Over the years I do get several people making the comment that
real estate is the best way to secure your finances, and that
real estate values always hold up.
Well, of course, as I have conclusively proved on many
occasions, not least in some of these blogs, that latter
comment very rarely holds out to be true. There are times to
buy and times to sell. You certainly dont buy when prices are
high and affordability is getting close to some of the limits.
You also dont buy going into a crisis. You wait till the
crisis works its poison, and when things appear to be at rock
bottom, that would be the time to buy. Prices of real estate
are always a lagging indicator, that's why it's so easy to
work out what's going to happen next. But most people just
dont get it.
I mean, for heavens sake, I've been forecasting house price
movements since the mid sixties. I've never yet got it wrong.
There is also a question which comes up very frequently when I
do my financial calculations based upon a minimum return of
10% p.a. Where am I getting 10%?
I assume it hasn't escaped your notice that the world of
banking has drastically changed over the decades. In
particular, over the course of the past generation interest
rates have kept falling, and they are now effectively running
on minus figures. Bank rate is somewhere in the dodgy zone of
about 0.1% across rather a large chunk of the world. With
inflation running somewhere around 1% in most countries that
sends the return on money saved with a bank negative. But then
who wants to leave money in the bank? Bloody silly place to
I take a very simple view of money. This view differs from
that of most people, so I think I need to start by explaining
how I regard money.
I look at money as a servant. I work hard to get it so I
expect when I've got it that it starts to work hard for me.
That means first and foremost that I do not borrow money in
order to spend it. If I borrow money it is for one purpose,
and one purpose only, to make more money.
The average financial idiot borrows to spend, and therefore
remains forever poor. If I need something and it costs money,
the first thing I do is work out how I can create a financial
situation that will make me money. I then set everything up
and use the money that situation makes me to pay for what I
want. That way every deal I do makes me money instead of
costing me money. Disarmingly simple, and to my way of
thinking, disarmingly obvious.
Once I've made some money I then treat that money as a servant
and put it to work for me. Who needs staff? They are a
nuisance, usually unreliable, and they cost money. Money
doesn't cost money, it makes money, and money is the best
servant I know, and it works non-stop, and it has the capacity
to create money exponentially which is totally beyond the
ability of a human worker.
When I look at any investment situation I do my due diligence
first. I have several basic rules, but this isn't the place to
go into how one should do due diligence. But assuming the
investment passes all the necessary tests I apply one further
test: the return must be more than the rate of inflation
rounded up plus 10% ROI. That means at the moment I would not
even consider any investment that returned less than 12% p.a.
The next question is: where do I get such an investment?
I am writing this on Tuesday Feb 9. If I look in my inbox I
find at least three threads suggesting deals. I won't
necessarily take any of them, but let's look at what I'm
"High-yield property development
partnerships-profit share & security.
LUXURY PROPERTY DEVELOPMENTS WITH ATTRACTIVE PROFIT SHARE
OPTIONS AND FULL SECURITY AND OWNERSHIP
IN STRATEGIC SOUTH-EAST LOCATIONS CLOSE TO HIGH SPEED RAIL
LINKS TO LONDON
Property joint ventures are when parties come together to
form a company which will be used for the purposes of buying
residential or commercial property. This can be in the form
of buy-to-let for rental income or for development of new
properties or refurbishment of existing properties for
re-sale. Joint ventures are a common practice in property
and can be mutually beneficial for both developers and their
partners, and the ability to share costs and risks can be a
significant benefit to all parties."
This deal advertises returns of 8%. Too low for me, so let's
Email 2 is from the same company, so let's move on to the
"If Fixed Returns of 15% per year aren't
compelling enough as an investment proposition, then what
about an Equity Bonus to further enhance the offer ?
Receive a gift of Equity Shares equivalent in value to your
original investment and still benefit from a Loan Note
offering 15% Fixed Returns per year for 36 months.
This way, you will earn a fantastic fixed rate of return -
and also share in any further upside that High Street Group
can produce over the same period.
You will even receive your shares shortly after you make an
• 36 month Loan Note
• Fixed Annual Returns
of 15% per year
• Receive an Equity
Bonus to the value of your original investment
• Security Trustee
acting to protect investor interests
• Corporate Guarantee
on capital invested
• Pipeline comprises 14
Ongoing Projects with an estimated GDV of over £1 billion
• Minimum Investment of
• Open to High Net
Worth and Sophisticated Investors"
I'm not recommending this deal, just showing you what's out
there. And that is just taking pot luck from my daily email
Okay, let's forget real estate. Who wants it? Where is the
real money? In money of course. It always has been.
One person once hit me with the extremely stupid, but
apparently unstoppable argument about the Indians selling the
land on which New York was built for the measly sum of
$6. Yeah, right. How much would $6 be worth today if it
had been put in a bank account and had received the basic
interest over the years? Now tell me how much the land under
New York's buildings would be worth if nobody had built a city
there. That $6 would be worth an insane amount today. I did
the calculation once, but haven't the time to go look for it
now, but believe me the figure is astronomical.
Remember, money works for you, land doesn't. You have to work
the land to make it give up value. And it can be hard work. I
know, I used to live on a farm. I know, I've built the houses
and landscaped the gardens. Give me money as my servants any
day of the week.
Okay, let's look at modern banking just for a moment.
I live in Portugal which is a very old fashioned country, way
behind the times. The country still does things in an old
fashioned, labour intensive way. In most countries if I want
to pay a bill I simply flash a piece of plastic over a reader
and the bill is paid within seconds. That's it.
Now let me explain what I do in Portugal to pay my electric
There is one office in Faro (forty miles away) where I could
pay over the counter (I think). Generally I get an email
telling me to pay the monthly bill. I cannot reply to this
email as it is a No-Reply email. I cannot phone anybody as the
telephone numbers all run into answerphones. I have to open a
bank account. It has to be a Portuguese account, which costs
me eight euros a month in fees. I then have to fund that
account. If I did that by transfer from my own bank that would
cost me £25 each time I did a transfer. I therefore choose to
withdraw funds using my card, then queue to get into the bank,
and pay in the money. I do that once every two months, wasting
usually about forty minutes of my time. The bank then charges
me a fee for paying the monthly electric bill, which is
usually about thirty-five euros. In other words my bank costs
in paying a bill are larger than the bill.
What a waste of space for the bank, a waste of employment for
the bank tellers, a waste of my time, and a ludicrous chain of
events. With DeFi none of this is necessary. Portugal may
discover Defi sometime in the next ten or twenty years, or
What am I talking about?
Traditional finance requires several layers of middlemen. It
requires brokers, clearinghouses, auditors, and specialised
DeFi replaces all of that with a few lines of computer code.
DeFi uses "smart contracts" to do all of the things that banks
can do like issuing loans, interest accounts, and even bonds
and derivatives. You see, smart contracts are computer
programs that run automatically on blockchains. So even people
who don't have bank accounts can get involved. All you need is
a mobile phone and crypto.
This technology today offers interest rates between 8% and 12%
for lending, borrowing, and trading... and even buying digital
art through blockchain-based smart contracts that execute
automatically without human intervention.
You want to earn 10% p.a.? Well, what's stopping you? You can
automate the whole process. Admittedly it's all a bit clunky
to do at the moment, but I bet that before the year is out
there will be a simplified, easy-to-use system in place. All
you have to do is keep yourself up-to-date with the
technology. It is true that people do take a while to catch up
I hassled my clients to get into Bitcoin in 2015 when the
price was $280. You dont have to go overboard. You want a
pension. Bung £1000 into bitcoin and forget it is what I
advised at the time. That £1,000 would have bought you four
Bitcoin. That's now worth over £150,000 as I write this.
Ten per cent per annum? Difficult to find? I think not.
Let's not give up just yet. What else do I claim in my books
on making money? Find the current trend and hang on in there.
In the sixties it was real estate. In the eighties it was
Japanese unit trusts. In the early nineties it was real estate
again. In the mid to late nineties it was the internet. These
days it's all about AI and biotech. If you want to latch onto
a real estate ride you need me. (I dont advise it at the
moment. If you have been watching these blogs you know why.)
If you want to latch onto AI and Biotech then get someone on
your side who knows the score.
How am I doing? I'm only into this in a small way as I have
only been doing this for the past six to nine months, but I'm
up one hell of a lot more than 10%.
Of course, one of the stalwarts of the investment business is
the world of art. I have in my in-tray an article claiming
that a company that invests in art has managed a return of
31.1% for their clients in 2020. That's not bad at all. Here
are a few statements from the article.
"For the last fifty years the art market has shown
steady growth. In 2020 Christie's, Sotheby's and Philips
achieved more than $370 million through auction sales. And
Art has been named 'Best Investment' by the Wall Street
Oh yes, and you can invest from as little as £10,000.
Not for you? In that case how about the very latest way of
investing by using SPACs. But this is not a lesson in how to
make money, simply a way of answering a question. If you guys
want me to go into all of this in a big way then let me know
and I will do my best to oblige.
On the other hand, if all you want is 8% p.a. then stay poor.
But you most certainly dont have to.
Next week I'll go back to exploring
whether there is anywhere I can advise readers to move to.
In the meantime do click the Like button below and also
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See you next week.