How Will President Trump’s New Policies Impact Your Portfolio Values (Part 1)? [EPISODE #240]
How will Trump policies affect real estate investors specifically? I’m Bryan Ellis. I’ll give you the answer right now in Episode #241 of Self Directed Investor Talk.
Hello, Self Directed Investor Nation. Welcome to the show of record for savvy self-directed investors like you, where for just 7 minutes of your time per day, we give you MASTERY as a self-directed investor.
Welcome to another week, folks. I’ll be honest with you, I’ve had a pretty awful last 24 hours and don’t even feel like doing this show right now. Am I allowed to admit that to you? Well of course I am. It’s my show, I can say whatever I want. I suspect that’s part of why you continue to listen, frankly.
But I have some important things to say today and it might take just a minute or 2 longer than the 7 minute standard we have around here.
Ok, let’s talk about Trump and how I expect his policy proposals to affect real estate as an investment.
Look, I think overall, the outlook is extremely positive, but with one rather large question mark I’d like to explain to you, and I need for you to listen to every word of this brief show so you can hear that.
First, the good news:
If Trump is even only partially successful at cutting both personal and corporate income tax rates as he’s pledged to do, then I can tell you with utmost certainty what will happen: The economy will BOOM, absolutely BOOM.
Let me tell you something… I’ve already told you I’m feeling a little foul this morning so I’m not going to hold back on you, and while I hope I don’t offend any of you, the fact is I’m far less concerned with your sensibilities than your portfolio value.
So here’s the deal: In the history of the United States – over 240 years – EVERY SINGLE PRESIDENT has produced one particular economic result, so common, so baseline is this result. That result is that each president has seen at least one year of GDP growth of 3% or more.
All presidents – every single one of them – except, that is, Barrack Hussein Obama, who also holds the distinction of being the fourth-worst presidency on record for GDP growth, clocking in at an anemic 1.45%… and those stats are per Obama’s own Department of Commerce, the link to which you can find on today’s show notes page at SDITalk.com/240.
Curiously, even JIMMY CARTER had a better average GDP.
So why does this matter? Here’s why: The American economy is nothing more than a real-world demonstration of the prevailing psyche of the American public. That’s it. And for the last 8 years… and frankly, longer than that… because George W. Bush was certainly no great champion of economic growth… but PARTICULARLY for the past 8 years, Americans have operated under an explicit admission from our leaders that there’s a “NEW NORMAL” in effect, which includes things like lower job growth, decreased national security and reduced prominence of America on the world stage. If you think Obama didn’t actually say that, check out the show notes page on SDITalk.com/241.
Why does it matter? Well that sort of talk is bother a damper on the psyche of Americans, and is totally ANTITHETICAL to the very fundamental nature of who Americans are. We are optimists. We are opportunists. We are lovers of freedom. We are seekers of wealth and greatness.
And suddenly, we have a President who – love him or hate him – TOTALLY agrees with all of that… and has made the GREATNESS of America the central theme of his campaign and his Presidency. So he’s looking to do the things that ALWAYS spur economic growth, which are to reduce the punishment of taxation so there’s MORE MONEY in the pockets of people and companies; and he’s looking to substantially cut back the complexity of regulation and the costs those regulations create, which also directly contributes to MORE MONEY in the pockets of people and companies.
And it doesn’t take a rocket scientist to figure out that MORE MONEY in the hands of people and companies means more spending which leads to more economic growth which leads to higher incomes. These are all VERY GOOD THINGS… notwithstanding the concoctions of propeller-headed intellectuals. I, for one, am sick of hearing from academics or ANYONE who has never owned or run a business where it comes to what’s necessary for our economy.
And that’s why, frankly, there’s a broad and growing very POSITIVE CONSENSUS about Trump’s policies. You’ve got well known and highly regarded people and organizations – nearly all of them diametrically opposed to Trump politically – coming out and making positive pronouncements about Trump’s proposals and their effects on the economy – including investment superstar Mohammed El-Erian and none other than the World Bank itself.
You might not like his politics, but his economics – at least, his proposals – absolutely work towards a stronger economy. And a strong economy, simply put, means more money for people to spend on buying homes, renovating homes, renting homes… and of course all of the other investment opportunities under the real estate umbrella.
Folks, put your politics aside. You know what I’m telling you is true. These kinds of policies will be VERY GOOD for the US economy.
BUT… there is a point of concern for me, which is that Trump’s people are proposing to eliminate the mortgage interest deduction in favor of increasing the standard deduction. The idea is that you’ll still get the same tax break, but that tax break will no longer be tied to real estate in any way.
Look, I get what they’re saying, but that’s a horrible idea. There are MANY reasons for that, but the biggest one is this: I believe that eliminating the mortgage interest deduction will actually directly hurt home values… the value of YOUR real estate investments. One study from the Federal Reserve – linked for you at SDITalk.com/240 – predicts homeowners will lose an average of 11.5% of their property value as a function of eliminating the mortgage interest deduction.
That’s a lot.
Here’s the bright side of that: I don’t think it will happen. The mortgage interest deduction is one of the most popular deductions of all, and I suspect it won’t be particularly expedient for this particular item to be attacked.
One more thing: I suspect those of you who were Obama supporters are already frustrated with me and those of you who are Trump supporters are basically giving me high 5’s. Well, you’re both responding the wrong way, here’s why:
It’s easy for us to assume something like “hey – Trump is a real estate guy, and I’m a real estate investor… he’s not going to do anything that will hurt the real estate investing business.”
That, my friends, is plausible but not rational. Remember: Trump is a real estate DEVELOPER, not a real estate INVESTOR. You and I are, by and large, PASSIVE investors in real estate… we want to make acquisitions that will pay us over time and will require as little direct involvement as possible. For Trump, real estate is a BUSINESS, not an investment… and so the vantage point is RADICALLY different and thus, there’s just not room to assume that what’s good for the individual investor is also good for Trump’s investment interests. It’s an irrational stretch.
Having said that, it’s definitely my belief that Trump’s proposed policies, taken as a whole, will be PROFOUNDLY positive for our economy generally, and for real estate specifically.
The future is bright, my friends. So invest wisely today, and live well forever!
Bryan Ellis is host of Self Directed Investor Talk, America's #1 radio show and podcast for affluent self-directed investors. He's also an expert in self-directed IRA's, solo 401k's and turnkey rental property investing... at least, that's what his wife tells him 🙂 He's a contributor to well-respected publications like TheStreet.com, Entrepreneur and ThinkRealty. Bryan lives in metro Atlanta, Georgia with Carole Ellis - his wife, business partner and best friend - and his 4 children ranging in age from 2 to 19.