AMA 386: Jim Rickards on The Death of Money, Aftermath, Currency Wars & The New Great Depression

Jason Hartman talks with Jim Richards, author of The New Great Depression. Jim shares his discoveries about the lockdown, the stock market’s influence, and asset bubbles vs. asset inflation.

Jim Rickard’s Book: The New Great Depression

Key Takeaways:

[3:20] You cannot understand The New Great Depression without looking into the pandemic.

[4:00] “What I discovered was that the scientists don’t agree with each other.”

[10:25] Have the lockdowns killed more people than they have saved?

[16:00] The stock market no longer bears any relation to the real economy.

[20:00] Did the lockdown cause a pent up demand?

[24:00] Asset bubbles or asset inflation?

[25:35] What causes inflation?

[28:45] Your Keynesian multiplier works up to a debt to GDP ratio of about 90%.

[33:20] Why buy gold and silver if you’re not afraid of inflation?

[36:25] Bitcoin, will it ever have a chance of being a global currency or taking over the dollar?

[44:00] Millions of people are migrating out of major cities; where are they going?

Websites:

jamesrickardsproject.com/

jasonhartman.com/sweethome

jasonhartman.com/protect

JasonHartman.com

JasonHartman.com/properties

Jason Hartman Quick Start

Jason Hartman PropertyCast (Libsyn)

Jason Hartman PropertyCast (iTunes)

1-800-HARTMAN

AMA 385: Mortgage Update 2021 January with Adam

Investment Counselor Adam talks to one of the lenders in the Jason Hartman network about what’s going on with interest rates these days. People are locking rates below 3.5% on properties $100,000 and up! With rates being at a historic low, what is the timeline on closing a deal?

Website:

www.JasonHartman.com/Properties

AMA 384: 2021 SMART Goals! 5-Year Investment Plan

New Year, New Goals, Same proven asset class! Jason Hartman invites you to celebrate with him another fantastic year of prosperity for all real estate investors practicing some of Hartman’s proven investment techniques. Following the celebration, we must look for the “what next” plan or goal. How do you build your goals? Do you write them down? Do you create realistically achievable goals?

Contest:

jasonhartman.com/contest

Key Takeaways:

[1:30] Let’s celebrate our prosperous year of 2020 and look forward to another great one to follow.

[5:00] The Hartman Stimulus Payment CONTEST

[8:45] Be a self-sufficient person.

[10:00] 80% of Americans do not have goals, and even fewer have written them down.

[10:40 New Years’ Resolutions are so cliche.

[12:15] A goal should be just out of reach but not out of sight.

[15:20] The Winner of the 5-Year Plan Video Contest

[15:40] Winner, Michelle, laid out how she and her family intend to achieve their income property goals.

[21:20] It’s the kind of person we become just by trying.

[22:00] SMART Goals

[23:00] Smartsheet from monday.com

[26:50] Balance out your portfolio.

Websites:

jasonhartman.com/sweethome

jasonhartman.com/protect

JasonHartman.com

JasonHartman.com/properties

Jason Hartman Quick Start

Jason Hartman PropertyCast (Libsyn)

Jason Hartman PropertyCast (iTunes)

1-800-HARTMAN

Launching a Digital Bank by Chris Skinner

In today’s episode, Jason Hartman is joined by Chris Skinner, Chairman at the Financial Services Club and founder of Finanser. They start the show by talking about banks being challenged technologically and the antiquated banking systems that need updates recently forced by COVID-19. Jason and Chris discuss launching a digital bank and switching gears to robotics and technology in the future. They also posed this question: on robotics and essential work, what happens when people no longer need to work?

Announcer 0:01
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.

Announcer 0:12
Welcome to the American monetary associations podcast where we explore how monetary policy impacts the real lives of real people, and the action steps necessary to preserve wealth and enhance one’s lifestyle.

Jason Hartman 0:29
It’s my pleasure to welcome Chris Skinner. He is chairman at the financial services club and founder of financer, he’s author of the best selling books, digital bank strategies to launch or become a digital bank, digital human. The fourth revolution of humanity includes everyone in the new book doing digital lessons from leaders. Chris, welcome. How are you?

Chris Skinner 0:51
Yeah, I’m good. Jason. Thanks for having me on.

Jason Hartman 0:53
It’s good to have you. And you’re coming to us from Poland a great place. I’ve been to many times, what city are you in?

Chris Skinner 0:59
Just outside Warsaw in the suburbs? Luckily, we moved to a place with a big garden in November. So it’s not been so bad for the last three months, we couldn’t get out

Jason Hartman 1:08
of the house. Right? Absolutely. Yeah, the world has really changed. And all of this change is accelerating what economist Joseph Schumpeter called creative destruction. And it is really accelerating change in the world in so many ways, a lot of it for the good. I mean, a lot of things that would have taken five or 10 years to happen, in terms of convenience, technology, so forth are happening right away. And so there’s definitely some good, good that’s coming out of this, no question about it. But tell us what’s going on in the world of money and banking, and how that affects all of us and in the economy in general?

Chris Skinner 1:47
Well, I’ve been saying for a long time that banks are challenged fundamentally by technology, because they have, in many instances, not upgraded their systems for over half a century. A stunning statistic from Reuters is that 43% of the big bank systems in America run on COBOL. That was developed back in the 1970s. In most cases. So this is a issue because today, everything has been born on the internet. And everything is moving to be cloud computing based, and allowing people to plug and play software wherever they want to be able to work in whatever way they want. And that’s led to what’s called a FinTech revolution in the last decade, and in particular, in the last decade, there’s been a big pressure on banks to move to being more digital. And they’ve resisted that move, because they have leadership that doesn’t understand technology that well. And then the lockdown arrived at one had to work from home. And they all suddenly found that they left those decisions way too late, because they didn’t have a digital backup, the physical operations only had physical backup. And suddenly they needed digital backup, and they didn’t have it. So we’re going to see a massive change, not just in banks, but in retail and normal institutions to the digitalization over the next couple of years that you might have might have taken a decade is going to happen in 12 months.

Jason Hartman 3:08
Yeah. So their old systems, the software that runs their businesses just won’t integrate with the internet, or how does that play out?

Chris Skinner 3:18
Well, a lot of people describe the systems of any large institution that’s been around for more than 50 years as spaghetti structures. And what they’ve got is a lot of underlying core technology that some dating back to the 1980s 70s, or even in some cases, the 1960s, you unbeliev and they’ve layered everything on top of it through the years. So it’s now become incredibly complex. And I liken it to the New York subway, you know, if you try and put it in a brand new subway line, navigating through the existing subway system is incredibly difficult. And that’s what banks are trying to do, and large companies are trying to do when he add the internet to the old systems. Instead, what they should be doing is re architecting completely fresh and new for the internet era and the digital era, and eventually dumping all those old systems.

Jason Hartman 4:09
So tell us how it will change. I mean, what can we expect in what will happen to the criminal organization known as Wells Fargo? Or the criminal organization known as chase or Bank of America? You know, they’ve all had their, their foibles. But lately, Wells Wow, it’s like one scandal after another. It’s incredible. Are these banks just going to kind of fade away? Will we all be using Venmo? Or what what’s going to happen? What does this future look like? Well, I

Chris Skinner 4:40
keep coming back to the fact that unfortunately, the big banks will not go away and they’ll just get bigger, you know, we thought they would disappear after 2008 and the global financial crisis but they’ve actually gained market share and they’re bigger than they ever were, and they’ve consolidated

Jason Hartman 4:53
more there’s a lot less choice right? Because the the too big to fail, created a consolidation of

Chris Skinner 5:01
Exactly. And that will continue. And a lot of that has to do with the way in which the financial system is completely integrated into the governmental and economic system. And so you can’t take that away. And because a lot of it has to do with trust, and regulation, then it’s very difficult for it to change. And in my lifetime, I’ve spent many times thinking that banks would eventually disappear, but they just get bigger because of that regulatory structure. There’s an interesting statistic again, in the US, which is the average bank in America deals with 128,000 regulations, the average technology company deals with 27,005 times more regulations to deal with. And if you’re dealing with pure technology play, but what is happening is the pure technology players are starting to make an impact, particularly around credit loans, payments and savings. So you’re absolutely right, when you mentioned Venmo, or square or stripe, or Lending Club, I’m Sophie, all of these new companies have just appeared in the last 12 years Born on the internet after the financial crisis, I really started to have an impact. But the impact is on the margins and profits. It’s not on the core business of banking.

Jason Hartman 6:10
But stripe isn’t a bank, for example, that’s just a merchant credit card processor, right? Or is it? Is it more than that? Well,

Chris Skinner 6:17
it’s a little bit more than that. I mean, that my favorite FinTech company, and FinTech is this term that describes the integration with finance and technology that’s come around in the last just over a decade. And a lot of that’s resonating around cloud computing the internet and platforms and marketplaces, which will turn you in but but

Jason Hartman 6:33
I don’t get it I mean, authorize dotnet a big old credit card processor. They have a website. So does stripe stripes is better. But what’s the real site Jason

Chris Skinner 6:45
stripes unique aspect is it they offer beautiful sort of piece of code that allows checkout to be created really easy and simply for anybody trying to do merchant checkout as a company on the internet and the code, and they launched in 2011. And they’re now worth 36 billion.

Jason Hartman 7:06
I know, they’re they’re amazing. I follow their

Chris Skinner 7:09
context. And one of the oldest and biggest banks in Germany is commerce bank. And stripers, over seven commerce banks in value. So amazing. Isn’t this a phenomena?

Jason Hartman 7:19
Yeah, but just to ferret that out a little more. And we don’t, you know, we don’t have to belabor this point. If you sign up with authorized dotnet, to do your merchant processing, that’s sort of an old company, or you sign up with stripe. I mean, they both have integrations, a lot of various merchant websites, just have like a one click integration, they’ll both integrate, right? or What am I missing there, that makes stripe such a big deal.

Chris Skinner 7:43
I think this is the simplicity and beauty of the code that they do accept an offer and that they do have competition does not from companies like authorize dotnet. It’s more from companies like ad yen, or alipay players with different industries and countries in different markets. And the reason why stripe has been so successful is that they got a lot of traction with the new big players, the sort of Ubers, or lifts or Airbnb ease of this world. And as a result, that traction gained a lot of momentum. And when people are developing code, they look at the plug and play code, which are called API so they can get from other players. And what they tell them is stripes, the you know, the engineers and developers that are developing code online, look at their code and go, Oh, it’s just art. It’s beautiful. So it’s almost like saying, Would you rather have, you know, authorize dotnet? Which will be let’s see. You, you too? Or would you like to have Snow Patrol? Or Taylor Swift or whatever, but it’s kind of just some old guys on the block on your new guys. Yeah,

Jason Hartman 8:48
something a geek would appreciate for sure. Okay, what about all the other services that banks offer? I mean, banks offer a variety, a whole cafeteria of services, and they largely suck at it. They’re pretty bad. The surface is pretty terrible at banks, everybody complains about them, kind of the way people used to complain about the phone company, the old traditional phone company, you know, are these services all discombobulated among a bunch of different companies now? Or, or maybe none of them exist outside of banks. And in terms of, you know, certainly services. I mean, there’s a whole infrastructure of various services, right, a big variety. Yeah,

Chris Skinner 9:27
I mean, what’s happening, and I often talk about this specifically is that there’s 1000s of new companies doing one specific thing like the stripes and the origins of this world and the squares, just doing a retail payment or merchant payment online with a bit of code. So that’s stuff that is replacing just a very small piece of processing within the financial network. And when you think about the financial network, investing in mortgages and real estate and payments and high street deposit, taking full service accounts, etc, etc. There’s a myriad of services that banks are offering And what’s actually going to happen over time is they’re going to start providing those services by picking these guys who the new kids on the block and bringing them to the customer. I call it the curation of technology, which banks haven’t got there yet. But some are moving in this direction. More and more quickly are saying, we know we can’t develop everything ourselves, we’re not good at everything, we’re going to start bringing the best things out there to the customer. And we’ll do the integration, we’ll do the delivery, because why should you or I, as a customer, don’t find out Can I trust stripe or square or add Yuan or Ali pay, let the bank do it for me, and then bring that to me and make it something that’s a really great service.

Jason Hartman 10:36
One of the bank names that comes to mind, that was probably from the sort of the first.com bubble era is Ally Bank. You know, I remember I called them once, and it seemed as though the disconnect was they just do consumer banking, and I need business banking. So they want for me, these old fashioned banks really seem to still have a lock on like, real business level services when it comes to banking. I mean, I assume that will change. But with all the know your customer rules, and so forth to how do you really operate an online bank when you can’t meet your customer? That’s a, I guess, another part of it right?

Chris Skinner 11:16
Well, times are changing. And it’s all around timing, to be honest. And it’s um, you know, for many years, there’s been many technologies at once forecast will change the way we do travel, shopping, buying houses by doing banking, you name it. And it hasn’t actually made huge differences yet. So alley bank was kind of maybe before their time, and they got China in the US, which are doing pretty well. And in the UK, it’s been really interesting, because there’s lots of new banks that are being launched. The two biggest names on monzo, and Starling and stalling certainly been going for three years already has almost 3% of the UK small business marketplace, Monza has got 3 million account holders, which is pretty substantial in a market of 30 million accounts. So you start to see changes happening. And it’s just timing. And one of the really interesting things about lot the likes of chime, and monzo is what they end up doing is becoming quite hip and cool as brands because people like to show their card and their service. And so they get your lifestyle payments and and services. And the old banks still maybe you have an account with them, you still might have an account with a wells or Chase, but they become boring or bank with boring All bills. So it’s your utility bills for electricity and gas or whatever is your mortgages and loans and foreign exchange. But your everyday living is in the new hip and cool bank.

Jason Hartman 12:40
Interesting. Let’s switch gears and talk about your other two books for a moment if we can Well, really not too. But first of all, strategies to launch and become a digital bank. Can anyone do this? Is this? Is this a business opportunity for the common person? Or is it still only for banksters? banksters.

Chris Skinner 12:58
This is for anybody that’s for absolutely anybody. One of my favorite stories was a bank that was launched in Britain. Unfortunately, it didn’t succeed for various reasons, mainly to do with funding. But it did get quite a lot of users and a lot of support amongst the millennial and Gen X community. And it was a bank called loot launched by 21 year old University dropout.

Jason Hartman 13:23
Yeah, I love it. So, but but in the US, I mean, you’ve got to get FDIC insurance. And that’s got to be super complicated, right? navigating that you’ve got to have, you know, a million FBI background checks and tons of regulations. So when you talk about launching a digital bank, is that outside of the US, or can you do it?

Chris Skinner 13:45
I mean, Monza and then 26, and others are coming to the US and Europe. And what they’ve realized is that the best way to start a bank is not to be a bank is to be a prepaid card with a cool brand. And then you build the online community, the social network, and finance. And you do it in such a way that people like the way that you talk and the transparency that you offer, and gradually launch more and more services. And yeah, Luke’s going back to being watched by 21 year old University dropout. Again, it wasn’t a full bank, what it provided is the front end app, and then brought in API’s and back end services from other providers who did a lot of the regulatory piece, for example. So y card is a big financial back office provider in Europe that does a lot of the pain of regulation and allows people to go on do the cool stuff at the front.

Jason Hartman 14:36
But how much capital Are you talking about that someone needs to start paying? I mean, that sounds like a just a giant undertaking. I do see the way I see the path that you mentioned. And I think that is really cool. By the way. You start with your audience. And you you start with maybe one application, and you build from there and just to keep adding services, but when do you Become a bank bank, you know, sort of what’s the definition of addicts, I guess when you take deposits, right? That’s a bank.

Chris Skinner 15:07
I mean, to build to be a full bank, you have to take deposits. Yeah, that’s you have to have the FDIC, capital coverage of all of your operations. And you also have to have the due diligence of the Federal Reserve, looking over your shoulder making sure that you’re doing the right things, you’ve got the right governance, the right people on the executive team, etc. That sounds

Jason Hartman 15:25
like a lot of money and compliance costs, and lawyers, accountants, auditors, etc.

Chris Skinner 15:31
So first off is Jason, the minimum amount, you need to be a full service bank from the get go is $30 million. And that’s just to get the license, that’s not to launch the operations, that’s just to get through the gate, right.

Jason Hartman 15:42
So $30 million, is considered ultra wealthy, 30 million net worth and above. And so I don’t think a lot of our listeners will qualify for that, I actually know that a couple of them will.

Chris Skinner 15:55
If you roll it back to my university dropout, you can launch the tertiary services with $50,000, you don’t need 30 million. And then you build and build and build. And as you get the momentum, you get the venture capital and investor support, you get the customer support, and you take it from there. So it’s step by step, don’t try and eat an elephant all at once. Do it one piece at a time.

Jason Hartman 16:18
Okay, so the future and you know, in your book, the digital human, you talk about robotics and other fascinating things. Let’s switch gears and talk about that a little bit. Yeah, I

Chris Skinner 16:29
mean, I’m a big fan of technology. I’ve always been in the technology industry in financial services, which is why I was talking about those two things. And I always focused on the future, because that’s what we don’t know. But what was interesting is that until the pandemic, I’ve pretty much been traveling non stop for a decade, and I’ve seen nearly every nook and cranny of the world. And I generally ended up in museums and churches and temples, learning a lot about the history of humanity. And it kind of struck me during those travels that we initially became human because of shared beliefs, because we could communicate because we have a voice. And then we had another revolution when we became civilized and created farming, so we could live in cities and towns. And then we had, and at that point, we invented money. And we had another revolution when we started to connect across borders and across continents, and went through the Industrial Revolution, which is when we invented banking. And now we’re going through another revolution because for the first time ever, in humanity’s history, every single human on Earth can connect directly in real time, anytime, all the time. And you and I are experiencing that right now. Because we’re on different sides of the world. And I have zoom calls almost every day where I’m meeting people in every single country of the world. But the fact I still have that global connectivity, although I’m sitting at home for the last three months is quite incredible. that’s never been something available to humanity before. And it’s changing the way we think and do things. And a lot of what’s happening right now is going to turbocharge that technology transformation. I just was writing something about 2030 arrived in 2020, which is because when everyone’s been locked in at home, suddenly everyone said, Well, we have to do things differently. We have to shop from home, get everything delivered. And that behavioral change is going to be a fundamental shift that blankly and it will impact your audience massively, massively because of the real estate drop. You know, in the UK, I just got a statistic and they just ease the lockdown and everyone’s gone to the shops. But compared to a year ago, the numbers that went to the shops is down 69%

Jason Hartman 18:28
Yeah, absolutely.

Chris Skinner 18:29
Yeah. Amazon and co are going through the roof. Yeah, right.

Jason Hartman 18:32
And you know, the three primary value drivers for real estate have always been even since we were living in caves, location, location, location. And eight years ago, in 2012, I started saying that location is less meaningful than it’s ever been in human history. I started saying that on my show back then, eight years ago, and I was primarily saying that not necessarily because of all the technologies and you know, we had WebEx 20 years ago, okay, you know, this, we had Skype many years ago to these technologies are not really new, but the adoption has been, you know, somewhat mediocre, really, until the last three months, which is great. I mean, there, that’s wonderful that people are finally, really, really using these things. I mean, even my mother now will use all this stuff, right? She wouldn’t work. And the reason I said that in 2012 was because of the rise of autonomous vehicles, the self driving car was gonna change the location being so meaningful. And you know, like you said, You live in Poland, in somewhat out of the way place it sounds like and you can still be fully connected. That’s great. That’s incredible. You know,

Chris Skinner 19:48
I was just gonna say there’s two big big behavioral shifts that happens immediately this lockdown came in. One is that for some reason, everyone wants to connect on a video call which we never did before. quite happy with You know, a phone call. Yeah. And actually, you know, we’re connecting more and more often. So take your mother and my mother, I mean, my mom is 92. And I’m talking two or three times a week on zoom, when I used to speak to a one time a week on the telephone, yeah. But the other second big shift in behavior is that people have downloaded loads and loads of apps to have more things that they can do easily on their mobile devices, specifically, mobile banking. And a lot of people were worried about using digital bank services, that’s, again, completely fundamentally shifted. Now, we’re not going to go back to the way that we were doing things before. And one of the trends that I spotted going to your point from 2012, about location, location location is, you know, I saw it in China first, which is, and, and India, which has a lot of entrepreneurs, who had to move to cities to get work, have now gone back to the villages, because they’re using the internet to work, right. And that is a massive shift in the way in which urbanization and society will operate.

Jason Hartman 20:59
Right. But it’s also a digital divide, because some people can’t do that. And then that’s what, that’s what we’re really seeing. And I think that’s going to shift the pay structure a lot. I think all of these people that have been doing these physical jobs have sort of been getting gypped, they haven’t really shared a lot of the prosperity in the economy. I mean, it’s kind of odd to me that, like, Why do Why is it always been that food workers get paid so poorly? You know, if you’re a waitress, you can make good money with tips, right? Or at least in the States, you can. But you know, if you’re the cook in the back, unless you’re like a famous celebrity chef or something, you’re getting meager wages, and that job isn’t very enjoyable, in my opinion. It’s just sort of a it’s odd that it’s that way. Like I don’t know why it evolved that way. I mean, obviously, a lot of people have that skill, a lot of people can cook. So there’s there’s not a rarity to it. But a lot of people can do digital work to the technologies become so easy. thoughts on that

Chris Skinner 22:00
was interesting. Going back to your earlier question, which I didn’t really answers some about robotics and artificial intelligence, the word robot actually comes from where I live right now, Poland. It was first used in the Czech Republic, which is next door country, and it to describe forced labor, doing drudgery. And that’s what robot means that it’s doing drudgery work, right. And so many people are doing that sort of work about What amazed me. And again, to your point is that when we had this lockdown, who were defined as essential workers, well, it wasn’t bankers and technology. Exactly. Right. And hospitals and driving buses

Jason Hartman 22:39
and working at the grocery store. Yeah,

Chris Skinner 22:41
yeah, exactly. And so what’s gonna happen? And this is a huge debate, and I don’t know the answer, being honest, because I’m not an economist. And this isn’t an economic question is what happens when people no longer need to work? What? How will we structure society?

Jason Hartman 22:57
I’ve been wrestling with that forever. I mean, is it universal, basic income. You know, when you look at the robotic revolution, it’s way more than just these menial, repetitive tasks, you know, flipping burgers, etc. It’s writing music, writing articles, doing all sorts of things humans do now. Are we all just going to live in this world of abundance that’s created by the machines? Or is there going to be massive unemployment and civil unrest? I mean, which way is it going to go?

Chris Skinner 23:23
Well, we got a little bit of an answer around it during the last three months in the some Coronavirus crisis, which is, what have we been doing at home? Yeah, in my case, I’ve been getting much closer to my loved ones sharing a lot more time with them, learning trying to learn to speak Polish, which I’ve never had the time to do before. I’ve been getting better on the piano, which I played 40 years ago, but haven’t touched since. And that sort of stuff. And so it really says that online a lucky position because I can afford to do that. If you don’t have the, you know, universal basic income, if that has some way that we would just get the basics of food and shelter, then you have an issue. And I think what we’ll see is that governments will be forced in the next 10 to 20 years as more and more jobs are automated, that they will have to give people food and shelter as a basic human right.

Jason Hartman 24:09
Mm hmm. Yeah, I agree with you. Even my most libertarian friends that don’t want the government to do any of this stuff are saying UBI is the future. It’s it’s gonna happen. And it’s all we’re already seeing evidence of that now. You know, I agree. I had Andrew Yang, the presidential candidate on my show that was a big part of his platform was universal basic income. And that’s going to happen, right? That’s it’s just got to do

Chris Skinner 24:36
maybe, because the adapt there’s a downside to it, which you’ve seen, maybe on the first peoples reservations in the USA, or we’ve seen in experiments that have been taking place in the Nordic communities in Finland and Norway, which is if people are given everything, so they don’t have a work ethic. They can fall fall off the wagon and start to abuse themselves. So it’s kind of where’s the pride in not doing anything? You have to encourage people to do something. But the question is, what are we going to encourage people to do? Is it to be creative and share emotions and relationships? Or is it going to be to do drudgery? It definitely might be to do to drudgery. So it will rise to be something new above what we are today, I

Jason Hartman 25:20
hope. Yeah, there’s definitely a moral hazard in that, and we’re already seeing it with these enhanced unemployment benefits in the US, people won’t come back to work. Now that we’re having things reopen. A lot of people are just deciding, yeah, you know, I’ll just stay home and collect, collect my government money. So it’s quite interesting. Yeah, yeah. Wrap it up with a closing thought and give out your website.

Chris Skinner 25:42
sure that the website is the financer.com with an S, because it’s short for financial services, and also Chris Skinner dot global, which is where you’ll find everything about me.

Jason Hartman 25:52
All right, any closing thought you want to mention?

Chris Skinner 25:55
I think bottom line is, you know, some people said that I’m way too optimistic because digital human ends with the view that eventually we moved to being far more like Star Trek, and Gene Roddenberry when he invented Star Trek, categorically refused to allow money to be exchanged, because in the future, his view was that we deal with the betterment of humanity and not with the generation of wealth. That’s an interesting thought. Whatever happened, I don’t know. But it would be interesting if you’re just a better humans.

Jason Hartman 26:23
Right. That would be interesting. We’ll see if that can happen. Chris Skinner, thank you so much for joining us today.

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.

Inflation Sectors & Rent Collection, Fear from Coronavirus

To start the show, Jason Hartman and Investment counselor Doug talks about people moving out of high-density areas to suburban areas. They’re also giving their thoughts on the ultimate collapse of the “middle-class fiction,” where the whole middle class is being hollowed out. Jason and Doug also discuss rent stability between residential and commercial tenants and the work from home option, and how the people are liking it.

Announcer 0:01
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.

Announcer 0:12
Welcome to the American monetary associations Podcast, where we explore how monetary policy impacts the real lives of real people. And the action steps necessary to preserve wealth and enhance one’s lifestyle.

Jason Hartman 0:29
It’s my pleasure to welcome one of our investment counselors back to the show. And that is Doug, you’ve heard him on the show for maybe 10 years now on and off. And you also may have seen him speak live at our conferences. He’s the guy that does the portfolio builder game, and all those great games that have entertained so many of you. And so many of you have really said some very positive things about those end, Doug, you know, the challenge, we’ve got our virtual meet the Masters coming up, and your chance, right, is to do the game or a game, because you always modify it a little bit every time, which is really nice for our regulars to keep coming back over and over. We want them to have something new, not just the same old thing over and over again. And I don’t know what your plan is for virtual meet the masters. But this is the first time you’ll be doing the portfolio builder game, or maybe you’re changing the name to virtually

Doug 1:26
right. So Exactly, yes. virtuals coming up. Well, one of the things that we’re that we’re really trying to orient our challenge around, is getting people to really take action, because, as you said, right, there’s not a bad time to buy real estate, but we are really at almost a mother of all buying opportunities, not from not because prices are depressed, like they were in 2010 11. But more because, you know, we’re really on the precipice of a multi year of possibly a generation long migration away from urban cores out towards suburban areas. And so this is really probably one of the better times in the past 30 or 40 years to purchase, the kind of real estate that we offer the detached single family residential rentals.

Jason Hartman 2:09
Yeah, yeah, no, it’s really, you know, nobody wants to live in a high density area anymore. It used to just be about Coronavirus, and that fear, but now it’s also about civil unrest. And when you see what’s happening in some of these cities, it is just really scary. I mean, the police are literally giving up pulling out, like I said on the show recently, you know, if there ever was a reason to go buy a gun or five, go buy a gun or five, and get trained on how to use it, and have adequate ammunition, you know, it might be now because we are really seeing another time where the police either can’t or just won’t protect you. And that’s pretty scary. Now, you know, I’m looking at the world falling apart. If you know, we’re all seeing that from our own perspective, because we all live in different places. And we all have different lives. And people have asked me Well, how you doing over the past several months, I’ve heard that a lot. And it’s like, I’m fine. My life hasn’t. Other than not getting on an airplane, which I actually appreciate, unlike my life is quite fine. I mean, I live in suburbia. And everything’s quite nice around here. No, no problems whatsoever. Everything’s great. But I tell you, if I lived in a city, it doesn’t even have to be a big city or super high density. If I lived in a suburban apartment complex or condo complex, that was four storeys high, and I needed to take an elevator or go down a hallway. I wouldn’t feel that comfortable. And then you add civil unrest to that. And wow, it’s, you know, you got Well, it’s a one two punch, isn’t it?

Doug 3:57
Well, and I’ve actually been thinking about that a lot lately, because of course, you know, all the people in the media are trying to make it about, quote white America versus, quote black America or Hispanic America,

Jason Hartman 4:08
whoever you’re trying to make a race for when there isn’t one. It’s ridiculous.

Doug 4:12
But what it’s really about is affluent versus everybody else. Yeah. which incidentally, everybody else includes many people in, you know, in the Caucasian ethnic group who are disproportionately represented in the affluent class. Yeah. But one of the things that is really kind of popped out to me is that what we’re really seeing is we’re seeing the ultimate collapse of you know, what I call the middle class fiction, you know, of course, the middle class fiction, is that right? Okay. You know, you go to school, you go to a good college, you get a great corporate job, you go up have your career path, then you retire with a ton of money. And all likelihood, in all actuality, what happens is you go to college, you take up on a ton of debt, you might eat and you basically have a raffle ticket. And that raffle ticket says, Hey, I have a chance at a corporate job. But if I don’t get that corporate job, I will probably end up doing something that I didn’t need to go to college for everything I needed to know, I could have learned on the internet for free. So

Jason Hartman 5:10
you know, I just mentioned, I mean, I have my criticisms of Ilan Musk, but I’ll tell you one thing, he claims I was watching a documentary about him, he says he learned rocket science by watching YouTube. Isn’t that amazing? I mean, he is an engineer, okay. But we live in this amazing, it’s an amazing time to be alive, where we live in this amazing era, where your fellow citizens will just teach you everything, learning has become a peer to peer experience. And that’s just a wonderful thing. You don’t need a professor to teach you this stuff anymore. Now, in some cases you do for the credential, but not for the actual knowledge, necessarily. So you’re talking about that raffle ticket to the middle class fiction, right? Go ahead.

Doug 6:03
Exactly. Well, and so because what happens is right, you go through a normal career path, and you know, say you’re at a corporation, and you know, and he took on a whole bunch of debt, but you’re making good money. So you’re paying it off, it’s not a big deal, you get promoted a few times, you go up through the ranks. And then at some point, you know, something happens, like there’s 40 million people unemployed, and everybody needs to cut payroll, because, you know, the revenue just went down by 40%. Well, in all likelihood, what they’re gonna do is they’re gonna say, okay, who’s making the most money, those are the people who have seniority. And then at some point, you get your your, you’ll get pushed off the books, if you’re one of the extremely small percent that managed to make it up the high enough in the chain, to where you’re the one deciding who gets let go before a lot of people get let go, you might be able to make it. But again, that’s a raffle ticket inside of a raffle ticket. And what’s happened is, there’s so many people chasing after kind of this, you know, this paper fantasy, that it’s, you know, it’s escalating the cost of college, it’s escalated the cost of a whole bunch of other things, when in all likelihood, this is largely a delusion that’s all coming unraveled at the same time.

Jason Hartman 7:06
Yeah, sadly, it is the middle class fiction, that’s a really good way to put it.

Doug 7:10
Corporate America is not going back to what it used to be No,

Jason Hartman 7:13
nothing’s going back to what it used to be. This is a mega shift, folks. And I just recognized that pretty early, because for many years after this, there is going to be a degree of post traumatic stress disorder, a PTSD that is not going away with a vaccine. And it’s not going away with race reparations. And it’s not going away with Joe Biden as president or anybody else. It’s deep in the culture. And California is sort of a good example of this in a in a negative way. It’s a bad, but a good example of a bad thing. And what California my home state has become is a banana republic, and a Banana Republic is speaks of this, this concept, where you have the rich elite class, and then you have the peasants, okay. And the middle class has just been hollowing out for years. And what we’re here to help people do to guide them through this process of not getting hollowed out to help them get up into the upper middle class, or if they’re already there, to get up into the wealthy class. And there are various definitions of you know, ultra wealthy as usually considered $30 million net worth and above. And, you know, there are various tiers of this. But look, we want to be people’s guide, and we’ve done it for a couple 1000 people already. And hopefully we’re going to do it for someone new listening to to make sure that they are secure, and their lifestyle moves up. Well, the whole middle class has just been hollowed out, and it’s been going on for a few decades now. And it’s that middle class fiction. And the other thing is, we are going to have more opportunities as we did during the Great Recession. 12 years ago, I had a lot of listeners listening to the podcast, asking, you know, hey, Jason, I love everything you’re saying about real estate. But right now, times are tough. And I need a side hustle. I need another income stream so that I can do more investing. So I started making some of the podcast episodes about home based business opportunities and side hustles, if you will, and I’ve done that a little bit so far. Now, you know, we talked about the tax deeds. We talked about some other things that people can do to create wealth for themselves. And so you’ll see more of that coming up. But Doug more on that. middle class fiction and then let’s get to rent payments and inflation. We got some stuff to talk about there.

Doug 10:06
Yeah, sure. And the thing that I’m just really seeing, as you know, with all this coming on wound, you know, there’s been a lot of perceived stability in corporate employment, that is just coming to an abrupt end for a lot of people. And one thing that or opportunity A lot of people have is that, you know, if you have been displaced, you’re able to put your primary mortgages under forbearance. And the forbearance guidelines actually going to go for quite a while. So there’s a lot of people who really have an opportunity to remake their life, it doesn’t feel like it, it feels like your whole financial worlds coming apart. But there’s actually a really big opportunity that hope a lot of people will take advantage

Jason Hartman 10:43
of America is really good at second chances. You know, a lot of people have emerged from a history where they had real real struggles, and that it’s a pretty, like resilient economy, because it gives those second chances, or some other countries, you know, if you’re ruined once, you’re never going to have the chance to be ruined again. Yeah, in other words, you’re ruined forever, you know, you’re it’s over. But you know, the US is pretty forgiving like that. And that’s it. That’s a good thing, I guess. But remember, forbearance is not without its consequences, okay? If you’re wanting to buy income properties, the word on the street is do not enter a forbearance program, do not do that, because it’s going to inhibit your ability to get more financing for future purchases. And you don’t want to miss out on this opportunity here. As we experience what john burns called, The Great American move, we are in the midst of the great American move. While we’re at the beginning of it, it’s going to be hugely significant. And just, we’re going to share with you on an upcoming episodes about moving stats, and how the movers are doing if you’re in the moving business, if you’re in that industry, you’re probably already seeing that you’re very, very busy. Now, if you if you own a u haul franchise and rent trucks, you’re good for you. You’re gonna do

Doug 12:04
quite well, exactly. Yeah, exactly. Well, and because moving on to one of those things we were planning on talking about was just the rent stability. And one of the things that we were looking at was, you know, what’s the percentage of rent that was there was paid on time. And it’s actually really close to last year, I think we went from something like 82%, down to 80%. I mean, that’s an almost imperceptible,

Jason Hartman 12:25
it’s amazing, you know, Doug, so let’s be specific. So may of 2019 rent collections. Now, remember, this is going to be a survey of multifamily units. This is not for single family homes. Again, the reason for that is that single family homes don’t report to any big centralized place. So when they do these surveys, and this one is from the National multi family housing Council, that’s a trade group, okay. And so, you know, they have lobbyists, and they have conferences, and they keep statistics, okay. And what they’ll do is they’ll survey their big institutional landlords, and they will share the numbers on their rent collection. So again, single family home rent collection, I will guarantee you is far better than these numbers far better. Because I know we’ve noticed ourselves with our own clients. And in my own portfolio, I’m not having any rent collection problems, I expected it yet, the prints are all coming in. On the apartments, you have a more transient lower quality tenant base. So you know, collection is never going to be as good. And you’re always going to have more move ins, move outs, apartments are temporary, single family homes are more permanent, but may of 2019 at 1.7%, made their rent payment. Now, this chart doesn’t show how much time that was like. In other words, oh, well, it says weekending on the sixth of the month. So it does show that so by the sixth of the month, in 2019, May, at 1.7% of tenants in these large institutional apartments made their rent payment. Now fast forward. And Doug, I’ll let you share this one. May of 2020. Tell us what happened.

Doug 14:22
Let’s see. So when we come to May of 2020, the number is 80.2%. So that’s, it’s fairly insignificant. It’s nothing. It’s so nice. So

Jason Hartman 14:32
you’re saying to me, Doug, that one half of 1% decline deterioration in the rental market in May, year over year?

Doug 14:44
Something like that. Yeah, it’s let’s see, let’s look at the exact numbers. So for talking 81.7 down to 80.2. That’s 1.5%. That’s the net total deteriorate. Oh, sorry.

Jason Hartman 14:55
Sorry. You’re right. Yeah. 1.5% even

Doug 14:58
that, isn’t that I mean, Nothing. Yeah. In fact, even this Okay, so look at this in April, April rent collections were 78%. And they went up to 80.2. And so the decline from May 19 to may 20, is less than the increase from April 20. To may 20.

Jason Hartman 15:17
Yeah, significant. It’s, uh, the news media would love to make a story out of this, but there just isn’t a story there. You know, this, you know, where there’s a story is in the commercial world, I’ve shared that on the show, you know, that the commercial landlords are just not paying their rent, commercial tenants. I mean, whether it be an office space, I just read an article about all the law firms defaulting on their rent. You know, obviously, in the retail in the restaurant, rentals, they’re just not paying. So that’s landlords are really suffering there. But in residential, the home is the center of the universe. And people want to keep the home. And interestingly, even if they know, they can’t get evicted, at the moment, it seems as though they’re either just doing the right thing and being good moral people, good citizens, or they just don’t want to ruin the relationship with their landlord for future months. And that may be the other reason, you know, because those moratoriums have been lifting, obviously. So let’s, June over June. Tell us about June 2019, to June 2020.

Doug 16:21
So I’m gonna go June 2019. That was at 1.6% last year down to 80.8%. So this means that June is up 0.6% sequentially made a June and is down only 0.8%. year over year,

Jason Hartman 16:36
so so not even even a 1% difference. year over year. Now, in 2019. We didn’t have a pandemic, if this time of year, we did not have a race for we did not have civil unrest. And in the month of June, the rent collection difference by the sixth of the month is less than 1%. dug as they say. They say on the old Wendy’s commercial with a little lady. Where’s the beef? There’s nothing.

Doug 17:11
Yeah, there’s not a story here. Yeah,

Jason Hartman 17:13
yeah. It reminds me of that famous song from the 80s. Let’s give them something to talk about. You know, yeah.

Doug 17:19
Right. Yes. There’s

Jason Hartman 17:20
nothing to talk about here, folks move on. It’s just, there’s just nothing there. We’d like to give them something to talk about. But there isn’t a story. Okay, so rank collection is strong. Thankfully. That’s good news. Doug, we got to wrap up fairly soon. I think you you’re in a bit of a time crunch. But you want to talk about inflation real quickly.

Doug 17:38
Sure thing. So one of the things, beautiful chart that we saw, was looking at some different inflation by sectors and the sectors that had the high inflation. were, you know, groceries, meats, were medical care services, and then gardening and lawn care, you know, makes sense. Because all those are things that have been buoyed up by people staying at home. But then on the other hand, our lower inflation sectors or deflationary sectors have been energy, which has dropped like a rock, and then apparels, hotels, airlines car rentals, you know, auto insurance, you know, those things just all just plummeted. And one of the things I think that’s Yeah, exactly, is that all the areas that have been strong are areas that are associated with people at their home. And so I think what that’s doing is that’s really showing us that, you know, hey, in a really stressful time, real estate has, you know, the income real estate that we recommend has tremendous resilience. You know, as I’m fond of saying, right? You don’t really know if the strategy works until you have a stress test, right? And you don’t get stress tests, all that often. Anything can look good when you’re in you know, when you’re in a growing market, but it’s when you have a big disruption that you find out whether what you’re doing makes sense. So it’s really you know, I

Jason Hartman 18:55
think it’s all Warren Buffett or Charlie Munger who says, It’s when the tide goes out, you can see who’s wearing a swimsuit or not right or

Doug 19:03
time goes out to you find out who’s swimming naked in folks. I

Jason Hartman 19:06
mean, look, it couldn’t be worse than this with what’s going on in the world. But it couldn’t be much worse. I mean, yes, we could have a war. And there are definitely tensions. I mean, we’ve got North Korea, again, going off the deep end, we’ve got Iran. There’s definitely geopolitical concerns. But we have a global pandemic. We have civil unrest, not only in the US, but all over the world. We have austerity measures. I mean, the world in a lot of ways it doesn’t look very good right now. Okay. And, and yet, we see all this. Let me just give you a soundbite on each of these charts. Okay, so, higher inflation sectors food up 4.8% groceries are at the highest price in five decades. I’ve totally noticed that myself as I’ve been shooting Hoping I go to Trader Joe’s. And just anecdotally, that I buy pretty much the same pattern of groceries, I don’t change it too much. Anecdotally, Trader Joe’s, I get two bags of groceries. And you know, I’d have some wine in there and some nice things, and it’d be 100 bucks. Now, it’s $160 I did not change my cart around that much, or what’s in those bags? I’ve definitely noticed that myself. I know everybody listening house. So meat prices up 11.7%. Now, that one, you know, you got to take that with a grain of salt because there have been specific problems to the meat industry. So that one’s a bit of an anomaly. I don’t want to say that’s inflation based completely, but healthcare medical services up 5.9% who says there’s no inflation? This is crazy. Like you said, Doug, gardening and lawn care up 9.7% I don’t know why that is that doesn’t seem like it would be a Coronavirus related. Any thoughts on that? One?

Doug 21:06
I think it all has to do with the fact that people that are out there are stuck at their house. And so they’re trying to take care of you know, they’re they’re trying to take care of the property. I know for us, I’m okay. Yeah, go ahead. Well, and so in this case, right. You know, if you’re talking about gardening and lawn care services, now’s the time to do projects, right? If you’re stuck at home, it’s a time to do projects. Whenever I go to Home Depot or Lowe’s, the place is just packed. Just people Oh, yeah, there’s people that are getting stuff for doing home projects all over the place. I know because I was at Lowe’s trying to get the polymeric sand for doing a project at our back patio about a month back.

Jason Hartman 21:40
What is poly Eric sand,

Doug 21:41
it is sand that has plastic polymers in it. So what you do is you put it in between paver stones and then when you get it wet then the the polymers bond together as a self sticking sand got it got

Jason Hartman 21:53
it isn’t that boy technology’s everywhere is an

Doug 21:57
amazing time to be alive. But yes, technology stand as

Jason Hartman 22:01
the home is becoming the center of the universe. People want to make it nice. I’ve been saying this for a couple of months now. home improvement projects. I not specifically like I haven’t been to a hardware store like you have. But you know that that doesn’t surprise me too much remodel projects. Okay, that’s gonna be big soon. Or just moving instead. That’s the easier one and furniture stuff for the home. If you’re in the home goods business, you’re going to do pretty well. Okay, let me think about

Doug 22:30
it like this. Jason, if you live in a apartment or condo in the middle of a city, then moving is the ultimate remodel project. Right? Exactly. Because Yeah, what you’ve done is you’ve just gone from a 500 square foot elevator shared, shared living space to say a 1500 square foot detached house at the property. Yeah, that is the ultimate remodel. And guess

Jason Hartman 22:53
what, it’s a major upgrade to your life in so many ways in your rent went from 30 $800 a month to 15 $100 a month. Yes. So it’s much better and you have a yard too. And you can get a dog bound. So there you go. Okay, so low inflation sectors, energy energy’s been crushed. We all know that because people haven’t been moving around. So Oh, we saw oil prices totally collapse, energy usage. Now the interesting thing about the electrical energy, okay, there’s many types of energy, okay. But the grid has been stressed because everybody being at home uses more energy than everybody being at an office because it’s not communal. You know, people when they leave their house, they wouldn’t run their air conditioning all day. Yet, everybody’s in their individual bubble running it instead of in a common office where it’s, you know, more efficient, and you can cool more people for much less cost and much less taxing many less kilowatts, but energy for industry and manufacturing, the demand for that just plummeted for quite a while, but it’s coming back, as we know. So energy down 18.9%. Okay, now, apparel. We mentioned this on the show before, but if you talk to apparel companies, they said that apparel for the top half of the body was still selling pretty well. But for the lower half of the body wasn’t selling, meaning people were on video calls, care what they look like, for me. That is the funniest thing ever. But anyway, yeah,

Doug 24:36
that that is a that is actually an amazing anecdote. And one of the things I was thinking on the energy side too, that’s that’s very interesting is that if you have electrical transmission energy, electrical is one of the forms of energy that is that they’re actually the most options that don’t involve hydrocarbons. And so one of the things that you have with this is you do have an opportunity for an inflection point in trying to reduce overall carbon output, you know, no, this is of course, you know, assuming that the objective is to reduce carbon output and not to use carbon as a shill to have an authoritarian government, right? Like they already have that it’s called COVID. They, you know, they don’t need to use us climate change for that anymore.

Jason Hartman 25:17
Like the saying goes, green trees have red roots. Okay. So yeah, so now they can do the authoritarian intrude on our lives and tell us what to do thing, because they got the guise of the virus to hide under rather than the environment. So yeah, they can switch, wag the dog, you know, Hey, everybody, you need to see the movie, the old movie from the 90s wag the dog right now I’m gonna watch it again. Because this whole COVID thing and race war is the two giant wag the dog things if you asked me, it’s getting quite interesting. Go ahead.

Doug 25:51
Oh, and the thing that I was thinking of, though, is that the notion of, you know, the climate changing is real, you know, and you know, the impact of carbon is real. I think the place where that’s, you know, where it’s always falling down is just the assumption that an authoritarian government is the only way to deal with it. You know, if you give the government unlimited authority to deal with the climate, it won’t fix the climate, you’ll just have an authoritarian government with a climate that is pretty much just as bad as it was before or worse,

Jason Hartman 26:16
because nobody owns the, if you don’t have private ownership of things like we saw in communist Russia, the you know, when Greenpeace went in there, I remember reading Greenpeace magazine, right after the Soviet Union fell. And they went in and toured the Soviet bloc, you know, Russia and the other countries, and they just saw environmental destruction everywhere. And the the article basically, that the net of it was that when people and this is from Greenpeace of major left wing group, okay. The net of it was when people don’t own property when they don’t own the land, they don’t care about it.

Doug 26:53
So correct. So yeah, I think just the the dynamics of what we’re seeing are just just utterly amazing. And I have at least a modest idea of how they’re going to how it’s going to shake out, you’re going to have, you know, especially in things like airlines, I highly doubt that airline, of course, because airline prices have gone down like 30%. And there’s idle capacity everywhere in the aerospace industry. And so that means you’re probably going to have at least one major carrier that goes out of business, you’re going to have prices stay extremely low for a long time, just because there’s just so much idle capacity, that you know that there’s going to be intense competition to try to keep those planes anywhere remotely close to full. Yeah. So yeah, there’s going to be very long lasting impacts from all this

Jason Hartman 27:38
air, air air travel right now. And this is TSA, so it’s not worldwide, but it could be non domestic flights where someone has to clear TSA, the number of passengers is only 17% of what it was one year ago. And that and it’s already coming back. It’s better than it was it was really bad during the worst point in the lockdowns, but right now, it’s 17% of last year’s number. And yeah, that’s still I mean, that’s a catastrophe. So yeah, so apparel down 7.9%, hotels, motels and lodging, down 17.3% and airfare, Doug, you just said it down 28.8%. Car and Truck rental that you mentioned, down 19.2%. And what’s interesting about that, one is that car and truck is not split up. And I say that car rental will remain very cheap. By the way, if you’re looking for a used car, go to hertz.com they are selling 1000s of cars. I looked at a few I was thinking maybe I should pick one up there so cheap. You know, you got these. There’s just a lot of a lot of good deals. Those cars, it was pretty attractive, like truck rental, I say will actually get very inflated during the Great American move. Now. They’re not distinguishing what type of truck but if there any thing that’s a moving truck, or a construction truck, you know, that’s boom, time for that. Yeah, no, it’s not split up. So in motor vehicle insurance, because nobody’s driving down 14.3% but rent, CPI, the consumer price index for rent, year over year, up 3.5%. Up 3.5% in the midst of all that rents are up after seeing

Doug 29:39
that Exactly, exactly. One thing what all this comes back to is that it’s like you said it really is an amazing time to be in life, an amazing time to be alive. And it’s an amazing time to be an income property investor. I mean, boy, the economy just got shellacked. And our properties have just held up beautifully. And their position right in the middle of where everybody’s moving to Yeah, I

Jason Hartman 30:00
know we’re right. Since we sell suburban properties, and this is exactly what everybody wants, we are in a very good position. I mean, I shouldn’t say we, I should say you listening, if you’re assuming you’re following our advice, our plan our guidance, you are in a very good position. I gotta tell you, I’m just going to be very candid as we wrap it up here, folks. You know, I had a, you know, a heart to heart talk with one of our investment counselors. I mean, we’ve talked, of course, Doug, but this particular talk that I’m going to recall right now, was with Sarah, and, you know, I said, Sarah, you know, we may have to make some really tough decisions in the next six months. As this broke out, I was worried. I mean, I didn’t know where this was gonna go. None of us really even now know where it’s going to go. But one thing we know for sure, is that Well, a few things we know for sure, I guess I should say, housing is the center of the universe. People can work remotely. They all have discovered that people can learn remotely, they don’t need to go to an office, they don’t need to go to a school, they can do all that remotely, and they like it. And they’ve adopted it. And suburban migration is huge, huge, huge. Yep. And interest rates are low. We know that too. So take advantage of it, folks. And Doug, on that note, I’ll let you wrap it up.

Doug 31:22
Basically, we have the strategy. We all know what needs to happen. And now’s now it’s time to pull the trigger. If there was ever a time to do it, now is the time to do it. It’s not that crazy low prices from from foreclosures that we saw in 2010. It’s the crazy big migration trend that are going to eventually make the prices and rents we’re seeing now just seem like pennies.

Jason Hartman 31:46
Yeah, I agree. Okay, Doug. Well, thank you very much. And if you need us, we’re here for you, to guide you to assist you on your path to building wealth through income property, reach out to Doug or any of our other investment counselors at Jason hartman.com. or by calling one 800 Hartman if you’re in the US, that’s only a US phone number one 800 Hartman if not catch us on the internet, Jason hartman.com. And until next time, happy investing.

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The Last Trial of T. Boone Pickens with Chrysta Castañeda

Jason Hartman interviews Chrysta Castañeda, the go-to lawyer for high stakes litigation in the energy industry and author of The Last Trial of T. Boone Pickens. Chrysta discusses what happened with Pickens and how did the investment deal go bad. She also shares her knowledge of the current oil market problems. They also talk about the brief history of the name “Railroad Commission” and if we are going to shift to a larger work-from-home community.

Announcer 0:01
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.

Announcer 0:12
Welcome to the American monetary associations podcast where we explore how monetary policy impacts the real lives of real people and the action steps necessary to preserve wealth and enhance one’s lifestyle.

Jason Hartman 0:29
It’s my pleasure to welcome crystal caston ADA. She is the go to lawyer for high stakes contentious litigation in the energy industry and beyond. She’s a Dallas trial lawyer and head of the caston Ada firm, a boutique litigation firm that handles complex commercial oil and gas to spirits. There’s obviously a lot going on in the energy industry right now. With prices collapsing. Her firm won a very large bird verdict for her client T. Boone Pickens, it was $145 million verdict. She is also running for Texas railroad Commissioner, and has a lot to share with us about some insights into the energy industry. And maybe a little bit about her book for last trial of T. Boone Pickens. Krista, welcome, how are you?

Chrysta Castañeda 1:20
I’m fine. Thank you.

Jason Hartman 1:21
It’s good to have you on. So first off, just give us a quick overview of what happened with T. Boone Pickens and this investment deal gone bad. You know, many of our listeners are investors and, and we always say try to avoid pooled money investments. And oil and gas is particularly risky. But t Boone Pickens is an oil and gas man. So yeah, I guess he would, you would know his way around this stuff. What happened?

Chrysta Castañeda 1:47
So yeah, Pickens invested in an area of mutual interest play, also known as an ami agreement for 15% in 2007, in the Permian, and back then the Permian had proved out, it looked like it was, you know, had petered out and wasn’t really a place people were looking for oil. And when this,

Jason Hartman 2:09
by the way, is the Permian Basin, which is an oil reserve. Okay, go ahead.

Chrysta Castañeda 2:13
Yeah. And it’s where all the oil is being produced in West Texas. Now. I mean, it’s, if it were a country, it’d be the eighth largest oil producing country in the world. So anyway, back in 2007, Pickens agreed to participate for 15% in this investment deal. And the idea of it is it’s kind of like a series of option contracts, the parties agree that they’re going to go buy leases in certain County, certain sections. And every time they pick one up, the people agree, okay, I’m in for my 15%, which means I get 15% of the ownership and the profits, or I’m passing on this one. So pick and signed up and agreed to participate in every one of those deals. And then you build, you drill the wells and prove that there’s oil there, and you try to do it under the radar. Because what you want to do is pick up as much land and as much territory and then, you know, prove it out and then sell it for many, many times what your investment in

Jason Hartman 3:11
other words, you want to do that quietly so other wildcatters don’t get wind of it, and then start competing with you to buy up the land and the leases of oil wells. Right?

Chrysta Castañeda 3:21
Exactly. Before you get into that bidding war. You want to prove up your land and your concept and hope you start the bidding war. That’s how you know you put pennies in and you get millions out. That’s the kind of the concept of these deals. And what ended up happening was that one of the investors needed to bring in more of a piece of the pie to spread its risk among sub investors, which is how this gets done. And so they claimed that Pickens said he wanted out of the deal, and they tried to buy his interest, didn’t end up buying his interest, but ended up taking his 15% going forward anyway. And so that’s what the lawsuit was about. And we did end up winning $145 million.

Jason Hartman 4:09
How much dude, the T. Boone Pickens invest in that deal. You never said that you said it was a 15% share, but can you disclose what he actually put into the deal?

Chrysta Castañeda 4:17
Sure, by the time we went to trial, he had a little over a million dollars in the deal. And of course, the million was supposed to turn into what we claimed at one point a billion dollars. And in fact that the whole pie ended up being worth several billion dollars. So we were claiming tickets 15% plus a little bit more because we were litigating the issue.

Jason Hartman 4:42
Yeah, okay. Okay, good. So basically, the the verdict, the judgment you got for the 140 $6 million was for lost profits. That was the opportunity costs are $145 million. Right?

Chrysta Castañeda 4:55
Yeah, exactly. And it was pared back by a series of court rules. About which part of the properties we could end up claiming, and there were limitations issues, you know, you have to bring claims you have to bring claims within a certain period of time in Texas. That’s four years. And so all those rules got applied. And we were allowed to ask the jury for exactly what we got it. Sure.

Jason Hartman 5:19
Okay, good stuff. Well, that’s a fascinating story. And the book is just about to be released, I guess. So looks very, very fascinating. And again, that’s the last trial of T. Boone Pickens, if we can shift gears though for a moment. The everybody’s talking about the Wu Han virus Coronavirus, whatever we want to call it COVID-19. And after, you know, we saw that we’re as we saw the financial markets plummet. So did the oil market. And I mean, it is just shocking to see what has happened to oil prices. You know, you know a lot about the economics of the energy industry, what’s going on? And what can we expect in the future?

Chrysta Castañeda 6:04
Well, those are great questions. So number one thing is we’re all staying in our houses, we’re not driving to work, we’re not driving to the restaurants and bars, we aren’t taking trips, we aren’t flying anywhere, that has cratered demand for oil and gas. So what ended up happening is in particularly here in Texas, but also in Saudi Arabia and Russia, they’ve taken this particular period of time as the opportunity to start a supply war. So they are over supplying the market, which was already over supplied. And oil has dropped down into the teens and low 20s from where it was three months ago, which was in the 60s per barrel. That’s West Texas Intermediate. And so the oil companies are hemorrhaging cash right now. And and in fact, they’re being told by pipeline companies here in Texas, don’t even plan on producing because we can’t take anymore. Our storage facilities are becoming glutted with the excess supply. Yeah, it is incredible.

Jason Hartman 7:10
Incredible. They’re actually using actually, oil tankers are now being used as storage units that even you know, it’s not about shipping the oil. It’s about literally just storing it, because there’s such an open

Chrysta Castañeda 7:25
door. And if you have such vessels or empty tanks, you’re making money, like crazy, but the oil companies themselves are there’s, there’s no, there’s no place for their product to go. And so we are in in a really challenging time for the industry right now. And so, you know, the Railroad Commission is Texas, which has nothing to do with railroads. It has everything to do with oil and gas. It is our oil and gas regulator is for the first time in 40 years considering whether to enact production controls because it was the first OPEC

Jason Hartman 8:02
Huh, so what what are we going to do about this? So production control can only be as as far as Texas, though, I mean, you can’t control Saudi Arabia and Russia and Venezuela and stuff while Venezuela was a disaster anyway, but you know, that’s a different discussion. Right?

Chrysta Castañeda 8:20
So interestingly, you mentioned that I’m running for the Texas Railroad Commission, the repub the Republican incumbent lost his election, which, interestingly, apparently has freed him up to advocate for what republicans almost never advocate for, which is production controls. And he’s actually going to Saudi Arabia and talking with Russia, about some kind of coordinated response to try to limit production internationally. And then there are also interstate agreements whereby, you know, we could limit production, North Dakota could limit production, there is a coordinated market mechanism. I don’t know that Saudi Arabia and Russia are friends. And I’m skeptical that the strategy is going to work on that level. But I think for for Texas producers, at least, you know, the the Commission has got to hold the hearings, so that now oil companies themselves are asking be held to figure out what to do about this.

Jason Hartman 9:21
Okay, so you you end the Republican incumbent, your opponent, or both for production controls, right?

Chrysta Castañeda 9:28
Well, what I’m calling for is to actually dust off the machinery that hasn’t been used for 40 years, figure out whether it still works in the age of horizontal drilling and how it would look and then gather the information for for goodness sake. The one thing we need right now is government that gathers information and acts promptly and decisively to mitigate all of these risks, you know, whether it’s a health perspective or whether it’s markets crashing, we need functioning government, and this What’s proving it out?

Jason Hartman 10:01
So consumers listening to this might say, well, what’s the problem here? I like cheap gas for $1 99. I mean, that’s the cheapest. I’ve seen it in forever. They’re thinking this is a good thing. But the bigger problem is, is that when you put all these oil producers out of business, and you’ll want to elaborate on this, I’m no expert, but you put them out of business, then when you need their product, again, they’re not there to supply it. And you have this supply demand shock issue that we’re experiencing with other products right now, because China was offline for, you know, a good three plus months. So it’s a national security issue, to see that we have an oil industry in the country, right?

Chrysta Castañeda 10:46
I mean, yes, you’re exactly right. And the problem with no regulation is that they’re the shocks come through unmitigated, right, there’s this what they call a bullwhip effect. So you know, it’s great right now where we’re all paying less than $2 a gallon for gasoline, even though we’re all staying home. But what is going to end up happening is that bullwhip is going to come back up to where, you know, we’re paying for $5 a gallon for gasoline, because there isn’t, you know, functioning market for oil and gas production, because so many people have been driven out of business, you want an orderly transition from phase to phase, and we’re definitely not going to get that with no Betty, taken a look at these issues. Thank God, the Railroad Commission is waking up. But for so long, it’s been asleep at the wheel. And I just hope it’s not too late.

Jason Hartman 11:40
Well, so what what is it called the Railroad Commission? So it was a railroad thing have to do with it?

Chrysta Castañeda 11:45
Yeah, it’s over 100 years old, it was originally set up, because of all things, grain shippers in Texas, could not get the railroads to transport their grain for fair prices, and, you know, allow shipping Interstate and out of the state. And so it was set up to regulate the railroad industry. And then later on, you know, the federal government has almost exclusive control over our railway system now. And so the Railroad Commission no longer has any role to play with railroads. But it picked up oil and gas regulation about 100 years ago as well. And they’ve just never changed the name.

Jason Hartman 12:28
Yeah, okay. Okay. That’s fine. I mean, there’s that’s not the first agency that’s like that. But what do we do to keep it in business? You know, keep the oil industry in business obviously shales out, because that’s just too expensive to produce. You know, unless oil is wet, like $50 a barrel or something like that. Right?

Chrysta Castañeda 12:45
Yeah. So a lot of the producers are hedged at $50. There’s a little bit of a cushion here. What’s going to happen is on I had mentioned that a couple of companies had filed a petition to have a hearing on this issue. And those companies are going to be heard on April the 14th. And I hope what ends up happening is the Railroad Commission gathers the information necessary and make some hard decisions about how to help guide the industry. And, frankly, a lot of Texas jobs and a huge portion of our state revenues into a little calmer environment. But the answer is not here yet. Yeah.

Jason Hartman 13:26
So what do you expect? I mean, what’s coming down the road here? You know, we’re in such uncharted territory with the pandemic. And I don’t know that, why really ever see, even when this blows over, at least for quite a while, the same level of travel, you know, a lot more people are going to work at home now. I think I think these are, these are things that are going to stick with us to an extent, right.

Chrysta Castañeda 13:51
Yeah. I mean, I think there’s no question that we have been changed and will be changed by this event. And I mean, we are still social creatures, we still will seek our favorite restaurants and watering holes and you know, vacations on the beach. But, you know, what, we’ll it shift the way we work fundamentally to where we do more work from home. Possibly. I mean, I think there’s a lot of employers who are figuring out Yes, people can be working from home and maybe we don’t need huge real estate portfolios to house all those people at the office. I you know, your guess is as good as mine on that stuff. But I think pretty clearly, life will change as a result of this. Yeah, it doesn’t wait for the better.

Jason Hartman 14:38
Yeah, right, in some ways for the better, agreed, agreed, but for sure, probably a lessening in demand for oil and other energy products as well, right.

Chrysta Castañeda 14:50
At least for the short term. I would agree with that. You know, there’s one really interesting aspect of oil and gas that doesn’t get talked about a lot and that is plastic. You know, all you need to do is look at your clothing, or your pen or your computer screen or your cell phone and realize that our lives are suffused with oil and gas in the products that we use every day, even if we don’t drive gasoline powered vehicles. So how that transition gets made? I guess it remains to be seen. But, you know, I think we’re going to have the need for plastics and therefore the need for petroleum products with us for a while.

Jason Hartman 15:29
Yeah, yeah, definitely. No question about that. Okay, good. Well, what else do you want to share with people either about the case or the oil industry? Just Just anything I haven’t asked you?

Chrysta Castañeda 15:41
Well, you know, we started talking about the book. And I think the book is a really interesting picture of what it’s like to be in the Texas oil patch. This case was tried in Pecos, Texas for five weeks. T. Boone Pickens, the former corporate raider, remember, this is the guy who terrorized Wall Street in the 1980s, with his takeover attempts, at 88 years old, sat through that trial every day trying to get justice for him being cut out of a deal. And so it’s very interesting in In my opinion, juxtaposition of his early life and his later life. And if you’re interested in trial drama at all, I’m hoping people think it’s a really interesting read.

Jason Hartman 16:29
So I think we’ll see a movie out of it.

Chrysta Castañeda 16:31
I would love to see a movie. If Reese Witherspoon is listening, and I hope she is I think she’d be great at playing me. So we can we can cross our fingers.

Jason Hartman 16:43
Yeah, there you go. But what what was the big deal? I mean, here you’ve got t Boone Pickens, a billionaire in I guess this is a little Podunk court or not. Am

Chrysta Castañeda 16:54
I wrong about that? I mean, I’ve never heard of the county, you mentioned it, right. Yeah, you’re not wrong. So this is Pecos, Texas, I think it’s normal population is about 8000 people. And you know, it’s swelled with all the oil workers, right. But it is the heart of the Permian Basin, it is where I mean is that the very center of where all this development was going on. But, you know, it’s got the infrastructure of the 1950s and 60s. And so, you know, the judge who presided over our trial, he has three counties, one of which is loving County, the only has 102 people in the entire county. This was Reed County, so he would ride circuit from front, as we call it, from county to county. And it was his first trial. And there was just a lot of a lot of really interesting, interesting things that happened, you know, when you’re trying to case in 100 year old courthouse with technology that, you know, is not really up to par. And you know, all these lawyers, I mean, we had probably 10 1520 lawyers

Jason Hartman 18:05
in this, this was I guess, the state court, not a federal courthouse.

Chrysta Castañeda 18:09
Right, correct. Yeah. Most of our most of our contract disputes in the United States get tried and stay clear, right.

Jason Hartman 18:16
If there were cross state lines, it did end up in federal court, probably. But yeah, very interesting, very interesting stuff. Well, thank you for sharing this with us. And please give out your website. Obviously, the book is available in all the usual places, but maybe you have a direct website you want to share with people.

Chrysta Castañeda 18:32
Sure. So the book is actually website is last trial of T. Boone Pickens calm, and it is out and the Amazon is delaying shipping because of the need to put out essential products right now. And they’re not shipping books that you can order directly from the publisher, and that’s Texas a&m University Press. And then campaign website is Christa, CH r y sta for Texas calm if people are interested in that the Railroad Commission.

Jason Hartman 19:02
All right, Kristen. Well, thanks for joining us and good luck on the election. And be well

Chrysta Castañeda 19:07
Thank you and thanks for chatting. I enjoyed it.

Jason Hartman 19:14
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website Hartman Mediacom 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.

Global Economic Meltdown by Dr. Richard D. Wolff

Jason Hartman interviews Dr. Richard D. Wolff, professor of economics and author of Understanding Marxism to talk about the global economic meltdown. Wolff gives his thoughts on Marxism and whether Karl Marx’s ideas were applied wrong. Jason and Richard also talk about capitalism, the Yellow Vests Movement, and the disproportionate pay between CEO and workers.

Announcer 0:01
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.

Announcer 0:12
Welcome to the American monetary associations podcast where we explore how monetary policy impacts the real lives of real people, and the action steps necessary to preserve wealth and enhance one’s lifestyle.

Jason Hartman 0:29
It’s my pleasure to welcome Professor Richard de wolf. He’s a professor of economics emeritus at the University of Massachusetts, Amherst and a visiting professor at the new school in New York. He’s the number one best selling author of Democracy at Work, a cure for capitalism, and the capitalism’s crisis deepens essays on the global economic meltdown, and the new book, understanding Marxism. And Richard, I, as I told you, before we started, I would mostly really pick a fight with a guy like you, but I watched a few of your videos, and I found myself strangely agreeing. I’ve told my listeners before that, Karl Marx as the most influential economist in world history, I don’t think it turned out very well the application of his principles. But, you know, what do you think? I mean, you wrote a book about understanding Marx was his stuff just applied wrong? And that’s why there was, there was so much travesty, or was it misunderstood? I mean, what happened?

Dr. Richard D. Wolff 1:31
Now, I think it you know, he is one of those people that come along, historically, for reasons we never quite understand. I’m sure it had something to do with his mother and his father and the community and all the rest, who’s just ahead of his time. I mean, he sees things, he pulls together different strands of understanding, and comes up with insights that we keep going back to, you know, he was deeply respectful, as Marx was of Adam Smith, for example, wrote long, wrote great detailed analyses of Adam Smith’s work. And I would say Adam Smith is another one, another one of these people that comes along, and for whatever complicated reason, they get it, they see things that other people don’t see or don’t see for a long time. And then periodically, others get a glimpse and realize that he saw it already back then. And it’s not that it doesn’t change. It’s not that we can’t do better than Marx, we can, we should. And he would have been the first one to agree. But it’s an enduring level of insight. And the way I would explain it to people is that there’s no great mystery here. If you think of Adam Smith, and David Ricardo, they’re usually the people considered the, the founders of modern economics. They had something in common. They thought capitalism was spectacular. They loved it, they welcomed it. They thought it was an immense progress over feudalism. And so they was column this way, they were analysts, who also celebrate what Marx was coming after them. What Marx was, was a person who said, I agree that capitalism could add, and should add, brought the wonderful things that Smith and Ricardo thought they would, they thought capitalism would bring in the slogans of the French and American Revolution, liberty, equality, fraternity, democracy. Marx loved all of that. But he felt coming, you know, 50 years later after them that capitalism had come, but it hadn’t brought the the gifts it didn’t bring the Liberty, Equality, Fraternity and democracy. And he felt that capitalism, and he used this phrase, once he was saying he is Karl Marx. Right? Here’s Karl Marx. His view was a capitalism had somehow not delivered the goods not delivered on its own promises. And he posed himself the question, why not? And again, make a long story short, his answer was that even side capitalism, are the reasons the blockage is you might say, for why it couldn’t deliver on the promises that it made. And his life’s work was to show how and why capitalism prevents the achievement of Liberty, Equality, Fraternity and democracy. So again, long story short, what you had in Marx is a critic of the system. Once you having Smith and Ricardo are the lovers the celebrant service, and, you know, a balanced education and economics should include both

Jason Hartman 4:46
Yeah, fair enough. Of course,

Dr. Richard D. Wolff 4:48
yeah. Like if you want to if you want to study I don’t know French literature. Read people who think it’s the greatest thing you know, ever and read people who are critical of it and then make your own conclusion. Yeah, yeah. The only thing that motivates Americans like me to get to have a little bit of an edge when we talk is that we were denied that, look at me, I’ll speak very personally, I’m a product of America’s elite education. I went to Harvard as an undergraduate. Then I went to Stanford to get my master’s degree. And I finished up with a PhD from Yale. It’s like a joke. Right? Right, even 10 years of my life, and hear me now, I was never assigned a word of Karl Marx, in those three institutions. In terms of his mature economic analysis, I’m not talking about the Communist Manifesto, that’s a political document written in the heat of a revolutionary time. Sure, it’s worth reading. But that’s not where you go, to get the the core analytics of a person. So I feel kind of ripped off by American education, that they were so frightened by the Cold War, when I was a student, that they almost took pride in not having anything to do with Marxism, socialism, communism, any of that stuff. It was all disloyal. Somehow, it was all scary. And so we as students were protected. I like to use the analogy, it’s like, if you protect your children, from learning about sex, you’re not doing them any favor at all. But they’re gonna discover it later. And where you could have helped them have a healthy attitude about it, or now, it’s going to be a mess a little bit, a little bit of the edge, you sometimes pick up from people like me, because we had to learn it on our own. We had to go and find the books and all the rest, we could do that they were in the library, that censorship wasn’t 100%. But you know, the professor, if you asked a question about marks, the professor looked at you, as if you had forgotten to wear your pants that day, you know, you are.

Jason Hartman 7:01
But not in a modern University today, some on the right would argue, anyway.

Dr. Richard D. Wolff 7:08
Just a footnote on that. Yeah, I am occasionally confronted by that. And it’s one of those moments where you say to yourself, do we live in different planets? I mean, I’ve been a professor all my life in half a dozen American universities. I’ve given lectures at at least 50 universities in my life, the notion that Marxists have any kind of significant presence in American higher education. I mean, that’s not that’s not the case. They were weeded out if there were very many, and I don’t think there ever were, but if there were a bunch, the cold war did a number on them. What you do have is you have a lot of liberals. But you got to be careful, a liberal and a Marxist are not the same. There

Jason Hartman 7:58
was didn’t tell us about that. But that I gotta fire some questions at you. But tell us explain that one. That’s, that’s worth worth it. A liberal and a Marxist Marxist are not the same thing. When you say that, what do you mean?

Dr. Richard D. Wolff 8:08
What I mean is that a liberal is part of the consensus of support for capitalism. liberals and conservatives, in my judgment, are both like Adam Smith and David Ricardo celebrants of capitalism. They had some disagreements about how you best support and help and endorse capitalism. The Conservative tends to believe our laissez faire, that the government should keep minimum position and minimum role interfere as little as possible, either not at all if you take it to libertarianism, or minimally maintain the currency and courts and police and military, but that’s it. Right? The liberal says, No, no, no, you leave capitalism to its own devices. It produces a business cycle collapses, it produces

Jason Hartman 9:02
inequality, gotta regulate it, and distribute a little bit. Yeah. And you have

Dr. Richard D. Wolff 9:06
to control it, you have to limit it. The only agency capable of doing that is the government. And so the proper support for capitalism is to have a judicious targeted interference by the government in an ongoing way. And the sixth manner and and periodic

Jason Hartman 9:25
so if we’ve got that spectrum from libertarian to conservative to liberal, then what’s a Marxist complete redistribution?

Dr. Richard D. Wolff 9:32
No, no, no,

Jason Hartman 9:33
not at all. liberal. Okay, that’s

Dr. Richard D. Wolff 9:35
a look. Okay. We’re

Jason Hartman 9:36
Workers of the World unite. What? We’re where do we put Das Kapital in here?

Dr. Richard D. Wolff 9:42
Okay. preface. capital is a very rich piece of work. Yeah, it is. And it is encoded in different ways by different writers. Just like Adam Smith, just like the Bible. Sure. That’s

Jason Hartman 9:53
like, it’s like anything just like iron Rand. Yeah,

Dr. Richard D. Wolff 9:56
exactly. I so I’m going to answer the question the way I can’t stand it. But I’m not claiming that everybody who calls themselves a Marxist would agree, okay. But for me the critique that Marx offers, particularly in volume, one of capital, but in other places, too, is a critique that says, the root of the problem, why you have an unequal distribution of income, why you have instability, business cycles, and all of that has to do with the organization of the workplace, the enterprise, we, in capitalism organize it in a fundamental way with which Marx disagrees. And the reorganization, the changing of that organization, is the root problem, which, if it isn’t solved, renders all the efforts to solve capitalism’s other problems unsuccessful. So Marx would argue, for example, that the reason we are worried about poverty today in capitalism is the same as the reason that we 20 years ago worried about poverty, and 40 years ago, worried about poverty, that as long as we’ve had capitalism, the gap between rich and poor has animated an immense array of social criticism, ditto our business cycles, everything we’ve tried to do to deal with those problems has failed. Why? Why has it fit? Why are we now as I speak with you experiencing one of the worst collapses of capitalism in its history? And why have we had three of them? In this new century? I’ve

Jason Hartman 11:31
got a question to illuminate that. That’s my next question area, but finish up without Yeah, okay.

Dr. Richard D. Wolff 11:37
What Marx’s answer long story short, as usual, given the constraints of time, Marx’s answer is capitalism didn’t make the break from feudalism and slavery that it thought it did. That break still has to be made. And Marx is the analyst who explains to us what it is. And here’s the summary. Okay. in slavery, you divided the people involved in production into two groups, master slave, the master had all the power literally owned a slave control the situation amassed great wealth, yep. In feudalism, you divided people in again, in the production of goods and services into two groups, Lord and serf, same store, yeah, capitalism, criticize those systems, criticize them for their inequality, but all that. And it promised to break from that that’s what the French Revolution, and American Revolution slogans were about. Yeah. But it failed. And the reason it failed, is it replicated the split, only now it wasn’t Lord and serve a master and slave. It was employer

Jason Hartman 12:47
and employees, its labor and capital. Basically,

Dr. Richard D. Wolff 12:52
that’s, that’s, and the solution, the Marxist critique of that goes right there and says, you could organize the economic life of a society, meaning the micro level of the enterprise in a radically different way, a democratic way, because capitalism is not democratic. The owner does not consult the workers as to what it is he’s going to do, the Board of Directors doesn’t either, but you could have an alternative women could have an alternative in which it was run as a worker, co op. In other words, everybody has one vote, and you decide collectively, what are you gonna produce? What technology gonna use? Where you’re going to do it? And what you’re going to do with the profits collectively that all of you have helped to produce? Marx’s argument is that turning the enterprise into a community, hence the word communism, is the way forward has nothing to do with the state. Marx didn’t write about the state wasn’t interested in the state. So when you asked at the beginning, about misunderstanding, yeah, people made some decisions, that the way to get to a communism was by seizing the state, either with elections, or with revolution. And then they got a little bit waylaid along the way, they got really entranced with the state. And you got this peculiar 19th and 20th century aberration, I would call it in which they focused on how you get to, rather than what Marx said was the place you were going and ended up stuck in the middle with a very powerful state, but they couldn’t make because they didn’t understand how to do it. And so they ended up with what we would call state capitalism and not not a transition.

Jason Hartman 14:50
Right. So I’m guessing then you would say that the former Soviet Union was not Marxist it did not have a Marxist system then right. That’s Right, okay, because the government administrated all of the co op, if you will, versus the workers with the company. Now, just to answer that one objection, or that one statement you made about, you know, the workers, unless it’s an employee owned company, it’s not really a cooperative or a community or a commune. Right? And that is rare. Okay, but it does exist out there. But the argument any capitalist would say to you is, look, it’s a free market, the employee can just go somewhere else, they don’t have to work there. So they’re not a surfer or a slave, or they’re not indentured, either. Right. But rather than get off on a tangent, which we could discuss for three days, I want to ask you, do you so we determined and I agree with you that the Soviet Union did not really have true Marxism. Fair enough. I agree with that. Did any country to China under Mao have that or no?

Dr. Richard D. Wolff 15:50
Oh, you know, I don’t know what pure Marxism is. I would rather use this line, okay. re interpreted Marxism in their way. Look, Karl Marx dies in in 1883. So we are basically 150 years since Marx died, right? In that time, his writings have become important in every country on the face of this earth, the spread of Marxism, found in every corner of the planet, people excited by it, absorbing it using it.

Jason Hartman 16:25
Like I said, He’s the most influential economist of all time.

Dr. Richard D. Wolff 16:30
One of the things you know, if you like the bad news that goes with the good news, you spread very fast and 150 years to every your your it means you’re entering Marxism is entering countries with very different economic situations, political situations, historical trajectories, cultural institutions. Of course, you’re going to get on to a different interpretation. Of

Jason Hartman 16:54
course, of course, no, no, yeah, no, no, no problem. Rather,

Dr. Richard D. Wolff 16:57
I would rather say that what you had in the Soviet Union was an interpretation of Marxism. different from mine, I’m critical of there, there probably would be critical of mine, in which you gave a kind of peculiar priority to the state. And I would call it state capitalism in which the state hires people, you know, and okay, but you haven’t then broken the employer employee, you just added the state as another employer alongside private, okay, well, slavery and feudalism did that too. We would never have thought of saying it isn’t slave because the government had slaves, right? Where it is beautiful because the government had served. Why do we say it’s socialism or not capitalism? If the government also employs people,

Jason Hartman 17:45
okay, so we agree that the so the former Soviet Union did not really have Marxism. But do you say that the United States of today has capitalism? Yes. Really? Okay. So I disagree. And here’s why I think we live in this I and I interviewed the professor who wrote the book with his title, the winner take all society, you probably know that is I forgive me, I can’t remember his name. But that’s what we have. We have this winner take all society. We’re just because of the way public markets work and Wall Street, which is not capitalist that’s a crony we have a crony capitalist system. I mean, you know, it’s an insider’s game. And it’s all so rigged. And these, these certain companies get to be huge. And control everything. And everybody else is just a little peasant. You know, it’s it’s, this is not capitalism. It’s been totally perverted.

Dr. Richard D. Wolff 18:39
But they give the same answer that you admitted ago wanted to give me about work worker can quit and become a capitalist. Right? Right.

Jason Hartman 18:48
Well, if you really well, they can become they can become an entrepreneur. Sure, yes, they can quit. They can do their own their own side, hustle or whatever, even while they’re working. But the point is, we still have these giant companies that had massive access to capital that other companies don’t have.

Dr. Richard D. Wolff 19:05
So it’s their answer to you is the same one you just gave me. You can, you can go out and borrow. You’ll go out and issue shares of stock. If you’re here comes the punch line, which no one wants to say because it’s ugly. If you weren’t stupid or backward, or it would have been Amazon too. Yeah, right. Jeffrey Bezos wants us all to believe that he’s just smarter than we are. Yeah, he got there. We could Yeah, but we didn’t make it. Okay. It’s like telling the worker you could be a capitalist. There’s a reason why a very small number of people are capitalists and a very large number of people are worker it sounds like when

Jason Hartman 19:43
you say capitalist, you mean entrepreneur. Those are synonymous right? Yeah. lexicon.

Dr. Richard D. Wolff 19:47
Oh, boy. Yeah, I like the word employee. Okay. For me, there are structural reasons that keep the capitalists, the employers a small number and the employees large. I don’t attribute that to smart I don’t attribute that to personal differences, we have differences. But that’s not the explanation. The explanation is a system that reproduces these divisions, generation after generation, just like we have monopoly powerful companies on the one hand, and a mass of junior partners of those big guys. On the other end. For me, capitalism is what it is that we produces these divisions, it’s a set of institutions, that makes a few people, employers, and a few among them giants, who are able over decades, sometimes even longer than decades, to hold on to what are effectively monopolies as we call that in economics, like Amazon, or Facebook, or Google or a whole bunch of others that you can name and they push back, they hold on to their monopolies by constantly spending a ton of money on lobbyists, lobbyists to keep the laws in place. It’s right you’re their monopolies, but ideologically to tell us that they are just smarter and quicker and better equipped, and they’re getting their reward for their superior performance. In economics, we teach this absurd theory called marginal product. And we explained that one worker gets more than another because he or she is more efficient or more productive. I tell you, as a mathematical economist, that’s completely nuts that there is no way to measure that. And this is make believe, but it’s very powerful ideologically, like many make believes in your human history have been so where do we go from

Jason Hartman 21:39
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, in in lou dobbs book, which I quote off and war on the middle class from years ago. And he talks about how the rank and file worker versus this the C level execs that the 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 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 22:28
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 their four big shots on the right, one of which was lou dobbs. And answer this in less than an hour, the show after the show was over. Lou Dobbs was eager to talk to me, which I found interesting. Dogs would not disagree with you completely. He was taken with, obviously, and he was very friendly and all that. But that’s what he wanted to talk about how he was he? He and I both I think I had made some comment about how back in the 1960s, the CEO got 50 or 60 times.

Jason Hartman 23:09
Yeah, now it’s like 400 times. That’s right.

Dr. Richard D. Wolff 23:12
Yeah. 400 is where it is now. And there’s no rational basis. Right? You’re not going to argue he’s that much more productive. That is 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 and the university to acquire it. They wouldn’t give everybody the same amount of money. They get that? Yeah, me. No, no, I

Jason Hartman 23:52
agree that they do get that.

Dr. Richard D. Wolff 23:54
Yeah. 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 or 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 the question, well, that’s the cool

Jason Hartman 24:20
idea, right? The cut the company, the employee owned company concept, right?

Dr. Richard D. Wolff 24:25
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 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, whatever you think of it, per se, is that the workers are usually either in fact incompetent. In 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, you know, your board of directors that you elected

Jason Hartman 25:15
representative Republic concept,

Dr. Richard D. Wolff 25:17
right? That’s right. And so they do that, too. And then what they look at the shares the way most shares small shareholders do, this is a source of a quarterly check. But beyond that, I don’t give it them. 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

Jason Hartman 25:49
attend a company with 80,000 workers really do that is everything voted on? I mean, sure. The I mean, the problem is in those employee stock owned 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 law is 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 looks. So how do we do that? How, what’s the real mechanics of that?

Dr. Richard D. Wolff 26:26
Let me answer it by describing to you a company that has done it, okay, but 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. I prefer to be the messenger who tells you how it’s already being done. All right. probably the single most powerful and successful a worker Co Op in the world is called a Mondragon Corporation. It’s based in Spain. And in the city of Mondrian, which is a small city in the north of Spain, in the foothills of the Pyrenees mountains. In 1956, a Catholic priests 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 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 to 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, the 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 had 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 the place blows my mind very well organized.

Jason Hartman 29:31
Right? Yeah, that’s right.

Dr. Richard D. Wolff 29:33
It is it’s doable. Okay.

Jason Hartman 29:35
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 and that person 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 Bezos is it’s like a trinket. Okay. And it took him forever to get around to it, by the way, too. So, you know, I’m pretty critical of he could be visas, 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 31:03
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

Jason Hartman 31:52
by they’ll get the pitchforks eventually, you know, it’s a we have this plutocracy or kleptocracy now, and

Dr. Richard D. Wolff 32:00
will 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 that.

Jason Hartman 32:26
So they hire an army of lobbyists, which is much more powerful than our votes.

Dr. Richard D. Wolff 32:30
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 it 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 33:02
like? Does that look like a labor union doesn’t look like Elizabeth Warren, what does it look like? Well, we’ve seen

Dr. Richard D. Wolff 33:09
Well, it could be could be something new. I’ll give you a minute, an example of something that might be the beginning. In traditionally, in the last 150 years of capitalism, it has basically taken two parts, two forms, the labor union, organized labor, and political parties, Labour Party, socialist parties coming and all that, yeah, they’re taking those two. Now, there is something which I find it 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 in 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 there the beginnings of another forum, 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 cells and all the rest of it. They were able to mobilize people in fact, adds to the envy of both the labor movement and the left political bodies, in terms of the number of people, the 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 recognized 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 35:48
Oh, 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 35:58
Yeah. We have websites. And we also

Jason Hartman 36:02
you can wire your books free. Why are your books free?

Dr. Richard D. Wolff 36:06
on YouTube, you can find us at Democracy at Work. 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 36:21
90,000 subscribers. Yeah, yeah,

Dr. Richard D. Wolff 36:23
yeah. Oh, no, no, 150.

Jason Hartman 36:26
I’m looking away. I’m looking at Richard D. Wolf, maybe. Okay.

Dr. Richard D. Wolff 36:31
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 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 it’s an 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 37:43
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 you. So, good stuff. Thanks for joining us today, folks. That’s Richard D. Wolf. Thanks so much for coming on.

Dr. Richard D. Wolff 38:23
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 38:33
workers the world unite. Never thought I’d say that on the show. Thanks, Richard.

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Hugh Hendry on Investing in Chaotic Times

In today’s episode, Jason Hartman is joined by Hugh Hendry, where he shares the preliminary actions he took to position himself during the 2008 recession. They discuss where the market is going, and Hendry gives his 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. Jason and Hugh also talk about how you can profit from chaos instead of order.

Announcer 0:01
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.

Announcer 0:12
Welcome to the American monetary associations podcast where we explore how monetary policy impacts the real lives of real people and the action steps necessary to preserve wealth and enhance one’s lifestyle.

Jason Hartman 0:29
Hey, it’s my pleasure to welcome Hugh Hendry from St. Barts from his resort, maybe modestly, it’s not a resort in total, but he’ll tell you more. And he was a founding partner and it various times through the years Chief Investment Officer, CEO and Chief Portfolio Manager of eclectica asset management, and that ran for 15 years. And it attracted a lot of attention back in 2008, obviously, during the Great Recession, when he achieved a 31.2% positive return in the depths of really bad times in the Great Recession. And he has a reputation as a contrarian investor. Lately, he’s just been a macro viewer of the economy and the markets. And he’s known for his outspoken Twitter bombs and wisdom of many, many years. In the macro community view, welcome How you doing?

Hugh Hendry 1:24
Judo, I never felt better. And as you say, I I closed down the eclectica hedge fund at the end of 2017. And I think I retreated into a dark, gloomy cave. I know everyone’s just at various stages of coming out of confinement. But I think I went into confinement at the end of 2017. But this year, and I ventured forward, and I’m daring to offer my view on the world. And it feels like the old me, I’m misbehaving. And to be curious, you have to misbehave first. And that was one of the wisdoms that I learned earlier in my career.

Jason Hartman 2:07
Sure. Well, hey, any conformists in person who doesn’t misbehave a little bit doesn’t get any attention, right?

Hugh Hendry 2:13
Well, I don’t know if it was the naivety of youth. I mean, I certainly recall back in the day, so that would be back in 2002. And my seed investor for the macro hedge fund the offshore fund, was Would you believe it was the same patron as George Soros and his fund back in George launched in 1969. And this wonderful sponsor, he was saying, I only have I think, was it three problems, my fault free I could I could name 33 off the bike. But one of his issues was was youth, you know, that I was at the time, I want to say, I think it was 3033. And he was lamenting that he could remember the day that when george soros began, he was 14 or something, but the wisdom of investing in a mind who had survived the vicissitudes of life, and therefore you felt perhaps more comfortable deploying capital with the mind as opposed to a boy, but you know, I am known, who knows well, I am.

Jason Hartman 3:18
Jim Rogers, Soros former partner has been on the show four times now. I just had him on again last week. So but he doesn’t want to talk about Soros at all.

Hugh Hendry 3:29
Jim is a one of a kind. I think, in my last podcast, I was recounting and the evening spent in a private party overlooking Red Square. And I had Jimmy Rogers I had Nassim Taleb. I had mark the legendary kind of strategy smart father and profound deep thinker about a character and I was both the all three of these these geniuses of the of the financial world. And obviously, Kim is just hysterical. He’s always great value. But even in downtime, I clearly the mystique that surrounds him being the founding partner with George, back in the day, young everyone wants a piece of piece of Jeremy and he gave us it and like he has like a gun to his left lapel and come out with a cigarette sugar sachet. I want you to buy sugar. This was back in 2005 2006 when commodities were really ripping another pocket you would have a silver coin and other would be a gold coin and other it would be you whatever. That was Jamie always on. That sounds like him. Yeah, he’s

Jason Hartman 4:35
a great guy. But you know, we’ve had Mark Farber on the show but Nassim to lab. Oh, wow. I mean, just so interesting. I, I have not interviewed him yet. So it’s on the bucket list. Definitely. But hey, you know, tell us what you think about where we’re going. There’s a lot of uncertainty out there. And you people are rightfully, I think very concerned. Take it wherever you want. There’s so What’s going on in the world right now.

Hugh Hendry 5:01
But there’s one stuff, people get concerned by the new, they get concerned by the law of big numbers. And since the crisis of 2008, we have seen new practices developed by central banks around the world, and which kind of come under poorly classified, but they’re willing to go on to the theme of quantitative easing or the printing of money, as though the printing of money absolves all financial sin. And since that emerged really very strongly in March 2009, I want to say, there has been a very strong bull market in fear. And by that and what I’m what and I very specifically actually using the phraseology of another fantastic commentation. In the macro space, Christopher kusa, a great expert on options, and the mechanics and the construction of option strategies, and up until the virus, you and I, and the faux pas watching this, and we’ve been kind of had a sense that everything’s not quite right. And having seen how quickly things could change, in 2007 2008, we’d be very keen to, if you will protect ourselves. And in the financial markets, people have been doing so by buying put options, and in the process of volatility, which is one of these kind of nebulous, kind of ethical concepts, but it’s one of the founding stones, which kind of allows you to create a stock market, a bull market or a bear market, that kind of the living, breathing and exhaling is really volatility and volatility has been too high, which is to say that people have been willing to pay too, too much to protect themselves against bad events, the reality is the events of 2008, I can be uncovered maybe once every 100 years, you know, if left unchecked, and if the financial authorities had not pursued the course of action, if they did, we could have gone back into the analog of the Great Depression. And of course we did, but there’s a fear that the Great Depression is just on our doorstep. So this being a boom market in fear, fear, perhaps, not misplaced, but the ability to profit from fear just has not existed, because the kind of the central banks and what they’ve done, rightly or wrongly, and in doing so will actually be put out of DVD put me out of business, I was your supplier, you know, if you were scared about the war, like you say, I made 31% in 2008. If we look at that, Father, I made 50% in the month of October, I make 21%. on a Monday, taking the kids to school,

Jason Hartman 8:02
give us some context for that, because, you know, I don’t have the numbers off the top of my head, but you were up 31% in 2008, how much was the market down in 2008? I know it was down. I just don’t remember that calendar year, holiday year. Question that delta really shows how skilled you are or lucky?

Hugh Hendry 8:24
Well, I would disagree with that. So I mean, let’s try and answer your question. The Comedy you draw for the s&p, I want to say we would be maybe high 30s percent, in terms of point to point from high to low, would it be much greater possibly is like 58%. In terms of determining skill, it is more a function of the course of how we got from point A to point B. And that was the the truly most difficult aspect to manage. In 2008. You’ve seen the movie, The Big Short, I know most of the participants are that the characters were portrayed in that movie, but necessarily the American managers, but I knew all the sales people and the products because we were all going to be risky with a small community, they could see the future, like happening in front of our very own eyes. And if you remember one of those, that wonderful job from California, he was sitting on the most genius portfolio, he was sitting on nitroglycerin, which was going to blow to the high and make so much money for his clients. And yet he had to get them gets a technical word. But essentially, he had to close the fund to redemptions because the clients wanted their money back. I had the same thing a month, the month before October. My biggest client I was very concentrated in terms of clients. I had a client that would 50% of my income. Positive. And they wanted all of their money by? Yeah, just on the bearish. So the hardest thing is trying to keep people invested.

Jason Hartman 10:08
In other words, they did well, and they wanted to take some cards off the table.

Hugh Hendry 10:12
No, no, no, the event had yet to happen. And they were beginning to give up on it. Oh, God, I like is way too full of interesting anecdotes. I had a conversation in New York with these benefactors, the sponsors of my fund, and I was down 3%. At that point, I’d been all over the place I’d been up 25, I’d been down 10. And no, I was recovering my losses, and I was near flat, but near flight was minus three. And I remember them saying, You’re done minus three. But you don’t get these markets. You don’t understand these markets. We are going to give all of our money to this guy. This guy. He’s don’t fare too, but he gets it. I was just like, What are you talking about? These are? These are amongst the most sophisticated investors in the world. Go figure the world is a crazy place.

Jason Hartman 11:02
Yeah, it is. Well, at the end of the day, everybody’s human, you know, and it doesn’t matter who they are. They’re all just people, you know, at the end of the day,

Hugh Hendry 11:09
yeah. And the date of your boss doesn’t change your genius. You know, if you’re born in 16 1969, or 1769, you’ve still got the same weaknesses.

Jason Hartman 11:21
Yeah, no question about it. Well, you everybody’s wondering, where are we going from here? I mean, this is like what we’re talking about. It’s a crisis time. I’ve been doing this presentation, I called pandemic investing. And I actually got the domain name for that pandemic, investing calm, I kind of couldn’t believe it. Yeah, that was kind of amazing. And I think things are gonna get pretty tough. It’s a lot of businesses are picking up a lot of efficiencies now that they didn’t have before. But at the same time, a whole nother set of businesses losing a lot of efficiencies, businesses that depend on physical space, hotel, restaurant capacity airlines, where people can’t socially distance and they’re going to be forced into lower capacities, that’s going to affect their operational ability dramatically. I think movie theaters, Broadway plays, you know, whatever. So what’s going to happen? It’s hard to make sense of the world nowadays.

Hugh Hendry 12:15
You correct and I typically I am curmudgeonly you typically, I’m a kid of the glasses is half empty, no hospital. And, and it’s feeling half empty. today. The thing is with the virus, three months ago, we had no data. And therefore, it was legitimate to be very fearful, and to go the extra yard, to try and protect our communities, and to try and manage the pressure that it seemed was likely to be felt by our medical infrastructure. Today, and I say this is I’m a fierce guy. I’ve spent the last 30 years analyzing stuff now. And we have so much data and worth the data, it is very hard to reasonably justify this willful destruction or enterprise across the world. It’s easy for me to say that, you know, kind of cozying up in my kind of billionaires Island in St. Barts. The figures speak to another story. And so part of me feels like today is a is a narrative from an an rund book. Has Atlas just shrugged. Where is john? JOHN gold?

Jason Hartman 13:39
Behind gold is in his Valley.

Hugh Hendry 13:41
Yeah. And if you will, that I’m in my island. I’m like, you know, what, have it, take it? And we’re, like, conspiratorial theories, I think are for the fairies. But I can’t understand. It is this this is it feels like a coup d’etat by the state. We’re no all working. We’re no. All in the fate in the hands of the government knew that very, maybe that was the most scary thing. You could say. We’re from the government. We’re here to your house. Right? Yeah. Go to hell. Really? I think you got the wrong house. Like I think you wouldn’t be next door. You

Jason Hartman 14:15
know, right. So Famous last words, Reagan used that line a lot. You know, I’m here from the government. I’m here to help. But you know, and certainly, everybody around the world has become they’ve been forced to become a lot more dependent on government. And the next stage of this is going to be even more scary. And I’m not talking about the economic impact. I’m talking about contact, tracing, the surveillance society, the Orwellian 1984 of this. We ain’t seen nothing yet. We thought it was bad after 911 it’s just going to mushroom after this.

Hugh Hendry 14:51
I feel that’s correct. So but I you know, I think it’s, I think it’s very important that you know, I was using that very powerful slogan. From Reagan from 1980, it’s 40 years ago. Yeah. And I think we’re at the end of a 50 year cycle. So I think the origins of the 50 year cycle began with the US breaking away from Bretton Woods. And from the gold standard up until I want to say August 1971, you know, a US citizen, or, you know, anyone holding $1 bill could exchange it for its equivalent in gold ounces. And I was exposed as a lie by the overseas central banking community, and notably the French and that 50 year cycle. So by the mid 1970s, the the end of the previous session, so that we I want to say we had a cycle, which run from 1930 to 19, to mid 1970s. So again, see the 40 or 50 years, but they kind of they did end marriages with the cycle, which is just concluding No. And at the end of the cycles, chaos, reigns and gorjuss, we’ve had 40 years of order, not chaos. But if this was 1974 chaos, would very much be the accepted belief system. What is chaos, chaos would be the OPEC cartel pushing the oil price from nothing to 12 bucks and traffic around the block to get gasoline. Yeah, chaos would be the Vietnam War. And it would be the vacuum would be the failure. Chaos would be the hippie revolution, chaos would be breaking down. Thankfully, the liberation of the crazy racist legislation, there’s so much chaos would be the central bank, the Federal Reserve having a kind of an income cap on how much you could air chaos would be the government telling you how many dollars you could take out of the country. Chaos was everywhere. And, and we were we elected Reagan and Thatcher. And we were praying for otter. And we got people like Paul Volcker, the chairman of the Federal Reserve, and Paul was spiritually and physically a giant of a man, he’ll think of a central bank that raises interest rates, a recession

Jason Hartman 17:14
he forced, he forced a recession, you know, I mean, he wanted it of course, Volcker just passed away. But you know, his proponents would say that he was willing to make the country take the tough medicine and break the back of inflation. But others would say not so much. I mean, what do you think? What is your Volcker stance? I’m curious,

Hugh Hendry 17:34
all of these characters, they are a combination of making it happen and being in the right place at the right time. Okay. Paul Volcker today, would not be the right time to why was Paul Volcker, the right man, at the right time, when he became Fed Chairman, I want to say 1977, he became Fed Chairman and he was potent and powerful, because we were at the end of the previous cycle. We deal every afternoon, the US banking system was bankrupt in 1932. And we parched the economy of its debt and we had a global war in between which slowed that process done. But we typically kind of we went from total debt of three times the American economy, and by 1973 74, that debt figure was one times we d leveraged. When you d leverage when debt is small versus income. You can employ a sheriff like Paul Volcker, and he can raise interest rates. He raised them by 200 basis points, two percentage points on a Saturday morning, you can do that you can purge the system of his rottenness. I was kind of saying the bed that no Volcker fed the Fed. The mission there is to be kind of like Tony Soprano, you can the economy, nothing pimps us because my kind of colorful language. And today, a paul volcker would be at strophe. Or that strategy because of

Jason Hartman 19:06
too much debt is Jerome Powell doing the right thing today. The balance sheet is insane. I don’t think any of us I mean, we thought it was crazy during the Great Recession. But now, this is outlandish what the Fed is doing. And Powell is so bold about it. He makes no bones about it. Buzz Lightyear is this hero to infinity and beyond Greenspan would be talking in code and you’d have to decipher him but Powell is just

Hugh Hendry 19:35
no, I think I think you’re very unfair. I think post Exactly. I take issue with almost everything you said about power and

Jason Hartman 19:42
saying he’s a bad guy or anything. I’m just saying he is what

Hugh Hendry 19:46
he issue with the policies that he is trying to explain to the American public. And of course, he’s explaining and and trying to say that they are worthwhile or they are very much they’re like a medicine which is necessary. And so the actions of the Federal Reserve, the fear is that they are printing money. And eventually, if you print enough dollars, and the price of finite things like property, like so, prime real estate, prime real estate, the other things that are like St. Barts is prime real estate, a, this is a, I want to say 23 kilometer wide. The circumference I think, is 23 kilometers, which is to say is tiny, that building code makes it harder and harder to construct on the island. And so the stock of new housing is not expanding. Okay, so that’s a finite supply, as the argument is, the more and more and more there is no, we talk about trillions of dollars that you produce, then you’re going to push prices higher for these finite assets. That’s the argument in favor of gold. And that’s why gold is beginning to resuscitate and rejuvenate itself when prices look as if they’re set to go higher. And is the Fed, what is the Fed doing wrong? I would say the Fed is pretty much at the limits of what it can do. I think the Fed gets a bad rap. I think that it’s not printing money. The financial markets are watched like hawks by very, very smart and aggressive bond traders. They’re pricing 10 years securities today, at almost zero yield, the problem of the Fed is credibility that no one believes that they have the wherewithal to generate inflation. So I don’t really take issue with what it would be the crisis, the crisis, we saw about a 35%. Peak to trough very rapid decline in the price of risk assets in the month of March. And were it not for the intervention of the Fed, that probably could have been a 50 or 60%. correction.

Jason Hartman 21:59
No, I’m not necessarily being critical. I’m just saying that it’s amazing. I mean, the action has been overwhelming. It’s really

Hugh Hendry 22:11
what it has. So so I’m not trying to kind of say the opposite each time to you. But you

Jason Hartman 22:18
said push your Up button. So here we are.

Hugh Hendry 22:23
I know sometimes I have a tendency to kind of be a little bit too full of myself. But the remarkable aspect of what’s happening with the American central bank view, J was on Jays trying to put it he tries to say, Look, I’m Fed Chairman but call me g I’m like I’m just a regular guy. He’s actually he’s no embarks on a radical PR campaign. Again, it’s been advised to do so because of his credibility problem. The thing is, there’s when they, if you will printed money, which is a nebulous concept, yeah. But they can print it to the equivalent of almost annualized, if they continue printing, or intervening in the manner that he did in one week in March, you’d be talking about something like $60 trillion of dollar creation. To put that in context, that would be like three times the size of the US economy, and that’s enormous. And yet, the bond market went big deal. But what did you do? You didn’t do anything? There’s no if anything, you didn’t do enough. If anything, interest rates are gonna go negative. So on one hand, you’re sitting there going, Wow, I can’t read in the newspaper. The fat is just lost his, his bearings, and we’re printing all this money. And, you know, this must be the advent of higher prices, we’re going to get inflation. I’m going to be in my car, I’m gonna have to queue run the blog, and I was going to be 100 bucks. On the other hand, the smartest people smartest, I know this emotional intelligence, but bond, people who know more about pricing bonds than anyone in the world. They’re sitting there going, mostly. So you it’s kind of hard to be Jay Poe today. Everyone thinks you’re a moron. I had that problem. And don’t be a moron. Be an oxymoron. And that’s the today that’s an oxymoron.

Jason Hartman 24:16
Give us some predictions, gold, Bitcoin, the dollar asset prices, consumer prices.

Hugh Hendry 24:23
Okay, so predict predictions for the birth. Okay. Until the embed Time Machine. Oh, yeah. You know, we’ll have to get Elon Musk on. Once he has conquered Mars. We must reroute his intelligence to designing a time machine. They don’t exist, aren’t they? And so I have not been to the future. And and predictions. I just higher predictions are from morons. And I’m an oxymoron as I stated earlier, but what can I say? I feel as though the I’m guessing the majority of your listeners are based in America or Canada. have an affinity to calling themselves the American majority. I

Jason Hartman 25:03
mean, we have listeners in 189 countries. So I’m waiting. You know who I’m waiting to get North Korea and Cuba online, but Oh, well.

Hugh Hendry 25:12
Well, they’re probably using a proxy server with their VPN. And they’re probably listening right now. Yeah. So I want to say that I feel as though actually America has been taken hostage. And that if you’re a US citizen, you are a serf. You’re almost like a slave to external forces, the external forces being other economies, I want to say China’s kind of one that China has pinned to America. And secondly, financial speculators have pimped America.

Jason Hartman 25:45
Yeah. speculators for sure. No question about that.

Jason Hartman 25:50
China? I don’t know. So you’re bullish on China, then? Hmm.

Hugh Hendry 25:52
didn’t say that. Okay. Let’s say that I said that the US by its own admission, it had an ambition to have the dollar serve as the reserve currency answerable to no one. The currency of commerce is the US dollar. And through a whole series of crisis in Southeast Asia, in the late 1990s, they really reinforced the point, if you’re going to run the Thai economy or the Malaysian economy, the Chinese economy is run effectively on US dollars. That’s amazing, you know, and for them to grow. prosperity creates a desire for more and more dollars. And it’s the Federal Reserve that has to produce those dollars, right. And when there’s a crisis that emanates a crisis that begins, like a hurricane that begins offshore, offshore to the United States, is the US that has to react is the US that has to print those $60 trillion of annualized dollar bill issuance in one weekend March, because of a crisis that began in Wuhan. Yeah. I not in Detroit, if you will. Okay. So partly, you get what you want. And so the US policymakers have a load, they’ve each step along the road, the twisted road of history, decisions have gotten tougher, and tougher. And tougher, though, back in the 19. In the late 1920s, policymakers were zealots. Okay. And so you’ve got a choice. Okay, your choices this, you can have policymakers, like we had in 1930, at the US Federal Reserve, and kind of like Paul Volcker at the Federal Reserve in the late 1970s. And they are, they have an ideology, which is hard money. Yeah, the dollar has to be strong, and it has to protect the purchasing power of the US citizenship, right? At all costs. And if we use the language, kind of which was there around the US elections in the 1890s, effectively, those policymakers were willing to sacrifice the US household and to crucify an on across a gold on the, on the ideology of hard money.

Jason Hartman 28:16
Yeah, I agree. That goes too far. It doesn’t seem practical nowadays. And

Hugh Hendry 28:20
I at its peak, you had Andrew Mellon, the Treasury minister, treasury secretary for the US 1930 and his famous thing, let’s raise interest rates and purge the system of its rottenness. Let’s clean the stables. Yeah. And what happened? You had 20% unemployment. Yeah, you are the generation deeply psychologically scarred by the human tragedy. Okay, multiple generations actually. Yeah, that end so or you can have today and really today be done. I mean, it kind of began in the cloud with Greenspan, like you said he, he was a smoke and mirrors guy. He didn’t reveal himself. There was there was a lack of democratic check on him because he refused to reveal what he was doing. And Bernanke, he really is the architect. And really the person who marks the beginning of the polar opposite, and there’s nothing in between. and the polar opposite is Frankie, I want to say, at the bottom of the bear market after the TMT crush, but Bernanke, he put his hands up, he said, I am here on behalf of the Federal Reserve to apologize to the US household. I’m here to apologize to your grandparents, to your families that were made to suffer for generations, because my three assessors pursued a hard money doctrine at the expense of everything.

Jason Hartman 29:45
of their depression to Yeah, no, that was his thing.

Hugh Hendry 29:47
Absolutely. And he says if it happened, or into an ideology, it wasn’t necessarily so here we are now and we’re in another world. And you can do fair and fair and fair. And the notion of the Great Depression and that human tragedy, and that’s what the Federal Reserve are doing. And they’re getting it, they’re getting a bad rap for it.

Jason Hartman 30:10
And they’re getting a bad rap from is that sort of from the Peter Schiff type camp of the hard money, the ron paul Peter Schiff type of camp.

Hugh Hendry 30:19
It is an a and a huge contingent of the financial base, those owning Bitcoin and gold shares are very much older. I know, like passing judgment. I’m simply saying that this is ideology. And the and it’s like this kind of strategic game. And what people forget is that it’s not checkers on a board is real people. Yeah. Okay. And the proponents are the fiercest critics of the Federal Reserve can’t really offer a solution they can go, they can offer an alternative, or if I’m to put words in their mouth, because they don’t really offer the alternative. But if you’re just part of the system of the rottenness, that means enormous bankruptcy. And again, it means it means a Redux of the 1930s. That’s what it means.

Jason Hartman 31:12
And the thing about it is all of those sort of hard money crowd, they’ve been saying that stuff since Well, I mean, probably forever, but Howard Ruff, if you know that name from back in the 70s, I remember and through the 80s 90s 2000s, and he was on my show, and they’re just always wrong. These guys are just always wrong. They make like really interesting arguments. I love listening to them. But it just seems like we are actually in a new world. And when you have the reserve currency, when you have the biggest military, you can kind of defy the laws of math and physics, at least for a long time.

Hugh Hendry 31:53
I am not here to cast judgment on who is right and who is wrong. And I think, actually, that when people form opinions, and then people are people are entitled to their opinions, I’m not expressing your opinion in terms of the veracity, or smartness of anyone else’s argument, I have my own problems. But what I want to say is that we make geniuses of people going mostly owing to circumstance and and the time in the cycle. And these cycles, kind of the almost the run as long as an adult life, which is to say 40 or 50 years, and we spent 2025 years being kids and being just stupid rough. And then we spend 4040 to 50 years kind of trying to wizened up. And so that’s a that’s like one of the one of the outer planets going round, I think, is it I said this before someone correct me is it soft on us only if it takes it takes us one year to grow in the sun, some planets, CNC took you 200 years, you might never see snow, if you saw snow, you’d be like, Oh, my God, what is this stuff? You know? So we’re conditioned by the very slow passage of time, the thoughts with regard to hard money and you name some people like Peter Schiff, they’re kind of relevant today in the sense that gold has got a pulse Gold’s been trending gold, change this behavior in the year 2000 to 2003. It exited a bear market, and it kind of has heralded and told you that the Federal Reserve was changing from this hard money ideology to we will do, we will go to the old Lance to save the American household. And there will be consequences, the consequences are being failed at the political economy level, where again, when you feel you’re being taken hostage by the overseas sector, then the great fear is that we get closer and closer to conflict. Just know the conflict seems to be over over trade nature, but God forbid that would like carry or into military conflict. But that becomes a potent risk at times like this. This is one of the unpleasant side effects of the Federal Reserve’s policies. The other one is, again, when you are when you’re being pimped by the financial community, then, again, it’s the 1% get to own the economy, that will that is fermenting political revolution. You have Donald Trump today, we have Brexit in Europe, we probably have the inevitable breakdown and failure of the European project because of the Federal Reserve at the Federal Reserve and other central banks ideology of avoiding oil crisis. Again, I’m I think you should try and avoid all crisis. But let’s understand the pitfalls are really, really hard. And one of those pitfalls It

Jason Hartman 34:47
sounds like you’re saying his concentration of wealth, because you know what seems to happen and it’s so hard to work out. I mean, you know more about it than I do for sure but is that whenever you have all of these things stimulus plans, just the people that are just kind of closest to the money, you know, the people that are in that system, they get most of it. And, you know, the little guy gets a couple of shekels, and that’s about it

Hugh Hendry 35:13
with this thought. And it’s just not free enterprise. I, I struggle. And I hesitate, because this is, this is a global pandemic, you know, where the statistics kind of say that really, I know, it’s not influenza. But you know, we have developed a mindset where just one life is worth sacrificing the US or the global economy. And we’re kind of the wrong way round. And so are our thinking, what I’m, what I’m struggling to say is that 50 years ago, we were on the transition point from chaos into order. And the hardest thing about our life today, 50 years later, is that we’re at another pivot point. But sadly, we are pivoting from order the accepted belief system today is one of order, right? And we are pivoting into a world of chaos. That’s the challenge. Okay. So

Jason Hartman 36:10
before you go, just enlighten us a little more as to what that chaos looks like, if you can I know we got to wrap up here. But

Hugh Hendry 36:18
let’s answer that in the in the inverse. What was chaos? or less? What? What did we do to reimpose order, we gave central bank’s independence. And we said hey, look, you know, bring on a recession to you, we are central banks, to control and to constrain the creation of dollars. That’s just two examples of what we did. Another example would be we liberated the world, we use the great poster of the American dream. And we projected that onto this blank canvas of the rest of the world, we said, Look how wonderful this is. And in doing so we brought down the Berlin Wall. And we liberated literally billions of people from tyranny into a world more recognizable as our water, okay, and, and then let’s think of where we’re heading, we’re heading into a world where the central bank is less and less independent, the central bank works for the mind and works for the chief of state, right, we’re looking at a world with its the central bank is not trying to reduce inflation is trying to increase inflation. We live in a world where rather than reducing the money supply, they are desperate to increase the money supply. And we’re living in a world where that whole liberation of liberation from tyranny is being rolled by and this awful virus thing is perhaps going to make us less of a connected world and more of a disconnected world. And so that’s, that’s what I call the early signs of the chaos, which awaits us. And that chaos within the Euro, this burden of time, which has no weighing upon us a flight path, like a chaotic war that I could see is that, you know, the, like the boy in, put his finger in the down, the Fed put their finger in the dam in March, and they start the cascade this this stops the prices from falling. But the pressure is I think, gonna mount and mount because, you know, it’s so bad for commerce. I mean, here I am in sin boss, do I go forward and invest in my, my boat? You’re gonna make a decision in the next two weeks whether to go forward with a $4 million construction project. And I don’t know if there’s going to be any airline to bring my American clients from New York to say, boss, it’s

Jason Hartman 38:41
a fair question. Yeah.

Hugh Hendry 38:42
So and if I don’t spend that $4 million, I’m just one guy. Yeah. Okay. One kind of rich guy by just one guy. Yeah, I think what you could see when let me like, I’m not saying this is gonna happen. But this is the chaotic world, the Fed and his finger the pressure against the s&p, which is rally to where’s the s&p today, like 2750, let’s say the s&p, it could plunge again. And then the 2000, or less than 2029 5529 50 goes under estimated 2950. And the high was 30 to 50. So we’ve almost gone back to the high,

Jason Hartman 39:21
you got the biggest investor in the world, you’re buying up assets. The Federal Reserve,

Hugh Hendry 39:27
the biggest investor in the world, is when you and I become fearful. There is a central bank that could hold us back because you and I and our resources and our access to leverage and when we have fear, nothing can take us on. Okay, this is all just a game of confidence. Yeah. So anyway, I can I can see the world. I could see financial markets, getting slammed and falling again. And then the Federal Reserve and the US government come in with another package. And then everyone gets loans from the government and then they say, you don’t have to pay us and then we start really printing money and no One goes, holy cow, I can’t own 10 year treasuries at zero and interest rates start moving and all along. So I can see a world I the chaotic world that I could see would entail the s&p trading at five or 6000 in the next five years 10,000 in the next seven or eight years, and then that would not be pretty, that would be a tragedy.

Jason Hartman 40:24
Yeah. Wow. That’s something Yeah. Who knows? Well,

Hugh Hendry 40:27
I don’t know. For sure. I don’t know. Okay. But my franchise for the last 30 years was life is capricious. There’s always like weird things happening, not just the financial markets, in day to day life, your work, you always hear that expression. Who would have thought, you know, who thought well, kind of my own little world, I’d be like, I kind of thought that in 2008, I kind of thought the gold actually could embark on like three decades of a dramatic bull market back in 2002. Back in 2012, I said my role was no longer to be this moral comergence commentator on the moral philosophy of the US Central Bank. And so my role was just to be contentious. I am not claiming any ability to see the future. But I would want my I would counsel your audience. And I’d ask them just one thing in terms of preparation, think of the most chaotic events and begin to think of them becoming normalized. And then time think how you can profit from chaos as opposed to order. And that’s going to be very difficult. Because for 50 years, we’ve trained our thing our minds to think orderly. Yeah, and now you and that’s fine. Look at me, like people want to hear me Look at me. You know, I look like a financial dilute like Jimmy Rogers. No,

Jason Hartman 41:51
you don’t, don’t I botai.

Hugh Hendry 41:54
This is the face of the future. This is chaos, my friends. You have to hear first.

Jason Hartman 42:02
That’s pretty good.

Hugh Hendry 42:03
Sammy that 20 seconds.

Jason Hartman 42:06
That’s a good clip right there. I love it. That’s perfect for your Twitter feed. Just this is chaos. So the last chaos decade was the 60s or into the mid.

Hugh Hendry 42:17
Chaos comes is the transition between 40 and 50 year cycles. So I’m saying that we had a cycle of excess, a cycle of exuberance, which facilitated and enabled the US economy to leverage up and typically the ratio is up to buy the debt three times incomes. Yeah. And that concluded spectacularly with the crash, right? The crash was made worse by the ideology of the Federal Reserve. I then say to you, we spent 40 years de leveraging at the bottom of a deleveraging cycle. Everything is cheap. So here I am the Caribbean, as you know, Richard Branson, the virgin entrepreneur, he buys an island. Yeah, I’ve been there twice, once a billion dollars, but at the bottom of a deleveraging cycle, he says, I’ll give you 100,000 the guy says thank you very much.

Jason Hartman 43:11
I think Necker Island he paid $177,000 400

Hugh Hendry 43:15
but he wanted a new one. And he agreed on 177. Yeah, that’s what happens at the bottom of the cycle. Okay, and you get the chaos. The Chaos is the UK goes bust it has to call in the IMF. The Chaos is the Latin American crisis. The Chaos is the Petro dollar currency crisis is queuing for oil. The Chaos is inflation. The Chaos is the debacle of the American hostages. Or suddenly you think we used to be America we used to be great. What happened? Yeah, that’s the chaos right? Then you say well give me chant Let’s kick these morons kick Carter right let’s bring in Reagan. Let’s bring in Volcker give me order. Right. That’s 7980 but today is 2020 right and today’s like I’m so rich that I don’t punish me with higher interest rates. So you know what, we’re going to punish you with chaos. Buckle up the right is gone. He is going to be torturous.

Jason Hartman 44:14
Interesting don’t punish me with higher interest rates. So the pressure to leave these negative interest rates or you know real negative interest rates so you probably agree out there it’s a funny time you agree it really is.

Hugh Hendry 44:27
Well, it’s the Chinese curse May you live in interesting time that Santa we may be imposing or you may be imposing trade restrictions on on their products entering their states but they have imposed interesting times on us so

Jason Hartman 44:42
no question in that quote used to circulate a lot around in 2008. May you live in interesting times and in here it’s back again. So you have some good stuff out there on Twitter etc. share link or wherever you want people to find you.

Hugh Hendry 44:55
I am defying convention because I know financial flows. Don’t like Instagram I don’t wear a bikini and I may have to depend on desperate I become

Jason Hartman 45:06
Are you a social influencer I think a lot of those guys went out of business and Instagram

Hugh Hendry 45:10
but like i said i i’m going to rescale so everyone I want people to be training people to think chaotically My passion is my Instagram account which is huge Hendry official and but really my fault my followers my tribe if you will like to be found on on Twitter and it would be the inverse of my name to be at Hendry underscore huge and you will find me there to come is I’m soon to come is my my YouTube but my YouTube page is not finished.

Jason Hartman 45:42
Yeah, good stuff. But folks think about how chaotic what he just said is how many hedge fund managers do you find on Instagram? That’s for 20 something girls in bikinis, you know, and social influencers right. So yeah, very interesting. You thanks so much for joining us today. It’s really been fun talking to you.

Hugh Hendry 46:01
No, thank you. Always a pleasure.

Jason Hartman 46:08
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AMA 383: Inflation Is Coming, Wealth Preservation, Stansberry Research, Dan Ferris

Jason Hartman talks with Dan Ferris, the editor of Extreme Value and host of the Stansberry Investor Hour Podcast. Dan and Jason speak on subjects ranging from the broad economy to some of the conspiracy theories that might be ignored a little too much. Understanding the government’s role in the shifting economy and what the Fed is doing with each dollar can help one understand whether or not we are in a bubble. As well, how long can the stimulus work before it has no effect?

Land, gold, and art OR stocks, bonds, and cash? “You need to learn to preserve wealth outside the financial system,” Ferris said. Ferris and Hartman go in-depth discussing diversification and its importance versus playing it safe with multi-dimensional assets. Inflation, don’t predict it, prepare for it.

Key Takeaways:

[2:00] Would our founding fathers have been called “conspiracy theorists with tin foil hats?”

[5:00] The government wins every election.

[6:00] Where is the economy going?

[7:45] The Fed doesn’t buy securities because they are saving up for retirement.

[11:15] Why might the stimulus stop working so efficiently?

[15:00] “This is the most insanely overvalued market in all of history.” – Ferris

[18:00] Nit-picking on Warren Buffet.

Dan Ferris

[21:00] Let’s talk about Bitcoin, Gold, and Silver.

[23:10] “Bitcoin is the hardest currency on Earth.” – Ferris

[30:00] Bitcoin, is 11 years long enough for people to start accepting it for commerce?

[32:45] Inflation is coming!

[34:00] Will there be a great reset?

[35:00] Don’t predict, prepare.

[36:45] Land, gold, and art OR stocks, bonds, and cash?

Websites:

investorhour.com

stansberryresearch.com

jasonhartman.com/protect

JasonHartman.com

JasonHartman.com/properties

Jason Hartman Quick Start

Jason Hartman PropertyCast (Libsyn)

Jason Hartman PropertyCast (iTunes)

1-800-HARTMAN

AMA 382: The Last Gold Rush…Ever by Charles Goyette

Gold is the only monetary asset in the world that is not somebody else’s liability. Jason Hartman talks with Charles Goyette going beyond every conversation about gold in the economy right now. Gold’s value continues to rise, and not just compared to the dollar. Goyette says that China, along with the rest of the world, is de-dollarizing. Goyette gives an insightful, thought-provoking history and prediction of currencies in all forms across the globe.

Books:

The Last Gold Rush…Ever! 7 Reasons for the Runaway Gold Market and How You Can Profit from It by Charles Goyette

Key Takeaways:

[1:30] Maybe we should have ‘socialist distancing’ as opposed to social distancing.

[3:20] In the last 100 years, the US has had three versions of the US dollar.

[4:00] Was the US government doing the mega version of check kiting?

[10:30] No trillion dollar debt?

[12:00] Are we looking at a sort of rampant runaway towards socialism in the US?

[13:40] For our economic might to end, it has to be replaced.

[17:15] China, along with the rest of the world, are de-dollarizing.

[18:40] How does bitcoin play into the future of global currency?

[20:15] “Socialism; ideas so good we have to force you to accept them.”

[22:20] Is gold an investment, insurance, or a currency?

[24:00] Is gold as scarce as we think?

[27:45] Any closing thoughts on the new world order and the great reset?

Websites:

charlesgoyette.com

jasonhartman.com/protect

JasonHartman.com

JasonHartman.com/properties

Jason Hartman Quick Start

Jason Hartman PropertyCast (Libsyn)

Jason Hartman PropertyCast (iTunes)

1-800-HARTMAN