Our Investing Strategy In This Age Of Uncertainty

Were you forwarded this email? Subscribe here for free.

Welcome to the Age of Uncertainty.

For at least the next four years, this will be our guiding mantra. As I write this, Donald Trump has just taken office, and his early moves have set the stage for what promises to be a volatile yet opportunity-laden era.

While some in the financial publishing world are already peddling fear and overhyped "opportunities," let me be clear: I won’t tell you there’s some magical event or secret strategy that will make you rich overnight.

Instead, let’s focus on a proven, steady approach to building wealth—the same approach that’s worked for the world’s leading private equity firms and investors.

A Predictably Unpredictable Presidency

Donald Trump’s presidency has already shown it will be anything but predictable. While his campaign rhetoric suggested an immediate trade war with China, his first day in office included no tariffs but rather a review of U.S. trade policies.

Similarly, executive orders on immigration and border security were signed quickly, including measures to halt birthright citizenship and "catch and release" practices. These moves align with his promises but will likely face significant legal challenges. Expect court battles to dominate headlines for the foreseeable future.

On trade, Trump announced plans to overhaul the U.S. trade system, establishing an External Revenue Service to explore tariff opportunities. Energy policy took a sharp turn with pledges to ramp up oil and gas production, dismantle offshore wind leases, and end electric vehicle mandates.

These policies are poised to benefit U.S. energy producers, including those we have invested in through royalties, infrastructure, and non-operator ownership interests. I’ve handpicked the best in our Real Income Portfolio. Higher production and prices will directly boost the returns from these assets.

Inflation and the Markets

While the economy is relatively strong with low unemployment, decent consumer balance sheets, and continued spending, inflation remains a significant concern. Prices have come down from their peak, but inflation is proving stubborn. Factors like potential labor shortages due to stricter immigration policies could exacerbate wage pressures and push inflation higher.

Similarly, disruptions in energy or grain markets could reignite price spikes.

For investors, this means the next decade may see subpar returns on major indexes. Even bullish projections suggest only 3-5% compounded annual returns.

Inflation-adjusted, those returns could be negative.

Historically, markets priced for perfection in an imperfect world often disappoint.

The Real Income Report Strategy

Amid this uncertainty, our approach remains focused on what works: high-quality, cash-generating assets bought at attractive prices. We operate two portfolios: the Total Return Portfolio and the Income Portfolio.

Total Return Portfolio

This portfolio (for Premium subscribers only) focuses on real estate investment trusts (REITs) and other real estate assets. Since 1972, REITs have consistently outperformed the stock market, delivering strong total returns through bull and bear markets alike. Our strategy prioritizes best-in-class properties with solid balance sheets and reliable cash flow. Here’s what we’re buying:

• Open-Air Shopping Centers: Grocery-anchored centers are a cornerstone of our strategy due to their stable income streams. These properties benefit from high occupancy rates and long-term leases with tenants that provide essential goods. Their resilience during economic downturns makes them a dependable investment.

• Medical Office Buildings: With near-100% occupancy rates, medical office buildings are driven by aging demographics and growing healthcare demand. These properties often feature long-term leases with healthcare providers, ensuring steady cash flows and low tenant turnover.

• Class A Office Buildings: The best properties in top-tier markets. Class A buildings attract premium tenants and benefit from limited supply and high demand. While lower-grade office spaces face challenges, Class A properties maintain high occupancy and rent levels, particularly in urban centers.

• Apartments: Multifamily properties have a track record of strong performance across market cycles. With growing urbanization and housing demand, apartments remain a reliable source of rental income and long-term appreciation.

• Casino Properties: These properties are leased to tenants with deep pockets and feature long-term contracts with built-in rent escalations. Even during crises, casinos have proven their ability to generate consistent rent payments, supported by strong consumer demand for entertainment.

Our approach is rooted in margin of safety. We seek properties trading below conservative estimates of net asset value, backed by fortress-level financials. By focusing on cash flow and intrinsic value, we can weather market volatility and capture long-term appreciation.

Real Income Portfolio

For investors focused on income, this Premium-exclusive portfolio emphasizes high-yield, asset-backed debt securities. The core principle here is simple: cash flow reliability and minimal financial risk. We hold:

• Commercial Real Estate Mortgages: These loans are secured by high-quality properties, including premier New York City office buildings. With strong collateral and conservative underwriting, these mortgages offer attractive yields and a solid margin of safety.

• Mortgage REITs: We invest in both residential and commercial mortgage REITs that focus on high-quality underwriting. These securities provide robust dividend yields, backed by diversified portfolios of mortgage-backed assets.

• Energy Infrastructure Debt: Investments are secured by pipelines, storage facilities, and other critical infrastructure. These assets generate stable, long-term cash flows due to their essential role in energy transportation and storage.

• Oil and Gas Royalty Trusts: These trusts hold non-operating interests in thousands of oil wells across the U.S. They directly benefit from higher production and commodity prices, providing a strong income stream tied to energy market dynamics.

Our credit-first approach ensures we invest only in securities where repayment risk is negligible. We target undervalued assets with strong cash flow, providing a steady income stream while preserving capital.

Inflation Protection and Volatility

Real estate offers a natural hedge against inflation. Rising prices lead to higher rents and property values, boosting cash flow and asset appreciation. Additionally, our strategy thrives on volatility. Market pullbacks create buying opportunities, allowing us to add high-quality assets at discounted prices. This is how wealth is built: by making volatility work for you, not against you.

Long-Term Focus

Unlike many analysts, we don’t chase trends or try to predict short-term market moves. Instead, we concentrate on assets with enduring value. Our investments are designed to withstand economic shocks, political uncertainty, and market downturns. By focusing on quality, value, and cash flow, we can deliver strong returns over the long run.

Final Thoughts

The Age of Uncertainty brings both risks and opportunities. We can’t predict every move the Trump administration will make or how markets will react. But by investing in high-quality, cash-generating assets, we can build a resilient portfolio that thrives in any environment. Whether you’re looking to grow your wealth or generate reliable income, our strategies provide a solid foundation for navigating the road ahead.

Thank you for joining me on this journey. Together, we can turn uncertainty into opportunity and continue building wealth the right way.