The Wall of Money Pouring into U.S. Real Estate – Is It Slowing or Growing?

Almost every day – or at least every month or so – another country’s leadership announces restrictions on money getting out of that country.  There can be various reasons for this.  Sometimes it is just that they don’t want capital flight – and other times it can be that the leadership needs the money of wealthy people in order to fund other initiatives, i.e. Venezuela, Russia, and, most recently, Saudi Arabia.

Certainly, if you are in a country that has announced initiatives to control outflows of capital or is under autocratic rule, it is likely that you would be trying to figure out how to get your money out of the country to a safe location.

What about other countries with autocratic leadership that have not – yet – announced capital controls or wealth confiscation?  Wealthy people are more likely to be attuned to world events and world risks.  So one would think that people in those countries would be starting to think that it might not be the worst idea to move money out, ‘just in case…..’

And what about countries that don’t currently have autocratic leadership but might have such leadership in the future if political events turn out a certain way.  Maybe citizens with wealth in those countries might be wondering too.

And oh yes – let’s not forget wealthy people in countries with leadership that is just fine, but with stagnant economies.  There are fewer places they can send their money as, by definition, they will be excluding all of the autocratic countries I just mentioned.  If they send their money into these places, they might not be able to get it out.  Once again, I see the money flowing right here.

And finally, what about great countries where wealthy people just want to diversify.  The result is the same as the preceding paragraph.  There aren’t a lot of choices.  And, yes, again, more money flowing to the U.S.

In some of these situations, money will flow here quite legally and properly.  However, in other situations – the first few mentioned above — the odds are that those with wealth to protect would be thinking about how to move their wealth legally, but if not legally, then likely illegally if they have no really good alternative.

Money leaving autocratic – and non-autocratic — nations and flowing towards the U.S. is obviously nothing new, i.e. it has been going on for years; however, my belief is that rather than a wave cresting, it is, if anything, gaining in strength.  Yes – my view is that the wave of money coming towards the U.S. is growing and not slowing!

What does this mean for U.S. real estate?

I see two things:

First – it would point to continuously rising prices, especially in gateway U.S. cities.
Second – it would point to a lot of shady transactions and attempted shady transactions.

What should real estate players do?  Two things:

First – don’t let this wall of money pushing up prices push you away from your good underwriting.  The fact that other players are making a rational choice to overpay – based on their political circumstances, should not push U.S. real estate players to overpay when we don’t necessarily have those political circumstances.  Said another way, don’t fall prey to the greater fool theory that because prices are rising for the foregoing reasons it means that the underlying value of the item in question justifies its price.  And said still another way, the wall of money flowing into the U.S. pushing up prices will come to an end at some point, at which time the pricing could fall precipitously.

Second – in view of my prediction of increased efforts of frantic wealthy persons in other nations trying to get their money out, and the obvious benefits to third parties in assisting them in doing so, I suggest increased scrutiny of who you are dealing with.  In this regard, I suggest that U.S. real estate players be “over-careful.”  So called “know-your-client” and other protections should be increased.  It is never worth it to take a risk of breaking U.S. laws to capitalize on this otherwise potentially beneficial situation.  And, to belabor the point, turning a blind eye by pretending not to see something that has a funny smell to it, and hoping it will be ‘okay’ to claim ignorance if the matter is later challenged, doesn’t work either, as when it all comes to light everyone’s reputation is burned and sometimes irreparably.

Third – ‘if you can’t beat ‘em, join ‘em.”  What I mean by this is that in a gold rush the people selling picks and shovels always do well.  This means that U.S. real estate players with the reputation and ability should consider working with the foreign money in an advisory, co-investment or other similar capacity.  To be clear, I am not advocating taking advantage – I am advocating the opposite; namely, being an honest U.S. teammate to help the foreign money be invested safely in U.S. real estate in a win/win manner.

That is my philosophizing for today.

A last thought – if you feel the need/desire to speculate, maybe buy Bitcoin.  Jamie Dimon is no fool and he said the following about Bitcoin:

“If you were in Venezuela or Ecuador or North Korea or a bunch of parts like that, or if you were a drug dealer, a murderer, stuff like that, you are better off doing it in bitcoin than U.S. dollars,” he said. “So there may be a market for that, but it’d be a limited market.”

So if my theory that there is a wall of illegal money exiting autocratic regimes, it may result in pushing up the price of Bitcoin.

To be clear I am NOT advocating buying Bitcoin – and I don’t intend to buy it myself – but it might be a fun ride for the pure thrill of gambling and not having to fly out to Las Vegas.

7 Tips On How Lawyers Can Get Over The Greatest Fear of All — Public Speaking

For many people, getting up in front of a group of people to speak triggers a body response that is similar to being thrown in a cage with a wild animal. Indeed, there is that joke that most people would rather be in the casket at the funeral rather than delivering the eulogy.

While many people just try to avoid public speaking, it is hard to avoid it in a career where you need to be pitching clients, giving presentations, running transactional calls, and every once in a while being called to give a speech.

My firm recently celebrated its 20th anniversary, and at our annual firm gala I gave a speech just like I have done for the past 19 years. Each year, I undergo the same process for how I prepare to give such an important speech to a room full of close to 200 people. In reflecting on my preparations, I thought I would share the steps I undertake with the hope that it can be useful to you in the various stages of your careers.

Of course this is a “speech,” but the preparation is similar for pitches, presentations, and pretty much any situation where you are “presenting” in front of others who are watching you “perform.”

  • Fear. Gasp, I realize I am making a complete fool of myself. I have forgotten what to say. Or people are laughing at me. Or someone points out what I said was just wrong — in front of everyone. I wake up sweating. It is a dream, of course. For many years I was just terrified of public speaking. I heard all the silly suggestions like pretending everyone else in the room was naked — ugh. None of it worked. But then someone said something that resonated for me. This was that the adrenaline and butterflies I felt before speaking was “good” — it meant that my body and brain were ready to outperform! Is this true?  I don’t know, but it has worked for me. I get butterflies, but I am not really nervous any more. I try to look forward to these kinds of things, and I welcome those butterflies.
  • Pick a message and drive it home. It seems obvious, but before you write a speech you need to figure out what the message will be. As stated in the Churchill quote below, once you figure out the message, then you need to drive it home to the audience. I have learned — the hard way, by blowing it in the past — that ONE message is best. Two messages is blowing it. Got that? ONE message.
  • Be a storyteller. Regardless of the topic it is always good to weave in an interesting or thought-provoking story to make you more relatable as a speaker. People love listening to stories. They say Lincoln was a master story-teller, by the way. Supposedly many of his speeches were in the nature of stories. And they are really much easier for an audience to listen to, follow, and remember.
  • If you are naturally funny, that is great, and if not, don’t worry about it. Trying to be funny and failing really can take the wind out of your sails. There is nothing wrong with being serious and strong and passionate.
  • Share your speech with one or two people you trust. We’ve all been victim to our own delusions of grandeur and that definitely applies to speech writing. Sometimes I think I have an amazing speech but for some reason it just isn’t, or maybe it is, but the speech draft isn’t getting the point across the way I want. I have (two) trusted confidantes who will be ruthlessly honest with me, and I let them read it ahead of time. By the way, in an earlier draft of this speech, both of them told me my speech essentially “sucked.” I then rewrote it almost entirely. Thank God I have them around — thank God they are honest with me — and thank God I am willing to listen to them openly.
  • I remember Keith Barket — the former global head of real estate at Angelo Gordon — from whom I learned an incredible amount. He passed away tragically in 2010. But Keith was always so cool and impregnable in front of a group — how did he do it? I called him one night about something or other, and he told me he couldn’t talk to me because he was rehearsing his presentation. I was incredulous — Keith, rehearsing?  Keith told me, in his special way, “Bruce, everyonerehearses! (emphasis added)” Well, if Keith rehearsed, then I better do it too. I always rehearse. It is astonishing how awful I sound the first time through and how impressive (humbly) I sound after a couple of trial runs. By the way, for me, I don’t “over- rehearse,” as then it starts to sound canned and rote and boring. So I rehearse “just the right amount.”  One last thing: I don’t rehearse what I plan to say; I pretend I am actually making the speech — to an empty room, of course — and I then make appropriate changes if necessary.
  • Breathing. I don’t find this is an issue for me anymore but if you are really scared, I advocate saying your first few words really LOUDLY. It is surprising how much that energizes you — and makes you feel strong. So I used to do that.

Finally, I will end with the excellent admonition from one of the world’s great speakers, Winston S. Churchill:

“If you have an important point to make, don’t try to be subtle or clever. Use a pile driver. Hit the point once. Then come back and hit it again. Then hit it a third time – a tremendous whack.”

Good luck!  I hope this helps.