't exist anymore where investors, our community that we're talking to now can pay for those returns that make sense. The returns have, you know, basically disappeared with the high inflation rates. So something's got to give. So that can either come from the Federal Reserve dropping the rates, which doesn't look like it's going to be. It's going to happen anytime soon. And I can go into all the drivers for that. But more importantly for us as investors now it gets pushed back to the sellers. So do sellers want to adjust their prices to meet returns? To do sellers want to drop their prices to a level where us as investors can make a return that makes sense for the current environment? So that's kind of the a little bit behind the curtain all the way to where we're at today of how inflation impacts us directly making decisions in the marketplace.

Jen: (00:07:14) - Sure. So, you know, inflation rates vary over time. So if you're looking at your current and potential future inflationary environments when making investment decisions, how do you advise people to best assess that and make that decision?

Nic (00:07:32) - There's a few ways to chop this up and there's no perfect crystal ball, but that's the best. What you're asking is the absolute best question is how do we get there? How do we see around the corner of what's going to happen? Okay, sure. Here's what not to do. Okay. Here's I'll tell you what not to do. And then I'll dive into specifically what investors can do today. What not to do is read headlines and think take that as gospel, okay? Just literally in the last few days, I'm sure you saw this, Jennifer. It was all over the place. I was seeing everybody quoting ING, which is a data analytics group, saying all the fed is absolutely going to drop rate six times in 2024. Right. And people are just reposting this, you know, can't wait for this to happen.

Nic (00:08:18) - Right. And I'm going that's great. Right. That's great. Other headlines. You know what they're saying. Fed's going to drop rates. You know all over the place. All over the place. Headlines everywhere. And the only person that's not talking about this is Jerome Powell who's the head of the Federal Reserve. Right. So if you read the headlines, it's a very different story than going directly to the source and asking Jay Powell, hey, man, what are you doing here? What's the game plan? Okay. So what how how can we as investors not get caught up into sentiment with its overhyped or under hyped and that how do we keep a balanced mind in this environment and think clearly about inflation? The top two ways that I can give you are one look directly at the Federal Reserve. Jerome Powell is an interesting guy. He's the first attorney that we've had sitting in that role. Everyone else has had an economics background. Jerome Powell is an attorney. So when he hears 2% mandate, he thinks about that like an attorney thinks about 2% in the contract.

Nic (00:09:17) - This isn't a loosey goosey kind of 2%. He's saying, I'm going to smash this until it's 2%, whatever he's got to do. So when they ask him in interviews what his game plan is, he's very, very clear. I absolutely reserve the right to increase rates as needed. We're starting to find a balancing act right now of where that looks and rates. But and if you know, if there's further changes, we reserve the right to lower rates. Also, he's very open about it. Here's a way to look behind the curtain with the Federal Reserve that investors can do. There's something called the dot plot map. And what are you familiar with that, Jennifer.

Jen: (00:09:55) - No, I'm actually not.

Nic (00:09:56) - Oh, it's it's a great tool. So they take Jerome Powell along with the Federal Reserve Board. Right. And they sit them down and they all take a chart over the next period of time. And they each put a dot at where they believe interest rates will be over the next several years, next handful of years.

Nic (00:10:16) - So you're looking directly into the mind of the Federal Reserve Board. Okay. Jerome Powell, it's one thing. He's one individual, one man that can come out and make a statement. But there's a whole board of smart people, right? So you get to see directly where their heads are at as far as as it relates to rates. So that's one side. Here's the second opinion that I'll give you that I'll give the audience to to balance all this. Because by the way, if you remember, it wasn't that long ago the Federal Reserve said inflation is transitory, meaning it's going to go away quick. Don't you guys worry. Yeah, and here we are. I think it's three years later. Four years later now, three years, three years and change later that they said that. And we're still dealing with inflation and it does not look like it's going anywhere quickly. So when you take the Federal Reserve at what they say and you can balance that a second way, which is taking the economic data, just drilling into the actual numbers, removing the human element of what someone can or can't say.

Nic (00:11:13) - And how do we interpret what they're saying? And you drill down into the data and what the data is doing for us right now. If you compare a few different points, is it showing that inflation, the drivers that we're dealing with of inflation today are here for an extended period of time. So some of those might be, uh, you know, yield, right. How much do people want to make on their money that has actually gone down. So that actually drives down competitiveness of capital. People are wanting less returns because they're a little bit scared of the market. Right. We're saying I don't want that extra risk for that extra return. So it's less competitive on the on the capital side. So that actually drives rates up because there's less money. The other side is the driver specifically that we can look at data wise of we know where the CPI is, the consumer price index. That tells us a measure of inflation today. There are precursors to that that we can look at. One is the PPI the producer price index.

Nic (00:12:14) - So for the goods and services that we experience as consumers, someone has to produce those goods. So if you look at manufacturers and different people on the earlier stage of the consumer cycle, you can see where the PPI is at. That has consistently been higher. Then the CPI. So if that's the case it looks like there's higher inflation. Not crazy, not 9% or not. You know not everyone's running for the exits. But there are tools that we can look ahead a little bit and bet on where inflation is going. So that's what I'd say. The first is if you're trying to analyze inflation today look to the Federal Reserve. Let's see directly. Let's see what their what you know let's read their homework. Let's see what they're doing. The other side is look at the data that balances a lot of the factors of what they're saying. And see if those two things match up. And if they do, then you have a pretty good idea of what's going on in the market. Okay.

Jen: (00:13:08) - That's great advice.

Jen: (00:13:09) - So how does inflation affect different types of asset classes like stocks bonds. We talked about real estate and you know but there's other commodities out there other different types of investments and asset classes. So how does inflation affect those. Is it is it equal effect or is there differences between them.

Nic (00:13:27) - Great question. So there's there's two pieces to that. The first is how does it affect directly the assets that you're referring to a commodity a bushel of wheat. Right. Or gold or uh, you know, um, precious metals in general or real estate or anything else. One is how it affects the actual asset. Two is how does inflation affect the businesses that produce and support those assets. Right. Because if you take tech, for instance, tech has been a grand slam in the stock market and the US economy for so long. As far as we can remember, text has been the best, best, best, right. Sure. But that wasn't always the case. And we know that from the.com bubble.

Nic (00:14:09) - But when there's cheap money in the market, which is aka the last 1015 plus years, when there's cheap money in the market, tech takes off. It does so, so, so well because you have cheap money. So your risk of taking, uh, guesses and bets on things that have huge upside. It's much reduced now with rates where they're at today. It's a lot more expensive to take risks, isn't it? Sure. Because the loss is much higher. And when you have that huge amount of debt backing up, and companies and banks and hedge funds and investment banks are much more hesitant, that drops the investment market quite a bit. So those companies, Texas being an extreme example, uh, all companies are experiencing higher debt right now, so it's more expensive to run a company, which makes the difficulties along with the debt. So it's a if it's a high inventory company or it's a company, that debt is very built into their model, aka a lot of the real estate market.

Nic (00:15:07) - We know that, right? There's a lot of debt built in. Then those companies and those industries will need to adjust. Now, all that to be said, all that to be said is let's talk about assets. Right. The other half of that equation, running a business is more expensive right now, without a question. The other side of that is the assets that back up these businesses that prop them up. Now, I am very outspoken that without question, real estate is absolutely my favorite asset class for 100 different reasons. So the question is, is it still my favorite asset class today? And I think without question, I am the most bullish on real estate today because my background is in the wake of 2008. So we were buying deals for below replacement cost and everyone thought I was an idiot, right? So I say, well then you haven't read the numbers because the numbers tell a different story than me being a huge dummy. And maybe the whole market has changed in the US is tanking and it'll, you know, be a third world country.

Nic (00:16:04) - You know, there's crazy things being kicked around at that time. But the reality is the US recovered and bounce back and stronger than ever. And the fed did a good job and everybody and businesses and pulled together and made the US successful. Today we're dealing with a fraction of the problems of 2008. Truly sure, at this point, banks don't even want the properties back. So we're not dealing with a foreclosure situation. Most banks are kicking the can. They're saying, look, most operators that are having problems in real estate need some help. They need a longer leash. They need to be able to have enough breathing room to keep operating this because if anything banks learned in 2008 is that they are horrible landlords and they don't want to repeat that. So where is that today? I am extremely bullish on real estate. I think there's only real two to real strategies to operate in real estate today are kind of our thesis and our, our, uh, you know, what compels us at Saint and how we move forward.

Nic (00:17:02) - But I still think real estate is the belle of the ball and the most consistent, stable asset class over the next handful of years, while maybe even a decade while we figure out what inflation lands at and how to balance this economy.

Jen: (00:17:14) - Okay, so as inflation becomes a long term reality, how can investors generate profits in this type of high inflationary environment? What are some of the tricks of the trade that you would advise people to do?

Nic (00:17:30) - Absolutely. So to me there's there's two strategies in today's market. Right. And they depend less on one's good and one's bad and depend a lot more on the type of investor and where that specific investor has their head at that period of time. So the first strategy that I think is, is still fantastic and is taking a lot of crap right now in the news and everything else, but it's just buying and holding a long term asset. It's buying the physical four walls in a roof. In key asset classes, you got to choose the asset class wisely. But it's buying an expensive asset, an expensive performing property and holding it for a long period of time.

Nic (00:18:11) - Because historically, in what we're seeing and what we can expect today is that if we deal with sticky inflation for, let's say, a decade, then what we can expect is that those properties with historic averages and historic norms and historic proof, those properties are going to increase along with inflation. So it's a hedge against inflation. So right now we're dealing with, you know in the threes about 3.5% inflation about double where the Federal Reserve wants to be. Uh that's not that's not very optimistic for rates. So if someone was to buy a long term property today with a plan of 5 to 10 years as a hedge against inflation, or invest with people that are doing that, that knocks it out of the park versus keeping your money in the bank and sitting on cash. Without a question, especially with the upside potential. The question is, is an investor? Are you and I or whoever are we comfortable with a 5 to 10 year hold right now? That's the big question. So if an investor is good with a 5 to 10 year hold and they believe in the underlying market, the US economy and the local market for that property to support, then I think that is absolutely a fantastic play, an A-plus play in this environment.

Nic (00:19:28) - The second option that we like at Saint a lot right now, and that is really the focus of where we're at investing. The second is that is buying fixed income strategies that are backed by real assets. So there's a million fixed income products in the market right now. And there always is. But the last part is backed by assets backed by real true physical assets. On our side at Saint we're real estate dogs. We will always invest in real estate. That is our focus forever. So we personally think the best balance of secured income versus asset backed is US mortgages, mortgages throughout the US. Because just like the previous example I gave, as far as interest rates remain at a higher clip and as inflation continues at a higher level, we end up with a position where the underlying assets of your payments, aka the mortgages, are being paid on an asset that's increased. So every time that value of that asset or that home goes up in value, the likelihood that the borrower is going to continue to pay also increases.

Nic (00:20:37) - So let's say you're getting an 8% return. That 8% return that you, as the investor are getting only becomes more confident over time because the underlying asset, the home, is increasing in value. The benefit to the strategy and why it's a balancing act with the other that I talked about, is that most fixed income strategies are shorter term. They're 12 months, right. Plus or minus. So if you have a 12 month situation you're making 8%, which are defined in real estate a lot of places right now making 8% with a 12 month, uh, horizon on it. It's very flexible for the investor. We are investors. Many of our investors are older. The many, many of our investors are very sophisticated in high net worth. They wanted that flexibility with all the concerns they had in the market. So we put together the same income fund to, you know, double down, triple down, quadruple down into a fixed income option that our investors were asking for. So between those two, I'm still extremely bullish on real estate.

Nic (00:21:38) - And it depends on what the investors looking for and their flexibility needed in this market.

Speaker (00:21:46) - The episode will continue in just a moment.

Jen: (00:21:49) - As an investor, we know it's important to stay on top of market trends and real estate opportunities that add value to your portfolio. We also know that having a trusted source of reliable information to help you stay a step ahead of other investors is critical to your success. If you're interested in having these types of resources as well as access to me and my team, I invite you to join the Empire Investment Club, a free service that gives you an easier way to make sense of today's and tomorrow's real estate opportunities. As a member of the Empire Investment Club, you'll get access to relevant resources and investment focused experiences such as live interactive webinars, market trend presentations, and investor socials designed to equip you with what you need to succeed. So whether you're an active investor, passive investor, a combination of both, or just starting out the club is where you'll get what you need to build a portfolio you love.

Jen: (00:22:37) - To join, just head over to Jennifer dejesus.com. Sign up and we'll see you in the club where everyone's on a journey to becoming a better investor. So if we're talking about real estate as the asset. Are there specific industries or sectors that you believe will tend to perform better than others in these inflationary periods?

Nic (00:23:01) - Sure. And I think, I think during inflationary times, it's what the drivers of inflation are that dictate the quality of which assets and which asset types are going to be the winners and losers. So in this market, to answer your question super directly, the bells of the ball that we see, we always love multifamily because it's such a privileged asset class. From the debt to the treatment by banks just across the board. It is an amazing asset class as long as you choose the market correctly and obviously, you know, make a good buy, beat up the sellers, right? Sure, sellers need to get beat up a little bit right now. You know what I mean. They they need it.

Nic (00:23:40) - So if you beat up the seller you get a good deal. I think it's fantastic. The other bet that we have that is really our major focus on the hard asset side is industrial. I absolutely you know, we have completely leaned into industrial more and more and more found amazing success in the markets that we play in in industrial because with China re-adjusting so much, there's so much opportunity at home for manufacturing in the US for distribution in the US. We really, really, really like the next decade plus of of industrial in the US. So that's one of our major focuses as well. And so between those two, those are the winners. I am terrified to invest in office right now. I'm sure there are good deals. There always are. But as a as an asset class, we are not investing in office. Retail is very hit or miss. Generally speaking. We're not taking shots on retail right now. We're just looking at the first two.

Jen: (00:24:41) - Since you already mentioned it, let's talk a little bit about how the mismanagement of China is going to disrupt the economy completely or as we know it.

Nic (00:24:51) - Sure. So when you say mismanagement, our mismanagement of the relationship with China or China's mismanagement internally over there.

Jen: (00:24:59) - Well, let's talk about both.

Nic (00:25:01) - Oh, shoot, I love politics, Jennifer. I'm ready for this. Okay. So. Well, yeah, we can we can zoom out a little bit. We'll we'll back up off real estate and let's dive into China. China is dealing with a lot of problems. Right. And one of the biggest problems is that they were poised. So there's this, there's this. I forgot the exact term, but it's it's assumption bias. If you take a chart that's on the rise and you draw that infinitely over in an infinite time span, and you assume that that's not going to change, China would have been the best bet you could have ever made a handful of years ago. Sure, because they were just such a meteoric rise economically. Their GDP growth, their, you know, economy, their, uh, their manufacturing potential, their huge workforce.

Nic (00:25:48) - But a lot of people miss some of the basics. China has a huge issue with their demographics. Their their population is falling out of the sky at a rate that we haven't seen. I want to say, you know, I haven't brushed up on the stats on this specifically. I think it's the worst demographic decline of a major economy that we've ever seen in modern times. So if you look at that, China did two amazingly smart things when they were dealing with a huge population that was starving and dealing with a lot of poverty. They first they said, hey, we're going to do a one child policy because hungry mouths overturn government's right. Sure, you can't have a massive population that's super underserved by the government and expect that to go on forever. So they started the one child policy, and even smarter than the one child policy was that they doubled down their leadership, doubled down on manufacturing because they had a huge, cheap labor force. The problem is, when you do both of those, you're going to hit a brick wall.

Nic (00:26:48) - And that's what we're seeing right now is we're seeing a massive demographic decline, aka there's just not enough freaking people. Right? So labor wage or, uh, labor inflation, the cost of each worker in China has gone through the roof. I think it's something like 15 x since 2000. So 15 x increase in costs while their labor production only went up, their labor efficiency only went up 2 to 3 x. Wow. So that's a mismatch. That's a huge problem there. So then that's one side is cost of goods are just so much more expensive coming out of China. There is no uh there's no end in sight for that. It looks to continue. They're doubling down on robotics, the doubling down on AI to replace humans in a manufacturing, you know, 100% in a manufacturing capacity is very far out. That's not on the horizon for China. Sure. So if you're the US and 90% of goods from China come to the US, just trying to want to pick a fight with the US, not when they're being sober right now.

Nic (00:27:51) - So all that to be said, that's where we're at. And China, we're seeing a lot more sober China when they're sitting down with Biden. And she is saying we can either be the best of friends or the worst of enemies. Sure, anyone who knows the real scale of the US military's like, yeah, right. Okay, you want to be friends? Let's be friends. Um, in the US, that presents a huge opportunity for manufacturing, presents a huge opportunity to make new friends in the world and take our US dollars, the global exchange currency, new places to make new friends. Everyone likes making money together. So that's kind of a really quick look at China. Um, you want me to talk a little bit about how that might affect that investors most importantly. Yes.

Jen: (00:28:32) - Absolutely.

Nic (00:28:33) - Okay. So goods and services right. Things going up. We're dealing with inflation in in China. They're dealing with inflation also. They're dealing with so much inflation they're not even reporting the numbers accurately.

Nic (00:28:46) - Right. So if we think any problem that we have in the US, if you just zoom out and look at other countries, other top, first world, top performing countries, everything's worse. There is just the general gist of geopolitics today. So that said, with goods and services increasing from China, even if we increase the manufacturing in the US, all those things are very inflationary. All those things will take a decade plus. Now, if the cost of the money to support that transition is also more expensive, aka you know, debts, a lot more expensive, banks are loaning at higher rates, construction loans are significantly more expensive. All that gets passed along to us as the consumers. So while all this world reshuffling is really, uh, tough right now, it really does benefit the US consumer, the US population at the end of the day. And I think the US comes out on top in a big way.

Jen: (00:29:41) - Okay. Fair enough. And that's also it sounds to me like that's kind of why you're also leaning heavily, as you mentioned, into the industrial side because of that, the trades.

Jen: (00:29:51) - Right. It's it's all the goods and services and products that we've got to get out there.

Nic (00:29:55) - Exactly right.

Jen: (00:29:57) - Um, how do those triple net leases that are so typical in the industrial world play into that equation as well? Is that a factor for you, or is it more about the economy as a whole?

Nic (00:30:09) - It's so it's both it's both. So you're asking more. So the triple net question is that more of an operational question? How nice it feels to have all those fees and expenses covered. So for sure. Yeah. The triple net lease. So industrial is a privileged asset class in a different way, right. You know, without a doubt, the belle of the ball from the government and the debt perspective is always, for the foreseeable future, going to be multifamily industrial. Where it sits today in the marketplace is very interesting because the tenants that you have most commonly have national or international credit, right? Sure. Leasing can be complicated. We have a lot of overseas timelines to, to match and, and customs and things that we got to work through that are, that are different negotiating styles and different thoughts on a lot of different things.

Nic (00:30:58) - But the credits there, you know, our tenants, we have tenants that are, you know, doing hundreds and hundreds and hundreds of millions, millions a year in revenue. And so our concern of the tenant not paying, it's like you don't nobody wants to go to court over this. Just pay your bills. We're all good. And we have very, very few disruptions on that side. The balancing, like you said, is the triple net. The lease structure is fantastic. They cover a lot of the expenses, especially triple net lease. Most expenses get passed along to the tenant, which is a national credit in most cases. All that said, the problem, the downfall of industrial is if you don't have a portfolio balance because all your eggs are very literally in one basket, you have one tenant. So if, God forbid, that tenant does dip out or does, uh, you know, underperform or has a stock merger switch, swap, you know, things that are outside of any of our control and it doesn't pay off.

Nic (00:31:59) - You have a very, very, very big hole in the bucket. Sure. And when the when the tenant adjusts to different market conditions like a different lease rate, those can be wildly different swings. So industrials a game best played at scale. That's the difference. So there's a huge benefits. There's huge downsides. We choose very very carefully what markets we deal with and very, very carefully what type of product in that market. So that we feel we have the best defense and offensive strategy as we as we invest in industrial.

Speaker 4 (00:32:32) - Okay. So I want to jump back to.

Jen: (00:32:34) - Something that you had mentioned earlier. And that was like the baby boomer generation and what they're doing with their investing. So, you know, things like shifting investments from stocks to stock market to fixed income assets like treasuries. How do you think that in itself is going to impact or reshape the US economy?

Nic (00:32:55) - That's that's a great question because we're dealing with any way you cut it. The baby boomers, you know, leaving the workforce is stage one.

Nic (00:33:03) - Stage two, sadly, is a, you know, what's the next generation look like, post baby boomers during that period of time. So the next several decades we will be dealing with in the United States, the largest of transfer of wealth in US history by a wide margin, because the baby boomers were extremely successful and they were huge, they were massive. The next big generation to come up will be the millennials. Many of those are the kids of the baby boomers, big generation, big generation. One creates the other. So with that money moving down the pipeline, whether it's a huge chunk will go to government because, you know, the government loves to take a bite of, you know, anything passed along. So that will, you know, refresh coffers of the government to be sure as well as where does that money go in the next future generations? Forbes just did a study on the billionaires list, and for a long time, uh, self-made was one of the top categories of billionaires.

Nic (00:34:02) - They're seeing a massive rise in billionaires that are inherited wealth. So the deck is reshaping in a big way. So what happens from here on out with the with, uh, the baby boomers? One is they're a pretty sophisticated generation and a whole financially. So they're actually checking the boxes better than previous generations of what that looks like for their estates when they pass money along. Um, you know, again, wealthiest generations. So you see just a mass of that. But as individuals, most of them are facing out of the workforce. I think it was 2021. That was the, uh, beginning of we had passed the midway point of the baby boomers leaving the workforce. So now every day we're on the other side of that slope where there are less baby boomers, or there are more baby boomers retired than there are in the workforce, and that's significantly increasing over the next decade to essentially phase out completely. So from that period of time, what we know from the US and really all countries in retirement, or excuse me, what we know from all countries moving towards retirement age in their populations is that they are much less concerned about returns and much more concerned about capital preservation.

Nic (00:35:18) - So. It's the safe assets. You mentioned treasuries. We still with investors. We will explain to them over and over and over what the actual real rate of Treasury is versus, you know, an 8% or a 6% or a 10%, all those things and the different pros and cons to that. We'll talk through that with investors. And it still is backed by the US government. So the odds even if there's a question of if you're even making money net inflation, it's still the money's going to be there. So that's a huge thing that keeps them warm at night, knowing that the money's not going to go away. They work their whole lifetime for that. Right. The other side is when they are investing and they're looking for a slightly higher return. That flexibility component we're seeing as very critical to their decision making, because we deal with individuals that let's say, are in their 80s, right? So if you have a, you know, a discussion with a woman and she's 83 years old and you're saying, well, it's a seven year investment, I mean, she's got to think about she's got to think about a timeline of who enjoys that money even.

Nic (00:36:19) - Right? Sure. And if it's a and if it's a multigenerational discussion and her passing it along, well, she's got a lot of ways to do that rather than, you know, some different investment options today. So it's a the yield that the baby boomer generation needs is much lower. And the conservatism of the investment, the safety of that investment need is much higher from that class of investor right now.

Jen: (00:36:45) - So as we're talking about all these demographic shifts, how will the demographic shifts impact on the Federal Reserve's ability to manage monetary policies? What's your thoughts on that?

Nic (00:36:56) - That's a that's a good question. I think the fed still has a lot of control and it has a lot of power, and they're that their levers are still effective. We talked about primarily their rates, you know, kind of their first lever number one. Um. There's an interesting thought, especially as it relates to the baby boomer generation. I think it's something like 80% of mortgages are locked in at 3 or 4%. So if you want to talk about a rock solid asset class, it's the freaking baby boomer generation sitting in homes at extremely low rates with fixed payments.

Nic (00:37:35) - I mean, they're pretty dialed in on that side. So as far as it relates to housing, I think the baby boomer generation is extremely insulated from the factors of inflation. I think they're in a very safe place as a whole nationwide. That's one side. Um, as it relates to the Federal Reserve, to the economy, I got to say, the fed, I think it was 2022. The fed had, uh, what was it, a 3%? Uh, I don't want to misquote this, the fastest increase in rates in history during 2022 for about a six plus month period. And during that time we saw a lot of changes in the economy. But we saw employment so insanely sticky and strong, which it has stayed today. So the the underlying fundamentals of the Federal Reserve's ability to impact the economy, I think are still there. And I, I personally see us if you take the chart, you look back the last 100 or so years, you see a rate, depending on what date you choose, of about 5 to 6% on average.

Nic (00:38:40) - I see that for the foreseeable future, a 5 to 6% rate arguably is back in balance. So the losers of a 5 to 6% rate are people that bought, thinking that rates would be at 4% for the rest of their lifetime. Right. They have some reshuffling to do, and the winners of that are people that are buying with higher rates in mind and pricing to that. So do I think the Federal Reserve still has a lot of power? Absolutely. It affects the expenses that businesses incur. And higher, higher pricing affects the whole economy. Right. But it affects affordability. It affects incomes. It affects all of that. So I still see the fed as having a lot of teeth and a lot of ability to impact the economy right now.

Speaker 4 (00:39:22) - Okay.

Jen: (00:39:23) - So let's talk about Saint investment as a whole. Why would investors or why should investors contact you and, and uh, talk to you about your offerings.

Nic (00:39:35) - So we have one offering right now. We're always very focused. And I'm very proud of our focus because it's awesome.

Nic (00:39:40) - I'm seeing people bounce around a lot of different places. Sure. For us, we're always be real estate. We'll always be looking for the best asset class and the best strategies in the current market environment. Our background was buying distressed assets in the wake of 2008. That's the start. The genesis of Saint Investment Group. So buying loans in a at a discount is like dead center middle of the fairway for us. So our business model is working with banks and financial institutions. And when they have loans that are underperforming, let's say someone from Covid didn't make payments for six months. We buy those mortgages from them. We let them recapitalize and go do what they do best, which is trying to create more mortgages and more loans. And we deal with the borrower directly in ways that they can. We customize it to the borrower. We pull those loans together. We have over 500 mortgages in our Saint income fund, and pay a fixed return of 8% to investors with a super flexible structure in zero fees.

Nic (00:40:41) - So I think we're the best. And I'm super, super biased, okay. But I frankly don't see a better strategy that's more balanced for risk return ratio in this environment. And I just love debt right now because of what I said earlier in that the housing market is so fortified against market conditions. So I think we're strategically and safety wise, and the best position that I'm seeing in real estate, and I mean, we're growing rapidly. So, you know, we catered this because investors asked for it. And we're seeing a lot of investors that, uh, even more investors that are looking for the exact product. So we're just happy that we're, you know, hitting the nail on the head and servicing investors how they need it.

Jen: (00:41:23) - Wonderful. So how would my listeners get Ahold of you?

Nic (00:41:26) - Oh, so the best, best, best value that I can offer listeners obviously hit us up if you want to learn more about the fund. Right. We're always accepting, you know, new investors.

Nic (00:41:36) - We usually hit our minimums quarterly, uh, or a maximum raised quarterly. So just keep in touch with us on the next opportunity available. But we offer a ton of free education on a monthly basis. We're putting out new webinars, hour long, 90 minute deep diving into economic topics and strategies of how investors can make money during those economic variables that they're dealing with. There's a lot going on right now. We don't charge a dime for any of it. It's literally just we're already doing the research, so we might as well give it to investors for free and just put it out there in the world. The best place to find those is that. Same investment. Com slash resources.

Jen: (00:42:17) - Okay, great. Nic, I cannot thank you enough for your insight, your politics chat, your economic chats, your financial overview, your information is stellar. And it was such a pleasure to talk to you today.

Nic (00:42:35) - Oh, I had a ton of fun. This is my favorite stuff. I geek out on this all the time, so I really enjoyed talking with you, Jennifer.

Nic (00:42:41) - And uh, let me know how we can keep in touch on future discussions.

Jen: (00:42:45) - All right. Awesome. Thank you for listening to my episode with my special guest, Nic D'Angelo. I hope you enjoyed our conversation, and I hope you're ready to hedge your bet against inflation with your investment properties. And until next time, take care.

Speaker (00:43:01) - For more information about how Jennifer can help you plan, develop and manage a strong real estate investment portfolio, visit Growing empires.com.