Grow Your Cashflow Podcast

Pascal Wagner (00:00)
Today's guest holds a special place in my journey as an investor. When I got into this space, I was searching for a way to really understand how money moved from Wall Street to Main Street and from operators to actual cash-lowing assets. And that's when I stumbled across the Real Estate Radio Guys radio show. through that radio show, it's been around for a very long time.

I ended up going to how to win funds and influence people. And it was a total game changer. Learned a ton of new concepts about the money pie and honestly, you know, one of the core ideas that really shapes how I think today, but we have Russell Gray on the show who is a cohost of one of the most downloaded investing podcasts with over 28,000 YouTube subscribers.

Decades in syndicated radio and a global community of loyal listeners. He's been a passive investor in commercial real estate for over 20 years and he's mentored thousands, I think maybe thousands at this point, new syndicators through events, masterminds and coaching. And I'm incredibly excited to have him here on the show today. Welcome Russell.

Russell Gray (01:11)
Well, I'm excited to be here, Pascal. Thank you for having me.

Pascal Wagner (01:14)
Yeah, I want to get, know, Russell is one of the people who has a great understanding of macroeconomics partially because maybe he got burned early in his journey, but I would love for you to start out with telling us how you got into LP investing and walk us through that journey that kind of influences how you think about the market today so that we can

then have a good foundation to talk about the macro topics that I think our listeners will be interested in.

Russell Gray (01:45)
Yeah, so I think I didn't grow up in a real asset investing family. My dad was a immigrant to the United States. He kind of escaped Japanese occupied Philippines in the 1940s, went to high school in Southern California in the 1950s, ended up at Stanford University before it was Silicon Valley. And that's when I showed up. And so I grew up there and my dad was a freedom lover really.

loved America and the ability to own a business and have property rights and freedom of speech. And, you know, when you've lived under tyranny and you've seen it firsthand, you know, you really appreciate it. And so that kind of got sewn into my blood a little bit. And then he was an entrepreneur. And so I watched him do that. And I became very interested in business. And I really wasn't that interested in investing, but I threw dumb luck.

I ended up finding a mentor when I was 19 years old who convinced me to buy real estate and taught me how to sell. And then I realized, sales is an essential survival skill. And once I knew how to do that, then I realized I could start businesses, I could go to work for companies, I could make money. I didn't have to worry about whether I had a degree or whether I got along well with the boss. mean, all that really mattered was performance. So I got really excited about that.

I ended up going into the financial services business in my twenties and because I saw people who were in that space just making millions of dollars. And so I thought, I'm a corporate sales guy. I'm making hundreds of thousands of dollars. I want to make millions of dollars. And so I went over there and what I learned is a lot of people in the financial services space that are quote unquote financial advisors, really commission paid salespeople. And they're very narrow in what they teach.

And in the middle of doing all that, I was a registered representative. I'm out there convincing, trying to convince people to purchase mutual funds for their long-term retirement. I'm kind of that dollar cost averaging and blah, blah, blah, kind of the Dave Ramsey mold. And in 1987, my dad had taken his company public in June of 1987. And if you know anything about taking a company public, if you're an insider, you have 120 day lockout period.

And so during that lockout period, he got a small margin loan against an eight figure net worth. And we had a great Christmas set here. He bought his wife a Jaguar. I mean, it was a lot of fun. Right up until October 19th, 1987, when the stock market crashed, he got margined out and he lost everything. And not only did he lose everything, but he lost everything because of the tax bill on the capital gain. So he'd already spent the money.

His $12 million fortune went down to less than $500,000. He had this $500,000 loan, and he was completely wiped out and had a tax bill cost him his home. And I'm looking at that, and I'm thinking, how in the world does that happen? So I got out of that business, and I went back into corporate sales, and I started trying to understand what had happened and why it happened. And that led me on a longer journey.

that later on took me into the mortgage business. My thesis was that as the baby boomers moved into the asset reallocation phase from equities into bonds, that a lot of money would go into bonds, interest rates would come down, it would be a big refinance boom. So I went into the mortgage business. And when I was in the mortgage business is when I really got interested in real estate and real estate investing. And that's when I was out looking for faculty to help in this mentoring club model, business model that I'd created.

to solve the problems that I discovered when I was in the financial services business, I met a guy named Robert Helms. I heard the Real Estate Guys radio show. I wasn't the co-host back then. And I went to the seminar. And Robert and I got together, and we started mentoring investors. And through that process, we eventually ran out of our own money, and we began to organize money. So I invested some of my own money. I was probably more active in raising money than I was in investing. Most of the investments I had were

in my own name and then we raised money and I would take the carry. I think there's only two or three investments that I was passive in. But then a funny thing happened and we all know what that was. That was 2008. And in 2008, the mortgage industry was at the epicenter of the crash. My mortgage company went broke and my beautiful six-figure a month income went away. And now all of sudden I had no income. I had

real estate all over the place, was negative cash flow because I was feeding it from my business. I was super over leveraged, didn't understand firewalls. I didn't understand the importance of not signing personal guarantees or segregating assets. So many things I did not understand. And so that was a, that was a big wipeout for me. And when I came out of that, that's, that's when my love affair with macroeconomics really started because I, I read every book I could.

about trying to understand what these derivatives were, what were these weapons of mass destruction as Warren Buffett described them, how did they nearly take down our entire financial system and what were the signs, were they there, could I have seen them, should I have seen them, what should I be looking for going forward? And so for the last, I'm gonna say 17 years of my life, I've lived in that space.

And as you'd listen to the show, and I'm not with the show, I left the show a year ago for a reason, which is I feel like right now there's a huge opportunity in Main Street capitalism and I want to be an advocate for that. Maybe we can talk about that. But I do think that it's important for any investor, whether they're on the active side or the passive side, if you're going to underwrite a deal, you have to understand the market, the property, the pro forma, the operator.

But you also have to understand the macro because just jacking up interest rates, as you know, which the Fed did over the last couple of years, really created a lot of pain for passives and GPs because nobody had ever seen that kind of aggressive interest rate rise. Nobody expected it. It crushed equity. It blew up capital stacks and it created instead of distributions, you're getting cash calls. Right. And that all you could see it coming. I knew it was coming. Kenny Mackerel and I were talking about like we knew it was coming.

But most people on Main Street didn't know for the same reason I didn't see 2008 coming.

Pascal Wagner (07:51)
Yeah. Big topic for today, especially, you know, just before the show, we were talking about, you know, the policy of the, of the United States and how there's a lot of, a lot of new things, happening that the Trump administration is trying to, to, to do for America and how that's impacting economy and investments and everything like that. I think that's, ⁓ I'm excited to get into that. I'd love to, to start with.

When you think back to 2008 and what did you not see coming and how has that influenced how you think about the investing today? I know you've mentioned a little bit that you focus a lot more on macroeconomics, but let's dive in a little bit deeper there.

Russell Gray (08:33)
Yeah, so it's a great question. So thank you for that. What happened is we in the mortgage business started hearing the rumblings in the subprime market. We were very near to that. We were using Alt-A paper, which is one step up from subprime, very aggressive for people that have a lot of leverage. Of course, there were a lot of stated income loans back then, but we felt like we were safe because real estate was on such a tear.

And the subprime seemed like to be such a small thing. Now you weren't best ever as was I. And one of the speakers mentioned that, this situation in CRE or CMBS commercial mortgage backed securities is very minor compared to the overall pool of mortgage backed security. So people shouldn't be worried about it. Well, that's exactly the same thing then Fed chair Ben Bernanke was saying. And what I think the speaker at best ever

didn't acknowledge and what I didn't understand and what the general market did not understand is how levered the bond market is. And when you understand leverage, it's a two-edged sword, right? So if you have a property that you put 80 % leverage on and you have a 20 % downturn, you're 100 % wiped out in your equity. Well, can you imagine going in and being at 50 or 100 to one?

where you only got one or two points of equity. And instead of just having to be underwater, you actually have to meet that margin call. So that's what happened. What happened is when the subprime market busted, the bonds began to be worth less. People bid less for them because they weren't AAA like they were all stamped. In other words, they were worse quality. And obviously, interest is a risk premium. And when the risk is obvious, the investor who's going to buy that paper is going to demand a higher yield.

pay a higher yield on a fixed note, that means the price you pay for that fixed note goes down. It's like cap rates, right? If you got the same rent as you had before and cap rates go up, if cap rates go down, your price goes up. If cap rates go up, your price goes down. And so when people want higher cap rates or higher yields on the bonds, the equity goes down. That's why Silicon Valley Bank blew up when the Fed jacked up the interest rates, a lot of balance sheets blew up.

Insurance companies right now balance sheets are strained to be kind and so they're having to make it up with premiums who are all feeling that on Main Street. So these things are connected what happens in the macro are connected in on to Main Street and so these bonds make up the credit market and when the credit market breaks everything that runs on the credit market and real estate is way up at the top of the list begins to collapse and equity comes out. call it somebody tripped over the air pump.

for the jump house and all the air came out and that's what happened and if you're over leveraged and you don't have the cash flows to support your structure or your instruments that are going to require margin calls you're to have to realize the loss the whole system can unwind very very quickly and I think there's a lot more fragility right now in the financial system than people realize and one of the things that I learned was where do you see the signs? Gold is one of the places you see the signs.

When people are risk on, they're in stocks and they're buying real estate and everything's going up and it's wonderful. And it's usually driven by credit, easy money. And the credit markets break and it goes risk off. People come out of those and they want higher yields or they don't invest at all. And so now you have cap rates rising and you have interest rates rising on debt and credit harder to get and lower LTVs and all the things we've experienced in Main Street investing.

So you have all that begin to happen. And when the paper asset investors are not able to find safety in bonds, because bonds are the problem, they have to go someplace. Where do they go? They go to gold. so gold is a canary in the coal mine to let you know there's fragility in the credit markets. And so if you go back and listen to the things I was saying over the last two or three years, especially as the Fed began to jack up rates,

I was saying, guys, take a look at gold, pay attention to gold. I do an investor mentoring club every month and every month I do the gold watch. Like we watch gold, watch gold, watch gold like a hawk, because it'll tell you there's fragility. And there still is, there's still fragility. Obviously gold as we're sitting here recording is over $3,100. It's been on a tear. It's been the number one appreciating, blown out the S &P. It's where the money's going for safe havens. So I didn't understand any of that in 2008.

But today I do.

Pascal Wagner (13:05)
Where what other things are you seeing happening today that are these these red flags that that you're noticing and maybe maybe gold is the only one other others.

Russell Gray (13:15)
So gold is a good indicator of what's going on with both the currency and the credit markets, which kind of make up the financial system. And then the symptoms of those things breaking are bank failures or people that have balance sheets that are in big trouble. The stock market has been going along because everybody needs a place to put their money in. So that's where they've been putting it. And a lot of it has been foreign investment.

because as bad as it's been perhaps in the United States, it's been worse around the world. So you got all this foreign money coming in. And so that's one area that I pay attention to. It's why I go to the New Orleans Investment Conference every year. It's not a real estate conference. It's a metals and resource conference, but they talk about energy, they talk about economics, and they look at it through a different lens. It's really taught me a lot. So I go every year, get a chance to sit on this really cool panel called the Future of Money, get into

sit in between people who are arguing about gold and Bitcoin. So it's a lot of fun. So you pay attention to that. think right now, one of the other things has to be what's really going on with employment. It's no secret now that a lot of the numbers that we were getting on the strength or the alleged strength of the economy over the last couple of years were cooked. They constantly every month they had to revise them back down. And most of it we find now we were running on life support.

The government was pumping lots of money. This is called fiscal policy. The government controls that. Monetary policy is what the Fed controls. But the fiscal policy was we spend a lot of government money. We're funneling it through these NGOs and we're creating all this employment. And if you looked and did a deeper dive on any of those employment reports, you would see a lot of employment through the government. Well, if you're a Main Street investor, you don't care, right? You don't care.

It's like, there's a lot of money in the marketplace. People need jobs. But look what happened in Washington, D.C. when they came in with Doge and they really started cutting government. All of a all the houses are on the market. Equity is collapsing everywhere. What people could have argued was one of the most resilient markets in the country because it fed off of the federal government who had the ultimate power to suck money in from all over the world, but certainly all over the country into a geography. You think, well, that's a safe place to be. Well, it didn't turn out to be.

People who are paying attention could see it coming and it happened very fast, right? These things can happen very fast. That's why no matter how good something is, you don't get overexposed to any one market, any one niche, any one philosophy. You can't afford to do that. So I think right now what we're seeing is a lot of government unemployment. We're going to see markets that were very heavily dependent upon government spending going to start to tighten up and we're going to go through a lag and a lag is painful.

because it's disconcerting. And when we change from say a financialized or a very government life supported economy, those are two different versions of artificial economy to a real economy that manufactures things and produces real goods and services. There's gonna be a transitory period where there's gonna be weakness. And if you recognize it for what I think it's gonna be, which is transitory.

then that means there's going to be softness. And so if you're getting your ducks in a row now, if you're liquid and you're being prepared, people, was suggesting to people a couple of years ago, begin to pull equity out of real estate, put it into gold, because I felt like credit markets would have a problem. Real estate equity would go away. Gold equity would grow. It's exactly what happened. And I'm not trying to take a victory lap or brag about how smart I am. What I'm saying is that if a guy like me can figure it out with diligent study,

You know, I think anybody can figure it out because it really isn't rocket science once you understand the basics. But I think that if you're in a market right now that's very heavy dependent on government, maybe with the exception of the military, you're going to need to be pretty careful. You know, and then we just have to watch and see everything that is happening in the Trump administration could be a hundred percent unwound in the subsequent administration.

if they come in with a different philosophy and take a page out of his playbook in terms of hyperaggressiveness. And then a lot remains to be seen what kind of a Congress are we going to get at the midterm. And then of course, the other big wild card is hysterical thing. How is that really going to shake out? So I think they're being honest about it. saying, hey, there's going to be some pain, especially for those of you that are in the paper asset world. There's going be some real pain while we get this thing reorganized. We're committed to privatizing.

the economy. Basant has said it in so many words. So that's great news if you're on Main Street. Nothing could be better for you as a Main Street investor than some factory to come to some sleepy town, create a bunch of jobs. And now all those little houses that weren't worth anything are all sudden worth something and they're renting and there's income and little shops are popping up and there's going to be opportunities and all kinds of secondary and tertiary business and real estate. So I would really be paying attention to that. I had a chance one time on a

on a cruise ship. know, when I was with the real estate guys, every year Robert would take us on this cruise. And the first year we did it, I ended up sitting next to a woman and I said, you know, what do you do? Where are from? She goes, I'm from Colorado. I said, what do you do? She goes, I take cruises. I said, well, how have you put yourself in a position to take cruises? She goes, really want to know? I said, I really want to know. And then she says, well, I read that the Denver Broncos were moving their stadium.

And I found out where they were moving it to, and I went and bought up all the available land.

And then when they came there, I run parking lots. And so she got passive income on parking lots because she could see where the puck was headed. It was that simple. And I think we're going to have some of that. So I would just encourage, know, whether you're active or passive, pay attention to where this shift is going to take money. saw in Trump 1.0 with the opportunity zones that he likes to try to move capital into under capitalized areas. If that happens again, then you front run that.

Pascal Wagner (18:36)
Easy.

Russell Gray (19:03)
Well, then you're going to have a chance to ride that infusion of capital, whether it's tax breaks or private incentives or I mean, he's already announced over two trillion dollars worth of foreign investment coming into the United States. Figure out where that's going and go there and start getting your feelers out and learn the market.

Pascal Wagner (19:20)
You've mentioned that there is a, if Trump is successful in his agenda, that there is, we will successfully move from more paper assets to these real assets as you're talking about. Can you kind of dig into that a little bit more? You know, I think I've heard multiple times from this administration talk about how the stock market might

And also, the stock market is not really the bulk of America, right? Like the everyday working citizen is – doesn't have a huge fortune in stocks. And so I think that's I'd love for you to kind of dig into that. And what is it – what would it look like assuming Trump was successful in his agenda?

Russell Gray (20:08)
So I think this is where if you're an active investor or even if you're a passive investor and you are trying to decide, should I put my money in the mag seven? Should I put my money in the S and P? Should I ride the stock market? Should I buy the dip? You have to really ask yourself a question. What is value? Where does value come from?

Right. I don't if you saw this Newsmax IPO, but it was ridiculous, right? They issued $75 million of stocks, $75 million. That's it. At $10 a share, it got bid up. went up like 800 % in day one. Chris Ruddy, the guy who created the thing was worth day two, $3.3 billion. And this is a company that lost $74 million in operating income the previous year. So they were trying to sell enough stock to just fill the hole.

that they were hemorrhaging in negative cash flow, and suddenly they wake up two days later and on paper, they're worth more than Fox News. It makes no sense. It makes no sense. And the reason this happens, and this is what people have to be very, very careful about, is you have to understand where the value is being determined in real estate, just to use real estate so that we understand. If you go and somebody

can afford to pay $300 a month more than you when they're bidding on a house on a 6 % 30-year fixed rate mortgage. They can pay $50,000 more for that house. And so if they do that, then every similar house in a one mile radius is deemed to be worth $50,000 more on paper. Equity happens.

And of course, when I was in the mortgage business, you go harvest that equity as quick as you can and use it as collateral to borrow money and hopefully arbitrage and borrow at six and invest at 12 or whatever the number is. And that was the game, great game. Stocks work the same way. If there's a hundred million outstanding shares of Apple stock at $200 a share and somebody comes along and pays 250, all want for a thousand shares.

At the end of the day, when they close, all 100 million shares are deemed to be worth $250. So everybody marks their balance sheet to market and they're like, oh, I'm up. I got all this equity. It's not really there. It's fake. It's not there. Their income didn't go up by 10%. Their income, nothing changed. This is why you look at a guy like Warren Buffett, who's famous for being a value investor. What does that mean? He buys dividends. He buys income. He buys profitability. Now,

If you're a real estate investor, you're like, well, duh, duh. I mean, can you imagine going and buying a multifamily property? It's got 200 units in it. They're all empty. Only one is trading. One guy comes in and rents one thing, one apartment for a thousand dollars a month. And then you say, well, based on comparative sampling, 199 ones that aren't trading are deemed to be worth the same price. You never in a thousand years would

Would anybody appraise a building that way? But that's how stocks are appraised. And so there's so much fake. When you see, ⁓ the stock market lost $4.5 trillion. No, it didn't because it was never there. When you're valuing an investment, it should be valued by the income. If you were to value Newsmax by its income, what's it worth? Nothing. Barely anything.

And so you're saying, okay, well, I'm going to put a little bit money in a bet on the come. That's a very different type of investing than, than going out and buying something that is real is tangible. when 95 % least up on a neighborhood is 95 % least up, that value is very sticky. That's why you see prices go up and down and income just be very steady. So if you invest for income, if you value for income, I would go as far as to argue, if you denominate your net worth by income.

You're better off giving an example. If you have a $10 million house and you have no mortgage on it and you have no income, or you have a guy who's got a $5 million house with a $3 million loan, but $100,000 a year passive income coming in, say an apartment building. Who's richer? This guy can't even, the $10 million guy, he's got a net worth of $10 million, but he can't even buy a bag of Doritos.

Pascal Wagner (24:15)
Right?

Russell Gray (24:15)
Can't

pay the property tax. You got nothing in the real world. He's a pauper. He's eating dog food. The person over here who only has the networks of say, you know, $2 million, $5 million less than three on the loan, but got $100,000 coming in. They got $100,000 coming in. You throw a 5 % cap rate on that. Now all of sudden they got a net worth of $2 million. But it's based on value, not on equity. Same net worth, but it's based on actual income. And so this is what

Kiyosaki teaches us in his cash flow game, right? The focus is on that passive income. If you focus your valuation on passive income, now that doesn't mean you don't go buy something, a business that's gonna start up and has the potential for income. Doesn't mean you don't go buy a property that is empty or vacant and rehab it. And you believe that you're gonna get it to income, but if the only reason you buy it is so that you can sell it to somebody else who's dumb enough to pay more for it, in an era when we're.

De-financializing the economy. We're no longer going to bail out Wall Street. We're no longer going to worry about creating fake wealth to deceive people into thinking they're wealthy, to deceiving America into thinking she's wealthy. We're going to get focused on actually creating wealth, which is producing goods and services and selling them to the rest of the world. That's what Trump is after, but it's a transition. And we've been, we've been financializing for

decades and most people alive have no idea what that kind of world looks like. But if we can get there, and I hope we can, right? You may not like his demeanor, you may not like his aggressiveness. You know, some people love him, some people hate him. I think if you're the type of person to say he walks on water and everything he does is perfect, or you're somebody who says he's the devil himself and everything he does is evil, I think you're both probably wrong. There's probably something in the middle there.

And we have to set our proclivities aside and just look at what's actually happening and say, well, what's he trying to do? And then what are, you know, plan A is that it works. Plan B, know, know, what if it doesn't work? What's a fallback strategy and what if he's completely wrong? Like, you have to play out all those scenarios, but I would say as long as you're focusing on things that are real, that serve essential needs, and you are focusing on real income, you have a better chance than most.

to survive whatever the transition will be. And then again, going back to what I said earlier, look where the incentives for capital to go are and try to skate into position before the capital really gets there in mass.

Pascal Wagner (26:40)
So how are you looking at investing or investments today? It's either there's the question of do I invest in equities or do I invest in debt through this period? Do I invest, do I think that commercial real estate is maybe at the bottom of its cycle and that is now set to boom, whereas we think the stock

market, you know, we think is dropping, you know, as, this transition happens, and there's a lot of turbulence, like, how are you looking at that picture and figuring out where to go, right? Like gold is now high. Do you think that is, you know, did you continue to do that? Or does that fall as maybe this transition continues to play out?

Russell Gray (27:23)
So I don't really consider gold an investment. It's just an alternative form of cash or liquidity. It gives you the advantage of being able to pivot into any currency that you want. It gives you a chance to sit out the financial system. You're not in the bank. You don't have counterparty risk. You don't really have at least currency risk from the dollar perspective. You do have currency risk that if you decide to go back from gold to the dollar,

Maybe gold went down in terms of dollars and you don't get as much. So that is a risk. But if you're playing the long game, think history says you're going to be okay because whatever it is, causes the dollar to continue to lose purchasing power, is built into the system. don't think until we change the system, it's going to change. It's a whole completely different discussion. But again, I'll go back to what I said earlier. You want to focus on things that are real. You want to focus on things that are essential.

And then you look at markets. And when I say markets, mean three things. mean geographic markets, because we all know in real estate, it's location, location, location, that you have to look for the specific factors in a given geography that are going to create a healthy supply and demand balance that are going to create a healthy regional economy and give people and businesses a reason to want to move there. believe Florida's talking about eliminating

property taxes. think another state just announced they Mississippi just got rid of income tax. Right. The states are starting now to compete because they know these businesses are going to start looking for a place to come and they're ahead of the curve because you have to say why are they doing that? Well, they're doing that because I understand that there are people right now shopping for venues to bring jobs.

Pascal Wagner (28:44)
tax.

Russell Gray (29:04)
and to make investments and they want to be competitive. This is exactly what you want to have happen when you have a one size fits all solution. Nobody has a competitive edge. Nobody is innovative. The federal government is literally a monopoly. The best thing we can do is decentralize. It's a system our founders gave us and it was specific to create competition, keeps everybody on edge. And so I think we're starting to see that happen. So you want to look at the geographic market. The other thing you want to look at is you want to look at the demographic market.

Right? We all know the baby boomers right now, senior housing, health care, anything related to where that season of life where where boomers are, it's going to continue to be probably a place where money is going to be. And a lot of money is going to be available. They control a lot of wealth. What are you to spend it on? They're going to spend it on their health care, trying to stay alive and enjoy what's left of their life. I think you had a speaker at the Best Ever Conference who was a from

Texas, believe UT, and she was a demographer. And she said, you hey, the baby boomers are still a great place to be. So you could look at that. You've got the millennials, which is kind of the echo generation from the boomers. Now their life experience, their journey is very different than the boomers. Their attitude is different. And then you got the Gen Zers behind them. And the Gen Zers are, from what I understand, having a little bit different take on life too.

My point is look at the demographics and try to figure out where you think that demographic is going to need products and services and then look for the companies, if you're a real estate investor, that are going to need real estate related to providing those products and services. And I think, you you're going to find a chance there. I'm very close to the Residential Assisted Living Academy and I spend a lot of time paying attention to that space.

And what I hear from them is that there is a shortage of over one million beds right now. And the baby boomer generation hasn't even begun to hit. Right now, it's them taking care of their elderly parents that are in their 80s. But the boomers that are in their 60s and 70s are getting into that space now. There's just not enough room for them. So there's some opportunity there. So look at that. The third area is product niche. Because when you understand the geographic

area and the demographic that you're looking for, then you want to find the right product niche that's going to serve that need. And so I think if I'm a GP and I'm telling my story, I'm going to start with the macro concept. This is my macro thesis and why I think this geography, this demographic, this product niche makes sense. And now let me show you my, my team and let me show you the deal. Let me show you the, numbers and let me

you know, back it all up, right? But that part of your story has to include that macro story. And I think a lot of Main Street syndicators, they don't understand how important that is. Right? When they're competing with Wall Street guys, they're all talking macro. That's all they talk about. That's all they got. They don't talk about counterparty risk. They can't talk about real value. They just talk about, you know, buy, hold and pray. You know, trust me, I'll manage your money and just be patient, right? And ride the inflation wave. Trust

the continual inflation into the financialized economy. But if in fact we're departing from that, then at some point those guys are gonna wake up and realize, hey, I don't have the answer. And so then.

Pascal Wagner (32:21)
I think you make

a... Keep going, keep going.

Russell Gray (32:23)
Well, no, no, I'm monologuing here, so you go.

Pascal Wagner (32:25)
Yeah, I think you make a great

point here. One of the things I talk about in the programs that I have, when investors come to me, all they're doing is looking at deals that came through their email inbox. And it might be a referral from a friend. And there really is nothing more.

then, this has this looks like it has great returns. And I think what I want to highlight here and what I think is phenomenal, just having Russell's monologue here, I appreciate it. want you to continue. It's it's a you have to think bigger picture and take a step back and think what is going to happen the next decade and how does that influence what I'm investing in?

If you think, for example, like Trump doesn't care as much about the financial, the stock market and cares more about bringing actual manufacturing, you might say, if I believe in that thesis, then maybe moving assets from that asset class to another is a wise choice. there's, I mean, it's interesting that I'd love to keep going into the details here where we're talking about.

Manufacturing, example. So I'm an LP investor and I'm thinking about, Trump is incentivizing a lot of manufacturing to come to the US. So what does that do to industrial or office or I don't know, like pick the asset classes that are related to what will be influenced there. the other thing that, and the geographies. Yeah. Where do these people go?

Russell Gray (33:59)
And the geographies, and the geographies. Yeah, the geographies are important.

Yeah, so I learned this from my partner, Kenny McElroy, and we're partners in Collective Inner Circle. It's a mastermind with George Gammon, Robert Helms, Jason Hartman, Kenny and me. And we spend a lot of time kinda talking about the way Kenny thinks, because he's been extremely successful.

One of the things I learned from him and I should have listened to him more in 2000 and 2008, I thought I was as smart as Kenny. I found out I'm not. And so we have great conversations today, but what he said was he looked at what industries could not be exported. And so he honed in on energy. And so I thought, okay, well, based on that principle, if I wanted to pick another industry that couldn't be exported, it would be distribution.

Right? Right? If you're going to have distribution, if you think about when the country was founded, right? All these distribution hubs were built because we were manufacturing stuff. You had to be on the river. You had to be near the railroad. You had to be near a port or now an airport. Right? Memphis is a town that lives off of that giant FedEx hub there. Atlanta's got UPS. Georgia's got the Savannah port. Jacksonville has that one port that brings in a lot of autos.

If you want to be near the river, the Louisiana at one point was kind of a termination point of shipping lanes that went into the Gulf of Mexico. And so if you get back into the business of being a manufacturing company, you want to try to figure out where these companies are going to go. That's one discussion. The other thing is what's going to happen if all these goods and services now need to move from manufacturing centers to distribution centers. And so what's that going to do to a distribution center? So it's this idea of understanding, really understanding.

the way business is done in an industrialized economy. Again, nobody's thought about this for like 40 years. There used to be an old newsletter writer named Richard Russell, and he wrote the Dow Theory newsletter. And his basic thesis was that you could tell the strength of the economy based on the transportation stocks.

because if the transportation stocks were shipping a bunch of stuff, then that meant the companies that were selling them in the future were going to be reporting profits based on all those shipments. It was a very simple thesis, but he wrote that newsletter for decades, and that was his whole thesis. That's why you get guys who are in the space that are paying attention to what companies like FedEx and UPS are reporting, or now Amazon. What are they reporting? And so the tariffs may have an impact for a little while on some of those

companies. And so that may create opportunities or stress in these distribution areas that later on will pick back up again once the manufacturing comes in. That's where understanding where you are in the lag and trying to think moves ahead. So your point's a good one. I liken it to your portfolio or specific investment floating on an ocean.

And so you've got a bunch of stuff going on under the surface. It's fluid and dynamic and moving. got a bunch of stuff up in the atmosphere, things happening on the horizon, more than just what's happening right where you're at, more than just what you can see when you look down at the water. There's a bunch of things happening. And so being part of a mastermind, listening to podcasts like this, attending conferences are all great ways to get a bigger perspective and find out what's happening, where it's happening, how people are thinking.

And then that gives you context, a framework for the data points that are coming in when that deal comes into your inbox. And again, I'll go back and make the argument that if I'm a GP, it's incumbent upon me to be prepared to tell my story. And I can strengthen my story and have a big competitive edge against the guys who do just, Hey, it's got 20 % IRR, blah, blah, blah, blah, blah, blah. Right. Everybody does that, but tell me your story. Sell me your team.

And if it makes sense, then I'm understanding, because these are long-term, most of these are long-term commitments. When people put their money in, they're not day trading, you know, private placements. You get in and you're going to be there for three years, five years, whatever. And usually the underlying asset, you may be in there for 10, 20 years. You're getting married to this thesis. You have to really think it through.

Pascal Wagner (38:08)
When you, you mentioned all of these different things. We're talking about industrial, we're talking about manufacturing. We talked a little bit about assisted living being on the early, you know, early side of that, right? Like they would have to literally be building more facilities to be able to house everyone that's aging into that demographic. You just imagine that as there is constrained supply,

Like here's how I, you know, tell me if you agree. Thinking about this in terms of cycles and 10 years ahead, right now there's, you know, we have a given supply. We're just aging into it over the next five or 10 years. There's going to be a huge increase in the first five years. There's going to be a huge increase in price because there's going to be a lot more demand for the existing supply. Then there are going to be a bunch of operators that come in and, and build.

and likely oversupply. And then we get towards the end of the cycle where all those people start to pass away. now you have this big crisis that happens 10, 15, 20 years from now in that space.

Russell Gray (39:13)
Yes, you're brilliant. You are brilliant. And so this is exactly the kind of thinking that I'm talking about. And so when you compare, let's just get, we're going to get down into the weeds, like into the weeds. I'm an investor and I'm like looking at these deals coming in and I'm trying to think it through. And I've done this exercise. You just did them like, well, gee, that would be a problem. Right? I understand like, we're going to go build this 120 bed single use facility.

so that we can put 120 seniors in there and we get economies of scale and blah, blah. And that's awesome. And then 15 years from now, the bell curve is on the other side. And now we don't have so many people coming into the facility. What do I do with this facility? Or if something changes, if we do get an oversupply and I've got 120 bed facility and I only have room for 90, how do I lop off those extra 30? I can't do it.

Now compare that to the residential assisted living model where you're buying a McMansion and you're putting maybe 10 or 15 in Texas is 16 in California at six with some subsidies and Arizona it's 10 but you got 10 people in there that are paying you know five six seven eight thousand dollars a month whatever it is and you've got it's a business you know you're paying for it but it's a single-family home in a regular neighborhood that's a selling point you have a better caregiver to

to resident ratio. That's another selling point. feels more like a home. That's another selling point. All that's great. But as an investor, the selling point is if I'm an investor and somebody that's got 100 units because they've got 10 houses in one area, they've got economies of scale operationally, but they have 10 different APNs, 10 different deals. The market can only support 80. They can take and sell two of them.

and they have an out, you say, why would anybody buy it if the residential assisted living market is saturated? They wouldn't. Maybe they turned it into a different type of shared housing, or maybe you just sell it to somebody who wants to turn it back into a McMansion. You have multiple exits, so you can right size your portfolio a little easier. You have multiple exits coming out. You could say, well, I'm just going to keep it, but I'm going to turn it into a regular rental. doesn't cash flow as well. But I hold on to the asset until

a better day comes. So there's a lot more flexibility. And so you have to ask yourself when you're thinking through, that's great for now, but what happens when then somebody's got to come along. And again, I'm saying if I'm an LP, I want to hear that type of long term strategic thinking coming from my GP. If I'm a GP, I need to figure out how to think that way. So I tell a better story because when it comes down to competing for return,

and you got a bubbly stock market, you cannot compete on return. And so you have to add two words to the word return and it is an internal rate. It's risk adjusted. And when you put risk adjusted in and you start talking about the risks and then they start seeing the stock market do what it does and they realize this is nauseating. It is risky. Well, listen, now you're not competing on price, which is return. You're competing on quality.

which is risk adjusted return. And when you know how to tell your story and really understand the investment thesis, then you can describe why your lower return is a better return compared to this other thing, which could evaporate tomorrow.

Pascal Wagner (42:31)
I would love to dig into this idea that you're an LP and you're looking at a bunch of different operators. you know, let's say there's typical, like an operator has been doing their niche, let's call it multifamily or mobile home parks or whatever it is for the last 10 years. And if we're realistic about it,

There are some operators whose asset, probably every single operators asset class comes in and out of style, in and out of demand. And I mean, the operators, you know, if you've been doing the thing for 10 years, you have a specialty, you're not going to go pivot to something else. It just, just doesn't make sense for you. But as an LP, you're sitting across from the table and you're getting the pitch from every operator about why they're the

they're the best investments in sliced bread, regardless of the season that they're in, because they are obviously financially motivated, you know, to keep people investing in and building out their portfolio. How do you as an LP investor?

See through that is not the right phrase, but like, how do you educate yourself enough to understand if a strategy or an asset class is on the back half of the bell curve going out of style?

Russell Gray (43:50)
Well, I think first of all, if you're going to be a Main Street investor and you're not going to turn your financial wealth and decision making over to a quote unquote professional, then education is incumbent. You have to do it. And listening to shows like this is a way to do it. Reading the news and paying attention to what's going on and digging a little bit deeper.

Every month I do a thing called Clues in the News and I try to break it down. And I think that's really important. I always used to do that with the Real Estate Guys show because I felt like it was such an important thing. And so it's really not about having answers. It's about asking questions and then running around asking smart people, smarter investors than you, more experienced people than you, operators in different spaces. And then just use your common sense. I mean, the entire point of being a

a passive investor in private placements is you are taking the responsibility to make the investment decisions upon yourself. You have to get to the place where you trust your judgment. If you're not willing to put the work in and if you're not willing to trust your judgment and pull the trigger, you can't do it. You might as well turn your money over to a money manager. But if you're serious about it, in today's day and age, the information is readily available. And so it's just like with all this AI.

You'll hear everybody tell you, everybody now is coaching programs and I'm dabbling in AI as an older guy. I'm like, okay, I'm not going to let this one get by me, right? I'm going to pay attention to it. So I'm trying to figure it out. And what I've, what I've realized is it's just like being a professional salesperson or a professional investor, or I've been listening to Elon Musk's biography. And what he's famous for is going in and talking to a room full of engineers and asking a ton of questions.

And so the prompts that you put in AI or the prompts that you put into whoever you're talking to, like your interview, you're asking me questions. If you ask good questions, you're going to get a lot of content. Well, that's what you want to do. So I would focus not on what you don't know. I would focus on what you need to know and start asking questions.

And you did it. You just went through a logic process. Yeah, that's all great. But what happens if what happens if? Yeah, but yeah, but yeah, but you're not looking for a reason to say no. You're looking for a reason to believe. Sometimes people think people, you're you're focusing on the negative. Sam Zell, you know, Sam Zell is or was. Yeah, Sam Sam Zell, you know, everybody thought Donald Trump was the big real estate mogul. He was the most famous, but Sam Zell was right. I don't know, at least five times bigger. Sam Zell was amazing.

And Sam Zell wrote a book called Am I Being Too Subtle? And in the introduction to that book, he said that his superpower was not his ability to see the upside, because everybody sees the upside, any clown can see the upside. But I had the ability to see the downside and look for a way to do the deal. Because when you understand the downside, now you know how to make a better decision. Warren Buffett, pretty well-known investor, doesn't invest in real estate, but he's got a pretty famous saying.

Rule number one, don't lose money. Rule number two, always remember rule number one. In other words, you can't afford to fail. So you have to think what could go wrong here? What could go wrong here? What could go wrong here? And you get people who are qualified to help you make that decision or get that intelligence. What do I need to know to make a good decision? And you'll figure it out.

And then when you see it, use your common sense. whatever anybody's got enough money to invest is smart because they figured out how to master something in their life and go out and earn, provide enough value to the world that they make money. So they're smart and they're very competent in their area of expertise, but they've never put any time in this. And so they assume, well, I'm really smart over here, but I can't be smart over here. Yes, you can. Yes, you can. Because all the information in the world is available to you in the palm of your hand. You just have to learn how to ask good questions.

And that takes a little bit of time. And then after that, you trust your judgment. Now, it's good to become part of a mastermind or an investor club or someplace where you can bounce ideas off people. Nothing wrong with that. And then the other thing, stay in your lane, no matter how good the deal sounds. Right. If you haven't had time to learn it and understand what you're investing in, I would say don't do it. Or if you do just, you know, even though it may seem like a conservative investment, take a very small bite and consider that part of your speculative.

slice your portfolio so that if you lost at all, wouldn't change your life at all. And maybe by making that small investment, you'll pay more attention and you just chalk it up to tuition. If you lose it, if you make it great. But if not, then then you learn the space. that that, you know, it's the only way to me you can do it. You just got to dig in.

Pascal Wagner (48:23)
I'm thinking tactically, if I'm trying to implement what you're talking about here in a typical deal, you know, we're talking LPs, looking at deals, asking the operator questions, looking at the investment deck and trying to figure out what am I missing in this deal? And the first questions that kind of come to mind to me are what you mentioned around location. rent growth. Why is this area growing? Typically an operator will have tons of

I have a deck saying, this, you know, we've got the 20 biggest companies here and they're bringing lots of jobs. And then, and then the real question instead of taking that at face value, it is maybe more like, okay, if I over the next five years, given what's happening in the economy, do I think all of those employers are going to stay?

Do I think all of those employers are gonna continue to hire if that is the driving force for rent growth or take Florida, for example, there is, why did we see a mass migration of people into Florida? It was because of COVID and in COVID, COVID ended at some point. And so the dynamics of

when everyone's like, we have massive rent growth, people are moving to Florida, it's more remote. If you take away the things that started the trend, then you shouldn't expect it to continue. And I think that's, you know, we're now seeing that with prices dropping in Florida and that, and, but yeah, I guess, you know, I'm pointing a couple of these out that maybe a listener can take some of these and apply, but

I'm just, you know, that's a, it's an interesting skill to try and teach someone how to do, you know, that, doesn't come naturally.

Russell Gray (50:00)
Yeah, well, you know,

you came to my my workshop, how to win funds and influence people. And I what I teach there and this is applicable. I told you this is the greatest skill to ever have because it's about discernment. It's about understanding. If you say what's going on in this market? Well, all these people have jobs. Why do they have jobs? Well, because all these companies are here. OK, so you go from a what to a why to a what? And then you say, well, then you got the what all these companies here?

why are all these companies here? And now you're getting back into their motivations because at the end of the day, people and money move based on motives. And you have to understand the motives of the actors that you're depending upon from your tenant all the way up to the jurisdiction, whether it's the locality, the municipality, the state, or even the government, what is the motivation?

So for example, we had the Bakken. I talk about this a lot, right? Back in the days when the shale boom hit and there were no jobs anywhere in the country, they were looking for oil everywhere and they found some up in North Dakota. Nobody wanted to live in North Dakota until they found all this oil. And so now they find all this oil, all these construction workers who couldn't find any work because of the real estate bust are now getting into the oil business and they all move to North Dakota.

They're sleeping in their trucks. It's 30 degrees below zero. They're bringing in trailers. And so now everybody is screaming in the real estate, hey, big opportunity, huge demand, come in here and build rentals. Well, the challenge is that, you know, I looked at it, I said, yeah, but to your point, what happens if the oil prices change and it's no longer affordable to drill oil? What happens if the oil, you somebody invents a technology where, you know, oil isn't a thing anymore, right? I mean,

People want to live in North Dakota or are those people all going to move out? Right. So, you know, we ended up not doing the go zone during Katrina was another example of that. So what we saw Trump do in Trump 1.0 was he recognized the short-term motivation of people who invest money. And so he goes, you want to get this big tax break? You want to get this big capital gain break with an opportunity zone? You got to park the money there for 10 years. That was the deal. So he understood that I got to keep that money there long enough for it to catch.

And so these are the types of things you do. You think about, okay, what, then why? What, then why? Okay, and then who? Who's the decision maker? What are they doing and why are they doing it? And are the things that making them want to do it gonna continue or not likely to continue? And how likely are they to continue? So it's just a lot of asking questions. And that's why, again, I'm a big fan, you know, start a little club of investors and do.

Conference calls once a month and talk about what you're working on and what you're looking at and why you like it and where you don't like it. Let other people poke holes in it. It's good for you. Don't be afraid of having people challenge you. Say, I don't want them to blow up my deal. Wouldn't you rather have the deal blow up before you fund it than afterwards? I if it's going to blow up, it's going to blow up. You're not looking for a reason to say no. You're looking for a reason to say yes. And the reason to say yes is that you see

as many of the risks are as visible and you have a risk mitigation strategy or risk mitigation tolerance that makes the investment acceptable. And so an investment that has risks because they all do is still a go as long as you've been able to put that risk in proper context. And it always comes back to context. That's why you have to have these types of conversations, which I'm having a good time with, by the way. Thank you.

Pascal Wagner (53:26)
Yeah, I'm really enjoying this. like thinking of frameworks that we as investors can use that don't necessarily need to be shortcuts, but are filtering mechanisms to help us know if we should spend more time researching this deal. And I'm trying to apply what you're talking about here of thinking about the underlying dynamics and what are the trends.

And I'd love to get your take on this idea of this. It's kind of similar to the five whys that you might hear of like, what is the root cause of a problem? And looking at demand for the investment that we're looking at and then understanding where are we in the cycle? And I think if you take those three things, it'd be like, okay,

Why is there a lot of demand? Okay, we have a bunch of manufacturing facilities around, it's causing a lot of people here. Cool. Those two pieces check. Now, where are we at in the cycle? Are we at the beginning of that cycle? Are we in the middle and we see it continuing for another 10 years? Or are we closer to the end of that cycle? And that might even be for a specific city, like a city has been growing and

You're hearing an operator talk about, we've had 3 % rent growth year over year for the last three years. And then you need to look at the deal and say, yeah, why?

Russell Gray (54:45)
Then the question is why? Why?

What are the drivers? And that's really what you're looking for is drivers. The cycles are interesting, but cycles don't happen in a vacuum. They happen because of drivers. There's something driving it. And it could be tax. It could be interest rates. It could be legislation. It could be tariffs. It could be demographics.

Pascal Wagner (54:49)
and

Legislation?

Russell Gray (55:11)
And it's usually not any one thing. And that's why you have to kind of look at it and then begin to think at what are all of the different factors. And then you always have to ask yourself, what am I not seeing here? What am I missing? And then when you go through that whole process, and if you really listen to biographies or read books by people, Ray Dalio, Warren Buffett, Charlie Munger, some of these great business people.

You know, I'm enjoying Elon Musk's biography, but you begin to think about the thought process, Sam Zell I mentioned. Think about the process they go through and how they make their decisions. Ray Dalio all about principles. He's got principles, guidelines, testing. He tries to focus on the facts and remove the emotion. Tries to everybody. It's like if you've listened to his or read his book.

And the culture at Bridgewater was pretty much anybody could challenge anybody on anything at any time. Right. There was no hierarchy. There was no ranking. Right. Whoever had the best idea, put it in play. And there was no dumb idea. The worst thing you could do is think something and not say something. That was the culture. And so because of that, they were very successful at seeing things that they didn't see. And they avoided having a culture of a bunch of yes people that went along to get along. And they made better decisions because of that.

And so you can think a little bit about that even in your own culture, knowing your personality. Are you somebody that enjoys conflict? You always see the contrary. Or are you somebody that is always trying to get along and you're going to be super agreeable? You may not change your stripes, but then you can put somebody else in the decision-making loop with you that offsets what your weakness is. Robert Helms, when we were together, Robert is very prone to action. And I tend to be more analytical.

All my life, I've always worked with people that were more prone to action because it pulled me along. God, once you pushed me out on the dance floor, I was happy to dance, right? But getting the, you know, over my own inertia to get out there. So you just have to know who you are and don't put yourself down for it. Understand just like in syndication, anything that you need is available out there. And for every inadequacy you have, somebody else is going to have an adequacy and for every

inadequacy somebody else have, you're going to have an adequacy. And so you can find ways to partner up. And it can just be on a deal. And again, it can just be in an exchange of ideas. You don't have to get into financial bed with people. You can get into idea bed with people. You can just share ideas and think things through. And they're going to be happy to have you there. If you're studying, if you're doing your homework, if you're speaking up and you're helping them think clearer, see better.

be wiser, then you're going to be welcome in that community. One of the things I love about what you guys do with Best Ever is it's about community. I I went to the first Best Ever Conference and I made two testimony videos on my own. I'm going to send them to you guys because I thought it was fantastic. You brought in thought leaders. You brought in people with different perspectives. You had

discussions on stage with people that, you yeah, I think you should only do real estate or I think you should do business. I think business is stupid. Now, some people like, well, now I'm confused. Just tell me what to do. Tell me what to think. Right. If you catch yourself thinking that way, that's a sign of intellectual laziness. And you can't really afford to be an investor if you're going to be intellectually lazy. But it doesn't mean it has to be hard work. It can be a lot of fun. Just get in the right tribe.

Pascal Wagner (58:37)
Something

you mentioned, I do see, I'm wondering if you see this trend working with a lot of capitalizers, but I think there are a lot of LPs who get new into the industry and I see this idea that it isn't as, that it doesn't take that much work. You just need to figure out the right operator to work with and you know.

That's kind of enough. And then now as things are starting to go sideways these last couple of years, I feel like there's a lot more eyes being opened. I still, you know, what you mentioned about, where do you think the line is between you deciding to manage yourself and investing in deals like these versus trusting a professional manager?

to do it.

Russell Gray (59:22)
I think that for people who are very busy and high net worth, high income, that's why they create family offices. They hire a professional to manage their portfolio for them. In between that would be a professional money manager, like a registered investment advisor. And then you have to really vet that one person. If you found out that you had terminal cancer or you had some really bad, rare disease,

Would you just pick some guy out of the internet search or would you actually ask around and try to find somebody that's got a great reputation, do a deep dive on who they are, what they've done, really get to know them, make sure they get to know you. You're probably going to pay a lot for that service, but if you're busy making money elsewhere, probably worth it to you. And so I think there's a big opportunity in that space as more people.

I think get out of trusting the Wall Street machinery, which has been living on printed money, easy money for decades. You're gonna find out that these so-called professional money managers riding the equity wave of inflation and fake, what I call fake equity as we described earlier, when that glitter all rubs off and I think some of that's happening right now.

People are going to be wanting to invest in real people. They don't want to be some account number for some big brand. They want to know who they're doing business with. They're going to want to invest in investments and asset types and markets. They understand they can see, they can feel, and they're going to want to have explained to them at least the basis of a thesis so that they can intellectually go along, even if they let somebody else do the heavy lifting. And even then I would stick my toe in the water cautiously, give them a little bit of money to manage and see how they do.

And then you can begin to increase it. So this is really a shift. It's part of why I got into financial education. It's bigger for me than just seeing people become wealthy. I feel like without freedom, wealth doesn't mean anything. Our founding fathers were wealthy and they sacrificed their wealth to give us freedom. They didn't give us their wealth. They gave their wealth to buy us our freedom. We used our freedom to become wealthy. Now,

We've had over many years a government that has made us less free. And as a result, we've become less wealthy. And to supplement that loss of real wealth, they've been feeding us a credit bubble for decades. Well, that credit bubble is now at the end of its life cycle and we need a giant reset. And the question is, what is the reset going to be? If we just sit back and let the powers that be figure it out, you can guess that the powers that be are going to stay the powers that be.

and whatever rises in the place of our current setup probably will not be good. History says that when a system resets, if you give more centralized power to a group of people, absolute power corrupts absolutely, and we've seen that. The answer is decentralization. Main street investing in main street is decentralization. It's taking the money away from Wall Street and saying, why should I on main street run a business, do a job, live below my means?

pay taxes, send my savings to a consolidator, whether it's a bank or a fund, who then gives the money to a big company that I have to go work for. So let's see, how does this work? I get up every day and do work and the bulk of the profit goes to the big company. And then I take what little savings I have left and I give it to the big bank or the big fund. And then they take my money and give it to the big company that I'm working for and they make the profit off it. What do I get? I'm carrying the freight.

Right? This is why we have what's going on in America right now. People may not have the economic education, but they understand this thing is totally rigged. It's flawed. the younger people are waking up going, you know what? The older guys rode this thing, kicked the can down the road, and now we got to pay the piper and it's our generation. Well, I don't feel like it's a specific age generation.

that needs to solve this problem. think it's a particular group of people who happen to be on earth and alive at this moment. I don't care if you're 25 years old or you're 65 years old or you're 85 years old. This is our collective problem. And the way we're gonna solve it is by Main Street investing in Main Street. And today with technology, we don't need these market makers. We don't need banks. We don't need Wall Street. We don't need them.

We can do peer to peer lending. can do private placements. We have the right to contract. We have the right to privacy. We don't have to be in these big searchable databases, right? We have rights. We just need to stand up and take our power back. And that's what the Main Street investing in Main Street movement has meant to me. It's why I got started coaching syndicators a dozen years ago when I saw the jobs act come out. I realized that, and I wrote a report on it, new law breaks Wall Street monopoly. wrote that in 2013.

I think early 2013. And my prediction was you were going to see a whole bunch of people get into the private equity space on Main Street and we're going to see a big boom. And we made an effort to be at the front end of that. And I'm proud to say, I think we gave birth to a lot of movements in doing that. And I think that's fantastic. So now it's like, OK, what's next? This thing is up and running, but what's next? Well, two parts. One is we have to do better at self-policing. So I have a call later today with

some folks that we're working on putting together some form of an association that will create some training, some standards and due diligence and whatnot for the private placement or the Main Street syndication space. And then the other thing is, is we need to educate Main Street investors as we're doing right here and now on how to actually get involved in it and all the reasons to do it. I know you can get a...

quick fix, you can get a quick hit, you can buy a stock and have it go way up and woohoo. But you know what, you're feeding the machine, you're feeding the beast. And at some point, that beast is going to come to town, and they're going to buy up all the real estate in your marketplace, and you won't be able to buy it investment. It might feel good if you're the seller, but it's not going to feel good for your kids. It's not going to feel good for your kids kids at some point, right, a generation has to step up and say enough is enough. And I think we are.

that generation, this movement, this Main Street capitalism movement, Main Street investing in Main Street. That's why I left the real estate guys. That's what I'm focused on doing. And not just for, you know, people, younger people like you or people my age, but I'm talking about getting to the children. I created a foundation, the Raising Capitalist Foundation, to get mentors who are experienced investors and entrepreneurs working with parents to help teach our kids principles of capitalism.

You know, it's scary to think about, there are 14 year olds right now in high school that are going to vote for your next president. What do they know about the real world? What do they know about what it takes to create real things and provide real services? They just think everything should show up. They should buy an asset. It should just go to the moon and they don't have to work. I'm going to buy bit. I'm not putting down Bitcoin. Don't get me wrong, but I'm going to buy Bitcoin and then I don't have to do any work. I'm going to sell everything I own that's real. I'm going to sell my business. I'm going to sell my house. I'm going to quit my job. I'm going to

borrow everything I have, I'm put it all into Bitcoin, and then I'm going to wake up in five years after I've been sleeping on my mom's couch and I'm going to be a billionaire. And that might happen, but what have you contributed? That's a wealth transfer mechanism. It's not a wealth creation mechanism. And that's what happens when financialized thinking makes its way into society. We have to turn that around. We've got to become productive. know, mean, love him or hate him, I'm cheering for the Trump agenda.

to revitalize Main Street and Main Street productivity. And I think if that happens, it's gonna be wonderful for Main Street investing in Main Street, it'll be wonderful LPs, wonderful for GPs, wonderful for real estate. It's gonna be a big opportunity to raise private capital to inject it into small businesses. And we don't need banks, we don't need the Small Business Administration, we don't need hedge funds, we don't need venture capital. We just need Main Street investing in Main Street.

Pascal Wagner (1:07:04)
I'm loving it. Russell, this has been an incredible show today. Where can people find more about you and what you're working on? Love you to touch on that a little bit.

Russell Gray (1:07:12)
Yeah, I'm getting everything all put together. I've been a year kind of organizing it and getting myself set to go. So I'm a kind of a measure twice cut once guy. But just send an email to follow at Russell Gray, R-U-S-S-E-L-L-G-R-A-Y.com. Follow at RussellGray.com. We'll send you an email, tell you all the places I am, all the outlets I talk and way I share. If you like it, keep subscribing. If you don't, unsubscribe, no harm, no foul.

Pascal Wagner (1:07:38)
Love it. Russell, thank you so much for joining us today. This was incredible. Yeah, and we'll have to do a run too at some point.

Russell Gray (1:07:46)
Anytime, really had a good time. And thanks for letting me go. It's like sometimes I don't get a chance to just go. So I really appreciate that.

Pascal Wagner (1:07:52)
All right. Thank you so much for joining us. This is the Passive Income Playbook with Pascal. If you loved this episode, please don't hesitate to share with a friend or leave us a review. We show up on Thursdays, this Thursday and every Thursday moving forward. And our whole mission here is to help you become a better LP investor. Thank you so much for joining us on the show and we will talk to you soon.