Episodes

  • Bracing for the Real Estate Bang

    Bracing for the Real Estate Bang
    Jun 10 2025
    The Looming Crisis Few Want to Confront Paul Daneshrad, CEO of StarPoint Properties and author of Money and Morons, is sounding the alarm: the United States is barreling toward a sovereign debt reckoning – and real estate professionals are not nearly prepared. Citing economists Reinhart and Rogoff, along with voices as diverse as Jamie Dimon, Jerome Powell, and Ray Dalio, Daneshrad warns that the U.S. has not only crossed the 100% debt-to-GDP threshold, widely viewed as a critical danger zone, but has kept accelerating. "We're at 120 to 140% on-balance-sheet," he notes. "If you include off-balance-sheet liabilities, we're at 300%." While the exact timing of the crisis is unknowable, Daneshrad argues that its inevitability is not. “It’s not a question of if – it’s when.” Politics, Populism, and Normalcy Bias Daneshrad is quick to dismiss the conventional partisan narrative. The deficit is no longer a left-right issue, it’s a bipartisan affliction. Both political parties, he argues, are fueling structural imbalances. Worse, the electorate, while voicing concern, refuses to vote for hard choices. This disconnect is the heart of his book’s provocative title: Money and Morons. “86% of Americans say they’re worried about the debt,” he says. “But they won’t vote for politicians willing to solve it, because that solution involves pain.” The result is what psychologists call “normalcy bias” – an instinct to ignore looming threats and retreat into the comfort of the familiar. Fixed-Rate Fortresses: Real Estate’s First Line of Defense If the debt crisis triggers hyperinflation and a spike in interest rates, as Daneshrad expects, the implications for real estate will be seismic. His response? Radical preparation. StarPoint has already begun shifting its portfolio into 20+ year fixed-rate debt and is moving toward 30-year structures. “It’s painful. It’s more expensive. But if the crisis comes in eight years, and you’ve got two years left on a 10-year loan, you’re vulnerable.” He emphasizes that this is not a fringe view. “Even Powell, whose mandate doesn’t include the deficit, felt compelled to warn the public. That’s how serious it is.” Deleveraging with Purpose Debt levels at StarPoint are also coming down – fast. The firm is targeting 40% leverage, down from a peak of 70%. They currently sit at 54%, and the journey continues. The rationale is clear: when interest rates jump from 6% to 15%, the re-pricing of real estate will be brutal. “That’s trillions in lost value,” says Daneshrad. “You have to de-risk now.” The Forgotten Asset: Cash Cash, often derided for its lack of yield in boom times, plays a central role in Daneshrad’s playbook. “The Rockefellers, Kennedys, Guggenheims – they had cash when it mattered. They bought at two cents on the dollar.” Berkshire Hathaway’s record cash holdings reinforce this strategy. “Buffett sees limited opportunity right now and high risk. That should tell you something.” Daneshrad recommends targeting cash reserves as a percentage of either AUM or annual free cash flow, steadily building them over time. "Public companies get punished for it. Private firms like ours have more flexibility and we’re using it." Why He’s Not Buying (Yet) Despite market dislocation, Daneshrad says StarPoint is mostly sitting on the sidelines. Cap rate spreads don’t justify the risk, and few deals offer the deep value he’s targeting. “We’re looking for rebound plays where sellers are on their third buyer and need certainty of close. That’s where the discounts are. But those opportunities are rare.” Asked whether the mispricing stems from short-term underwriting or optimism bias, he shrugs. “We’ve flooded the system with liquidity. Asset prices are artificially propped up.” Diversification and the Limits of Real Estate Daneshrad is not betting the farm on U.S. real estate. He’s pursuing modest geographic diversification abroad and expanding into non-real estate asset classes. “Historically, real estate hedges inflation well but a debt crisis changes everything.” He’s candid about the difficulty: “We’re not that smart. Timing a crisis is hard. But we can prepare for one.” The Aging America Conundrum One of the more nuanced points Daneshrad raises is the intersection of demography and fiscal sustainability. Aging, he agrees, is inevitable. But the care infrastructure it requires is not financially supported. “The trustees for Social Security and Medicare, not politicians, say the funds go bankrupt in under ten years. That’s $90 trillion in off-balance-sheet liabilities.” Senior housing? “A great idea if the elderly can pay. But with savings rates at historic lows, I’m not optimistic.” Market Signals That Matter Daneshrad watches for three early signs of crisis: A ...
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    45 mins
  • The Crash You Won’t See Coming — Because It’s Already Started

    The Crash You Won’t See Coming — Because It’s Already Started
    Jun 5 2025
    The Real Estate Cycle: A Warning for 2026 Insights from Phil Anderson on the Coming Real Estate Market Crash In my conversation with renowned economist Phil Anderson, you will gain unprecedented insight into the mechanics of real estate cycles and why we are right on the precipice of the next major real estate market crash. Anderson, author of "The Secret Life of Real Estate and Banking," presents a compelling case that combines economic theory with historical precedent to paint a picture of where we stand today – and where we’re headed tomorrow. The Foundation: Understanding Economic Rent The Law That Economics Forgot To understand the thesis, here’s a powerful analogy: just as we accept the law of gravity dictates that a dropped pencil will fall to the ground, there exists an equally immutable economic law that has been largely forgotten. Anderson calls this the "law of economic rent" and it’s the principle that all of society's gains and benefits will ultimately gravitate toward land prices. This fundamental concept explains why we experience predictable real estate cycles. When society allows land earnings to capitalize into prices (typically representing 20 years of earnings), and banks are permitted to extend credit based on those inflated prices, a real estate cycle crash becomes inevitable. It's not a possibility – it's a mathematical certainty. The Erasure of Land from Economics Anderson reveals a crucial historical shift that occurred after World War I. Prior to 1907, economists universally recognized three factors of production: labor, capital, and land. However, as land reform movements gained momentum and threatened established interests, there was a deliberate effort to remove land from economic textbooks entirely. Today's economists learn only about labor and capital, treating land as merely another form of capital. This fundamental misunderstanding, Anderson argues, is why virtually no mainstream economists saw the 2008 financial crisis coming, nor will they recognize the signs of the coming downturn. The Cycle Mechanics: Why 18-20 Years? Historical Reliability The 18-20 year real estate cycle has been remarkably consistent throughout American history, documented back to 1800. Anderson traces this pattern through every major economic downturn: the 1920s, early 1970s, 1991, and 2008. In each case, the proximate cause wasn't what most economists claimed – it was the deflation of land prices. The current cycle began in 2012, marking the bottom of the last downturn. We are now in year 13 of the cycle, approaching the critical 14-year mark that historically signals the beginning of the end. Here’s how it works: The Anatomy of a Cycle Anderson explains that real estate cycles run like this: The cycle is 18.6 years on average - "14 years up and 4 years down" 2012 was the bottom - Land prices peaked in 2006-2007, then had approximately 4 years down to the 2012 bottom 2026 is the projected peak - As Anderson states: "14 years up from there [2012] takes you to 2026. It really is that simple." We're currently in year 13 - From 2012 bottom + 13 years = 2025, approaching the 14-year peak in 2026 Years 13-14 are the "Winner's Curse" - The final speculative phase when "animal spirits are truly unleashed." Current Position in the Cycle This precise timing explains why Anderson identifies us as being in "the last couple of years of the cycle." All the current signals he observes - housing stocks rolling over, banking deregulation beginning, frenzied speculation in Bitcoin and cryptocurrency - point to our approach toward the 2026 peak rather than suggesting we've already arrived there. The critical insight is that we're in the dangerous final speculation phase right now. We're experiencing what Anderson calls the "Winner's Curse" period of years 13-14, when speculation reaches fever pitch and "animal spirits are truly unleashed." The peak is expected in 2026, which would then trigger the inevitable 4-year down phase running from 2026-2030. This timeline explains why Anderson emphasizes the urgency of preparation - we're not looking at some distant future event, but rather a cyclical turning point that's rapidly approaching and may have already begun. Presidential Patterns: The Republican Connection A Striking Historical Correlation One of Anderson's most intriguing observations concerns presidential politics. Since Abraham Lincoln's era, every final phase of a real estate cycle has coincided with a Republican president taking office. These aren't coincidences but reflect the political dynamics that emerge during speculative bubbles. Anderson notes the historical bookend: George Washington, the first president and America's largest landowner at the time, and now Donald Trump, the 47th president and a prominent real estate developer, both representing the connection between land ownership and ...
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    59 mins
  • Real Estate's Margin for Error is Gone

    Real Estate's Margin for Error is Gone
    Jun 4 2025
    The Margin of Error Has Vanished: What CRE Investors Should Be Watching Now Commentary on a conversation with John Chang, Senior Vice President and National Director, Research and Advisory Services, Marcus & Millichap The New CRE Investment Mandate: Survive First, Then Thrive “The margin of error has narrowed to virtually zero.” This was John Chang’s stark assessment of today’s commercial real estate environment – an era marked by fragile capital markets, rising Treasury yields, policy instability, and speculative hangovers from a decade of cheap money. According to Chang, the headline playbook hasn’t changed: keep leverage low, maintain reserves, underwrite for downside. But the stakes have changed. What used to be prudent is now required. Those who forget that, particularly those lulled by the long post-GFC bull run, risk extinction. Cap Rates, Treasury Yields, and the Compressed Spread A central theme of our conversation is the vanishing spread between borrowing costs and asset yields. Cap rates have risen 100–200 bps depending on asset class and geography, but Treasury rates have risen more. That’s compressed spreads, rendering most acquisitions reliant on a value-creation story or an eventual rate reversal. Investors are still transacting, says Chang, but only if they believe they can bridge the spread gap through operational improvements i.e. leasing, renovation, management upgrades. Passive cap-rate arbitrage is no longer viable. “The potential for something to go wrong is high,” Chang warns, especially in a policy environment that remains erratic. The Treasury Market’s Imminent Supply Shock Chang outlines why he expects upward pressure on Treasury yields for the balance of the year – contrary to the market's general expectations of rate cuts. Key reasons: Federal Deficits: With a delayed budget, Treasury issuance has been running below historical norms. That’s about to reverse, with $1–1.5 trillion in supply expected by October. Shrinking Buyer Base: The Fed is reducing its balance sheet. Foreign holders, especially China and Japan, are net sellers. Even traditional allies are showing less appetite, driven partly by frictions over U.S. trade policy. Trade Tensions: Tariffs of up to 145% on imports from China, EU saber-rattling, and a broad retreat from globalization are alienating the very buyers of U.S. debt. “People don’t want to do us any favors right now,” Chang says. “That uncertainty alone elevates risk premiums.” Normalcy Bias and the Myth of the Perpetual Up Cycle Chang pulls no punches on the market psychology underpinning risky underwriting in recent years. He describes a bifurcated investor landscape: Those who entered post-GFC and think 2–3% interest rates and infinite rent growth are normal. Veterans of the 1990s S&L crisis, the dot-com bust, or the GFC, who know better. What’s striking is the lack of long-term data. Even Marcus & Millichap, he notes, only has robust CRE data going back to 2000. Without context, many have mistaken the tailwind-fueled 2010s as a standard baseline. “We’re back to old-world real estate,” Chang says. “Where you have to actually understand the property, the tenant mix, the microeconomics of location. The era of pure financial engineering is over.” Lessons from the Pandemic and GFC: Underwrite for Downside, Not for Hype Chang recounts closing on an investment in April 2020 at the very onset of pandemic uncertainty. “What if we rent at breakeven?” he asked. If the answer was yes, he proceeded. That conservative approach worked then and still applies today. The biggest blow-ups, he says, came from sponsors who: Modeled double-digit rent growth. Over-leveraged. Used floating-rate debt without hedges. Ignored capex and reserves. By contrast, Chang praises sponsors who locked in fixed debt, kept leverage under 65%, and stayed humble. “They’re embarrassed to be earning 7% IRRs,” he jokes, “but in this climate, that’s a win.” Washout in the Syndication Space: Good Riddance? Perhaps most damning is Chang’s commentary on the wave of underqualified syndicators who entered during the boom years. “Thousands came in with no operating experience,” he says, pointing to the proliferation of coaching programs offering checklists instead of expertise. These new entrants mimicked industry language – AUM figures, fund manager titles – but often had no institutional track record or risk management skills. Many of them, Chang believes, are now out or on their way out. And while some may return with hard-earned wisdom, he expects the flow of “tourists” into the syndication world to dry up for the foreseeable future. Tailwinds Still Exist: But Only for the Well-Prepared Despite the short-term risks, Chang sees multiple long-term tailwinds: Demographics: Millennials are delaying homeownership, renting ...
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    59 mins
  • Real Estate's #1 Rule: Don't Lose Money!

    Real Estate's #1 Rule: Don't Lose Money!
    Jun 2 2025
    Leyla Kunimoto brings a rare and unfiltered perspective to today’s commercial real estate conversation: that of a full-time individual LP who writes publicly about her investment decisions. She’s not a sponsor, a capital raiser, or a fund manager; she’s an investor allocating her own capital and speaking candidly about what she sees in the market. Through her newsletter Accredited Investor Insights, Leyla connects with hundreds of other LPs and GPs, giving her a uniquely well-informed view of how sentiment is shifting, how sponsors are adapting (or not), and why many individual investors, herself included, are taking a more cautious, capital-preserving stance in the current environment. Track Records Are the New Credentials Leyla made one thing immediately clear in my conversation with her: experience across market cycles matters more than ever. Sponsors who lived through the Global Financial Crisis (GFC), and made it out intact, view the world differently. “There’s a certain level of conservatism they develop,” she said, that translates into more disciplined underwriting, more thoughtful pacing, and fewer emotionally driven decisions. This stands in sharp contrast to what Leyla observed in 2020, when billboards at Dallas airports advertised real estate masterminds promising to teach people how to raise capital fast. She watched sponsors pile into deals with razor-thin margins, driven more by optimism than fundamentals. Some of those same players are now facing tough questions from investors. Tariffs Are Already Affecting CRE in Two Big Ways While many LPs focus on interest rates, Leyla highlighted tariffs as a macro driver that’s beginning to affect commercial real estate, particularly in development. First, tariffs are raising costs on imported materials, like lumber, pushing construction budgets higher. Second, she’s watching what tariffs could mean for demand in the industrial sector. “If trade with Mexico declines, what happens to logistics facilities near the border?” she asked. Conversely, if reshoring takes off, we may see demand rise for inland warehouse space. It’s a nuanced picture and one that sponsors in ground-up deals can’t afford to ignore. Equity Is Cautious. Retail Capital Is Now in Play. Another shift Leyla is tracking is on the capital side. Institutional equity has pulled back in many corners of the market, and some sponsors are turning to retail LPs for the first time. But this isn’t an easy pivot. “Retail investors are expensive to reach,” she said. They also tend to ask more questions – and now, they’re more skeptical. Many LPs are sitting on deals that aren’t performing. As a result, the bar for new allocations is much higher. “There’s a sense of caution,” she noted. “LPs aren’t allocating blindly anymore.” Floating Rate Debt Divides the Market Leyla sees a bifurcated sponsor landscape: those who are still dealing with the aftermath of floating-rate debt, and those who have the capital and flexibility to transact but can’t find deals that pencil. Sponsors with legacy floating-rate loans are focused on rate caps and marginal cash flow. They’re rooting for the Fed to cut rates. Others are hunting for acquisitions, but the math isn’t working. “Without aggressive assumptions, most deals don’t pencil,” she said. The IRR Illusion: What LPs Should Actually Be Watching Many sponsors still lead with IRR projections, but Leyla has shifted her mindset. “I don’t screen for how much money I’m going to make. I don’t screen for the IRR probability,” she told me, “the only thing I’m laser beam focused on when I evaluate private placement deals is the probability of losing money.” That loss-aversion lens changes everything. She believes LPs are better off compounding modest, positive returns over time than chasing double-digit IRRs that come with a real chance of loss. “Making 3-4% positive IRR for 10 years straight outperforms hitting 20% on some deals and going to zero on others,” she said. Stress Tests Are Private. Optimism Is Public. Behind closed doors, sponsors are more conservative than they let on, she says. The real pros run multiple models – best, worst, and most likely scenarios. “I always ask for stress test scenarios underwritten to the GFC,” she says, continuing that she used to hear sponsors saying such scenarios were never going to play out because the underwriting is too stringent. “I’m hearing a little bit less of that now,” she says. Still, she’s skeptical of any deck that doesn’t acknowledge the possibility of a rent decline. Of course deals won’t pencil if you underwrite to a 10% rent drop but, in some markets, that’s exactly what’s happening. Cash Is a Position. Waiting Is a Strategy. When I asked what she’d do if handed a $1 million windfall today, Leyla didn’t hesitate: “I’d keep it in ...
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    39 mins
  • How to Survive the Coming Real Estate Storm

    How to Survive the Coming Real Estate Storm
    May 30 2025
    How to Survive the Coming Real Estate Storm – What Sean Kelly-Rand Learned at Lehman For the experienced real estate investor or sponsor, this is a masterclass in what really matters. When Lehman Brothers unraveled in 2008, it exposed a truth that many in the real estate world still prefer to ignore: even the most sophisticated capital structures can implode when the cost of capital and access to liquidity are misunderstood – or worse, taken for granted. My podcast/YouTube show guest today, Sean Kelly-Rand, didn’t just watch that collapse unfold; he lived through it from inside and the playbook he uses today as the managing partner of RD Advisors is shaped, in part, by that early, formative experience. His approach offers a deeply pragmatic framework for anyone navigating real estate in today’s uncertain climate. In an era of overpromised alpha and fragile capital stacks, Kelly-Rand's doctrine is a study in restraint, structure, and staying power. From the Heart of Lehman to the Edges of Risk Kelly-Rand joined Lehman Brothers in 2006, just before the implosion, drawn by its dominance in the bond markets which he saw, even then, as the true engine behind real estate. While most looked to equity investment banks for leadership, he understood that the debt markets were where real decisions were made. His work centered on real estate financing and syndication, with a front-row view of a business model that was, in hindsight, structurally doomed. Lehman’s capital stack had been stretched too far – built on short-term funding to support long-term positions. As the firm accumulated assets, expanding its real estate exposure from $5 billion to over $36 billion, it did so with virtually no cushion. Liquidity was cheap and ubiquitous, but inherently unstable. When securitization markets seized up, those long-term assets could not be offloaded without catastrophic discounts to book value. And because any sale would have forced a full repricing of the entire book, no sale could be tolerated. Lehman was stuck – and the system broke. That lesson remains central to Kelly-Rand’s thinking today. The real issue wasn’t the quality of the assets; it was the fragility of the structure behind them. Risk wasn’t in the deal. It was in the funding. Rebuilding from the Ground Up In the years that followed, Kelly-Rand transitioned from the institutional capital markets to operating in the private lending space. He co-founded RD Advisors not just to chase yield, but also to build a firm capable of weathering downside scenarios – starting with a clean-sheet design of its capital strategy. The fund today focuses exclusively on senior secured debt, kept short in duration and conservatively underwritten. The business avoids the artificial stability of interest reserves or payment-in-kind structures that mask actual performance. Instead, it emphasizes cash-paying borrowers and short-term duration to preserve optionality and liquidity. Leverage is kept modest by design, with loan-to-value ratios structured around exit values that tolerate declining markets. Crucially, every deal is evaluated with a focus on capital preservation. Underwriting is done not with optimism, but with contingency: would the fund be comfortable owning the asset if they had to should a borrower walk? If the answer is anything but a clear yes, the deal doesn’t proceed. This mentality isn’t just prudent, it’s essential. The goal is to never rely on someone else’s execution for one’s own capital security. And that institutional memory from the GFC sits the core of the process. Avoiding the Illusion of Alpha Much of what passes for outperformance in today’s real estate environment is simply leverage in disguise. Sponsors show high IRRs, but beneath them is a capital structure dependent on favorable refis or asset appreciation that may no longer be achievable. That’s not skill, it’s exposure. Kelly-Rand’s fund’s returns, by contrast, are deliberately boring. They are stable, predictable, and quarterly. It’s a feature, not a bug. In fact, Kelly-Rand views volatility as a symptom of poor underwriting or misaligned structure, not a badge of aggressive performance. He’s wary, too, of the growing interest in ‘loan-to-own’ strategies, particularly among opportunistic capital looking to buy defaulted notes in the hopes of acquiring assets at a discount. While technically accurate – private credit can convert into equity when things go wrong – he emphasizes that building a business around that premise introduces operational complexity, execution risk, and volatility that neither he nor his investors are seeking. Today’s Market Echoes the Last Crisis What concerns Kelly-Rand most now is how little has changed in institutional behavior since the last crisis – and how closely today’s market echoes that of 2007. There is the same ...
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    1 hr and 15 mins
  • Navigating Multifamily CRE in a Volatile Environment

    Navigating Multifamily CRE in a Volatile Environment
    May 27 2025
    Navigating Multifamily CRE in a Volatile Environment Insights from Paul Fiorilla, Director of U.S. Research at Yardi Matrix Paul Fiorilla offers a data-driven view of today’s commercial real estate (CRE) landscape using the vast resources he has at his disposal at Yardi. While market sentiment may be growing more optimistic, Fiorilla acknowledges investors should separate short-term mood from long-term fundamentals. His perspective, rooted in close analysis of multifamily data and macro conditions, is both pragmatic and cautionary: yes, there’s capital on the sidelines and deals are getting done but many investors may be misreading the durability of recent tailwinds and underestimating latent risks. Short-Term Confidence, Long-Term Industry Real estate is an inherently long-term, illiquid asset class yet, much of the current market behavior appears to be anchored in short-term confidence (and short term memories). That dissonance should give investors pause. While macroeconomic shocks like tariffs, interest rate hikes, and political uncertainty do not immediately register in quarterly CRE data, their effects compound over time. Investor sentiment, meanwhile, remains buoyant. Debt markets have resumed activity, stock indices are back near prior highs, and many assume the worst is behind us. But the lagging nature of real estate data means we're still months away from fully seeing the impacts of recent fiscal and geopolitical developments. Multifamily Fundamentals: A Shifting Landscape Fiorilla addresses the fundamentals of the multifamily sector, noting that demand has remained strong in recent years, but the distribution of that demand is shifting. Rent growth is no longer universal. Over the past 15 months, metros in the Midwest and Northeast, markets like Chicago and New York, have consistently posted moderate, steady rent growth. In contrast, high-growth Sunbelt cities such as Austin, Atlanta, Nashville, and Salt Lake City are experiencing flat to negative rent trends. What’s driving this bifurcation is primarily supply. In oversupplied markets, absorption hasn’t kept pace with new deliveries. Despite a sharp national decline in starts, down approximately 40% year-over-year, the existing pipeline remains heavy. Nationally, over 1.2 million units are either in lease-up or under construction. In high-growth markets, deliveries will continue at elevated levels for the next several years. Some cities may see 12–15% added to their multifamily inventory by 2027. Fiorilla underscores that while national numbers suggest a tapering of supply, the local realities are more complex. Markets that arguably need more housing, Los Angeles, New York, and Chicago for example, are seeing similar slowdowns in new development as oversaturated markets. The result is a continued misalignment between where capital is building and where it’s most needed. The Waning Tailwinds of Demand Fiorilla also points to softening demand drivers that may soon undermine current assumptions. Over the past several years, demand has been supported by several powerful tailwinds: robust job growth, high immigration, and pandemic-era trends such as household formation and suburban relocation. But these are now tapering. Net immigration, while still meaningful, is slowing. Job growth has begun to decelerate. Moreover, federal employment cuts and delays in private-sector hiring – driven by political and fiscal uncertainty – are contributing to a weakening outlook for household formation. These are not necessarily signs of imminent distress, but they do suggest that the extraordinary absorption rates of 2021–2022 will be difficult to sustain. As Fiorilla puts it, “the risks are to the downside.” He’s not forecasting a collapse but cautions against overreliance on recent performance when underwriting future deals, particularly in light of ongoing supply pressure. Policy Risk and the Fragility of Subsidized Housing Among the more underappreciated risks in the market, Fiorilla emphasizes policy risk, especially in affordable and subsidized housing. He notes that while programs like LIHTC and Opportunity Zones appear safe, others such as Section 8 are under pressure. Of particular concern are proposals to convert these programs into state-administered block grants. While this may seem like a technocratic shift, it would represent a material change for property owners. Federal guarantees would be replaced by varying state-level funding regimes, increasing payment risk and reducing the predictability that underpins underwriting in the subsidized housing sector. For owners reliant on these programs, even modest payment disruptions could be “catastrophic,” he notes. Interest Rate Volatility: The Real Pain Point Turning to capital markets, Fiorilla distinguishes between the level of interest rates and the pace at which they change. Today...
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    44 mins
  • The Real Risk to Real Estate Today

    The Real Risk to Real Estate Today
    May 21 2025
    The Dollar Standard, Global Liquidity, and the Coming Economic Reckoning In my expansive and highly accessible conversation with renowned economist Richard Duncan, we discuss the logic behind his long-running critique of the international monetary system, a system Richard calls the Dollar Standard where he explains why current U.S. policy moves, the system could come crashing down. The Origins of the Dollar Standard and America’s “Exorbitant Privilege” The Dollar Standard, Duncan explains, evolved out of the collapse of the Bretton Woods system (implemented after WWII) in 1971. Under Bretton Woods, currencies were pegged to the U.S. dollar, and the dollar was pegged to gold. But when other countries accumulated more dollars than the U.S. had gold, President Nixon suspended dollar convertibility, effectively ending the gold standard. What replaced it was a floating currency regime and the birth of the Dollar Standard. Crucially, the U.S. began running persistent trade deficits, importing goods and sending dollars abroad. These dollars, in turn, were recycled by foreign central banks, especially in trade surplus countries like China and Japan, into U.S. dollar-denominated assets, primarily Treasuries, but also equities and real estate. This loop, Duncan argues, created America’s “exorbitant privilege”: the ability to fund government spending and consumer imports at artificially low interest rates, because foreign buyers are constantly reinvesting in U.S. debt and assets. The phrase "exorbitant privilege" was first coined by Valéry Giscard d’Estaing, who later became President of France, but at the time was serving as France’s Minister of Finance under President Charles de Gaulle in the 1960s. He used the term to criticize the unique advantages enjoyed by the United States under the Bretton Woods system, particularly the ability to run persistent deficits by issuing debt in its own currency (the U.S. dollar), while foreign nations had to hold and use those dollars to trade and build reserves. Giscard and de Gaulle saw this as an unfair financial hegemony that allowed the U.S. to “live beyond its means” at the expense of others. The phrase was intended as a critique but, ironically, it's now often used in a neutral or even admiring tone by economists. How Global Credit Became a Bubble Machine Duncan makes the case that this system, while benefiting the U.S. enormously, has been fundamentally destabilizing for the rest of the world. As surplus countries absorb dollar inflows, their central banks convert them into local currency, often by printing their own money. That liquidity ends up in domestic banking systems, fueling excessive credit growth, asset bubbles, and financial crises. It happened in Japan in the late 1980s. It triggered the Asian Financial Crisis in the late 1990s. And it helped fuel China’s real estate boom and the global credit bubble that preceded the 2008 collapse. Notably, Duncan predicted the 2008 financial crisis in his 2003 book, The Dollar Crisis, warning that runaway global imbalances would eventually lead to a systemic shock. He now argues that post-2008 bailouts and quantitative easing (QE) only expanded the bubble rather than fixing the problem. Trump’s Trade Doctrine: Potential to Destabilize the System Fast forward to 2025: Trump is back in office, and his administration is moving quickly to reshape global trade. Duncan’s concern is that the Trump administration’s effort to eliminate the U.S. trade deficit by imposing high tariffs and pursuing a strategic devaluation of the dollar, undermines the very structure that has sustained U.S. prosperity and global financial stability for decades. Why? Because every U.S. trade deficit is matched by a capital inflow. It’s a balance-of-payments identity: if the U.S. runs a $1.1 trillion current account deficit, there must be a $1.1 trillion capital surplus (i.e., inflows) to finance it. Take that away and you choke off the supply of global liquidity that props up asset prices worldwide. The Doom Loop: What Happens If Capital Stops Flowing In Duncan walks through the scenario: If tariffs succeed in shrinking the trade deficit, dollars stop flowing abroad.Without those dollars, foreign central banks have fewer reserves to recycle into U.S. assets.This reduces demand for Treasuries, pushing interest rates up.Rising rates crush real estate, stocks, and credit-dependent sectors.Simultaneously, trade-surplus economies face a liquidity crunch, leading to job losses, bankruptcies, and potential financial crises. The result? A global depression triggered not by market excess this time, but by deliberate government policy. Duncan notes that the Trump administration has already blinked once in rolling back tariffs on China after markets began to seize. But the damage to global confidence in the dollar’s stability and America’s ...
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    1 hr and 10 mins
  • Where Are We in the Real Estate Cycle?

    Where Are We in the Real Estate Cycle?
    May 19 2025
    When it comes to understanding real estate cycles, few voices carry as much weight as Prof. Glenn Mueller, of Denver University. With over 40 years in the real estate industry and more than three decades of publishing the Market Cycle Monitor – used by institutional investors, developers, and academics alike – his data-driven framework is one of the most respected in commercial real estate. In my conversation with Prof. Mueller, he shared where each property type stands today, what signals matter most, and how CRE professionals should be thinking about the road ahead. Market Cycle: Where We Are Now Most Property Sectors Still in Growth Phase Despite headlines, the underlying fundamentals in many sectors are still solid. Industrial and retail are at or near peak occupancy, with retail benefiting from a decade of underbuilding. Hotels and some apartments are in expansion phases, while office remains in recession. Office: Structural Downshift, Not Just a Cycle Post-COVID remote work has fundamentally reshaped office demand. Class A in prime markets (e.g., NYC) is thriving; B/C assets and suburban offices are struggling. Adaptive reuse (e.g., office-to-resi conversions) is being explored but not yet widespread. Apartments: Strong Demand, But Misaligned Supply There's a 6.5 million unit housing shortfall, yet high-end, urban supply has overshot demand. Affordable and workforce housing remain undersupplied and present the most attractive opportunities. What CRE Pros Should Track Employment > GDP Mueller emphasizes employment growth as the single most reliable predictor of real estate demand. Despite economic noise, job growth remains positive, indicating continued underlying support for real estate fundamentals. Occupancy Drives Rent, Not Price Mueller’s cycle model is based on physical occupancy, not asset pricing. Price movements are driven by capital flows, but true performance comes from rent and income growth – especially critical in today’s higher-rate environment. Supply Trends by Sector Retail: Nationally at peak occupancy. Almost all new space is pre-leased. Over a decade of cautious development has created a tight market. Industrial: Slight oversupply after a COVID-era building spree but expected to correct by 2026. Multifamily: Select markets are overbuilt (e.g., downtown Class A), but suburbs and affordable housing show structural undersupply. Hotels: Bifurcated; leisure and conference travel rebounding; business travel still lagging. Capital Markets Insights Prices Are Down, and May Not Drop Further Higher interest rates have cooled pricing, but a wave of dry powder is still waiting. Institutional investors are sitting on capital and may deploy if prices stabilize rather than fall further. Cap Rates Are Rising – But Slowly Cap rates haven’t adjusted upward as fast as borrowing costs, leading to negative leverage. Cash buyers dominate today’s market. Defaults Without Distress? High-profile institutional owners (e.g., Brookfield) are handing back keys on offices; a sign of strategic exit, not systemic distress. Geopolitics and Macro Outlook Tariffs and Reshoring Could Reshape Demand Mueller sees Trump’s industrial policy (tariffs, reshoring) as a potential long-term positive for U.S. real estate, especially industrial. Global Capital Still Engaged, But Cautious Foreign investors remain active, but currency shifts and geopolitical risk are reshaping cross-border flows. Bottom Line for CRE Sponsors Know Your Local Cycle – Even in national downturns, markets like Norfolk, VA, Honolulu, HI, and Riverside, CA, are peaking. Prioritize Income Stability – Focus on tenants who weathered COVID and economic shocks. Watch Employment, Not Noise – Labor market data remains the clearest leading indicator for demand. Cash is King (for now) – With interest rates high and spreads compressed, unlevered buyers have the advantage. Position for Affordability – Whether in retail or multifamily, demand is strongest at the middle and lower price tiers. I’m sure you’ll find Glenn’s insights as valuable as I did – and be sure to watch the episode as he guides us through slides of his latest report. As always, the goal is to help you make better-informed investment decisions by understanding where we are – and where we might be headed. *** In this series, I cut through the noise to examine how shifting macroeconomic forces and rising geopolitical risk are reshaping real estate investing. With insights from economists, academics, and seasoned professionals, this show helps investors respond to market uncertainty with clarity, discipline, and a focus on downside protection. Subscribe to my free newsletter for timely updates, insights, and tools to help you navigate today’s volatile real estate landscape. You’ll get: Straight talk on what happens when confidence meets correction - no hype, no spin...
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    59 mins
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