Ray Dalio, Real Estate, & Chicken Nuggets

Ray Dalio talks about him being a macro investor, meaning he looks at very large scale events and analyses cause and effect and how that will impact investing.

An example of this could be once war in Ukraine broke out, Ukraine is a huge exporter of corn, so if we were farmers or investors in agriculture that could be a good sign for us to expect an increase in the price of corn and anything that uses corn since a major exporter will now likely not be able to export as much corn as they previously could.

Quick Notes:

Would you rather listen than read? Check out our Podcast

Looking to replace your income with passive income? Check out our Retire Within 10 Bundle and get our RETIREWITHIN10 Calculator, Top Secret Investing Strategy For Sales Professionals, and a special bonus download: RETIRE WITHIN 10 Bundle

Interested in investing passively in syndications? Schedule your intro call with us here: https://calendly.com/justin-732/investor-call

So that’s an example of analyzing cause and effect relationships and investing based on macro information. Ray Dalio actually used this type of strategy to make a huge investment possible, which is McDonald’s production of the chicken nugget.

McDonald’s didn’t want to produce chicken nuggets at scale because they were having a hard time getting consistent prices for chickens, and they didn’t want to constantly have to change the price so McDonald’s was considering not even offering them anymore.

Ray Dalio used his macro investing techniques and cause and effect relationships to break down how McDonald’s could make this a viable investment.

When digging into pricing of chicken nuggets, the primary cost is the chicken itself, and the leading driver of that cost to farmers was in chicken feed which is predominantly soy and corn.

By understanding that the price of soy and corn would ultimately have the largest impact on the price of chickens, which would then have the largest impact on the price of chicken nuggets, and by securing consistent courses of corn and soy production McDonalds was able to lock in a consistent price of chicken and start to offer chicken nuggets at large scale.

So, when it comes to real estate investing, how can we bridge macro knowledge to local real estate to make strong investing decisions, there are a few trends we’re watching that are swaying opinions on asset classes….

Oil & Gas is an interesting investment right now, this is actually a conversation I initially had about a year ago with the managing partner at a family office and have kept seeing signs of this asset class growing, one piece of macro knowledge is that there are government forces pushing companies to invest in green energy, which is pulling investment out of oil & gas, which is causing a widening gap in supply and demand where production of oil is likely to decrease with demand still remaining high.

Another is the lack of mass efforts to move to sustainable energy products. Electric cars are probably front and center of these efforts, but in 2022 14% of cars were electric, but that 14% took over 60% of all lithium we mined for the year, meaning there’s a ceiling with electric cars that we’re not able to address yet because wide scale production of lithium won’t be able to sustain much more.

Other examples could be China’s aging population and growing cost of labor and energy pushing companies to reshore production to South America, which will increase demand for warehousing and transportation hubs by the southern border as opposed to ports.

Real estate is a hyper local form of investing, but understanding macro events and how those events push or pull demand of locations or asset classes, can help position you as an extremely effective investor.