The Real Estate Espresso Podcast

Latest Episodes:

More Labor Market Turmoil Dec 09, 2022

Show notes

On today’s show we are talking about what impacting labor markets and how that can affect real estate.

In the food and beverage industry we’re seeing a massive shortage of workers. The question is, where did they all go? We saw in the most recent statistics for the past month a trend that has been underway for much of the past six months. In November, the US enterprise employment report shows that 263,000 new jobs were created and that unemployment remains at a low 3.7%. A large percentage of jobs hired were in the travel, leisure and hospitality industry.

What does that mean?

It means hotel staff, restaurant staff, retail staff, flight attendants have been hired in record numbers.

While we have seen major job losses in the tech sector at with 10,000 google, 11,000 at Facebook, Twitter of course, and major layoffs at Amazon.

In the past week alone some of the more notable announcements have been layoffs of 400 people at reverse mortgage funding, 1500 at H&M, Doordash, 1250, Global Foundries 800, Wireless Advocate, up to 1800 inside Costco Wholesale stores, Morgan Stanley, 1600, Blue Apron Holdings, 10% of corporate workforce. Intel corporation let go 300, 100 at corporate headquarters and 200 in Santa Clara. Hewlett Packard is expected to lay off 4000-6000.

I’ve only listed a handful of more notable layoff announcements in the past week. There are certainly many, many more. But frankly, having me list layoffs for five minutes will get boring. I think you get the point. So are these people showing up as unemployed? Well no, they’re not. Almost all of these will have received a severance package and they won’t appear on the unemployment rolls for months.

Many of the job losses are higher paying corporate jobs. Some of the job losses are in retail with H&M and Wireless Advocate. But most are high paying white collar jobs. The hiring is also happening in ways for restaurants to stay in business.

We spoke with a hotel owner this week who said that applicants for the role of dishwasher in the hotel kitchen were asking for $30 per hour.

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Host: Victor Menasce

email: podcast@victorjm.com

Off Balance Sheet Financing Dec 08, 2022

Show notes

On today’s show we are talking about off-balance sheet financing. Increasingly, borrowers are seeking ways to hide their liabilities so as to appear financially stronger than they are in reality.

This represents a growing risk to the economy and financial as our debt laden world sinks deeper into the abyss of rising interest rates.

Let’s start with whether a liability needs to be disclosed on the balance sheet in the company financials or not. If not, why not?

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Host: Victor Menasce

email: podcast@victorjm.com

What is Happening in Oil? Dec 07, 2022

Show notes

On today’s show we are talking about what is happening in the world of energy. There are so many moving parts right now that it’s hard to make sense of what is going to happen to energy prices, and oil prices in particular.

Is a REIT The Same As Holding Real Estate? Dec 06, 2022

Show notes

On today’s show we are asking the question as to whether investing in a REIT is the same as investing in real estate?

In order to answer that question we first need to unpack and define what a reit is .

A real estate investment trust is a publicly traded fund that is generally registered to be traded on a public exchange like the nyse or the Toronto stock exchange, and subject to a number of regulatory limits.

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Host: Victor Menasce

email: podcast@victorjm.com

Elastic Money Supply Dec 05, 2022

Show notes

On today’s show we are talking about the money supply and whether we would be better off with a fixed money supply such as when the dollar was on the gold standard.

In a fixed money supply the economy cannot grow. In fact it is possible for commerce to be inhibited by a lack of money in the system.

Back in the 1970’s the Italian Lira was dropping in value. That meant that the coins in circulation were worth more than the face value of the coins. You could melt down the coins and sell the metal for more than the coins were worth. Coins virtually disappeared from circulation. In those days if you went to the grocery store and, you could expect to receive change in the form of postage stamps which had a face value. When the postal service could not keep up with the demand for stamps, the shop keeper would go to the shelf and grab a big bag of caramels or hard candies and give you a handful of candies as change. It was not very long before you could go to the store and buy a bunch of bananas and pay for it with postage stamps or caramels instead of paper currency or coins.

If you think about it, you don’t want commerce to be inhibited by a lack of coins in circulation. By extension a fixed money supply can result in an inefficient distribution of monetary resources. If I start hoarding cash and keep that cash out of circulation, I can create the exact same conditions as the coin shortage in its in the 1970’s. You don’t need to melt the coins to create the problem. Just keep the coins in a jar in your kitchen cupboard and you will create the same problem.

We have been programmed to think that government has a monopoly on the money supply. But as we will see, we have always had elasticity in the money supply. Let’s imagine a simple example where you or I can create money out of thin air.

Let’s imagine that you are an artist and you paint a painting using about $20 in materials between the paint and canvas. You put the painting on display at the local gallery and a customer comes in and agrees to buy your painting for $1,000. It’s a lovely painting and $1,000 seems like a fair price. But the customer confesses has they are a bit short on cash so you agree to extend credit to the customer. The customer gives you $100 in cash and you write up a loan agreement for $900.

Did you in fact increase the money supply by $900? That $900 now appears on your balance sheet as an asset and there is $900 as a liability on the customer’s balance sheet.

Government was not a party to the transaction. The central bank had nothing to do with the creation of the $900 that funded the painting.

Ok, so we have established that we don’t need government to print money. Money can be loaned into existence.

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Host: Victor Menasce

email: podcast@victorjm.com

Live From Norris Ranch Dec 04, 2022

Show notes

On today's show, I'm coming to you live on location at the Norris Ranch on the outskirts of Colorado Springs. This is an extraordinary property that formed part of a much larger cattle ranch, originally close to 20,000 acres.

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Host: Victor Menasce

email: podcast@victorjm.com

Joel Friendland Dec 03, 2022

Show notes

On today's show we are speaking with Joel Freidland. Joel is based in Chicago where he specializes in industrial space in the Chicago. Today's show is packed with statistics on the market and how to helps if you have multiple sources for capital. You can connect with Joel at britproperties.com.

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Host: Victor Menasce

email: podcast@victorjm.com

AMA - Accepting a Lower Rate of Return Dec 02, 2022

Show notes

Today is another AMA episode.

Tony asks “I love your show and I wake up to your voice every morning. So much quality in a few minutes. My question is, given the changing market conditions, have you had to change your investment criteria? If so, how have you changed them? Are you willing to accept a lower rate of return?”

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Host: Victor Menasce

email: podcast@victorjm.com

BOM - Iceland's Secret by Jared Bibler Dec 01, 2022

Show notes

Our book this month is called “Iceland’s Secret “ by Jared Bibler.

Jared is an American who worked on Wall Street as an analyst and trader. In 2004 after several trips to Iceland, he fell in love with the country and eventually sought employment in finance. His first role in Iceland was developing software that was used for asset management. He was finding the software development role to be a back room effort with little human interaction.

After this, Jared took a role at one of the three large banks in Iceland on their trading desk. It was a role for which he was well suited. His Wall Street experience had prepared him well. Never mind the fact that almost everything was being done in excel spreadsheets when proper databases simply did not exist.

Along the way Jared observed financial irregularities which he dutifully reported to his superiors and was given assurances that they were being handled. But the evidence showed that they were being swept under the rug. These days in Iceland were heady days. Private jets flew in and out of the island on a regular basis. Construction cranes were everywhere. The number of new units far exceeded any reasonable demand from the local population.

Jared quit his job at the bank days before the entire financial system collapsed.

The Icelandic crisis of 2008 was an earthquake that levelled the financial fortunes of a whole country.

Jared found a job at the regulator and was put to work investigating what happened. In a temporary cubicle erected in the old lunch room at the regulator, he set about trying to find out what happened, who did it, and who needed to pay for it.

Six months into his new job, trading patterns for one of the banks on a single day showed what appeared to be unlimited buying from a single trader who bought all the shares that day in one of Iceland’s banks. It was a market with only one buyer. Further investigation showed the same pattern the day before and the week before and then the month before that. The pattern of unlimited buying had been going on for years and it involved not one bank, but all three of Iceland’s largest banks.

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Host: Victor Menasce

email: podcast@victorjm.com

Interest Rate Yield Curve Inversion Nov 30, 2022

Show notes

On today’s show we are talking about what an inverted yield curve means for real estate investors.

The yield curve is making headlines. The Wall Street Journal reports that the yield curve has not been this inverted since 1981 and 1981’s recession pushed unemployment rates even higher than the 2008 financial crisis.

A yield curve inversion happens when short term rates are higher than long term rates. This is a bit like an atmospheric inversion. In an atmospheric inversion, the temperature at the ground is lower than the temperature up in the clouds. It can happen, just not very often. It’s not natural.

Just like the atmospheric inversion, interest rates will normalize eventually. One of two things will happen. Long term rates will rise to match short term rates, or short term rates will fall to match long term rates. We don’t know what the future will bring.

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Host: Victor Menasce

email: podcast@victorjm.com

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