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I think most of you intuit that I’m not like the normal guy out there. I think outside the box, analyze everything, respect and revere cycles as much as I hate them for their downside.
The truth is, I’m an entrepreneur, more than I am an economist. In fact, I think economics is mostly a load of B.S., and there are only three classical economists I pay any attention to: Dr. Lacy Hunt, Steve Keen, and Robert Shiller.
As an entrepreneur that just happened to trip onto demographics while consulting to entrepreneurial businesses in the 1980s, I found a profession that was stale and ripe for radical new insights…
That’s how I became a “rogue economist.” And most economists hate me for daring to disrupt their nice, neat and academic “pipe and cloak” club.
The reason I respect Robert Shiller, who is more traditionally academic and now more respected, is that he came up with new indicators that showed that real estate doesn’t appreciate long term when adjusted for inflation… Damn! (The same is true for gold.)
And he adjusted P/E ratios (valuations for stocks) to iron out extreme cycles with a 10-year moving average for earnings… kudos again. He saw the bubble peaking in late 2005 in real estate, as did I, and he is now worried again about another bubble in stocks.
But back to my story…
Since I am an entrepreneur by nature, I take big risks and I’m enticed by radical innovations that can change the world. I have no interest in being in “the club.” I have little interest in traditional asset allocation and balanced risk versus reward strategies.
So, I invested in the late 1990s and early 2000s, when I made the most money from books, speaking and investment – when I was bullish and popular. But those investments were largely in new ventures. I invested in people who were potentially changing the world in a big way.
I could afford the risk to invest in my passion… but I didn’t fully understand those risks.
Such new ventures have extreme failure rates. They’re like babies crawling in the streets without parents to protect them! I put most of my money in new ventures and saw almost all of them fail. I finally got it when I talked with a friend who was a major venture capitalist investor. He said: “Harry, we only make it on one out of 11 at best – and we’re the best at what we do.” Well, his one was Oracle (ORCL) … and his returns were way better than mine. It’s what he did… and he got lucky on top of that.
Still, that didn’t stop me. Eventually, that one for me was… my own company! I learned to “stick to my knitting.”
So, now that I’m older and “wiser,” do I still invest more in other new ventures as I approach retirement?
No *bleeping* way! My circumstances are different now, as are my needs. I need more income and lower risk as I get ever closer to retirement.
Of course, I have no intentions of ever retiring. I think the whole concept is complete idiocy. Human beings are not meant to sit idle for decades. Still, I realize that, as I age, I must prepare for a time when either health or something unexpected slows me down. I’m a risk taker, yes! But I’m not stupid.
So, I now have two baskets of assets. The first is a cash hoard. I’ll take 10% and profit from the initial 40% crash in the bubble burst ahead. The rest of that cash I’ll put to work in our array of investment plans for a balance of risk. I’ll start with Adam and Lance and John’s services and then move into the lower risk strategies like Rodney and Charles over time.
The second basket is my one real estate asset that has done better than any new ventures I tried. I’ve been renting my primary home since late 2005, when I forecast the real estate crash. After all, I eat my own cooking.
The only real estate I kept was a 25-acre lot on an island with the best view ever. I kept it both because it was my “get-away” if things get as bad or worse than I expect, but more because it was due for five-acre zoning, which has now finally happened. That means I not only have a house worth a lot with almost no debt, but I now have four extra five-acre lots to sell, and they’re each worth 70% of what the original 25-acre lot was worth… oh yeah!
So, my strategy is to get more conservative while still taking some risks. And my real estate will become a cash flow machine through rentals… at least for now.
Then, around 2024/5, when the baby boom peaks in its retirement and vacation-home-buying cycle, I’ll sell my house and those four extra lots. That will greatly increase my nest egg for “retirement.”
You may be wondering why I’ve got real estate as part of my retirement plan when I believe we’re in for another real estate bust. It’s a good question. And a simple one to answer. I bought this property decades ago, at barrel-bottom prices. Even once real estate prices reset, as I expect them to, I will still have a decent investment on my hands. It’s a win/win on real estate that otherwise would be a horrible investment for most.
So, that’s my retirement plan.
I’ll enjoy paradise, moving between a great San Juan condo and an ultimate vacation home – both with killer views – until well into my 70s. Then my wife and I will move back to Florida, to be close to the best medical facilities anywhere. We’ll steadily get more conservative, building income as much as possible, while still taking some risks. What can I say? Once a risk taker… always a risk taker.