We recently interviewed Kathy Fettke about the economy on the Real Estate Investor Podcast. Kathy is the author of the number one bestseller, Retire Rich with Rentals, is a frequent guest on CNN, CBS, CNBC, and more and she’s the host of three podcasts, The Real Wealth Show, Real Estate News for Investors, and On the Market. She has been in syndications for 10 years, was one of the first when money dried up and banks were failing in 2009, she quickly pivoted to syndication and has over 66,000 members at Real Wealth and growing.
What is Kathy’s thoughts on the economy in the next six to 12 months?
It seems like everybody’s guessing something a little bit different. So it’s really confusing, right?
In an incredible year and so often when you’re in that frenzy of awesomeness when everything is just going your way, it’s hard to imagine that that can slow down. What slows it down is the manipulation of the Fed and they made it really clear this year in January or February when it’s too late.
Kathy says “I knew they’d raise rates but you know, the last time they did was in 2018 and Trump came in and stopped that train. Said, “No-no-no, you reverse this” I don’t know if you remember that but he fought with the Fed. That doesn’t normally happen and he won and they reversed but in 2018, when they raised rates, they were kind of that less than where we are now and it really slowed down the housing market, at least in new homes. So here they are now going way beyond what they did in 2018 with the full intention of again, slowing down the speed of circulation of money but it’s almost like the arsonist. I just heard someone say this, the arsonist is now putting on the fire fighter garb, you know? Because they’re the ones who started the fire. They’re the ones who put seven trillion dollars into the economy.
This is kind of an interesting little tidbit but in 2008 and a lot of people like to look at now versus then and are we in the same kind of bubble. Back then, right before that crash, we had seven trillion dollars circulating. Today, we have 21 trillion dollars and they increased the money supply by three times. How could that not create inflation, especially in an environment where we really haven’t been bringing on new supply?
So it’s frustrating because we can’t know what’s coming because it completely depends on the Federal Reserve and what they decide to do. So you got to be prepared, you got to be defensive, that’s the best thing I could say. It could be a soft landing, they could decide to reverse course, that could happen in November, you know? And when election comes and people say, “Enough is enough” or they you know, we just don’t know. So the best way to prepare is to not know and to have everything be based on, “Rates could go up or rates could go down.” We just don’t know.
So it’s really not inflation per se. It’s not like things have become more expensive, it just that there are more dollars chasing the things that are there. It’s like the monopoly game. If you’re playing monopoly and everybody wants the buildings on the table and then the banker comes in and brings in a couple more boxes of fake money and passes it around and they’re still the same number of apartments on the board, you’re going to – yeah, you have more money to pay to get those because, at the end of the day, it’s the hard assets that everybody wants.
It’s the things that are in short supply but are in high demand that are going to do well and right now, we know that’s housing. We know that all this is happening when we have a massive generation of millennials looking to form households. They’re the largest group of this millennial generation, which is already a huge generation, it’s aged 29 to 34 starting households. People were saying they weren’t going to behave like other generations and I don’t know what they were talking about. They are getting married, they are having babies, they do have dogs and they want homes. They want a yard with a fence or a nice apartment. In the meantime, if they can’t afford that home, they are going to be living in apartments. No matter what you invest in residential though, there’s going to be demand moving forward, at least for the next few years, yeah.
Here’s how I look at it and I’m sure you do too is there’s so much fear and headlines are terrifying and all you have to do is type in the word recession and we’ll sit back, you’ll have lots to read because it will – your entire Google page will be filled with horror stories of upcoming recessions. So of course people are scared and sitting on their money and not sure what to do and watching their stock portfolio decline and it’s a scary place to be but when you really look underneath it all and look at the demographics and the demand out there for at least the industry that we’re in, this is just an incredible opportunity. Just an incredible opportunity as people sit on the sidelines, there are unbelievable deals out there to be made and if you understand the fundamentals and for us that means, you know, looking for where the jobs are, looking for where the demographics are growing, not reduced then and you and I both live in California.
You know, so affordability and then infrastructure growth and if you can find markets that have those things, then oh my gosh, what a time to get in because the competition is so much less. I can’t even imagine what your world is like trying to buy things today versus a year ago, you know what I mean? It’s such a different world.”
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