Jason Hartman is joined by Consuelo Mack of Wealth Track on PBS. They discuss the recent headlines concerning Coronavirus. Consuelo discusses why reserves are essential during times of crisis and the value of liquidity should not be underestimated. They end the show with some investment recommendations.
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Jason Hartman 0:29
It’s my pleasure to welcome CONSUELO MACK back to the show you heard her on a few years ago. She is host and executive producer of WealthTrack on PBS, former managing editor and anchor at the Wall Street Journal and The weekly syndicated business program The Wall Street Journal report. Consuelo Welcome back. How are you? I’m great. Jason. How are you doing? It’s nice to be back. Good. These are crazy times we’re in. It’s nice to have you on the show. Gosh, where do we start? There’s so much to talk about, first off, just what is your general take on things right now? Talk about a general question. Take it anywhere you want.
Consuelo Mack 1:09
Right. You know, I think there are a couple of things going on. Number one, this virus, you know, this invisible enemy as people talk about, I think is a wake up call for for all of us both from my personal point of view and also a professional point of view and from a financial point of view. So I think that’s for starters, this is a you know, it’s a once in a century event. It’s global, and it’s hitting everyone. And, you know, as we learn more about it and see what’s what the impact is that even the people who thought that they were going to be immune to it, which are younger people children under 10. Well, it turns out that it’s very dangerous for them as well. So I guess, my major point is that it’s reminded us in this country, we are so lucky. You know, we’re affluent, We’re entrepreneurial. You know, we our lifespans are long. I’ve talked to many of my friends. And many of our expectations were that, you know, we would probably end up you know, dying in our homes in our 80s or 90s. Most of the diseases that have been conquered, we have vaccines for them, we’ve got antibiotics. But guess what stuff really happens that is completely out of our control. And in this case, again, it’s global, it is completely out of our control. It does not discriminate between, you know, developed countries in developing countries and rich and poor. We are all potential victims, and I think it’s it’s a real time for a reset button. Yeah. And I guess that would be my first observation is I think a lot of us are reevaluating our personal professional life and financial life.
Jason Hartman 2:55
I couldn’t agree more and Consuelo, I know you’ve got more to say, but just a note. Matt, you know, I believe that as we come out of this, people are talking about that, you know, will it be a V shaped recovery and L shaped or swoosh, whatever, right. I think it’ll be a modified square root sign. And the modification is that when you go up in that V, we will come up to a smaller economy. I think people really are reevaluating. I think there’s a PTSD that will exist for many years to come. And I think the economy, the size of the general economy will just shrink. I think people are going to be more interested in a bit of a simpler life. Am I am I right or wrong about that? What do you say? No,
Consuelo Mack 3:39
I think you’re absolutely right. And I will just add, you know, some new information that I have, which would be everybody talks about, they’re concerned about the second wave of the virus. Well, there is a second wave happening right now in the economy. So that the which is being tracked by Ed Hyman who was a guest on WealthTrack, who Wall Street’s number one economist for 39 years running. And you know, what he’s most concerned about is he said, we’ve had this the first wave was the was the shock, the shock, where the economy just stopped. He said, The second wave is the after effects of the aftershocks of this and that is the fact that there are so many small businesses and large businesses where their revenues have just stopped and they can’t ride out the next you know, two months, three months, four months, a lot of them are going to go out of business, they’re going to they’re not going to just lay off workers there, they’re actually going to terminate them. So I think you are correct. I think the notion that we’re going to get back to where we were with record, you know, low unemployment in anytime soon, even in the next you know, three or five years I think is, is a remote is not a good path. Ability I agree with you completely. I think it’s this is a game changer. Yeah, I
Jason Hartman 5:03
do too. And I think it might be with us for an entire generation. It’s a big time Game Changer if he asked me. What else did you want to say before? You know, we went off about
Consuelo Mack 5:15
what you were talking about, I think frugality, kind of what my grandparents the way they used to live a simpler life. I think that is true. I think that cash reserves are extremely valuable in times of crises. And I think for most of us now, it’s I want cash reserves, because I don’t know where the next crisis is going to come from. And you mentioned that Ray Dalio, who is you know, the most successful hedge fund manager, right now is a terrific book called principles. And right he he’s been saying cash is trash. Cash is not trash. He is dead wrong. cash. King. Yes. And, you know, to think of cash as an investment, you know, Except that doesn’t give you returns is not the way to think of cash. It isn’t a separate category of its own. And I think its value has been, you know, been underestimated. And I think now we all realize how important it is to our financial security and our sense of well being,
Jason Hartman 6:17
you know, and that doesn’t mean, you know, I think, to be fair to Ray, you know, he was probably saying that in the sense of inflation, you know, destroys cash and, and you know, you do need to invest, obviously, right. But for the vast majority of people that if they have a small business, maybe a restaurant, they’ve got 16 days of operating capital, like you can’t weather any storm with 16 days of operating capital, you know, you need more cash than that. So cash is not trash. Yeah,
Consuelo Mack 6:47
right now, but I wouldn’t apply the same standards, quite honestly to a business that I would do us as individuals. So I think it’s very difficult for businesses unless you’re Warren Buffett, you know, to hold on Big cash reserves because you’ve got to put that capital to work. And so but I think for individuals, I think it’s it’s become an imperative that we need higher cash reserves. And we should still, of course, we should still be, you know, investing in the stock market in the bond market. But so that brings up yet another point that I would like to make, and that is that the value of US Treasury securities, they’ve been maligned, they’re the most maligned investment class and have been for the last 10 years everybody’s saying, you know, and they were saying this when the you know, 30 year Treasury was yielding 5% and where they are 10% I mean, 5% for the 10 year treasuries as well that you know, that it’s expensive, it can’t possibly make money you’re going to lose money well, if that’s not the case, US Treasury securities have been a terrific investment number one, but number two is that they are instant liquidity and and they’re also you’re guaranteed to get your principal back. So they have tremendous value as an asset class as an alternative to, you know, the risk investments like equities, but also as an asset class that you know that you can, you’ll get your principal back and they’re very highly liquid. And so the value of liquidity also cannot be underestimated at times like this.
Jason Hartman 8:18
So it sounds like from you saying that and kind of sticking up for treasuries, which very few people do, by the way, in the investment world, that you’re thinking that inflation is not a concern. Would that be a fair statement?
Consuelo Mack 8:33
I would say it is not a concern now. And this has been a de facto missionary shock and if what you believe and that, I believe, I’m not sure, I might disagree, the degree to which the economy is not going to come back. I am very optimistic about the entrepreneurship in this country. And and I’m very optimistic about that. You know that Americans are hard working And they’re creative, and that that we will come out of this. But I don’t think it’s going to inflation I do not see as being a big issue for it, you know, at least three to five years,
Jason Hartman 9:10
you know, somebody have talked and I’ve been talking on my show a lot lately about this rather rare economic malady that we saw in the 70s, of course, of supply demand shock, which initially is deflationary. And we’ve certainly seen that already in some assets, but then it becomes inflationary later in it, it really kind of sucks to, for lack of a more sophisticated term. You know, do you think that’s true that that’s a concern?
Consuelo Mack 9:40
I guess what I would say is, you know, I mentioned Ed Hyman earlier, Wall Street, several other economists. And he’s saying, you know, when it becomes a concern, we can kind of deal with it then but right now, it’s kind of the last thing on our minds. And if anything, we’re more concerned about, you know, deflation and So I think that we are we’ll be able to adapt our portfolios and our strategies when we start seeing some inklings of inflation. But right now it is Mia.
Jason Hartman 10:13
Yeah. You know, Consuelo, I gotta ask, I’m guessing dealers in New York. Yes, yeah. Yeah, I had a feeling he did. And you know, one of the things I’ve been predicting I’ve, you know, developed a whole presentation and strategy called pandemic investing, believe it or not, I actually got the domain name, pandemic investing calm. I know that was pretty good. I was surprised. Very good for $8 I didn’t even have to buy it. And,
Consuelo Mack 10:41
you know, one of the things that I am talking a lot about, as I’m doing this presentation around on other shows, and such, is I’m predicting this pretty big migration out of high density environments. Two weeks ago, I had Dottie Herman on my show, you might know her. She’s the CEO. Douglas Elliman, real estate, and, and against surprisingly candid discussion against her own self interest. I think she was talking about how people will leave New York City and other high density environments because they can’t socially distance. And you know, I’ve been saying that for two months now and she just reconfirmed all my beliefs. Do you think that that will be part of this kind of PTSD that will linger long beyond even after there’s a vaccine where we’ll see what I call the rise of suburbia? I think suburbia is kind of coming back. Do you agree or disagree? No, you know, it’s that’s a it’s something that I think about on a daily basis because I am in the city. And I have a son and daughter in law and young baby who are in Connecticut and they are really glad they’re there. So I am of two minds. One is I think you are correct on that. I think if we are able To move that a lot of people are not going to want to live in a high density environment. So I think you’re, you’re correct about that. But my other observation is, as I look around the city is that if people are able to work from home, and then maybe living in the city, you know, as long as you’re not taking the subway to work every day and you’re not in a, in a dense environment in you know, your workplace, then maybe the city with all of its conveniences can still be a good place to live. I don’t know how people are going to vote. And I do know that looking around me that they have voted during this pandemic, if they can to get out of the city during this pandemic area.
Jason Hartman 12:46
This is quite literally voting with your feet.
Consuelo Mack 12:48
Yes, yeah. It is. And so, you know, I just I it’s gonna be very interesting to see how it turns out and I certainly know for a fact It’s happening in households all over, especially the tri state area here, because this is where the epicenter of it is in this country, whether or not it’s happening, quite honestly, in other cities, and you probably have a much better read on that than I do. Where the COVID-19 has not had a huge impact. I don’t know if they feel under the same pressure. I mean, you know, friend of mine son was in Toulouse and Denver was playing golf the other day. So they’re, you know, in other parts of the country, they’re not as affected.
Jason Hartman 13:30
It’s definitely going to be interesting to watch. But I think as these restrictions lift, there is going to be a big push for moving as people have been cooped up in maybe houses they don’t like or condos or apartments, they don’t like they’re going to try and with the combination of that and the fact that a lot of them have learned that they can work from home even though Yeah, before they felt they couldn’t and now their boss has accepted that it’s okay for them to work from home because they’ve been doing it And, and they’re studying from home. So you know, they’re not going to the college or university, they’re doing all that at home, which I think is gonna lead to the collapse of a university debt enslavement complex. Thankfully, that’ll be good, because nobody’s gonna pay 50 grand a year for an online degree, even if it’s from, you know, a really taught school there just without a college experience. It’s just not gonna pay for that, you know, I just don’t think they’re gonna pay that much for it. They’ll pay something, but not the kind of exorbitant fees they’ve been paying.
Consuelo Mack 14:31
Right now. I think you’re right about, you know, college education, except I would say probably the top 100 schools or whatever, that they will probably still be able to attract students, but when you think of how many foreign students have been paying full freight, and they’re not going to be coming back anytime soon, and you know, what is if you can take your courses online, even at top colleges, you know, why would you, you know, go there except for the experience can afford it. So I agree it’s, it’s finally universities have competition. Yeah. And then they haven’t had it.
Jason Hartman 15:08
Yeah, you know prior to this it’s a good thing they need some competition. Thank you Sophie, it’s creative destruction will will occur. So Consuelo thoughts on you know any like the financial markets the stock market you know bonds real estate any asset classes What are you thinking?
Consuelo Mack 15:26
I mentioned I think liquidity liquidity is going to demand a premium and so the value of holding stocks during this which you can sell and remain liquid versus bonds, which are not liquid for a whole number of reasons. I think that stocks are at the end publicly traded stocks are going to be become more valuable. The markets it’s so interesting, you know, where we’ve had the economy global economy fall off the cliff basically, and the US economy and and the stock Markets doing incredibly well. You know, everyone’s talked about this disconnect, will, you know, the markets, they’re a leading indicator, they react on a change of direction and we’re seeing some change of direction we hit the bottom. And so we’re starting to see things percolate. I mean, at Hyman again, I just interviewed him, which is why I’m talking about him so much. But you know, he said, You we’ve gone kind of from really bad to better and better is not a lot better. But that’s the markets respond to a change in direction and that’s what’s going on with the stock markets right now. Again, I, I feel like the markets ahead of itself, but I’m not I you know, I I’m not sure I’m obviously hesitating, because I don’t know and the markets can change on a dime, especially if we have this second wave, which you know, many of us are afraid of, well, let me just add one more thing. You know, what you’re talking about and this is your specialty, is the value of homeowners leadership as a residence, I think it’s definitely been accentuated in this. I think that for retirees that homes can be a really good source of income through crises, in that you can if you’ve got a big decline in the stock and bond market and you don’t want to, you know, take out, you know your payout, because it’s going to be in your principal is going down, then a home equity line of credit can tie you over, and also on reverse mortgages, you know, that it’s there now largely, you know, FHA programs, the Home Equity Conversion Mortgage, the accm. So, a reverse mortgage is not a bad idea for a, you know, your primary residence if you need another income stream, and so, the home can be a home can be a very valuable asset, especially for retirees.
Jason Hartman 17:56
You know, Consuelo, I’m really glad you mentioned reverse mortgages because Because that is a rarely talked about thing and I think it’s an interesting vehicle. Of course like anything that’s it’s not really that new anymore but it still sort of new it hasn’t been widely accepted. And you know, there have been a lot of scams in that world like anything you know, when you came out there were lots of scams do but you know, things after a while, they smooth out and they fizzle out
Consuelo Mack 18:23
for now because the FHA, again, your backs these the this Home Equity Conversion Mortgage, the agcm. It’s a government backed program. So it’s it’s regulated now where it wasn’t before. So I think that’s made a big change makes a big difference. Yeah,
Jason Hartman 18:39
that’s very interesting. That’s very interesting. You know, when you were on my show a few years ago, I don’t know if it was your quote, or you were quoting someone else. But you said something to me that I’ll always remember it was that great line, when we were talking about I think we were talking maybe about Meredith Whitney’s book, and, and she was on the show, she wrote that book called state of the states and we talked about these migrations. trends into the business friendly states and out of the business unfriendly states, not to mention what’s going on in California with Tesla right now. It’s an interesting battle. And that’s gonna be one to watch for sure. And you said this great line you said, the Midwest is my favorite emerging market. And that right, that was absolutely
Consuelo Mack 19:24
spot on. You know, that was Nancy lazaar.
Consuelo Mack 19:29
The chief economist at Cornerstone macro, and yes, and it actually the Midwest is still her favorite emerging market. Yeah, I ran the Midwest, we’ll come back from this. And, you know, another big victim of this is globalization. And, you know, we’re all looking at I mean, I’m looking at, you know, and every vitamin that I take or whatever I’m saying, was this manufactured in China, because if it was, I’m not going to swallow, right. And you know, Zantac, for instance, it’s ingredients that Raiden were made into China that are cancer causing, there are all sorts of things. You know, where do we get the are the supplies these critical supplies from and that is being, you know, a lot of that’s going to be repatriated to other countries and back to the US. Yeah. And I think that’s positive in in what’s interesting about that is Trump is going to get his wish, this whole thing is like a win for the trumpian agenda. Right? bring jobs back on shore. Yeah, control the borders, made in America. You know, that’s all what you know, that’s, you know, support the middle class worker, that is going to be good. And you can comment on that. But I don’t want to forget to mention, you know, a lot of these people sitting at home all this time, have been thinking about, maybe I can start a business, maybe I can improve my skills. Maybe I can learn how to do coding, and I didn’t know how to do that before I was just driving an Uber and now I can code. You know, this is good for a lot of people and it’s going to be good. For the economy in a lot of ways to, let’s hope, you know, I can we don’t there’s no data on this. This is just anecdotal, of course, but right, any thoughts? So it’s incredibly painful. And you and I both know this, both from a health point of view and also from the economic point of view. And, again, it’s unprecedented for governments to say, you have to cease doing business. I mean, this is just, it’s unimaginable. And so the pain, we haven’t totally seen what the full pain is going to be through this cycle. But I do agree with you that, that it this reset, is going to enable many of us to rethink the way we are living and working and I think that is a positive, but there are a lot of people that are it’s going to be a terrible blow, and they’re going to need help. No, it’s just as simple as that, and they’re going to get it and I will say, as far as President Trump is concerned And this has nothing to do with politics. But he, he was right in taking on China and, and calling them out. And this populism and nationalism, I think and globalization is going to be a loser in this and it’s in it should have been challenged, and it’s being challenged, and the populism and nationalism that, you know, think of your country and your fellow citizens and what’s going to benefit them the most. I think the pendulum is swinging back that way, and it had gone too far the other way. So I think it is it is a positive.
Jason Hartman 22:33
So that’s means upward pressure on consumer prices for consumer products, because Made in America is more expensive, but it means more jobs too. So that that’s a good thing. And when you say it was right for Trump to call out China, which time like where are you talking about the trade war before? COVID? Are you talking about the response I’m
Consuelo Mack 22:55
saying before carpet, and now
Consuelo Mack 23:00
Yeah, I think both times that people were just businesses especially were too and governments were too afraid to alienate the Chinese and because it’s such a big market Well, now many countries, not just us are saying to the Chinese, which you are not acting as a responsible world citizen, and therefore, we’re not going to do business with you. And I think this is the first time that’s happened and Trump was early on it. They’re very interesting.
Jason Hartman 23:29
Last thing for you. FinTech, you know, we’re seeing all of this this great new stuff, we see millennials that just have a totally different, you know, idea about banking and they lay they manage their finances, and then Gen Z coming up after them. You know, what, what role does FinTech play in all this financial technology is what I mean fin
Consuelo Mack 23:51
No, I know. I think it’s really exciting. And you know, I’m a very slow adopter of any new technology. But I’m looking at what my millennial son and all of his friends are doing and they are on, you know, these online financial planning platforms. And it’s fabulous. I mean, I just I think it is really positive. So I think FinTech is a win. And, you know, my generation, I just need to, you know, get with the program.
Jason Hartman 24:22
Does it mess with Wall Street? Does it disrupt the Goldman Sachs and stuff like this? Or are they so insulated from any disruption that will never matter?
Consuelo Mack 24:33
No. Well, I mean, Goldman Sachs is adapting you know, they’ve got this Marcus this online savings program and banking. So you know, but I think there’s a lot of challenges to the way that wall street used to do business, but they are they’ve got really smart people working for them. And, and the ones who are, are smart enough and savvy enough will adapt and they’ll probably flourish as well.
Jason Hartman 24:59
Yeah. stuff, Consuelo wrap it up with any closing remarks and your website.
Consuelo Mack 25:05
Right? I will just say you know one more thing. And you know, we talked about the kind of the value of you know, things like liquidity and cash. I’m also going to say the value of Social Security, eight out of 10 Americans dependent social security for an income stream. And I think social security will will be there even with all these big deficits. It’s not going to go away and and it is an incredibly value valuable benefit and unnecessary one for many Americans. It’s been underestimated and under appreciated and I think through times like these more and more people are really appreciate that guaranteed income stream for life. So I’ll just I’ll make a plug for social security as a pro. You’re You’re
Jason Hartman 25:48
funny. you’re promoting treasuries and Social Security, that’s so unorthodox.
Consuelo Mack 25:55
And I’m a free market as well.
Consuelo Mack 26:00
Capital Markets, but there are some things that that are working well. And that is one of the programs that is working well. And and so is cash and transferred treasuries.
Jason Hartman 26:10
Good stuff. All right, give out your website.
Consuelo Mack 26:12
Oh, it’s wealthtrack.com. And, you know, we would love to have all of you join us for our, you know, weekly program and our podcasts and we cover everything to do with building financial security to last a lifetime. So it’s, it’s wealthtrack.com.
Jason Hartman 26:27
Excellent. Consuelo Mack. Thank you for joining us.
Consuelo Mack 26:30
Thank you so much for such a fun and interesting interview. Jason, as always.
Jason Hartman 26:41
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