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Real Estate Without Borders
Will Iran's bombing of Dubai impact their property markets? What about Mexico's recent Cartel activity?
00:45:56
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- [00:01]
A
Welcome back to Real Estate Without Borders. Been a while since I've done a two host show. I've been doing a lot of interviews, interviewing people all over the world, trying to find out what's going on in different real estate markets. But I'm glad to have a new and improved. Maybe not improved, I don't know. You're good. But you know, a new co host, we'll see whether or not it's an improvement. Leave it up to the audience to decide on that one. Um, but same last name as my last co host which is. We're not. No relation.
- [00:32]
B
No relation. No relation.
- [00:33]
A
Yeah. And I, I don't know, I mean we've been kind of working on some content together doing like some webinars and stuff for global real estate. You're obviously really active in the money moving space and I was just like, yo, this would be the perfect opportunity for you because this is what you are doing a lot. So tell me, who are you? What do you do? Let's do the new co host reveal. Yeah. What do you do?
- [00:56]
B
No, I appreciate it. I look forward to running this through with you. So Cameron, yeah, no relation to your previous co host but the same last name of Hutchinson as he pointed out. Certainly not nearly as strong nor as tall as him. So we'll see if we can do our best here. I've been working in as you kind of allotted to the helping businesses and individuals move money around the world. So we'll call it the Forex global payment side for about nine years now. It's kind of just double checking before I hopped on this, it looks like since 2017, which is as you pointed out how we got moving along because for the last two years there's been a focus in my life on helping individuals and investment firms and stuff along those lines make international real estate purchases, specifically managing the currency exchange side of it. And so as you and I have been talking for the last little bit, we focus more in on the economics and the pricing and the risks from a currency side which we'll dive into over the next little bit making sure that clients understand that aspect of it. And so we're building out a network of people within the Canadian market and globally looking at new markets. I think one of the areas that we're going to talk on, which would be pretty interesting given the last couple weeks, is Mexico and the UAE has been areas of focus for us, which has made my life busy.
- [02:18]
A
But yeah, yeah, you know, yeah, so let's, let's lean into that like I Think today what our goal. You know, we originally, like when we were going to do your little co host reveal kind of episode, we wanted to zoom in on North America and talk about what's happening on happening here. And then there's so many things happened. Like literally two weeks ago we did the webinar together and it was like the two markets where you had local experts presenting from were Mexico and Dubai and. And I mean the Mexico one, it was like the day after all of that stuff happened with the cartels, but the Dubai then. So both markets materially changed a lot within a couple of weeks around this webinar that we did. And I want to lean into that discussion today. I guess we kind of have to chase the clickbait a little bit on the headlines Dave and I were talking about. I mean, when we started the show, it was all trade war. Right. How's this going to impact the U.S. canada, whatever. That seems to have taken a big backseat. And now we've got a lot of geopolitics and then a lot of local or national stuff going on in Mexico between the military and the cartels. As somebody who's working moving money in and out of those countries all the time, what seems to be the sentiment you mentioned you were talking to some people. What's going on?
- [03:32]
B
Yeah, I can point to death. Literally the day after the stuff happened in Mexico, we were hosting a webinar and one of the guys that was joining us lives in the east coast for it. And then I was feeling great because I was also heading out to Mexico on the Thursday. You know, ultimately that one looks to be a blip.
- [03:53]
A
Yeah. I mean, it like people who are involved in the Mexico economy and like live there or expats or whatever, they're like, yeah, like this happens. Like, like, didn't this happen three years ago when there was like military storming the beach, like. Or like a militia storming the beach and stuff.
- [04:07]
B
I think the last big one was what El Chapo sun. And they had the whole uprising from it, you know, talking with people down there. And then again, I was down there myself. That one appears to be more of a blip for. And kind of what we call like a general risk.
- [04:20]
A
Yeah.
- [04:20]
B
Of potentially looking down there. You know, the beaches were the same the following weekend. Talking with people that were living there, they're like, it'll pop, it'll pass over. Everything's fine. You know, I was focusing more on the east coast and that's where we do more of our business because that's for east coast North America, it's an easier place to travel to. You know, you're avoiding those time zone changes and they weren't afraid, affected nearly as much from a currency standpoint. You know, it barely moved. Kind of regular fluctuations, kind of looking into it a little bit more. I mean the peso's been on the run the last little bit, especially against the dollar. Those are the types of things that can change your pricing standpoint because if your dollar is going not as far, your investment doesn't look as, as easy to purchase. But no, for the most part they're kind of back to normal and people that live there are like, yeah, you expect it to happen. I was doing a little bit of research into it and it's going to be the same thing almost with anything. When you're talking about economics of it is where does it go? Yeah, people aren't really sure about that, but locals certainly are like, nope, still great. And I'll tell you, you know, the bars were busy last week, the beaches were busy.
- [05:31]
A
So I think the word that comes to mind for me is like priced in. Right. It's like, I feel like, I feel like this cartel, like that, the fact that like Mexico basically operates on like a two government system where they have like the, they have like their on paper economy and then they have their other economy and, and that economy has more, it appears, more firepower, you know, a stronger military. They have their own cell phone networks. It's their own economy. And that is certainly like a massive shadow driver of GDP and an entire market down there. And it's always been that way. I mean it's basically been that way as long as we've been alive. And then they have the sort of more modern political structure with a president and a real military and police force and whatever. And I feel like that's just always been priced in and you see these kind of things and it's like, yeah, okay, it puts maybe a blemish on the global marketability of it for like six months or like not even. And then people, yeah, whatever.
- [06:35]
B
I think that's probably about right. You know, again, we don't, I don't live down there, but I can tell you from a parent standpoint it's like, oh my gosh, it's not safe. And then you go and you come back and it's totally fine. Right?
- [06:47]
A
Yeah, yeah.
- [06:47]
B
But there's just that kind of notion, whether it's right or wrong, of, oh, there's some instability down there. So I think I don't think you're wrong. It's definitely priced in. If it were to have kept going further and caused more instability than people would start looking at it. You know, they cleared up the streets and everyone was back to normal. The big thing from the Mexico economy standpoint is you're still seeing a huge growth of kind of from probably you're talking about it last time with Dave about the trade war of near shoring. And so you're still seeing a lot of foreign investment going but more on the industrial and business side. And a lot of the times, at least from my standpoint, when we're looking at it or helping people, it's to buy places to get away from the cold. So that's when you're getting into the Caribbean side and it still seems relatively safe. Everyone will have their opinions on it and maybe people will start looking more towards Florida again. But I think if you're looking at purchasing in Mexico anyways, you know in the back of your mind that there's those certain things, you know, 100% man.
- [07:46]
A
Yeah. Now I think and you, you kind of can contrast that a bit to what's happening in Dubai. Right. Like I, I so I think one of the themes that's persistent with both of these markets is that both have, both are sort of already either plateauing or on a downtrend. And so it's really easy for people to point to, you know, a one time event and say oh look at property prices are down in the last six months or like they're down 10% in the last six months. And it's like yeah, well this thing happened like a week ago and two weeks ago. And so why, you know how, what does that have to do with this six month like what happened to prices in the last two weeks? Nothing.
- [08:30]
B
Right.
- [08:31]
A
It's too quick. Yeah. So I think that it's really easy to like try and lump in these geopolitical or like whatever instability things with a price trend. But I think the price trend was really driven by, I mean especially with real estate markets because it's a debt, debt based product. It's driven by liquidity. Right. It's all credit and interest rates have been up, elevated since coming out of the pandemic. And you know, we've seen a negative wealth effect, liquidity contraction. Americans and the Anglosphere aren't spending money abroad, they're barely spending money in their own countries. That probably has a lot more to do with it than the cartel thing or segueing over to Dubai a bit, the bombing happening in the uae.
- [09:19]
B
Yeah. And I mean we can avoid kind of diving in too much about the war, but that creates more long term, right?
- [09:27]
A
Yeah.
- [09:27]
B
Nobody knows.
- [09:28]
A
Yeah.
- [09:29]
B
And if you're watching all the reports and stuff along those lines, I mean, we're seeing it from the North American viewpoint. They're shifting around of how long it's going to take and, you know, the duration of it. Now we've. The firm that I work for, we've got an office over there. So I've been talking to people that live there and they're like, you know, for the most part everything's fine. Mind you, you'll see your drones and stuff overhead as the conflict ultimately fights further over further in the Middle east. Over in Iran, they seem pretty chill with it. I don't know if it was me and I was walking into work, I don't know how comfortable I would be. I'm well aware that you get pretty spoiled from a lifestyle and security standpoint being in, in North America and up in Toronto, but to me that seems a bit skeptical. Like I was talking with, yeah. A colleague and he was over in the UK and flying back and you know, he had to fly to Oman and then fly somewhere else just to be able to get back to his house. How long that takes, they'll have probably a little bit more of an issue with it. It is a more serious conflict. Like there's not even a question about that.
- [10:35]
A
Yeah.
- [10:36]
B
About how this changes the money flow. And one of the things that they have sold, and rightfully so, is stability and safety. And if you're seeing drones and missiles overhead, does the average person feel that way? You pointed it out. Well, it's yet to be seen. You know, I was talking with a gentleman that works over there as well over the last couple days because that's an area where we do work. And he's like, you know, it's probably going to be quiet for a couple months. So he's like, I might head out somewhere else while this stuff cools off. Is the some of the benefits from a Dubai market and you know, you see a lot more international inflow. You're getting people from China and Singapore and huge portion of Brits are moving down there. How's that going to long term fend out? Who knows? I think that's up for debate. I don't think I'd be dropping, moving myself there right now. But I'm also probably a bit of a coward and I feel like dealing with it.
- [11:33]
A
Yeah, it's funny because I think everything you said is true. But I always try and wonder what's the second or third order effect of this? And part of it makes me think about this changes geopolitics a lot in the regard of which global hegemon are we trending towards as a result of the outcome of this? And it seemed like now that this is happening and the US is sort of forced to be involved or choosing to be involved as almost like defense or some sort of military partnerships, which is why I think Iran rationalized that they were penalizing the UAE and Saudi and whatever is that there's a lot tighter knit between the US and some of these other really powerful nations like the UAE and Saudi. There's an upgrade to their, like, to their intimacy, I guess you could say.
- [12:44]
B
Right.
- [12:45]
A
On a geopolitics basis when a year ago when we were talking trade war, it looked like the balance had really shifted away from the US and it was almost like a threat to their global hegemony because of the mercantilism and other countries pushing back. And they sort of had assumed this kind of bully role in a trade capacity, probably getting criticized a bit in a bully role in a military capacity. There's now outside of my scope to even weigh in on. That's more of just an observation than a statement. The places that were jockeying for that hegemony, the BRICS idea. Right. That seems to have. That's not a thing at the moment. Nobody's thinking about that because those were a lot of groups that seem to be more geopolitically aligned with uncomfortable buying oil from Iran, being supportive financially of the regime in that moment. And politically, I think that this potentially, if I'm thinking long term, second order effects. Sure. Everything you're saying is the easy way to evaluate is like, yeah, this is going to be silly and impactful on the market for a short period of time, a year or two as this conflict exists. But what about in two, three, four years when there's a tighter bond between Saudi Arabia, uae, the US, et cetera, and there's probably a new regime in Iran and the Middle East. Does that make those markets actually more compelling and more economically connected to the
- [14:26]
B
us Depending how it goes. I mean, they've been doing Dubai in particular, and you'll see their ads everywhere for the last number of years, invested Dubai. They've been doing a hell of a good job of pushing North American and European flows into there and building this place. And this has been going on as far as I can remember when I've been working and now that's been done, a lot of people that have lived there are looking to move there and it's a great hub for getting around. And it's kind of almost, you know, there was like the, the crypto scene in Miami for a while and then pulling finance and they're doing a good portion of that type of stuff. Digital Nomad over there, I would gather. There's still going to be an inflow, but all into that place, you know,
- [15:20]
A
in the fullness of time. Absolutely. I think this is just a short term headwind that is, is like anyone's guess how that trade goes.
- [15:28]
B
Yeah. And you know, you and I were talking about the other day about, okay, you're looking at Mexico, if you're looking at other regions, you have to take currency risk into consideration. You're bringing it up with the ties to the United States. Well, ultimately they got the AED over in UAE in, in Dubai, which is the dirham for themselves and that's pegged to the dollar. So you're buying a property in Dubai, you have the same currency risk. As long as they keep it pegged to the dollar as purchasing something down in the States, then they keep it at like 3.6 and change and that stays the whole time. They do that for oil ultimately. Not so much from any other reason. Their main exports, oil, Oil trades and dollars. But that allows them to have some additional security and lack of, or lowers their risk of if this keeps going off, does it just completely.
- [16:23]
A
Yeah.
- [16:25]
B
What do you got there?
- [16:26]
A
Yeah, just an article that I pulled up sort of about like I'd come across some, some commentary that, you know, there was this guy as well. I think he was a former JP Morgan guy. He says what is happening in the UAE could be catastrophic unless they pressure Trump to defeat Iran quickly and decisively or to fold right away. With 88% of the country being expats, tourism, finance, air and shipping exposure, it could send shock waves pretty quickly and globally is their expectation. Right. So I don't know, like that's the, I guess that's the bear case of like the short term. Right. Which, which is that it is a country that, you know, like everything you're saying. Totally agree. I guess the question is like, is there a hidden piece that makes it a bit like our. Are people going to be leaving? Is less money going to be going there in the short term? Probably.
- [17:17]
B
I mean like if I was just living out there, kind of quote unquote digital nomad life, I'd probably be getting a way out for the short term. Yeah. And you know, you're looking at it and these people will know more than me 100%. But you said just the average buyer, which would, to the average person looking to go there. If you realize the area they're in and the growing. There's no way can this be short term, medium term, science, kind of a positive for their marketing. The next question comes down to a real estate standpoint is are people going to start jumping in because they think there's blood in the water and can you start getting discounts on it?
- [18:07]
A
And this is one of the big things that I think about is. So there's that there's two other knock on effect effects that I really have been evaluating. Number one is that. And then number two is the oil impact. So let's start with what you just mentioned, which is like any dip, any dip since COVID when people like felt like the government is going to backstop any like hardship, economic hardship, you know, like with like stimmy checks and dropping the rate. I mean the bond yields have been up, so like that's not necessary. And typically global conflict is pretty net upside risk on, on bond yields, right. On interest rates in the short term. So you know, we can, we can evaluate that. But like you've, I feel like every dip, like even when SaaS multiples got crushed like a couple of weeks ago and people just, people just jump in and they're like, you know, yeah, like this is the last one. Am I ever going to see a 2020 flash crash? Like let's get in, right? And all these dips just get bought so quickly. It makes you wonder is real est our global property markets comparably because there's so much global wealth now and Dubai is such. If you've been thinking about buying in Dubai for the last five years and now all of a sudden everything that we're saying so far is correct and prices do come down. I think in that Bloomberg article or Fortune article on Yahoo Finance there they said 10, 15% by the end of the year. It's like, okay, cool. Well, if I've been sitting on the sidelines and been feeling like, oh frick, I either got to buy now because I'm getting a FOMO and feeling like I'm risking getting priced out and then now all of a sudd goes on sale and I'm, and I'm still bullish on the long term case and the recovery, you could see that I, I totally could see that happening. And I think you could see that in In Mexico as well as you see kind of these like the, the brand, short term brand blemishes. If you believe in the long term, it's like a company. If you believe in the long term strategy of the market, which like how couldn't you with Dubai's tax haven, you know, like the, the social policy, etc. Like I feel like it's still an investable market. And does this present a one year window for people that want to buy there?
- [20:14]
B
Yeah, I mean, I mean that's the running question. And I think what you see down there, a fair amount and this is what one of the gentlemen was talking about on the webinar we did the other day. There's interest. I'm sure he come on here and talk our ears off of it for the next.
- [20:28]
A
Yeah, we should definitely have them on.
- [20:31]
B
But the main things that are doing quite well there too are these large villas and then you can transact that into what's called, I think it's still called the Golden Visa. Maybe I'm misinterpreting the trump card or whatever it would be. But you spend enough money, you get access to residency there, you want to live there and you're buying a couple million dollar villa. Is it that you want to live there 100% of the time or not? It's probably just one of your multiple places. And are those people gonna go okay, now I can get a 12 bedroom house instead of a 10 and kind of continue onwards because they've got that freedom of mobility as well that only the high net worth and ultra high net worths are allotted to or fortunate enough to have. Still got to get myself out there. I'll probably delay my vacation for a little bit, but I'm also not able to buy my sixth house at this point in time in my life. I think I view it differently than where a lot of the people that are moving forward money in. As you pointed out, it's kind of global ultra high net worths and high net worths that are getting over there.
- [21:39]
A
Yeah, yeah. And I think a lot of them, like I don't know, I mean if you're, if you're buying, if you're getting a discount and you were already ready and you believe, and you believe in the thesis that you know, the, the US and the UAE and this and Saudi and Israel can stabilize the Middle east and that this ends like it's probably a pretty solid bull case because like the growth that's happening in the Middle east, especially in Saudi and the uae, like Saudi with That the, the line, the Line project, I think it's called the Line.
- [22:11]
B
Look it up. I think they just stopped it.
- [22:13]
A
They've scaled it back a lot and they have put a pause on a couple of. But still like, I mean these are just like, you know, infrastructure projects that like you would only ever see coming out of places like China. Like the US is just too riddled and bureaucracy to get like insanely ambitious projects like that even contemplated. Oh yeah, I don't know. Just to me, when I see stuff like that, I'm like, it's not over there at all. It's not over. So I think there's an incredibly high financial incentive to put an end to this swiftly and I'm interested to see how it plays out and what opportunities it creates in the meantime.
- [22:47]
B
Even Canada, because of their exploding wealth and the interest from the international community, we're opening up our trade with them, which is in my opinion great. And now the Canadian banks are starting to set up formalized operations there because they still view it now I looked into that in the last eight days to see what the businesses are still doing. Probably not, you know, going back to your thesis stand, going back to your thesis standpoint. It's not like they did this without this being a risk assessment in some form or not, but some form.
- [23:25]
A
Yeah.
- [23:26]
B
And I doubt they're going to pull back or anybody's going to pull back a four year plan or you're looking at, they might put it on pause. And that's what that gentleman was talking with or is saying is, you know, he expects a lot of things to be paused. You can call it kind of the quote unquote, wait and see side for it. But there's still people running in and it's still a great place to live for everyone that has spoken to you. Never know what two weeks from now will look like.
- [23:54]
A
Yeah.
- [23:54]
B
In this world.
- [23:55]
A
It's true, man. It's so true. There's that like Chinese proverb may live in interesting times. I don't know if you've heard of it. It's like, have you heard that they say it to people? Like it's supposed to sound like a compliment, but it's like an insult, you know, And I feel like that's just like the world right now.
- [24:11]
B
Yeah. I mean what for the last like 12 years, 13 years since I got into this business that I've been in, it's just been non stop chaos.
- [24:21]
A
Yeah.
- [24:22]
B
It makes it interesting, that's for sure. And I'm sure it does from the real estate investment standpoint. But there's no place without its difficulties from an investment thesis standpoint. You know, living standpoint and stuff alone aside. Yeah, crises aside, everywhere it's got its problems. Whether you're looking at an investment property here, states where you'll be able to find stuff. I'd be curious to get your thoughts on it. Because, you know, everything that you're reading now with these poly markets and all these things is people are taking a higher risk from an investment standpoint. So if you're thinking about the blood in the water thesis, do you think people will, given that risk is really utilized these days from investing? If you're thinking about investing in real estate, you see that same type of risk appetite that you do and everything else. And if that would relate over to places where you might be able to buy it cheaper.
- [25:16]
A
Yeah, it's a good question. I think about this a lot, honestly, more than I should. And I would say that the like credit, credit cost is a huge part of the risk premium or the risk calculation. And I think nothing makes people more willing to take risk than cheap debt. And so I don't know if, I don't know if it'll have a comparable impact of like the crazy frenzies that we saw during the pandemic, you know. But I also think that, like, when you're talking about polymarket, I feel like the global economy is so disparate and the middle class is actually getting evaporated a lot faster than people think. Like, you see people in the middle class who can't afford to live because of inflation. And like there's lifestyle inflation. Like, you know, they don't all need to be driving around brand new Denali HDs and freaking living in McMansions and whatever. Right? But it's still a thing. And I feel like there's this, currently there's this psychology around risk that it's a necessary thing to create economic mobility. People don't trust and our ability to defer gratification has been crushed by, I think, social media and attention spans and comparing ourselves to others and whatever that it's so hard to like, you see Dave Ramsey come up on your feet and you're like, fuck this guy. Like, I don't believe this shit at all. You know what I mean? It's like, save money and like, you know, put it into index funds and wait 10 years is like boring, you know?
- [26:55]
B
Also, what does he do? He yells at you if you lease the car.
- [26:59]
A
Yeah. It's like if you're not. If you're not driving like a three year old clunker, you know that you're burning like you know that you're, that you're spending a bunch of time like OPEX on a monthly basis. Like I don't know, I used to, I used to drive like I was passionate about driving like old crap cars honestly. And I just realized that like at a certain point I achieved enough wealth that it was like actually just a stress creator drawing my time and stupid. And I was fine paying a bit of a premium and felt that I deserved it. But I do think that like embedded somewhere in consumer psychology right now is that risk is the only way that people can get from the lower middle class to the upper middle class and push above that threshold. I don't think people truly believe in the tried, tested and true Warren Buffett dollar cost averaging industry.
- [27:50]
B
The American dream.
- [27:51]
A
Yeah, honestly, I think that people don't believe in that. And it shows in the equity markets and it shows in the way that people are trading stocks and it shows in the way that retail capital behaves in the markets right now that people feel like they have to take risk if they want a shot and they're willing to put it all on the line if they have very little to lose, they're willing to put it all on the line and risk it to try and get to the top.
- [28:12]
B
I'll go back to one thing because I finally found the number. We're talking about the flow of investment and again we can sit and spitball over what will happen with it moving forward. But into just to buy. You want to take a rough stab at 20, 25. How much money flew in just in real estate?
- [28:29]
A
Trillions.
- [28:31]
B
250 billion. A 20% up kick from the year before. Crazy, crazy, crazy. That can't get tapped often over one thing at least, you know.
- [28:43]
A
No, I think it's not going to. I think that there, I think that the, I think that the problem probably for Dubai's market and maybe Mexico's facing this a little bit as well, is every, actually, frankly every real estate market in the world is facing this right now is we saw a huge increase in, in liquidity during the pandemic and real estate's a long run cycle. And so a bunch of people were pumping money into markets that looked great. And you start building a project especially in, in the UAE where you've got Abu Dhabi and Dubai where mostly high rise cities, high rise projects or larger scale projects. These aren't like, it's not like building A house, it takes you a year. You know, it's, it's building a high rise. It takes you six years, five, three, four, five, whatever. Even, even if you're fast, two, three years. And so the market risk that takes place during that period of time is palpable. And similar things happening in, in Mexico and a lot of these markets that are tourism focused, that are attracting a lot of US capital, expat capital where people want to go buy condos, to have a pieta terre and maybe get some Airbnb cash or whatever. Right. And though that the, the timing is actually probably the biggest issue for both what happened with the credit cycle and these things are credit cycle associated? Right. Like I don't know if you ever read the book the fourth Turning but incredible book. I hope you get a chance to read it. And a new one just came out. But like you often see all of these major events taking place both economically and politically sort of simultaneously. And so you have this pandemic coming out of it, sort of new normal credit hangover, a bunch of projects that are contemplated, maybe pre sold to foreign investors. Now completing Dubai has a very similar thing happening that we're seeing in a lot of Florida and Texas where. And Mexico is very similar. So what happened in 2020? 2020 world shut down. There's a few places in the world that weren't stupid about policy. Everyone in the world was going to Miami for Art Basel and hanging out. Miami was like the hottest place on earth, whatever. A couple places that slowed down on the lockdowns earlier. Dubai was super chill. Dubai has been good from tax perspective. Attractive to Bitcoin Bros. Whatever. Mexico, similar thing. Then credit contracts. The world opens back up. What's happening now? People are moving from Texas and Florida to New York and back to California. Same thing's happening in a global basis. Right. Capital's repatriating. The places are becoming less of a oh wow, I could live here forever and work remotely and more. I still like the place, but I'm only going to spend three or four months of the year, not seven or eight.
- [31:29]
B
Yeah, you look at Tulum, that was where everybody went during pandemic. Anyone who wasn't in Miami and it was crazy the amount of developments there and even you know, again kind of reverting back. It's all good timing to that conversation that we had Monday or last week, he was like, yeah, there's almost a surplus of one bedrooms. But what you're getting good returns on within that market for the foreseeable futures. You Know the three? Four.
- [31:56]
A
Yeah.
- [31:56]
B
Five where you can, you know, so a big house so you can have your family down there as a personal user and then alternatively to rent it out. So yeah.
- [32:07]
A
Two more things I want to talk about before we wrap up here. Number one, like you're moving money all the time. Has this had an impact on. And the reason I like talking about currency so much is like when I think about buying real estate in just the US or Canada, you really only have three variables, right? You have your value of the property, you have your interest rate, local interest rate and you have the income of the property or the borrower. So if you're a first time buyer it's your own income. If you're an investor it's the tenant's income or the income of whoever's paying your. Those are your only three variables. When you start buying in other countries you add a fourth variable which is forex, which is how much am I paying relative to my domestic currency? Have we seen and I know we're going to do a whole episode on this. It's like one of the. We were going to do it until this happened. This was going to be our first episode, right? Or one of the ones that we recorded which is which currencies have performed the best and worst against the U.S. but now that list has completely changed because there's a lot of shit going
- [33:03]
B
on in the world.
- [33:03]
A
So from your perspective, have we seen increase decrease in demand for certain currencies? Are people starting to fly back into the US because it's a safe haven currency? Are we seeing a flight to safety yet or is it too early to make that cross call? Like what's happening in currency markets and if you want to. The next question I was going to ask before we wrap up is related to oil. So if there's anything oil related that you want to try and use to a segue, let me know.
- [33:26]
B
Yeah, so I mean the interesting thing about the dollar being the US dollar is and you point to that it's a safe haven currency. So anything, something goes abrupt in the, in the world and it can be anything that's not even US related but just call it uncertainty or concern, a lot of that being conflict or alternatively stock market crashes. People take their money and they dump it into the States because it's stable and it's almost psychological as well as economics for it. So you've seen a good increase within that the States also to go back into oil and I think oily 15 to 20% I'd have to double check or if you want to do it now.
- [34:04]
A
Yeah, 150.
- [34:07]
B
Yeah. The dollar now correlates just the same way as almost a commodity currency. And if you're thinking about the stuff that's going on in the Middle east is it creates energy uncertainty and the states is one of the largest energy producers in the world. So you get an added benefit that there's going to be more infrastructure there and you have more certainty that their economy can function on its own if oil gets disrupted. Because they can almost self service themselves and they certainly can with the addition of our crude up north. We run off of the same thing. So we're commodity based currency. Although that correlation slowly been kind of giving way and it's more focused on interest rates. Talking about what's going on overseas. I mean the Iran currency is useless now. It's hyperinflated immensely. So but that's makes sense because their economy is going to be shot and they're stuck in a war and they're in a war. The dollar has been going up but you're still seeing economic pressure pushing it down. Job reports came out this morning and they weren't great. So you've got this new risk associated with the currency market that's kind of pushing the US dollar up. But their economy and their intervention within it adds on additional risk from a debt standpoint is pushing it down. So you're seeing a lot of quick fluctuations on it, you know and you're seeing the peso a similar side to it. Less so to do with the events from a couple weeks ago, but more so do or yeah we can have more so to do with just uncertainty in the global economy. And how will this correlate out? And you're right. I mean this will change your investment if you're purchasing in or selling out immensely. You know, we were working with a guy that was purchasing a spot down in Mexico and happen to get into the market at the right time and saving 2% on a large movement of flow of funds down and the 2% on the real estate purchase. Whether you're lending against it or not is a substantial difference when you're looking at your accounting side ultimately. And it's kind of the saying that I was taught a long, long time ago in sales of my industry is if I knew where the currencies were going to go, I wouldn't be doing my job right sitting on a beach and trading them. But anything to do with volatility will continue to create whether it be economics or politically or from A war standpoint will create issues with it. I pulled something up here.
- [36:38]
A
Yeah. So I'll just read. This is from Adam Kobesi. How high will inflation go? According to a recent fed study, every $10 rally in oil prices can increase inflation by 20 bips. Oil had already surged from 55 to $80 a barrel, implying 50 bips of inflation pressure. This could push CPI from 2.4 to 2.9%. When oil prices rise above $90 a barrel, inflation becomes hotter with 3.2% inflation expected at $95 a barrel. And they have a chart here for those of you who are watching our chart and our and below article summarize why oil prices are now the key leading indicator to watch on inflation. So the easiest way to understand this anything that uses planes, trains or automobiles to consume oil to ship goods to you will get more expensive as shipping the goods to you becomes more expensive. And they've quantified it pretty well. So this creates a bit of a short term headwind on rates as well obviously like credit costs going up, which is often why wartime can often become expensive because wars tend to be in places with oil. It's weird how that works. Right. But interesting man. It's just an interesting observation that I think that's the other piece because I don't know the currency stuff as well as you. I mean you're living this stuff every day. Right.
- [37:55]
B
It relates a lot similar because it tracks bond markets and interest rates from a fair amount. Right. And then if inflation starts to skyrocket again, what do you do with your interest rates? Because you got to service that debt and if you push the interest rates down, then your currency loses purchasing power.
- [38:12]
A
Yeah.
- [38:13]
B
Because you get less return on. From an investment standpoint, it's a good thing. I know and it's an interesting point to bring forward is inflation will end up being a huge talking point for it.
- [38:21]
A
Yeah.
- [38:22]
B
If you're looking down south and we can see that the pumps here. But people don't like it when the gas costs too much and that's when they start making noise. Then how does that noise correlate out to policy? So you know, whatever that Chinese saying was that you'd mentioned before, interesting times is spot on because for the next couple weeks, couple months, probably forever, there's going to be weird events that'll change things and you know, currencies aside, there's also if you're investing somewhere else is how's that the stability there within those countries and those will be things that I guess we'll Talk about more and more as we focus in on other ones.
- [38:59]
A
Have you observed a net like increase in people wanting to move money into Canada or the U.S. from some of these places yet? Or it's probably still too early.
- [39:07]
B
Yeah, it's still too early. And so it's an interesting thing. We work with corporates and individuals and when corporates are looking at purchasing stuff and there's instability over shipping routes and how the, the economy is ultimately doing, they're not. As for, they don't forecast as hard. You know, if you're a distribution company and you're selling whatever, for Canadian example, canoes. But people aren't going to be buying secondary homes because they don't trust the stock market as much or they're not going to be spending those 2,500 bucks on that. They can't gauge how much they'll need to buy from an inventory standpoint. And so they'll shrink their purchase requirements down. But the nice thing about our sides is we're normally on both sides of the market. So when one thing's down, another thing's up. And so then we'll start targeting those. You know, the one that I'll relate to when I talk to people about this industry is covet. And most people were hurting. And you know, we used to do a lot of work at my old firm with traveling. So obviously that market went away. But you know, where we made a. We made our new requirements or new revenue off of people importing ppe. We always have. Somebody's always importing something, somebody's always selling something. That's just figuring out the right way to the right market to go after.
- [40:23]
A
Okay, totally. And that actually leads me to my. Like, I did. I was kind of thinking about this when you, when we were trying to wrap it up. What's like, what's the trade here? Like, okay, we assume like, even if you just say like, there's no, there's no real viable way to short housing in, in Dubai or Mexico.
- [40:42]
B
Yeah.
- [40:43]
A
You know, if I'm like, maybe I'm biased because I've been looking for a, for an excuse to be bullish on. On Europe for a little bit on realist. On property. I'm not bullish on Europe for much, but property, I'm like, you know, although actually the guy that we just interviewed for the, for those of you listening to our most recent episode, he, he was telling me, like, dude, they're their like tech licensing infrastructure, at least for crowdfunding is they get a thing from the European Central bank and it's actually better than like a lot of states or provincial regulations where like he can actually crowdfund all over Europe.
- [41:17]
B
Yeah.
- [41:18]
A
Rather than, you know, in Canada. Like you have osc, bcsc, all the different securities exchanges in the US for the jobs act, like at least for crowdfunding you have an individual regulation and you have the sec, but there's different banking regulations in each state. So that made me actually, I was like, wow, that doesn't sound like Europe at all to be. It sounds very non bureaucratic. But all of this to say I've been thinking if I'm a rich guy and I was going to buy a condo in Dubai to go be warm in the winter or whatever, maybe I'm looking at Italy right now or something like that, the Mediterranean, I don't know. Because a lot of those places were looking less sexy because of what's happening with immigration. Like a lot of the North African asylum stuff and you know, you get all these like Twitter. I don't know, it's all sensational. So I have no clue. I haven't been there in years.
- [42:08]
B
You also take on, take into account tax havens. So what are you thinking? Malta.
- [42:12]
A
Yeah.
- [42:12]
B
Was it the Seychelles? Seashells.
- [42:14]
A
Yeah.
- [42:14]
B
Maybe the Caribbean could be places they
- [42:18]
A
have that like the 200k Euro minimum or whatever on income.
- [42:21]
B
Yeah. Spain's got something going on right now too.
- [42:23]
A
They've so. Well, they did, but they capped the golden visa system of buying property and Portugal's doing the same thing because the, the second order effects on their property markets were so brutal that basically locals were revolting. Right.
- [42:37]
B
Yeah.
- [42:38]
A
Because we covered those markets so much last year, man. And, and they're just like, they've been to complete those. That cow's been completely milked, you know.
- [42:45]
B
Yeah. The locals are done with it.
- [42:47]
A
I think so. Yeah. Like the only place that saw a worse deterioration of housing affordability in the world above Canada from the beginning of COVID to present day was, was Portugal. Funny story. Like I made a chart that showed this and it showed Canada. It was the, the point of the chart was to show Canada, but since Portugal was above it, the chart actually went viral in Portugal and I had like Portuguese news calling me like asking, oh yeah, dude, it was freaking hilarious. Yeah.
- [43:12]
B
Where people go to next. You know, for us up here most of the time, what your second property wants to be, if it's not on the lake, do you want it to be somewhere warm so you can get away from the dream?
- [43:20]
A
Yeah, yeah. I'd be going to the US personally. But I mean, I am, I'm going next week, so. So are you.
- [43:25]
B
Yeah, me too. I think we see more and more people look at Costa Rica as well.
- [43:29]
A
Yeah, Costa Rica is a good one, man. My parents have some property there actually. We should have my buddy Jordan Skrinko on. He's. He's a Toronto guy, but he was like living in the. In Costa Rica. He's. He pre cons a bunch of projects down there. Interesting market. Yeah, interesting market too because like kind of unregulated on the realtor side. Mexico, similar. Right? You just yolo. You just like, you want to broker a deal, like as long as there's a contract that says you're getting paid, you're getting paid, right?
- [43:53]
B
Absolutely. Got to find the right people, I think. But yeah, no, I think that'd be great to learn about because that's what I mean. You don't want states for your own reasons. You don't want Mexico because of instability. Costa Rica is pretty nice and it's on the same time zone. So that's where I'd go.
- [44:06]
A
Yeah, isn't it pst or you'd be on the inside. Yeah.
- [44:14]
B
Yeah.
- [44:15]
A
On that note, then maybe like, if you can get your Dubai guy, like my goal, my vision for the show was always to have like a rolling, like regular group of guests. Right. So if you can get him whenever, like, you know, and maybe we just book him for like, you know, the last X day of each month and have him on the show. Costa Rica, same thing. We'll just like try and hit you once a month, maybe probably once a month. Right. Or like once a quarter with a lot of these different markets. That was really my original vision for the show. So let's get after that too. So there you go. You'll hear from Mexico, Dubai, Costa Rica. You and I are each going to be interviewing somebody in the States to figure out whether or not Canadians have stopped buying property in the US as a result of the trade war. Because it sounds like a lot of boomers are upset and selling, but I guess we'll find out whether or not it's true.
- [45:00]
B
Yeah, I'll dive into that and I guess if there's any other places of interest, we can go out and find the best people for it too. Right?
- [45:05]
A
So, okay, amazing. Before we wrap up, tell people what you like, what you do and how they can contact you and whatever. Like, I mean, we. I do this because I want to do deals around the world, so I want people to contact me to do deals around the world. I want you to get the same benefit out of it. Like, you know, we give away free information. All we ask is that if you're thinking about moving some money somewhere, you call us first. Right?
- [45:25]
B
Yeah, you can reach out to me. So the company that I run Canada for is called Fitzetta. F I N S E T A and you find me on LinkedIn.
- [45:34]
A
Cameron Hutchinson, big finance guy, LinkedIn.
- [45:37]
B
Yeah, I don't know what else they could put up.
- [45:41]
A
That's good. No, that's perfect. I'll put it in the show notes,
- [45:43]
B
drop it in the show notes and yeah, throw my email in there as well. If you need to talk about anything or you just want to kind of spitball anybody can reach out, see what we can do to help.
- [45:52]
A
Amazing. Thanks man. Have a good weekend.
- [45:54]
B
Talk to you. Appreciate it. Bye.