Nouriel Roubini is the New York University economist who rose to fame as the first to predict the 2007/2008 Great Recession and was given the name “Dr. Doom” for espousing what was considered then a heretical doomsday vision at a time when the U.S. economy appeared to be booming. Now “Dr. Doom” has issued his new predictions and we couldn’t agree with them more.
Prediction #1: “Anyone who still believes that a soft landing is possible is delusional”
Roubini believes that we are entering a period of “great stagflationary instability” with “massive insolvencies and cascading financial crises” worldwide in the coming years. Although the media has been in an all-out blitz to try and claim that there is no recession – or that if there is one it will be minor – to influence the midterm elections, the fact remains that nearly 100% of economists predict that the U.S. will enter a severe recession in the next twelve months. For Dr. Doom to make this prediction he’s not stretching too far as virtually nobody would take the bet that there will not be a recession in 2023. You will see much more of this in the media once the midterms are over and there’s no reason to promote a false appearance of economic strength in the U.S.
Prediction #2: Real estate along with short-term government bonds, inflation-indexed bonds, and gold and other precious metals, are “assets that will hedge against inflation, political and geopolitical risks, and environmental damage”
When I was a Stanford economics major, I remember well the section in the textbook that talked about what assets did well in periods of inflation, and the answer was exactly what Roubini has offered above. It was of interest to me because it was during the Jimmy Carter stagflation crisis. Between these protective assets classes, I would suggest that the best is income real estate as gold and precious metals pay no dividends and bonds have extremely low yields. Mobile home parks, on the other hand, have the highest yields of all real estate assets, and are also superior due to the fact that you can’t build any new ones, the customers can’t afford to move their mobile homes, and lot rents could double and still be affordable. Roubini didn’t take much of a gamble on this prediction, either.
Prediction #3: The best market to buy real estate in is the Midwest
OK, this prediction is unique. Roubini believes that “a lot of real estate is going to be stranded because of global climate change…People have stupidly moved from New York to Miami, and from San Francisco to Austin, but Florida is going to be flooded and Texas is going to be too hot to survive there. Literally there are maps that show that half of the U.S. in the next 20 years is going to be either underwater on the coastlines or too hot, or droughts or wildfires, to be living in it. There will have to be a massive migration from the South and the coastlines towards the only part of the U.S. that is going to survive climate change, which is the Midwest. So there’ll be trillions of dollars of real estate assets that are going to be damaged by essentially global climate change.”
Roubini’s prediction is extremely significant for the mobile home park business, as the top three markets for mobile home parks in the U.S. are Texas, California and Florida. If you knock out those three states, you will see a huge reduction in the total number of mobile home parks in the U.S. and that does not even include the neighboring states that will also be untenable according to Roubini. We have always favored the Midwest as a region for mobile home park investment due to a number of factors including steady economic growth, attractive pricing, stability of home prices, and strong property rights laws. Now it would appear that Roubini has added a new climate rationale for buying and owning parks there.
We have always favored the Midwest as a region for mobile home park investment due to a number of factors including steady economic growth, attractive pricing, stability of home prices, and strong property rights laws. Now it would appear that Roubini has added a new climate rationale for buying and owning parks there.
Prediction #4: The Fed will soon “wimp out” on interest rates
Roubini believes that Jerome Powell will soon have to reverse course on interest rates after a lengthy period of tough talk on being 100% committed to battling inflation. The reasons are simple: the nation is losing over $500 billion a year on increased interest costs on the federal debt, and Powell is more concerned with recession than he is with inflation. Even since Roubini made his prediction, you are already seeing this item coming to fruition, with leaks coming out that the Fed is already starting to change course. This reduction in interest rates will be great news for mobile home park owners and buyers, as it will usher in renewed stability in rates and will increase spreads on deals that saw them stating to thin.
Conclusion
Roubini was one of the first to predict the 2008 Great Recession – and did so at great personal peril as many branded him an idiot for predicting doom during a time of seemingly economic boom. Due to his past success, you have to take what he says seriously. And, to be honest, we would support all of those theories ourselves. The U.S. is rapidly changing due to terrible decisions by the current administration as well as other world leaders and you have to go a new path to create financial freedom in this unstable environment. At times like these, you should absorb as much information as you can and make your own educated decisions from a number of sources.