Preserving Wealth as Real Estate Falters

Published on
March 5th, 2019
Duration
58 minutes

Preserving Wealth as Real Estate Falters

The Interview ·
Featuring Michael Sonnenfeldt

Published on: March 5th, 2019 • Duration: 58 minutes

Michael Sonnenfeldt, founder and president of TIGER 21, is known as one of the greatest real estate investors in history. But in this introspective interview with Grant Williams, he describes himself more as an entrepreneur who learned the most from failure. Going forward, Sonnenfeldt sees massive changes in demographics and interest rates driving real estate. He also explains why his need for wealth preservation drove the formation of TIGER 21 and why, today, inequality is one of the issues he’s most concerned about. Filmed on January 30, 2019 in Boca Raton, Florida.

Comments

  • MT
    Matthew T.
    2 April 2019 @ 20:57
    Just got around to listening to this as a podcast. It was so good I came back and found the episode just to express my thanks. One of my favorite interviews to date, please bring Michael back many times. He is full of wisdom and modesty, I'm going to listen again.
  • F
    Floyd .
    10 March 2019 @ 01:01
    I enjoyed the focus that Grant had in his questions relating to life experience and lessons. With regard to the bigger issues like climate change and if and how to solve that problem, I would have expected Mr. Sommenfelt to propose something other than just government is in the best position to solve the problem. If this problem is an urgent one it would seem that the private sector would play a role(technology,leadership etc..). With all due respect government has had a poor record in understanding major issues and a sense of urgency in which to solve them.
  • TS
    Tyler S.
    8 March 2019 @ 16:26
    I wonder how many of these members earned their wealth vs was given it. https://tiger21.com/membership/becoming-member
    • JB
      Jonathon B.
      9 March 2019 @ 21:38
      I find this "earned v given" position ironic. What does it matter? Did you "earn" your language, knowledge, freedoms or culture? Or was it given to you to keep for safe keeping? The same applies for wealth. Money given has exactly the same value as money earned. If you are not worthy, you will lose it quickly. Hence the quote "shirt sleeves to shirt sleeves" - one generation makes, one generation holds, one generation "enjoys" leaving the next back at the start. You choose to give your knowledge to those around your through your site, no? Should they feel it is un"earned" for visiting it? Are they not to take that knowledge that you have given and to spread it and maximise it's effectiveness? If someone reads a post or article and does nothing with it, it is the same as those who never read it. The same is done with wealth. It is good that those who are "given" it grow it as much as those who earn it. Given is the same as earned - there is no difference. PS - my parents spent their wedding night on creates and had takeaway. I have earned everything I have and 100% of my experience has shown that those who have an issue with those who are given, still have an issue with those who earn. It makes them look bad.
    • KS
      Kashyap S.
      10 March 2019 @ 05:03
      @Jonathon, if you think "earned vs given" makes no difference, you haven't watched Barbara Young's interview. It makes a lot of difference according to someone who spends time with clients who actually have inherited wealth.
  • WG
    Wade G.
    7 March 2019 @ 23:07
    Wow, what a great chat. I feel like there was a lot of wisdom offered there and I may need to give it another listen. Thanks.
  • MM
    Mike M.
    7 March 2019 @ 19:15
    Great interview. Found it interesting was no mention of the Central Bankers???? Wealth effect, Zirp, Nirp, QE, QT, Stock buybacks etal and Psuedo Free Markets?
  • JK
    Josh K.
    7 March 2019 @ 12:59
    Why so many climate change deniers here?
    • AJ
      Aaron J.
      7 March 2019 @ 20:27
      I’ve noticed that many of the climate change deniers I personally know (family and friends) are usually on the wealthier end of the spectrum. After thinking about this I realised that due to their wealth, they mostly lead highly carbon-intensive lifestyles. Frequent international air travel, flying your own airplane, boats, driving a high performance car, owning large houses, high consumption of discretionary items, and so on. I believe this is an example of cognitive dissonance as people internally struggle to reconcile their lifestyle with the unfortunate evidence that climate change (for the most part) is driven by human activity. Even though I agree with Mr Sonnenfeldt that climate change is an existential threat to humanity, I can partially sympathise with the deniers. It simply reflects a human psychological blind spot (which has been mentioned many times on RV in the context of trading) which we probably all have in some form or the other.
    • WM
      Will M.
      8 March 2019 @ 17:36
      Josh I do not deny that climate change is occurring, I just deny that it is a settled case than humans are driving it. I would say CYCLE deniers are the biggest threat. We live on a planet that has cycles just like the business cycles except natural cycles can wreak more havoc. Martin Armstrong's site has some good opposing views. We are coming into a sun spot minima which could mirror the Maunder Minimum of the circa 1600s and result in lower global temperatures with correlated poorer crop yields and potential disease pandemics. I have read and heard us move from global cooling to warming in just the last 30 years alone and yet as Armstrong shows on his site historically there have been comments on global climate change from as far back as weather reporting has been around. Too many people equate pollution of the environment with CO2 production. That is nonsense. One of the biggest greenhouse "gases" is water vapor i.e cloud cover. A couple of Mount Pinotubo eruptions on the planet could provide quite a shock as solar dimming coupled with potential global cooling in an extended solar sunspot minima yields us with a sharp shock that humans are getting it wrong yet again.......
    • JB
      Jonathon B.
      9 March 2019 @ 21:41
      Why so many climate change believers own smartphones, computers, air conditioners, cars, fridges......... ?
    • BC
      Burton C.
      13 March 2019 @ 06:20
      Because it's not driven by mans input, but the sun and orbits
  • DF
    Dominic F.
    6 March 2019 @ 23:28
    "Middle ground where People of Reason could find Common Purpose" This must be the quote of the year :-)
  • DS
    David S.
    6 March 2019 @ 20:08
    What a pleasure! Boatload of wisdom well delivered. Thanks to both of you. DLS
  • GO
    Greg O.
    6 March 2019 @ 19:46
    Fascinating guest, listening to him was a time well spent. Thank you!
  • KC
    Kenneth C.
    6 March 2019 @ 19:41
    Incredibly smart man. I'll simply disagree with him on climate change and man's ability to affect it. In regards to deficits, our government, our representatives, have spent our way into it. It's not simply reducing taxes. And I am very interested by what means he believes that we will "close the gap" if not by taxes. I do not blame him for not wanting to pay any sort of wealth tax, I do not either and it will more affect my lifestyle than his. I believe he doesn't want to pay the tax because he does not believe in the govt's ability to address the deficit problem and wisely apply his tax payment towards it. And yet he wishes us to believe in this very same govt. I always remind my friends who bring up the taxation system that they can voluntarily contribute more in the way of taxes. Grant, another great interview. Thanks.
    • DS
      David S.
      6 March 2019 @ 21:19
      Just believing that man has no effect on the climate without supporting evidence or reasoning is a cozy corner. We fall into this trap from day to day. DLS
    • SM
      Stephane M.
      16 March 2019 @ 01:41
      Hey David, you should read this!! Posted Mar 15, 2019 by Martin Armstrong QUESTION: I find it interesting that you are against human-induced global warming yet you confirm that climate change is natural. You seem to be in the middle of these arguments. You warned that solar activity was declining and there was a risk of going into a mini ice-age, but you did not seem to place high odds on that one. So can you elaborate on this since you seem to be the voice of reason? GR ANSWER: Sunspot activity has declined on schedule. February was an incredible month void of sunspots. This is clearly contributing to the extremely cold weather we are having. Cyclically, between 1645 and 1715, there was a prolonged collapse in sunspot activity known as the Maunder Minimum. Indeed, that was a period where sunspots all but disappeared. This coincided with the “Little Ice Age,” which was a period from 1500 to 1850 in the northern hemisphere. It was so cold, Viking settlers even abandoned Greenland. I have stated many times that a major error in analysis is the attempt to reduce a problem to a single cause and effect. This topic of climate change is no different. Many scientists have strongly suggested that the Maunder Minimum caused the Little Ice Age. As I have shown, correlating everything that took place revealed that during solar minimum there is also an increase in volcanic activity and earthquakes. You will read that scientists seem to be debating between the two rather than comprehending that EVERYTHING is absolutely connected. We cannot reduce everything to a single cause and effect. Therefore, in order for me to confirm that we are heading into a new ice age requires more volcanic activity in addition to a prolonged solar minimum. The sunspot cycle is also called the Schwabe cycle, and currently, we are moving toward the end of cycle 24. It does appear using long-term cycle analysis that cycle 25 will probably be at the very least a quieter cycle than we are concluding here with cycle 24. There’s been this steady decline, so we are indeed heading into what could be a prolonged solar minimum. There have been several protracted solar minimums since 1000 AD: Oort minimum (1040–1080 AD) Medieval Minor minimum (1150–1200 AD) Wolf minimum (1270–1350 AD) Spörer minimum (1430–1520 AD) Maunder minimum (1620–1710 AD) Dalton minimum (1787–1843) This post-Dalton minimum peaked strangely with the Economic Confidence Model on 1989.95. The peaks in solar activity have been declining with each wave subsequent to that turning point. It is now declining faster than ever previously known for nearly the last 10,000 years. Pretend scientists claim climate change is due to human activity. They were predisposed to arrive at that conclusion and not offer legitimate analysis whatsoever. Society expands during warming cycles and contracts during periods of global cooling (see chart above). I have also warned that if next year is colder than the 2018/2019 winter, and if this summer ends up with an expansion of drought, then besides keeping an extra supply of canned goods, the short-term cycle would warn of a further cold period into 2024/2025. The problem here is that if governments can blame humans, then they can tax us. When something is natural, there is no one to tax or blame except Acts of God. So YES, there is always climate change, but humans do not create it. There is far more complexity to this than a single cause and effect. REAL analysis cannot take place when the objective is always to reduce it to a single cause and effect.
  • MS
    Matt S.
    6 March 2019 @ 18:24
    Umm... perhaps find out where the Pentagon has lost 21 trillion dollars? Never mind about tax, that's the entire national debt right there.
    • DS
      David S.
      6 March 2019 @ 21:20
      Where did this fact come from? DLS
  • MS
    Matt S.
    6 March 2019 @ 18:12
    What is this talk of, "the greatest transfer of wealth in our lifetimes" all about? Dan Pena is always saying this too... but I don't really know what it means.
    • EM
      Elean M.
      6 March 2019 @ 18:53
      In the next 20 years all of the worlds billionaires and $100+ millionaires will be reaching their end of life and all of their wealth and assets will be transferred to their heirs.
    • KC
      Kenneth C.
      6 March 2019 @ 19:28
      10,000 Baby boomers are hitting 65 every day. The front end of that demographic is roughly 77 years old. And they are starting to pass away. This demographic is also the wealthiest. That's what they're talking about. On the other side of the spectrum you have the Millennials who are already being identified as the other rapidly growing demographic in terms of wealth and affluence.
  • CW
    C W.
    6 March 2019 @ 16:07
    I never fail to be impressed by someone who is willing to openly attribute his or her success at least partly to luck and admit weaknesses and who sees early failures as positives. Michael also comes across to me as very insightful. I especially like his take on how age and how much you can afford to lose affects your investing behaviour. "Where you stand depends on where you sit" is a great quote.
  • SW
    Scott W.
    6 March 2019 @ 14:27
    RV - global warming is a hot button topic and always gets a rise from the audience. Maybe a discussion between two non-polarizing, polite, rational professionals with different perspectives is in order. Or individually as part of a short series. Perhaps anthropogenic C02 is causative; perhaps any effect cannot be distinguished from noise and natural cycle. BUT, I'd be willing to listen to somebody making an argument provided he doesn't equate me with a holocaust denier.
    • DS
      David S.
      6 March 2019 @ 21:28
      Scott W. - You are one in million who would listen with an open mind. DLS
    • JS
      J S.
      10 March 2019 @ 17:58
      Great idea.
  • RS
    Robert S.
    6 March 2019 @ 12:47
    Great point on age related difference in investments in a single investor scare of loss with accumulation of assets versus age related testerone reduction and less willing to risk not dealt often enough with IMHO
  • LW
    Lukasz W.
    6 March 2019 @ 12:40
    One thing I know for sure; my parents will not have to bother how to distribute their wealth. First because I am their only son and second they are broke.
  • SF
    Simon F.
    6 March 2019 @ 11:32
    What an interesting and thoughtful guy, as usual opened up by Grant's unique ability to put the interviewee at ease and steer them to reveal what's valuable about their experience. The stand out for me was the opportunity to hear the story of someone who has created things that many of the RV viewers then trade. Wrestling with the real world through creating a business and coping with the personal risks that entails, often, as here, accrues unique insights and a more nuanced understanding of the real world. Grant lets hear from more wealth creators to balance the stories of wealth managers
  • KB
    Kieran B.
    6 March 2019 @ 06:56
    Any possibility of a Sam Zell interview?
  • VS
    Victor S. | Contributor
    5 March 2019 @ 23:32
    Grant i respect Michael’s story. But anyone who stresses “Climate Change” which is a scam of the highest order gets a thumbs down❗️You never here this Globalist speech ever saying lets get rid of private jets or yachts over 30 feet. This is a TAX ON THE MIDDLE CLASS PERIOD. Do you think that David Geffen’s yacht “Rising Sun “($300,000,000) and the size of and aircraft carrier cares about fuel going up 2 $ a gallon? If he talked about stopping the toys like this i would be for it. And I have no problem with wealth but i cant live with bull_hit to sell a globalist concept using the people ?
    • SM
      Stephane M.
      6 March 2019 @ 02:00
      This is exactly right Victor!! Climate change propaganda is everywhere. If you want to open your eyes, go to Martin Armstrong blog. I'm sick & tired of this pseudo climate change "science". Mother Nature is not linear...Everything is a CYCLE. If you take a 10 year trend and extrapole it 50 years in the future the result will be very WRONG. That's climate change utopia...
    • NI
      Nate I.
      6 March 2019 @ 19:14
      It's a manufactured crisis to justify more taxation and government largess on a global scale. Follow the money. Carbon tax.
    • DS
      David S.
      6 March 2019 @ 21:55
      Climate change is a single issue. It is not part of any other global issue. The world climate is and always has been changing. The question is "are human behaviors accelerating a current warming cycle that will harm human's ability to live on Earth?” Just like the controversy about the Earth being flat or round, this too will be shown in the fullness of time. When Columbus sailed, many scientist knew the Earth was round. (In fact, an ancient Greek calculated that the circumference of the Earth was about 25,000 miles in the units of distance at that time.”) In the late 1400s cartologists calculated the distance from Europe to the Orient was much farther than provisioned ships could sail at that time. Columbus was lucky that the unknown New World was between Europe and China. It is nice to be lucky. DLS
    • CM
      C M.
      8 March 2019 @ 04:43
      Those that like to say nature is just cycles (recognizing it does cycle), check out NASA's chart on carbon dioxide https://climate.nasa.gov/vital-signs/carbon-dioxide/ It is one heck of a cycle that is about 100% above its 400,000 year average. And most of that increase happened in the last 80 years. And on the same NASA pages, you can see that in the short term, all the temperature increase (since 1880 and hence a short cycle) has happened since the mid 1960s. So as investors, we should be good at tying facts together. Carbon dioxide skyrockets starting in the 1940s. Carbon dioxide traps atmosphere heat. Global tempertures rise dramatically starting in the 1960s. Basic cause and effect analysis. Seems hard to argue that mankind is not impacting that 400,000 year cycle, and that mother nature just decided to ramp up carbon dioxide in the atmosphere to levels not seen over 400,000, and how this has nothing to do with the +1 billion cars we are driving on this planet since the early 20th century (much less everything else that operates a carbon based motor).
    • TR
      Travis R.
      8 March 2019 @ 13:48
      Correlation is not causation.
    • sm
      sam m.
      9 March 2019 @ 04:54
      C.M. check out https://realclimatescience.com/ for criticism of NASA data and how it has been altered.
  • TM
    Timothy M.
    5 March 2019 @ 23:22
    I enjoyed the interview and the insight on leaving assets to your children. One interesting item was Michael suggested we are at a 30 year low in interest rates. There are a fair amount of experts, including Kyle Bass, who believe rates will move lower in 2020. I think Mr. Bass will be correct.
    • DS
      David S.
      7 March 2019 @ 22:12
      Travis R. - We both agree on the problem, it is the cause where we may differ. It is the combination of politicians wanting to be re-elected that drives up the need for fiat currency explosions by the CBs to pay for it. This includes the loophole legislation that allows massive frauds in the markets. DLS
  • JH
    Jesse H.
    5 March 2019 @ 22:12
    Interesting and insightful, and refreshing to hear from such a successful entrepreneur who has made it big yet clearly cares about people and more systemic issues.
  • TR
    Travis R.
    5 March 2019 @ 21:40
    The best way to fix income inequality is to abolish the Federal Reserve to allow debt markets to function again.
    • DR
      David R.
      6 March 2019 @ 15:01
      Yep, again. Travis is on fire today.
    • DS
      David S.
      6 March 2019 @ 22:23
      Respectfully to Travis and David, if it were only so. The real progenitors of CBs mismanagements are politicians who want desperately to retain power and be re-elected. Politicians are more often re-elected in good economies. Politicians have forced massive deficits for the CBs to fund by overspending and passing bad legislation. We elect politicians who promise everything to everyone on all sides. Then they need to kowtow all the lobbyist. Let's have term limits as a first step. DLS
    • TR
      Travis R.
      6 March 2019 @ 22:33
      David S. Absolutely the politicians share blame as do the electorate. However their behavior are symptoms not the disease. The disease is found in fiat money, central banking, and fractional reserve banking. The entire world economy is based on debt. Dollar=Debt=Slavery. I recommend The Creature of Jekyll Island by G. Edward Griffin. Also check out: https://www.youtube.com/watch?v=fKob3fGSm9o.
    • DS
      David S.
      8 March 2019 @ 07:20
      Travis R. - We both agree on the problem, it is the cause where we may differ. It is the combination of politicians wanting to be re-elected that drives up the need for fiat currency explosions by the CBs to pay for it. This includes the loophole legislation that allows massive frauds in the markets. DLS
    • DR
      David R.
      8 March 2019 @ 21:16
      Perhaps you're right. So it'd be better to just abolish federal governments. The nation state model, which is a relatively new concept, is clearly a failure. Abolish state/provincial governments too. Solves many problems.
  • TR
    Travis R.
    5 March 2019 @ 21:31
    Interesting Topic: "How not to screw up your kids". Transferring wealth to hard working, sound minded, long-term thinking children is the tough part. Mitzi Perdue has a couple great books on Amazon worth reading. Mitzi would be a great interview; more on this please.
    • TR
      Travis R.
      5 March 2019 @ 21:36
      Great advise on distribution begins at 44:30 (12:30) remaining.
  • je
    james e.
    5 March 2019 @ 20:41
    Always surprised by the thumbs down. Another terrific Grant interview. Grant, you have an art for asking the right questions to spark a great conversation and elicit the wisdom your guest has to offer. In Michael's case, that was a lot. Loved his comment, "RE is a deal business with a different rhythm than managers who work day in and day out and require a steady hand". While I would always love to hear where interviewees are currently investing (and how), the wisdom they have to offer is every bit as valuable, in some cases more.
  • NI
    Nate I.
    5 March 2019 @ 20:11
    Michael is right about the US national debt, but tax rate discussions are a deliberate distraction from the core issues. It's not possible to collect enough tax at any rate. Any discussion about balancing the budget has to being with cuts to the $600B military industrial complex (MIC) and to the welfare state. Unfortunately the one thing that gets Democrats and Republicans to hold hands and sing Kumbaya is more spending on the security state and on the MIC. According to President Trump, the $600B US military (more than the rest of the world combined) is "depleted" and you don't hear any argument from Congress.
  • DD
    Daniel D.
    5 March 2019 @ 19:26
    These are the interviews I enjoy the most. Real world/life lessons from successful, intelligent and humble people. My test is always did I learn something and would I want to have a cocktail with this person (silly, I know). The answer is yes to both. Thank you Grant & Michael!
  • KB
    Kirk B.
    5 March 2019 @ 18:58
    Brilliant interview. This conversation between a gifted interviewer and an articulate, wise interviewee elicited profound insights about investing and life from a true sage. Regretfully, only a small portion of the interview was directly devoted to real estate; yet, the observations that Mr. Sonnenfeldt did make specifically about investing and building wealth through real estate were succinct gems. While I greatly appreciated the insights about broader investing and life themes, I encourage Real Vision to conduct a follow up interview with Mr. Sonnefeldt focusing more on his insights regarding real estate, as well as having interviews with other great real estate investors, such as Sam Zell. Real Vision does need to increase the amount of content it provides about real estate investing. Real estate is a $217 Trillion industry globally, and represents 60% of global assets (Source: Capital City by Samuel Stein). Real estate represents one of the four fundamental investment asset classes, yet Real Vision has devoted almost all of its attention to the other three: equities, fixed income, and commodities.
    • TR
      Travis R.
      5 March 2019 @ 21:08
      Completely Agree. Sam Zell, Tom Barrack, Ken McElroy, and Robert Kiyosaki to name a few. More millionaires are minted in RE investing than in any other asset class. More crypto would be appreciated as well; some interesting things going on in OSTK that I would like more clarity on.
    • DR
      David R.
      6 March 2019 @ 15:00
      Yep and not just US real estate which is less than 5% of the world.
  • DW
    Daniel W.
    5 March 2019 @ 16:09
    Have not watched this yet. Does he give insights about where he is investing right now?
    • PU
      Peter U.
      5 March 2019 @ 16:27
      No
    • DR
      David R.
      5 March 2019 @ 18:42
      Ok, so then how he can talk for an hour about preserving wealth without any discussion about investment assets?
    • DR
      David R.
      5 March 2019 @ 18:45
      The title suggests real estate is bad for wealth preservation. Well that's a start but then what do do with the cash? Speaking of real estate, what about REITS, they tend to well in stagflation (falling growth + rising prices) which is the big-picture cycle the US and much of the world is heading into. Remember the 1970's. REITs have been doing fairly well for several months and this year too. Foreign REITs have been stellar, signficantly beating US stocks in many cases over six months, without the volatility (ditto some precious metals). Looks like the beneficiaries of stagflation are outperforming (stocks tend to spike and go poof during it).
    • TR
      Travis R.
      5 March 2019 @ 21:10
      David R. Agree some real estate is bad for wealth preservation such as owning a McMansion in a jurisdiction with rising property taxes. However just like the stock market you have to know where to invest. Income producing real estate is generally fantastic for wealth preservation with the numerous generous tax loopholes.
    • JH
      Jesse H.
      5 March 2019 @ 22:11
      No investment insights relative to today's markets, but insightful interview nevertheless. Well worth watching, I'd say.
    • DC
      Dan C.
      6 March 2019 @ 21:13
      Nothing actionable, really. I guess it's nice to hear what some have to say but RV is pretty light on Real Estate insights. For those of us who are not traders (maybe I'm one of the few) where is the insight for what to do with our cash? Would be good to get into real estate positioning a bit but this interview does not have it. The closest I heard was that in real estate there will always be opportunity because even bad markets misprice assets to the downside.
    • DS
      David S.
      6 March 2019 @ 22:36
      David R. I am often wrong, but I do not see stagflation. I see slow growth, hopefully, with low CPI inflation over the next five years. If this happens then Travis R. comment on real estate may be the winning hand. All real estate is local so be careful where you diversify. DLS
  • AA
    Ali A.
    5 March 2019 @ 14:28
    No simple solutions Michael? Marginal tax rates @ 70% will help that income inequality and replenish government coffers... be careful what you wish for.
    • DS
      David S.
      6 March 2019 @ 22:42
      I agree with Jeff Gundlach that we need to cut out loopholes and see how much more tax we collect before just raising marginal tax rates. The balance, of course, is to work toward much more efficient spending at all government levels. There are a thousand crises out there that will need to be fixed. DLS
  • TJ
    Terry J.
    5 March 2019 @ 12:33
    What excellent insights, including “Sam at 77 is going to be thinking and investing differently to Sam at 50”! I almost did not watch this, as I find real estate one of the less interesting asset classes, but so glad I did. What an extraordinarily rich, varied and interesting life Michael has achieved thus far, and I bet there's much more to come. An inspiration for all aspiring entrepreneurs.