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Should you really be buying index funds right now?

Speaker 1 (00:00):

Hi everybody. This is John Denton again, and I’ve got another exclusive video with my good friend, Tim, Melvin, he’s got some surprising insight on an important aspect of investing. For those of you that have 401ks or any kind of investment account, I guarantee you that you have some sort of index fund in those accounts. They’re especially popular with people that are getting new to investing and the stock market, but should you really be buying index funds right now? Well, Tim’s here to set the record straight and the answer may surprise you. Welcome back to him. How’s it going, man?

Speaker 2 (00:30):

Hey John, how are you today? Good to be back catching up. Yeah, it’s you know, index funds are all the rage they’ve been around since the seventies, but it was John Bogle at Vanguard funds really made them the flavor of the day. Everybody loves an index fund. Your college professor loved index funds. Warren Buffett says, well, most people can’t do what I do. So you should buy an index fund. And when he, you know, he’s even left instructions that when he dies all the money has to go into an index fund, right? So, you know, you go in, you say, I want to get some money in the market. And Kim can’t make any in money in interest rates. What do I do? I buy this index fund. It’s going to give you this great long-term rate of return. And she’s just going to tell you, it’s not going to work out that way right now. You do not buy an index fund right now. I’m not telling you, you got to go out and sell your index fund if you own one, but don’t buy one right now when you buy an index fund matters. Okay? It matters a lot. If you bought an index fund in 1999, you weren’t happy over the next 10 years because you made no money. Right?

Speaker 1 (01:39):

I was about to say, you didn’t make any money in that stretch

Speaker 2 (01:42):

Of time. Exactly. Now, if you bought an index fund in 2009, you’re a happy camper, right? You really are. You’ve averaged close to 15% a year on your money. It’s just been fantastic experience owning that index fund when to buy matters. And now is not the time to buy. This is the kind of market where you want to have a black Swan hedge on like you and I talked about a few weeks

Speaker 1 (02:05):

Ago. Exactly. Yeah. Those of you who don’t know, go back and look at the video. Now, after this one, black Swan, I think

Speaker 2 (02:13):

Everybody should have that on right now in their portfolio. It’s a great idea. And also stick to what I call special situations investments. Don’t worry. I’m going to give you an example of one at the end of this video. So you can get an idea of what kind of things you should be looking to do with your money. Don’t buy an index fund. I’m pretty much begging you. Well, you’re

Speaker 1 (02:31):

Upsetting a lot of people because I remember when I first started getting invested, you mentioned college professors and all that. That’s when I started investing was in college and yes, all my economic professors were like, oh, you have to get into index funds. This is the best way. And it’s just seems like it’s a, they’re beating a dead horse. So you’re saying there’s more to it than just jumping right in, right.

Speaker 2 (02:50):

The academics and the professors. They’ll tell you, Hey, you know, time cures everything. So if you can leave your money in here for a long time, you know, you’re going to be great. Okay. Except what if I don’t live that way? Great. I need my money

Speaker 3 (03:03):

To grow today. Things happen. Yes they

Speaker 2 (03:07):

Do. And it’s people say, well, they know what are the chances of that? Well, pretty high, you know, from 1968 to 1982, if you own an index fund, you made no money, none. Same 2000 to 2010, you made no money. 2007 to 2013, you made no money. So the market can go a very long period of time. Just kind of tracking sideways or going down and coming back. So when you put the money in matters and now is not the time John, when I look at the market, we’ve gone straight up since 2009 with just last year’s hiccup, which the fed money whipped. So we came right back and exceeded the previous highs. So now we’re at levels where the market is trading at the highest tenure average PE ratio. When we call the Cape ratio ever, wow, this is higher than 2007.

Speaker 2 (04:04):

It’s higher than 2009. You’re paying more to buy a dollar of earnings than you ever have before now back, many, many years ago, Warren Buffett was asked, what’s your best indication of whether the stock market’s cheaper or expensive? He said, well, yeah, generally speaking, if I can compare the total market cap of all stocks to U S GDP, that gives me a pretty good idea. The lower that number is the cheaper. The market is the higher. It is the more expensive. Sure. Okay. John, it’s also at the highest level ever. Okay. So you’ve got just a really overpriced expensive market and they, you know, people are gonna justify it with low interest rates. I don’t care how you make a mental equation, right. Of that. Historically, from anything close to this level over the next decade, you’re not going to make a ton of money.

Speaker 2 (04:57):

Just investing in the stock market indexes. You really have to be specialized. Okay? Yeah. You’ve got to look for situations. We’re called special situations. First off, if you’re investing in stocks, put a black Swan trade on, it costs a very small amount of money. Go back, watch that video, get it done. Because if we get a crash, you’ll be fine. You’ll be off. You know, you won’t lose money is basically what will happen there. So let me give you a trade that I like a special situation right now. I love this trade. I would put it on with anybody’s money. Mom, grandma, kids, anybody, because no matter what happens, you can’t lose money in this trade without just disaster happening. Okay? Okay. So there’s a real estate investment trust out there called Monmouth Monmouth real estate investment trust. The symbol is M N R okay.

Speaker 2 (05:45):

Monmouth owns industrial real estate. That means warehouses guys. That means, okay. That means e-commerce. That means rebuilding the supply chain. Monmouth was little forward thinking than most, and what’s the best sector of the real estate market. They started years ago concentrating their warehouse portfolio in the Southeastern portion of the United States because they realized that the widening of the Suez canal was going to divert traffic from LA and long beach to east coast ports. Wow. So that’s where that they’ve still got some properties out west, but most of them Southeastern portion of the United States. And it’s paid off

Speaker 1 (06:23):

Some impressive insight for them to really look and dig into that. I’m going to look forward. Like that’s brilliant. Yeah.

Speaker 2 (06:28):

Brilliant. Now another brilliant guy also has decided he wants to be in the industrial real estate. His name is Sam Zell may or may not have heard of him. Those of us that follow the market. I love Sam Zell. Cause he’s a grouchy old guy. Who’s made a lot of money buying stuff that nobody else wanted at the time. He’s they call him the great dancer. He’s made billions in real estate and he really is. He invented the real estate investment trust. Back in the seventies, he remade the industry into what it is today. He’s decided he’s going to buy Monmouth. He’s made an offer of $19 and 40 cents a share a four month. And he’s using a REIT to buy this and it’s going to be a stock for stock deal. This is great news. The REIT that he’s using is equity. Commonwealth Zell took this over as an activist trade back in 2015, I believe it was okay.

Speaker 2 (07:20):

And he immediately went about the process of selling all their properties. They had a hundred and some properties they’ve got eight left. He sold it all paid out special dividends, bought back some stock, but he’s got almost $3 billion in cash. So when this deal is done, Sam Zell and his team best real estate investors ever, couldn’t be sitting there with two, $2.9 billion that they can leverage out of 30 billion to buy new properties and a portfolio of warehouses, single tenant warehouses like FedEx ups. Coca-Cola all the big companies, big names, big names. And I’m doing my part to help out here because a beam Suntory the makers of Jim beam and maker’s mark. They also are tenants. So I’m helping,

Speaker 3 (08:07):

I’m helping him cashflow.

Speaker 2 (08:11):

So they are going to be a massive player in the fastest growing segment of the real estate business. Now, interesting Barry, Sternlicht another really well known a real estate investor came in and made a higher offer. The board turned him down. Wow. They said, no, long-term, we’re going to make so much more money. Having Sam Zell with his style pack of cash and cashflow from the existing portfolio, we will make so much more money than your offer. We’re just going to say, no thank you and move on because we’ll still be shareholders when this deal is done, right? If no, I don’t care what the market does. You’re going to beat the index with this trade.

Speaker 1 (08:49):

It’s it’s, there’s so many facets of it that seem to be coming together exactly the way they should. It’s it’s, it’s impressive. It’s mind blowing almost.

Speaker 2 (08:56):

It’s a perfect storm of opportunity and it’s, it’s not just e-commerce and Amazon and FedEx and ups. It’s, you know, the entire supply chain is getting remade because of what happened last year, we’re creating demand for warehouses. It’s just this incredible rate rents are going up and you know, how many industrial REITs had problems with people paying rent when the pandemic hit last year? None. Wow, no corporate tenants. Everybody needed the space. There was demand for it. All the rent got paid on time. Every time it’s the cashflow is going to keep coming in, this will pay four or 5% dividend. We don’t know exactly how much yet, because we’ve got to wait for the deal to close. But when this closes, you’re going to have the smartest team in the real estate business, operating with lots of cash and borrowing capability in the hottest sector by Monmouth real estate. Forget about the index fund.

Speaker 1 (09:53):

Well, I mean, just so many people would sit here trying to get into investing. And of course, they’re going to hear index fund index funds, and then you come along and smash that all to pieces.

Speaker 3 (10:03):

But the data

Speaker 1 (10:05):

Makes sense. It’s a matter of just math and common sense when you really, you know, there’s a lot of technical stuff in the background. A lot of people may not understand, but a lot of this is just simply, you know, market demand. Like you pointed out the math involved in what’s going on and, and where the market is right now. That’s really what it’s about. Right. Right.

Speaker 2 (10:21):

And you know, I’ve been doing this a long time, over 30 years. So I’ve, I know where to look and how to dig and what the fine in order to bring these types of special situations to my readers, even during the most extended overvalued stock market of our life.

Speaker 1 (10:35):

Absolutely. And that’s why we have you here is to give that insight to our viewers and our readers, because I know they absolutely appreciate it and they’re not going to find anywhere else. So, but Tim, again, thank you for joining me. It’s it’s I learned so much every time I talk with you, just when I thought that I knew enough about investing in the market, you come in and give me even more information and more things to learn about. And I know that our viewers can say the same thing. So again, thank you so much for joining me today, Tim,

Speaker 2 (10:59):

Not a problem, always glad to talk to you and it’s always, you know, good fun chatting with you. So I look forward to doing this again.

Speaker 1 (11:05):

Absolutely. It’ll be soon and to all of our viewers out there. Thank you for joining us again and listen to what Tim has to say. Index funds, not a good buy right now because of the way the market is. He’s going to show you how you can specialize. He just laid out an entire prophetic view on this particular trade and how it’s going to earn money for years to come. And that means you can earn money too, but only if you jump in on this and follow what TM is telling you. So please follow along, watch our videos, go to the website, click the links, get all of his reports information. You won’t be. Sorry again. This is John Dutton. Thank you for joining me. I’ll speak with you next time.