Private Placement Investing During Chaos

by Marc Halpern, Founder Deep Due Diligence Investors

April 4, 2025

It was not Warren Buffet who originally said, "buy when there is blood in the streets."

Baron Rothschild, an 18th-century British member of the Rothschild banking family, is the one who said "Buy when there's blood in the streets, even if the blood is your own." Rothschild made a fortune buying assets in the chaos that followed the Battle of Waterloo against Napoleon.

Here we are on April 4, 2025, the second day after "Liberation Day" and the American consumer is likely to cut back on everything from retail to cars/appliances/furniture to luxuries such as travel and vacations, all while the global economy is undergoing major transformation on an hour-by-hour basis.

How does that affect our DEEP due diligence (DDD) for private placement offerings (PPO's)?

I will be soon adding a video to my training program that, among other things, will highlight "The Track" as a formal component to DDD in addition to The Jockey and The Horse.

I am in the middle of DDD on an open air retail PPO and a business park PPO in which more than 40% of the rent comes from a tenant that sells a non-essential home improvement product.

The viability of these two PPO's appears to depend heavily on discretionary consumer spending. It is an easy decision to be gun shy at this moment to invest in anything that requires discretionary retail spending. Retail discretionary spending at this moment might meet the definition of "blood in the streets."

Then again, we would be buying into projects with high the cap rates = low price = potential large long-term gains.

My biggest increase in net worth came from buying single family homes in 2010 and later when home prices were very low. The low price meant that I could buy low enough to achieve positive cash flow at a low portfolio-wide occupancy. My occupancy was actually pretty good and the result was that I passed the threshold of accredited investor that led to my passive private placement investing today. Had I not bought single family homes when there was blood in the streets, I would not be where I am today.

As long as cash flow is breakeven or better, one can greatly benefit from major appreciation when the market recovers.

If so, then the question for the open air retail offering and the business park offering may come down to a combination of breakeven occupancy during the downturn and personal risk tolerance.

I'm not a big fan of the predictability of the Wall Street Casino, but the forward-looking fickle stock market yesterday and today (April 3-4, 2025) dropped 10% in just two days and it suggests that there is blood in the streets (Liberation Day = liberating cash from US consumer checking accounts and liberating net worth from 401k's).

So, when you have a great jockey on a great horse on a bad track (as shown in the picture), is it time to buy in anticipation that the track will get much better in the future? Can we win the race as long as the jockey keeps the horse moving forward on this extremely muddy track?

The easy decision is to sit on the sidelines in the stands and watch the jockey race the horse on such a muddy track that it is nearly impossible to move. The harder decision is whether to place a bet.

Personally, I intend to wait a few weeks and see how retail markets play out before deciding if to invest in the open air retail PPO and/or the business park PPO. Both are managed by best-in-class sponsors (great jockeys with track record) and provided significant strong supporting documentation (good horses subject to more DDD). I want better clarity about the track to increase my confidence before making the decision to wire money for investment.