August 22, 2024 • 49 mins
Unlock the secrets to transitioning from a corporate career to successful real estate investing with our guest, Jay, on this episode of the Conscious Investor. Jay's journey from Microsoft to real estate is nothing short of inspirational, and he’s here to reveal how treating real estate as a business can set you up for success. Drawing on his engineering and business background, Jay simplifies complex concepts and stresses the importance of continuous learning, making this a must-listen for new investors eager to thrive in the market.
Ever wondered how to balance marital bliss with business acumen? Our second segment delves into the dynamics of working alongside a spouse in a real estate flipping business. Drawing from personal experience, we discuss the initial hurdles and how we mastered dividing tasks based on individual strengths. This practical guide offers insights into improving both business operations and personal relationships through mutual respect and clear communication.
Finally, we tackle the pressing issue of economic cycles and the looming threat of a recession. Understand the crucial indicators that signal economic shifts, such as GDP growth and the inverted yield curve, and learn how to navigate real estate investments during turbulent times. We also debunk myths about real estate value declines in recessions and shed light on the Federal Reserve’s role during election years. Tune in for a balanced discussion enriched by diverse perspectives, providing you with the knowledge to make informed investment decisions.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Hello Conscious Investor and welcome back.
I'm your host, julie Hawley.
For over four years, I'vepaired my background in real
estate, investing, education andcoaching to create powerful
content for you each week.
This podcast is where we take aholistic approach to investing
by focusing on three ingredientsto a life of personal freedom
health, mindset and wealth.
(00:23):
We'll talk about everythingfrom passive investing through
syndication and how to use yourretirement accounts to boost
your investing, to mineralbalancing and gut brain health,
and into topics that cultivateyour inner strength and
resilience so you can thriveregardless of any of life's
current events.
And yes, those are all episodescurrently available and linked
(00:44):
in the show notes below.
Join me each Monday for amindset episode and later in the
week for an interview withexpert investors and health
professionals, so that you canexperience your greatest health,
strongest mindset and build thewisest wealth.
Speaker 3 (00:59):
Jay, so excited to finally have you here on the
Conscious Investor Welcome.
Thank you.
I've been wondering why youhaven't invited Conscious
Investor Welcome.
Speaker 2 (01:04):
Thank you.
I've been wondering why youhaven't invited me sooner, but
thank you for having me.
Speaker 3 (01:09):
You know you have this like you're on this whole
other tier, this whole otherechelon of coolness and smarts
and just awesomeness that I waslike, okay, I got to get at
least 500 episodes in before Iinvite Jay on the show.
Speaker 2 (01:24):
Well, I have been.
You and I sat in a mastermindtogether for several days Last
year was it About a year ago,and ever since then I've been
very excited about coming on theshow, so thank you for finally
having me.
Speaker 3 (01:37):
I'm so glad that we finally pulled this off and
pulled it together.
You and I are both talkers andI cannot even wait to get into
conversation with you, becauseone of the things that I was so
endearing when we were in thatmastermind setting was just like
you're so freaking smart, butyou're not the smart that is
(01:58):
disassociated from everyone inthe room type smart right and
like you're able to take suchhigh level concepts and to, like
, make them tangible to theworld around you and I
absolutely appreciate that somuch.
And you understand a lot ofelements and a lot of nuances
that I don't understand, and orI'm.
(02:19):
You know that I'm always like,okay, I have to front load, I've
got to constantly be learning,learning, learning, learning,
and I feel like it, just likeyou're the wellspring.
I feel, like you're just thelife giver of that, so I'm so
grateful.
Speaker 2 (02:31):
Well, I appreciate that, but the reality is that
I'm just older than you are.
I'm old, and so all the thingsthat you're doing learning,
learning, learning, learning,learning is the stuff that I've
been doing for probably a decadeor two longer than you have,
and so I like to say I seemsmart because I remember how
dumb I used to be, and so it'sreally easy.
(02:54):
Seriously, I can put myselfback in that place where I knew
very little, if anything aboutanything, and so when I talk to
people and can explain thingsthat I have learned and that I
do know, I can do a good job ofremembering how I wanted to be
or needed to be talked to backwhen I knew nothing.
And so for me it really is.
(03:15):
It's just that memory of when Iused to be just as ignorant as
all the new investors out there.
That will be exactly where I amin 10 or 20 or 30 years of
study.
Speaker 3 (03:28):
Gosh, see, conscious Investor, you can see exactly
what I'm talking about.
Even that ability to have thatlevel of awareness to be able to
say no, I know how I can talkto myself, my past self, which
lends itself perfectly to thequestion in Conscious Investor,
you know what that question is.
All right, jay.
I mean we're making perfectlyto the question in Conscious
Investor.
You know what that question is.
All right, jay.
I mean we're making someassumptions, right, conscious
(03:49):
Investor, that we know that hedoes.
But let's go ahead and ask thequestion of all questions what
do you do and how did you getstarted?
Speaker 2 (03:59):
Yeah, so I like to say that I am a business person.
I know I mostly focus on realestate these days, but I've made
a very conscious effort oflearning the business side of
real estate as well as the realestate side of real estate.
So I come from an engineeringbackground and a business
background.
So I have an electricalengineering degree and an MBA.
(04:21):
I spent about 15 years incorporate America, spent most of
my career at Microsoft, didsome engineering and business
stuff there, and in 2008, mywife and I quit our jobs.
We got married and we kind offell into real estate.
It wasn't supposed to be acareer for us, it was just
something to do when we took asummer off after our corporate
jobs, before we kind of figuredout what it was we wanted to do
(04:41):
when we grew up.
And so our corporate jobsbefore we kind of figured out
what it was we wanted to do whenwe grew up.
And so we decided to flip ahouse and I knew absolutely
nothing about real estate.
She knew absolutely nothingabout real estate, and I was
terrified.
And so I asked myself okay, howam I going to do this if I know
nothing about real estate?
And what I realized was prettyearly on was that if I just
(05:06):
treat real estate like abusiness and I knew business if
I treat real estate like abusiness, then I have a
headstart over a lot of people,even without knowing the real
estate side of things.
And what I've come to realizeover the 15, 16, 17 years that
we've been doing this is thatreal estate really is just
another business, no differentthan if I ran a car dealership
(05:28):
or a restaurant or a techbusiness.
It really is the same thing.
You need to understand thingslike reading financial
statements and hiring andleadership and cashflow
management and dealing withinventory and marketing and
sales and dealing with customersand all of these things that
are consistent across anybusiness you might be in.
(05:49):
Real estate has that as well.
Unfortunately, what I see is alot of people who get into real
estate who have this attitudethat real estate is not a
traditional business and we cantake shortcuts.
I can learn how to flip housesor buy rentals or whatever I
want to do in real estatewithout learning all that other
business stuff that I would haveto do if I were going to start
(06:10):
a real business.
Quote unquote.
Real estate is a real businessIf you learn the business side
of things, you're necessarilygoing to be a better investor
than if you just treat realestate as if it's something
different from business oreasier than business or just a
hobby.
And so, if anything, when Ithink about what I do, I'm a
(06:31):
business person.
That just happens to be in realestate.
Speaker 3 (06:35):
I value this response so deeply, in a large part
because my background, my family, is residential real estate
sales, which is very differentthan real estate investing,
particularly commercial realestate investing Black sheep
over here.
But what's interesting aboutthat is that I never saw that
(06:57):
actually run as a business andit was transactional and yeah,
they're the clients and therepeats and things like that,
but it wasn't super intentional.
It wasn't run like a well-oiledbusiness operation.
And when I look at real estateagents who are friends, just
going on that real estate sideof things, on the sales side, I
(07:21):
can see the difference day andnight between those who run a
business and those who are justlike oh, I am a glorified
self-employed person.
It's a day and night difference.
Speaker 2 (07:33):
We see this all the time in this industry.
It doesn't matter if you're aninvestor, if you're a real
estate agent.
I think the best example is acontractor.
How many of us have worked withcontractors who are amazing
contractors but they do a reallypoor job of running the
business side of things.
They can't manage their cashflow, so they're constantly out
of money.
They're not really good atstaying on schedule, they show
(07:56):
up late or they don't show up atall.
They take weeks to give youquotes and it's not because
they're bad at their job, it'sthey're bad at running the
business.
They're not business people.
And I see the same thing in realestate with investing.
Those who come from abackground of real estate, those
who have been contractors oragents or appraisers or whatever
else it is, they get into thisbusiness and I think they feel
(08:20):
like I'm going to leverage thoseskills that I have.
I'm going to leverage myability to swing a hammer.
Or I'm going to leverage thoseskills that I have.
I'm going to leverage myability to swing a hammer.
Or I'm going to leverage myability to stage a house.
I'm going to leverage myability to do whatever it is in
the business and they're sofocused on leveraging that skill
that they avoid the moreimportant things, the higher
level stuff, the hiring and thedelegating and actually managing
(08:42):
the business.
And I think that's part of thereason why my wife and I were
successful early on because wedidn't have those skills, we
couldn't leverage our realestate knowledge or our real
estate experience.
All we had was the businessknowledge, and so we were forced
to focus on that.
Speaker 3 (08:58):
That's amazing.
Okay, this really isinteresting because I was I'm
like, okay, engineer, electricalengineer with an MBA, working
for corporate America, likeyou're in the engineering wing.
How did you develop and growall of your business of humans,
like, how did that happen?
Speaker 2 (09:17):
Hanging around smarter people than I was, and
it really that's that's.
That's the key to everything Ido is I try and surround myself
with people who are super smart,super experienced.
And I'll use the word wise Idon't use that word a lot, but
in thinking about it it reallyis important and wisdom is the
(09:38):
ability to take the experienceand translate that into making
good decisions, moving forward.
And so what I've tried to do isI've tried to surround myself
with people who have thatexperience, that knowledge, that
wisdom, so that I can kind oftake shortcuts.
When you have to learneverything from scratch and
there have certainly been thingsI've had to learn from scratch
it takes a lot longer than whenyou can surround yourself with
(10:01):
people who can help you coursecorrect or help direct you in
the right direction, so that youdon't make as many mistakes.
Obviously, we're all going tomake mistakes.
Mistakes are great, but if youcan cut your number of mistakes
in half, you're probably goingto cut the time that it takes to
get from point A to point B by10 or 20 fold fault.
(10:26):
And so really, I'd say thebiggest thing that I've done is
just surrounding myself withreally smart people and
leveraging them and trying tooffer them value so that I can
get value in return.
Speaker 3 (10:33):
I love surrounding myself with smart people.
I generally feel like,especially when we're at that
mastermind, I was like I am notqualified to be in this room.
I felt so and I remembercalling my husband saying I'm so
in the right room because Idon't feel qualified to be in
this room.
I felt so and I remembercalling my husband saying I'm so
in the right room because Idon't feel qualified to be in
here and I am learning so muchand this is the best time of my
(10:54):
life.
It's that nerd tactic where youjust go, although I want to be
able to contribute and add value, and like, well, I can share
jelly bellies, I don't know.
You remember I like I literallyhad some jelly bellies.
I'm like I don't know how I canadd value because this is such
a powerhouse of brain power here.
Speaker 2 (11:15):
But the cool thing about that room was and I think
this is another key takeaway isthat nobody in that room, I'm
guessing, felt like they werethe smartest.
Nobody in that room felt likethey didn't have anything to
learn because there were so manydifferent sets of skills in
that room and you're good atcertain things, I'm good at
certain things, the other peoplein the room they're good at
certain things, and it's not aton of overlap, and so you can
(11:37):
learn stuff at the same timethat you're teaching.
I can learn stuff at the sametime that I'm teaching.
If that you're teaching, I canlearn stuff at the same time
that I'm teaching.
If everybody in the room isdoing the exact same thing, then
it becomes a competition.
Okay, who's split more housesor who's bought more rentals, or
who owns more apartments or whoowns more self-storage, but
when everybody has a differentset of skills and a different
background, everybody can be theteacher as well as the student,
(11:59):
and so that's another part ofsurrounding yourself with smart
people not just smart people,but people who do things that
you typically don't, people thatyou don't typically surround
yourself with so that you canlearn new things without having
to compete for who's the best orwho's the most successful.
Speaker 3 (12:16):
That's so important.
I just finished reading.
Well, I listened to the bookand it's called the Magic of
Thinking Big.
I think it's by CharlesSchwartz.
I can't remember and I'm notgoing to.
I was going to pull my phoneout and pull up the book.
I'm like I know I'm not goingto do that, but but it's
interesting.
It was written in, I believe,the late fifties and it reads
like something from the fiftiesbut it is timeless.
(12:45):
Truths about caring andconducting yourself in the
business world and justgenerally like in life, and how
to create and establish thisbeautiful life right.
And one of the elements he saidis hey, don't be around all the
same people all the time, justto you know, like double down on
that is like let's make surethat you were around a variety
of different people, because itbrings out differences in us.
I love that.
It's so important.
Speaker 2 (13:06):
And it makes it easier for us to add value to
their lives, because if they'rein a different space than we are
, have a different area ofexpertise than we do, then they
can learn from the things thatwe're really good at as well,
and so it gives us the abilitynot just to take, but to add
value as well.
When you surround yourself withpeople who are different than
you are, add value as well whenyou surround yourself with
people who are different thanyou are.
Speaker 3 (13:26):
That's so insightful.
I have so many questions thatare probably not the typical
questions.
But, conscious Investor, I knowthat you are thinking this
particular question.
You've mentioned your wife acouple of times.
You and I, off air, we'retalking about our families.
We've been married for manyyears.
We're just within a couple ofyears of each other on that.
So it's like it's a beautiful,beautiful thing to build life
(13:48):
together.
You guys, you know, have workedtogether.
That's amazing.
So how did how did that workfor you when you first started
out in real estate, flippinghouses and such Um?
It's an interesting dynamicthat many couples cannot execute
(14:08):
well.
So how did that go?
Speaker 2 (14:11):
Yeah, it's tough and it took us a decade before we
kind of figured out the rhythmand figured out how to get it to
work.
And even after a decade and wedon't work together I mean she's
kind of decided that she's donewith me, she'd rather not work
with me anymore.
You're tired yourself.
Well, she's focused on the kidsthese days, but for a decade we
(14:34):
worked together and yeah, it'schallenging and at the beginning
we're both very type Apersonalities.
We're both very smart people,we both come from the corporate
world and we're both used tobeing in charge.
We're both used to runningteams, we're both used to making
decisions and having the finalsay, and so the first couple of
years were really really toughbecause every decision it felt
(14:56):
like it needed to be a democracy.
But a democracy with two peoplecan be very difficult because
we well, we're both smart people.
I like to think, and we havesimilar corporate backgrounds.
We think very differently.
She's a marketing type person,she's a creative type, I'm an
engineer, I'm very analytical,and so oftentimes she'd have one
(15:16):
reaction or one opinion.
I'd have a different reaction,different opinion.
If you're going to vote on it,well, you're never going to come
to consensus with two people,and so for the first couple of
years, every decision was anargument, every decision was a
debate, every decision took waytoo long to make, and so things
progressed a lot more slowlythan they should have.
(15:37):
Eventually, we both realizedthat in the business that we
were doing, in the flippingbusiness, there were certain
things that she was amazing atthat I could recognize that I
wasn't.
She was great at findingproperties and negotiating deals
and staging and marketing andselling.
Then there were the things thatI was really good at that she
would be the first to admit thatshe wasn't Underwriting and
(16:00):
raising capital and dealing withcontractors and dealing with
the financial statements and themoney.
And so once we realized that wehad all the skills to be a
great business person she hadhalf of them and I had half of
them what we realized was weneeded to run this business more
like a bigger business.
So if you go into any corporateenvironment, what you see is
(16:21):
that there are departments so Iworked at Microsoft forever and
you go to Microsoft and they'reengineers and they're
salespeople and they'remarketing people, they're QA
people and they're productmanagers and I mean there's
finance people and all differenttypes of people and the
engineers don't try to do thesalespeople's job.
The marketing people don't tryto do the products people's jobs
(16:43):
.
Everybody knows what their roleis and that's what they focus
on.
And the sales people have thefinal decision making authority
when it comes to something salesrelated.
Engineers have final authoritywhen it comes to something
engineering.
And so we did the same thing inour business.
We realized, okay, she's reallygood at the acquisitions and
the dispositions, so staging andselling, I'm really good at the
(17:04):
raising capital and renovations.
She took her half of thebusiness and she had full
autonomy, full authority to makedecisions.
I took my half of the business.
I had full autonomy, fullauthority to make decisions.
Things started to go much moresmoothly because she was making
great decisions on her half ofthe business, because that was
her area of expertise.
I was making good decisions onmy side of the business because
(17:25):
that was my area of expertise.
I was making good decisions onmy side of the business because
that was my area of expertise.
And suddenly our businessstarted working.
Not only that, but ourrelationship started working a
whole lot better because we hada whole lot more respect for
each other.
We weren't fighting over everydecision and we were able to let
things go.
We were able to say, hey, hey,this is your area of expertise,
I trust you, whatever you decide, and vice versa.
Speaker 3 (17:48):
I love that and I love that.
I love how you you and yourwife processed through it and
didn't quit, didn't give up.
You persevered through theprocess in Atlanta, you know,
put you in a whole differentposition in life.
It'd be a very differentscenario if you were unwilling.
(18:10):
I was just mentioning this to acoaching client the other day.
You don't know what's on theother side of working on a big
project right now and I'm likeyou don't know what's on the
other side.
You have to go through thistrough of despair, the most
emotional cycle of change.
You've got to journey throughthe trough of despair and if you
want to quit now, you're goingto go back to the beginning and
(18:32):
you're going to have to figurethis out.
You're going to learn thelesson one way or another, so
just stick through it.
It's going to be worth it andyou'll have a different
perspective on the other side.
Speaker 2 (18:38):
Yeah, that's a great way of saying it.
Speaker 3 (18:41):
That's absolutely remarkable.
I have some good friends andthey actually have a brand doing
business as a couple and theysupport other couples in doing
business as a couple.
That wasn't what they wanted.
They didn't set out to do thatand then the pandemic happened
and they're like let's dobusiness together.
I'm definitely dumbing it down,but it's nuanced.
(19:02):
My husband and I are talkingnow, only now, about
collaborating and he's going tocome into my investment company
and that's a whole.
But it's been years of no,let's not do this.
I like being married to you.
Let's not go down that road.
Speaker 2 (19:19):
Yeah, I mean, I often say that marriage is difficult,
but partnerships are even moredifficult Because, at the end of
the day, with a marriage youknow well, hopefully your
marriage is strong enough thatyou know you're going to get
through it.
You know you're willing to putin that effort at the end of the
day, because the family is themost important.
(19:41):
But with a partnership, it'sreally easy to say this isn't
working and and just want togive up and move on and so, um,
partnerships in my mind are alot more difficult than a
marriage, and then when you dothe two together, well then it
gets really, really tough.
Speaker 3 (20:00):
Get into some sticky territory.
I can park on this topic forquite some time because I think
that this serves people well.
I think even when we're notnecessarily in business together
, we're going through things.
I mean, if we're committed toour marriages, we're going
through different evolutions andstages of it, and just hearing
(20:21):
other people finding theirsuccesses is always encouraging.
And I love it when couplesstick through the uncomfortable
times because there's such areward on the other end and you
and I know that because we'vebeen married for 16 and 18 years
.
It's like man, it's totallyworth it.
Speaker 2 (20:41):
Yep, and here's the other thing.
I think the other difficultpart of working with your spouse
is we know, as entrepreneurs,that what we do is a 24-7,
365-day thing.
It's not working a job whereyou go in nine to five, you come
home and you shut it off andyou focus on family.
It really will absorb yourentire life.
(21:05):
It's it, really.
It will absorb your entire life.
And when it's just one of youthat's doing it, the other
person can say, hey, you need toshut it off, you need to to
leave the the work mind spaceright now and you need to be in
the family mind space.
And so it's nice to havesomebody that can say that.
When you're partners with yourspouse, it's a lot more
difficult because at any giventime, one of you is probably
thinking about work and theother one doesn't want to pull
them out.
When you're partners with yourspouse, it's a lot more
difficult because at any giventime, one of you is probably
(21:26):
thinking about work and theother one doesn't want to pull
them out because it's like, yeah, now I have to think about that
too, and you end up spending 24, 7, 365 thinking about work and
not focusing enough on thefamily, and so one of the really
important things to do ifyou're going to work with your
spouse is you really have to setboundaries and you really have
to say hey, six o'clock at night, phone goes off, we talk about
(21:49):
family, we don't talk about workstuff, weekends we're taking
Saturday off, and maybe Saturdayand Sunday, if you're lucky,
and we're not talking about work, we're just going to focus on
the family.
And you really have to forcethat, because if you don't and
we fell into this pattern in thefirst couple of years as well
that it will be work 24-7.
And that's not good for anybodyin the family.
(22:09):
If you have kids, for thespouses, for the parents, I mean
you're going to literally beabsorbed and you're not going to
have a life outside of yourbusiness.
Speaker 3 (22:20):
This is so true and it's even in your own business,
even for me, in my own business.
I love, I love everything I doso much that it's it's a hobby,
it's an obsession, it's a itchecks so many boxes of
contribution obsession hobby youknow income, all of that that
it's like it's happy spot to be.
And it's so easy to find myselfdriving in the car and not
(22:43):
being present.
It's like wait, wait, wait,jules, step out of your mind, be
present with your kids.
And I have to say that aloud tothem.
I'm like I'm so sorry I'm lostin thought over here, but you're
here and I want to talk Likewow, yeah, it happens, I'm going
to shift gears, total 180.
Here we go, from doing the, theheartfelt things, the way you
(23:08):
talk about economics and the wayyou understand and interpret
you know the marketplace isabsolutely phenomenal in my
opinion.
Um, and so I love hearing and Ilove listening.
Conscious investor, you'regonna go when you're done
watching this list, watching oror listening, head on over.
Make sure you subscribe andfollow the Drunk Real Estate
(23:31):
Podcast, because it's so muchfun listening to you guys talk
and it's also deeply informativeand so and hearing so brilliant
, like you guys are all suchstrong thinkers.
It's fun, it's lighthearted,but you guys know how to get
deep and I love how you talkabout what's happening in the
(23:52):
economy.
I just love to like you know, Ihear a lot of people saying
well, you know, interest ratesare going to go down and I don't
really like to get so lost inthe interest rate conversation
because it's just one toggle.
But I would just love to inviteyou to say what are some of the
most exciting things you'renoticing in the economy right
now.
Speaker 2 (24:12):
So interest rates will go down and then they'll go
back up again and they'll godown again and they'll go up
again.
And I think that's the takeawaythat people need to realize
that everybody's so focused onthe short term, what's going to
happen in three months, sixmonths, 12 months, when I think,
well, it's definitely important.
We have to be focused on theshort term, especially if we
(24:33):
have investors, we haveinvestments.
We need to manage thoseinvestments short term.
But before we think long term,we have to start by looking at
the bigger picture, and thebigger picture is the economy
runs in cycles and the economyhas always run in cycles.
I mean, we've had 35 recessionsover the last 150 years 160
years and so if you divide 160years by 35 recessions, that's a
(24:56):
recession every four or fiveyears.
And so if we're going to have arecession every four or five
years and I know it's been areally long time since 2008, we
had the longest market expansionin history.
But the reality is, for anybodythat's old, like I am you
remember that before 2008, wehad recessions every few years,
(25:17):
and so there are going to betimes where interest rates are
high, and interest rates tend tobe high before recessions and
then we're going to head into adown period and everything's
going to suck and it's going tofeel horrible and it's going to
feel like everything we'veworked so hard for is going away
.
And then, 18 months later, 24months later, we're going to get
into that next economicexpansion and everything's going
(25:37):
to be great again and life'sgoing to be wonderful.
And we have to get used tothese cycles.
And so for anybody out there,that's like thinking well,
where's the market headed?
What's going to happen in thenext three months, or six months
or 12 months?
Yes, that's important, but keepin mind that, regardless what
happens in the next three or sixmonths, in three years or four
years or five years, things aregoing to be completely different
(25:59):
.
And then in 10 years, they'regoing to be different again and
we're going to keep goingthrough those cycles.
So whenever things seem bad,don't get hung up on it, because
they'll get better.
Whenever things seem good,don't get overconfident, because
they will get worse.
And so where we are right nowis it's weird, we're in a very
weird part of the economic cycle, and I would even say that in
(26:22):
my lifetime and I'm in my early50s.
I don't remember a time that itwas anything like this and I
know, talking to some peoplemaybe the 80s were like this,
where we saw periods of highinflation but not necessarily a
strong economy.
So maybe we're going back tothe 80s here, before we've seen
what we're seeing.
But I think that we're likely infor a softening in the economy.
(26:46):
We've definitely seen that overthe last month or two We've
seen inflation come down.
We've seen retail sales numbersstart to come down.
We've seen prices for wholesalegoods come down, so businesses
are buying things cheaper.
Business confidence is comingdown.
Everything's kind of pointingtowards a softening in inflation
(27:08):
, but it's likely going to leadalso to a softening of the
economy.
So I wouldn't be surprised ifin the next six to 12 months, we
see a recession.
But I think this will be goodbecause I think we do need a
reset in the economy.
Right now.
I think people are in a lot ofdebt.
Obviously, real estate pricesare super high.
(27:28):
There's a lot of things that areset.
It might be bad for some people, but I think for the overall
economy would be a good thing,and so I don't expect there to
be a lot of great news over thenext year or two, but I don't
think it's going to be that badeither.
I don't think we're headingtowards a 2008 type event.
But long story short, whatwe've seen over the last two or
(27:53):
three years, with asset pricesgoing through the roof, what
we've seen the last 10 or 12years, with multifamily doing
great and single family doinggreat and all of their assets
doing great, I think that couldslow down as well.
So I think we're getting backto the normal cycles and we may
see a recession here for thefirst time since 2008.
Speaker 3 (28:12):
I think it'd be refreshing as well.
I think the recession it's justa natural like cleansing that
needs to take place to kind ofrecalibrate everything, to
reground what is taking place inthe marketplace.
You know, we see the prices, wesee everything.
Just kind of recalibrateeverything to reground what is
taking place in the marketplace.
You know, we see the prices,you see everything.
Just kind of sigh.
It's like a sigh of relief,thank you, because when I think
(28:35):
about growing and like if youand I, we went out we're running
and someone said, no, just keeprunning.
Like, and they keep moving thegoalposts, no, you're gonna run
further, you're going to runfurther, wait, whoa, whoa, whoa,
we'd be exhausted.
And I know that the economyisn't a physical being, but I
feel like it just gets acrossand it's like can we just stop
and just catch our breath here?
Speaker 2 (28:58):
Yeah, and what that tiredness is?
What the analogy is in theeconomic world is debt.
So what we're seeing when wehave good economic times,
generally we have low interestrates.
Businesses are doing well.
So they want to buy, they wantto expand, they want to hire
more people, they want to buymore equipment, they want to buy
(29:19):
more factories, they want tobuy more inventory.
That all takes money.
So they borrow lots of moneyand they do it at low interest
rates, and so everybody's takingon debt.
People are taking on debtpersonally, businesses are
taking on debt.
Debt's just being created outof thin air.
And then things start to slowdown.
And when things start to slowdown and things are actually
(29:40):
they overheat.
Before they slow down, theyoverheat.
The Fed says, okay, things areoverheating, there's too much
demand, people are spending toomuch money, things are too good,
it's causing inflation.
We have to raise interest ratesto stop the inflation.
And so once they raise interestrates, well, everything starts
to slow down.
And now suddenly interest ratesare higher, so it's harder to
(30:00):
get debt.
Floating rate debt that we hadis now cost more because
interest rates have gone up onthe debt that we had.
Suddenly, people can't paytheir debt anymore.
Debt becomes so burdensome thatthat's what causes the
recession.
The nice thing about arecession is exactly what you
said is it's a cleansing.
By cleansing, what I mean isit's a cleansing of debt.
(30:21):
Businesses go bankrupt, peoplego into foreclosure, people have
to declare bankruptcy andcredit card companies take big
hits, and it's not a good thing,but it's a necessary thing for
the economy.
We need that cleansing.
We need that debt to go away sowe can start over and head into
the next cycle.
Speaker 3 (30:41):
It's absolutely imperative.
Are there any markers that youlike I mean you're, I just feel
like you're in the weeds, likeof all of this and you have such
an understanding of it.
What are some of those likemarkers that you look for as
like, almost like KPIs of sorts?
With the economy, everyone has,almost, like you know,
conscious investor.
(31:02):
You might prefer to look atcash on cash, but another
conscious investor might like tolook at the IRR, and so
everybody has their nuances thatthey're looking for.
So what are you know, what areJay Scott's nuances of looking
at the economy?
Your lovers?
Speaker 2 (31:17):
Yeah, there are a few things that and I'm not going
to take credit for any of thesethese are things that have been
tried and tested by economiststhroughout the decades, and what
we found are there are a fewvery reliable leading indicators
of recession.
So number one and no surpriseto anybody is just GDP numbers.
So basically, gdp grossdomestic product is the total
(31:40):
output of the economy.
How much money is movingthrough the economy, and as that
tends to trend downwards, asthe economy starts to slow down
and maybe even shrink, if we getnegative GDP, that's the first
sign of recession.
In fact, for a lot of people,that's the definition of
recession, and what we've seenover the last several quarters
is that GDP has started to slowdown.
(32:01):
We've been over 2% for much ofthe last few years 2% growth per
year.
In the last quarter, we sawgrowth at 1.3%.
This is not a horrible number,but given that we were expecting
over 2% again, 1.3% was a verybig surprise, and so it's
leading some people to believethat this could be the reversal
(32:24):
of that growth in the economy.
That's number one.
Number two is jobs.
There's one particularindicator when we look at jobs.
There was a woman, an economist, a decade or two, named Claudia
Somm.
She theorized and the datasupports this that the
unemployment number isunimportant.
(32:45):
It's not how many people areunemployed, whether it's 3.5
unemployment or 4% unemployed or5% or 6%.
The important number is, or theimportant point is the trend of
the unemployment number.
And so what she said and againthe data bears this out is that
if unemployment goes up a half apercentage point above the low
(33:09):
point in any given year, that'sliterally the single best
leading indicator of recessionthere is.
So basically, right now, we gotdown to about 3.6%.
In the last year we got down toabout 3.6% 3.7% unemployment.
Today the unemployment numberjust hit 4%.
So we're about 0.3% 0.4% abovethe low point in the past year.
(33:34):
If we get to 0.5% above the lowpoint a half point above the
low point, which would be 4.1%or 4.2% that's literally the
best leading indicator forrecession.
So I know the Fed, I know a lotof economists, a lot of
armchair economists like me arekeeping our eye on that
unemployment number, because ifit gets to 4.1 or 4.2% even
(33:57):
though 4.1 or 4.2% is actually areally good number historically
but the fact that it's a halfpoint higher than the low point
in the past year that's going tobe majorly concerning.
So that's the second thing.
Third thing that we tend to lookat is this thing called the
inverted yield curve.
So government borrows lots ofmoney.
(34:22):
That's how we fund all theridiculous stuff that the
government spends money on.
They issue these bonds and biginvestors, big companies,
countries basically will buythese bonds.
So they're loaning thegovernment money.
And so if we buy a bond thatlasts a year or two years, a
short-term bond, thegovernment's willing to pay a
certain amount, typically asmall amount.
If somebody buys a bond thatlasts 10 or 20 or 30 years, the
(34:45):
government's willing to pay alittle bit more because
obviously they're taking abigger risk by holding that bond
for 10 or 20 or 30 years.
And so sometimes what we see isa weird situation where the
market kind of pressures theprice of these bonds to kind of
move in opposite directions.
So short-term bonds end upgenerating more return than
(35:07):
long-term bonds, and we callthat an inverted yield curve,
and when that happens that's agood indicator of recession,
simply because banks they keepthe economy going by lending
money.
So much of our economy is debtdriven and banks like to borrow
money short term and then lendit out long term.
(35:27):
They want to borrow money atthat 30 day rates or 60 day
rates or 90 day rates, and thenlend it out to people like you
and me as investors for 10 yearsor homeowners for 30 years, and
so they rely on being able toget debt short term debt at very
cheap, and then they loan itout at higher rates, but with an
inverted yield curve they'reactually borrowing the money.
(35:49):
The banks are borrowing themoney at higher rates and
loaning it out long-term atlower rates, and so the banks
are losing money.
They're not losing money, butthey're not making nearly as
much money, and so an invertedyield curve puts the banks in a
situation where they don't wantto loan money nearly as much
because they're not making asmuch money by loaning, and so
when the banks start to slowdown lending money, that impacts
(36:11):
the economy, and we saw that in2008.
One of the big drivers of the2008 recession was simply that
credit tightened up so badly,banks stopped lending, and so
this inverted yield curve isanother big indicator.
We've had an inverted yieldcurve now for about 23 months,
so since July of 2022, which isthe longest period we've ever
(36:31):
had an inverted yield curve, andso typically we think that
within 18 or 24 months of theyield curve inverting is when
we're going to see a recession.
It's now been 23 months, sothere are a lot of people who
think, from an historicalperspective, we're probably
within a couple months of arecession there.
So just looking at the data,and again, anything can happen.
(36:52):
The data has been wrong beforeand the government actually has
a lot of control over theeconomy the Fed.
By printing more money, bylowering interest rates, they
can stave off a recession forquite a long time, as we've seen
.
And so just because the datasays we might be heading for a
recession doesn't necessarilymean we are.
But as of right now, the datais making it look like it's
(37:15):
probably on the horizon.
Speaker 3 (37:17):
And I think it's interesting, and you and I have
enough life experience and we'veexperienced recessions enough
times.
To we, it's not a bad thing,it's a great thing.
On the other end of it, likeit's, it's just like.
I look at it in a very healthyway.
I always think it's interesting.
I'd love to get your opinionand I just conscious investor.
(37:38):
Can you see why I'm like gosh?
Can we just get inside thebrain of Jay Scott please?
So you have such a great way ofexplaining things, jay.
Just to double click on thatreal fast.
Speaker 2 (37:51):
Can I say something real quick, Because you brought
up the point about recessionsaren't that bad of a thing.
I think part of the problemthat we're seeing right now is
the typical let's call it realestate investor is probably in
their late 20s, early 30s, maybeeven mid 30s, and so the last
time, the last recession, was2008.
(38:13):
And that was at this point 16years ago.
So if they're in their mid 30s,even 40 years old, when they
Can you hear me?
Speaker 3 (38:22):
There we go.
Yes, okay, during their mid-30s, early 40s.
Speaker 2 (38:26):
Sorry about that.
So typical real estate investornow is probably in their late
20s, early 30s, maybe mid-30s.
2008 was 16 years ago.
So during 2008, they were intheir teens.
They might've been 10 years old, five years old, 15 years old.
They were young and therecession before that was 2001.
Most of the real estateinvestors today don 15 years old
.
They were young.
(38:46):
The recession before that was2001.
Most of the real estateinvestors today don't remember
2001.
They certainly don't rememberearly 90s or late 80s or the
four recessions between the late60s and the early 80s.
They don't remember those.
All they remember is 2008.
2008 was such a horrific eventfor many of us that if that's
the only thing you remember,that, if that's the only thing
(39:07):
you remember, if that's the onlyrecession you remember, you're
going to be terrified when youhear the word recession, because
in your mind, a recession iswhat happened in 2008.
And what they don't realize iswhat people who are younger than
we are don't realize is thatmost recessions aren't like 2008
.
2008 was a once-in-a-lifetimeevent.
We haven't seen anything likethat since the Great Depression.
(39:29):
A typical recession is a wholelot more mild.
It's not fun and it affects alot of people negatively, but
it's not like 2008.
I think it's really importantfor people to recognize that,
while 2008 is this thing that wethink about as a recession, the
typical recession is nothinglike that and it's unlikely that
the next recession is going tobe anything like 2008.
Speaker 3 (39:54):
I appreciate that you mentioned that what's
interesting is, by nature, ofgrowing up in a residential real
estate and I always say thatbecause it's a very different
environment, in a differentthinking, than real estate
investor thinking.
But what was interesting isthat, growing up in that
environment, I just was aware ofthe recessions and I remember
(40:15):
the dot-com crash and I remembereven though I was little I was
one of those my daughter is thesame way just highly aware, just
observing what is taking place,and so it was just very much
like, oh yeah, okay, this doessuck.
You know this isn't necessarilyfun, maybe we can't go do all
the same things we used to do,you know, with ease and such,
but I just remember, oh, and wegot through it and it wasn't so
(40:40):
bad.
But 08 was you're right, Ididn't even that was
short-sighted on my part, takingfor granted my own experience
to say.
A lot of people, 08 was theirfirst wide-eyed awareness and
that was definitely a smackdownfor a lot of people.
Speaker 2 (40:58):
It was, and it's created a lot of misnomers in
people, in people, if we talkabout it.
If I go to the typical realestate investor these days and I
say, okay, you remember 2008and how real estate prices
crashed, if I ask thoseinvestors of the previous 34
recessions before 2008, how manytimes do you think real estate
(41:19):
values crashed?
They'd probably say a few times.
The reality is they never did.
If I asked them, how many timesdo real estate values go down
more than 1% in those 34recessions, I'm positive most of
them would say several of themdid.
The reality is none.
Real estate literally has onlygone down more than 1% once in
(41:40):
the last 125 years, and that wasduring 2008.
Even during the Great Depression, we didn't see real estate
values go down the way they didin 2008.
And so typically we don't evensee real estate values go down.
Same with rents.
People are terrified that rentsare going to drop 20%, 30%, 40%
.
Yeah, we've seen rents go downa few percent before 2%, 3%, 4%,
(42:00):
5% but even that is very, veryrare.
It's unlikely we're going tosee any major hit to rents
because that's just not whathappens during most recessions,
and if all you remember is 2008,.
You probably think a lot ofthings are likely to happen that
actually aren't very likely tohappen during the next recession
and the one after that.
Speaker 3 (42:20):
I feel like that's so much optimism.
You're welcome, consciousInvestor.
There's some optimism for youknow, a recession now here's.
Here's one of the interestingquestions that I have for you.
Um, all my questions areinteresting, but as we wrap up
here, um, I am curious.
I have my own opinion and myopinion is, as we go into any
type of presidential electionyear, I feel like they try to
(42:43):
just keep everything.
My experience is like keepeverything stabilized.
We'll keep all the levers, allnice.
Everything's going to stay neatand tidy until we have this
election experience.
I'd love to hear yourperspective on that and if, in
your opinion, they would saveoff a recession if the Fed would
just to keep everything coolleading into the election.
Speaker 2 (43:08):
Yeah, we've talked about this a lot on the Drunk
Real Estate Podcast.
We did a segment a few monthsago where one of us I don't
remember who it was walkedthrough the data on what the Fed
tends to do during electionyears just to get an idea of
does the Fed tend to favor theincumbent or the person running.
Does the Fed try to make surewe have a great economy or do
(43:31):
they not care?
And what the data says is thatthe Fed has actually done a very
good job historically of beingimpartial, of being independent
and really trying to do theright thing for the economy.
We've actually seen more timeswhere the Fed has raised
interest rates because we wereheading towards inflation than
(43:53):
they've lowered interest ratesto kind of keep the economy
moving along, keep the economyoverheated, and so I want to say
, cautiously optimistic, thatthe Fed is going to do the right
thing, which is they're goingto do as little as they need to
to ensure that things keep going.
But if we see a situation whereeither we see inflation spike
(44:18):
again, I think they would bewilling to raise interest rates
again, or if we start to headinto a recession, I think they
will be willing to cut rates.
But for the most part I thinkthey will be willing to cut
rates.
But for the most part, I thinkthe Fed's going to try and be as
impartial as possible.
They're going to try and notlook like they're taking sides
and I think if they had theirway they would do as little as
(44:40):
possible between now and theelection.
So, barring any major economicsituation either inflation
spiking again or hitting arecession I think it's unlikely
we see either rate cut or ratehike over the next several
months.
I think we will see a rate cut,but probably after the election
.
Speaker 3 (45:01):
So interesting, jay, I can literally just I feel a
little selfish because I justenjoy picking your brain and,
you know, accessing it.
It's like you know what'sinside Jay's brain and you know
you explain things as such asimplistic way and I really
appreciate that.
And, conscious Investor, I knowyou have appreciated that as
(45:21):
well, because it's not oftenwhere people can take these
complex concepts and really likeparse them down into a way
where we can access them andreally engage in a practical way
for lives, investing in wellbeing.
So I can't thank you enough andI want to double down and say
(45:42):
conscious investor, make sureyou go check out the Drunk Real
Estate Podcast because it's sofun.
You, mauricio, aj and Kylethere's such a camaraderie
between and I know you guys arefriends, but it's just there's
so much camaraderie and it comesout and every single one of you
(46:02):
brings going full circle backto the beginning of our
conversation about masterminds.
You all come with very uniqueperspectives and sometimes you
challenge each other and it'ssuch a friendly way.
So it's nice to see somediscourse taking place that's
respectful and authentic andit's like well cheers at the end
of the day.
Speaker 2 (46:20):
Yeah, that's why that show is so much fun, and for
anybody that's listening thathasn't listened to it, it's
basically the four of us everyweek getting together and just
talking economics, talking realestate Sometimes we talk
politics if it's related to realestate and we all come from
very different backgrounds, notjust the businesses we're in,
but we come from differentsocioeconomic backgrounds, we
(46:42):
have different political views,and so it can be fun to debate.
If for no other reason, thenit's great to hear people that
disagree with you, smart peoplewho disagree with you, because I
can't tell you the number oftimes that we've had
conversations where I wasdebating with one of the other
guys on the show and I walkedaway thinking he's right, I was
(47:03):
wrong, and so, if for no otherreason than to hear all sides of
a point, is a great reason tolisten.
Speaker 3 (47:14):
It's so great, jay.
Thank you so much for your timetoday.
Is there any other way that theconscious investor they can go
listen to Drunk Real Estate?
But what other ways can theyreach out if they want to get to
know more of you?
Follow you.
I will say LinkedIn, y'all forsure.
What's your favorite place forpeople to connect up with you?
Speaker 2 (47:34):
Easiest way is if you go to jscottcom, just the
letter J, J-S-C-O-T-Tcom.
That will link you out to allof my social media, to all my
websites, to my email, anythingelse you might need or want to
get in touch with me.
Speaker 3 (47:50):
Love it, jay.
Thank you so much for your time.
And Conscious Investor thankyou for your time for listening.
Remember this show.
If this meant something, ifthis supported you in some
capacity, then please.
There's a free way ofsupporting the Conscious
Investor podcast and that issharing the show.
So go ahead and share this outon your social platforms or with
a friend.
But this is how the show grows.
(48:11):
It is a show that growsorganically.
It's not paid ads and thingslike that.
It's from listeners like youtaking initiatives to be
ambassadors.
So thank you so much forhelping grow the show.
Expand the reach that we canhelp elevate other lives around
the globe.
Until next time, cheers to yourhealth, mindset and health.
(48:33):
Thank you.
Hello Conscious Investor and welcome back.
I'm your host, julie Hawley.
For over four years, I'vepaired my background in real
estate, investing, education andcoaching to create powerful
content for you each week.
This podcast is where we take aholistic approach to investing
by focusing on three ingredientsto a life of personal freedom
health, mindset and wealth.
(00:23):
We'll talk about everythingfrom passive investing through
syndication and how to use yourretirement accounts to boost
your investing, to mineralbalancing and gut brain health,
and into topics that cultivateyour inner strength and
resilience so you can thriveregardless of any of life's
current events.
And yes, those are all episodescurrently available and linked
(00:44):
in the show notes below.
Join me each Monday for amindset episode and later in the
week for an interview withexpert investors and health
professionals, so that you canexperience your greatest health,
strongest mindset and build thewisest wealth.
Speaker 3 (00:59):
Jay, so excited to finally have you here on the
Conscious Investor Welcome.
Thank you.
I've been wondering why youhaven't invited Conscious
Investor Welcome.
Speaker 2 (01:04):
Thank you.
I've been wondering why youhaven't invited me sooner, but
thank you for having me.
Speaker 3 (01:09):
You know you have this like you're on this whole
other tier, this whole otherechelon of coolness and smarts
and just awesomeness that I waslike, okay, I got to get at
least 500 episodes in before Iinvite Jay on the show.
Speaker 2 (01:24):
Well, I have been.
You and I sat in a mastermindtogether for several days Last
year was it About a year ago,and ever since then I've been
very excited about coming on theshow, so thank you for finally
having me.
Speaker 3 (01:37):
I'm so glad that we finally pulled this off and
pulled it together.
You and I are both talkers andI cannot even wait to get into
conversation with you, becauseone of the things that I was so
endearing when we were in thatmastermind setting was just like
you're so freaking smart, butyou're not the smart that is
(01:58):
disassociated from everyone inthe room type smart right and
like you're able to take suchhigh level concepts and to, like
, make them tangible to theworld around you and I
absolutely appreciate that somuch.
And you understand a lot ofelements and a lot of nuances
that I don't understand, and orI'm.
(02:19):
You know that I'm always like,okay, I have to front load, I've
got to constantly be learning,learning, learning, learning,
and I feel like it, just likeyou're the wellspring.
I feel, like you're just thelife giver of that, so I'm so
grateful.
Speaker 2 (02:31):
Well, I appreciate that, but the reality is that
I'm just older than you are.
I'm old, and so all the thingsthat you're doing learning,
learning, learning, learning,learning is the stuff that I've
been doing for probably a decadeor two longer than you have,
and so I like to say I seemsmart because I remember how
dumb I used to be, and so it'sreally easy.
(02:54):
Seriously, I can put myselfback in that place where I knew
very little, if anything aboutanything, and so when I talk to
people and can explain thingsthat I have learned and that I
do know, I can do a good job ofremembering how I wanted to be
or needed to be talked to backwhen I knew nothing.
And so for me it really is.
(03:15):
It's just that memory of when Iused to be just as ignorant as
all the new investors out there.
That will be exactly where I amin 10 or 20 or 30 years of
study.
Speaker 3 (03:28):
Gosh, see, conscious Investor, you can see exactly
what I'm talking about.
Even that ability to have thatlevel of awareness to be able to
say no, I know how I can talkto myself, my past self, which
lends itself perfectly to thequestion in Conscious Investor,
you know what that question is.
All right, jay.
I mean we're making perfectlyto the question in Conscious
Investor.
You know what that question is.
All right, jay.
I mean we're making someassumptions, right, conscious
(03:49):
Investor, that we know that hedoes.
But let's go ahead and ask thequestion of all questions what
do you do and how did you getstarted?
Speaker 2 (03:59):
Yeah, so I like to say that I am a business person.
I know I mostly focus on realestate these days, but I've made
a very conscious effort oflearning the business side of
real estate as well as the realestate side of real estate.
So I come from an engineeringbackground and a business
background.
So I have an electricalengineering degree and an MBA.
(04:21):
I spent about 15 years incorporate America, spent most of
my career at Microsoft, didsome engineering and business
stuff there, and in 2008, mywife and I quit our jobs.
We got married and we kind offell into real estate.
It wasn't supposed to be acareer for us, it was just
something to do when we took asummer off after our corporate
jobs, before we kind of figuredout what it was we wanted to do
(04:41):
when we grew up.
And so our corporate jobsbefore we kind of figured out
what it was we wanted to do whenwe grew up.
And so we decided to flip ahouse and I knew absolutely
nothing about real estate.
She knew absolutely nothingabout real estate, and I was
terrified.
And so I asked myself okay, howam I going to do this if I know
nothing about real estate?
And what I realized was prettyearly on was that if I just
(05:06):
treat real estate like abusiness and I knew business if
I treat real estate like abusiness, then I have a
headstart over a lot of people,even without knowing the real
estate side of things.
And what I've come to realizeover the 15, 16, 17 years that
we've been doing this is thatreal estate really is just
another business, no differentthan if I ran a car dealership
(05:28):
or a restaurant or a techbusiness.
It really is the same thing.
You need to understand thingslike reading financial
statements and hiring andleadership and cashflow
management and dealing withinventory and marketing and
sales and dealing with customersand all of these things that
are consistent across anybusiness you might be in.
(05:49):
Real estate has that as well.
Unfortunately, what I see is alot of people who get into real
estate who have this attitudethat real estate is not a
traditional business and we cantake shortcuts.
I can learn how to flip housesor buy rentals or whatever I
want to do in real estatewithout learning all that other
business stuff that I would haveto do if I were going to start
(06:10):
a real business.
Quote unquote.
Real estate is a real businessIf you learn the business side
of things, you're necessarilygoing to be a better investor
than if you just treat realestate as if it's something
different from business oreasier than business or just a
hobby.
And so, if anything, when Ithink about what I do, I'm a
(06:31):
business person.
That just happens to be in realestate.
Speaker 3 (06:35):
I value this response so deeply, in a large part
because my background, my family, is residential real estate
sales, which is very differentthan real estate investing,
particularly commercial realestate investing Black sheep
over here.
But what's interesting aboutthat is that I never saw that
(06:57):
actually run as a business andit was transactional and yeah,
they're the clients and therepeats and things like that,
but it wasn't super intentional.
It wasn't run like a well-oiledbusiness operation.
And when I look at real estateagents who are friends, just
going on that real estate sideof things, on the sales side, I
(07:21):
can see the difference day andnight between those who run a
business and those who are justlike oh, I am a glorified
self-employed person.
It's a day and night difference.
Speaker 2 (07:33):
We see this all the time in this industry.
It doesn't matter if you're aninvestor, if you're a real
estate agent.
I think the best example is acontractor.
How many of us have worked withcontractors who are amazing
contractors but they do a reallypoor job of running the
business side of things.
They can't manage their cashflow, so they're constantly out
of money.
They're not really good atstaying on schedule, they show
(07:56):
up late or they don't show up atall.
They take weeks to give youquotes and it's not because
they're bad at their job, it'sthey're bad at running the
business.
They're not business people.
And I see the same thing in realestate with investing.
Those who come from abackground of real estate, those
who have been contractors oragents or appraisers or whatever
else it is, they get into thisbusiness and I think they feel
(08:20):
like I'm going to leverage thoseskills that I have.
I'm going to leverage myability to swing a hammer.
Or I'm going to leverage thoseskills that I have.
I'm going to leverage myability to swing a hammer.
Or I'm going to leverage myability to stage a house.
I'm going to leverage myability to do whatever it is in
the business and they're sofocused on leveraging that skill
that they avoid the moreimportant things, the higher
level stuff, the hiring and thedelegating and actually managing
(08:42):
the business.
And I think that's part of thereason why my wife and I were
successful early on because wedidn't have those skills, we
couldn't leverage our realestate knowledge or our real
estate experience.
All we had was the businessknowledge, and so we were forced
to focus on that.
Speaker 3 (08:58):
That's amazing.
Okay, this really isinteresting because I was I'm
like, okay, engineer, electricalengineer with an MBA, working
for corporate America, likeyou're in the engineering wing.
How did you develop and growall of your business of humans,
like, how did that happen?
Speaker 2 (09:17):
Hanging around smarter people than I was, and
it really that's that's.
That's the key to everything Ido is I try and surround myself
with people who are super smart,super experienced.
And I'll use the word wise Idon't use that word a lot, but
in thinking about it it reallyis important and wisdom is the
(09:38):
ability to take the experienceand translate that into making
good decisions, moving forward.
And so what I've tried to do isI've tried to surround myself
with people who have thatexperience, that knowledge, that
wisdom, so that I can kind oftake shortcuts.
When you have to learneverything from scratch and
there have certainly been thingsI've had to learn from scratch
it takes a lot longer than whenyou can surround yourself with
(10:01):
people who can help you coursecorrect or help direct you in
the right direction, so that youdon't make as many mistakes.
Obviously, we're all going tomake mistakes.
Mistakes are great, but if youcan cut your number of mistakes
in half, you're probably goingto cut the time that it takes to
get from point A to point B by10 or 20 fold fault.
(10:26):
And so really, I'd say thebiggest thing that I've done is
just surrounding myself withreally smart people and
leveraging them and trying tooffer them value so that I can
get value in return.
Speaker 3 (10:33):
I love surrounding myself with smart people.
I generally feel like,especially when we're at that
mastermind, I was like I am notqualified to be in this room.
I felt so and I remembercalling my husband saying I'm so
in the right room because Idon't feel qualified to be in
this room.
I felt so and I remembercalling my husband saying I'm so
in the right room because Idon't feel qualified to be in
here and I am learning so muchand this is the best time of my
(10:54):
life.
It's that nerd tactic where youjust go, although I want to be
able to contribute and add value, and like, well, I can share
jelly bellies, I don't know.
You remember I like I literallyhad some jelly bellies.
I'm like I don't know how I canadd value because this is such
a powerhouse of brain power here.
Speaker 2 (11:15):
But the cool thing about that room was and I think
this is another key takeaway isthat nobody in that room, I'm
guessing, felt like they werethe smartest.
Nobody in that room felt likethey didn't have anything to
learn because there were so manydifferent sets of skills in
that room and you're good atcertain things, I'm good at
certain things, the other peoplein the room they're good at
certain things, and it's not aton of overlap, and so you can
(11:37):
learn stuff at the same timethat you're teaching.
I can learn stuff at the sametime that I'm teaching.
If that you're teaching, I canlearn stuff at the same time
that I'm teaching.
If everybody in the room isdoing the exact same thing, then
it becomes a competition.
Okay, who's split more housesor who's bought more rentals, or
who owns more apartments or whoowns more self-storage, but
when everybody has a differentset of skills and a different
background, everybody can be theteacher as well as the student,
(11:59):
and so that's another part ofsurrounding yourself with smart
people not just smart people,but people who do things that
you typically don't, people thatyou don't typically surround
yourself with so that you canlearn new things without having
to compete for who's the best orwho's the most successful.
Speaker 3 (12:16):
That's so important.
I just finished reading.
Well, I listened to the bookand it's called the Magic of
Thinking Big.
I think it's by CharlesSchwartz.
I can't remember and I'm notgoing to.
I was going to pull my phoneout and pull up the book.
I'm like I know I'm not goingto do that, but but it's
interesting.
It was written in, I believe,the late fifties and it reads
like something from the fiftiesbut it is timeless.
(12:45):
Truths about caring andconducting yourself in the
business world and justgenerally like in life, and how
to create and establish thisbeautiful life right.
And one of the elements he saidis hey, don't be around all the
same people all the time, justto you know, like double down on
that is like let's make surethat you were around a variety
of different people, because itbrings out differences in us.
I love that.
It's so important.
Speaker 2 (13:06):
And it makes it easier for us to add value to
their lives, because if they'rein a different space than we are
, have a different area ofexpertise than we do, then they
can learn from the things thatwe're really good at as well,
and so it gives us the abilitynot just to take, but to add
value as well.
When you surround yourself withpeople who are different than
you are, add value as well whenyou surround yourself with
people who are different thanyou are.
Speaker 3 (13:26):
That's so insightful.
I have so many questions thatare probably not the typical
questions.
But, conscious Investor, I knowthat you are thinking this
particular question.
You've mentioned your wife acouple of times.
You and I, off air, we'retalking about our families.
We've been married for manyyears.
We're just within a couple ofyears of each other on that.
So it's like it's a beautiful,beautiful thing to build life
(13:48):
together.
You guys, you know, have workedtogether.
That's amazing.
So how did how did that workfor you when you first started
out in real estate, flippinghouses and such Um?
It's an interesting dynamicthat many couples cannot execute
(14:08):
well.
So how did that go?
Speaker 2 (14:11):
Yeah, it's tough and it took us a decade before we
kind of figured out the rhythmand figured out how to get it to
work.
And even after a decade and wedon't work together I mean she's
kind of decided that she's donewith me, she'd rather not work
with me anymore.
You're tired yourself.
Well, she's focused on the kidsthese days, but for a decade we
(14:34):
worked together and yeah, it'schallenging and at the beginning
we're both very type Apersonalities.
We're both very smart people,we both come from the corporate
world and we're both used tobeing in charge.
We're both used to runningteams, we're both used to making
decisions and having the finalsay, and so the first couple of
years were really really toughbecause every decision it felt
(14:56):
like it needed to be a democracy.
But a democracy with two peoplecan be very difficult because
we well, we're both smart people.
I like to think, and we havesimilar corporate backgrounds.
We think very differently.
She's a marketing type person,she's a creative type, I'm an
engineer, I'm very analytical,and so oftentimes she'd have one
(15:16):
reaction or one opinion.
I'd have a different reaction,different opinion.
If you're going to vote on it,well, you're never going to come
to consensus with two people,and so for the first couple of
years, every decision was anargument, every decision was a
debate, every decision took waytoo long to make, and so things
progressed a lot more slowlythan they should have.
(15:37):
Eventually, we both realizedthat in the business that we
were doing, in the flippingbusiness, there were certain
things that she was amazing atthat I could recognize that I
wasn't.
She was great at findingproperties and negotiating deals
and staging and marketing andselling.
Then there were the things thatI was really good at that she
would be the first to admit thatshe wasn't Underwriting and
(16:00):
raising capital and dealing withcontractors and dealing with
the financial statements and themoney.
And so once we realized that wehad all the skills to be a
great business person she hadhalf of them and I had half of
them what we realized was weneeded to run this business more
like a bigger business.
So if you go into any corporateenvironment, what you see is
(16:21):
that there are departments so Iworked at Microsoft forever and
you go to Microsoft and they'reengineers and they're
salespeople and they'remarketing people, they're QA
people and they're productmanagers and I mean there's
finance people and all differenttypes of people and the
engineers don't try to do thesalespeople's job.
The marketing people don't tryto do the products people's jobs
(16:43):
.
Everybody knows what their roleis and that's what they focus
on.
And the sales people have thefinal decision making authority
when it comes to something salesrelated.
Engineers have final authoritywhen it comes to something
engineering.
And so we did the same thing inour business.
We realized, okay, she's reallygood at the acquisitions and
the dispositions, so staging andselling, I'm really good at the
(17:04):
raising capital and renovations.
She took her half of thebusiness and she had full
autonomy, full authority to makedecisions.
I took my half of the business.
I had full autonomy, fullauthority to make decisions.
Things started to go much moresmoothly because she was making
great decisions on her half ofthe business, because that was
her area of expertise.
I was making good decisions onmy side of the business because
(17:25):
that was my area of expertise.
I was making good decisions onmy side of the business because
that was my area of expertise.
And suddenly our businessstarted working.
Not only that, but ourrelationship started working a
whole lot better because we hada whole lot more respect for
each other.
We weren't fighting over everydecision and we were able to let
things go.
We were able to say, hey, hey,this is your area of expertise,
I trust you, whatever you decide, and vice versa.
Speaker 3 (17:48):
I love that and I love that.
I love how you you and yourwife processed through it and
didn't quit, didn't give up.
You persevered through theprocess in Atlanta, you know,
put you in a whole differentposition in life.
It'd be a very differentscenario if you were unwilling.
(18:10):
I was just mentioning this to acoaching client the other day.
You don't know what's on theother side of working on a big
project right now and I'm likeyou don't know what's on the
other side.
You have to go through thistrough of despair, the most
emotional cycle of change.
You've got to journey throughthe trough of despair and if you
want to quit now, you're goingto go back to the beginning and
(18:32):
you're going to have to figurethis out.
You're going to learn thelesson one way or another, so
just stick through it.
It's going to be worth it andyou'll have a different
perspective on the other side.
Speaker 2 (18:38):
Yeah, that's a great way of saying it.
Speaker 3 (18:41):
That's absolutely remarkable.
I have some good friends andthey actually have a brand doing
business as a couple and theysupport other couples in doing
business as a couple.
That wasn't what they wanted.
They didn't set out to do thatand then the pandemic happened
and they're like let's dobusiness together.
I'm definitely dumbing it down,but it's nuanced.
(19:02):
My husband and I are talkingnow, only now, about
collaborating and he's going tocome into my investment company
and that's a whole.
But it's been years of no,let's not do this.
I like being married to you.
Let's not go down that road.
Speaker 2 (19:19):
Yeah, I mean, I often say that marriage is difficult,
but partnerships are even moredifficult Because, at the end of
the day, with a marriage youknow well, hopefully your
marriage is strong enough thatyou know you're going to get
through it.
You know you're willing to putin that effort at the end of the
day, because the family is themost important.
(19:41):
But with a partnership, it'sreally easy to say this isn't
working and and just want togive up and move on and so, um,
partnerships in my mind are alot more difficult than a
marriage, and then when you dothe two together, well then it
gets really, really tough.
Speaker 3 (20:00):
Get into some sticky territory.
I can park on this topic forquite some time because I think
that this serves people well.
I think even when we're notnecessarily in business together
, we're going through things.
I mean, if we're committed toour marriages, we're going
through different evolutions andstages of it, and just hearing
(20:21):
other people finding theirsuccesses is always encouraging.
And I love it when couplesstick through the uncomfortable
times because there's such areward on the other end and you
and I know that because we'vebeen married for 16 and 18 years
.
It's like man, it's totallyworth it.
Speaker 2 (20:41):
Yep, and here's the other thing.
I think the other difficultpart of working with your spouse
is we know, as entrepreneurs,that what we do is a 24-7,
365-day thing.
It's not working a job whereyou go in nine to five, you come
home and you shut it off andyou focus on family.
It really will absorb yourentire life.
(21:05):
It's it, really.
It will absorb your entire life.
And when it's just one of youthat's doing it, the other
person can say, hey, you need toshut it off, you need to to
leave the the work mind spaceright now and you need to be in
the family mind space.
And so it's nice to havesomebody that can say that.
When you're partners with yourspouse, it's a lot more
difficult because at any giventime, one of you is probably
thinking about work and theother one doesn't want to pull
them out.
When you're partners with yourspouse, it's a lot more
difficult because at any giventime, one of you is probably
(21:26):
thinking about work and theother one doesn't want to pull
them out because it's like, yeah, now I have to think about that
too, and you end up spending 24, 7, 365 thinking about work and
not focusing enough on thefamily, and so one of the really
important things to do ifyou're going to work with your
spouse is you really have to setboundaries and you really have
to say hey, six o'clock at night, phone goes off, we talk about
(21:49):
family, we don't talk about workstuff, weekends we're taking
Saturday off, and maybe Saturdayand Sunday, if you're lucky,
and we're not talking about work, we're just going to focus on
the family.
And you really have to forcethat, because if you don't and
we fell into this pattern in thefirst couple of years as well
that it will be work 24-7.
And that's not good for anybodyin the family.
(22:09):
If you have kids, for thespouses, for the parents, I mean
you're going to literally beabsorbed and you're not going to
have a life outside of yourbusiness.
Speaker 3 (22:20):
This is so true and it's even in your own business,
even for me, in my own business.
I love, I love everything I doso much that it's it's a hobby,
it's an obsession, it's a itchecks so many boxes of
contribution obsession hobby youknow income, all of that that
it's like it's happy spot to be.
And it's so easy to find myselfdriving in the car and not
(22:43):
being present.
It's like wait, wait, wait,jules, step out of your mind, be
present with your kids.
And I have to say that aloud tothem.
I'm like I'm so sorry I'm lostin thought over here, but you're
here and I want to talk Likewow, yeah, it happens, I'm going
to shift gears, total 180.
Here we go, from doing the, theheartfelt things, the way you
(23:08):
talk about economics and the wayyou understand and interpret
you know the marketplace isabsolutely phenomenal in my
opinion.
Um, and so I love hearing and Ilove listening.
Conscious investor, you'regonna go when you're done
watching this list, watching oror listening, head on over.
Make sure you subscribe andfollow the Drunk Real Estate
(23:31):
Podcast, because it's so muchfun listening to you guys talk
and it's also deeply informativeand so and hearing so brilliant
, like you guys are all suchstrong thinkers.
It's fun, it's lighthearted,but you guys know how to get
deep and I love how you talkabout what's happening in the
(23:52):
economy.
I just love to like you know, Ihear a lot of people saying
well, you know, interest ratesare going to go down and I don't
really like to get so lost inthe interest rate conversation
because it's just one toggle.
But I would just love to inviteyou to say what are some of the
most exciting things you'renoticing in the economy right
now.
Speaker 2 (24:12):
So interest rates will go down and then they'll go
back up again and they'll godown again and they'll go up
again.
And I think that's the takeawaythat people need to realize
that everybody's so focused onthe short term, what's going to
happen in three months, sixmonths, 12 months, when I think,
well, it's definitely important.
We have to be focused on theshort term, especially if we
(24:33):
have investors, we haveinvestments.
We need to manage thoseinvestments short term.
But before we think long term,we have to start by looking at
the bigger picture, and thebigger picture is the economy
runs in cycles and the economyhas always run in cycles.
I mean, we've had 35 recessionsover the last 150 years 160
years and so if you divide 160years by 35 recessions, that's a
(24:56):
recession every four or fiveyears.
And so if we're going to have arecession every four or five
years and I know it's been areally long time since 2008, we
had the longest market expansionin history.
But the reality is, for anybodythat's old, like I am you
remember that before 2008, wehad recessions every few years,
(25:17):
and so there are going to betimes where interest rates are
high, and interest rates tend tobe high before recessions and
then we're going to head into adown period and everything's
going to suck and it's going tofeel horrible and it's going to
feel like everything we'veworked so hard for is going away
.
And then, 18 months later, 24months later, we're going to get
into that next economicexpansion and everything's going
(25:37):
to be great again and life'sgoing to be wonderful.
And we have to get used tothese cycles.
And so for anybody out there,that's like thinking well,
where's the market headed?
What's going to happen in thenext three months, or six months
or 12 months?
Yes, that's important, but keepin mind that, regardless what
happens in the next three or sixmonths, in three years or four
years or five years, things aregoing to be completely different
(25:59):
.
And then in 10 years, they'regoing to be different again and
we're going to keep goingthrough those cycles.
So whenever things seem bad,don't get hung up on it, because
they'll get better.
Whenever things seem good,don't get overconfident, because
they will get worse.
And so where we are right nowis it's weird, we're in a very
weird part of the economic cycle, and I would even say that in
(26:22):
my lifetime and I'm in my early50s.
I don't remember a time that itwas anything like this and I
know, talking to some peoplemaybe the 80s were like this,
where we saw periods of highinflation but not necessarily a
strong economy.
So maybe we're going back tothe 80s here, before we've seen
what we're seeing.
But I think that we're likely infor a softening in the economy.
(26:46):
We've definitely seen that overthe last month or two We've
seen inflation come down.
We've seen retail sales numbersstart to come down.
We've seen prices for wholesalegoods come down, so businesses
are buying things cheaper.
Business confidence is comingdown.
Everything's kind of pointingtowards a softening in inflation
(27:08):
, but it's likely going to leadalso to a softening of the
economy.
So I wouldn't be surprised ifin the next six to 12 months, we
see a recession.
But I think this will be goodbecause I think we do need a
reset in the economy.
Right now.
I think people are in a lot ofdebt.
Obviously, real estate pricesare super high.
(27:28):
There's a lot of things that areset.
It might be bad for some people, but I think for the overall
economy would be a good thing,and so I don't expect there to
be a lot of great news over thenext year or two, but I don't
think it's going to be that badeither.
I don't think we're headingtowards a 2008 type event.
But long story short, whatwe've seen over the last two or
(27:53):
three years, with asset pricesgoing through the roof, what
we've seen the last 10 or 12years, with multifamily doing
great and single family doinggreat and all of their assets
doing great, I think that couldslow down as well.
So I think we're getting backto the normal cycles and we may
see a recession here for thefirst time since 2008.
Speaker 3 (28:12):
I think it'd be refreshing as well.
I think the recession it's justa natural like cleansing that
needs to take place to kind ofrecalibrate everything, to
reground what is taking place inthe marketplace.
You know, we see the prices, wesee everything.
Just kind of recalibrateeverything to reground what is
taking place in the marketplace.
You know, we see the prices,you see everything.
Just kind of sigh.
It's like a sigh of relief,thank you, because when I think
(28:35):
about growing and like if youand I, we went out we're running
and someone said, no, just keeprunning.
Like, and they keep moving thegoalposts, no, you're gonna run
further, you're going to runfurther, wait, whoa, whoa, whoa,
we'd be exhausted.
And I know that the economyisn't a physical being, but I
feel like it just gets acrossand it's like can we just stop
and just catch our breath here?
Speaker 2 (28:58):
Yeah, and what that tiredness is?
What the analogy is in theeconomic world is debt.
So what we're seeing when wehave good economic times,
generally we have low interestrates.
Businesses are doing well.
So they want to buy, they wantto expand, they want to hire
more people, they want to buymore equipment, they want to buy
(29:19):
more factories, they want tobuy more inventory.
That all takes money.
So they borrow lots of moneyand they do it at low interest
rates, and so everybody's takingon debt.
People are taking on debtpersonally, businesses are
taking on debt.
Debt's just being created outof thin air.
And then things start to slowdown.
And when things start to slowdown and things are actually
(29:40):
they overheat.
Before they slow down, theyoverheat.
The Fed says, okay, things areoverheating, there's too much
demand, people are spending toomuch money, things are too good,
it's causing inflation.
We have to raise interest ratesto stop the inflation.
And so once they raise interestrates, well, everything starts
to slow down.
And now suddenly interest ratesare higher, so it's harder to
(30:00):
get debt.
Floating rate debt that we hadis now cost more because
interest rates have gone up onthe debt that we had.
Suddenly, people can't paytheir debt anymore.
Debt becomes so burdensome thatthat's what causes the
recession.
The nice thing about arecession is exactly what you
said is it's a cleansing.
By cleansing, what I mean isit's a cleansing of debt.
(30:21):
Businesses go bankrupt, peoplego into foreclosure, people have
to declare bankruptcy andcredit card companies take big
hits, and it's not a good thing,but it's a necessary thing for
the economy.
We need that cleansing.
We need that debt to go away sowe can start over and head into
the next cycle.
Speaker 3 (30:41):
It's absolutely imperative.
Are there any markers that youlike I mean you're, I just feel
like you're in the weeds, likeof all of this and you have such
an understanding of it.
What are some of those likemarkers that you look for as
like, almost like KPIs of sorts?
With the economy, everyone has,almost, like you know,
conscious investor.
(31:02):
You might prefer to look atcash on cash, but another
conscious investor might like tolook at the IRR, and so
everybody has their nuances thatthey're looking for.
So what are you know, what areJay Scott's nuances of looking
at the economy?
Your lovers?
Speaker 2 (31:17):
Yeah, there are a few things that and I'm not going
to take credit for any of thesethese are things that have been
tried and tested by economiststhroughout the decades, and what
we found are there are a fewvery reliable leading indicators
of recession.
So number one and no surpriseto anybody is just GDP numbers.
So basically, gdp grossdomestic product is the total
(31:40):
output of the economy.
How much money is movingthrough the economy, and as that
tends to trend downwards, asthe economy starts to slow down
and maybe even shrink, if we getnegative GDP, that's the first
sign of recession.
In fact, for a lot of people,that's the definition of
recession, and what we've seenover the last several quarters
is that GDP has started to slowdown.
(32:01):
We've been over 2% for much ofthe last few years 2% growth per
year.
In the last quarter, we sawgrowth at 1.3%.
This is not a horrible number,but given that we were expecting
over 2% again, 1.3% was a verybig surprise, and so it's
leading some people to believethat this could be the reversal
(32:24):
of that growth in the economy.
That's number one.
Number two is jobs.
There's one particularindicator when we look at jobs.
There was a woman, an economist, a decade or two, named Claudia
Somm.
She theorized and the datasupports this that the
unemployment number isunimportant.
(32:45):
It's not how many people areunemployed, whether it's 3.5
unemployment or 4% unemployed or5% or 6%.
The important number is, or theimportant point is the trend of
the unemployment number.
And so what she said and againthe data bears this out is that
if unemployment goes up a half apercentage point above the low
(33:09):
point in any given year, that'sliterally the single best
leading indicator of recessionthere is.
So basically, right now, we gotdown to about 3.6%.
In the last year we got down toabout 3.6% 3.7% unemployment.
Today the unemployment numberjust hit 4%.
So we're about 0.3% 0.4% abovethe low point in the past year.
(33:34):
If we get to 0.5% above the lowpoint a half point above the
low point, which would be 4.1%or 4.2% that's literally the
best leading indicator forrecession.
So I know the Fed, I know a lotof economists, a lot of
armchair economists like me arekeeping our eye on that
unemployment number, because ifit gets to 4.1 or 4.2% even
(33:57):
though 4.1 or 4.2% is actually areally good number historically
but the fact that it's a halfpoint higher than the low point
in the past year that's going tobe majorly concerning.
So that's the second thing.
Third thing that we tend to lookat is this thing called the
inverted yield curve.
So government borrows lots ofmoney.
(34:22):
That's how we fund all theridiculous stuff that the
government spends money on.
They issue these bonds and biginvestors, big companies,
countries basically will buythese bonds.
So they're loaning thegovernment money.
And so if we buy a bond thatlasts a year or two years, a
short-term bond, thegovernment's willing to pay a
certain amount, typically asmall amount.
If somebody buys a bond thatlasts 10 or 20 or 30 years, the
(34:45):
government's willing to pay alittle bit more because
obviously they're taking abigger risk by holding that bond
for 10 or 20 or 30 years.
And so sometimes what we see isa weird situation where the
market kind of pressures theprice of these bonds to kind of
move in opposite directions.
So short-term bonds end upgenerating more return than
(35:07):
long-term bonds, and we callthat an inverted yield curve,
and when that happens that's agood indicator of recession,
simply because banks they keepthe economy going by lending
money.
So much of our economy is debtdriven and banks like to borrow
money short term and then lendit out long term.
(35:27):
They want to borrow money atthat 30 day rates or 60 day
rates or 90 day rates, and thenlend it out to people like you
and me as investors for 10 yearsor homeowners for 30 years, and
so they rely on being able toget debt short term debt at very
cheap, and then they loan itout at higher rates, but with an
inverted yield curve they'reactually borrowing the money.
(35:49):
The banks are borrowing themoney at higher rates and
loaning it out long-term atlower rates, and so the banks
are losing money.
They're not losing money, butthey're not making nearly as
much money, and so an invertedyield curve puts the banks in a
situation where they don't wantto loan money nearly as much
because they're not making asmuch money by loaning, and so
when the banks start to slowdown lending money, that impacts
(36:11):
the economy, and we saw that in2008.
One of the big drivers of the2008 recession was simply that
credit tightened up so badly,banks stopped lending, and so
this inverted yield curve isanother big indicator.
We've had an inverted yieldcurve now for about 23 months,
so since July of 2022, which isthe longest period we've ever
(36:31):
had an inverted yield curve, andso typically we think that
within 18 or 24 months of theyield curve inverting is when
we're going to see a recession.
It's now been 23 months, sothere are a lot of people who
think, from an historicalperspective, we're probably
within a couple months of arecession there.
So just looking at the data,and again, anything can happen.
(36:52):
The data has been wrong beforeand the government actually has
a lot of control over theeconomy the Fed.
By printing more money, bylowering interest rates, they
can stave off a recession forquite a long time, as we've seen
.
And so just because the datasays we might be heading for a
recession doesn't necessarilymean we are.
But as of right now, the datais making it look like it's
(37:15):
probably on the horizon.
Speaker 3 (37:17):
And I think it's interesting, and you and I have
enough life experience and we'veexperienced recessions enough
times.
To we, it's not a bad thing,it's a great thing.
On the other end of it, likeit's, it's just like.
I look at it in a very healthyway.
I always think it's interesting.
I'd love to get your opinionand I just conscious investor.
(37:38):
Can you see why I'm like gosh?
Can we just get inside thebrain of Jay Scott please?
So you have such a great way ofexplaining things, jay.
Just to double click on thatreal fast.
Speaker 2 (37:51):
Can I say something real quick, Because you brought
up the point about recessionsaren't that bad of a thing.
I think part of the problemthat we're seeing right now is
the typical let's call it realestate investor is probably in
their late 20s, early 30s, maybeeven mid 30s, and so the last
time, the last recession, was2008.
(38:13):
And that was at this point 16years ago.
So if they're in their mid 30s,even 40 years old, when they
Can you hear me?
Speaker 3 (38:22):
There we go.
Yes, okay, during their mid-30s, early 40s.
Speaker 2 (38:26):
Sorry about that.
So typical real estate investornow is probably in their late
20s, early 30s, maybe mid-30s.
2008 was 16 years ago.
So during 2008, they were intheir teens.
They might've been 10 years old, five years old, 15 years old.
They were young and therecession before that was 2001.
Most of the real estateinvestors today don 15 years old
.
They were young.
(38:46):
The recession before that was2001.
Most of the real estateinvestors today don't remember
2001.
They certainly don't rememberearly 90s or late 80s or the
four recessions between the late60s and the early 80s.
They don't remember those.
All they remember is 2008.
2008 was such a horrific eventfor many of us that if that's
the only thing you remember,that, if that's the only thing
(39:07):
you remember, if that's the onlyrecession you remember, you're
going to be terrified when youhear the word recession, because
in your mind, a recession iswhat happened in 2008.
And what they don't realize iswhat people who are younger than
we are don't realize is thatmost recessions aren't like 2008
.
2008 was a once-in-a-lifetimeevent.
We haven't seen anything likethat since the Great Depression.
(39:29):
A typical recession is a wholelot more mild.
It's not fun and it affects alot of people negatively, but
it's not like 2008.
I think it's really importantfor people to recognize that,
while 2008 is this thing that wethink about as a recession, the
typical recession is nothinglike that and it's unlikely that
the next recession is going tobe anything like 2008.
Speaker 3 (39:54):
I appreciate that you mentioned that what's
interesting is, by nature, ofgrowing up in a residential real
estate and I always say thatbecause it's a very different
environment, in a differentthinking, than real estate
investor thinking.
But what was interesting isthat, growing up in that
environment, I just was aware ofthe recessions and I remember
(40:15):
the dot-com crash and I remembereven though I was little I was
one of those my daughter is thesame way just highly aware, just
observing what is taking place,and so it was just very much
like, oh yeah, okay, this doessuck.
You know this isn't necessarilyfun, maybe we can't go do all
the same things we used to do,you know, with ease and such,
but I just remember, oh, and wegot through it and it wasn't so
(40:40):
bad.
But 08 was you're right, Ididn't even that was
short-sighted on my part, takingfor granted my own experience
to say.
A lot of people, 08 was theirfirst wide-eyed awareness and
that was definitely a smackdownfor a lot of people.
Speaker 2 (40:58):
It was, and it's created a lot of misnomers in
people, in people, if we talkabout it.
If I go to the typical realestate investor these days and I
say, okay, you remember 2008and how real estate prices
crashed, if I ask thoseinvestors of the previous 34
recessions before 2008, how manytimes do you think real estate
(41:19):
values crashed?
They'd probably say a few times.
The reality is they never did.
If I asked them, how many timesdo real estate values go down
more than 1% in those 34recessions, I'm positive most of
them would say several of themdid.
The reality is none.
Real estate literally has onlygone down more than 1% once in
(41:40):
the last 125 years, and that wasduring 2008.
Even during the Great Depression, we didn't see real estate
values go down the way they didin 2008.
And so typically we don't evensee real estate values go down.
Same with rents.
People are terrified that rentsare going to drop 20%, 30%, 40%
.
Yeah, we've seen rents go downa few percent before 2%, 3%, 4%,
(42:00):
5% but even that is very, veryrare.
It's unlikely we're going tosee any major hit to rents
because that's just not whathappens during most recessions,
and if all you remember is 2008,.
You probably think a lot ofthings are likely to happen that
actually aren't very likely tohappen during the next recession
and the one after that.
Speaker 3 (42:20):
I feel like that's so much optimism.
You're welcome, consciousInvestor.
There's some optimism for youknow, a recession now here's.
Here's one of the interestingquestions that I have for you.
Um, all my questions areinteresting, but as we wrap up
here, um, I am curious.
I have my own opinion and myopinion is, as we go into any
type of presidential electionyear, I feel like they try to
(42:43):
just keep everything.
My experience is like keepeverything stabilized.
We'll keep all the levers, allnice.
Everything's going to stay neatand tidy until we have this
election experience.
I'd love to hear yourperspective on that and if, in
your opinion, they would saveoff a recession if the Fed would
just to keep everything coolleading into the election.
Speaker 2 (43:08):
Yeah, we've talked about this a lot on the Drunk
Real Estate Podcast.
We did a segment a few monthsago where one of us I don't
remember who it was walkedthrough the data on what the Fed
tends to do during electionyears just to get an idea of
does the Fed tend to favor theincumbent or the person running.
Does the Fed try to make surewe have a great economy or do
(43:31):
they not care?
And what the data says is thatthe Fed has actually done a very
good job historically of beingimpartial, of being independent
and really trying to do theright thing for the economy.
We've actually seen more timeswhere the Fed has raised
interest rates because we wereheading towards inflation than
(43:53):
they've lowered interest ratesto kind of keep the economy
moving along, keep the economyoverheated, and so I want to say
, cautiously optimistic, thatthe Fed is going to do the right
thing, which is they're goingto do as little as they need to
to ensure that things keep going.
But if we see a situation whereeither we see inflation spike
(44:18):
again, I think they would bewilling to raise interest rates
again, or if we start to headinto a recession, I think they
will be willing to cut rates.
But for the most part I thinkthey will be willing to cut
rates.
But for the most part, I thinkthe Fed's going to try and be as
impartial as possible.
They're going to try and notlook like they're taking sides
and I think if they had theirway they would do as little as
(44:40):
possible between now and theelection.
So, barring any major economicsituation either inflation
spiking again or hitting arecession I think it's unlikely
we see either rate cut or ratehike over the next several
months.
I think we will see a rate cut,but probably after the election
.
Speaker 3 (45:01):
So interesting, jay, I can literally just I feel a
little selfish because I justenjoy picking your brain and,
you know, accessing it.
It's like you know what'sinside Jay's brain and you know
you explain things as such asimplistic way and I really
appreciate that.
And, conscious Investor, I knowyou have appreciated that as
(45:21):
well, because it's not oftenwhere people can take these
complex concepts and really likeparse them down into a way
where we can access them andreally engage in a practical way
for lives, investing in wellbeing.
So I can't thank you enough andI want to double down and say
(45:42):
conscious investor, make sureyou go check out the Drunk Real
Estate Podcast because it's sofun.
You, mauricio, aj and Kylethere's such a camaraderie
between and I know you guys arefriends, but it's just there's
so much camaraderie and it comesout and every single one of you
(46:02):
brings going full circle backto the beginning of our
conversation about masterminds.
You all come with very uniqueperspectives and sometimes you
challenge each other and it'ssuch a friendly way.
So it's nice to see somediscourse taking place that's
respectful and authentic andit's like well cheers at the end
of the day.
Speaker 2 (46:20):
Yeah, that's why that show is so much fun, and for
anybody that's listening thathasn't listened to it, it's
basically the four of us everyweek getting together and just
talking economics, talking realestate Sometimes we talk
politics if it's related to realestate and we all come from
very different backgrounds, notjust the businesses we're in,
but we come from differentsocioeconomic backgrounds, we
(46:42):
have different political views,and so it can be fun to debate.
If for no other reason, thenit's great to hear people that
disagree with you, smart peoplewho disagree with you, because I
can't tell you the number oftimes that we've had
conversations where I wasdebating with one of the other
guys on the show and I walkedaway thinking he's right, I was
(47:03):
wrong, and so, if for no otherreason than to hear all sides of
a point, is a great reason tolisten.
Speaker 3 (47:14):
It's so great, jay.
Thank you so much for your timetoday.
Is there any other way that theconscious investor they can go
listen to Drunk Real Estate?
But what other ways can theyreach out if they want to get to
know more of you?
Follow you.
I will say LinkedIn, y'all forsure.
What's your favorite place forpeople to connect up with you?
Speaker 2 (47:34):
Easiest way is if you go to jscottcom, just the
letter J, J-S-C-O-T-Tcom.
That will link you out to allof my social media, to all my
websites, to my email, anythingelse you might need or want to
get in touch with me.
Speaker 3 (47:50):
Love it, jay.
Thank you so much for your time.
And Conscious Investor thankyou for your time for listening.
Remember this show.
If this meant something, ifthis supported you in some
capacity, then please.
There's a free way ofsupporting the Conscious
Investor podcast and that issharing the show.
So go ahead and share this outon your social platforms or with
a friend.
But this is how the show grows.
(48:11):
It is a show that growsorganically.
It's not paid ads and thingslike that.
It's from listeners like youtaking initiatives to be
ambassadors.
So thank you so much forhelping grow the show.
Expand the reach that we canhelp elevate other lives around
the globe.
Until next time, cheers to yourhealth, mindset and health.
(48:33):
Thank you.
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