Austin, Texas – Over the past several years, we have seen a major downturn in the trust American citizens have in public and private institutions. The numbers are alarming. Recently, Gallup, an American analytics company, recorded significant declines in public confidence in 11 of the 16 institutions that it tracks.

Not surprisingly, small businesses enjoy the most public trust, even after our government did everything possible to try to destroy them during the pandemic. The institution that saw the largest decline in public confidence was the Presidency, and the lowest confidence rate of all institutions was Congress, at 8%. The average confidence rate among all tracked US institutions stood at 26%, an all-time low. Even the view of our military has dropped significantly in the eyes of the public.

As we pointed out, tongue-in-cheek, in our last newsletter, all is not well. While the stock market continues to hit new highs and companies consistently outpace new job estimates, it’s easy to be lulled into a state of complacency. However, for the second time in our nation’s history, our credit rating has dropped below AAA. The impact of the debt downgrade will result in higher yields, which means higher interest and expenses, leading to an even greater deficit. The last time our debt was downgraded was in 2011, when our national debt was under 70% of GDP. Now, it is estimated to be at 118% of GDP by 2025. For comparison, the median AAA-rated country has a debt balance of 39% of GDP.

Fitch, the credit rating company that downgraded our national debt, sees a “steady deterioration” that could suggest even further rating downgrades to come. Fitch cited 20 years of deterioration in fiscal and debt matters and an annual budget deficit 170% higher than the year before. The last time our credit rating was downgraded, the powers that be ensured that the CEO of Standard & Poor’s, the company that downgraded the debt, was fired within 18 days of the decision. I would hate to be the President of Fitch right now.

I have been around for several economic cycles now and I can tell you how the deterioration happens: gradually and then suddenly. We have warned in past newsletters of the vulnerability of the banking system. With this new rate hike and the pressure to raise bank reserves by 16%, our banking system is far more constrained than most care to admit. Currently, we are in the “gradual” phase. My advice would be to have a game plan before the “sudden” phase arrives and all begin to scramble at once.

Our game plan consists of locating prime real estate opportunities in the fastest growing area of the country – Central Texas. With construction well underway on Samsung’s $17 billion chip plant, the expansion of Tesla’s Giga Texas, the recent announcement of a 50 million SF industrial megasite just outside of Austin, and dozens of other projects, we are confident that we are in the right place. Georgetown, Kyle and Leander, all suburbs of Austin, are three of the fastest growing cities in the US and three of only four with double-digit population growth rates. The demographics are on our side, and we are slowly beginning to see opportunities arise. We sit 100% in cash after returning all investor money with healthy profits in our past two funds, and we are hungry for our next opportunity.

As the stability of our economic foundations continue to deteriorate and public confidence wanes, do not be caught without a game plan. For this reason, we invite you to join us on our journey into the Next Frontier of Real Estate Investing.