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- [00:01]
A
Welcome back to Real Estate Without Borders. Joined here as always, or at least always for the last little bit and hopefully the foreseeable future, the legendary Cameron Hutchinson. We're going to be talking today about what's happening with I think the one variable that makes Real Estate Without Borders different than real estate in your own country, which is the fact that you often have to buy and sell in different currencies. And so we're going to be talking a little bit about Forex, what's happening with currencies around the world, what factors are at play with those currencies right now. I sent you an article this morning about how the Canadian dollar has actually been, I mean I don't want to call it strong against USD because it's still down, but it's among the strongest relative to pure currencies. Anyway, we'll get into that. A bunch of other stuff but. How's it going, Cam?
- [00:48]
B
Yeah, not bad. We were just talking about it. It's been a busy week last week, which is a lot of what we'll talk about today because there was a lot of, well, there's the ongoing Middle east dis and the Fed spoke and the BOC spoke as well and gave their interest rate decisions which obviously not only plays a huge effect on mortgage rates, plays a massive effect within the currency markets. So we've seen a lot of jumping around and people starting to put out their updated opinions on it and which we'll kind of regurgitate and give our own 2 cents on but you know, springs around the corner. The end of Q1 is near so not a bad, not a bad time.
- [01:32]
A
Yeah, so give me like a 30,000 foot view here. Like what, what are you seeing as somebody who does what you do? Obviously you're interacting. I don't really interact with the currency markets very often other than like my US Stock portfolio and then when we're trying to do real estate deals in other countries. Right. So it's, you know, it's like a one time kind of thing. People need to move money into a different currency to make a transaction happen. But like what are you seeing from, from, from your view.
- [01:55]
B
Yeah, exactly. So you know, we were chatting about it a little bit beforehand given that my day to day is literally just looking at these things and helping individuals and currencies make the companies, excuse me, make these types of moves in markets on a day to day basis. So as mentioned that preamble at the very beginning, we've been seeing a lot happening. So what I think we should probably Start with from a currency standpoint, the dollar still runs its thing from a global standpoint as well as from an economic one. Really is we can go into what we've seen over the last week or so, take some points in from a trailing side of it and then go to how what it might mean from an investment standpoint. Ultimately last week was a big one, right? You had Chairman Powell coming out to talk about interest rate decisions and most people will see the headliner of saying that they held and kind of move on with their lives. But whatever that works in this space really looks for is the rhetoric that comes from it after the fact. And what I mean by that is what he's talking to and speculative traders, the markets, anybody from a stock investment side will look into little things like how many times did he say I don't know and try and read into what that means moving forward. And we've seen a fair amount of fluctuations with that from there. So even though they held the exchange rate, which was as was expected and you know, what we did see him come out and talk about was overall some downward or some potential risks to the US economy which in turn affects the US dollar and its long term run rate and what they'll do with interest rates, the big one, which you'll hear a fair amount if you're reading anything in the news and stuff that we'll talk about for the next little bit is obviously what's going on in Iran because it can caus some, we're already seeing it affect gas prices, the pump, but it affect everything else. And what this will ultimately do is put some upward pressure on inflation, interest rates a lot of the time. Yeah, sorry, go ahead.
- [04:07]
A
No, yeah, I was just like, I was just going to say the hard part is like most economies I feel like are setting up recessionary until this happened. Right. And so it's like is there a stagflation risk and what kind of headwinds does that put on? But I don't know, I think it's too early to tell to be honest.
- [04:25]
B
You know, he came out and hit that head on when he was talking about it because that's always the fear, right. And as he liked to point out, which I thought was a good comparison, is if you look back to the last time that this was really something that came through in the 70s and even then the economy looked much different. The states has had a resilient economy for ages for as long as we've really been alive outside of 20 2008. But if you Go back to the last time when this was a serious concern. Well, it's not a nothing concern. You call it more of like a black swan event. They're talking, he mentioned back in the 70s, you know, unemployment was sitting at double figures, inflation was way higher than they're seeing it on a day to day basis. And you can attribute the increase in inflation to a couple folds which is something again that they bring forward. And this is what's causing them the lack of clarity on when they can actually lower interest rates. And a lower interest rate helps deflate the dollar. And the reason behind that is tariffs are a huge portion of that inflation rate jump. And you're seeing it start to come through. And then the other aspect of it is the war and the ongoing conflict overseas right now in the Middle east and it's causing shocks to the energy world. And you're seeing this play out across a lot of different currencies and a lot of different stock markets. And interestingly enough, you know, the dollar and I can't remember we spoke about it on this so far. Any form of global conflict actually helps increase the value of the dollar and it's considered a safe haven currency. So people typically tend to flood into the market to try and protect their assets from downside risk or potential fluctuations in other areas. If you're looking at the dollar index, this will bring us back to more currency conversations. Up until probably late last year, the dollar and Canadians won't really agree with it. But the dollar until recently, which is something else that we'll touch base on. But the dollar has actually been weakening globally against the euro and the pound and all the other major currencies in the yen. This has taken a fairly large shift actually in the past couple weeks. You know, we've seen the dollar start to regain some of its strength from a global standpoint. The one currency, the dollar a year ago, this is a lot to do with trade uncertainty with continuing to strengthen against was the cat. I think as you pointed out and I think probably got the stats up in front of you, the loonies actually been doing quite well over the last little bit. The huge catalyst for that is we're in an exporter or we co, we basically track oil prices. So oil goes up which is obviously one of the huge outcomes that we've been seeing from an economic standpoint from this conflict in the Middle East. The loony will actually appreciate from that. The dollar does too. But we've got more of a historical correlation to the two and that's just
- [07:28]
A
like due to petrodollar.
- [07:31]
B
Yeah, yeah. I mean, one of our largest exports is oil. So what ends up happening is more and more businesses, we pump out and export more oil and make more profit off of it. And oil sold in dollars globally like most commodities are. And what that'll do is increase the demand for Canadian. Because you sell the U.S. any Canadian oil company sells dollars to buy cat. And ultimately that will help inflate from a simple economics of supply and demand, inflate the pricing of the loony. Yeah. What do you got here?
- [08:05]
A
This is just that, that table that I was mentioning like that, that showed me that CAD has been. Been relatively strong against peers. So I think it's down what, seven basis points by comparison to everybody else. Down more against USD? Yeah, cads up against everybody else, against the euro, the pound, the yen, Australian dollar, New Zealand dollar and Swiss franchise.
- [08:37]
B
I guess there'll be a couple other good things to touch base on. But that's a nice segue over to what happened with the bank of Canada's meeting. Again, similar thing that we talk about with the Fed. They held the rate steady. Everybody with mortgages are looking at that, wondering about their new renewal, if you're a Canadian listener. But one of the things that we've seen, while there is good upward potential from rising oil prices, if the Canadian economy continues to falter. Yeah, we might see an increase in. And this puts the BoC in kind of a bit of a tough spot. And the Fed was saying something similar, that private job gains was actually quite low as well because everybody tracks the payrolls for businesses as well, or, sorry, excuse me, countries. But Canada's in a strange spot because the economy continues to have issues which you need to. You can inflate by making money cheaper, that is lowering the inflation rate or, sorry, the interest rate. But we're also running into a potential risk of inflation coming back as an issue. And if you decrease the interest rate, you raise inflation and that can create some serious potential risks. So I mean, the funny thing about currencies altogether, and anybody that's purchasing things internationally will be able to tell you is it constantly fluctuates. You know, I would say the fluctuations in the past couple years or couple months have been more than usual because the world changes off a single tweet these days, or truth, or whatever you want to put it. But you know, even today. Well, when I'm talking about it. So Monday the 23rd, we've seen it fluctuate in over a century in movement between the CAD and The dollar. And this has been based off of a couple new segments that's come out. And ultimately what this does is it changes your buy in cost if you're looking at international real estate purchases or alternatively yourself. And so I think one of the things that we were talking about before is was it a weaker US dollar or that was in the past, so now a stronger US Dollar, what does that do from an, from an investment standpoint? And it can create some serious changes from our pricing. You're looking at an investment property and I've got that similar chart in front of me here. And you, you're seeing kind of a 2% raise in US dollar against. If you're looking into purchasing over in Europe again and the US dollar is now stronger by 1.8% and the property you're looking at costs you a million dollars for simple math, you know, that's $18,000 difference in purchase price. So how does that look and what do people do with that? Who knows? But these quick fluctuations can also cause differences in pricing. That needs to be kept in mind when you're looking at real estate internationally, when you agree on a purchase price compared to when you actually have to buy the local currency to be able to do so.
- [11:50]
A
Yeah, the part that makes me like the, that I kind of want to think about in this regard then is, you know, I think we're, we're probably too in the weeds on the macro to be thinking like. And not for the, not for the show per se, but like to be thinking like property level decisions. Right. But I think there's still a lot of people who are like super far upstream of even thinking about where they want to buy property? And does this tell us something or has a dynamic changed somewhere in the global macro that tells us countries in which you might want to start thinking about investing because there's an upside to the currency trade or the stability. Do you start to think about flight to quality or flight to safety? Canada has always been a place where you'll see global capital go to try and find stability. If it looks like we're in an oil bull market for, I mean, probably until this conflict is resolved, does that improve the likelihood that people actually start putting money into Canada and that there's some currency upside to be found from that trade? And it could be anything. It doesn't have to. They could be buying Canadian oil stocks, not real estate. But where, how has this changed sort of from what you're seeing or the way you're thinking around what countries people are considering Putting money into it doesn't have to be Canada. I just use that one as an example. But are there places that people are thinking last episode we talked about money maybe leaving the UAE because people are afraid and maybe they'll take it out for a short period of time until things look stable and they want to come back. Are you seeing that taking place yet? Are there conversations happening around it so far?
- [13:36]
B
No. You know, I think what you'll find. So we work with both businesses as well as individuals on real estate. Everyday purchases are everyday purchases and prices fluctuate accordingly. Right. So that can either lead to increased inflation because it costs more to purchase your goods from China or whatnot. But that could also correlate over to a real estate side. The difference between buying a stock or a product would be the liquidity of that asset. You know, if you're thinking about it from a, there's too much cost associated with purchasing real estate for it to be a quick change and to purchasing to try and take advantage of the currency fluctuation. Now, I've been in the space for coming up on over nine years now. I'm going to go, yeah, over nine years now. And I think to play a speculative trading market from currencies isn't going to be a tough one to be consistently profitable on. I think what you will see is as the Canadian dollar strengthens if the economy was also booming, because you have to take that into consideration about the fear of pushing money anywhere. Meanwhile, job security in Canada could be potentially lower or outputs potentially lower is the loony strengthens, things abroad becomes cheaper. And that's just a simple fact because your loony goes further, but for Americans, your dollar goes further. So you'll see people starting to look at these assets more. So from an international standpoint, from an investment side, the old adage of you're almost trying to catch a falling knife at that point if you're playing it on either side. But it is something that needs to get taken into consideration. And you talked about U.S. stocks beforehand. You know, the stock market can continue to pump up if you're investing in the States, in the US Dollar, but if the dollar swines, it's going to ease away into your returns. Timing those things is incredibly difficult. Try and get it for the next time. We run through these things, but there are some people out there. Forecasts are great, but they're very volatile. It's subject to change because they're just the forecast. And I used to pull charts basically comparing bank forecasts to how the Market actually moved and they're never accurate. Right. Because nobody knows where the market's going to go. You did know you'd be, well, probably not working and just sitting in day trading.
- [16:07]
A
Yeah.
- [16:08]
B
And it's, you know, if we go back to that Fed one in terms of kind of how much fluctuation could come. One of the things when people are looking at future interest rates in the United States is the upcoming shift of Chairman Powell to Marsh, I believe his name is. Yeah, Wash, sorry. And he washes Trump's appointee or the person he would like to take over the Fed and ultimately with a mandate. If you're listening to anything that President Trump is saying of lowering interest rates, well, that would technically lower the value of the dollar and allow for better time purchases. If he comes in, he hasn't been appointed yet. It was even addressed on the last speaking, last speech that followed last week, saying that he would stay on until he gets nominated or pushed through the nomination process. But if he comes in, you can see more downward pressure on the dollar. If he doesn't immediately, you could see it kind of gained some value back up. It's so constantly moving that it's really, really difficult to nail down. But what you can do is, if you're looking at something, is take advantage of potential swings. But I think if that's the caveat, like the currency movement moving for you by 1% is the caveat of you being able to make any form of investment viable. Probably want to find another investment.
- [17:36]
A
Yeah, yeah, for sure, for sure. I mean, less that and more like. And maybe the correct answer and sort of what you're alluding to is that people shouldn't be thinking about investing based on investing in real estate or moving money to other economies purely based on a forex trade. It just wouldn't maybe be an advisable strategy. You might want to have some more
- [17:58]
B
qualitative core thesis of it. Do you know what I mean?
- [18:02]
A
Yeah, that's a good conclusion to arrive to.
- [18:06]
B
Yeah. I mean, and then if you look out further, because obviously there's other nice places in the world to be able to purchase, Europe would be great. The euro continues to fall off. Main driver behind that conflict in the Middle East. They've got rising inflation concerns because they are heavily reliant on international oil and LNG and stuff along those lines. So if you're looking at, oh, I need to make that purchase, and this is what I mean more about trying to time it than anything else. And you won't know after you purchase which way it goes or not. But you can look at it from the last six weeks, eight weeks and if you're an American looking to purchase in Europe, yeah, it's better time for you. It's like a 2% difference than it was at the start of the year and that can help you save some. The second that this conflict gets resolved, then who knows where the prices will go to because all the currencies will readjust and certain assumptions will shift. And until then you don't really know
- [19:08]
A
unfortunately how much of this is from your perspective, how much future volatility has been appropriately priced in. Or do you think that this is going to be. We're in for turbulence. For years at this point there's been
- [19:24]
B
some of the major institutions that have come out and if you're thinking about it just from what everybody buys on a day to day basis and if you were driving out of, well, you're not here right now, but driving out of Toronto this weekend, gas is already pumped up to like 170, 178 a liter. What people. I think it was Goldman Sachs, maybe somebody else was saying is so much damage has been done to the area for oil over in the Middle east that it's still going to take anywhere from a year to restabilize in pricing. On a global perspective, there's some other outlier thesis is that people will continue to shift away from oil and look towards clean, clean tech or clean energy. And that's a running thesis for like five years down the line. But from one act of conflict, everybody shifting their thesis or their bets basically to create more volatility. The foreseeable future really, you know, this is going to be long, long standing turbulence to the global economy. And then you've got other outliers from a global economy standpoint which obviously changes currency valuations from unemployment potential from AI, other forms of trade, conflicts from tariffs which we've seen play out over the last 12 months or so.
- [20:53]
A
Yeah.
- [20:53]
B
So if you're looking at volatility, you should continue to see it for the foreseeable future. Realistically in my opinion, and by no means am I a PhD in economics, but I was looking at some of the Canadian banks, the forecasts and please relate back to what I was saying before. Forecasts are only forecast. No one really knows their best guesses. I guess is a better way of putting it.
- [21:22]
A
Such a finance guy with the disclaimer, with the embedded disclaimers. I love it.
- [21:26]
B
Yeah, I've been doing it for too long. It's not advice, it's opinions. Right. It's projected to continue to strengthen and a lot of this has to do with infrastructure that we're looking to build out as well as the increase in pricing in oil. So the CAD over the next six, seven months could continue to see benefits from an increase in oil price long term. How that plays out depends on the continued demand for it. But I don't think oil's going anywhere anytime soon. So do I think that there's been a lot of variation. Has it been priced in. I think you've seen that at the start of January the euro was the strongest it had been in quite some time and now it's already fallen back, move pretty heavily and a 2% move in what we'd consider a major currency isn't anything to balk at. You know, that's a huge fluctuation from a global trade standpoint and how it can affect pricing. And those things are typically related for what is a large global event and how it plays out after the fact. Depends on how long ago this morning the war was supposed to be slowing down and you saw the stock market attribute it to be so. And then later on it came out that no one really knows who they've agreed to stop the conflict with. And then it's fluctuated accordingly. So volatility is massive and the VIX is at its highest level it's seen in a while, which basically tracks volatility and options.
- [22:59]
A
Yeah, yeah.
- [23:02]
B
It's a long winded way of saying, you know what, I don't know. But I would guess that volatility is here to stay for the next little while.
- [23:08]
A
Yeah. And then if anything, your thesis should be maybe seeking out, maybe not trying to trade the volatility on currency. If you're going to look to buy something, you should actually be focusing on whether it's real estate or any investment that you're making in a domestic economy. If you're moving money to I want to invest in Canada or I want to invest in somewhere in Europe or whatever to try and catch those things. Do it for the fundamentals that you believe in of that deal that you're doing. Whether again, if you're buying a property and Italy because you believe that Italy is going to be the next Portugal and their tax reforms for foreign investors are becoming compelling and the Italian brand is strong, that's a good reason to buy in Italy. And yeah, maybe you capture some upside because European currencies are performing poorly right now. And maybe you capture some upside because they recover on your 10 year horizon because you're owning real estate or owning an investment for an appropriate period of time, not trying to trade volatility over a two year horizon and doing it through a weird vehicle and getting smoked.
- [24:14]
B
Right? Yeah, and I think that's exactly right. You know, whether you're a business or an individual that's purchasing something, you should do it because the, the underlying product is going to be a good investment and that you'll get utility from, from the original thesis. Then you have to bear in mind that you know your, your end purchase price is going to fluctuate right now probably more than it would have five years ago, depending on the currencies. But you can also take advantage of that on the way out as well. Right. So we look back at the states, we're talking about how the loonie is strengthened recently, what six months ago it was probably double checked that it was over, it was about a buck 40. And so if you were selling in the American market, you know, back in December it was over A$40, which I do it that way, not the reverse. So let's see what it is on the 70 cents seems about right. You know, if you're selling out of the states at that point, that is taking your getting divesting from the real estate market there, you've done quite well. People looking to purchase down might push off that thesis. They know they want to be in California, they know they want to have a foreign place or a secondary home or an investment property in Florida as an example December, you'd be looking at your pricing and you could get 3% less as a Canadian purchasing down there. But if you're selling you'd get 3% more. And when you're looking at properties, you know those percentage points can add up, you can change. If you're getting a 2 and 2, like a 2 bed, 2 bath or a 3 bed and 2 bath depending on what the fuck. So it's an interesting side from currencies as well because you can always be on the off. There's people on the other side of it that are thrilled when the currency goes one way and people that are pulling. So yeah, your thesis is right. Do you like the place that you're looking to invest in? Do you think whatever tourism or your enjoyment will be there and ultimately can you afford it? And then you block in the currency after you made that and you can look at backwards trends from it in terms of regular pricing.
- [26:25]
A
Any markets that we've talked about that stood out to you and how the currencies are performing a couple of the ones when I look at Middle east stuff, some of the strongest currencies in the world against the USD and still seem to be doing that way even despite conflict, Qatar, Kuwait, UAE et cetera. Anything else been surprisingly resilient or surprising to the downside from your perspective?
- [26:56]
B
You got to bear in mind that some of those are pegged. Right. So yeah, the AED is pegged. So it's always going to look the same, you know, fluctuate against the cad, but it's not going to fluctuate against the dollar in principle because that's what it's for. Europe and the Japan's had a very, very tough time with their yen so far this year and I know we were talking about people how people bought purchase properties over in, in Japan but you know we've seen that fall off so makes purchasing there a little bit easier. Got something here about the peso.
- [27:38]
A
The. Yeah. When you think about the yen as well, like is that that carry trade is that like everybody's always, you know, all the do all the macro doomers are always like okay, yen carry trade is going to unwind and blah blah like can you want to explain what that is and whether or not that's a likely outcome?
- [27:54]
B
I can try my best but mainly it was because it was at 0% inflation. So you were able to take or sorry, 0% interest. So you're able to take advantage of the differences between the interest rates.
- [28:07]
A
Borrow yen, pay no interest, invest in a GIC in the US or Canada and collect 3% and capture the spread.
- [28:17]
B
Yeah, yeah. So there was some potential arbitrage as well as just good returns on those things is my understanding. I'm not an absolute expert in it because you know I don't do or help people do currency trading for underlying yields.
- [28:31]
A
Yeah.
- [28:32]
B
But as you see they've started to raise their central bank interest rates. It starts to dilute that potential trade but it's so ingrained within the financial community I don't know if it's going to go. And the yen also, you wouldn't think of it so much because they're so reliant on oil from the Middle East. The yen is also a safe haven currency as well. So you typically see not as strong as the US dollar but you typically see that increased it if it didn't have form of status. I mean it's looking like it's lost 2%. Yeah, it's 2% stronger versus it dollars 2% stronger. Since this is all started. So yeah, I don't think that's going to unwind anytime soon. Depending on what they do with interest rates. But it always falls down to interest rates, which is why you see so much build up for these central bank meetings.
- [29:22]
A
Yeah, yeah. It is funny. Anything that we didn't cover in the, in the notes that you wanted to chat on or
- [29:34]
B
run through it. I mean, I think right now there are a couple black swan events or things they call them outsider affections outside of normal economic day to day life. AI, how that's going to affect everything. Energy in the conflict in the Middle east and then we're still dealing with inflation which really got out of control factoring the COVID and everything that happened with COVID So those will be the main talking points and things to look at that could create huge volatility within the market.
- [30:12]
A
And it's when you, when you think about AI, like, because I, I mean I work for an AI company. Right. Like we're a real estate brokerage, but functionally we're an AI company. And so I've been pretty embedded in the space. Like I was just at the Nvidia GTC event in, in San Jose last week. You know, talk to a lot of people, see what, see what's happening, see what it's doing. Seeing the layoffs that are taking place. Cover economics a lot in the Canadian and the U.S. in regards to how AI is replacing labor in many cases. But when I think about AI, it feels like this probably warrants its own entire episode. But it feels like both a bear. It feels like a bear case for labor and a bull case for capital, really, to be honest with you. Right. Like, and it'll probably end up exacerbating a lot of disparity that already exists in the world. So you've got, especially in the us, this huge concentration of wealth to the top and this huge erasure of wealth in the middle class pushing people down into the lower middle class or into poverty. I mean not poverty, but into the bottom of your economic cohorts. That doesn't read well when you think about a place that you might want to invest money, but yet you do. See when you think about safe haven places, Japan, Japan would be a decent example. Or Scandinavia, the happiest countries in the world. And we're going to do a whole episode on the world happiness. Sorry, we just did a whole episode on the world happiness index and why those countries are there. So make sure you check that out. But though, like, they're places that have A relatively strong middle class. And in the U.S. you had like this. The thing that made the U.S. the U.S. was that it wasn't this massively disparate place that feels like it's being erased and could, could that erasure could get supercharged by this, this trend. Does it like, does that present like a big headwind from your lens?
- [32:11]
B
I've got a personal thesis on this whole thing is that.
- [32:14]
A
Can't wait to hear it.
- [32:15]
B
First things that it seems to be coming for is entry level jobs. And those are the sounding blocks of people starting their careers to become high earners.
- [32:24]
A
Yeah.
- [32:25]
B
And companies used to go out and you'd hire more than you needed, people from university or people without experience and you'd sift through and find people that you thought could continue to grow within the organization and train them up. If we are businesses, economies as a whole and you're seeing youth unemployment rates thump up everywhere if you stop hiring and getting people the kind of, you know that old ladder that you'd climb up from a kid to getting into your 30s and then continued onwards, continuing to ultimately increase your purchase power through years of hard work and people taking risks on you as an employer, taking risk on employees. If you're lowering that number, we're just going to. Where's the baseline next generation going to come from? There's not going to be as many people that have consumer abilities nor the skills to be able to get into these jobs that will allow them to make international purchases and to buy whatever the third car or whatnot which ultimately pumps up a modern economy. So while you might be able to lower costs, you're ultimately in my small little brain, you're ultimately in the long run going to dilute the people that you can sell your services or products to. And I don't. And I think, you know, again, you're seeing in the K shaped economy which we've spoken about before, which is 50% of consumption is happening by 10% of the ultra of the high net worths or the highest earners. You're seeing youth unemployment continue to go and it's just going to continue to create instability. But from a long term standpoint, who, who's going to be taking, you know, the middle management roles to be trying to grow up to become upper management and whatnot. And I think that will have more computers, man.
- [34:19]
A
Robots.
- [34:20]
B
Yeah, but robots don't buy stuff. They cost money to produce and they cost money to maintain and whatnot. But you know, it kind of goes to. I'm going to pull the wrong statistics for it, but you can put up. They're putting all this money into data centers. Like it's great we're building a factory here, but they only employ like 100 people once it's done being built. So all this capital are going to a few. But you need more people to be consuming to be able to grow as an economy.
- [34:49]
A
Unless you go like a UBI or something. Does that become a case for a universal basic income? It is funny though because if you look back at 200 years ago, 25% of the U.S. gDP came from firewood. Right. 100 years ago, 80% of Americans were employed in agriculture. So the world evolves and we create new jobs with it. Is AI meaningfully different from that or from those technological revolutions? Some people would argue probably, but I don't know. Having tractors or having natural gas that can replace firewood or having tractors that
- [35:35]
B
can replace caused a huge amount of turmoil. Everybody was working in factories. You're right. We always found a way to find something new and put resources into something that can then be more beneficial. And that kind of goes to my fear though. Whereas if you're getting rid of the stepping stones for people to build up their, their soft skills and their hard skills, who are you going to have to. That's well trained to take stuff they've learned at one job and push it to another one. If you're not building up youth employment very well. But yeah, I mean we always find something new and hope as a society forever. So hopefully we'll be able to do it again. But you know, that's my fun thesis on AI. It's like, yeah, I like it, it's going to do wonders. But I wouldn't want to be. Doesn't matter school right now.
- [36:27]
A
Well, yeah. And it doesn't matter if, if like your economy, it has nothing left because there's no. Because it's replaced people's ability to have money. And you know, like people, a lot of people talk about AI as if like we're heading for like a post work or like post money society. You know, like people are like, stop saving money. It's not going to matter in 10 years. It's like what, I'm going to keep saving. Yeah, same, same.
- [36:51]
B
I'm not going to stop. I still want to retire at some point.
- [36:53]
A
Yeah, that's not financial advice for sure. Okay, cool. I enjoyed this. I feel like you got to do most of the talking, which is great because I learned a lot about and your perspective and depth of knowledge on the Currency side of things is great. And I think again, this is what makes investing in real estate in other countries super dynamic is the fact that you do have to be not just like. I think I agree with your sort of conclusion that you drew, which is like it shouldn't be considered an upside that you're trying to like shouldn't become part of your investments. The thesis that you're trying to capture forex in a real estate investment. But I think that it does, it just presents a really interesting dynamic that people that's fortunately or unfortunately, unfortunately necessary for people to be aware of when they're making these types of trades.
- [37:46]
B
Yeah, there's the purchase side of it too, but there's the carry costs for it also fluctuate with it as well.
- [37:52]
A
Yeah, that's a huge point. A lot of Canadians learning that the hard way with their CAD USD and owning their properties, holding their properties in the US right.
- [38:02]
B
Your property taxes now cost you $1.40 to convert over into it rather than whatever it was 10 years ago. 129, like 125, 122. That's a substantial cost. So those are the things that you kind of want to bear in mind, what you call like a stress test basically. But if you're thinking about it from a thesis of investment standpoint and you're going, ah, you know, I think whatever, the peso is low right now and in 20 years it's going to strengthen up and I'm going to make a return on it. You know, that's a great sub. Subplot note to have on it, but I don't think it should be your final idea.
- [38:39]
A
Yeah, again like if you, if you have that strong of a read on the market to go lever long real estate based on a currency hunch, you probably don't need to be listening to this podcast for advice for financial, for financial education. Not advice.
- [38:53]
B
Cheaper ways to trade that fourth or fifth place somewhere else.
- [38:58]
A
Yeah, yeah. The carrying cost piece is interesting too. Like, and I'll. We'll wrap up after this, but that, you know, you mentioned, oh, your property taxes go up X amount as a result of the cost. You know, the, the forex Exchange on CAD USD or $CAD or whatever the. I think the other side of it is, and this is really where we are advising people like that NAR report said, you know, majority of people are looking for something as like a vacation rental or investment property and maybe like something where you use it personally, but you also get some rental income if that's what you're doing. Make sure your fundamentals are strong because you also can benefit. It can also be a net benefit. And so your fundamentals actually end up being a hedge against that currency risk. I think if your costs go up, but you're also earning rental income by renting your property out as an Airbnb or VRBO or whatever, and you're getting 140, whereas before you invested it at 125. That's where you benefit. And the same would be true. So it's almost like, I don't know if you would call it a caller trade. On either side, you get both sides.
- [40:14]
B
If you've got income in local, then your costs in local depreciate. From an international transaction standpoint, if you're getting revenue in dollars, everything else is dollars. You hold those dollars and you actually don't have as much foreign exchange exposure.
- [40:31]
A
So that's the key, man. Just comes back to it. Make sure your fundamentals are good when you're buying property, wherever it is, doesn't matter where. I know people forgot about this for the last 10 years. They were just like, YOLO interest rates, Covid helicopter money, Stimmy checks, and everybody just buying the dumbest stuff they possibly could. But I think feel like we're now at the point where people actually really need to think about, like, do I believe in the fundamentals of this investment? Do I believe that the market that I'm investing in is strong? Do I believe in the, you know, that the. Do I believe that the vacation rental market that I'm going to be buying in, do the numbers work? Am I buying in a cash flow position? But also, is it sustainable?
- [41:09]
B
Yeah, yeah. You mean NFTs weren't a good.
- [41:12]
A
No. Yeah. So weird, eh? Like, buying like $400,000 JPEGs was, like, not a good idea.
- [41:20]
B
Yeah. The new. The new. And I'm sorry, I know we're going a little bit long. I was reading articles that people had lost, like $24 million on the metaverse real estate, dude.
- [41:29]
A
It's so funny because. So when the Metaverse stuff happened, I was like, all right, you have to put some play money into some dumb stuff just in case, right? Yeah. So I put like a couple of grand into buying this thing in the Metaverse, but I insisted that it had to have yield. So it was like a. It was a piece of wearable tech that somebody could wear in the Metaverse, and I could rent it out to people and they could go play poker. Like, it allowed them to play this, like, game, a poker game. Only people who had this, like, piece of tech could do it. And it yielded out, man. Like, it paid. It still. It still pays. Like, people still go and play poker in the Metaverse, apparently, you know? Yeah, so. So, like. Yeah, but. But that, like, it's just like, I'm glad you brought up, like, JPEGs in the metaverse, because I'm such a historically real estate guy, and I think about purely fundamentals, so it's always like, how do I do this as a not dumb investment? It's like, okay, well, can it generate yield for me? Am I speculating? Or can it generate yield? And can I make this actual fundamental. Make this investment on strong fundamentals? And that's what compelled me to actually make my first metaverse deal. I lost all my principal for sure on that, but it yielded me out.
- [42:45]
B
Yeah, but you came up that. You better fit positive.
- [42:47]
A
Yeah, like, if I were gonna sell. If I was gonna sell the thing, like, I think I paid, like, I don't know, two or three grand for it, and I probably could sell it for, like, two or three dollars maybe. Maybe if I'm lucky, nothing.
- [42:57]
B
Totally shut down. Yeah, they shut it down or. ANNOUNCER Shutting it down.
- [43:00]
A
No, that was the.
- [43:01]
B
At least you got your money.
- [43:02]
A
Yeah, this was a different one. Like, it's one of the. Like. Yeah, but. But still, like, it. During that period of time, like that, you know, two years, that maybe people were still into that stuff. People were, you know, they were using it to play poker and paying me commission or whatever. Paying me my rent for the. So whatever. Who cares? Yeah, it's funny, though. Anyway, we'll leave it there. Thanks a lot for your time and insight, and I guess we'll see you again. I think we got two apps going out this week. I got an interview coming out with a guy who built a really cool AI tech platform, real estate tech platform in California. So, yeah, man, I'll see you again.
- [43:42]
B
Yeah, we'll talk soon. Appreciate it.