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Colorado Real Estate Market with Mark Ferguson of InvestFourMore

On this episode Jason Hartman starts with in-house economist Thomas to discuss inflation and how it is measured and manipulated. On the second segment of the show Jason hosts Mark Ferguson, founder of InvestFourMore. They talk about the northern Colorado housing market and the lack of inventory. They go into the best practices for rehab and how to work with contractors.

Investor 0:00
I really need to thank you and Sarah for being there for me, you guys could have easily said, This isn’t my problem. This is your problem. Your lack of due diligence is entirely your fault. And not done anything at all. But you guys have been there for me every step of the way. You responded on voxer at 342 in the morning, I know, it might have been 642 depending on where you were, but honestly, who works at that time. So just the fact that you guys were there for me. I appreciate it so much.

Announcer 0:31
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. 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. And now here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 1:22
Welcome to Episode 1175 1175. I’m here with our in house economist Thomas and we want to talk to you about one of my very favorite topics in the intro portion today. And that is chocolate. No, it’s not chocolate, real estate investing. No, it’s not real estate investing. It’s inflation. You know, I talk often about inflation induced debt destruction. One of my favorite topics, it really is the hidden wealth creator. And at our last meet the Masters event, we presented the big boring idea and that big boring idea was our own a return on amortization. And, you know, we try to ferret out some of the unique things that other people really aren’t talking about the multi dimensional nature of income property, that really, really creates a fantastic return for you. Of course, inflation induced debt destruction is one of those things. You won’t see it on any performer, not even our performance. But it is a beautiful and incredible thing. Thomas, how you doing today? I’m doing well. How are you? Good. Good to have you. So how does inflation work?

Thomas 2:38
Oh, yeah, and simple terms. What the federal government does or what other entities that track inflation do is they go out and they sample a whole bunch of prices, and then they wait those prices and convert it into an index. They’re really only the sampling and then there’s the waiting. The most

Jason Hartman 2:53
common index is the CPI, the consumer price index, and listeners should Know that there’s more than one version of the CPI, which is interesting, but we don’t need to go down that rabbit hole today. But the other sort of commonly referred to thing that I hear economists say Thomas is something they call core inflation, or the core rate. And I think it’s worth going down that rabbit hole for just a moment. So Thomas, what are your thoughts on core inflation or the core rate?

Thomas 3:29
Yeah, so core inflation is prices with food and energy excluded. And the reason why analysts exclude food and energy is theoretically they are more volatile than other prices, whether they are more volatile or not is a is a separate question. But in general, analysts like to exclude them,

Jason Hartman 3:52
right, right. I wouldn’t even give them that that they are more volatile, but he can’t exclude them because there are huge Significant I mean, nobody listening can live without food or energy. So it seems kind of ridiculous that there would be any really even any mention or much mention of core inflation or the core rate, you know, try going to the grocery store and saying you’d like to pay the core rate, you know, for your groceries, you can’t do it. But one of the other things, I think it’s worth just bringing up again, and you know, I’ve talked about this on past episodes, but not lately. And that’s the way the consumer price index the CPI is, is manipulated. And there are significant motivations for the powers that be to manipulate the index. And this is not only a US thing, of course, it’s every government around the world, every reporting agency around the world, every statistical methodology around the world, because of course, government payments, whether they be welfare benefits or government employees, and I’m not just talking about US government, our index to inflation. Number one, and number two, in order to make the populace the voters feel better about their life. They want to make it seem like inflation is lower than it really is. So I played and you know, I really got to play this as a flashback Friday episode again. I’ve got to find that episode, but I thought it was great. Tom Keane, who is on Bloomberg did a great piece where he interviewed one of the Fed Chairman and it’s that guy who was only on for a short time. I believe it was in the late 70s it was I think it was right before Volker email or maybe a Robert was a Robert Miller or something. I don’t even know his name. He was it was such a short time, right. Was that him? I don’t remember his first name, but

Thomas 5:43
it was Miller and he was a businessman.

Jason Hartman 5:45
Yeah, yeah. I think TOM KEAN interviewed him if I could be mistaken. And maybe I’ve even got the wrong guy. This was years ago. I played this on the podcast. I actually got the recording from Bloomberg and play that clip on the show because was so insightful, because it talked about how there was a lot of pressure to start manipulating the inflation index at a time when inflation was high and somehow suddenly it it got lower magically. So the three major ways they are being manipulated into believing inflation is is lower than it really is our substitution waiting and hedonic. Now you mentioned waiting, right? But there’s there’s really those three ways substitution waiting and hedonic. So substitution just says, Hey, if the price of beef goes up, they think everybody will just switch to chicken but you know, maybe you think chickens a dirty bird and you don’t like chicken, right? So you really have the beef inflation rate, waiting. I’ll let you talk about that a little bit because you brought it up. Tell us a little bit more about waiting.

Thomas 6:55
Oh, waiting just as they go out and sample what people spend their money on. And they say Will you spend 25% 30% on your home mortgage or your housing, you say spend 20% on your food. And you know, the rest of the way it’s transportation 15 20%. And those weights make up the index,

Jason Hartman 7:15
right? So they just decide what weighs more in the index and whatever weighs more, maybe if it doesn’t inflate as much, it has more weight. So it it makes the rate the overall inflation rate look lower because of the waiting. And so that’s a good point. And by the way, Thomas, you mentioned housing, which I think is interesting, because they use this rather esoteric metric called the I think it’s called the rental equivalent rate or something what, you know, owners equivalent owners equivalent rent. Yeah. Do you know much about that? I talked about it before on the show, but I can’t remember the interesting gymnastics they used to calculate that one.

Thomas 7:59
Yes, almost. There’s equivalent rent is basically the average rent across the country for a given month. Just a certain size of home. Right, right.

Jason Hartman 8:09
And you know, that varies so much based on location and, you know, market segment housing type. I mean, wow, that’s a that’s a tough one. It really really is. Let’s just take a quick stab at hedonic here for the listener, so hedonic. I love that one. And I don’t know what you think about it, Thomas, because we’ve never discussed hedonic, but the root of that is the word hedonism, which is seeking pleasure, right? We all know what hedonism is, hopefully, the concept being how much pleasure Do you get out of an item that you buy? And so the example I use, when I talk about this in depth in the creating wealth conference that I do, in that one day event, is a computer. So every couple of years, I buy a new laptop, and you know, it’s funny thing, the laptop Always cost me about 20 $800 when I get the top of the line laptop, and I always buy the whatever the best one is they have, and it never seems powerful enough, because they keep making the software demand more processing power. So it seems like you never get ahead, but that’s another discussion. But if the speed of that processor is double the speed of the one I bought a year or two earlier, and the price is the same, they will assume if a computer is twice as good as the last one, that I really only paid 1400 dollars for it. But the reality is I didn’t I really paid 20 $800 for it. Now, of course you could adjust that for inflation. But over the course of that fairly short time period, it wouldn’t be that significant. But that’s the concept of hedonic x. And what I hate about hedonic indexing, even though there’s an argument that is logical, right, and I see that side is that it says to our We are really entitled to progress. I mean, let’s think about it, let’s think if they had dynamically indexed every item on earth since the invention of the wheel, or, or the invention of the electric light bulb, or one of these, you know, hugely significant inventions of any type. And they said, Well, you know, you used to light your house with an oil lamp. And that used to catch the house on fire, and now your LED light is thousands of times better than that old oil lamp. Of course, that’s true. But you don’t get to say that humanity is not entitled to progress, right. And that’s what hedonic indexing does. It takes the progress entitlement away from us, and gives it to the inflation index and says, oh, inflation is really much lower because we’ve had progress. Well, I hope we’ve had progress. Don’t we all expect progress, you know, this is the evolution of human thought and market innovation and capitalism that allocates resources so well, people out there chasing their own dreams and hate their own greed to make the world a better place. Right. And onyx is just a kind of a crazy one. Any thoughts on that?

Thomas 11:15
It’s amazing, right? The computer example. Basically, that means that you experience deflation of 50% Oh, yeah. Oh, wait, yeah, right, right, your computer went from 2800 to 1400. So prices went down by 50%. We’ve

Jason Hartman 11:28
had 50% deflation in two years. So now, what happens is it depends how much weight they give that particular item that sonically indexed in the overall consumer price index. And so there you see it, folks, there you see this massive amount of manipulation in the index. And what’s interesting is we all feel better in so many ways because a lot of things truly are deflating and price, the business systems, the internet, all of this stuff, the supply chains have become so much more efficient manual Factoring more efficient, better in so many ways. And so it feels better. But you know, what’s massively inflated? Is the assets the asset prices have massively inflated. So the cost of a house is so dramatically much higher. And then you’ll see these idiots who talk about well, houses nowadays are bigger and better Okay, well, we should hedonic Lee index those, but they never consider Thomas, the density of housing, the fact that we all live like packed rats now, right on top of each other, whereas before, you know, everybody used to have a one acre lot. And so things have definitely changed. You know, the density, the packing density of houses is much, much tighter than it’s ever been in history. So a lot of stuff there. But let’s end it and get on with the rest of our show. With just talking for a moment Thomas about inflation and do step destruction the hidden wealth creator, income property investments, Many of you have heard me talk about this many of you listening have been to my live events, where I’ve shown this fantastic chart that shows the typical person on a 30 year mortgage a 30 year fixed rate mortgage, literally got paid to borrow the money. They got paid. They thought they were borrowing and the example I give at 7.37%. But over the course of the three decades that they were paying on that mortgage, inflation and tax benefits, literally caused them to get paid paid negative interest rate of 1.16%. Plus, they got to live in the house for free. They got paid to borrow the money. It’s magic. It’s the closest thing to magic we really get. But I don’t know, you know, in our upcoming Savannah venture Alliance mastermind retreat, you know, Savannah is largely considered a haunted place. So we might see some ghosts there. Maybe that’s kind of magical. I don’t know. But, but inflation induced death destruction is a phenomenal magic thing. It really is. Let’s wrap it up with fat Thomas. Any last thought before we go to the rest of our show. Now good talking to you. Alright nation is a magic thing. I agree. As long as it’s on your side. That can be bad magic too. Great way to put it. Yeah, most people get hurt by inflation. But with our strategies that we’ve outlined over the years, on this show, and at our live events, it is magic and it works for you, not against you. So put inflation on your side with income property investments. Thomas, thanks for joining me. It’s my pleasure to welcome Mark Ferguson to the show. He is the founder of invest for more. He is a primarily a home flipper. He is in northern Colorado. Mark, welcome. How are you?

Mark Ferguson 14:58
I’m great. Thank you for having me on the show.

Jason Hartman 15:01
Yeah, yeah, it’s good to have you. So first off, how is the market? And what are your thoughts on the real estate market and the economy in general? Maybe

Mark Ferguson 15:10
it’s always tough to know, I think we are definitely seeing a slowdown in my area. Colorado has been one of the hottest markets in the country. You know, I’m in Greeley, Colorado, which is north of Denver a little bit, and our median price in 2011 was 110,000. And our median price right now is over 300,000. Wow, that was amazing.

Jason Hartman 15:31
Now distinction, though, let’s make sure we don’t get people thinking that home prices have tripled their they haven’t. It’s just the median home price has changed. So that doesn’t mean they’ve tripled in value. Okay, so I just want to make sure people understand that but feel free to comment on what appreciation has been like,

Mark Ferguson 15:52
you know, it has actually tripled in some neighborhoods or more, you know, some of the lower end properties. You could buy a $30,000 property right after the crash. In those houses are worth close to 200,000 right now.

Jason Hartman 16:04
But that’s not really the same house that house has been rehabbed now, right? A little bit. It’s, it may be see this is what’s so deceiving, right? There’s all these market distortions and people don’t really, you know, you got to peel the onion to understand it, right? The investor market that has just driven the market for so many years now, coming out of the great recession has fueled this boom and construction. And, you know, listen, I’m a hard money lender to Okay, so I I know the deals because I’m the one financing them, you know, a lot of times and you know, rehabbers will come in, they’ll buy that $30,000 house, they’ll put 60 grand into it, resell it to the first investor. And then a lot of these neighborhoods have been really upgrading substantially. And you know, they’ve been in different parts of the country, they’ve been gentrifying, and you know, there have been lots of improvements to the house. So even if you take the same property dress and follow it through time. It doesn’t mean that’s actual appreciation, there’s been added value to those properties a lot of times now, not always. But I mean, I guess the way you could most accurately tell what’s going on in the market would be to take a condo that can’t really be very improved. You can only improve the inside of it right, not the outside. And in a way, that would be almost a more accurate barometer. I don’t know, maybe not, but toughts stream of consciousness here. Sorry.

Mark Ferguson 17:33
No, I agree with that, too. And a lot of those properties were rehabbed. But even some of the condos you know, you could buy condos for 60 70,000. And those are worth 200,000 today, so it’s been crazy here. Yeah.

Jason Hartman 17:45
Okay, good. So the market is cooling down. Now, when you say the market, do you mean all price ranges? Do you mean certain price ranges dice that up for us?

Mark Ferguson 17:55
I think all markets are slowing down but it’s definitely slowing down more in the higher price ranges. You know, the starter homes, anything below 300,000. But we were seeing multiple offers, you know, contracts way above list price. And that is really stopped, you know, seeing one offer, it’s taken a couple of weeks for houses to sell, which is still a couple

Mark Ferguson 18:13
weeks. You gotta be kidding.

Mark Ferguson 18:18
Yeah. So we had record low inventory for like six years in a row. And we’re seeing that creep up now too. So I compared stats from last year versus this year in the last month. And we have about 30 to 40% more inventory, longer days on market, and just from the feel of selling my own houses, it’s definitely kind of leveling off, I would say.

Jason Hartman 18:38
Yeah. Now that begs the question, if things are slowing down, and it’s leveling off, why isn’t there any inventory of properties to buy in the lower priced side of the market? It’s just still dry everywhere. There’s nothing but yes,

Mark Ferguson 18:57
I think part of that is that well here is a little different. Because it’s hard to build houses in Colorado, people think there’s all this land available and there is, but water is really expensive here. Land is really expensive. And they aren’t building low end houses here. You know that I think the builders see hey, there’s more profit margin on this $500,000 house. I’m going to build a couple of those instead of build 20 smaller houses in we just have not seen building take off like it did pre crash when we saw everything fall apart. Right? Right.

Jason Hartman 19:28
So when you say water is really expensive. Are you talking about water rights?

Mark Ferguson 19:32
water taps water, right. So if you’re building a brand new house here and you want to buy a water tap for just a quarter acre lot, you’re probably looking at 30 to $40,000 for that tap.

Jason Hartman 19:43
Yeah. So that is expensive, and that limits development. Now, I’ll give you an interesting stat. I just read a report a couple of days ago, and I couldn’t believe this. This is really quite startling because this is not appreciation per se you It’s just Well, it’s exactly what it says it’s cost of construction. Okay. And the cost of construction for a like kind single family home over the last six years has increased by 31%. That’s really staggering. I mean, to build the same house six years ago would cost you, you know, now it cost you 31%, more Six years later. I mean, that is mind boggling. All the prices of all those ingredients of a home all those commodities, and put them together and assemble them. 31% more, you know,

Mark Ferguson 20:34
wow. Let’s try believe it.

Jason Hartman 20:37
Now, now, it’s amazing. So when you’re flipping, are you always rehabbing your properties or sometimes just flipping without a rehab

Mark Ferguson 20:44
95% of the time, we’re rehabbing. So there’s a few houses that we’ve sold without doing a rehab, but it’s pretty rare. And we’ve done a few where we’ll do real minor rehabs to get them you know, FHA ready, but most of the houses we’re doing, we’re spending 20 to $50,000 on the rehabs

Jason Hartman 21:02
now now, okay. And that rehab cost. I mean, I remember post Great Recession, there were little minor rehabs, you could do a rehab for seven to $15,000. That just seems virtually impossible anymore. I mean, it all depends what you do. But Wow, the rehab costs have gone up dramatically.

Mark Ferguson 21:23
Yes, in Nikki is my project manager and she helps manage my contractors and keep track of stuff. And she always makes fun of me because I’m still stuck, you know, a few years ago or even 10 years ago, when you could do a full rehab for a scene like 15,000 she’s like, you can’t do that you’re out of your mind is gonna cost us 30,000. So it’s Yeah, labor is gonna materials have gone up. Just everything has gone up so high,

Jason Hartman 21:45
and it’s really amazing. Okay, good. Talk to us about whatever you want to talk about for a moment. I’ve sort of driven the questions here, but just, you know, what do you want to tell the listeners,

Mark Ferguson 21:56
I think, you know, there’s a lot of talk about the market, what it’s going to do what’s not Do I definitely think we’ll see a slow down, we can even see a decrease. I don’t think we’ll see a crash like we did last time. I just think there’s so many investors out there. And the lending guidelines are so much stronger, that we won’t see a crash like that for a really, really long time. What happened

Jason Hartman 22:15
during the Great Recession was really a once in a lifetime event. I mean, you know, very few people are still alive, or at least they’re not they weren’t adults during the Great Recession, the Great Depression, I should say. So, you know, that’s sort of a once in a lifetime type of event. But certainly there will be minor recessions and cycles in the market, no question about it. And what’s interesting about it on the left to get your take on this mark, is what do you think will happen to rents? I mean, we find when interest rates go up, and affordability declines, it strengthens rents. So the long term buy and hold investors really benefit from a market slowing down a bit thoughts.

Mark Ferguson 22:52
Yeah, I would agree with that. Because when we had the great recession, you know, a lot of places didn’t even see decrease rents. They’re actually a lot More renters because they lost their homes in rent, you know may have gone down in some areas, but it wasn’t this huge crash in not every investor went bankrupt. And I just think you know if people realize, Hey, you know, it is a little scary to invest in anything, but you’ve got to get over this fear mindset and really just look at the fundamentals. I love long term rentals. I wish I could buy more of them here but our markets just the rent to value ratio is not suitable for residential properties anymore. I just think you know, people need to just not be afraid to get out there and invest even if it’s not the perfect market.

Jason Hartman 23:32
Yeah, okay. Good, good stuff back on to what you want people to know and what you want to tell people

Mark Ferguson 23:38
I love to educate people I love to teach people I started a blog investfourmore.com that’s invest. fo you are mo Rei calm, just to talk about my rentals, how to finance them, you know, talking about my flips, have videos before and afters of everything and also talking about starting a real estate brokerage, which I did this year. So I just love to educate people. Show them what I’ve done, give them some tips along the way. And I’ve written a few books about it as well. So I’m happy to give out free information or if people you know, are looking for other coaching, we have a few programs as well. And I just love, love seeing people succeed.

Jason Hartman 24:14
Talk to us about some of the best practices on rehabs and how you can really keep the cost down. And listeners, this doesn’t just apply to rehabbers per se. This also applies to tenant turns, your properties that are aging, and you need to make some upgrades to them over the years, things like that. Just share with us some of the best practices on managing contractors, which is frankly difficult. There’s no question about it, and getting good prices and making them keep their promises which is a whole art and science in and of itself. Yes, you can tell I’ve been through this before

Mark Ferguson 24:54
with my cynicism. Yes, great question. And, and there’s so many things to go over, but one thing To save price, you know is an art to figure out what to repair not to repairs, it’s really easy to make a house look amazing on HGTV if you spend $100,000. The tough part is making it look, you know, decent on a budget. And so we love to shop at Home Depot, we have a managed pro account there. So we buy in bulk to get you know, they have a sale on vanities, we might buy 15 of them and store them in our storage area. And just working really close with the contractors, we buy all the materials. So I pay for the materials, the contractors can’t say, Oh, I need you know, 50% up front to pay for materials because I’m paying for them. So that helps a ton. When we search for contractors. We’re very careful about how we interview them. We’re almost like interviewing for a job where we might place an ad on Craigslist, give them specific instructions on how to email us what to email us. If they do that right then we’ll give them a questionnaire and that eliminates probably 75% of the people because they’re not willing to answer a few questions or send us a resume or give us information that we need. And we figure if they can’t do that we can’t trust them to work on our houses. And then as far as getting them to do you know what they say they do. We are at the properties once a week during an active rehab, if not more, just there all the time making sure they’re working. And you know, we have a bid, we have a contract with them. But really, it’s more about trust and the people you work with, because if they don’t want to follow a contract, you’re pretty much gonna have to sue them to get any money out of them. They know that we know that it’s more about trust there is about your contract or anything written down.

Jason Hartman 26:32
Yeah, I agree. And I I’d say it’s even more about making sure that the incentives are aligned. And there’s a real art to this. I mean, it’s these been hard lessons for me to learn over the years. You know, you can write everything all over a contract, but the contract is just too hard to enforce. What matters is, can you make incentives align, in other words, progress payments, understanding what is expected On those progress payments, and so forth, any any thoughts on that, and you know how you how you structure those contracts,

Mark Ferguson 27:06
what we’ve usually done is we’ll pay 25% up front. And when the job is a percent done, we’ll pay another 25%. And when it’s all the way done, we pay the rest. And when I mean all the way done, it’s blue tape, they’ve come back and fixed everything, you know, everything’s clear to go. And that’s really helps just make sure they’re motivated. And we also have hired will have four full time employees now who are either handyman or contractors who we pay hourly, which is just amazing. I love having complete control, and they do whatever you want. We can use all their subs. It’s just been awesome.

Jason Hartman 27:43
Yeah, okay, good. How do you decide what to do and on property mean, you know, rehabs can go all over the board, you can get the property and just replace everything and do everything. Or you can do some minor. I’ll call it lipstick on a pig. It was the old saying goes You make the right decision. How do you arrive at that decision in terms of what to do,

Mark Ferguson 28:06
a lot of it starts with the systems in the house. So I mean, we’ll always have our electrician go in our hbic guy, our plumber, and make sure the house is safe. everything’s working right. So you know that electrician has to tear down drywall that’s going to dictate how much work we do and how far we go. Hopefully, we try and find houses where less is more, we can do some electric, some plumbing hbic the roof, but on the inside, we’re very rarely changing floor plans or tearing out walls. We replace a lot of kitchens, but we can replace the kitchen at Home Depot, you know, for around $7,000 all in, but we’re not tearing out the wall and moving electrical and moving heating vents to do that we’re replacing the kitchen where it is and we just try and do minimal repairs that look really good. So we focus on kitchens, bass, light fixtures, paint and flooring in whenever I get into the huge rehab. We’re doing addition for really changing the floor plan. That seems to be where we run into the nightmares things take forever. We go over budget and it’s just usually not worth the hassle. Yeah.

Jason Hartman 29:10
Okay. What about the concept of how much value will that household on the rehab? Making a larger rehab sometimes makes sense if the neighborhood will support it right. But sometimes a neighborhood won’t support a high end rehab. And you want to just do something basic,

Mark Ferguson 29:28
great question and a lot of our houses you know, we’re selling them from 270,000 to 400,000, which is actually the low end of our market. And so we are not going all out on materials. Some houses might get granite but a lot of them get the prefab Home Depot, laminate counters. You know, we’re doing not the bottom of the barrel appliance package, but you know, next up maybe a little nicer in the cabinets. We’re not spending a ton of money on the cabinets. Because most of these houses were making them nice enough where they’re selling at the top of their neighborhood. If we spend 10 or 20,000, more, we’re not going to get any of that back. You know, we’re already seeing pushback from appraisers on a lot of these deals. And we have to be very careful that we’re not over improving for the neighborhood. So, all the time we’re conscious, okay, how much can we spend where we’re close to the top, but we’re not pushing the barrier, because those appraisers will come in and just, you know, shoot us down every time. Yeah,

Jason Hartman 30:21
okay. Okay, good stuff. Well, let’s wrap it up. Anything else you want to say? It sounds like you’re still very excited about long term, buy and hold income property investing? It’s good to hear I know, a question. Actually, before we do that wrap up question. Let me ask you about your shopping center, you did a strip center, right? Is that is that your only retail deal? How’s that going?

Mark Ferguson 30:42
So I bought 15 residential properties from 2010 to 2015. In rent evaluations were great. Then our prices got so high, you really couldn’t cash flow with those anymore. And so I started buying commercial in 2017. And I bought four kind of smaller properties last year. And then yes, I bought a 68,000 square foot strip mall this year that has a grocery store coffee shop or restaurant and then actually opened my own office and one of the vacant spaces. And it has been awesome. We had a really good deal on it, which was the first really selling point on it, but just the cash flow has been great is a triple enly so the tenants pay all the expenses and it’s been making more money than we thought been less work than we thought and it’s just been a fantastic investment.

Jason Hartman 31:28
Okay, so that’s when you say commercial you mean retail,

Mark Ferguson 31:32
right? Not apartments. Yes. Go like one of my commercials like industrial little shop area. We’ve been an office building one of them. I just bought a restaurant actually two days ago that’s vacant that we’re going to rerun so yes, straight, you know, retail restaurant industrial, not apartment buildings.

Jason Hartman 31:50
Right? Sounds like the secret to that deal was really the buy side, right? Just getting this deal buying it.

Mark Ferguson 31:56
And so even though I’m an agent and a broker, I am not a specialist. Commercial. So I had teamed up with another commercial broker in the area who’s been doing it for 30 years. And let him be my broker. I paid him a commission and everything. And he kind of brought me a pocket listing on this deal. And that’s how that came about. Okay,

Jason Hartman 32:15
good. So, that was sort of luck of a draw. Right? You got that? You know, off market deal, right?

Mark Ferguson 32:21
Yes. And in dealing in the commercial world versus the residential, it’s so different. There’s Oh, it’s

Jason Hartman 32:27
massive. A lot of

Mark Ferguson 32:29
Yeah, listings. It’s more about who you know, then what you can do yourself. It’s, it’s crazy. Yeah,

Jason Hartman 32:36
no question about it. Good. Good stuff. Okay. So back to our wrap up question. Just any thoughts before you go? gave out your website already, but just just wrap it up for us with any closing thoughts,

Mark Ferguson 32:48
just happy to be on the show love to help people. Like I said, the blog is a great place. If you want to learn more, you can always email me [email protected] and then we have a pretty robust YouTube channel too, with 30,000 supporters. Drivers where I show all my properties and give other advice is just to search for investor more on YouTube and you’ll find that there too.

Jason Hartman 33:06
Fantastic. Thanks Mark.

Mark Ferguson 33:08
Thank you happy to be on the show and really enjoyed it.

Jason Hartman 33:12
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.

AMA 346: Chrysta Castañeda, The Last Trial of T. Boone Pickens

Jason interviews Chrysta Castañeda, author of The Last Trial of T. Boone Pickens. Get the oil and gas industry insight from Chysta, the go-to lawyer for high stakes litigation in the energy industry and beyond. Chrysta shares her experience with T. Boone Pickens and her knowledge of the current oil market problems. 

Key Takeaways:

[1:30] What happened with Pickens and how did the investment deal go bad?

[5:40] “As we saw the financial markets plummet, so did the oil market”

[6:30] Suadi Arabia and Russia are starting a supply war with oil, which was already oversupplied

[8:30] There is a coordinated market mechanism for oil production limitations

[11:40] Brief history about the name “Railroad Commission”

[14:00] Will we shift to a larger work-from-home community?

15 plastic





Jason Hartman Quick Start

Jason Hartman PropertyCast (Libsyn)

Jason Hartman PropertyCast (iTunes)

Jason Hartman’s Blogcast

Inflation as a Business Plan for Governments and Central Banks

On this Flash Back Friday originally published in September 2017 as episode 887, Jason discusses a pending financial crisis. He outlines the business plans of the government to easy inflation and talks about which of these plans will have negative consequences. Jason illustrates how governments report inflation and presents us with some educational resources to better understand the concept of inflation.

Jason Hartman 0:00
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is hand picked to help you today in the present, and propel you into the future. Enjoy.

Announcer 0:15
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 1:06
One of the unique strategies I implemented a few years ago fit with my 10 commandments of successful investing, especially number eight, thou shalt borrow to accelerate wealth and reduce risk. And number 10 thou shalt only invest in tax favored assets. So my money grows tax free, and I can leverage down payments. My friend Pat Donahoe his team at paradigm life got me started, and I have a few accounts with him now. Check out this perpetual wealth strategy at be your bank.com

Jason Hartman 1:42
Welcome to the creating wealth show. This is your host Jason Hartman with episode number 887 887. Thank you so much for joining me today. I just returned from Jamaica mon last night and had a quick trip to Jamaica got a little sunshine. I saw a few people I know Did a little networking down there and came back. And I keep wondering why I go to these countries. That was my second trip to Jamaica. And, you know, I just don’t like these primitive places that much. I like modernity, the modern world that humankind has been working toward, for millennia. Why don’t we enjoy it? I don’t know. Anyway, whatever. I’m back home, just got back from brunch at Tony Shay’s new home today. And Tony Shea, you know, the founder of Zappos, who sold to amazon.com several years ago and he is likely a billionaire, but if not, he’s very close to being a billionaire. And he moved to a much nicer place. He lived in a trailer park. Yes, I’m not kidding a trailer park. Then he moved to a another trailer park now it’s not what you think. Okay. This is a fairly swanky hipster version of a trailer park that he owns. He had an extra hotel. Yes, a spare hotel. He’s basically redeveloping downtown Las Vegas and a lot of you have followed Tony Shea and the amazing stuff he is doing for downtown Las Vegas, and really some interesting projects and I had brunch at his place. There were a whole bunch of people there maybe, I don’t know, good 60 people there today that’s that. I’ve been to his place for brunch several times. And that was the largest attendance I have seen. So he has this hotel, and then he put some trailers and some tiny houses. You may be familiar with a tiny house concept into some of the land around the hotel and is kind of redoing that place and it’s pretty cool, I must say so that was neat. I talked to Tony for a while and heard what his vision was for that and and he’s doing some really cool stuff. But yeah, definitely a different kind of centa millionaire or possibly billionaire, then you would expect from the old days and that just goes to show you you know, Tony Shea and his, his lifestyle just goes to show you how much things are changing, and how much things are miniaturizing and how much things are becoming more portable in the world than they’ve ever been in human history. And how much well, to my old quote, geography is less meaningful than it’s ever been in human history. So, as Bob Dylan said, times, they are changing times they are changing. Peter Diamandis, also, in his newsletter, was out with some new stuff about longevity, and three companies that are doing amazing things in the world of longevity. And, you know, this is going to change everything. There are so many game changers, so many inflection points in technology that have such wide Reading impacts on real estate investing on the economy. And I tell you, you better be paying attention to this stuff, folks. Because the rules are changing. The game is changing in so many ways, from longevity technologies that we profile on the longevity and biohacking show to robotics that we profile a lot on this show. dentists in China have successfully used a robot tour to perform a dental implant surgery without any human intervention. First time ever, D is just incredible. We have all of these amazing things going on.

Jason Hartman 5:43

Jason Hartman 5:44
and this is negative, but also positive because every problem is an opportunity. Like the Chinese symbol for crisis that is the same as the symbol for opportunity. literally translated means crisis is an opportunity, writing dangerous when so one of those is the pension, tsunami. We’ve got that going on. We’ve got this crazy radicalized Islamic world that wants to bring us back to the seventh century A be yet we’ve got some hopeful signs on the other side of that Saudi Arabia, there is some real movement to see some modernization he has letting women drive. Oh, so modern and so cutting edge. Yes. Can you believe it? Imagine that. And then you’ve got the Fed, you’ve got Janet Yellen talks about how recently is is showing some signs about how the Fed is changing things Indian in signaling that the economy is improving, and they are shrinking their portfolio of bonds. Now remember, during the Great Recession, the Fed was a huge buyer of bonds, and they were just buying up all these bonds to shore up financial markets and we talked about that many times on past shows. So amazing stuff going on in the world. Again, we will talk about all of this stuff more deeply on future episodes. But I want to take you to a clip of me talking live about some of this stuff, and how you’ve heard me say this before, but talking about the impacts of what the government will probably do. And really, governments I should say that plural, not just the US government, but governments around the world will do in reaction to a various inflationary and deflationary pressures. We’ve got them both playing out at the same time, in a much different dynamic than we’ve ever had before it anytime really, in human history, at least in any major shift toward these things. And we’ve got all of this stuff going on with the crypto currencies Bitcoin. The other crypto currencies. And I’m telling you folks do not bet against the Fed do not bet on anything that would be against the Fed, especially these cryptocurrencies, I think you are playing a dangerous game. And as I said many more many times before, I would love nothing more than to be wrong about my advice on crypto currencies like Bitcoin, but I don’t think I’m wrong. So just heed my warning. I met someone in Jamaica. She has an app, a startup, kind of a social app, and very, very smart person who has basically her entire net worth in Bitcoin and I said, Boy, you better sell some of that Bitcoin off and get out of that. And you know, it’s very appealing, especially if you’re a techie and a tech minded person to think that this is the answer and we’re going to decentralize the monetary system, but you look The reaction of China to that just recently, never bet against the most powerful forces in human history. And that’s why this live clip is important because I’ve identified most people have identified, you know, one, two, maybe three ways governments will deal with this massive debt load and the inflationary pressures that will cause but I’ve identified not one, not two, not three, most

Jason Hartman 9:25
people stop at three.

Jason Hartman 9:26
And I’ve identified six Yes, six ways that governments around the world but especially the US government, because the US government is in a very unique and very special and very enviable position to deal with inflationary pressures as they come about. So

Jason Hartman 9:47

Jason Hartman 9:49
the times they are changing it not every way though. That’s the dangerous thing. It’s easy to think that this is happening every way that the rules are just Changing in every way, and they’re not, some things will stay the same. Maybe it’s like, you know, there are some sort of basic things, the fundamentals, that will always be the underpinnings of the economy of the real estate market. But then some other things that are really changing. So it’s, yeah, it’s kind of an amazing time to be alive. But it’s a complicated time for sure. It’s a time when there’s more options, and more information than ever for in human history. And so that’s all the stuff we continue to talk about on upcoming episodes of the show. And so we’ll dive into that more deeply. But I don’t want to take too much time in the intro portion here. I want to get to this live clip. Again, whenever there’s a live clip, you gotta bear with us little bit on sound quality, the sound quality isn’t too bad. And maybe in the future, I’ll tell you how basic that this record This recording was done in such a sort of a basic format with basic basic equipment that you probably use every day. But you know what, I’ll keep that for later. And I’ll, I’ll tell you later how I did that. So we’ll get to that. But first couple of housekeeping items number one, tickets are still selling quick to our meet the masters of income property event coming up in La Jolla, California, in January. This is our next live event, we will not have another live event until our annual meet the masters of income property event. JOHN burns, john burns, real estate consulting a confirmed speaker and many more great confirmed many more speakers to be announced for that event. And it’s a three day event this year, not a two day event. So that’ll be Friday, Saturday and Sunday in January. Go to Jason Hartman calm click on events for details and registration. Get your tickets for that before prices go up again. Also Property tracker and real estate tools at the front page of Jason Hartman. com. You can find out more great information on the revised newly updated version of property tracker and a great tool for your real estate investment. We are going to close the contest and announce the winner. I think we’ll do that probably on Wednesday. So enter right away, get your finals entries in for the Amazon Echo at Jason Hartman comm slash contest. And then lastly, many of you have filled out the application to be on the short term rental Council. If you own and have experience with short term rental properties. Go to Jason Hartman comm slash STR and kind of Raise your hand. Let us know a little bit about your experience with short term rentals and you can take advantage of some good VIP perks for Helping us in our research and our survey about the short term rental market and we appreciate so many of you have come forth and filled out the application there. So please do that. Again. This is free. This is a perk for you. It’s not anything we’re asking you to buy or or do anything except that just be involved and share your experience. That’s it. So Jason Hartman, calm slash s t are for that. Okay, let’s get to this live clip. And here we go.

Jason Hartman 13:33
Okay, so as we have talked about, it is an amazing time to be alive. And during the break. You know what we just did? Stefan Adam and I just recorded the podcast intro for tomorrow’s episode, uploaded its Dropbox or editor can grab it and publish it tomorrow. isn’t that easy? You know how difficult that used to be. It used to be much more difficult in the old days. I had to walk to school and it was uphill both ways. In the southern California snow. Yeah. That’s what they always say, right? Older people always say younger people are always so spoiled. We’re saying that now about the millennial generation. This time, I actually think it’s true. They are some spoiled. So inflation. There’s a lot of inflation fear with Mr. Trump in office inflation, fear or inflation opportunity. I don’t know which it might be opportunity, certainly for real estate investors. And basically, we as a country are in a mess. Okay. We are in a mess. We have spent way too much money. Ronald Reagan used to say, to say that the government spends money like a drunken sailor is an insult to drunken sailors. And that’s a great quote. I love that one. Reagan had a lot of great quotes. So the question is, what do we do now? Right? What can we do with country as a nation to get out of the mess we’re in, what do we do? Well, there are six ways out of the mess that I’ve identified. You’re welcome to add a seventh or disagree with one of my six, I don’t know. But these are the six that I’ve identified. They basically go like this. Number one, we have all this debt, we could just default and say to the, to Japan and China, and all the countries that we owe money to, and all of the people and companies that we have obligations to in terms of repayment of debt, and then also entitlement obligations, which are much, much bigger than the debt. Okay, that’s the what Laurence Kotlikoff, the economist, was on my show a couple times, he talked about the 220 trillion dollar time bomb, okay, of entitlement obligations, that simply cannot be paid. Now, to put this in perspective, just know that the country’s growing Domestic Product annually is somewhere around about $18 trillion. And if we have to pay 220 trillion dollars over the next 1520 years, obviously this math doesn’t work, right? The tax revenue is dramatically lower than all of this. So the idea of art taxing our way out of it is very, very unlikely. Okay? Even if you taxed everybody at 150%

Jason Hartman 16:30
there wouldn’t be enough money. This is just math, okay. It’s just math. That’s all it is. There simply isn’t enough money. So the first two options default on our obligations, that would be very politically unpopular. It would probably create multiple wars, okay. And it would not be good. The other option is tax our way out of it. That’s impossible. The third option, have a yard sale. We could sell stuff off, right? We could sell Off assets that the country has. Many of our roads now are owned by businesses or governments in foreign countries, literally. Okay. remember a few years ago, they wanted to sell the ports to Dubai. Right? That was a big thing in the news didn’t happen. But, you know, it was it was talked about, remember several years ago when he was alive. It’s just funny how we go back and forth with these little tin pot dictators around the world. It’s we’re really stupid and ridiculous. You know, that’s Ron Paul. He’s the man, you know, too bad. He’s not going to be president. Maybe his son will be he’s not quite as good. But, you know, his, his dad really got it, like George Washington said when he was leaving office. You know, do you remember when Washington said this? I don’t remember good. But I heard that he said it. He said avoid foreign entanglements. You know, try to stay out of everybody’s business as much as possible in a in a connected world. It is an impossible to do that, but as a philosophy as much as possible, let’s just stay out of all these dumb wars and all that, you know, it’s just not worth it right? The old saying you gotta pick your battles. So have a yard sale, sell something off. We were selling military equipment to our arch enemy for so many years when he was alive. We just had started this selling military hardware to Kadafi archenemy, and he’s blamed for the Lockerbie, Scotland bombing of that 747 where everybody died, you know? So this is crazy how the world works, right? So we could have a yard sale, we could sell assets. The other thing we could do is we could steal, we could just pillage right? We could rob other countries of their assets. And so you heard a lot about this during the second law, the first and the second Gulf War, you know, we’re in Iraq to just steal their oil, right? Well, if everybody’s gonna blame us for it, I wish we would have actually done it, we might as well, right? If they’re gonna blame us for it. That’s what we could do. I mean, if you look at the history of the world, and all these different military conflicts, what you realize at some level is all of these great military leaders like Napoleon. He’s a great example. Okay. Napoleon was really just a burglar with an army. Right? You know, he’s to invade countries to steal their wealth. That’s what he did, right? And so, you know, militaries are used to steal. That’s one thing they do, right? But there’s a softer version of it. And I interviewed him on the show, john Perkins. He wrote a great book called confessions of an Economic Hitman. And he talked about how he worked for this consulting firm that was hired by the US government to go in and negotiate with foreign leaders about you know, making deals with them. Saudi Arabia when it was just a desert wasteland, we basically made that country incredibly rich by the economic Hitman deal we made, okay. And this is very complicated and nuanced. And there’s lots of opinions back and forth. My mom listened to his audio book and said, Oh, he’s such a hypocrite, you know, he’s just a guy who went in and profited from all this and then years later is saying it’s so bad, but he kept the money, you know, whatever you think, you know, I’m not sure. But it’s interesting to say the least. Right? Okay. So a positive way. Those are four negative things that we just talked about. But a positive way that we could get ourselves out of the mess is through technological innovation, energy, biotech, nanotechnology, you know, all these great technologies like 3d printing, etc. Maybe there will be some America centric, big innovation or many big America centric innovations that will create tons of wealth for the country. And in so doing, create a lot of tax revenue for the government. And if that happens, Possibly, I guess we could essentially grow our way out of our mass. But it’s super unlikely because the numbers are so big and ominous with when you’re looking at 220 trillion plus, plus plus, right? It’s pretty hard to imagine that but I don’t know could happen, and it would be great if it does. Who knows? I believe the most likely way we will work ourselves out of the masses, we will inflate our way out of the mass. Using inflation as a tool to avoid repaying debts, and avoid paying obligations is really a fantastic business plan for governments and central banks around the world. And certainly many, many governments throughout history have done this and many are doing it today. One huge difference, though, is that the United States has the reserve currency of the world and it also has the largest economy in the world. And it also has, and don’t underestimate this. No one really talks about this that I know, but me, it also has the biggest brand in the world. Okay, a brand that stands for freedom and opportunity. And we can certainly argue that that brand has been tarnished and diminished. And I would agree right now, especially with the government spying on us and so forth, right. But still, in comparison, America is a pretty good place. And a lot of people around the world still want to come here. They may talk on one side of their mouth and say they hate America and America throwing its weight around around the world. And on the other side, they’ll say, but I’d love to come there. Right? The same time. So America has a big asset in its brand name. And that’s very powerful. I don’t think that should be underestimated. Okay. But it certainly has the largest military the reserve currency and the largest economy. And one way or another. America can get away with a lot of stuff. With all those assets, okay? And it also has obviously very good geography, the American geography has really allowed it to be very safe. It’s got a very secure geography with oceans between it right, you know, poor poor King Kim Jong Hoon in North Korea, you know, he’s really struggling to get a missile to come all the way here right? To those evil American oppressors.

Jason Hartman 23:24
You’ll probably one day, you know, pull it off, right? Hopefully you won’t. And, and so the geography is a big American asset to you know, if you if you’re in Europe, you know, you’re just susceptible to all kinds of problems because of your geography. And we’ve seen that throughout history. So with all these assets America has, it can get away with a lot of stuff. And it can spend like crazy and it can go into debt like crazy, and it can just create more fake money to repay the debt in dollars that become cheaper and cheaper and cheaper or Time, and that is basically the definition of inflation. Okay, so inflation is our friend as a real estate investor is the home run for real estate investors. And there’s really only one opposing force to this inflation. This is going to happen except for one wild card, which is a significant wild card. And that’s technology like we were talking about when we started this morning. Okay. So technology is deflationary. Everything else is inflationary. Okay, so these two will be opposing forces, and we’ll see which one wins out. None of us really know. Okay. So getting excited about the government’s mismanagement of our money is is a pretty big thing to be excited about. Okay. It’s It’s pretty good. And we got a question here

Jason Hartman 24:54
for saving city

Jason Hartman 24:58
around in New Orleans, that a new city

Jason Hartman 25:01
God, Okay, go ahead.

Jason Hartman 25:14
Oh, that would be bad. Paper money is a real asset. It’s actually a big part of our freedom as people and we’ve seen attacks on higher value currencies like what happened in India fairly recently, where they D monetize the largest bill they have and in Sweden is almost a cashless country now, it’s pretty much everybody just uses credit cards or wireless payment systems like Apple Pay. So, believe me, you do not want cash to go away because cash is a very private thing. You can spend it without people knowing how you spend it. It’s all electronic. The government can track every move That is very bad. You know, I mean, part of our privacy is how we spend our money. Right? Okay, so yeah, I think technology of electronic currency unless they’re not controlled by the big powers that be like Bitcoin or these other cryptocurrencies, those would be great. But I wouldn’t bet on them. You know, I wouldn’t hold out a lot of hope for Bitcoin, because the likelihood is that, you know, the fight between huge governments and central banks all around the world, not just the US and the standing armies they control and an idea like Bitcoin, I think Bitcoin is likely to lose, okay.

Jason Hartman 26:50
They’ll find every possible way to crack down and squash it, you know, yeah. We got to not do a lot of questions because of time. Okay, but what’s your question? I just wanna make a point to

Jason Hartman 27:03
point to that is if you look at the last couple years

Jason Hartman 27:14
yeah, it’s actually more.

Jason Hartman 27:21
Ah, yeah, the US government can basically force other countries to buy our treasuries. And, you know, we knew that to some extent, if you read the Economic Hitman book, you’ll, you’ll see how this works. It’s a really interesting, you know, peek behind the scenes of this world that most of us don’t even know exist. I didn’t know it existed until I found a comic book Okay, okay. So, understand that and to understand inflation, we need to distinguish between real and nominal and price and value, okay, real and nominal in price and value. So I have in my wallet, exactly. $1 that’s only half, okay, in cash because I mostly don’t use cash, right? So I got this dollar. And this dollar has been around for a long time, not this particular one. But the thing called the dollar has been around for a long time. So, for example, the Federal Reserve was created just over 100 years ago and one of our venture Alliance trips was to the place of its creation in Jekyll Island, Georgia, where they created the Federal Reserve just over 100 years ago. And when the Federal Reserve came about, it’s the United States, I believe it’s the US is third central bank, they had two other failed attempts and Federal Reserve has stuck around for a while. But when the Federal Reserve was created, does anyone have any idea what this was called? reserve? Reserve Note? Yeah. So I agree, it was you could exchange it for silver right? But I’m not getting that technical. I’m just getting really simple. Yeah, green back. Yeah. Okay.

Jason Hartman 29:01
I owe you. I wasn’t and I was an IOU for silver, I guess, right? I don’t know it was called that. But I’m just being really simple here. It was called $1. Okay, it was still called $1. That’s the point I’m making, right? It’s called $1. It was called $1, over 100 years ago, and it’s called $1. Today, yet, the value of this dollar is only about four pennies versus what it was back then. So you’d have to just rip a little tiny piece off. To illustrate the real value of the value has changed significantly, even though the name is the same. Nominal means in name only. Okay, that’s what that word means in name only. So the dollar is called $1 in a moment, all right. So we need to distinguish the difference between the name of something and the actual value of the value is a fluctuating thing, even if the main stays the same. Inflation is The insidious hidden tax that is a pickpocket, it literally takes money out of our wallet out of our savings account out of our stock brokerage account out of our bond account, okay? You know, it is a pickpocket, it’s a thief, it’s a liar and the thief. And why is it that way? because it keeps calling the thing, the same name, yet diminishing the value of it. Okay, so it’s, it’s something very few people really understand. It’s really hard to truly like wrap your head around it. And I would say that I still haven’t wrapped my head around it. And I’ve been studying this stuff for I got really into it in about maybe 2003. Okay. I mean, it’s interesting that I took an econ class in college, and I didn’t get that into it then but when I self studied and became interested for personal reasons, I did get interested Keith quickly What helps out works because money is a central place that money actually goes to somebody first. If that’s the tax, right, because in my basement, thousand dollars, I get the most benefit from that. But let’s say I go buy a car, the guy that gets the mind for the next he gets the money to install the entire money supply recognizes that it’s out there. So the poorest people get hundred most Yes, very good point. So it’s it’s not like the prices just move up in lockstep apart it circulates out. Yeah, absolutely that it gets spread around. It’s slow and insidious. And it hurts the poorest people the most. That’s the thing. And this is why, by the way, I can’t be a liberal because they say they want to help the poor, yet their policies hurt poor people the Marxist and remember, I grew up Poor so I know what it’s like to be poor now I wasn’t destitute poor. I still ate okay. Although not much okay, but I had a little bit it be Corazon fun, right. But the inflation hits the poor hardest because when gas prices go up, for example, a fairly large part of their income goes to gas, especially because a lot of the poor people have to commute the longest to have a job. I’ll just give you a great example in Southern California, Riverside, they if you don’t have as much money you live in Riverside, but you likely work in LA or Orange County. So you’ve got this long commute when gas prices bump up a buck that’s like hugely significant to them. Okay, richer people. Well, first of all the dollar increase in gas prices it doesn’t matter that much. But second, they don’t have a long commute because they can afford to buy a more expensive home near near their work, right. So anyway, yeah, it’s it’s really a bad deal. Okay, so it’s this insidious, hidden tax inflation destroys the value of saving stocks. bonds and actually equity and real estate. equity in real estate is denominated in dollars anything denominated in dollars and loses value proportionately, so even equity in real estate, but thankfully it also destroys the value of debt. That’s why it’s a home run for us, because we love debt. Debt is our favorite four letter word. Okay, raise your right hand and say, I love that. Yeah, I know it’s counterintuitive, right? It’s totally counterintuitive, but it really does make sense as long as the debt follows rules. It’s not consumer debt, its debt against assets that produce income or produce wealth in some way at least. Okay. And it’s long term, low interest rate, fixed rate, debt, investment grade debt. That’s the kind of debt we love. Okay. Inflation is the most powerful method of wealth redistribute

Jason Hartman 34:01
Most people will think taxes redistribute wealth. I had joe the plumber on my podcast before Remember him? Yeah, he was on the creating wealth show a few years back. And he became famous for walking up to candidate Obama and really surprising him and saying, hey, you’re gonna redistribute my wealth. And you know, Obama was accused of being a socialist and communist and all this stuff, right? So most people think that the powerful method of wealth redistribution is through taxation. That’s amateur method. The powerful method is inflation. Because inflation redistributes wealth, from lenders to borrowers, from lenders to borrowers, and by the way, this is you can fill this in in your workbook, okay? If you want to, and from old to young. So why does it distribute wealth from lenders to borrowers? Well, if you loan money, and when you loan the money, you loan it in today’s dollar that has a certain value, we know What a million dollars today means we know what that means, right? But in the future, we don’t know what a million dollars means that’s up for grabs. So as you go through time, and you’re, say 10 years in the future, okay? And now it’s 2027. I mean, what do you want to bet that that million dollars is going to be worth less than it is today. And you are really not even you but your tenants pay it back in cheaper dollars. on your behalf. Your tenant is like your representative that pays your loan back for you. Okay. So that’s a pretty great deal for a borrower. Why would it distribute wealth from old to young? More specifically, I you kind of got it. But old people have assets usually, hopefully, and young people have debts.

Jason Hartman 35:50
And so that’s how it’s just distributed through the generation. You know, it’s redistributed from old to young, and it’s totally unfair. Old people that did the right thing. delayed gratification, save money. invested, they did all the right stuff, they got totally screwed by the system. And here’s the thing that’s hard for a lot of people to come to grips with luck. We all have parents and grandparents that we heard say things to us about money throughout life. And a lot of our beliefs were formed by this. And one of those beliefs at least I heard all the time was don’t have debt. Debt is bad, right? And my mother and my grandmother who told me that and my grandfather that told me that kind of stuff. Basically, they played that game. That was the right game. That all changed the rules of that game changed in 1971. When we went off the gold standard. Why did it change in 1971? Because when the when Nixon closed the gold window, and the government was allowed to spend without being tied to any intrinsically valuable thing like gold, and I’m not a gold bug at all, but you know, it is a measuring stick When the government was allowed to just spend like drunken sailors insulted drunken sailors, okay, then inflation we saw in the 70s. It went crazy, right? And inflation really has been going crazy. Even since then, most of the time, the government just figured out ways to manipulate the numbers really well to hide it from us. And technology, which is a positive thing. Also get it from us. Okay. All right. The example is that million dollar mortgage, if over whatever amount of time you want to pick one year, six months, 10 years doesn’t matter. If you have 10% inflation in that given period, that real value of that mortgage is $900,000. That’s what you’re really paying back in real dollars, not nominal dollars. In nominal dollars, you’re still paying a million, but in real dollars, 900,000. Okay, so that’s the very sweet deal. Okay. Here Now here’s a good video from CNBC. Now this video is several years old, but it is very, very telling. It’s got Peter Schiff arguing with a guy named Harvey Hirshhorn from Bank of America, Peter Schiff. Although I would never invest with him, actually, I did and I lost a bunch of money so I would not recommend investing with him. And you know, it’s like, they couldn’t care less how much money I lost there. They were so arrogant, terrible, didn’t even return a phone call half the time. awful experience, but I invested with Peter Schiff many years ago because he sounded so good. You know, he Peter Schiff is a very intelligent person. He He’s like, quick witted. He’s a master of the soundbite. He’s just got the zingers. And he’s in here and he’s right. Okay. You’ll love this video. It’s great because Peter Schiff is right. He just nails it. Harvey Hirshhorn this guy from Bank of America, total idiot, okay, and the host is It’s interesting how the host at CNBC just, you know, rails on Peter Schiff like he’s, you know, they try to totally marginalize him and make him sound like an idiot, because they’re part of the big wall street central bank government scam. Okay, that’s really like that. And, you know, you hear this stuff about like, the people in the media, well, they’ll say things like this, who is how, like we had any meeting to decide which candidate to support, like the media will defend themselves, you know, they’ve constantly accused of being left wing right, the media, we’ve all heard this, this is not a surprise. Right. And, you know, journalists usually are left leaning people, right. So, you know, they’ll defend themselves sometimes and they’ll say, Well, you know, we never had any meetings saying we’re going to support Obama or Hillary or anything. I believe them I don’t believe they had a meeting. It’s just the general Zeit guys the thought, you know, it’s just their their world that they’re talking about that they believe that right? So this is their world. CNBC is like a mouse Peace for the basketball street conspiracy. And you just hear it all the time, just the constant theme. It’s not like it’s not like they got together and had a collusion to you know, probably, I mean, maybe they did, just like part of the way they think, okay, it’s just the way they think. And so this video really illustrates it. Now, the three basic ways that the government manipulates the inflation statistics, when they publish them in the consumer price index is through three basic things waiting, substitution and hypnotics. Okay, waiting just means, you know, in this basket of goods that makes up the consumer price index, the government will say, Well, you know, we’re going to give more weight to this item, this widget and less weight to that widget. And if that widget widget a goes way up in price, they’ll just wait it less is though people buy less of widget a okay? And more of widget be which didn’t go up and So it makes the index look better, like inflation is lower than it really is. Okay? And then substitution is kind of similar with substitution. They’ll say, Well, hey, the price of beef went up. So everybody will just buy chicken. And we’ll just put chicken in the index and take beef out. Okay? And you know, maybe you don’t like chicken, maybe you think chickens a dirty bird. And you don’t want to eat chicken, right? You want to be right. And anyway, so you know, that’s substitution, right? The third way is hedonic. And hedonic basically says, It’s from the word hedonism, right? And hedonism is pleasure seeking the amount of pleasure you get out of something, right? So if I take this laptop computer here, basically, every time Apple comes out with a new laptop that’s got enough of an upgrade, I buy it, okay. And I always buy the most powerful, best thing myself. And every time I buy it pretty much cost the same amount of money. It’s 20 $800 for the best laptop, they make At any given time, that’s about the price, always the same price for years, it’s been the same price. Now 20 $800, the value of that’s obviously a moving target, right? But the technology keeps getting so much better. And that’s why what incentivizes me to buy a new one. So hypnotics will say that even though Jason bought his new computer and paid 20 $800, in actual dollars, the computer is twice as good as the last model. So we’re going to assume he only really paid 1400 dollars.

Jason Hartman 42:33
That’s hedonic indexing. And that is addressed in this video quite dramatically. So you’re going to like that. When Harvey hirschorn talks about he’s gonna say, well, the power of a processor has gotten faster. Well, yeah. So I mean, Peter Schiff just kills them. But understand that the concept of hedonic indexing is logical. It’s true, like what they’re saying is true. That happens. technology gets better. Products get better, right? But you know what they’re saying? When they hedonic Lee index, they’re saying that we are not entitled to progress. That doesn’t belong to us. It belongs to the misstated index of inflation.

Jason Hartman 43:17
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 of 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.

Compensation from CEO to Worker with Dr. Richard D. Wolff

Jason gives us an update on housing demand and talks about the migration towards the suburbs. He discusses how this trend was happening prior to the pandemic and that COVID-19 is simply accelerating it. In the next segment of the show, Jason hosts Dr. Richard D. Wolff as they finish a discussion from the previous show. They talk about the disproportionate pay between workers and a company’s CEO.

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 0:54
Welcome to Episode 1503 15032 Today we have part two of comrade Richard D. Wolf. Hey, I tease him, but I like this guy. I think he, I think he’s got some good points, the Marxist professor, and Hey, didn’t move the needle yesterday, did you become a Marxist? I thought I have any Marxist listening to this show. But maybe one or two, you’re always out there, right? You’re always out there reading your copy of The Daily worker, and plotting for the communist takeover of the free world. So here we go. We’ll get into that in a moment. But first, we have an important update about homebuyer demand. And one of the ways that you can assess a lot of the homebuyer demand is simply by looking at the number of mortgage applications. So let’s talk to one of my favorite reporters, Diana olek. With CNBC and hear what she has to saying about this. So let’s get to breaking news on the housing market. Diana olek has the latest report on mortgage applications.

Jason Hartman 2:07
Hey, Diana. Hey Joe. Yeah

Diana Olek 2:08
after a brief pullback at the end of June, homebuyers rushed back into the mortgage market last week, taking advantage of yet another low more record low mortgage rate mortgage applications to purchase a home Rose 5% for the week, but were a remarkable 33% higher than the same week one year ago and that’s according to the Mortgage Bankers Association, seasonally adjusted index and another adjustment was made to account for the July 4 holiday. Now the average rate on a 30 year fixed fell to 3.26% from 3.29. From wow down Wow. Well, prices are continuing to heat up given the very tight supply of homes for sale. And we saw that in the average purchase loan size increased to $365,700. That is another record high now applications to refinance a home loan which are generally more sensitive to weekly interest rate most there was just point 4% from the previous week, but what 111% higher than the same week one year ago, refi demand has been so strong for so long and interest rates have been as well. So there are now a limited number of borrowers left who could benefit significantly from even that new record low rate. It seems like we’re getting another record low mortgage rate every week, Becky.

Jason Hartman 3:17
Now, of course, we’ve talked about how we have the lowest interest rates in over 3000 years. I’m assuming the records that they kept 3000 years ago, were not as good as the records today, but you know, we’ll just take their word for it, the rates are pretty darn low. So what Diana olek was talking about there was very prescient based on what’s going on today. But note, the number she mentioned that $365,000 number, that was the loan amount, not the house price. So if they’re putting 10% down, or 20% down, remember that’s just 90% of the price of the house or 80% of the price of the house, as the case may be. So it’s pretty amazing. And doesn’t that make the properties that you are buying through our network that you’re finding at Jason hartman.com slash properties? Doesn’t that make those prices seem just totally amazing? Yes, it does. Yes, it does. So we’ve got one, maybe two more announcements to get to before we get to our guests today. But first, I wanted to play a clip from one of our meet the Masters speakers, and that is my friend George gammon, who by the way is going to be in Florida this weekend, and I’m gonna be hanging out with him and we’ll be talking about some, some big ideas for you. He got a flight out of Colombia, which is amazing. He said that was really, really hard to do. So here he is, and he’s going to give you a little educational preview about the upcoming masters talk. You heard him on the show before and it’s my pleasure to welcome George gammon back just for a brief discussion of what he is going to talk about at her upcoming meet the masters of income property conference. This is the first time we’ve done it virtually it’s our 22nd anniversary event. And George, we are so excited to have you tell us what you are going to be sharing with our attendees. Well, I just can’t wait first and foremost, Jason to get there and share hopefully what’s going to be some knowledge bombs and some serious value with your listeners with your viewers of the people that are going to attend this virtual conference. So the first thing I’d like to talk about is something that nobody understands and I think it’s just gonna blow people’s mind. And that is in the most recent tax bill that came out in 2018. The tax bill that we thought lowered people’s taxes actually is going to increase people’s taxes substantially. Over the long run, so how is this going to happen? Because they switched the CPI measurement, and that’s the rate of inflation for the tax brackets. So if they increase the tax brackets too slowly, in other words, they use a rate of inflation that understates the CPI dramatically, then the tax brackets will move up slower. That means you are going to pay more and more of your income to the government over time and I won’t go into great detail. But trust me, this is something that everyone is going to want to find out about take notes so you can prepare in the future. So you’re not getting ripped off by the government. George, that is fantastic. I saw you talk a little bit about this before with your famous whiteboard and you’re great with the whiteboard for sure. That is a super important topic. And it is amazing, the kind of really sleight of hand that the government plays with The IRS with monetary policy with fiscal policy. It’s just incredible. And it’s so important that people understand this, isn’t it? It absolutely is. Because as real estate investors, we can take advantage of certain tax opportunities. We’ve got depreciation. I mean, you go into this and a lot of your videos, and I’m sure we’ll be talking about it more at meet the Masters, but we’re going into an environment in the United States where taxes are going to increase, I can almost promise you that whether it’s corporate taxes, or there’s income taxes, or maybe capital gains tax. So you need to be cognizant of what’s going on. Because you’ve got two options right now going into the future. You can either be prepared or you can be a victim and Personally I’d rather be prepared. Yeah, absolutely. Well, we can’t wait to have you and it’s your first time speaking at meet the masters. We originally folks had this scheduled as a live conference. It will be live now but it’s virtual, but it was going to be an in person physical conference. I guess I should say, in Southern California, and then we postpone that and turn it into a virtual event. So here we are, George, we can’t wait to have you. And thank you again for joining us. And I’m sure the audience is just going to be really looking forward to what you have to say. So thanks again. All right, buddy. Well, I can’t wait to see you and everyone else, July 31, August 1 and August 2, we’ll see you there. You got it. Looking forward to it. So I hope you were excited about our upcoming meet the masters and I know you are because a lot of you have been buying tickets like crazy. This virtual conference makes it a whole lot easier than a physical conference. So very excited about our 22nd anniversary. This is the 22nd time we’ve done this event, but the first time we’ve done it virtually. And we’ve just been getting all our technology in order to make this a real pleasure for you. And I think it is going to be just that. Of course. We announced Sharon lechter to the speaking roster yesterday and we have Have a big new announcement. But you know what? I’m gonna make you wait for it. It’s a famous person, and it is a great real estate mentor will announce that one probably on Monday. Okay, so just wait for it, wait for it, you’ll love it, you’ll you’ll be very happy. Don’t worry about that one. And this one was just confirmed yesterday, but I just got to work out a few details and make sure the time and date work for the mystery speaker but you’re gonna love the woman out on Monday. Oh, by the way, early bird pricing ends. I believe it ends tomorrow night Friday night. So get your tickets quickly. Jason Hartman comm slash masters, then we’ll go to the second earlybird level. So it’ll be you know, a little bit more, and then there’ll be one more level of earlybird before the event. So we have been talking a lot about current events and what’s going on in the world. And two things I want to share with you before we get to our guest and we do part two of Marxism and the One is that this crazy, crazy world we live in this woke world where the hypocrisy just rains down on anybody with any degree of intellectual honesty.

Jason Hartman 10:17
It is raining cats and dogs have hypocritical, self interested stupidity. And here is yet another example of so many. Well, you’ve heard of the band Lady Antebellum and they decided that suddenly, their name of their band was somehow not woke enough. I guess it was just too racist. So they had to change the name of their band. So they changed the name to Lady a, that is the name of the band, and they tried to work out a deal because that name was actually taken. They tried to work out a deal with another African American performer who already was using that name herself she called herself lady a and I guess the woke hypocrite scumbags it Lady Antebellum did it like that they weren’t able to be woke enough and get full clearance to use the name lady a okay because there are a bunch of leftist virtue signaling fakes. And so even though I do like a couple of their songs, so good job lady a or antebellum or whatever your name is, I bet the courts are gonna side ladies not available to you. But guess what they did. They are now suing the poor African American lady who already owns the name. So here is a tweet I’m looking at Lady Antebellum decided to change their name to Lady a, because they’re woke now, only to find out that a black artist already existed under that name. So now they’re suing to use the name anyway, because they couldn’t come to a deal with her leftist virtue signaling in a nutshell. Unbelievable. That is truly unbelievable. I think we should start a legal fund for the original owner of the name lady, a the African American performer and help her fight this battle with the bullies Lady Antebellum to keep her rightful name. That’s like another form of police brutality. Its intellectual property brutality. That’s exactly what they’re doing. Oh, unbelievable. just unbelievable. Maybe she’ll start a GoFundMe campaign and we can all donate money to her because boy, I’ve I feel sorry for that the the woke virtue signalers just, you know, they want to steal her name some believable, and you know, they might get away with it because they have way more money than she does. I’m sure they’re a famous band with you know, many big hits. Okay, so we’ve talked a lot about the mass migration to the suburbs, the burbs, and it is continuing. But guess what? The firm the real estate firm Cushman and Wakefield, you’ve probably heard of this firm. They’re a big deal. They’ve been around a long time. I think ever since my career started probably way before that, hey, I’ve been doing this a while, in fact, over three decades, so that’s a long time. They say in this article at globe street calm that the new found interest in the suburbs is not so new. Since 2016, the gap in cost between get this cbgb I’ll get to that in a moment. And suburban office, meaning office space for you know, renting office space has receded from a high of 68% according to Cushman and Wakefield. Now, this is just a sideline, but you know, I really get an Well, What don’t I get annoyed about I get annoyed about everything. I get annoyed about leaf blowers. I get annoyed about Wall Street criminals. I get annoyed about real estate criminals. I get annoyed about woke Lady Antebellum scams where they’re bullying people around with lawsuits. I get annoyed by all kinds of things. Okay, I get annoyed by food labels, whether they’re lying to you, and they’ve got 67 or whatever names for sugar, when they should just call it sugar, but they’re just

Jason Hartman 14:34
trying to deceive you and poison you with more sugar. And don’t get me wrong. I love sugar, but it’s still a scam. So I just don’t like the scammy part of it. If I want to eat some sugar, just call it sugar and all eat it anyway. Okay, because it’s addictive. And I’m addicted to it just like anybody else. Right? Okay. So, it amazes me. When people use these acronyms, and they assume it Everybody knows what they mean. I have been in real estate for a long time. I have negotiated many, many commercial property leases. Of course I’ve done a ton of work in residential and had hundreds of tenants owned properties in 11 states and all that kind of stuff right so I have a long resume. But believe it or not, I did not know what that acronym was CBD I thought it was the marijuana thing right? You know, like CBD oils that you keep reading about and hearing about. Know, CBD stands for central business district. Nowhere in this article does it say what that means. Unbelievable. just unbelievable. annoying, hashtag annoying. Okay, so anyway, the article goes on to say as the pandemic rages on both companies and their employees, they are looking to the suburbs for salvation, the theory being that wider spaces In the city outskirts will make social distancing that much easier. By the way, that’s not a theory. It’s a fact. Okay, but you can still call it a theory if you wish. As a result, companies are dusting off playbooks to reconsider the hub and spoke site selection model meaning of their offices, not just for their own corporate purposes, but also to accommodate their employees. By the way, this is a better deal for everybody. Because the office space in the burbs is a lot less expensive than in the city. And so is the housing so they can afford to be way more competitive offering even lower wages to people living in the suburbs, because it’s if their cost of living isn’t as high, then the benefit a bargain accrues to both parties, the company and the employee, just like doing business in a business friendly state that’s less expensive to operate in. You can pay your employees less and they can still have a great life. So that’s the thing. Well, this trend is real, it would be a mistake to think that it kicked off with COVID-19 A new report by Cushman Wakefield makes the case that the rebirth of the suburbs was well underway before the pandemic. Instead the Coronavirus accelerated the process that had already started. I agree with them. The Coronavirus has accelerated a whole lot of things, a lot of technologies, a lot of adoption of technology and the move to the suburbs. So the article basically goes on to talk about something that we’ve reported on over the years, that millennials are obviously moving into their housing formation stage of their life because they’re getting older. Hey, the oldest millennials about 40 years old this year, right? So they’re not kids anymore, even though some of them are woken clueless and not all, but you know, a lot of them remember the millennials are the first most brainwashed generation they’ve been brainwashed with the woke, elitist school system and the woke elitist University. government debt enslavement complex By the way, did you see the ridiculous thing that even if you go to Harvard remotely, and you’re looking at a screen on your laptop, you have to pay $48,000 to go to Harvard this fall? Unbelievable. What a complete scam that is a scam. And why is it that Harvard has this multi zillion dollar endowment and

Jason Hartman 18:28
and they have tax free status. This is insanity, that we allow these universities to just rob us. They are robbing a whole generation of young people from their future. They are requiring them to have a mortgage without getting a house included. It is ridiculous. The student loan scam is ridiculous. Do you know that one professor at Harvard, say take economics For example, one economics professor could teach economics to the entire planet Earth. Everybody in the human race could learn economics from one professor. And they could charge each student $1 $1 to attend and get a college degree. That’s the way it should be. Technology has lowered the cost of almost everything except things where they have a fake Iron Triangle monopoly, like the college government debt enslavement complex. This is a massive, massive scam. And at the same time, these universities are brainwashing people. It’s like this elitist brainwashing scam. Don’t get me started. I get annoyed by everything, don’t I? Yes, I do. I do. But it’s you know, it’s good to be annoyed. Because if you’re not annoyed and dissatisfied about something, then nothing ever changes. Okay? It’s not so bad. Join me in your annoyance. I’m actually quite a happy, jovial person. Well, sometimes, but then I get annoyed. Okay, so anyway, the point is, the suburban trend was already there, and COVID accelerated it. Yes, that’s the point of the article. That’s the upshot. It’s all you need to know. So go look at those suburban properties at Jason hartman.com slash properties. And while you’re there, get a ticket at Jason hartman.com slash masters for upcoming meet the masters. Let’s get to part two and talk to the professor and learn a little bit more about another viewpoint on Marxism. So where do we go from here? I think we’d all agree that things are pretty messed up unless you’re Larry Page, Sergey Brin, Jeff Bezos, Mark Zuckerberg, Bill Gates, whatever. We would all agree that it’s you know, and then lou dobbs book, which I quote off and war on the middle class from years ago. He talks about how the rank and file worker versus this the C level executive pay, it’s astronomical, how out of proportion that is nowadays, compared to how it was years ago. I mean, it was it was in line, you know, the head honcho always gets paid more that’s we get that right. Nobody would object to that in principle, but the proportion is staggering. What jamie diamond work makes, versus one of his his serfs. Right? So how do we solve that? I mean, it’s we got to redistribute wealth, right? That’s the only way you do it.

Dr. Richard D. Wolff 21:31
A few months ago, maybe a year ago, I was on a fox news townhall. And they had two of us on the left. And then they had, they have four big shots on the right, one of which was lou dobbs. And after the last an hour of the show, after the show was over, Lou Dobbs was eager to talk to me, which I found interesting. Hopefully

Jason Hartman 21:54
your dogs would not disagree with you completely.

Dr. Richard D. Wolff 21:56
He was taken with me Usually it was very friendly and all that. But that’s what he wanted to talk about. Yeah, he was. He and I both. I think I had made some comment about how back in the 1960s, the CEO got 50 or 60 times. Yeah, now it’s

Jason Hartman 22:13
like 400 times. Yeah, that’s right.

Dr. Richard D. Wolff 22:15
Yeah. 400 is where it is now. And there’s no rational basis, right? I mean, you’re not gonna argue he’s that much more productive than it’s just silly. And he and I agreed on that. And I said to him, you know, if you had a democratic way of deciding on salaries, the workers themselves could be counted on to pay more to people they thought were more crucial to what the company did, had maybe some skills had to go learn for a while in the university to acquire that. They wouldn’t give everybody the same amount of money. They get that Yeah.

Jason Hartman 22:55
No, no, I agree that they do the good Pat. Yeah.

Dr. Richard D. Wolff 22:59
He looked at me With this funny look, I don’t want to put words in his mouth. He didn’t comment on what I was saying one way or the other. But you know, being a teacher on my life, I look at the students eyes, I looked at his eyes. I don’t I mean, I don’t mean this to be critical because I had a nice talk with him. I don’t think he had ever thought that way. I mean, he, when he asks himself, well, that’s the CO ops

Jason Hartman 23:23
idea, right? The company, the employee owned company concept, right?

Dr. Richard D. Wolff 23:29
But no, no, no, no, no, no, no, not ownership. Okay. When I say Co Op, I’m talking about what the better word would be directorship. The workers become collectively their own employer, their own board of directors. This is complete, you know, you can have an employee stock ownership plan, and we have many of those workers get, you know, X percent of the shares or something like that. The problem with that is, whenever you think of it, per se, is that the work is are usually either in fact, incompetent or unsure of how to run a company. So what they do as owners is the same thing anybody does as owners, you basically vote for turn over the company, to your delegate delegates, your your board of directors and you elect

Jason Hartman 24:18
a representative Republic concept. That’s right.

Dr. Richard D. Wolff 24:21
That’s right. And so they do that too. And then what they look at their shares the way most shares small shareholders do, this is a source of a quarterly check. Beyond that, I don’t give a damn I don’t know what’s going on in the company. I’m not involved. Yeah, I bought it because my broker told me it was a good deal and something like that. So I’m talking about when workers literally become the collective directors, designers, they run their own business. They don’t even have to own

Jason Hartman 24:52
a company with 80,000 workers really do that is everything voted on. I mean, sure. They I mean the problem is in those employees Stock own companies that you mentioned a moment ago. We have that all over the place. And because of the separation of the C level executives and the boards of directors and what’s known in laws, the business judgment rule, you know, it’s like Congress, they can just give themselves perks endlessly. And you know, there’s no accountability for that. Yeah, they could maybe vote them out, but that’s part of it. So how do we do that? How did what’s the real mechanics of that?

Dr. Richard D. Wolff 25:29
Let me answer it by describing to you a company that has done it, because we don’t have it in the realm of me. I don’t want people to imagine I’m suggesting how it could be done. Okay. I prefer to be the messenger who tells you how it’s already been done. All right, probably the single most powerful and successful. A worker Co Op in the world is called a mundra gone Corporation. It’s based in Spain. And in the city of Mondragon, which is a small city in the north of Spain in the fall. hills of the Pyrenees mountains. In 1956, a Catholic priest gave a famous talk in a little church in Mondragon. And he said to the workers, they’re very, very poor part of Spain. If we wait for someone to come here and give us jobs, we will all die of old age before that happens and everybody laughed. And then he made his pitch. He said, Let’s become our own employer. There are six of you in this room who are carpenters or whatever the hell they were. Let’s start a co op, we will employ ourselves. So he started in 1956, with six workers and the Catholic priests. Today, that company has about 130,000 employees. It is the seventh largest corporation in all of Spain. It is organized as a family of about 200 or 250. Individual worker co Ops, doing manufacturing services. a whole range of activities. And they organize each of those businesses, as a worker Co Op, where all the decisions are made collectively by the 50 to 500 to 10,000 employees depending on what it is give you an idea of how they’ve succeeded six people in 1956 130,000 that would be the envy of any capitalist Corporation, such a level of growth number two, along the way they competed with many capitalist enterprises, and they out competed them eventually ended up absorbing them, their workers, their use materials, their equipment. Number three, they have a rule that the highest paid worker in a co op across 130,000 cannot get paid more than eight and a half times what the lowest paid was. They have no Inequality like the United States in those parts of Spain, mostly in the north, where they are located. Okay, once a year they have an assembly with a workers vote on the supervisors, not the other way around. The workers vote whether to retain a supervisor or to let him or her go. It’s an extraordinary development. I have gone there myself. So I’m not only talking about reading about it and all that visited that place, blows my mind very well organized, correct? Yes,

Jason Hartman 28:36
it is. It’s doable. Okay. So I’ve got to ask you, though, when I asked you the question a moment ago, where do we go from here? We’ve got this, as people, especially on the left, like to talk about this wealth inequality gap. And I don’t disagree with that. It’s, you know, it’s not just, it’s not just like any quality, it’s much more nuanced and complicated, because, you know, it’s this percentile. Map percent. You know, it’s it’s very complex, right? But the fact is, the rich have become ultra mega mega rich. And I saw you on the interview with stuart varney and you were saying, you know, Jeff Bezos is giving away some money. That’s a drop in the bucket. Bezos has got to be the least charitable Scrooge of any I mean, he is so wealthy. Now Bill Gates is like the opposite end of the spectrum. He’s got his agenda too. But whatever, you know, at least he and Buffett are actually doing something philanthropic for real, but these houses, it’s like a trinket, okay. And it took them forever to get around to it, by the way, too. So you know, I’m pretty critical of Vika. Bezos, he, he treats his workers like crap. It’s a I mean, what do you do the only power that has that is able to change anything like this is government government has to say there’s a law. And hey, Jeff, if you don’t do this Co Op thing, or if you don’t give some of your money away Here’s a gun and a jail cell. I mean, that’s it. That’s what a law is. Right? So what do we do? Where do we go from here?

Dr. Richard D. Wolff 30:07
Well, you have to look for me. I’ve always had this disagreement with my libertarian friends. I understand that the government, in my view, the government is complicit with big business. And it has been for a long time. And I understand why. If you’re going to have a tiny group of people sitting at the top of society with the kind of obscene wealth you and I agree they have, if they’re stupid, they will imagine that that’s something they can simply assume will last for a long time, but I don’t think they’re stupid. I think they understand they have a problem. If you’re going to be wildly rich in a society that allows universal suffrage, everybody gets a boat, then you have a risk. And the risk is that the mass of people who are being screwed by

Jason Hartman 30:56
pitchforks eventually, you know, it’s a we have this plutocracy See or kleptocracy now, and, you know,

Dr. Richard D. Wolff 31:03
when they get the pitchforks, they have the vote. And they can use the vote to undo the economic consequences of what the rich are arranging for themselves. So the rich have understood. And I know this because I’m among the people that are occasionally approached by them for advice. They have understood they have to manage the political system, or else it will undo them. So they hire an army of lobbyists, which is much more powerful than our votes. That’s right. And so for me, the only solution is you have to mobilize the working class of people, those who are excluded from this wealth, those who are excluded from the role of the employer and say to them, you have to organize yourself. You have to mobilize yourself, then and only then will you be able to shape what the government does. So we can do The kinds of things you and I might agree would be good for the government to do. What does life look

Jason Hartman 32:05
like? Does that look like a labor union? Does it look like Elizabeth Warren? What does it look like?

Dr. Richard D. Wolff 32:10
Well, we’ve seen no, it could be could be something new. I’ll give you in a minute, an example of something that might be the beginning. In traditionally, in the last hundred and 50 years of capitalism, it has basically taken two parts, two forms, labor union, organized labor, and political parties, Labor Party, socialist parties coming and all that, yeah, they’re taking those two. Now, there is something which I find very interesting, called the yellow vest movement in France over the last year and a half, which is neither. It’s not a union. It’s not a political party. It is its leadership is very determined not to do that. But it wants to constitute itself as an ongoing social change engine. And it is France at least and granted France as a as its particulars, but in France at least it is stunningly powerful. It has endured now for a year and a half, which is itself a major achievement. It is constantly approached by the unions and the political parties, by the way, not only on the left, although it’s mostly the left. Marina lapan, which is the far right in France also, is trying to get a place in the yellow vest. So they keep all of them at bay. They don’t exclude them, but they do not let them take over which is in a way what they want. So you may be seeing their the beginnings of another form in which but the success of the of the yellow vests I think, is what you’re talking about. Because despite having no infrastructure, no Treasury, no accumulated, sells and all the rest of They were able to mobilize people in France, to the envy of both the labor movement and the left political bodies, in terms of a number of people that commitment, etc. So that’s right now in process, they’ve been quiet because they can’t get together because of the corona. But France is now opening up faster than the United States. And so we may receive that, but I see a variety of efforts. I see them coming in this country as well, to try to figure out how to mobilize and organize the mass of people, because I think everyone recognize that’s the only hope to have some real change. Otherwise, whether we have a Trump or a Biden, this is neither of them is going to change any of this.

Jason Hartman 34:52
Well, that I agree with. It’s just moving the needle a little bit. There’s no dramatic change. Yeah. Interesting. Well, Richard, give out your website. Your capitalist website.

Dr. Richard D. Wolff 35:01
Yeah. We have websites and we also you can

Jason Hartman 35:06
while your books free Why are your books free?

Dr. Richard D. Wolff 35:12
On YouTube you can find us at Democracy at Work. Well, that’s our channel on the YouTube. We have a weekly radio and TV show every week for half an hour. That’s been going for a decade

Jason Hartman 35:24
90,000 subscribers now. Yeah,

Dr. Richard D. Wolff 35:26
yeah. Oh no, no 150

Jason Hartman 35:28
no, I’m looking away. I’m looking at Richard D wolf. Maybe.

Dr. Richard D. Wolff 35:33
Okay. Different Yeah, Democracy at Work is the one you want to look at. Our website is Democracy at Work again, all one word Democracy at Work dot info. And you can also find me at rd Wolf with two F’s at the.com. And that will be the easiest way and we welcome people to look at all this stuff to communicate with us. We have a very active Facebook, Twitter, Instagram, you name it. We’re doing it Good stuff. And here’s the best part like you might be intrigued. I’ve been a critic of capitalism pretty much my adult life. Over the last 10 years, I have done more invited public speaking than in the previous 40. The United States has become open and interested in these critiques, in a way I never thought I would live to see. So you’re talking to a person who is being carried along by a current that is very strong, that I did not think would last but it has. Hmm. It’s a heady time for people like me, we’re back in the political reality and conversations of America in a way we haven’t seen for a long time.

Jason Hartman 36:46
Well, that’s what happens when American workers don’t get a pay raise for four decades. Okay. And And listen, I don’t agree with you in the sense that I like capitalism. I just don’t think we have capitalism. You know, but you know, the, you know, The Soviets the Soviets could argue we don’t I like Marxism, Marxism, but we don’t have Marxism. So I get it. You know, this is very nuanced. There’s a lot to it, obviously. But Richard, very interesting. Yes, the millennials, they definitely love they lean socialists. They lean modern monetary theory and all that kind of stuff, which you know, I’m sure. I’m sure there’s a big demand, like you said for for years. So, good stuff. Thanks for joining us today, folks. That’s Richard D. Wolf. Thanks so much for coming on.

Dr. Richard D. Wolff 37:26
Thank you very much. And I look forward to doing this again, because all conversations are should be part of what the evolution of our society now needs and will benefit from

Jason Hartman 37:37
workers the world unite. Never thought I’d say that on the show. Thanks, Richard.

Jason Hartman 37:48
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.

AMA 345: Gold, Dollar, Crypto, Investing in Chaotic Times,, Hugh Hendry

Hugh Hendry joins Jason Hartman to share what was going through his head through the 2008 recession and what preliminary actions he took to position himself well. Everyone is wondering “where are we going [market]” and Hendry shares some thoughts based on actions the Fed took over the last 60 years. 

Hugh discusses the early signs of chaos that awaits us as we move away from an accepted form of order. It’s not always a perfect situation for investing, especially if you only have one mindset for profit. Chaotic times call for positioning yourself to profit from a different angle. 

Key Takeaways:

[2:00] 31.2% positive return back in the 2008 recession

[3:00] To be curious you have to misbehave first.

[6:30] Discussing the “boom-market in fear.”

[12:00] Everybody is wondering where we are going [market]? 

[28:00] What is your stance on Paul Volcker?

[21:30] What is the FED doing wrong?

[22:00] Looking for predictions in gold, the dollar, etc.

[29:30] We are conditioned by the very slow passage of time. 

[30:00] Gold has been trending.

[32:45] 50 years ago we were pivoting from chaos to order. Today, we are pivoting from an accepted order to chaos. 

[34:18] We live in a world where instead of reducing the money supply, they are desperate to increase the money supply.

[38:15] In preparation, think of the most chaotic events becoming normalized, and how you can profit from chaos instead of order.

[39:30] At the bottom of a deleveraging cycle, everything is cheap.

[41:30] “May you live in interesting times,” -the quote is back. 


Twitter: @hendry_hugh

Instagram: HughHendryOfficial 




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