[Music] hi and welcome to this video I have Rick rule with me once again Rick how are you doing very well sir the better for being able to talk with you again thank you uh so you know we were talking beforehand and I want to put a poll out to the audience uh Rick is going to be a regular guest like once a month or so uh on this channel and I want to know should this uh section be called the golden rule or do you have any other suggestions other suggestions Mike not including fool tulle or drool excellent uh so you know we were


just talking about I just came back from speaking at a conference in uh NASA a mastermind group called the collective uh and it was all very high net worth people and uh it was a real estate uh crowd cash flowing real estate and you started telling me a story of your real estate but one of the things that um there there were a few people in that crowd that had suffered tremendously during the 2008 uh crisis and and uh lost a bunch of real estate and there is in those time that period of time there


was a real reverse correlation between gold and real estate so anyway tell us uh your little bit of your real estate background because you've got quite a background oh before we get to that when was the first time we met was that like 2004 or five did you go to Gold Rush 21 or did we meet at a Silver Summit or do you remember I think that we may have been introduced by uh Robert kosaki um but I can't swear to that to be honest with you uh now that I'm in my 70s things which happened 20 or 30 years


ago are remembered with somewhat less Precision Mike yes but we met back in 2004 or five so I think that's right I remember driving up to your studio uh in Santa Monica uh having a great discussion I remember after we were done recording you and I had the Good Fortune just sit and talk to each other for 30 that would have been 2010 I think we flew you out there to uh interview you for hidden secrets of money right it was wonderful yeah so okay so to uh your real estate investing in the 90s yeah I guess my history in real


estate goes back a little further when I was aged 16 uh I read a book uh I believe the author's name was Nickerson uh about how to make a fortune in real estate on your SP time which at age 16 sounded like a good idea had lots of spare time and no money uh of course I wasn't able to pursue uh his strategy for some time my mother however uh a single mother who later remarried uh had the very good sense to invest whatever spare funds she could ever scrape up into single family rentals her Theory being that her costs


were fixed with a fixed 30-year mortgage while her rents escalated over time and the Delta between her return on Capital employed and her cost of capital she wouldn't have said it that way but that the Delta uh would uh provide some security for her and after 30 years that that piece of real estate would in fact be her retirement it didn't occur to her that the price might go up too uh my own career in real estate investing began in my very early 20s I think 21 years of of age or maybe 20


years of age in Vancouver British Columbia where using the same idea I bought a Triplex uh living in the basement myself and Renning out the two upper floors thinking uh very similarly to my mom that uh I could raise rents over time while my cost of capital uh stayed fixed while also having a bachelor apartment uh for free as a place to live and if my memory serves me well uh I was able to buy four or five duplexes or triplexes in my 20s in Vancouver British Columbia which worked well um I learned that there were other


ways to make a living that were better for me uh I didn't add value in real estate I wasn't a good plumber I wasn't a good Carpenter I wasn't good at that sort of uh thing where you buy properties fix them up change the rents that kind of stuff I wasn't a value added real estate investor I was a passive real estate investor and hence I stayed out of the real estate market with the exception of Timberland uh really until the early part of the decade of the 90s in the early part of the decade of the 90s


having experienced the volatility and cyclicality of mining in oil and gas I decided that I'd get some money out of Harm's Way and I uh invested as a limited partner uh with three different private family office sponsors and my Criterion not knowing very much about anything was no development because I didn't want to take any development risk uh I would only participate in syndicates that bought stuff that had been built the second Criterion for me which by the way uh the general Partners took


on to very very very well was my suggestion that I would only buy uh or participate in properties in Capital Cities preferably in the South the idea being that the only the only business that I knew that only grew never shrank was government and while I don't approve of that uh I didn't want to let my morals in that regard get in the way of my pocket uh and that because I didn't have the ability to understand turn around stories that I wouldn't buy C or bclass properties but only a class properties


uh that idea worked a lot better than I thought it might Mike um the properties in Florida properties in Texas properties in North Carolina uh in the capital cities did extraordinarily well uh I think partly because of demographics but probably also because my cost of capital didn't in fact stay the same it continued to decrease as interest rates went down the first thing we did was Finance out which is to say we had all of our cash back but we still got the advantage of depreciation on the property while the


rents went up uh in about 2019 2020 it began it became fairly clear to me hold on while I turn this off [Music] okay it became fairly clear to me that the wind was not in my sales as a passive real estate investor anymore simply because the interest rate cycle was turning and I was able by the way again in conjunction with the general Partners who had the same sense uh I uh liquidated that portfolio too early as it see as it seems now but the truth is I I I sort of believed I believe two things the buildings that had been brand


new in 199 1991 1992 were no longer brand new and I didn't know enough about how to know uh you know how to Value them and it was very clear to me that interest rates were not going to continue to decline so for me the reasons that I owned those Investments had changed and uh I I decided to liquidate the Investments but it was a wonderful wonderful experience Mike particularly because I didn't have to do anything I just had to have the guts to write the check yeah you know you said just now


that you were early and um is this this is something at least for me uh I'm always too early on things but if if you're patient and you wait they come about is that the same throughout your lifetime pretty much well I was late once you know uh the decade of the 70s was a wonderful bull market and resources I profited might I didn't understand that markets work I was too late which meant that at the end of the decade of the 70s the beginning of the decade of the 80s I went from being a very wealthy man to having a


negative net worth uh I decided not to be late again uh for reasons that you can understand I'm I I'm reminded of that wonderful quote by Bernard baroo who said that the only guy who ever bought it the bottom and sold to the top was a liar it didn't happen right given that never happened to me I'd prefer to believe that other people couldn't do it either yeah he he also there's a quote in the beginning of my first book I think uh predicting the future is never easy especially when you try to do it in


advance that's Bernard baroo as well so um yeah uh being you know do you know Jim Sinclair Financial sense.com I think the operative phrase I'm sorry uh um Jim papava Financial sense Jim papava of course he used to live in San Diego uh knew him years ago uh know his son yes absolutely yeah um I sort of uh tripped across his uh um blogs and and uh writings uh and his he had a podcast uh back in I think like 2004 or something like that and I had already purchased some uh gold in 2002 when it was 315 bucks an ounce I


purchased a my my first tube of Gold Eagles and I kept on purchasing ever since and I went down to see him uh back then before I had started goldsilver.com or my own YouTube channel uh and uh but he wrote uh series and one of the things he said is that when you discover a new bull market one of the hardest things there is is to ride that bull all the way to the finish uh it always wants to Buck you off of its back and give you a reason to sell and so just me when I saw the Dow gold ratio gold real estate


ratio uh all of the different ratio charts that's when I decided wow there is a super cycle going on and I'm going to ride this bull until uh the completion of this Market have you got any comments on that yeah because I still psychologically bear this bear the scars of seeing my net worth as a very young man uh go from being really extraordinary relative to my age to being Subzero uh I'm willing to be bucked off at least the speculative part of my investments very early now I need to say


U Mike and I think we covered this in the last uh discussion that we had for me me at present at least my bullion Holdings on investments they represent yes they represent wealth and insurance uh I have from time to time trading positions in Gold although to be honest with you I'm not particularly good at it uh I regard gold as good liquidity and as I said the last time we talked although I have a fair bit of it I sort of hope it doesn't go up the set of circumstances around a dramatic increase in the gold price is fairly


hard on people's lifestyle as people get sold and on our freedom and the uh the whole political system yep that's what I'm afraid of you know I'm I'm fairly confident we're going to see gold at multiples of where it is now but at what price for society so people people's people like you and me at least our lifestyles as people can see by our drop backdrops are pretty good and if my gold didn't go up in price and my lifestyle didn't change you know I'd be happy about that it's it's


interesting too Mike when I look at the comments uh around our interviews and people who own gold for a different reason say well the price hasn't gone anywhere uh and that reflects a recency bias uh if you look back as an example to the year 2000 gold was at $256 now gold is flirting with $2,000 uh that's my kind of motionless Market uh it has done very well it hasn't reflected many very many people's um time preference but again from my point of view uh the essence of a good investment


is one where time is on your side where time does well compounding is what made me a complete novice in real estate do extraordinarily well it wasn't like I bought something for a million dollars and immediately sold it for $1,275 th000 or something like that that isn't what happened what happened was that I owned it long enough that inflation raised the cost of somebody being able to compete with me uh the rents increased the cost of capital stayed steady in fact decrease it was time that made me seem smart as a real


estate investor and I'm afraid it's going to be time that makes me seem smart as a bullion holder certainly in the rest of my portfolio around conventional Financial Services uh as an example owning an insurance company or a bank that serves its business well time that compounding is what makes you wealthy uh with oil stocks time is what makes you money I think if we get nothing else across in this interview you uh it's that you need to invest while time is on your side yeah yeah and well for me there's


not a lot of time left you know approaching 70 so uhh but and so I'm trying to enjoy life as well but I I was told once you know talking to older investors when I was still a stock broker uh I was told by a gentleman who was his late 70s he said you tell those coders when they tell you that they don't buy green bananas that next week they aren't going to have any bananas uh the truth is that what's happened to me is when I was young I was very impatient it isn't that my time


preference has changed it's just that I've learned that my preferences don't matter at all I've become more patient because I've learned it takes five or six years or 10 years irrespective of how long I thought it might take what it does take is fairly extended periods of time so ironically now that I have less time left on Earth I'm more patient yes and I am also uh you know Dave Morgan uh is says many times that 80 with with like Precious Metals 80% of the move comes in the last 20% of the


time and I looking you know in writing my book I actually became quite fearful of the economy and I was rushing to get that book out uh at the end of last year I thought that there might be a banking crisis headed for us uh in like October November December time frame well it didn't happen until March and April right and luckily the book came out a month before the banking crisis then on the third day Amazon changed the listing to a video game from a paperback and it took two and a half months to convince


them no no no this really is you can't plug a monitor into this thing right it really is a paperback and so it crushed my sales but it's it was interesting the first book came out uh like one month before the global financial crisis and this book came out one month before Silicon Valley silvergate signature First Republic and uh and credit Swiss all melted down and if you look at the way the last uh the global financial crisis unfolded there was a problem with one uh large bank and people go oh well


that was like an outlier event and everybody dismisses it and then five months later there's another problem uh I can't remember oh I think it was uh Bank runs at Northern Rock in England oh well that's over in Europe we don't have to worry about that and then s that was yeah five months later and then six months after that is Bear Sterns and then two months later and then uh a couple of weeks later and one day and one day and so now you've got uh Leman and AIG and Fanny May and Freddy


Mack and it just went Bam Bam Bam Bam and I really believe that uh that Silicon Valley that was just like the first leg down in the unfolding Financial catastrophe awaits us uh how do you I mean I'm looking at like the value of real estate measure Robert Schiller's data or uh the uh real estate price versus uh average income uh ratios and these are at all they're much higher than 2006 and S and I don't have data yet but we're trying to put together data on the average the like a mortgage


payment on a million dollar home versus or the the mortgage payment uh um uh income ratio that is the really important one because it's so sensitive and it moves so so fast with interest rates so I think that is an important thing it it reminds me of driving uh I guess it probably would have been late 2006 maybe early 2007 driving the 405 freeway which you'd be very familiar with Northbound from San Diego yeah and as I say I'm not a real estate guy but on the right hand side of the 405 there was a great big billboard


you know Outdoor Advertising thing uhuh and you know I've been a lender most of my life uh and the billboard said borrow 125% of the value of your house bad credit okay it said bad credit okay and I remember thinking I don't think that's gonna work out for somebody there's just something about that billboard that bothered this is that moment uh where Joe Kennedy says when the Sho shine boy gives you stock tips it's time to sell well I'll tell you it did bother me now I wasn't you know I wasn't a big


real estate investor and I wasn't a big real estate lender what I was was a shareholder in a couple of banks that were pretty good size in mortgage financing I wasn't smart enough to go short but I was smart enough to get that part of my money out of Harm's Way the other thing that you said that's really interesting to me uh has to do with these declines uh Buffett has observed that in his life every 10 or 15 years something happens a panic that changes general pricing levels most both Buffett and Doug Casey


obviously Polar Polar Opposites in many ways both of them have observed that bare markets don't make assets worth less uh they make them sell for less and they make them change hands they go from weak hands to strong hands now the weak hands don't like that a bit you know uh but I think if you conduct your life with the understanding that Buffett has that every 10 or 15 years the general price levels around Investments are going to fall by half and if you keep some powder dry and if you try to participate a in assets


that are out of favor but B in assets that are fundamentally mispriced not assets that are underpriced relative to the expected uh you know means or Norms that while you probably won't do as well as Buffett uh that's probably asking more than you should you will do fine I I remember very well the 2008 bare Market because I came into it with a reasonable amount of cash and I'd seen panics before so I had the tools and I had the courage to pull the trigger I'm not trying I've got them all right by


the way but 2009 was very very good to me and my own suspicion is that sometime in the next five years I'm likely to get another opportunity like that I hope I don't but I think I will uh if you that's one of the reasons why I ask people to have cash despite the fact that the interest that you get paid on your cash is destructive of capital if you think about the Delta between the deposit interest rate that you get paid and the real depreciation of your currency and you understand that


savings actually cost you money you have to have savings anyway because that Delta really is an option premium on having the liquidity to take advantage of an illiquid Market rather than being taken advantage of by that same Market I'm sure you've experienced that in your career uh yeah hi I just wanted to take a moment and thank you for subscribing and mention that if you'd like to help our Channel please consider my company goldsilver.com the next time you buy precious metals we're one of the most


trusted names in the industry our prices are sharp delivery is fast and we have an insiders program where you find out exactly what I'm doing with my own Investments thanks for making goldsilver.com your dealer and now back to the video and you know one of the things I just showed at the conference that I was at is uh from you know early in this Century 2001 uh gold and real estate were rising at about the same percentage rate uh until 2006 2007 2006 real estate and I'm referring to Dr Robert Schiller's 20


City index that goes all the way back to the year 1880 so it's an inflation adjusted index and then uh it so it was real estate and gold were Rising together real estate leveled off gold kept on going the markets crashed gold did a little pullback but then kept on going well well real estate fell by almost half now if it fell by half that means if you're saving dollars you could uh uh buy twice as much real estate if it fell by half however gold doubled so you if you had gone into gold by the


time real estate bottomed and it was half gold had doubled and so you could now buy four times as much real estate instead of two so uh for me I I have some cash but typically I am overinvestment collateral but also relatively of coll as collateral is truly spectacular you and I both know a lot of people you may be one who have very large amounts of gold uh but have occasional needs for liquidity yeah and uh the idea that other Banks uh aren't using uh highly liquid high quality high quality non-correlated collateral like


gold on the asset side of their balance sheet frankly Delights me uh that's an enormous market for battle Bank to go into it's a market too that's inhabited by people who I know and love and trust you know you and I have both been talking to the gold Community for many years and I'm not trying to say that there hasn't been the odd bat Apple uh in our business yeah uh by and large when I look at the community that I've been able to inhabit uh if you call it if you will the gold Community the hard money


Community uh very very very high quality people I delighted to associate with them I'm delighted to lend to them uh yeah you know I do want to to caution anybody out there thinking of uh taking a gold loan though yeah typically you can get like 80% loan to asset value but you are risking a margin call if things fall and uh um so you yeah I'm very I you know I built a spreadsheet so that I've got a calculator and if I do temporarily uh take some cash out against my gold uh I I look at uh where


I'm going to get Margin Call especially silver it's it's highly volatile and so um you know you want to make sure that you never I I think for anybody out there considering this I I I never give advice but if you're going to go greater than 50% loan asset value I would think twice and do some calculations before you do it uh during the that's precisely the number we're at 50% loan to value uh we aren't looking to have people over collateralize yeah uh a collateral package that doesn't


generate income remember that the gold can't service the loan the gold can only secure the loan yeah 50% loan to value serves both the borrower and the lender well it allows the gold to be used for its stated purpose which is to say a store of wealth but an occasional of liquidity too so your yeah your your words are your words are very wise it you know the community banking business in the United States did well as mortgage lenders when there was a 70 or 75% loan to value on single family residential and duplexes when we began


to get 97% loan to value we SED the SE we slded the seeds for what went wrong in 2008 I'm not trying to say it was just a lender problem it was a borrower problem it was a lender problem was a government problem but you know we took Collective leave of our common senses and I don't want to see gold investors do that right you know um uh I was speaking like I said to a bunch of Real Estate Investors and many of them uh you know are constantly pulling out equity and buying more real estate pulling out


equity and buying more real estate and the thing is if you pull out some equity and you buy gold when the gold goes up when the real estate crashes and right now Dr Robert Schiller says that real estate the 20 City index is 125% overvalued and so it could crash by more than half this is entirely possible uh and you know that data goes back to 1880 and I first started showing that data in 2004 at the Silver Summit I've got a video of me I had a beard back then uh uh presenting Dr Robert Schuler's index


and nobody had seen this before this was like brand new information and saying that there was a massive real estate bubble building I cautioning people about real estate that there was an inevitable crash because all bubbles burst and people are going oh no no no real estate always goes up it has to it's never gone down real estate always goes up well it did go down there was a massive real estate bubble in the mid 1920s it was Nationwide but Florida was the best example so a lot of people have


heard about the Florida real estate bubble but there's uh some data available not a lot but it it was a nationwide bubble and real estate values did go down especially in Florida people got wiped out uh the Marx Brothers mo movie coconuts was all about that absurd real estate bubble and it was produced while the stock market was going into a bubble and Groucho marks uh took all of his wealth and then went out on margin and bought uh stocks on margin in 1928-29 and got wiped out he went bankrupt and spent the you know all of


the income that he had made on all of those Mark's Brothers films and uh you know had to start again from scratch so I think a lot of what you describe uh I would ascribe to recency bias which is to say that people's expectation of the future is set by their experience in the immediate rather than the distant past and I think that many people don't pay enough attention to if you will the ground rules the causes of valuation they just pay uh attention to price action conflating I I suspect value and price one


anecdote uh that supports your thesis is very recently I was in Midtown Manhattan uh visiting offices that are familiar to you the offices of gbi gold bullion International oh yes uh prime prime Midtown down uh Eastside real estate second tier office building probably 50% occupancy at this point 16% occupied whoa the building I don't think I don't know much about operating commercial real estate but I don't suspect that the building can cover operating expenses much less a margin much much less uh interest on a mortgage


now maybe that's just one office I haven't done a statistical survey of uh b-class Office Buildings in Midtown Manhattan but the idea that this building is less than 20% occupied yeah uh how would you feel if you were that mortgage holder uh pretty Panic unless the uh the owner's balance sheet did include something like gold where it had doubled or tripled during that period of time now um I just there was a I was looking for it just now and I don't see it anybody anywhere but there was a uh a on


Twitter or x uh a comment about it it showed this office building in New York City that had sold I think in 20 uh 18 or 19 for $65 million and it just sold again for 16 million doll right and it's because of this occupancy commercial real estate occupancy crisis and when that crisis meets refinance at you know so you've got that low occupancy and people most viewers here probably don't understand that the value of a commercial building isn't based on the necessarily I mean it helps to have a


good location it helps to have h a nice structure but the value is really the rents that are coming from it so the occupancy determines the value of the building if they've already got a mortgage on the building and that mortgage is is coming up and they've got to roll over this mortgage at the new higher rates because the you know the rates have gone astronomical from where they were and uh the building is only 50% occupied well that means the building lost a tremendous amount of value and it


may be underwater right now compared to that loan and so they can't get the refinancing so they either have to come up with all the the cash difference or they've got to sell the building and that is the reason we have a $65 million build building selling for 16 no wants to buy them when they're not occupied there's no cash flow right it's important to understand as you correctly pointed out that that building if you think of it from a mortgage holders point of view is a brick and morar


bond if there isn't any coupon uh that Bond irrespective of whether or not the brick and mortar is Tastefully arrayed uh isn't going to carry the value of the building you know that's a very interesting analogy yeah one of the uh I think you know about me based on our last interview that I'm really over time a Perpetual Optimist uh I have looked at our country and in fact looked at the world and I've marveled at our Collective stupidity uh I I used to joke that Doug Casey and I between us have correctly


forecasted 17 of the last three recessions yep uh I believe that uh humankind absence nuclear war will be in better shape 10 years from now than it is today yes but I think we have to get through this next 10 years we're at a very dangerous moment in history if we don't develop a virus that that wipes us all out or have nuclear war or I mean there's so many ifs we've got the brightest future ahead of us a world of super abundance almost free energy uh it's it's all going to change artificial


intelligence and Robotics is going going to make everything so different than there's going to be more change over the next 10 years than there has been in the last 2,000 so I think it's incumbent on your listeners uh to prepare themselves for that change so that they come back so that they come out the backside with as little trauma as they want uh or pardon me as they can affect the reason I said that is because the next thing I want to talk about is pretty gloomy H and I don't want people to


use uh all of the negative circumstances that confront us to do nothing I don't want people to curl up in fetal condition yeah cor you have to take action right I want people to prepare themselves the thing when I look out there that scares the mo scares me the most uh well our credit markets generally but that includes corporate credits we may have talked about this before Mike but there's a whole uh group of retail yield Chasers uh inelegantly termed yield by the way uh and many of these


people Express their desire for uh high yields in the junk bond ETFs that is ETFs that are made up of below uh investment grade credits and what's scares me about this is that the top structures the ETFs are extraordinarily liquid but they own instruments junk bonds many of which trade over the- counter are unlisted that are extremely un liquid and if you have a situation like 2008 where there becomes broads spread concern among the populace about credit quality and people go to sell the topco


the ETF uh the ETF manager has to sell the underlying Bonds in a market where he or she can't do that and as we discovered in 20 8 they can go to zero and it's a multi-trillion dollar asset class with an unbelievable mismatch in liquidity I may have used this quip before but I remember when the junk bond blow up happened uh around 2000 there was a joke about something called Owl bonds an owl bond is where you called your broker and said sell and your broker said too too my my nervousness around these junk


bonds and these ETFs is that like when the money market funds blew up in 2008 you're gonna have a situation where the ETFs can't sell the underlying Securities fast enough to handle redemptions and I think the ripples through the entire credit Market uh the real estate credit market and every other credit Market I'm not saying this is going to happen but when I look at what what the things are that really truly keep me awake at night that's certainly at the top of the list for me yeah you know um from my


book um many of those junk bonds that you're talking about were issued by these companies here this is zombie companies that can't afford to pay the interest on their debt just the interest not the principal and it's gone from you know in the year 2000 it was down at 3% and it's up at 20% now that's one in five publicly listed companies this is scary as can be I just can't imagine driving down uh a main street in a uh a city like you know driving through New York or downtown Los Angeles and seeing


one out of every five stores boarded up uh you know and this doesn't just include uh retailers uh this would be you know manufacturers and and uh you know all sorts of sectors and so um we're I I just think we're at a very dangerous moment in history now but yes we have this incredibly bright future ahead of us we just have to get through the next 10 years and in every crisis there is an opportunity and it's the viewer's job to find it and learn as much as you can about it so well that's


absolutely correct yeah okay I want to thank you so much uh we're at about almost 40 minutes now so uh we'll do this again in a few weeks so Mike I always uh enjoy these conversations I look forward someday somewhere uh to doing one uh in person yes that would be great just sitting down and having a chat that would be wonderful so um I want to remind everybody please like And subscribe and if you can if you if you got anything from this just email the link to a friend so thanks Rick Mike


before I go any of your listeners who would like my opinion about their natural resource portfolio that old offer is still good if you go to rural investment media.com and list your natural resource stocks I will for free no obligation rank them one to 10 one being best 10 being worst I'll comment too on individual issues if I think my comments might be of any value at all uh I've enjoyed the interaction that I've had with your listeners over the years and I look forward to many more in the


future okay well thanks and uh to all of the viewers out there we'll see you in the next video hi I just wanted to tell you about gold Silver's 111 o Silver giveaway where you can win win win 111 one 1 o silver bar one 10 oz silver bar and one 100 o silver bar so enter today and win