My favorite time of year on the coast of Georgia in what we call the Golden Isles. Our leaves won’t change this far south for several more weeks, but the position of the sun amidst the live oak trees call to the soul of a Georgian during the golden hour in the early days of Autumn.
I snapped this picture last week while walking through an ancient forest on Jekyll Island near the storied Millionaire’s row where the Gilded Age Robber Barons had winter cottages. The Federal Reserve was founded in the clubhouse of the Jekyll Island club despite being so close to the majestic beauty of the nature found there. It is so beautiful there it’s like a dream …
Because it is, sort of.
This is not a photo. It’s a computer generated image but it’s hard to tell the difference. Even more interestingly, the picture was drawn by an AI using the prompt “Live Oak Trees on Jekyll Island at Sunset.”
This tree does not exist. It has never existed. It is solely the imagined amalgamation of live oak trees that an artificial intelligence bot computed to meet my instructions. It made it up. And it got it right. In amazing detail sufficient to fool my brain into thinking it’s real.
This AI is called Midjourney but there are others out there. They’ve been released to the public and every time someone runs a query, produces and images and tweaks it, the AI producing it learns a little more so that the next query is infinitesimally better. Millions of queries a day and the system improves noticeably every 2-3 days for a common user.
There are design professionals now who are using AI engines to produce paid work. “Midjourney, produce a logo for a chicken-packing plant with a red-scale color scheme, HARLAN in Times New Roman, in 7 permutations.” They show those 7 ideas to the client who selects one and pays $1,000 for it, without ever knowing (or caring?) that a computer did it all.
The creative side of AI art is so good that an art museum had to expressly limit entries to images produced without the aid of AI. Presumably, we aren’t far from a place where AI art wins competitions in a field which we never thought could be better than what the human heart could produce.
“You deserve the performance you accept.”
— George Robbins
The layoffs are here. Facebook’s parent Meta has begun its first round of layoffs, or “separations,” as its ad business has slowed noticeably in the past several months. Goldman Sachs has done so, as well. The Discovery Channel followed suit this morning, laying off about 30% of its sales staff. The pharmaceutical industry will be next since the COVID gravy-train is largely over for them. Hospitals and associated healthcare entities are looking to follow suit for the same reason.
Layoffs are a natural part of recessions. When the job market is as tight as it is today, the vast majority of these people will land in new positions by the end of the month. As the macroeconomy continues into a lazy downward spiral, though, things will get progressively worse … or better, depending on your perspective.
No matter how much the current Administration crows about the success of its inflation capping governing, inflation still tops 8%. In the most basic of terms, that means that my dollar buys 8% less than it did 12 months ago, except I can’t find anything that costs only 8% more, most things are 30-40% higher.
Exerting all the pressure in the world on now artificially restricting the money supply by making money more expensive to borrow — which is the Fed’s plan when they increase 75bps today and 125 bps next month so that the prime rate is above 4% for the first time in a decade — means that growth will have to slow. We’re seeing this first in home sales — August home sales were the worst in 4 years — and job creation — we only now have back the amount of jobs we had pre-pandemic and will start to lose those now.
The slowdown is here and it doesn’t matter what the definition of recession might be to whatever side of the aisle you listen to, its upon us. So what do we do about it?
Buy assets. In inflationary environments, own the things that appreciate because of inflationary pressures, and dump those that don't perform in accordance with those economic laws. When mortgages go to 6% (which happened this week for the first time in 4 years), less people can afford to buy houses which have increased in value. Some of those houses will decline in value to meet market demand but Americans are loathe to lose money on real estate and will simply opt not to move except when absolutely necessary.
When less people buy houses, they rent them instead. They may as well rent them from me, and from others like me. In the past 2 months, I’ve purchased 7 parcels of raw land, flipped 1 house and purchased 3 more, and optioned for sale another 2. Fortunes are made surfing the inflows and outflows of the capital markets and right now there is opportunity in purchasing properties that would have sold in 15 minutes last year but won’t budge for months now.
You can start small here.
Go and find a nice property that will rent for enough to cover your mortgage payment plus extra for repairs and vacancies. They are out there, not necessarily listed on MLS, but out there if you know where to find them, and how to buy them. You can wait, too, as I hear so many people are waiting for the real crash to happen. When that does come (and I’m 50/50% on whether it will), there will be bargains to be had, but you’ll be too scared to make a move then.
Trust me, you didn’t do it in 2008 or 2012 either, you won’t do it this time. You can’t outrun economics, so buy it right today and you wont’ care whether the price goes up or down because you aren’t going to sell it, just keep it and let someone else pay for it until you draw the income off of it when its paid off.
Tried and true strategies make millionaires in real estate investing every day.
“God will not have his work made manifest by cowards.”
— Ralph Waldo Emerson
Autocracy is the word on every political talking-head’s lips this year. Trump as an autocrat, Biden as an autocrat, Putin as an autocrat, we’ve gone deaf to it now. None of these folks know what they’re talking about. To see what true autocracy looks like, let’s spin the globe to … Eritrea.
No country in the world has perfected autocracy as its governmental system than Eritrea. The entire state of Eritrea is just one man, Isaias Afewerki. For twenty years, he headed a rebel army which won the country’s independence from Ethiopia in 1991, a fact that wasn’t represented on maps of the region for several years. Afewerki has ruled as President without constraint on his power since then.
The country today has no constitution, no elections, no legislature, and no published budget.
Its judiciary refers all decisions to the President or reverses itself at his whim, and a free press is not a known commodity at all.
The only recognizable institutions that function are the army and security but the nation has compulsory — and indefinite— national service.
Except for natural deaths the army generals, presidential advisers, and diplomats have been essentially unchanged for twenty-five years.
The whole country sounds like something made up in some silly Young Adult novel, and yet here it is, functioning and existing alongside the democratic countries of the world.
Great article Trey!