The Real Estate Espresso Podcast

On today’s show we are talking about the commodities super cycle. We often hear those words, but what do they actually mean? What does this mean for real estate investors? I’ve witnessed the shocking price increase of copper wire. Six gauge wire is used in high load applications like stoves and clothes dryers, AC units, hot tubs and EV chargers. I’m seeing that wire pricing at over $5 per linear foot. That’s much higher than I ever remember. As we transition to using more electricity and away from gas based appliances, the demand for copper is going up.  But the biggest issue is that the mines needed to produce these minerals take years to bring online. There is the entire regulatory process to get a mine approved which takes years. Then you need to make the capital investment and then develop the mine into a producing going concern.  The cost structure that was in place the day the mine was conceived will always be dramatically different from the cost structure when the mine actually hits production. For example, the cost of a lithium mine in Canada is now forecast to be 38% higher than estimated just 18 months ago. Lithium is the key ingredient in Li=ion batteries which make up the majority of high performance batteries. It’s possible that new battery technologies will reduce our dependence on Lithium in favour of cheaper minerals like Sodium. But for now, we’re stuck with Lithium and copper. We don’t have a replacement for copper.  -------------- Host: Victor Menasce email: podcast@victorjm.com

The United Auto Workers didn’t get the memo. Jerome Powell wants to stamp out any possibility of a wage price spiral.  The auto industry is in the middle of an escalating strike as the United Auto Workers are fighting for a catch up on the concessions delivered when all of the major US auto makers were on the verge of bankruptcy in the wake of the 2008 Financial Crisis.  But the United Auto workers are demanding a 40% increase in wages over a three year period. The question is, do you think that workers all across North America are looking to the resolution of the strike with the Detroit auto makers? I don’t believe that the workers will get a 40% increase in their contract. I expect they will come closer to 25%. But even that is going to fuel a demand for higher pay across all of manufacturing.  There is no question that wages have not kept pace with inflation. That means reduced purchasing power at the cash register for employees in nearly all sectors of the economy.   What does this all mean? ------------ Host: Victor Menasce email: podcast@victorjm.com

On today show we’re taking a look at how insurance is affecting choices in design.  Why are some insurers are exiting geographic areas entirely. What does this mean for owners of real estate in those locations? Insurance is both optional and essential depending on your circumstances. If you were ultra wealthy, then you can self in sure. However, For the rest of us and for anyone who borrows funds from a bank insurance is not optional. So what happens if you reside in California and your insurer decides to exclude California from its product offerings? What do you do if you reside in Florida and now your insurance company has removed Florida from its list of offerings? Does that mean the risk of living in Florida is simply too high? Should everybody just leave? Why don’t we empty out the state of California. The risk of wildfires is simply too high for people to live there, not to mention the risk of earthquakes. There is considerable precedent for governments to step in and provide insurance solutions. When private businesses decide that insurance is no longer profitable. There are simply some risks for which there is no insurance at all. For example, you will not find an insurance policy that will cover you for the risk of a landslide anywhere in the United States, that is simply not an insurable risk. If you happen to live in California, and other parts of the country that have experienced landslides. There are very few insurance companies offering flood insurance. When you buy flood insurance in the US, this policy is typically underwritten by the Federal Government and administered through your insurance broker. Would you spend extra in construction if you knew it would reduce your insurance cost? ---------------- Host: Victor Menasce email: podcast@victorjm.com

Real estate investors generally don’t care about short-term interest rates. The short term rates affect the cost of capital for bridge financing where those loans are indexed to the secure overnight funds rate. Short term debt can be replaced with permanent financing. I really painful increase in borrowing costs is tied to long-term interest rates. We have experienced an inverted yield curve for much of the past two years. This past week, yields on the 10 year Treasury hit 4.5%, a 16 year high. When you read the mainstream media, it’s as if the pricing for the 10 year Treasury is linked to inflation expectations and to some forecast of the Fed’s higher for longer narrative.  The question is why have the yields on US government debt increased in particular over the last 60 days? The United States has issued $1 trillion of new debt over the last three months. They have literally flooded the market. When you flood the market with any commodity, prices will fall which means yields will rise. ---------- Host: Victor Menasce email: podcast@victorjm.com

Aesops Fables are classics credited to Aesop, a slave in ancient Greece. The stories date back to a time between 620 and 540 BCE with each story containing a life lesson.  We are starting today’s episode with a fable called "The Ant and the Grasshopper.”  -------------- Host: Victor Menasce email: podcast@victorjm.com

Josh Lessard is the research engine behind George Gammon and the Rebel Capitalist Show. On today's show we are talking about Josh's journey to becoming a central figure in the Rebel Capitalist team when he was just emerging from high school. To learn more from Josh, check out the Rebel Capitalist show on Youtube. -------------------- Host: Victor Menasce email: podcast@victorjm.com

Scott Smith is based in Austin Texas where his law practice specializes in asset protection and insurance litigation. On today's show we are talking about structures to protect assets and create resilience from the many threats to your wealth. To connect and to learn more, visit royallegalsolutions.com -------------- Host: Victor Menasce email: podcast@victorjm.com

Robert asks - “Most successful people have mentors. Who are your mentors?” This is such a great question. In fact I’m struck by the fact that in five and a half years producing a daily show, this topic has not come up before now. I’ve had a number of mentors over the years. They date back to my days when I was in the tech industry.  I believe it is so important to have people to learn from in your life. Overwhelmingly, the people I look to for guidance are much older, and I have a few who are younger. For example, I have a mentor who is 21 years of age. More on that later.  Before I answer who my mentors are, I think it’s important to define what we mean by a mentor.  Mentors are those who provide you guidance 

On today’s show we are examining the latest Federal Reserve announcement and trying to make sense out of it for real estate investors.  We’re looking at what was said, the underlying assumptions, and what the likely decision points will be.  When asked if a soft landing was now a baseline expectation, Powell said “No, No” he wouldn't go that far. At this point he was off script. A soft landing is his hope, but not his base case. So he was clearly acknowledging that a soft landing is unlikely. So here is my interpretation of what was said in totality. There are clear contradictions. The economic forecast says soft landing, and Powell was clear that he doesn’t believe the soft landing as the most likely outcome. He used the word “carefully” on numerous occasions to describe the Fed’s stance. He said that word more than I’ve heard him use it before. To me, that signals a recognition that conditions could change that would warrant a change in policy.  --------------- Host: Victor Menasce email: podcast@victorjm.com

On today’s show we are looking at a new report on The Evolution of Work from Home published by three authors: Jose Maria Barrero, from the Instituto Tecnológico Autónomo de México Nicholas Bloom University of Chicago Booth School of Business and Hoover Institution & Steven J. Davis from Stanford University This 29 page paper has been in circulation since July as a working paper and was finally published yesterday by the Bureau of Economic Research. This piece of research shows us how work from home has changed not just since the pandemic, but over a longer time period.  Working from home has been rising in the United States for many decades, driven by the continuing improvements in technology that enables remote working. ------------- Host: Victor Menasce email: podcast@victorjm.com