Jason Hartman records this show from Hawaii as he discusses booms and busts throughout our recent history. Adam gives us the November mortgage updates then Jason moves on to the interview segment. He hosts Scott A Shay, co-founder of Signature Bank and author of In Good Faith: Questioning Religion and Atheism. They start a two-part interview discussing the dangers of society being more cash averse and the impacts of that on society and our ethics.
Announcer 0:02
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 0:52
Welcome to Episode 1079 1079. This is your host, Jason Hartman coming to you today from an hour absolutely spectacular VISTA here at the Grand Hyatt in poo poo in Hawaii, right? Is that where we Yes, boy cuca. Why? Okay, so that’s Carmen. You’ve heard her on the show before. And apparently from being on the show before. She was a little famous this weekend at prophets in paradise. We just flew to Hawaii today from Honolulu where we of course had profits in paradise for two days, our conference there at the marijuana Surfrider hotel, as there was a labor strike going on. So that was kind of interesting, interesting, for sure. And a little bit annoying, I will say, but it was a great weekend a fantastic conference. We had all sorts of speakers on a variety of topics from, you know, everything you would imagine about investing everything we talked about, but also asset protection and it was just a really great time we had 68 people, some flew from as far away as Washington, DC, Florida, and I really give a lot of credit. To the east coast people for coming out. Thank you so much for coming such a long distance. Of course, the vast majority of everybody else, there were some people from Hawaii, then some people from the western United States, thank you all so much for coming out. It was really, really great being with you. It always is, I absolutely love our clients love seeing you at events and love learning from you and getting great ideas from you. Because that’s what we really do. That’s what we’re really here for, to learn from all of our clients. And, you know, do that in addition to our own research and our own learning and so forth. But share that learning that we get from all of you individually, and kind of aggregate it and then share it back with everyone on the podcast. So every time you share your your successes and your challenges with me with our with our team with our investment counselors, or at a live event. You are really contributing to the community and we really appreciate you doing that. I don’t know if you can Hear the crashing waves here. But this is just, I gotta tell you, this is just beautiful. Is it not beautiful? Where we are
Adam 3:06
is just amazing. We’re sitting on a bench right in the middle of the beach on a swing on a swing, swinging, and that ocean just looks beautiful. There’s, it’s just I don’t know, how do we describe this? It’s just, it’s just amazing.
Jason Hartman 3:20
This Grand Hyatt Hotel is just spectacular when we walked in through the lobby, it’s got this huge opening out right to the ocean. And it’s just truly incredible. It really is. Folks, like I’ve said before, take care of the money thing. Get the money thing out of the way in your life. Because no matter what, whether you are rich, poor or middle class, money will always be an issue. And I would say it’s less of an issue when you’ve got more of it, and it’s just really a lot less stressful. It’s just a better life. So that’s what you’re here to do on this show. shows invest in the most historically proven asset class in the entire world. So you can take care of the money issue once and for all. And you know, once once you kind of start taking care of that money issue, it’s amazing how quickly things start to work in your favor when you make decisions, and you’ve become proactive about it. And I’m certainly not saying I know that most of you listening are doing all this already. So I’m certainly not saying you’re not but for those of you listening who haven’t taken care of the money issue yet, you know, when I was very young, I grew up without much money at all. I didn’t like it very much and, and you know, back then, it was constantly stressful. You know, I always had to think about money, and this and that and how much did everything cost and I still think about that stuff because I still kind of remember my roots and, of course, I love getting a deal just as much as the next person. But you know what, it doesn’t matter if I get a deal or not nowadays, right? Because the money issue was taken care of Long time ago, is Jim Rohn, one of my original four mentors used to say, and this applies to the money issue the the health and fitness issue or really any issues in our life, right? He used to say, let’s see if I can remember the quote properly. The pain of discipline weighs ounces, but the pain of regret weighs tons. The pain of discipline weighs ounces, the pain of regret weighs tons. And that’s really the thing, you know, delaying gratification, and doing the right thing today, making the right decisions today, taking action, planning, buying more investments, maybe sacrificing a few things, and not having all the instant gratification so that you can have a longer term prosperity. I tell you, when I’m in a place like this, looking at this gorgeous view and the crashing waves and the sort of Rocky and Sandy coastline here at the beautiful Grand Hyatt resort here in Hawaii. It really reminds you of that stuff. It really does. So, this weekend, it was a fascinating weekend. I learned a lot about real estate investing this weekend. And I know everybody in attendance did they said great things about it. One of the presentations that particularly was very interesting to me, and one of the really interesting presentations, at least for me, because it was it was really quite new for me, that was on bubbles. When Carrie talked about bubbles and kind of a history of bubbles. And you know, as humans, we really don’t learn much. It seems like we have very short memories. There’s the old saying, those who don’t learn from history are doomed to repeat it doomed to repeat it right? You know, there have been bubbles and manias and crashes and boom times throughout history right, way back in history a long, long way. Certainly, we’ve all heard about the tulip bubble. And we’ve heard about these other crazy times in history. We’ve all lived through a few of them ourselves, you know, every day It seems like we get into this crazy time and, and then things recede and there is or session time and, and you know, these are just the cycles and we’ve got to prepare for them. And I say that the best way we can prepare for them these cycles is to follow the 10 commandments of successful investing. But in this case, especially commandment number five. By the way, if you’d like to see some of the stuff that happened this weekend, you’re welcome to just grab the app. There are a lot of photos in there of what we did this weekend, a lot of our clients and so forth. And that’s it. Jason hartman.com, slash Hawaii, Jason Hartman, calm slash Hawaii. That was the event app. And you can just download that to your smartphone. If you’ve come to any of our other events, like meet the Masters, you have the event app, but this is the content for this past weekend. And then a little bit of this upcoming venture line strip, just so you can kind of see what we’re doing. If you’re curious. So Jason hartman.com slash Hawaii. go and grab that The app if you like, anyway, back to the bubbles, right? So those who don’t learn from history are doomed to repeat it. And we all have very short memories. We’re seeing this now with the banks and so forth, and how the loans are getting more and more liberal. And some of them seem like they’re kind of stupid and silly. And, hey, 10 years ago, we had a mortgage meltdown. And then we had a great recession, a global Great Recession. And so we’ve got to learn from this, but the way to avoid them is following the 10 commandments, especially though, commandment number five, what is commandment number five? It is Thou shalt not gamble, Thou shalt not gamble. And what that really means is the property or any investment must make sense the day you buy it, or you don’t buy it. And remember the definition of investment. at the conference yesterday, I spoke about this for a while. And I just want to remind everybody listening, what is an investment what is the definition? Well, if you look that up in the dictionary, I have no idea what it will say But here is the Hartman definition, which is the best one
Adam 9:03
should produce an income.
Jason Hartman 9:05
Yeah, well, no, I wasn’t gonna say that I was expecting Carmen, I was expecting you to say, Oh my God, you’re so arrogant.
Adam 9:13
No, I’m listening.
Jason Hartman 9:14
Okay, you’re just listening. As we’re swinging on the swing here. My definition is, and here’s how you know if something’s an investment, only one thing, it’s really simple. Does it produce income? Does it produce income, if it doesn’t produce income? In other words, if it’s a stock, and it doesn’t pay dividends, it’s not an investment. It’s a speculation. It’s a gamble. commandment number five, Thou shalt not gamble. Now, when I say that, you know, look at if you’ve got some money, if you’ve got some net worth, really, you should gamble a little bit, maybe take 10 or 15% of your portfolio and do some speculative things. I’m not completely against speculation, but I’m saying for the bulk of people who think they’re investors and when they’re really speculators and gamblers. You’ve got to go back to this definition, it must produce income or it’s not an investment. so precious metals not an investment because they don’t produce income. Raw land, not an investment doesn’t produce income, non dividend paying stocks, not an investment doesn’t produce income. Okay, property income property. Now I say income sort of in air quotes here, income property or rental property, I guess I should say, in this case, in cyclical markets, where the cash flow isn’t good, where it’s negative, if it’s properly leveraged, the cash flow would be negative, doesn’t produce income. So that’s a gamble. It’s a speculation it violates commandment number five. So just remember, that is the definition of an investment. It must produce income cryptocurrencies, what do they do? Do they produce income? No, they don’t. They are a speculation. They are a gamble. They are not an investment. If you want to weather the next storm, and you want to be a sustainable impact faster and have sustainable investments a term that’s used a lot in the environmental world, right? We hear about sustainability. Well, if you want to be green when it comes to being green with money, okay, and you want to weather the next storm in the next cycle, there will be another cycle, right? You got to follow commandment number five, Thou shalt not gamble, meaning you must be an investor, not a speculator not a gambler. So be careful out there. We are running out of time with the next two segments we’ve got coming up. So let’s jump over to Adam and get the mortgage update.
Adam 11:41
Welcome to the November segment of the mortgage minutes. We’re joined today by one of the lenders from Jason Hartman network. How are you doing today? Yeah, very good. How about yourself, man, I can’t complain too much. So investors are out there looking for homes. What kind of rates are you seeing these days. I’ve seen them range a little bit here and there just because of a lot of wild swings. But I was just hung up with somebody that quoting still the high fives, punching close to 6%. And I have seen some instances that win over 6%. In fact, me myself, I’m closing on a transaction on the state of Missouri with a competitor of mine. And I’m the only licensed loan originator in the state of Missouri for my company actually been blown there. It’s illegal for me to do my own deal. So I use a competitor and they locked me at 6.125%. Running the numbers and looking at that it really doesn’t bother me. I accepted that and I’m rolling forward, because it’s a it’s just a good deal. It makes sense. So the last time we talked to you mentioned, the Fed has been doing quantitative tightening. What have you seen in that regards over the past month or two, it’s continued to influence the interest rates. One of the things I find interesting about that quantitative tightening is the Fed was responsible for the rates going down because of the quantitative easing starting in 2009 to 2010. So that’s what drove interest rates down. Now with them doing their quantitative tightening, easing off of that injection of capital into the market as of the beginning of this year. 2000. In 18, we have seen some heavy influence to the interest rates and climbing up over 1% point a quarter to a point and a half in some cases since that time since the end of last year. But what I find interesting when you when you look at what the Fed has taken out of the market, what they stopped injecting, and you compare it back to say, 2006, before the crash happened to illustrate right now, let’s say a par rate today, or what would cause them to trust no points and say 6%. For an investor. Looking back at that point back in 2006, that same amount would have cost somewhere into five or six points according to some of the data I was looking at. So you can see we are still vastly better than we were back then when the market was at one of its all time greatest drives for real estate before the crash starting in 2007. So rather interesting to take a look at that and see the Fed has backed off the market is what is driving the mortgage backed securities in the interest rates today, and because of that, we’re still lower than we were back When he was at a tie before the crash, I’m still seeing we’re in better position. And I’m not seeing a major cause for alarm either. Because being a real estate investor, and associated with the most tax favored asset class on the planet, it really works out just as well to have a higher rate versus a lower rate, depending upon your tax bracket and where you’re at right now in your investing tour. Now, we mentioned at the end of our interview last time, that a flight to safety is really good for real estate investors. Now, recently, over the past month or so, the markets have been dropping, and they’ve actually pulled back about eight to 10%. How much of an impact do you think that we’ll have on the rates as people potentially start their flight to safety, you would have thought that we had had a lot more impact on that than what we’ve had. We’re still in a very what they called oversold position in the mortgage backed securities. We looked at the charts, because we’ve been fighting the bottom where it’s all traded out where the values are with the mortgage backed securities and finding that bottom are now just as of this morning, seeing this jump up out Have a trading range that we’ve been in since October 3. Now, if it continues on that path and continued flight to safety away from stocks in the volatility there, we may see an improvement of maybe a quarter, possibly three eights depending upon to the extent that that flight to safety occurs. You know, there’s a lot of analysts that claim that we may see a gain back of half of what we lost, since the interest rates or the mortgage backed securities started on a downward trend that happened as I started on August 24 of this year, we’ve lost somewhere in the range of looks like 170 points since that date, and the entire drop was somewhere in the range of about looks like 100 and almost about 190 points, what a drop from that time we gain that back. No, that’s going to be just short of 100 points. The game back that could we could see a quarter percent improvement interest rate potentially, the Fed funds rate is currently at two and a quarter percent. They’ve pretty much said if not explicitly, they’ve hinted that in December, it’s going to go up to two and a half percent. Will this be built in slowly over time for investors, or is it completely built in? Now, the second it gets announced the interesting thing about the Fed, they talk, it gets built in almost a day of the conversation. Everybody sits anticipating the Fed minutes to come out. Now, it doesn’t mean that the Fed minutes even though they do build in right after the Fed puts out what the intent is. And then any other things happen, the market will compound on top of that. So if that is something that’s something already laid out there, I believe it’s already built into the built into the market, especially since we are now at the worst place that we have been in the market, as far as mortgage backed securities are concerned, since as far back as my charts go, we’ve not seen it a lower point than this. So they’ve already built all that in. What we don’t know right now is what the ramifications are going to be with this little bit of a saber rattling going on between the President and the Fed president, President being appointed by our president, our president saying hey, maybe I made a mistake. I don’t know if that’s ever happened in the history of the US. So it’s really kind of interesting to see how it’s gonna work out. What have you in your company seen in terms of the velocity of mortgage requests? Are you seeing a decline as the rates have gone up? Are you seeing an increase as people try to get those lower rates before they escalate with the more and more rate hikes? or What are y’all seeing? I’m just looking at the charts as as a company company as a whole. And I’m seeing some declines. Now, there is some data that’s come out recently that shows that mortgage applications for up over the last 40 days. But that’s not what I’m seeing when I’m looking at the total volume of new applications, comparing what we typically would see within my region because I get to see those reports every day. It looks like we’re down in applications as a region. So I’d imagine as a company we’re down and applications are the company and most of our company focuses on the people buying on their occupied residences, a lot of the focus within much of our organization as a whole is a first time homebuyer and because of that we’re seeing a rather heavy decline. And applications in decline in those loan requests, because first timers are not able to afford the housing that they thought they would at today’s interest rates. Another interesting dynamic when you think about this, go back to when quantitative easing started back in 2009. That’s ever go as we’re going into the heavy downturn, and we’re going to try and try and work our way up as the economic decline. It took them up until about 2013 for people to go through all those foreclosures and go through the short sales and bankruptcies and all that negative credit. And that negative history hitting people with 13 and 14. Now, it takes seven years for some of the stuff off person’s credit and be lendable, you know, especially when you’re talking about a foreclosure in the conventional lending world, at least three or four years for FHA or your back that type loans. I can’t remember which one it is, but many people got hit with that in 2013 1415. Well, they’re just now coming out of that point where they can now borrow again, and all the great rates historically have vanished. We’re back into close to where rates were before. worth a crash. So they’re not in a position any better position they were before the crash, especially since the cost of living has gone up with inflation. And most of the times their wages have not really gone up that much. So I would think that that would slow down, or possibly had a fairly heavy impact to housing, especially first time homebuyers. And those people trying to get into houses again, they’ve been renting for the last few years, they now have the capability but the rates are putting them in a position where it outreaches them and their capabilities. So I think that is going to have more of an impact than what we would have had if rates stay the same. Because now we have a big chunk of buyers that are not going to be capable, even though their credit says is their income says it’s not. Now is there anything I haven’t asked you that you think the listeners should hear real estate investors need to remember interest rates? There’s really not as big a deal as you think. I know that that’s a big deal because we harp on this a lot. We’re a society of consumers. 72% of the US economy is consumption. Those who attended meet the Masters Last year, I got to listen to one of the speakers who used to be part of the central bank. And she had mentioned how over 19% of the global economy is the US consumer. So that means we as individuals get really wrapped up in very inconsequential things, because the consumer mindset takes over what’s my cost? How fast can I get it? And how much money am I making on a monthly basis, we forget to look at the greater picture. And understand that because it is still the most tax favored asset class on the planet, a very good chance that you as an investor, depending on your tax bracket, and depending upon how you’re where you’re at in your career, in your investing career, you could be literally in some cases making more money on a higher interest rate deal. When your taxes are filed, and all things are said and done, than you would on the lower rate deal. I personally have seen that. I’ve personally done that comparison with folks. I’ve got that data to show. When you have interest rates going up. It’s not always the end of the world at one individual buying two properties at the same time. Closing sales months apart. They’re both new build homes, same floor plan, same street, same purchase price, same potential rent, the only difference was their closing timeframe which pushed the interest rate up 1%. That 1% in his mind was $50 a month in total revenue loss from property One, two property two or $600 a year in revenue loss and property when the property to buy time he has done chatting with the CPA about what taxes he was not paying on the lower revenue property versus the higher revenue. And then what his tax deductibility was on the higher interest rate versus the lower rate. In essence, it whittled down to being only a difference of $3 and 55 cents per month. Very inconsequential. Do not walk away from a deal because the interest rates have gone up, take the time to analyze it, understand all the facets of what these what the real estate benefits you before you make any sort of decision. All right. Well, thank you very much for your time. I appreciate it. Roger. Thank you, man.
Jason Hartman 22:01
It’s my pleasure to welcome Scott Ha. He is co founder and chairman of signature bank. He’s the author of two books, and we’ll talk about them today. Scott, welcome. How are you? Thank you. It’s good to be with you, Jason. Yeah. And where are you located? Give our listeners a sense of geography.
Scott A Shay 22:15
Sure. I’m located right now in New York, New York, just a couple blocks from Times Square, fantastic.
Jason Hartman 22:19
The Big Apple, you did a TED talk. And you’ve written two books. Now, I believe. You talk about a variety of things. But first consolidation. I mean, the consolidation in the banking world is pretty scary. You know, the idea of American businesses that will have this free open marketplace with competition. Competition inspires innovation and good pricing for consumers and good service, and so on and so forth. the banking industry, even post Great Recession. I mean, it’s more consolidate than ever, isn’t it?
Scott A Shay 22:54
Yes, it is. And I think it’s been one of the great mistakes of government policy. See over the last 25 years, I mean, we now have such over consolidation that for banks essentially control 60% of the market. And if you go to six or seven banks, you’re up to 70% of the market. And that’s not good for the American economy. It’s not good for the consumer. I mean, and it’s not even good for our national interest. Because when you have that few banks, if one of them is about to fail, frankly, we’re gonna have to bail them out. It doesn’t matter what the law says,
Jason Hartman 23:29
oh, they’re too big to fail. That’s the phrase we heard over and over again, right. too big to fail
Scott A Shay 23:35
the phrase, and supposedly we have legislation that that are using that doesn’t permit that. But, you know, look, we wouldn’t interest our country’s defense to four or five military bases yet. We’ve essentially entrusted our economy to four or five banks.
Jason Hartman 23:51
Yeah. And just as an aside note, and, Scott, I bet you agree with me on this, but I have no idea. It’s a tangent. What’s going on in the world. Technology is maybe scarier than the banking world, the idea that one company called Google can control 70, or more percent of the global Internet search traffic between Google and YouTube is absolutely appalling to me. But that’s another discussion for another day. So in the banking world, you give this example about JP Morgan Chase, and how really, a small business person seeking financing for their business would be able to go to what 19 different banks and convince some banker to loan the money, right, but now, they can only go one place, right?
Scott A Shay 24:37
Well, that example that I gave in my TED talk about JP Morgan, consisting of 19 banks is pretty accurate. And it’s a big problem because you used to just have to convince one bank of your character. And by the way, it’s also bad from a public policy perspective, because now let’s say that one big bank, JP Morgan, we just took as an example, but it could be any big bank. systemically makes bad decisions? Well, from the other side, that bank is now going to be in serious trouble. So we both have less business choice and more risk for the economy, because fewer people are making final decisions. So it’s a lose lose proposition.
Jason Hartman 25:19
Yeah, it really is. It really is. So couldn’t someone though argue, though, that look, when you get these big giant companies, there are economies of scale and efficiencies, and I mean, centralization isn’t all bad. Is it? Or is well,
Scott A Shay 25:33
let me just say this, and I think that there have been several studies of bank mergers. And they’ve all been pretty consistent. 60% of bank mergers result in the destruction of value 20% in value staying about the same and 20% value accretion. That’s not a good record. I mean, signature bank and one of the things that we’re proud of is we grew from zero from The 85th largest bank to the 14th largest bank, we didn’t do one acquisition, and we didn’t do one merger. We just got bigger. We’re today a $45 billion bank, because we gave good service. Mm hmm. And that, to me, is the most important way to try to grow market share. Right?
Scott A Shay 26:19
Absolutely.
Jason Hartman 26:20
Absolutely. But well, you know, I mean, it’s not wrong for businesses to acquire other businesses, is it?
Scott A Shay 26:25
It’s now wrong for 95% of the banks. But at the top end, where the mergers were allowed, that allowed banks to grow to be well above 10% of assets, the country? Yes, I think that was a public policy mistake. And I’ve argued that to members of Congress, house and senate and to the executive.
Jason Hartman 26:45
Yeah, no, I mean, I agree with you. I’m just playing devil’s advocate on a few of these points. You know, anytime something is too big to fail, it’s just there’s no way that could it ever be argued that that is healthy. It is extremely scary and it makes for corporate socialism. Where the taxpayers are paying to bail out these rotten rotten behaviors of these companies? What about on the wall street side? I mean, you know, they call them banks, but it’s not exactly banks. You know, when you look at the investment banks like Goldman Sachs and so forth. I mean, there’s way too much consolidation. There are two right
Scott A Shay 27:19
there. I look at it a little differently. I think that Glass Steagall should have never been, and I will contemporaneously. I had said Glass Steagall repeal was a mistake I think it should be reimposed. Right. I think, combining the safety and soundness functions of banking. You know, making sure that money’s there making sure that safe loans are made with the more casino aspects and investment banking, which rightly shouldn’t be speculative. You we want liquidity and marketplaces. But essentially by tying the two together with a casino side of banking is funded by deposits by federally insured deposits, I think was just one of the many mothers of bad ideas and It should be repealed, I think there was nothing wrong with letting a Goldman Sachs or a Lehman or Merrill get big. And by the way, you know, maybe letting there be a wind down of a Lehman Brothers, you know, maybe in a little more sensible fashion, but nonetheless, a bankruptcy. Whereas you can’t do that with a bank. Because when you do that with a bank, you end up destroying money, because the deposits are on the other side of the balance sheet for banks, which has an impact on the economy. It’s not just the creditors who lose it’s the economy, the losers. So combining those two functions never made sense to me. And I think that, you know, I hope in some near future Congress and administration that Glass Steagall is reimpose the Volcker act was an attempt to do Glass Steagall light and it doesn’t work. Did you
Jason Hartman 28:53
accomplish? Did you just say the Volcker act? Is that what you said the Volcker rule
Scott A Shay 28:57
was part of her party. Right here Volcker Rule, the former fed chief the Volcker rule was put into place as part of Dodd Frank. It has been implemented to some degree and it’s supposed to ameliorate some of the impacts of not having Glass Steagall. But it’s one of those things that’s neither fish nor fowl and doesn’t really to my view, I think Paul Volcker is a hero, but it doesn’t work.
Jason Hartman 29:22
Well, he’s the only one that had the guts to break the back of inflation. In America take the hard medicine for a while. It did work, it did work. Talk to us a little bit more, I don’t think people really have an understanding of Glass Steagall and the real impact of that. So give us a little history lesson on that if you would, like, you know, When did it happen? Or when did the change happen? I should say, I think was the 90s. Right? And it allowed the banks to get into what the brokerage business and then what was the real, what was the real result of that and just give us a little layman’s overview of that if you would,
Scott A Shay 29:57
so the real the you’ve got to go back a little further and than the 90s. The, in the 20s. The banks and the investment banks were essentially, there was no regulation even before the fed the investment banks and the banks were essentially together JP Morgan. Famously, did they add himself when he was a person that just the name of a bank, and he would use deposit or credit or money both to finance loans and to underwrite stocks and bonds and to trade when the great stock market crash happened in 29, people blamed part of the reason for the bank failures on that very combination, because banks would fail because the underwriting of stocks and bonds didn’t go so well. So a senator and a member of the House by the name of Glass Steagall said, can’t do this anymore. So they passed a bill and that bill was the law of the land until 1999, if I’m not mistaken, and then it was repealed. Late 90s. I could be off on a year or so but late 90s. And then the law was repealed. And so you could get Citibank acquiring Salomon Smith Barney. You could get Bank of America acquiring Merrill Lynch and you could get Goldman Sachs starting Marcus, you know, and starting its own bank. And that I think, has laid the seed corn for I think of some future financial crisis. So I think the sooner that we unwind that and let Goldman Sachs let them go back to being an underwriter, let them grow, let them compete against Morgan Stanley, but they should stay out of the commercial banking depositor business and the bank should stay out of again, the casino aspects of the business of speculative business, even though I’m a big advocate of those businesses, we need those. We need speculation we need market makers to provide liquidity. We just shouldn’t do it with depositor funds.
Jason Hartman 31:51
Hmm, yeah. Well, that’s true, not with the positive funds. Sure. Talk to us a little bit about cash if you would. It was amazing to me. I was in Sweden, a few months back, I took a group of my clients there, I saw signs all over the place that said no cash accepted. The whole country is almost cashless. And that concerns me. I mean, listen, I don’t use much cash myself. But cash is a form of privacy. And I want the option to use it if I want to, you know, and I think that’s sort of an important thing. What What do you think about this sort of cashless movement? I mean, India, recently demonetised, one of its larger currencies, a lot of merchants in the US won’t take 50 and hundred dollar bills. They won’t take anything over a 20. What does this mean to all of us?
Scott A Shay 32:41
First of all, this is a really important question. It goes to civil liberties. It goes to a lot of a lot of really core questions about us as individuals and as economic beings. And I wrote an article I just we can’t go into it all here, but I wrote an article anybody can google it under my name Scott Shay sh a y cashless society, the dangers of a cashless society, the risks, you pointed out some of the risks, but the risks are even larger in a cashless society because once all of your money is digitized, and the government let’s just take the government for its kin know, every single transaction that you Jason do. If you decide you’re going to a basketball game or baseball game, buying gas, whatever you decide to do, can be instantly never buying a copy of Catcher in the
Jason Hartman 33:29
Rye
Scott A Shay 33:32
or attending a protest rally right now. Or let’s say, Jason, you put on a few pounds and that the government thought you know, you could be at risk of diabetes. No, we’re not going to allow your card, your chip your whatever you do your facial recognition, to permit you to buy any fizzy sugary soda. So you’re just not going to be allowed to do that. So your card, your face, your chip will be declined. It’s a way Frankly, of having total control over you, because essentially we are economic beings, and the way we express our humanity for better for worse to certain degrees through transactions, intellectual or economic with other people. And once you no longer have the freedom to make those decisions for yourself, that’s a bad thing. So I coined a term in this article, that at the point where the government can immediately know every transaction that you do, I mean, you probably have notifications of your credit card transactions on your smartphone. Well, once the government knows every single transaction that you do, Jason, we have arrived at what I call the econ angularity, which is sort of my mashup of economic singularity. It’s the point he can get clarity is the point at which we have the risk of losing our real human rights as economic beings and and it’s easy To imagine today, then when I wrote my article several years ago, the technology exists for that today the technology exists for real time understanding of every economic action you take.
Jason Hartman 35:11
Yeah, that’s pretty scary stuff. Talk about Big brother is watching you. That’s another of the many ways in which Big brother is doing that. This will be continued on the next episode. Thank you for listening and happy investing.
Scott A Shay 35:26
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 Hartman. Mediacom
Scott A Shay 35:37
for appropriate disclaimers
Scott A Shay 35:38
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