April 5, 2023 • 29 mins
Be The Bank S5 Ep7 - The Perfect Storm
On episode 7 of season 5, Justin Bogard and Richard Thornton debate what's going on in the banking industry today!
Key Takeaways:
- Catching up with Richard
- 5 things going on with the Banking Crisis
- Real Estate is still a solid investment
Resources and links discussed
- Videocast on our YouTube Channel
- ANB Funds Website - https://anbfunds.com
About the Host
Justin Bogard – Note Investor specializing in performing Residential Real Estate Debt. He finds deals and acquires them for his own portfolio as well as educates investors while walking them through the process of owning a Real Estate Note!
Connect with the Host:
- Facebook - bethebank
- Twitter - bethebank1
- Instagram - bethebankpodcast
- Constant CashFlow - https://brightpathnotes.com/constant-cash-flow/
- American Note Buyers - https://anbfunds.com/
- Monthly Broadcast - https://youtube.com/playlist?list=PLzc944w1xydt5aLDrrEPHJhdJeDkBjjD4
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Narrator (00:02):
Interested in real estate.
How about wealth?
Well, they go hand in hand.
And here you'll learn all aboutit.
Welcome to Be the Bank, apodcast where we discuss and
debate the topics centeredaround real estate investing.
Your host, Justin Bogart, sharesinsights into investing in real
estate to create real wealth andpassive income for you and your
(00:24):
family.
He'll share stories of realestate investments done right,
walk you through the process ofowning a real estate note, and
most importantly, educate you soyou can be the bank.
The bank.
This is be the bank brought toyou by American Note buyers.
Now, here's your host, JustinBogard.
Justin Bogard (00:47):
Hello again.
And it is episode number sevenof the Be The Bank podcast,
season number five.
I am your host, Justin Bogard.
And today I'm gonna be talkingwith Richard Thornton.
And we're gonna be talking aboutkind of the banking stuff that's
been going around, what we'vebeen hearing on the news and
social media.
And then, uh, also just kind ofcatch up on, uh, how we've been
(01:08):
doing.
Richard hasn't been on, uh, thelast podcast, so let's see how
he's doing.
Stay tuned, man.
That is just a really coolvideo.
Isn't that?
I
Richard Thornton (01:27):
Like it.
I like Where did you, where didyou get those again?
Justin Bogard (01:30):
Yeah, so for those of you that are listening
on the podcast, um, we'd stream,we film this via our app called
Streamy Yard, and we post thison our YouTube channel as well.
So if you go to the AmericanNote Buyers YouTube channel,
you'll see all of our videos ofall the podcasts that we do as
well.
And so, Richard, your questionwas how, how, how do we get
(01:50):
that?
Well, we basically do a lot ofthat stuff on fiber as, as you
know, and I just found somebodyon fiber and I was thinking
about these graphics that wehave and how can we make them
animated and just make it lookkind of fresh and new and cool
looking.
And sure enough, you know,there's somebody on there that
just has templates ready andthey just throw your logo in
there and they can do all sortsof cool animations and stuff.
Richard Thornton (02:11):
Well, this one , uh, and actually you've got
three of'em done.
They all look, uh, especiallygood.
So, uh, congratulations on that.
Good
Justin Bogard (02:18):
Work.
There's actually more of them.
I did, I did about eight ofthem.
Huh?
I hadn't shown you all of themyet.
I just showed you the firstcouple.
Um, a lot of'em, we, there's acouple of'em won't use, but, you
know, for those of you thatwanted to see that little
graphic interchange, uh, happen,it's pretty neat.
It's like an architect type oftheme to it, and it just kind of
makes the graphic kind of appearout of nowhere, which is kinda
cool.
(02:38):
So.
Richard Thornton (02:38):
Well, I can just put'em on, on my iPad and,
you know, watch'em before I goto sleep at night.
Justin Bogard (02:41):
Exactly.
Yeah.
That'll be mesmerizing.
What
Richard Thornton (02:44):
The heck?
Right?
Justin Bogard (02:46):
So you weren't on the last podcast that, that we
recorded.
Um, so I had interviewed MarcoBarrio, and I'm not sure if you
caught that episode or not, butit was a, it was a pretty good
episode.
Um, I did have to poke somespoon fun at you because you
weren't on the podcast.
Mm-hmm.
.
So I take it since you hadn'tjabed back at me offline yet,
that you hadn't actuallylistened to it.
Richard Thornton (03:05):
True, true
Justin Bogard (03:06):
.
So how have you
Richard Thornton (03:09):
Been?
Dunno, Justin.
I have a lot of fun poking funat each other.
So it's, it's all, all in goodhumor and, uh, yeah.
Keeps things light.
We like it.
Justin Bogard (03:18):
Well, today is opening day for baseball.
So as we're recording this,we're recording this on, uh,
March 30th, Thursday, March30th, which is opening day for
baseball, which is, uh, a funday for me because I am a
baseball fan.
I'm actually wearing my Red Sox,uh, t-shirt today because the
Red Sox had their opening gametoday.
They lost.
However, uh, I wasn't too happyabout that, but with the new
(03:38):
rule changes that I have goingon in baseball, the game was
played a little bit differentlytoday.
So it was interesting.
It's gonna take a little bit oftime for fans and players to get
used to the new, new rulechanges.
Richard Thornton (03:48):
So I get where this is going now.
I now having not watched that,that, uh, episode yet, um, I
think you're probably making thereference to the fact that Gida,
my significant other told me Ihad lost my man card because I
didn't know anything about MarchMadness,
Justin Bogard (04:05):
.
No, I didn't mention that in thepodcast.
Oh,
Richard Thornton (04:09):
There's other reasons.
Okay.
Justin Bogard (04:11):
All right.
No, I didn't.
You'll have to play it back andlisten to,
Richard Thornton (04:13):
I guess, sir, I'm
Justin Bogard (04:13):
Gonna have pick out episode number six and
you'll see couple free jabs thatI took on Richard, cuz he was,
you're gonna have
Richard Thornton (04:19):
To make me work.
Geez,
Justin Bogard (04:21):
.
So that's, that's got new withme.
So I understand that you justcame back from a cabin that you
rented out in the, uh, themountains for you.
You couldn't do any skiing cuzyou just had knee surgery and
stuff, but that's where you guysgo to ski.
Richard Thornton (04:34):
Uh, we do, uh, we actually have a group cabin,
uh, at, uh, south Lake Tahoe.
It used to be the old, um, uh,fire lookout for, for the entire
South Lake region.
And so it's got a wonderfulview.
Um, and we like to go up there,especially midweek, uh, we've
(04:55):
gotta improve the internet alittle bit as, as you know,
that's why I'm sitting here inmy office today and not doing it
up there, which, which, uh,should be, uh, coming, uh, soon.
Um, but, uh, yeah, we had acomplete whiteout on Tuesday.
We got three feet of snow upthere and you literally could
not see more than two feet infront of your face.
(05:16):
Hmm.
And the skiing up there isfantastic right now.
So, um, GI koki, I couldn't, cuzmy knee's not quite recuperated
yet, but those of you who wantto consider knee surgery, uh,
you know, I'm glad I did it, butit's not easy.
Uh,
Justin Bogard (05:36):
There, there's a, here's a few times.
Richard was a little outta sortsbecause, uh, medicine he had to
take was making him act a littlefunny.
.
Richard Thornton (05:44):
Wow.
Really?
Yeah.
Very little funny.
Very funny.
Yes.
Justin Bogard (05:46):
.
Right on.
So, Richard, um, there has, uh,you and I haven't talked about
this openly on, on Air yet, so Ithought this would be a good
time to do this.
And what I've heard on the news,what I've seen in social media
and I've heard, um, thegrumblings from other people
was, you know, there is abanking crisis going on right
now mm-hmm.
(06:06):
.
And so I just, I know you haddone some research about this
and I kind of wanted you to, totake, um, take us down the path
of setting the table here todiscuss kind of what is
information is out there and letus kind of disseminate it.
Richard Thornton (06:18):
Okay?
Yeah.
I mean, for all of us who are,uh, lay laypeople in the finance
world, and like I said, that'sprobably most of us, uh, I mean,
I've got a degree in finance andyou know, maybe some of you
others do also, but let's faceit, we're not in the banking
world.
Um, what we could, uh, term thiscurrent, uh, crisis, um, as is,
(06:42):
uh, sort of a perfect storm.
It's not one of one bigblockbuster event.
Like say the last recession waswhere mm-hmm.
, uh, we had, um, awhole lot of subprime loans, uh,
and that took us down.
Um, this is, uh, severaldifferent factors.
Uh, one is, uh, the banksunderestimating the effects of
(07:03):
the Fed's interest rate hikes.
The other one is the crateringof the cryptocurrency market.
Another is the market upset byRussia's war on the Ukraine.
And finally, uh, the credit suisand some of the other European
banks, uh, made overlyaggressive investment in hedge
(07:24):
funds to try and increase their,uh, profitability and credit
suis is being accused, has beenaccused by the s e C of allowing
money laundering and other, uh,nefarious accounts to occur
under their noses in their bank.
And you combine all that.
(07:46):
And that's leading us to where,uh, I think, um, we're going.
So we can take just a, just asecond and sort of go through,
um, some of these.
Okay.
You think that, um, a lot of thebankers, uh, would know that,
uh, since in March of 20, uh,22, the Fed said, we're going to
(08:07):
raise rates.
We haven't raised rates for along time, but we're going to
start to do it and do itsteadily.
You would think that theywouldn't invest in bonds because
Justin, if you invest in a bondat say 4% and rates move to 6%,
what happens to the value ofthat bond?
Justin Bogard (08:26):
Well, it's lost its value.
Right?
Richard Thornton (08:28):
It's lost value.
That's right.
So they, at that time, uh,especially Silicon National,
Silicon Valley Bank and FirstRepublic were flesh with, uh,
monies coming out of SiliconValley and the startups.
So they like, um, supposedlygood bankers took all that money
(08:48):
invested in bonds, which theyknew were gonna be devalued
because the Fed had said, we'reraising rates.
So one has to wonder why theydid that.
And that is actually part ofinvestigations that are going on
now.
But at any rate, they, uh,invested that money and got
whatever return they thoughtthey were going to get.
(09:11):
Uh, when the general market gotwind of this, and they knew that
rates were going up.
A lot of the, uh, groups thathad sponsored a lot of the, um,
well, a lot of the groups thatinvested in startups said, you'd
better get your money outtaSilicon National Bank and these
places because they'reoverextended.
(09:32):
This caused a good old fashionedrun on the bank.
Well, that meant that SiliconValley Bank had to now sell
their securities at guess what aloss.
So it meant that they didn'thave enough money to cover all
of the, um, depositors, uh,deposits and the had to be taken
(09:55):
over by the Fed, which in factmade up for all the shortfalls.
So that was one big thing.
The other thing was the fall ofthe crypto market.
Uh, as I think probably most ofus know, uh, FTX was, uh, one of
the biggest players in thecrypto market, uh, and was taken
over or not, was actually, uh,went under because it was
(10:18):
accused of all sorts of, uh,nefarious activities.
Um, overin investing, uh, insome places actually falsifying
reports, et cetera, et cetera.
And that caused the, the cryptomarket to crater well, uh,
silver Gate and Signature Bankswere two of the largest banks
dealing with the crypto market.
(10:41):
They subsequently were in thesame boat.
Oops, guys.
Now everybody is, since there'sa panic in the market, is trying
to cash in on their crypto, theydon't have enough money to cover
their deposits.
So they're in the same boat fora different reason.
Then Silicon National Bank.
Third thing is Russia's war onthe Ukraine.
(11:03):
Uh, there's no one factor there,but, um, we all know that, uh,
uh, gas prices, uh, have goneup.
Um, Europe was in a great, um,turmoil about not having enough
natural gas to heat their homes.
Uh, and all sorts of prices havegone up because of that.
So you've got just a whole lotof disruption in the, in the
market.
(11:23):
This kind of, this isn'thappening all at once, but it's
all within a sh short period oftime.
And you can see that the marketsare kind of getting kind of,
kind of nervous here.
You know, people going, wait aminute, what's going on?
Well, credit Suis and it's wise,um, uh, shall I say in Infinite
Wisdom, decided to in, uh, 2021along with a bunch of other
(11:48):
banks, um, invest, um, in alarge family, uh, hedge fund
called Archos.
Archos.
Overinvested couldn't cover itsmargin calls.
The brokerage community got, um,nervous.
They started to run on Archos,archos went under Credit Suis,
(12:13):
uh, had a five and a halfbillion dollar loss on that, as
did several other banks.
And you can say, well, what'sthe big deal about Credit Suis?
Well, the problem is, is that awhole bunch of other banks had
invested in Credit Suis and nowCredit Suis was no longer credit
worthy.
And Credit Suis is what's calleda Money center bank, which means
(12:37):
that there are one of 30 banksaround the world that make the
money work.
When we send fed wires, when wedo all these things, they're the
backbone of that system.
And all of a sudden, if yourbackbone is getting pulled out,
guess what?
You've got problems.
And the last little thing, uh,that I'll mention so I won't
(12:59):
bore you anymore, is the factthat the s e c started to look
at credit squeezes bank accountsand said, you know what guys?
We think you're allowing moneylaundering and you're allowing,
uh, a lot of guys from Columbiaand other, other governments to
launder money through your bank.
And lo and behold, uh, they werecaught and in fact they are
(13:22):
being, um, prosecuted thus.
So all those things combined aresort of a perfect storm that's
leading to the bank crisis thatwe are in, and I think is only
going to get worse.
Justin Bogard (13:37):
Okay.
That's a lot.
Richard Thornton (13:38):
That's
Justin Bogard (13:39):
A lot.
So I, I'm glad that you hadmentioned several of those
things that I, I hadn't heard ofbefore.
I haven't really dug into theSwiss, the Swiss bank, um, Swiss
bank information that you had.
I I had just read more or lessthe stuff about svb Silicon
Valley Bank and how they'rebuying treasury notes at 1% and
trying to cash out of those setnotes.
(13:59):
And they can't, they can't, theycan't get enough money out of
what they invested in to be ableto pay their depositors back.
Richard Thornton (14:06):
Right.
I mean, uh, you know, um,Silicon Valley Bank would've
been best off just to do nothingif they had just kept the money
in their coffers a dollar fordollar.
Uh, if you put in$10 and you askfor$10 back out, you're good.
Yeah.
But, but they invested it and,uh, invested 10 and got back
eight.
Oops.
Justin Bogard (14:27):
So guess who bails them out?
Richard Thornton (14:29):
Yes.
It's your tax dollars at work.
Justin Bogard (14:32):
Several banks bailed them out.
Richard Thornton (14:34):
Right.
But the but the Fed guaranteedall of the Yeah.
And, and, uh, the
Justin Bogard (14:40):
Uninsured ones too.
Richard Thornton (14:41):
Yeah.
Something that I didn't know.
So I bank at First Republic andI was talking to my rep there
and she was saying, oh yeah.
I said, you'd be amazed allthese people that have 10, 20
million in the bank mm-hmm.
, they're allsplitting them into all sorts of
different names that they havecontrol of their kids and
everything like that.
All hundred,$250,000.
(15:01):
So they're all guaranteed by theF D I C.
And I thought, holy smokes.
I had no idea.
Justin Bogard (15:09):
Yeah.
I, I think what the government'sgonna learn from this is that,
number one, the Fed's probablygonna raise their insured, uh,
amount accounts probably to amuch higher amount than 250.
But yeah, I can see a lot ofwealthy people doing that,
splitting their money intomultiple, multiple accounts so
that they're, they're federallyinsured for that two 50.
(15:30):
But I did hear that the Fed,when I read this morning, some
stuff that the Fed was from svb,they're ensuring everything.
They're not just, they'reinsuring the uninsured
Richard Thornton (15:38):
Amount.
Yeah, yeah.
They, they, they, they want tokeep the, the system, they're,
the decision they've made is, is, uh, it's less painful for us
to just basically absorb all theloss that it would be if we let
everybody go down.
And, you know, that's a, that'sa rational decision.
I can't, I don't, you know,blame them one way or another
(15:59):
for that.
They're, they're smarter aboutthat than I am
Justin Bogard (16:01):
.
Well, yeah.
It, it seems like no matter whatour safety net is always the
government just printing moremoney.
Yeah.
Somebody else, somebody elsebilling it up.
But the other banks are, youknow, they're making an
investment.
It's not like they're justgiving them money.
They're making the investment inthose banks and just, you know,
propping them up so that theydon't, they don't collapse.
Cuz the consumer loses in theend, right.
Not the bank.
Richard Thornton (16:22):
Yeah, exactly.
Consumer loses Exactly.
One way or another the consumerloses because we've got higher
rates somehow, or we're havingto pay more taxes to make up, or
you know what, we don't haveenough money for this, that, or
the other whate, whatever it is.
Justin Bogard (16:35):
So how do you see this getting worse than it is
right now with the gloom anddoom news that you just told me?
Richard Thornton (16:40):
Well, unfortunately, I mean, one thing
I find interesting is that, as Iread through a lot of this stuff
, uh, there were people that sawforesaw this, you know, there
were people who early on said,Hey guys, Silicon National Bank
is, valley Bank is, uh, ismaking investments that are
going to be underwater.
And, um, you know, creditSqueeze is doing this and that.
(17:02):
So as with the previousrecession, there's a lot of
people who are just beingignored, it should be paid
attention to.
And I don't quite know why thatthat happens, but what most of
the pundits seem to be saying isthat we're in a crisis, it's
probably only going to get worseand it's probably gonna end up
(17:23):
in a recession sometime soon.
That's the gist of it.
Justin Bogard (17:28):
So what does Richard think?
Richard Thornton (17:31):
Uh, I think I'd have to agree with that
because the, the, um, theevidence is just so o
overwhelming.
We, you know, the system canonly take so much.
Yeah.
And this is what I call sort ofthe nick effect.
You can, you know, you can dieby a thousand nicks.
No, no.
One big cut is worse enough orbad enough to, to kill you, but
you get a thousand of'em and allof a sudden you don't have any
(17:52):
blood pressure.
Yeah.
Um, so I think the Fed can onlydo so much.
Um, on the American side, uh, myunderstanding is, is is that the
gas crisis, um, natural gascrisis in Europe was actually,
uh, resolved by the fact thatthe US and other, um, countries
(18:16):
shipped boatloads and boatloadsof, of gas there, natural gas
there, and basically made up forthe shortfall, which is amazing
to me.
But still, you got so much, yougot so much, um, going on the
negativity in the markets.
I just don't see how it, maybeit's not recession, maybe it's
just a, a total tightening.
One of the big things that'sgonna happen is that rates are
(18:38):
gonna stay up and tightening isgoing to occur.
Uh, and so it's gonna make itbetter for private mortgages.
I don't know about Absolutely.
I don't know about you and yourportfolio, but I've actually
been dismayed because equity'sbeen up.
Um, values have been up and I'veprobably had now five different
refis on my mortgages that Inever thought would be refi that
(19:01):
were nice, you know, easy peasyloans.
Well, they're all 9%.
These people are re refining atthree and you know, I'm sol um,
that activity's gonna stop.
Justin Bogard (19:12):
Yeah.
I don't see the rates moving atall as far as interest rates for
the consumer, I think they'realready set where they should
have been anyways for a while.
But I agree that the lending isgonna get really tight again
because they, banks are going tobe extremely conservative about
how they lend money and who isgonna be a, uh, a worthy
(19:33):
borrower.
And so that's, like you said,it's only gonna make our private
mortgage seller financing, ownerfinancing business even more
popular for real estate peopleto, to do, because people are
still gonna need money to buyhouses.
The interest rates are not gonnago down.
They're not gonna be able toafford as much of a house as
they want because of where therates are at and what their
(19:54):
money can't afford.
So the the, um, the homes thatare 150 K and under, that's
really gonna be the super sweetspot for these private
mortgages.
And that's probably where wewanna land.
Richard Thornton (20:05):
Yeah.
I think it actually is going tostart to, um, we're starting to
see more, uh, well, I'll callsmall, smaller commercial, uh,
anywhere from the 1 million toto$5 million category, uh,
commercial mortgage, uh, needsalso.
And there'll probably be fiveyear loans.
You and I haven't talked aboutthis.
Yeah.
Um, but I've actually gottenthree or four inquiries lately
(20:26):
about would we in fact eithermake and or, um, by a commercial
loans like that.
Justin Bogard (20:35):
So, so this, this banking stuff, it extends more
than just the consumer.
This, this is going to theSenate and the house.
Like they have to make decisionson if they're gonna raise that
debt ceiling or not because theyhave to print more money, or the
Fed can't, can't bail outanymore.
Right.
They, they, they can only bailout so much in these other large
(20:58):
banks.
You know, CP Morgan, um, youknow, Goldman Sachs or whoever
the, the, the big ones are Bankof America.
They can, they can help youknow, the situation as well,
which they have been, um, youknow, feeding money into some of
these banks and stuff to helpstand them up.
But what I'm getting at Richard,is that I, I can see this being
stress to the economy and I candefinitely agree that the
(21:22):
economy will be, um, the stockmarket will be even more
volatile than it is right now.
And so what that does is, is forpeople that are consumers that
are wanting to invest theirmoney, number one, you know,
our, our title of our podcast isbe the Bank, right?
Right.
So we're saying all thesenegative things that are
happening with the bankingindustry, but that's not really
what we're doing.
(21:43):
We're trying to be like a bankas a metaphor, not actually be a
bank.
Now we're saying is you want tobe a lender.
You don't want to keep all yourmoney in that bank.
You wanna put it out there in a,in an asset, a hard asset like
real estate to where you'regetting income from that real
estate and that real estate isstrong.
Right now it's only gettingstronger because we're, we're
(22:03):
going back to more of a seller'smarket again right now in, in
the industry as it stands.
So, um, it it's even, it's evenmore obvious to me that people
should really be hyperfocused onreal estate as an investing tool
with their retirement if theyhaven't thought about it already
, uh, with all this stuff goingon.
Cause I think, I think you'reright, Richard.
I think we will dip into arecession.
I don't think it's going to becatastrophic at all.
(22:25):
And I'm not gonna sit there andsay, no, I'm not.
Richard Thornton (22:27):
It's more of a
Justin Bogard (22:28):
Dip.
Yeah.
It's, it's just gonna take astep back.
And I think 2023, uh, is justgonna be a year where things are
just gonna kind of slide down alittle bit.
It will get back on its feetbecause the government always
has a way, always has a safetynet, right.
That they can go in there andstimulate the economy and they,
they can do other things.
Um, but even some of the biggerCEOs like the Elon Musks and the
(22:50):
other, the other big time CEOsare all saying, like, right now,
um, in, in their work, becausethey're heavily in the market
and stuff, they're, they'resaying they're holding their
cash, they're waiting for thatright time.
They understand that by, youknow, maybe quarter one, quarter
two of 24, that's really wherethey're gonna start getting in
there and start buying things sothat they can, they can, you
(23:10):
know, start elevating theeconomy.
Cause I think that's gonna be alow point for a lot of the stuff
in the market.
Uh, so that's kind of whatthey've said that they're doing.
And I've only heard this likethe last couple of days, just,
you know, off of, uh, maybe nota reliable source, it's just off
of some interviews off of that.
I've heard off of feeds onsocial media and stuff.
But that kind of makes sensebecause they're kind of seeing
the light, they understand thatwe're going through just a weird
(23:32):
time right now and everything iscyclical that we do Right.
In real estate and the economyand stock market.
And so this is just the time towhere things are just gonna dip
a little bit and then it's gonna, it's probably gonna take off
pretty well in 24 and 25 to be,you know, start trending in a,
we call it a bull market or it'strending in the right direction.
Right.
And we're just dipping into abear market right
Richard Thornton (23:52):
Now.
Yeah.
And I agree with that.
And also, you know, we haven'treally talked about this on our
own separate portfolios, but Ithink you've heard me mention a
couple times out of, out of allthe notes that I've purchased,
I've only had three defaults.
Yeah.
Um, and, uh, knock on wood, uh,you know, I haven't lost money
on any of them.
Uh, I think I may have one thatI'm gonna lose a couple thousand
(24:15):
dollars here next year, butthere's a lot of security in
that.
I mean, we're, we're so belowmarket in terms of our loan to
values and everything like that.
I've got, you know, one rightnow going on in Illinois that,
uh, very sadly, the woman wasdisabled.
She rented some financialproblems and she's signing the
(24:35):
house over to me.
But, you know, I'm not gonnalose any money and I'm probably
gonna make a thousand dollars.
But yeah, not, not that.
That's a, the point is I'm notlosing anything and nor will my
Justin Bogard (24:45):
Investors.
You had a safety net and itwasn't the government
Richard Thornton (24:48):
Yeah, exactly.
Justin Bogard (24:49):
The safety net was at real estate.
And that's what's beautifulabout what we do, so, right.
It, it's, it's, it's an evenbetter time to be managing a
fund like we're managing.
Uh, it's even, it's even abetter time to be in real
estate.
Uh, if you don't wanna be thefix and flipper of the
wholesaler, I completelyunderstand.
Or even the landlord, but, uh,making passive investments and
having everything secured andbacked by real estate, it's,
(25:11):
this is really a great time tobe in it.
Um, real estate is just alwaysgonna appreciate, we did have a
anomaly, you know, what, 13years ago when, when we had that
financial crisis.
But you, you did a great job ofexplaining that in the beginning
of, uh, when, when you went intoyour research, um, a few minutes
back about saying that was adifferent type of problem.
(25:32):
That wasn't any, any, um, anydoing of, of, of, you know, um,
what's going on right now with,with people, you know, money,
money laundering, that, that hada lot to do with, you know,
lending being too loose andrates just going in the wrong
direction.
And then, you know, it was asnowball effect.
(25:53):
And then before we knew it, wehad way too many defaults and
then everything just kind of
Richard Thornton (25:57):
Right.
I mean, the only, the onlysimilarities really were that
there were some people out therewho were, uh, saying, we have a
problem early, and peopleweren't listening.
And so that's, I always findthat curious as to, uh, when
people are making a lot ofmoney, they tend to not listen
to somebody saying, um, there'sa problem here,.
(26:20):
Yep.
Justin Bogard (26:20):
You're
Richard Thornton (26:20):
Exactly right.
I dunno if it's a straight greedor what it is, but Well,
Justin Bogard (26:23):
They, they have blinders on, right?
It's a tractor beam.
Yeah.
They're, they're in a tunnelthat says, oh, this is, this is
a super speed highway.
I don't have to slow down atall.
Cause I don't have to get off myexit for another a hundred
miles.
Right.
They, they don't see all thenoise, the blur that's going
beside them.
And so that's, that's, you'reexactly right.
That's what happens.
Right.
But we all do it.
We all, we all miss the boat,um, you know, on the
(26:44):
opportunities to buy crypto whenwe could have, when we could
have bought it.
Not that I was going to, butthat was an opportunity to buy
it because you knew that it was,it was gonna go up and you knew,
also knew it was gonna crash aswell.
Um, so I feel sorry for thepeople that, you know, did
invest in that and they,hopefully they can recover from
that with something different.
But yeah, it's just aninteresting time that we're in.
Richard Thornton (27:04):
Yeah.
So the ultimate investmentthough that I've researched that
this comes under the category ofI wish, wish I had.
Yeah.
Yeah.
So I was very well employed inmaking a decent amount of money.
Not that I'm not now, but in1985, I figured out that if I
had just bought Apple Stock in1985, which was selling for
(27:26):
about 11 cents a share becauseSteve Jobs was just getting
kicked out and, and blah, blah,blah.
So I would've had to have been acontra cyclical investor that
with a stock splits andeverything else, that today,
that investment would be worthalmost 120 million.
Justin Bogard (27:45):
Wow.
.
Oops.
That'll frustrate you.
Yeah,
Richard Thornton (27:50):
Yeah.
No, you can't, you know, shouldawould've coulda.
But, uh, it was an interestingpiece of little research I did.
Justin Bogard (27:55):
Yeah.
That, that's the funny thingabout being in the stock market.
You can, you can be, uh,extremely wealthy all of a
sudden, or you can lose it all.
Richard Thornton (28:04):
Yeah.
I mean, this case, you know, youhad to really believe in Apple.
Yeah.
Uh, and they had a two for onestock split, and then several
years later they had a seven forone stock split.
And I don't know if you've everbeen through any stock splits.
I, I have, but wow, that canincrease your value, you know,
in two or three years.
Uh, a whole lot.
(28:25):
Um, but they don't happen veryoften.
And it's, uh, it's like rollingdice.
It's not like what we're doingwhere you've got a lot more
steady Eddie, and, and there's alot to be said
Justin Bogard (28:34):
For Yeah.
We're, we're doing ispredictable and it's, it's
really secure.
Richard Thornton (28:37):
Yeah.
There's a tortoise in the hairand, you know, everyone
Justin Bogard (28:40):
, right.
Tous in the hair.
Awesome, Richard.
Well, this was a goodconversation today.
Thanks for doing all thatresearch and bringing light to,
uh, what's going on with, withthe banking crisis and what
could happen and, and what kindof maybe we both project in the
future.
So this is episode number sevenof the Be the Bank podcast
sponsored by American Notebuyers.
And we will catch you on thenext episode.
(29:03):
See
Richard Thornton (29:03):
You.
All right.
See you later.
Bye-bye.
Speaker 1 (29:09):
Thanks for listening to Be the Bank.
We hope you learned somethingfrom today's show.
If you enjoyed this episode,please rate and review us.
Plus check out our channel onYouTube and follow us on
Facebook and Twitter at Be TheBank and on Instagram at Be the
Bank podcast, be The Bank issponsored by American Note
Buyers.
Thanks again for listening.
Interested in real estate.
How about wealth?
Well, they go hand in hand.
And here you'll learn all aboutit.
Welcome to Be the Bank, apodcast where we discuss and
debate the topics centeredaround real estate investing.
Your host, Justin Bogart, sharesinsights into investing in real
estate to create real wealth andpassive income for you and your
(00:24):
family.
He'll share stories of realestate investments done right,
walk you through the process ofowning a real estate note, and
most importantly, educate you soyou can be the bank.
The bank.
This is be the bank brought toyou by American Note buyers.
Now, here's your host, JustinBogard.
Justin Bogard (00:47):
Hello again.
And it is episode number sevenof the Be The Bank podcast,
season number five.
I am your host, Justin Bogard.
And today I'm gonna be talkingwith Richard Thornton.
And we're gonna be talking aboutkind of the banking stuff that's
been going around, what we'vebeen hearing on the news and
social media.
And then, uh, also just kind ofcatch up on, uh, how we've been
(01:08):
doing.
Richard hasn't been on, uh, thelast podcast, so let's see how
he's doing.
Stay tuned, man.
That is just a really coolvideo.
Isn't that?
I
Richard Thornton (01:27):
Like it.
I like Where did you, where didyou get those again?
Justin Bogard (01:30):
Yeah, so for those of you that are listening
on the podcast, um, we'd stream,we film this via our app called
Streamy Yard, and we post thison our YouTube channel as well.
So if you go to the AmericanNote Buyers YouTube channel,
you'll see all of our videos ofall the podcasts that we do as
well.
And so, Richard, your questionwas how, how, how do we get
(01:50):
that?
Well, we basically do a lot ofthat stuff on fiber as, as you
know, and I just found somebodyon fiber and I was thinking
about these graphics that wehave and how can we make them
animated and just make it lookkind of fresh and new and cool
looking.
And sure enough, you know,there's somebody on there that
just has templates ready andthey just throw your logo in
there and they can do all sortsof cool animations and stuff.
Richard Thornton (02:11):
Well, this one , uh, and actually you've got
three of'em done.
They all look, uh, especiallygood.
So, uh, congratulations on that.
Good
Justin Bogard (02:18):
Work.
There's actually more of them.
I did, I did about eight ofthem.
Huh?
I hadn't shown you all of themyet.
I just showed you the firstcouple.
Um, a lot of'em, we, there's acouple of'em won't use, but, you
know, for those of you thatwanted to see that little
graphic interchange, uh, happen,it's pretty neat.
It's like an architect type oftheme to it, and it just kind of
makes the graphic kind of appearout of nowhere, which is kinda
cool.
(02:38):
So.
Richard Thornton (02:38):
Well, I can just put'em on, on my iPad and,
you know, watch'em before I goto sleep at night.
Justin Bogard (02:41):
Exactly.
Yeah.
That'll be mesmerizing.
What
Richard Thornton (02:44):
The heck?
Right?
Justin Bogard (02:46):
So you weren't on the last podcast that, that we
recorded.
Um, so I had interviewed MarcoBarrio, and I'm not sure if you
caught that episode or not, butit was a, it was a pretty good
episode.
Um, I did have to poke somespoon fun at you because you
weren't on the podcast.
Mm-hmm.
So I take it since you hadn'tjabed back at me offline yet,
that you hadn't actuallylistened to it.
Richard Thornton (03:05):
True, true
Justin Bogard (03:06):
So how have you
Richard Thornton (03:09):
Been?
Dunno, Justin.
I have a lot of fun poking funat each other.
So it's, it's all, all in goodhumor and, uh, yeah.
Keeps things light.
We like it.
Justin Bogard (03:18):
Well, today is opening day for baseball.
So as we're recording this,we're recording this on, uh,
March 30th, Thursday, March30th, which is opening day for
baseball, which is, uh, a funday for me because I am a
baseball fan.
I'm actually wearing my Red Sox,uh, t-shirt today because the
Red Sox had their opening gametoday.
They lost.
However, uh, I wasn't too happyabout that, but with the new
(03:38):
rule changes that I have goingon in baseball, the game was
played a little bit differentlytoday.
So it was interesting.
It's gonna take a little bit oftime for fans and players to get
used to the new, new rulechanges.
Richard Thornton (03:48):
So I get where this is going now.
I now having not watched that,that, uh, episode yet, um, I
think you're probably making thereference to the fact that Gida,
my significant other told me Ihad lost my man card because I
didn't know anything about MarchMadness,
Justin Bogard (04:05):
No, I didn't mention that in thepodcast.
Oh,
Richard Thornton (04:09):
There's other reasons.
Okay.
Justin Bogard (04:11):
All right.
No, I didn't.
You'll have to play it back andlisten to,
Richard Thornton (04:13):
I guess, sir, I'm
Justin Bogard (04:13):
Gonna have pick out episode number six and
you'll see couple free jabs thatI took on Richard, cuz he was,
you're gonna have
Richard Thornton (04:19):
To make me work.
Geez,
Justin Bogard (04:21):
So that's, that's got new withme.
So I understand that you justcame back from a cabin that you
rented out in the, uh, themountains for you.
You couldn't do any skiing cuzyou just had knee surgery and
stuff, but that's where you guysgo to ski.
Richard Thornton (04:34):
Uh, we do, uh, we actually have a group cabin,
uh, at, uh, south Lake Tahoe.
It used to be the old, um, uh,fire lookout for, for the entire
South Lake region.
And so it's got a wonderfulview.
Um, and we like to go up there,especially midweek, uh, we've
(04:55):
gotta improve the internet alittle bit as, as you know,
that's why I'm sitting here inmy office today and not doing it
up there, which, which, uh,should be, uh, coming, uh, soon.
Um, but, uh, yeah, we had acomplete whiteout on Tuesday.
We got three feet of snow upthere and you literally could
not see more than two feet infront of your face.
(05:16):
Hmm.
And the skiing up there isfantastic right now.
So, um, GI koki, I couldn't, cuzmy knee's not quite recuperated
yet, but those of you who wantto consider knee surgery, uh,
you know, I'm glad I did it, butit's not easy.
Uh,
Justin Bogard (05:36):
There, there's a, here's a few times.
Richard was a little outta sortsbecause, uh, medicine he had to
take was making him act a littlefunny.
Richard Thornton (05:44):
Wow.
Really?
Yeah.
Very little funny.
Very funny.
Yes.
Justin Bogard (05:46):
Right on.
So, Richard, um, there has, uh,you and I haven't talked about
this openly on, on Air yet, so Ithought this would be a good
time to do this.
And what I've heard on the news,what I've seen in social media
and I've heard, um, thegrumblings from other people
was, you know, there is abanking crisis going on right
now mm-hmm.
(06:06):
And so I just, I know you haddone some research about this
and I kind of wanted you to, totake, um, take us down the path
of setting the table here todiscuss kind of what is
information is out there and letus kind of disseminate it.
Richard Thornton (06:18):
Okay?
Yeah.
I mean, for all of us who are,uh, lay laypeople in the finance
world, and like I said, that'sprobably most of us, uh, I mean,
I've got a degree in finance andyou know, maybe some of you
others do also, but let's faceit, we're not in the banking
world.
Um, what we could, uh, term thiscurrent, uh, crisis, um, as is,
(06:42):
uh, sort of a perfect storm.
It's not one of one bigblockbuster event.
Like say the last recession waswhere mm-hmm.
and that took us down.
Um, this is, uh, severaldifferent factors.
Uh, one is, uh, the banksunderestimating the effects of
(07:03):
the Fed's interest rate hikes.
The other one is the crateringof the cryptocurrency market.
Another is the market upset byRussia's war on the Ukraine.
And finally, uh, the credit suisand some of the other European
banks, uh, made overlyaggressive investment in hedge
(07:24):
funds to try and increase their,uh, profitability and credit
suis is being accused, has beenaccused by the s e C of allowing
money laundering and other, uh,nefarious accounts to occur
under their noses in their bank.
And you combine all that.
(07:46):
And that's leading us to where,uh, I think, um, we're going.
So we can take just a, just asecond and sort of go through,
um, some of these.
Okay.
You think that, um, a lot of thebankers, uh, would know that,
uh, since in March of 20, uh,22, the Fed said, we're going to
(08:07):
raise rates.
We haven't raised rates for along time, but we're going to
start to do it and do itsteadily.
You would think that theywouldn't invest in bonds because
Justin, if you invest in a bondat say 4% and rates move to 6%,
what happens to the value ofthat bond?
Justin Bogard (08:26):
Well, it's lost its value.
Right?
Richard Thornton (08:28):
It's lost value.
That's right.
So they, at that time, uh,especially Silicon National,
Silicon Valley Bank and FirstRepublic were flesh with, uh,
monies coming out of SiliconValley and the startups.
So they like, um, supposedlygood bankers took all that money
(08:48):
invested in bonds, which theyknew were gonna be devalued
because the Fed had said, we'reraising rates.
So one has to wonder why theydid that.
And that is actually part ofinvestigations that are going on
now.
But at any rate, they, uh,invested that money and got
whatever return they thoughtthey were going to get.
(09:11):
Uh, when the general market gotwind of this, and they knew that
rates were going up.
A lot of the, uh, groups thathad sponsored a lot of the, um,
well, a lot of the groups thatinvested in startups said, you'd
better get your money outtaSilicon National Bank and these
places because they'reoverextended.
(09:32):
This caused a good old fashionedrun on the bank.
Well, that meant that SiliconValley Bank had to now sell
their securities at guess what aloss.
So it meant that they didn'thave enough money to cover all
of the, um, depositors, uh,deposits and the had to be taken
(09:55):
over by the Fed, which in factmade up for all the shortfalls.
So that was one big thing.
The other thing was the fall ofthe crypto market.
Uh, as I think probably most ofus know, uh, FTX was, uh, one of
the biggest players in thecrypto market, uh, and was taken
over or not, was actually, uh,went under because it was
(10:18):
accused of all sorts of, uh,nefarious activities.
Um, overin investing, uh, insome places actually falsifying
reports, et cetera, et cetera.
And that caused the, the cryptomarket to crater well, uh,
silver Gate and Signature Bankswere two of the largest banks
dealing with the crypto market.
(10:41):
They subsequently were in thesame boat.
Oops, guys.
Now everybody is, since there'sa panic in the market, is trying
to cash in on their crypto, theydon't have enough money to cover
their deposits.
So they're in the same boat fora different reason.
Then Silicon National Bank.
Third thing is Russia's war onthe Ukraine.
(11:03):
Uh, there's no one factor there,but, um, we all know that, uh,
uh, gas prices, uh, have goneup.
Um, Europe was in a great, um,turmoil about not having enough
natural gas to heat their homes.
Uh, and all sorts of prices havegone up because of that.
So you've got just a whole lotof disruption in the, in the
market.
(11:23):
This kind of, this isn'thappening all at once, but it's
all within a sh short period oftime.
And you can see that the marketsare kind of getting kind of,
kind of nervous here.
You know, people going, wait aminute, what's going on?
Well, credit Suis and it's wise,um, uh, shall I say in Infinite
Wisdom, decided to in, uh, 2021along with a bunch of other
(11:48):
banks, um, invest, um, in alarge family, uh, hedge fund
called Archos.
Archos.
Overinvested couldn't cover itsmargin calls.
The brokerage community got, um,nervous.
They started to run on Archos,archos went under Credit Suis,
(12:13):
uh, had a five and a halfbillion dollar loss on that, as
did several other banks.
And you can say, well, what'sthe big deal about Credit Suis?
Well, the problem is, is that awhole bunch of other banks had
invested in Credit Suis and nowCredit Suis was no longer credit
worthy.
And Credit Suis is what's calleda Money center bank, which means
(12:37):
that there are one of 30 banksaround the world that make the
money work.
When we send fed wires, when wedo all these things, they're the
backbone of that system.
And all of a sudden, if yourbackbone is getting pulled out,
guess what?
You've got problems.
And the last little thing, uh,that I'll mention so I won't
(12:59):
bore you anymore, is the factthat the s e c started to look
at credit squeezes bank accountsand said, you know what guys?
We think you're allowing moneylaundering and you're allowing,
uh, a lot of guys from Columbiaand other, other governments to
launder money through your bank.
And lo and behold, uh, they werecaught and in fact they are
(13:22):
being, um, prosecuted thus.
So all those things combined aresort of a perfect storm that's
leading to the bank crisis thatwe are in, and I think is only
going to get worse.
Justin Bogard (13:37):
Okay.
That's a lot.
Richard Thornton (13:38):
That's
Justin Bogard (13:39):
A lot.
So I, I'm glad that you hadmentioned several of those
things that I, I hadn't heard ofbefore.
I haven't really dug into theSwiss, the Swiss bank, um, Swiss
bank information that you had.
I I had just read more or lessthe stuff about svb Silicon
Valley Bank and how they'rebuying treasury notes at 1% and
trying to cash out of those setnotes.
(13:59):
And they can't, they can't, theycan't get enough money out of
what they invested in to be ableto pay their depositors back.
Richard Thornton (14:06):
Right.
I mean, uh, you know, um,Silicon Valley Bank would've
been best off just to do nothingif they had just kept the money
in their coffers a dollar fordollar.
Uh, if you put in$10 and you askfor$10 back out, you're good.
Yeah.
But, but they invested it and,uh, invested 10 and got back
eight.
Oops.
Justin Bogard (14:27):
So guess who bails them out?
Richard Thornton (14:29):
Yes.
It's your tax dollars at work.
Justin Bogard (14:32):
Several banks bailed them out.
Richard Thornton (14:34):
Right.
But the but the Fed guaranteedall of the Yeah.
And, and, uh, the
Justin Bogard (14:40):
Uninsured ones too.
Richard Thornton (14:41):
Yeah.
Something that I didn't know.
So I bank at First Republic andI was talking to my rep there
and she was saying, oh yeah.
I said, you'd be amazed allthese people that have 10, 20
million in the bank mm-hmm.
different names that they havecontrol of their kids and
everything like that.
All hundred,$250,000.
(15:01):
So they're all guaranteed by theF D I C.
And I thought, holy smokes.
I had no idea.
Justin Bogard (15:09):
Yeah.
I, I think what the government'sgonna learn from this is that,
number one, the Fed's probablygonna raise their insured, uh,
amount accounts probably to amuch higher amount than 250.
But yeah, I can see a lot ofwealthy people doing that,
splitting their money intomultiple, multiple accounts so
that they're, they're federallyinsured for that two 50.
(15:30):
But I did hear that the Fed,when I read this morning, some
stuff that the Fed was from svb,they're ensuring everything.
They're not just, they'reinsuring the uninsured
Richard Thornton (15:38):
Amount.
Yeah, yeah.
They, they, they, they want tokeep the, the system, they're,
the decision they've made is, is, uh, it's less painful for us
to just basically absorb all theloss that it would be if we let
everybody go down.
And, you know, that's a, that'sa rational decision.
I can't, I don't, you know,blame them one way or another
(15:59):
for that.
They're, they're smarter aboutthat than I am
Justin Bogard (16:01):
Well, yeah.
It, it seems like no matter whatour safety net is always the
government just printing moremoney.
Yeah.
Somebody else, somebody elsebilling it up.
But the other banks are, youknow, they're making an
investment.
It's not like they're justgiving them money.
They're making the investment inthose banks and just, you know,
propping them up so that theydon't, they don't collapse.
Cuz the consumer loses in theend, right.
Not the bank.
Richard Thornton (16:22):
Yeah, exactly.
Consumer loses Exactly.
One way or another the consumerloses because we've got higher
rates somehow, or we're havingto pay more taxes to make up, or
you know what, we don't haveenough money for this, that, or
the other whate, whatever it is.
Justin Bogard (16:35):
So how do you see this getting worse than it is
right now with the gloom anddoom news that you just told me?
Richard Thornton (16:40):
Well, unfortunately, I mean, one thing
I find interesting is that, as Iread through a lot of this stuff
, uh, there were people that sawforesaw this, you know, there
were people who early on said,Hey guys, Silicon National Bank
is, valley Bank is, uh, ismaking investments that are
going to be underwater.
And, um, you know, creditSqueeze is doing this and that.
(17:02):
So as with the previousrecession, there's a lot of
people who are just beingignored, it should be paid
attention to.
And I don't quite know why thatthat happens, but what most of
the pundits seem to be saying isthat we're in a crisis, it's
probably only going to get worseand it's probably gonna end up
(17:23):
in a recession sometime soon.
That's the gist of it.
Justin Bogard (17:28):
So what does Richard think?
Richard Thornton (17:31):
Uh, I think I'd have to agree with that
because the, the, um, theevidence is just so o
overwhelming.
We, you know, the system canonly take so much.
Yeah.
And this is what I call sort ofthe nick effect.
You can, you know, you can dieby a thousand nicks.
No, no.
One big cut is worse enough orbad enough to, to kill you, but
you get a thousand of'em and allof a sudden you don't have any
(17:52):
blood pressure.
Yeah.
Um, so I think the Fed can onlydo so much.
Um, on the American side, uh, myunderstanding is, is is that the
gas crisis, um, natural gascrisis in Europe was actually,
uh, resolved by the fact thatthe US and other, um, countries
(18:16):
shipped boatloads and boatloadsof, of gas there, natural gas
there, and basically made up forthe shortfall, which is amazing
to me.
But still, you got so much, yougot so much, um, going on the
negativity in the markets.
I just don't see how it, maybeit's not recession, maybe it's
just a, a total tightening.
One of the big things that'sgonna happen is that rates are
(18:38):
gonna stay up and tightening isgoing to occur.
Uh, and so it's gonna make itbetter for private mortgages.
I don't know about Absolutely.
I don't know about you and yourportfolio, but I've actually
been dismayed because equity'sbeen up.
Um, values have been up and I'veprobably had now five different
refis on my mortgages that Inever thought would be refi that
(19:01):
were nice, you know, easy peasyloans.
Well, they're all 9%.
These people are re refining atthree and you know, I'm sol um,
that activity's gonna stop.
Justin Bogard (19:12):
Yeah.
I don't see the rates moving atall as far as interest rates for
the consumer, I think they'realready set where they should
have been anyways for a while.
But I agree that the lending isgonna get really tight again
because they, banks are going tobe extremely conservative about
how they lend money and who isgonna be a, uh, a worthy
(19:33):
borrower.
And so that's, like you said,it's only gonna make our private
mortgage seller financing, ownerfinancing business even more
popular for real estate peopleto, to do, because people are
still gonna need money to buyhouses.
The interest rates are not gonnago down.
They're not gonna be able toafford as much of a house as
they want because of where therates are at and what their
(19:54):
money can't afford.
So the the, um, the homes thatare 150 K and under, that's
really gonna be the super sweetspot for these private
mortgages.
And that's probably where wewanna land.
Richard Thornton (20:05):
Yeah.
I think it actually is going tostart to, um, we're starting to
see more, uh, well, I'll callsmall, smaller commercial, uh,
anywhere from the 1 million toto$5 million category, uh,
commercial mortgage, uh, needsalso.
And there'll probably be fiveyear loans.
You and I haven't talked aboutthis.
Yeah.
Um, but I've actually gottenthree or four inquiries lately
(20:26):
about would we in fact eithermake and or, um, by a commercial
loans like that.
Justin Bogard (20:35):
So, so this, this banking stuff, it extends more
than just the consumer.
This, this is going to theSenate and the house.
Like they have to make decisionson if they're gonna raise that
debt ceiling or not because theyhave to print more money, or the
Fed can't, can't bail outanymore.
Right.
They, they, they can only bailout so much in these other large
(20:58):
banks.
You know, CP Morgan, um, youknow, Goldman Sachs or whoever
the, the, the big ones are Bankof America.
They can, they can help youknow, the situation as well,
which they have been, um, youknow, feeding money into some of
these banks and stuff to helpstand them up.
But what I'm getting at Richard,is that I, I can see this being
stress to the economy and I candefinitely agree that the
(21:22):
economy will be, um, the stockmarket will be even more
volatile than it is right now.
And so what that does is, is forpeople that are consumers that
are wanting to invest theirmoney, number one, you know,
our, our title of our podcast isbe the Bank, right?
Right.
So we're saying all thesenegative things that are
happening with the bankingindustry, but that's not really
what we're doing.
(21:43):
We're trying to be like a bankas a metaphor, not actually be a
bank.
Now we're saying is you want tobe a lender.
You don't want to keep all yourmoney in that bank.
You wanna put it out there in a,in an asset, a hard asset like
real estate to where you'regetting income from that real
estate and that real estate isstrong.
Right now it's only gettingstronger because we're, we're
(22:03):
going back to more of a seller'smarket again right now in, in
the industry as it stands.
So, um, it it's even, it's evenmore obvious to me that people
should really be hyperfocused onreal estate as an investing tool
with their retirement if theyhaven't thought about it already
, uh, with all this stuff goingon.
Cause I think, I think you'reright, Richard.
I think we will dip into arecession.
I don't think it's going to becatastrophic at all.
(22:25):
And I'm not gonna sit there andsay, no, I'm not.
Richard Thornton (22:27):
It's more of a
Justin Bogard (22:28):
Dip.
Yeah.
It's, it's just gonna take astep back.
And I think 2023, uh, is justgonna be a year where things are
just gonna kind of slide down alittle bit.
It will get back on its feetbecause the government always
has a way, always has a safetynet, right.
That they can go in there andstimulate the economy and they,
they can do other things.
Um, but even some of the biggerCEOs like the Elon Musks and the
(22:50):
other, the other big time CEOsare all saying, like, right now,
um, in, in their work, becausethey're heavily in the market
and stuff, they're, they'resaying they're holding their
cash, they're waiting for thatright time.
They understand that by, youknow, maybe quarter one, quarter
two of 24, that's really wherethey're gonna start getting in
there and start buying things sothat they can, they can, you
(23:10):
know, start elevating theeconomy.
Cause I think that's gonna be alow point for a lot of the stuff
in the market.
Uh, so that's kind of whatthey've said that they're doing.
And I've only heard this likethe last couple of days, just,
you know, off of, uh, maybe nota reliable source, it's just off
of some interviews off of that.
I've heard off of feeds onsocial media and stuff.
But that kind of makes sensebecause they're kind of seeing
the light, they understand thatwe're going through just a weird
(23:32):
time right now and everything iscyclical that we do Right.
In real estate and the economyand stock market.
And so this is just the time towhere things are just gonna dip
a little bit and then it's gonna, it's probably gonna take off
pretty well in 24 and 25 to be,you know, start trending in a,
we call it a bull market or it'strending in the right direction.
Right.
And we're just dipping into abear market right
Richard Thornton (23:52):
Now.
Yeah.
And I agree with that.
And also, you know, we haven'treally talked about this on our
own separate portfolios, but Ithink you've heard me mention a
couple times out of, out of allthe notes that I've purchased,
I've only had three defaults.
Yeah.
Um, and, uh, knock on wood, uh,you know, I haven't lost money
on any of them.
Uh, I think I may have one thatI'm gonna lose a couple thousand
(24:15):
dollars here next year, butthere's a lot of security in
that.
I mean, we're, we're so belowmarket in terms of our loan to
values and everything like that.
I've got, you know, one rightnow going on in Illinois that,
uh, very sadly, the woman wasdisabled.
She rented some financialproblems and she's signing the
(24:35):
house over to me.
But, you know, I'm not gonnalose any money and I'm probably
gonna make a thousand dollars.
But yeah, not, not that.
That's a, the point is I'm notlosing anything and nor will my
Justin Bogard (24:45):
Investors.
You had a safety net and itwasn't the government
Richard Thornton (24:48):
Yeah, exactly.
Justin Bogard (24:49):
The safety net was at real estate.
And that's what's beautifulabout what we do, so, right.
It, it's, it's, it's an evenbetter time to be managing a
fund like we're managing.
Uh, it's even, it's even abetter time to be in real
estate.
Uh, if you don't wanna be thefix and flipper of the
wholesaler, I completelyunderstand.
Or even the landlord, but, uh,making passive investments and
having everything secured andbacked by real estate, it's,
(25:11):
this is really a great time tobe in it.
Um, real estate is just alwaysgonna appreciate, we did have a
anomaly, you know, what, 13years ago when, when we had that
financial crisis.
But you, you did a great job ofexplaining that in the beginning
of, uh, when, when you went intoyour research, um, a few minutes
back about saying that was adifferent type of problem.
(25:32):
That wasn't any, any, um, anydoing of, of, of, you know, um,
what's going on right now with,with people, you know, money,
money laundering, that, that hada lot to do with, you know,
lending being too loose andrates just going in the wrong
direction.
And then, you know, it was asnowball effect.
(25:53):
And then before we knew it, wehad way too many defaults and
then everything just kind of
Richard Thornton (25:57):
Right.
I mean, the only, the onlysimilarities really were that
there were some people out therewho were, uh, saying, we have a
problem early, and peopleweren't listening.
And so that's, I always findthat curious as to, uh, when
people are making a lot ofmoney, they tend to not listen
to somebody saying, um, there'sa problem here,
(26:20):
Yep.
Justin Bogard (26:20):
You're
Richard Thornton (26:20):
Exactly right.
I dunno if it's a straight greedor what it is, but Well,
Justin Bogard (26:23):
They, they have blinders on, right?
It's a tractor beam.
Yeah.
They're, they're in a tunnelthat says, oh, this is, this is
a super speed highway.
I don't have to slow down atall.
Cause I don't have to get off myexit for another a hundred
miles.
Right.
They, they don't see all thenoise, the blur that's going
beside them.
And so that's, that's, you'reexactly right.
That's what happens.
Right.
But we all do it.
We all, we all miss the boat,um, you know, on the
(26:44):
opportunities to buy crypto whenwe could have, when we could
have bought it.
Not that I was going to, butthat was an opportunity to buy
it because you knew that it was,it was gonna go up and you knew,
also knew it was gonna crash aswell.
Um, so I feel sorry for thepeople that, you know, did
invest in that and they,hopefully they can recover from
that with something different.
But yeah, it's just aninteresting time that we're in.
Richard Thornton (27:04):
Yeah.
So the ultimate investmentthough that I've researched that
this comes under the category ofI wish, wish I had.
Yeah.
Yeah.
So I was very well employed inmaking a decent amount of money.
Not that I'm not now, but in1985, I figured out that if I
had just bought Apple Stock in1985, which was selling for
(27:26):
about 11 cents a share becauseSteve Jobs was just getting
kicked out and, and blah, blah,blah.
So I would've had to have been acontra cyclical investor that
with a stock splits andeverything else, that today,
that investment would be worthalmost 120 million.
Justin Bogard (27:45):
Wow.
Oops.
That'll frustrate you.
Yeah,
Richard Thornton (27:50):
Yeah.
No, you can't, you know, shouldawould've coulda.
But, uh, it was an interestingpiece of little research I did.
Justin Bogard (27:55):
Yeah.
That, that's the funny thingabout being in the stock market.
You can, you can be, uh,extremely wealthy all of a
sudden, or you can lose it all.
Richard Thornton (28:04):
Yeah.
I mean, this case, you know, youhad to really believe in Apple.
Yeah.
Uh, and they had a two for onestock split, and then several
years later they had a seven forone stock split.
And I don't know if you've everbeen through any stock splits.
I, I have, but wow, that canincrease your value, you know,
in two or three years.
Uh, a whole lot.
(28:25):
Um, but they don't happen veryoften.
And it's, uh, it's like rollingdice.
It's not like what we're doingwhere you've got a lot more
steady Eddie, and, and there's alot to be said
Justin Bogard (28:34):
For Yeah.
We're, we're doing ispredictable and it's, it's
really secure.
Richard Thornton (28:37):
Yeah.
There's a tortoise in the hairand, you know, everyone
Justin Bogard (28:40):
Tous in the hair.
Awesome, Richard.
Well, this was a goodconversation today.
Thanks for doing all thatresearch and bringing light to,
uh, what's going on with, withthe banking crisis and what
could happen and, and what kindof maybe we both project in the
future.
So this is episode number sevenof the Be the Bank podcast
sponsored by American Notebuyers.
And we will catch you on thenext episode.
(29:03):
See
Richard Thornton (29:03):
You.
All right.
See you later.
Bye-bye.
Speaker 1 (29:09):
Thanks for listening to Be the Bank.
We hope you learned somethingfrom today's show.
If you enjoyed this episode,please rate and review us.
Plus check out our channel onYouTube and follow us on
Facebook and Twitter at Be TheBank and on Instagram at Be the
Bank podcast, be The Bank issponsored by American Note
Buyers.
Thanks again for listening.
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