Student Loan Debt and The Difference Between Paper And Real Assets with Ryan Moran

Jason Hartman welcomes Ryan Moran, founder of www.Capitalism.com. The conversation centers around assets and they look at the difference between paper and real assets. Ryan and Jason also discuss student loan debt and its burden on society. They go further and discuss whether or not it should be forgiven. To end the show, Jason gives a monthly mortgage update.

Investor 0:00
What I’ve learned is is you like to mention be area agnostic is one of your commandments and that I love that I like to look at this is also be when it comes to real estate investing, be age agnostic, who cares what age you are, you can start doing this in 19 like you did, you could start doing this 20s you can start doing in your 50s I started my 50s

Announcer Ryan Moran 0:24
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you Follow in Jason’s footsteps on the road to your financial independence day. You really can do it on Now, here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 1:14
Hey, this is Episode 1096. And someone is here to do the intro.

Ryan Moran 1:19
Welcome, everybody to the creating wealth podcast. I’m Jason Hartman to remind you that real estate investing is the number one asset class in history. Let’s dive into the show.

Jason Hartman 1:31
Okay, there we’ve got a comedian in the room. So this is my friend Ryan Moran. He really doesn’t talk like that. We’ve been at his beautiful lake house here in Austin, Texas, doing a mastermind retreat the last few days. Ryan, thank you for that. It’s been really really awesome. You know, you’ve been on the show before you are a returning guest and you have a huge podcast audience yourself. So today you had a good idea as to what to talk about. And that is the difference between paper assets. assets and real assets. And I love this topic.

Ryan Moran 2:04
Well, you and I recorded a great podcast with our mutual friend, Mike Dillard. And we were talking about basically making economic predictions about what’s going to happen over the next couple of years. And we all know it’s going to be interesting, it is not going to be interesting. We know that and we live in interesting times. I don’t always have something going on in the news or something, Jason. Anyway, the we were we had disagreed on a couple couple ideas, but where we kind of came back to is this really interesting brain gasm that that I had anyway, which was we like to measure economic cycles and GDP and all these numbers be made this great point, Jason about at the end of the day, they’re still assets before collapse, and they’re still assets after a collapse. And so the thing that collapses, actually, the paper value of all the things that we’d like to measure, I mean, even if we look at something like like Bitcoin, where everybody was all getting gung ho and excited about the run up to 16,000 or wherever at What were they excited about? They were excited that the idea that they would sell that so that they could buy real assets. And so real assets are the fundamental underlying driver of everything that we’re seeking. And so we like to have this conversation about what the paper value of things is going to be. But it doesn’t mean anything.

Jason Hartman 3:20
I love. I love that you said that because virtually all of the news media is about the paper value that I’ll call it the nominal value, in name only. That’s what nominal means, right? They talked about nominal dollars versus real dollars, right? inflation adjusted or not inflation adjusted. And, you know, that’s really an issue of nominal, right. And that’s what everybody talks about. If you turn on CNBC, or you read any article in the Wall Street Journal, it’s always about this paper value or nominal value. It’s not about the intrinsic value, right? Right. And things have intrinsic value. So the thing that spurred that thought, and I love that we’re expanding on this now as when we were recording today with Mike, the three of us were doing a little economic Roundtable. You’ll hear that on an upcoming episode. And I said that the day before the great recession started, there was a certain amount of assets in the world oil houses, companies, copper, gold, silver, platinum, palladium, everything, right. All these things were there. And then most people consider the Great Recession to have started the day Lehman collapse Lehman Brothers, right. And that company was in business for like 146 years. And it it died. It just collapsed, right they let it collapse after that the day after Lehman collapse all those assets were still there weren’t that Yeah,

Ryan Moran 4:41
they were there. And so we get obsessed over that quick when the quick thing that the buy and sell the flipping paper value thing but at the end of the day, what do you even after the paper values for your after it so that you can have some sort of freedom, some sort of autonomy, some sort of empowered Mint. And the way you do that is by putting that into real assets that have cash flow. Yeah, something that was interesting. I think you were on stage at one of our events, the capitalism conference, cap con, that’s right and said, an investment is only as good as the business mind. Because all investments are a business. A single family house is a business you have absolutely, you’ve got one customer and you’ve got one product and there’s profit. It’s so everything comes back to business, because everything comes down to an exchange of value. And if we’re just trading value to other people, we’re speculating, we’re not creating value. We’re not even investing in value. We’re hoping that there’s another sucker that comes later down the road, right?

Jason Hartman 5:40
They call that the greater fool theory. And I remember hearing that back in the 80s. In the 80s, there used to be this thing, the greater fool theory, they would talk about it, you know, all the real estate gurus back then would talk about it. And the greater fool theory says, no matter how much I paid for this house, some greater fool will come along and pay more and that’s a special disaster, isn’t it,

Ryan Moran 6:01
you are speculating on something outside of your control, changing in your favor, and it’s just not a it’s not a good bet. It’s not. Anytime you bet on something outside of yourself. It’s usually not a good bet.

Jason Hartman 6:13
Oh, that’s good. That’s good way to put it. So one other thing though, there’s one more thing to this, you know, the paper asset thing, everything you said is exactly right. But the title of those paper assets also changes hands, right? For example, if you have a stock and it’s valued at, you know, $100, and the Great Recession happens and it goes to 50. Right, you might get a margin call forcing you to change the title of that stock, meaning it’ll be owned by somebody else. The asset is still there, but the title, the ownership could change, right? I’m not following what you’re saying. Well, I’m just saying the reason people have a wealth effect when things are good is because they gain title. Two more assets are those assets increase in value one or the other and during a bad time, depression or a recession, they lose titled assets or the value of the asset loses, you know. And so when when the value of the asset declines, whether it be a house or an apartment complex or a stock, if it’s leverage, they get essentially a margin call.

Ryan Moran 7:17
And this the leverage part of that explanation, but even if the dollar amount of the value goes down, has anything actually changed about the asset itself? And it’s all there. And that’s the interesting conversation. And so what we’re really debating or really trying to discover when we’re market timing, for example, is trying to identify what is the the true valuation of the underlying asset. And if you’re happy with that, if you’re happy with the underlying value, then that’s when you should buy. Even I like to speculate what the market is going to do. Is it going to go up it’s going to go down I think, if we have a pullback, but the floor is like 15,000, but all that, to me is an indication of what am I going to buy? What am I going to continue to buy Wednesday? Going to be the cheapest price for which I can buy the assets that I’m already buying right now. And they’re undervalued. Yeah,

Jason Hartman 8:06
very good way to look at it. So what do you think is coming? I mean, it’s, you know, predictions are usually worth the paper. They’re real. Okay. But But, you know, if you had to guess and speculate, I mean, certainly things are changing. Look at the Trump trade, as they call it is largely gone from the stock market. Okay. Now, a lot of people made money trading in between when things were very high, but now they’re kind of back to where they were right. We had the Trump trade when the election happened. So stocks went way up, and then they went way up again, with the GOP tax plan. Okay, those two things were huge, you know, upward spirals for the stock market, but they’ve pretty much evaporated now, maybe they’ll come back Who knows? Bitcoin is way down. Gold sort of doesn’t do much at all, you know, but it’s a measuring stick, right? They at least has been, what do you think is gonna happen next?

Ryan Moran 8:53
I think what is going to happen next, is we’re either going to be flat, or we’re going to be down I think we’ll probably hit a another point of resistance at about 20,000 on the Dow. And if we break through that, I think we will have a very quick but very severe market correction. And or we would call that an economic recession. And and I think it will be severe because we are so overvalued, but that it will be quick because all the economic fundamentals are fairly healthy right now. So I think the biggest problem has been the overvaluation of these assets. So you will, I think you’ll have a major correction in their paper value. So I’m telling my friends and family members to sell stocks. I’m not an investment advisor This is for this is just for entertainment purposes only. I don’t,

Jason Hartman 9:43
there’s the disclaimer, I

Ryan Moran 9:44
have no idea what I’m doing. I’m in sell mode on a lot of my stocks and and some other assets. I’ve sold some real estate, I’ve sold a couple businesses, and I think there’s going to be a major correction and paper values, but I don’t Think that we’re going to have a big economic recession because the economic fundamentals are there. There’s just been a total over inflation of the surface level valuations.

Jason Hartman 10:09
Yeah, no question, especially in cyclical real estate markets that have been overvalued for several years. And I said that years ago that, you know, LA and, and every other cyclical market around the country, the expensive Northeastern markets, you know, the South Florida market, virtually all of the West Coast, totally overvalued and around the world. Same thing is true.

Ryan Moran 10:29
I would say that about Fang stocks. Oh, yeah. on the market. I mean, so if we look at something like Apple, Apple at its high was at about 230. And today was right around 170 or so. So it’s come down about 25, maybe a little bit more percent. And some people are like this is shockingly low. It’s like no, we’re getting closer to reasonable. I think apples are great by at about 150 and I think we’ll probably be able to get that scooped up at about 120 around that range, I think is where we had a little bit of a bottom but like it It’s a good business to buy. It was never a good business to buy it $220 a share. It was a complete overvaluation of of an asset.

Jason Hartman 11:09
Are you largely basing that on PE ratios? Or what’s your

Ryan Moran 11:12
metric EA I’m basing on.

Jason Hartman 11:15
So if you look at the price to earnings ratio in the stock market, that’s the same thing as the rent to value ratio in the real estate market, basically. Now, the rent to value ratio, of course, is a simplistic version of that. Because really, you should look at net operating income cash on cash return. Those things, the commercial real estate, people would say cap rate, but I think cap rates a little bit flawed. We don’t need to go down that rabbit hole. We’ve done it before. But you know, one of the interesting things you asked Today on our little roundtable discussion with Mike, is you asked about debt, and we didn’t really you asked but then the question when Mike answered that question like a politician, he’s like, Did you ask

Ryan Moran 11:53
Yeah, he did. He totally dodged that one and talked about Bitcoin or something.

Jason Hartman 11:58
And here’s how politicians answer Questions. It’s like someone asked them a question then the answer their own question. Right? Any did that nothing against my but that’s just where the conversation went. You know, the interesting thing about debt is debt does cause collapses and markets and so when consumer debt gets too high auto loan debt gets to lie real estate debt gets too high compared to values. Of course, college student loan debt gets too high. And this time around, I don’t think the real estate debt is much of a problem. Because the banks have been they’ve really overcorrected. And they’re still too damn conservative. They really should be a little more liberal with their financing in my opinion. However, you look at the student loan debt situation and you’ve got 1.3 trillion with a T dollars in student loan debt. All government insured most well, mostly government insured through Sallie Mae thoughts.

Ryan Moran 12:52
Well, this is actually why I think we have if we have a recession, it’s a much softer recession than what we had in 2008. I think that we’ve been a little bit conservative in lending except at the Federal Reserve where we’ve had zero percent interest rates, and now two or two and a quarter or whatever it is right now. So that has that has been liberal, but the way that it has been invested into real assets, like real estate has been more conservative than the 2008 crash, but you have something like the student loan debt. I don’t think that will be the unraveling of the economy. I think it’d be another reason why we have a big market slowdown, but I don’t see that leading to the overall collapse, like some of my peers disagree and that it will be a collapse. I’m not of that opinion.

Jason Hartman 13:34
I just think there’s got to be a like a debt Jubilee or some kind of relief in the

Ryan Moran 13:39
market. I hope not. You go up puke up everything I’ve ever eaten.

Jason Hartman 13:44
Well, tell me why you say that. But I just think that I don’t think the millennial generation your generation can handle that debt load of all that student loan debt they’ve racked up.

Ryan Moran 13:53
Well, the reason why that would be a bad idea is because you’re now punishing people who did things well. And you were forgiving people who did not do things as well.

Jason Hartman 14:02
Yes, you’re definitely right about that. But, you know, there’s an argument that they were scammed, okay? They got all these stupid liberal arts degrees that they no one’s hiring for, you know, feminist studies experts, right? There’s just not jobs for that they should have been in STEM fields, right?

Ryan Moran 14:18
And then college is massively overpriced. So Exactly. So Jason, if if you forgave all that debt, then you would continue to prop up the price of college.

Jason Hartman 14:29
Totally agree we need to take away the financing so the price drops to market level

Ryan Moran 14:33
that that’s exactly right. So you have to go through that pain. In order to prevent the next generation from being scammed. You have to let the college bubble burst. And that sucks and that’s why government always makes it worse.

Jason Hartman 14:49
Yeah, government always makes it worse because they throw money at something and then the you know what, what are the kind of can’t blame the college’s right they’ve got this tidal wave of money coming their way. So why not raise the price at four times the rate of real inflation, right? And just, you know, sell colleges based off health clubs and nice dormitories, and, you know, nice grassy quads and things like that, rather than fundamental education. It’s it’s absurd. But tell us what you think that collapse looks like in the student loan debt market, for example.

Ryan Moran 15:23
I don’t I don’t know.

Jason Hartman 15:25
Neither do I. here’s a here’s why. Here’s why. Because you know, that debt is not dischargeable by bank through bankruptcy, like every other debt out there. Unless the law changes, I

Ryan Moran 15:36
think what you’ll have that you’ll have a generation that is forced to become entrepreneurs. And that’s the only way out is the only way out. Like they either stay living at home and they become like the skipped generation, or they become skillful in the marketplace and they develop, I don’t like jubilees because I think pain can be a really good indicator of what we do need do next and the minute that we try to reduce pain, especially economic pain, you reduce a lot of really important economic indicators. And so you, you have to let it hurt. And the result of that is that some people get screwed. And we have to blame government for that. And others feel pain and they adjust. And the adjustment is how we heal.

Jason Hartman 16:23
Well, that’s a that’s a very good thing. And I would say that I would compare that to what happened to me last week. It hasn’t happened really in years. I actually got sick, okay, so I was dying one day, you know, with fever and all this stuff was terrible. But, you know, all you can really do is cover up the symptoms, right? None, nothing you buy, no drug you buy will cure you. There’s no cure for the common cold, right, or the flu. But there are things to cover up symptoms, but the symptom, the pain, if you will, is an important indicator to your brain of what your body needs, right. And if you Cover it up, and you don’t deal with it that can make the problem worse, right?

Ryan Moran 17:04
I’m not skilled to understand the human body in that way, but but I think that is exactly the case when it comes to when it comes to the economy. And we might make a similar example with terms of like drinking. Instead of medication. I can look and comment on drinking like

Jason Hartman 17:20
you Okay, drinking, we’ve all done that.

Ryan Moran 17:23
Well, I mean, you so you mask the symptoms of depression, for example, by drinking, right and it feels better for a short time. But eventually you have to pay that debt. Eventually you either become you implode or something else terrible happens unless you just get through the pain,

Jason Hartman 17:41
right? Yeah, absolutely. Yeah, you got to deal with it. That’s good way. Okay. We got to wrap it up. give out your website, if you would, but also some other thoughts. Any closing thoughts on this topic?

Ryan Moran 17:51
Yeah, my website is I love socialism, Doc. No.

Jason Hartman 17:57
I know it’s not bad.

Ryan Moran 17:58
My Websites capitalist dot com, I have a podcast network and my podcast show is called the 1%. It’s about personal development, investing and starting businesses for cash flow. My final thoughts on the topic are, it’s always a good idea to buy good companies at good prices or good houses at good prices, or good investments at good prices. And I think we’re in in for a window in which will have a lot of good prices, but the overall strategy doesn’t change it, have a business and use the cash flow, Matt to buy up your other assets, building businesses and investing the profits. That’s the path to creating wealth.

Jason Hartman 18:39
I want to ask you a little bit about building businesses for just a moment before we go. So you have a huge audience where you teach people while you start you got your start teaching people how to build Amazon businesses. And I met my girlfriend through your art from your audience right now. She’s out there listening, I’m sure. You know, you’ve got this big audience that does that. Right. Now you’ve you’ve expanded that a bit. So tell us what you’re up to nowadays.

Ryan Moran 19:04
So I got my start documenting my journey of building cash flow businesses, and the one that really hit was a physical products brand. And it took most of my sales on Amazon. So I accumulated a large Amazon ish following, but my my driver is building businesses to create freedom. I think we’re all trying to expand personal freedom. That’s what that’s why we’re in this game. And now what I have expanded to is is talking about that broader idea of creating freedom. And one of those routes is through starting businesses, and we have trainings that you can help people do that. But ultimately, money and wealth is the first step to liberating you as a human being. And then you get to go on your personal existential crisis and figure out the rest of your meaning of life.

Ryan Moran 19:49
Very good way to put it. Awesome. Ryan Moran, thank you so much for joining us today. It’s great having you on the show again, and we’ll have you back again soon. Investors. Thanks for joining us. We’ve got meet the Masters coming up, you can go to Jason hartman.com slash masters. For more information on that you’ve got early bird specials. This is the first time you’ve heard that announcement. And that is coming up in Southern California here in just a few months. So get your tickets early for Jason Hartman comm slash masters, and we will look forward to seeing you there. Thanks for joining us and happy investing. And here’s Adam with our monthly mortgage update. So welcome to the December mortgage minutes. We’re here with a lender from Jason Hartman’s network. How are you today? Good, how are you guys? We’re doing pretty well here. Now the Federal Reserve has come out and currently their rate is sitting at two and a quarter percent. They have said previously that they are expecting to raise rates to two and a half percent in December. But recently we’ve seen an inverted yield curve. Do you think that impacts what they’re going to do in December? I think for later the next hike in December, it’s somewhat priced into the market. I think if they decide not to Another rate hike because of the yield curve, I think that maybe you’ll see some improvement in mortgage rates, I do know that their attitude towards rates moving forward or opinion towards rates moving forward will be data based as opposed to, you know, quantitative measures, which is what we’ve seen over the last few years. So I think that moving forward, we may see the December hike, if we don’t do might see mortgage rates improve, and then going into 2019. I think it’s going to be more of an economic data analysis situation on whether they move rates up or down from that point forward. Now, what kind of movement are you talking about when you say we might see rates improve, rather minimally, I think if they move in a certain direction, or they started trend down or trend up over 2019, you may be see mortgage rates trend up or down as they move the fed fund rate to account for the economic growth that we’re seeing our laptop, right but what I’m asking is if we don’t see a move in December if they decide to hold What kind of movement? would you expect, if any, to happen to the mortgage rate? We might see just a slight improvement to where we are today, possibly in a to the point. Okay, but you can see other economic factors mitigate that, you know, very easily. So, if the stock market were to plunge into 2019, or towards the end of the year continues to decrease, then I see the Fed not acting as a good indicator for mortgage rates. But as the economy continues to grow, stock market continues to bounce a little bit and the Fed is not to have any action, then I think that we could just stay status quo. speaking more anecdotally, how have the mortgage applications been coming in for your business? Are they still steady? Have they slowed down and they picked up and What are y’all seen in your office? Well, you know, we’re, thankfully a preferred lender with with Platinum properties and we see and work with a lot of your clients. But we also work with a lot of other independent turnkey providers, so our application volume has remained relatively steady. Okay. Throughout the year, our closing ratio has remained relatively steady, you sold about 50 loans a month. So, you know, overall, I think application to closing ratios are pretty steady, regardless of the fact that we’ve been in a rising rate environment for most of 2018. Now, do you still think once the yield curve inverted Did you see any movement inside the bond market that kind of was a bit of an aberration outside the bond market? I think you see mortgage rates just improved slightly over the last couple of weeks. You know, so we’ve seen rates come off a high maybe a, you know, an eighth or a quarter point higher in the last two weeks back down, you know, to a more palatable rate, I would say, for your standard 20% down, invest in property, single family homes. Right. So what are the rates for that right now, prior to the curve, inverting? You know, we were seeing 20% down on an investment property, single family home with good credit scores above 6%. Now we’re seeing that down below 6% at 5.875 5.75. And if you put 25% down, we’re looking More at raising the five and a quarter to five and three, eight range, which is, you know, to the quarter, quarter to 318. Point off the highs. Now what loan size is that? You’re talking about basically averaging about 80 to $100,000 loan size. So that’s specific to your typical, you know, average turnkey price points that we see across the, you know, the number of loans that we apply every month and close every month. So now, is there anything coming up that you think might impact the mortgage market in the next few months other than, you know, the yield curve? Well, Fannie Mae and Freddie Mac are raising their prices really to the turnkey model, let their minimum loan size is jumping up to four at 430 50. And on January 1, so that’s a good move in terms of, you know, borrowing power and the conventional level, as opposed to moving into the jumbo world with regard to the turnkey and investment property financing. You know, I would hope that Fannie Mae and Freddie Mac continue along the trend of loosening their guidelines. You know, recently Freddie Mac loosened some guidelines there. they’ll allow you to do up to 10 finance properties just like Sandy bang. So typically one moves ahead of the other and then the other catches up. So I’d like to see hopefully in the in the near first quarter of 2019, first half 2019. See Sunday May kind of loosened more of the investment property guidelines. Maybe we all hope that they will allow us to finance more than 10. So I’m hopeful for that it’s a constant poisonous conversation with Sandy me know Is there anything I haven’t asked you that you think investors need to know? I just think that most investors, the two knots and I’ve not looked at rate so much as the most important thing in their investment portfolio, but the right off that it provides the bigger picture of having an investment property portfolio, passive wealth, but it does provide the security that it will provide as you grow your portfolio and rate is it is a good indicator of you know, indicating what your ROI is. But over time, you can always raise the rents and we had that conversation with customers all the time, that it is possible to, you know, lock in a certain race for 30 years and Never touch it again, but still improve your ROI. All right. Well, thank you very much for your time. Thank you, Adam.

Ryan Moran 26:11
Welcome to today’s property profile, the creating wealth show. This is producer Adam. Today we’re going to take a look at a property that’s currently available through Jason’s network located in Davenport, Iowa. This is a five bedroom two and a half bath 2441 square foot single family home that is located in Davenport, Iowa. Davenport is located along the Mississippi River and is the largest of the Quad Cities. With a population just under 100,000. Davenport saw 1% population increase between the 2020 10 census reports with an estimated growth of two and a half percent since then. The median age is 34. With 95 men to every 100 women Devons economy is driven by manufacturing with over 7600 jobs. JOHN DEERE is responsible for around 1000 of those jobs. Health care makes up about 8000 total jobs. The people in Davenport have a household name income of just over $25,000 and a family median income just over 35,000. This property is $135,000 price tag gives it a cost per square foot of $55. The home itself rents out at $1,300 for an RV ratio of point nine 6% with assumptions of 8% vacancy 5% maintenance 9% management fee and 25% down to $33,750. If you don’t want to use percentages and interest rate of 5.75% you’re looking at a cash flow of about $189. Your cash on cash will be about 5% and total return on investment with tax savings would be in the 29% neighborhood. If you’re interested in this property, contact your investment counselor and tell them that you want more information about the property linked in the show notes. For more properties available in Jason Hartman’s network, go to Jason hartman.com forward slash properties. Obviously this research is not guaranteed an investor should do their own research, get professional advice and conduct due diligence prior to vesting, we’re doing our best to help.

Jason Hartman 28:03
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.

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