414: Protect Yourself From Inflation, Cantillon Effect, Hartman Predictive Index, Largest Wealth Transfer, Are We in a Housing Bubble? Hartman Comparison Index™

Jason shares his speech at an Investment Fund Conference in Utah about inflation, government intrusion and censorship, and why you should use his inflation induced debt destruction strategy to protect yourself from the hidden tax of inflation and the largest wealth transfer we’ve ever seen!

He also talks about his brand new index – The Hartman Comparison Index™ – a truly unique way to value real estate. In our daily lives, we constantly compare things to one another to obtain a better understanding of value and we must do the same thing with housing prices; we can’t just measure them in dollars, because the dollar is a moving target and its worth is constantly changing. Listen as Jason compares house prices to commodities historically to help us understand if we really are in a housing bubble.



Debt: The First 5,000 Years Paperback by David Graeber

The Collective Mastermind with Ken McElroy (and George Gammon)





The WEALTH TRANSFER is happening FAST! Protect your financial future now! Did you know that 25% to 40% of all dollars ever created were dumped into the economy last year???  This will be devastating to some and an opportunity to others, be sure you’re on the right side of this massive wealth transfer. Learn from our experiences, maximize your ROI and avoid regrets.

Free Mini-Book on Pandemic Investing: https://www.PandemicInvesting.com

Jason’s TV Clips: https://vimeo.com/549444172

Asset Protection, Tax Savings & Estate Planning: http://JasonHartman.com/Protect

What do Jason’s clients say? http://JasonHartmanTestimonials.com

Easily get up to $250,000 in funding for real estate, business or anything else  http://JasonHartman.com/Fund 

Call our Investment Counselors at: 1-800-HARTMAN (US) or visit www.JasonHartman.com

Guided Visualization for Investors: http://jasonhartman.com/visualization


413: Inflation vs Deflation, Jeff Deist, Mises Institue, Enhanced Unemployment Benefits, PPP loans

Jason Hartman interviews Jeff Deist, President of the Mises Institute and former advisor and chief of staff to Congressman Ron Paul, for whom he wrote hundreds of articles and speeches. Are we in the midst of a battle between inflationary and deflationary pressures? How can we wake up Americans and help them understand the express policy of their own government to harm them?

Watch the YouTube video HERE.

For more information, visit Jeff Deist | Mises Institute


Key Takeaways:

[1:50] A false sense of security

[3:39] Enhanced unemployment benefits

[4:41] Competing with enhanced government perks

[5:20] Two twin opposing forces at work – inflation vs deflation

[8:00] That doesn’t create new Ford F150s

[10:22] Containing inflation in the 2020s at the consumer price level

[12:00] US Treasuries continue to look good by comparison

[13:53] We need to get back to normal and get government off our backs

[14:47] An express policy of their own government to harm Americans

[17:55] Government and central banks thwarting higher productivity

18:56 Caught in a war between inflation and deflation

[23:37] Snapping up rental real estate

[25:48] Resources on how this stuff really works, and how important it is to understand it


The WEALTH TRANSFER is happening FAST! Protect your financial future now! Did you know that 25% to 40% of all dollars ever created were dumped into the economy last year???  This will be devastating to some and an opportunity to others, be sure you’re on the right side of this massive wealth transfer. Learn from our experiences, maximize your ROI and avoid regrets.

Free Mini-Book on Pandemic Investing: https://www.PandemicInvesting.com

Jason’s TV Clips: https://vimeo.com/549444172 

Asset Protection, Tax Savings & Estate Planning: http://JasonHartman.com/Protect

What do Jason’s clients say? http://JasonHartmanTestimonials.com

Easily get up to $250,000 in funding for real estate, business or anything else  http://JasonHartman.com/Fund 

Call our Investment Counselors at: 1-800-HARTMAN (US) or visit www.JasonHartman.com

Guided Visualization for Investors: http://jasonhartman.com/visualization


412: Kari Lake, Arizona Gubernatorial Candidate for 2022, Collective Mastermind Weekend

Today, Jason welcomes Kari Lake. Kari is an American former television news journalist and anchor for KSAZ-TV television station in Phoenix. She stepped down from her anchor role in March 2021. She is a Republican candidate in the 2022 Arizona gubernatorial election.


Key Takeaways:

[01:37] The left losing balance

[04:15] You can’t hear the dogs that don’t bark

[07:30] Backfire

[08:57] A tyrant’s dream

[10:09] What to do with BIG TECH

[16:13] Communism’s ugly little brother and the left agenda

[19:47] MGTOW

[22:55] Pulling on the heart strings

[26:04] California 2.0

[28:37] How to support Kari Lake



Covid checks all the boxes for a tyrannical dictator- Jason Hartman

What else says “Lack of faith in the future” but the choice NOT to have children- Jason Hartman

Unlike in Las Vegas, what happens in Arizona doesn’t stay in Arizona. The policies that affect us spread to other states- KariLake.com





The WEALTH TRANSFER is happening FAST! Protect your financial future now! Did you know that 25% to 40% of all dollars ever created were dumped into the economy last year???  This will be devastating to some and an opportunity to others, be sure you’re on the right side of this massive wealth transfer. Learn from our experiences, maximize your ROI and avoid regrets.

Free Mini-Book on Pandemic Investing: https://www.PandemicInvesting.com

Jason’s TV Clips: https://vimeo.com/549444172 

Asset Protection, Tax Savings & Estate Planning: http://JasonHartman.com/Protect

What do Jason’s clients say? http://JasonHartmanTestimonials.com

Easily get up to $250,000 in funding for real estate, business or anything else  http://JasonHartman.com/Fund 

Call our Investment Counselors at: 1-800-HARTMAN (US) or visit www.JasonHartman.com

Guided Visualization for Investors: http://jasonhartman.com/visualization

The Great Demographic Reversal, Ageing, Inequality & Inflation Revival by Charles Goodhart

Charles Goodhart and Manoj Pradhan join Jason Hartman, authors of The Great Demographic Reversal, to talk about interest rate and how long it will stay low. They discuss the effect of globalization and technology on inflation, and the importance of dependency ratio.

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 Charles Goodhart and his colleague mannose. Pratt him and we are going to be talking about good hearts law in the new book, The Great demographic reversal aging societies, waning inequality, and an inflation revival. Charles Goodhart is member of the Bank of England’s monetary policy committee, and former professor at the London School of Economics, developer of good hearts small you can look that up in Wikipedia. But of course, we’ll talk about it today. And he is the son of Arthur Lehman Goodhart, who was the first American to be the master of an Oxford college, and the brother of House of Lords member William Goodhart, and leading British Conservative politician Sir Philip Goodhart, quite a pedigree and his new book. We’ll talk about that today. So I’m really looking forward to this. Welcome to both of you. Thank you. Yeah. First, I’d like to start off with Manos maybe? And can you explain your research and how you became affiliated with Charles.

Charles Goodhart / Manoj Pradhan 1:26
So Charles, and I worked on this idea when we were both at Morgan Stanley in the economics team. And that’s where we talked about what demographics would do how that might or might not stand in the way. And that was something that was taken on in a presentation to be is at the annual seminar, which then developed into a working paper. And that’s where we were encouraged to write the book. So we’ve written this book together, as it’s been fantastic working with him, and I’m enjoying every minute of it.

Jason Hartman 1:57
Excellent, excellent. Well, for either of you, what is the general thesis of the demographic reversal? What What do you mean, when you say that,

Charles Goodhart / Manoj Pradhan 2:06
we’re what we mean is that there were some very strong forces, causing disinflation reduction of inflation over the last 30 years. And these are now reversing, so that the forces have caused the inflation to come way down and be held down to about 2%, or even lower recently, again, to reverse now. And that’s going to reverse all the factors that we had earlier. So that the, the patient is going to start rising again, inequality within countries is going to go down. And they are going to be a very severe problem about dealing with debt. If and when interest rates start rising. There are two main forces really that have leading to the disinflation, the first one has been globalization, whereby first Eastern Europe after the fall of the Iron Curtain joined the world’s trading system. And then China did too, as well. And that has meant that the available working population for anyone who can shift their production from one place to another as more than doubled over the last 30 to 40 years, the blue line on the left, and was available to producers and manufacturers at the beginning of our period in about 1980. And the yellow line was the additional workers from Eastern Europe and China. And that increase in them relate to a huge increase in the working age population. And if you can see that chart, you can see that the yellow and the blue line start turning around at about 2010 and now start declining.

Jason Hartman 3:52
But let me just ask about that a little bit. So you’re saying that we would have much more inflation baked into the system, if we didn’t have globalization and probably technology as well. Those have been disinflationary, right.

Charles Goodhart / Manoj Pradhan 4:08
And again, on the right hand side, you can see the increase in the working age population from year to year, which is on jumping upwards, again to just around 2010. And from now on, is going to go rapidly downhill. There’s partly because say, China is gay and much of Europe, the working age population is actually going to shrink in other countries, because of the decline in the birth rate, working age population will at best stagnate. And this was further reinforced by the change in the ratio of dependents that is the young or too old, too young to work, and those who are above the retirement age. Now, the globalization actually reduced world inequality, because they shifted production to a manufacturing From the high wage countries like the US and Europe, to the low wage countries like China and Eastern Europe, and you will see the left hand column, and the ratio of the wages of the American worker to the Chinese worker, which was about 35. As far back as 2000 is only about five, that’s a huge change. The Chinese workers have done extremely well, the American workers have done extremely badly. And the same is true to a lesser extent by Western Europe and Eastern Europe. And since there are many more Chinese, and Asians, South Koreans, Vietnamese, and so on, there are Americans and Europeans that has made the world inequality has declined, while inequality within each country has actually been increasing quite sharply, because the workers, particularly the relative down skilled have had a very bad time. In addition to that as being effective, the dependency ratio, the number of young has been declining quite sharply as the birth rate has gone down with a number of the L has been increasing very rapidly, particularly the oldest old weren’t likely to double over the next 15 or so years. And as you get older, their likelihood of having an incapacitating illness, like dementia or Parkinson’s or just arthritis increases and increases, which means that there is a huge need for additional carers. And the need for Medicare, the need the need for medical assistance, the need for personal assistance of care for the old is going to mean the expenditures on this are going to be rising very sharply, with a result that even before the COVID-19 effect, affected the world, the likely increase in public sector and in debt, public sector debt was growing. I just rapidly and because the Coronavirus has increased this even more so. And of course, the private sector is now massively increased its debt. So the debt ratios that we now have around the world have been just jumping up very, very sharply. And if interest rates go up, and unfortunately, we think they’re likely to do so that he’s going to put a huge burden both in the public sector and on the private sector. Now, our viewpoint on this is both rather grimmer rather than more pessimistic than the mainstream, which expects is going to be interest rates are going to be terribly low, for exceptionally low for a very, very long time, lower for longer than that it’s called, we don’t agree. The main reason I think, why the mainstream view this is because of the experience of Japan. And now I’m going to hand it over to my colleague Manoj, who has done much more work on Japan than I have. So man is a very interesting case study for sure. So these low interest rates, so your basic thesis then is the low interest rates won’t last.

Jason Hartman 8:20
And when they go away, it is going to place significant hardship on the economy and widen the divide even more so right?

Charles Goodhart / Manoj Pradhan 8:31
Absolutely. And the best way of getting out into higher debt is to grow faster. But here the decline in the growth of the working age population. In many cases, an absolute cutback in the working age population is going to mean the growth of anything is going to slow down even further from the relatively slow levels that we’ve had over the past 10 years or so. Because the rate of growth of GDP, the overall economy is a function of the number of workers times the increase in their productivity and productivity has been poor. And the number of workers coming into the system is now going to actually reduce, so we’re going to have fewer workers, it would take a productivity miracle for us to be able to grow out of this particular problem.

Jason Hartman 9:21
Okay, so we do have a couple of crosscurrents, though. Number one being obviously automation, you know, still someone needs to operate the robots. Right. You know, number two is and you alluded to it, I’ve been talking a long time about the exploitation of Africa for you know, the next move for offshoring being Africa, but Africa is a much different case than China. You know, it’s a lot of little countries with conflicting sort of tribalism and, you know, language. I mean, Africa is just a whole different thing than than China, isn’t it?

Charles Goodhart / Manoj Pradhan 9:54
Oh, absolutely. And I’m going to talk about China as well, sure, but we see The decline in the working age population being such and the need for personal care for the old. And if you’ve ever had anything to do with dementia, you will know that robots just don’t cut it. What you need is an emotional support. And the emotional quotient of a robot is absolutely zero.

Jason Hartman 10:21
You mean you’re talking about the care of elderly now? Talking about manufacturing, on the assembly lines and such? Yeah, I get it. You’re talking about two issues, sir.

Charles Goodhart / Manoj Pradhan 10:31
So the we’ve talked, we’ve talked about quite a few things. In fact, some of the objections that you’ve got things that we have covered in the book, and they fall into a broader set of categories, along with Africa, India, and parts of South America also have dependency ratios that will not rise and be challenging for quite a while more. The second issue is that perhaps older people can work much later on in their lives. The third one is automation. And in fact, the last one that I’ll cover very shortly is one of the things we’re seeing are likely to happen with aging. Why isn’t it happened in Japan? But let me let me walk you through

Jason Hartman 11:08
a couple of the things is aging itself out of existence with its, you know, low, very exceedingly low birth rates? Same with Western Europe and Russia? No, no birth rate, and ageing populations in all cases. But go ahead.

Charles Goodhart / Manoj Pradhan 11:23
That’s it. You’re absolutely right. It’s a very dramatic story. And you know, you’re going to see that in Germany, you’re going to see that in North Asia, you’re going to see that in Russia, where there are other issues related to the rate at which males are not surviving into late ages. But let me address some of the questions you’ve had. First, I think technology, we want to think that technology has the ability to crush a lot of the employment in repetitive tasks. The reason for that is that, as Charles was saying, and that’s why the robotics story about looking after the elderly is important. If robots can look after the elderly directly, what we need is a reallocation of labor from one part of the economy to the other. So to the extent that many jobs will be crushed in manufacturing, that is actually something we’re counting on. If that doesn’t happen, our thesis becomes profoundly more powerful. And let me explain why. What happens is, if you look at the demographic projections of the UN population statistics, they’re scary enough as it is, but what we don’t realize because we’re not seeing those numbers is as the elderly begin to dominate the population, and they follow the working age population, many more of them are going to live to a much longer age. And as they live longer and longer, the risk and the incidence of dementia rises almost exponential. Now, these are diseases that we live with for a very long period of time. They need carers, they need attention, which is what Charles was alluding to. And this is what Charles and I call socially productive work, we do have to look after people who have contributed to our societies. But it’s not economically productive in the classic sense, the services being produced are consumed at one time by the elderly, and the elderly themselves, then don’t go on to produce anything else. So the demographic picture will become even more dire if we start deflecting some of that available labor force to look after the elderly, without crushing jobs in manufacturing. So we need that story to play itself out. We’re depending on that story to play itself out. The second part,

Jason Hartman 13:28
Okay, so first off when when you say you look at the UN statistics, and they’re scary enough, what exactly do you mean by that? Do you mean population growth? Do you mean the age distribution of populations in these different places we talked about? Because we’ve got coming at us and empty planet eventually. Right? But not for a while. So you know, that’s a curve, right? But go ahead. And

Charles Goodhart / Manoj Pradhan 13:54
so you’re right, actually, both the metrics that you suggested it’s, it’s not just the size of the populations, in fact, the labor force, it’s also the composition, which is that it’s not the young that are forming a large increase in what economists would call the dependency ratio, which is the sum of the young and the old, supported by workers. It’s the elderly who are not going to rejoin the labor force. But it’s also one more thing, which is that the incidence of these headwinds that you describe is happening in all the economies that today make up the bulk of the contribution to global growth. Every theater in the global economy, that is a large mover and shaker is going to see a demographic decline, which will be a significant headwind, and the likes of India and Africa and southern American states have the ability to grow fast, but like you said, they don’t have the administrative infrastructure. We don’t think they have the ability to build human capital quickly and together that means they can’t really export labor because that’s politically just impossible at the moment. They can import capital to an extent that they will do well. But they can’t import it and transform it into an output at the rate that will offset the demographics that are available in the rest of the world. That’s just not going to happen, we think. Okay, so

Jason Hartman 15:12
tell us why the dependency ratio is so important. And well maybe ferret that out a little bit more for people, if you would? Well, let

Charles Goodhart / Manoj Pradhan 15:19
me let me take that on. First of all, two reasons why a increase in the ratio of workers is disinflationary. The first one is that you don’t hire a worker, unless they produce more than you pay them over, obviously. And what’s more, the workers have got to save for their own retirement. So the higher the ratio of workers to dependence, the more disinflationary the system is well dependent, the young and the old consume, but they don’t produce, and therefore, by definition, they’re more inflationary. Moreover, when the number of young started to decline, and we got all the increase in consumer durables, there was an enormous increase in the participation rate of women. And that meant that there was a shift out of home production, which did not count towards GDP, to into women working in the labor force, which did count towards GDP. So in a sense, the rate of growth of output was considerably over, over exaggerated during the years when the dependency ratio was improving.

Jason Hartman 16:31
Okay, let it that’s, that’s really interesting. So what you’re saying is that the domestic work, if the home is not counted in GDP, are as we all know that. And so when women shifted into the workforce, the GDP numbers went up. As you as you would think that there’s more production, there’s more people in the workforce. But what what’s put what does that mean? So in other words, that wasn’t, well, it wasn’t increased, but it wasn’t I mean, I don’t know, you know, then there, then there became legions of housekeepers. So

Charles Goodhart / Manoj Pradhan 17:05
Well, yeah. And the thing is that when somebody buys a clothes washer, that adds to GDP, when they wash clothes at home by themselves, it does know that to GDP, so we’re shift from washing everything by hand at home would used to be the way things were done. They’re having a close washer, and going out to work in the labor force and producing more led to a sharp rise in the rate of growth of output overall, but the number of clothes that actually got washed, didn’t change very much. So what does that mean? What where do we go with that as

Jason Hartman 17:43
well won’t see that kind of increase in the future, because the women are already in the workforce now. Exactly. So that benefit to growth is, is being done. And now we’ve got the opposite effect with the rate of growth of the number of retired, increasing very sharply. So the dependency ratios are not going to worsen because the number of people who are old and retired is going to increase as a considerable proportion of the total population. And they need a great deal of care and looking after, as Manoj said, dementia increases exponentially. Once you get over 85, the likelihood of needing a considerable amount of support and care. And there has to be done by people, it can’t be done by robots increases to something like about 70% of the of those of that age group. When you get to buy over 90, it increases it to almost 100% 100 centenarians can’t look after themselves. Fair enough. However, you are making one assumption which may be valid for a long time, but probably not forever is that, you know, there won’t be treatments queuers advanced, you know, I mean, of course, that’s a possibility. But the slow process, indeed, and you certainly

Charles Goodhart / Manoj Pradhan 19:05
can’t rely on it, and rely on the ability I the medicine has done wonderful things in dealing with cardiovascular with dealing with cancer, with dealing with cataracts and things like that everything under the neck, they’ve dealt with magnificently. But the success so far in dealing with problems related to the working with the brain is actually been horribly disappointed. 90, so drugs that are being tried, only about two or three have had any beneficial effect whatsoever. And even that has been slight.

Charles Goodhart / Manoj Pradhan 19:41
Jason, let’s look at it this way. I mean, you know, first, we would love to be wrong. It really would give us immense pleasure to know that there has been a way out of here and a few a small laundry list of things that could prove us wrong or the following. If we get a cure pretty much the way we’re looking for a cure for COVID. If we can get a cure for dementia And old age related diseases or as the who has been pointing out, a lot of it can be prevented people could work to later on in their life. Second is if a lot of work could be transformed from physical work to mental work, being old helps you do that. But physical work is still hard when you’re aging. Second is, if AI turns out to be an absolutely fantastic game changer for productivity, not just for the few jobs that we can see immediate impact in, but just all around everywhere, including caring. And the last bit really is if policymakers don’t have to wait for a crisis to show up at their doorsteps and take action now, to really address some of the issues we raised in this book. But we don’t see any of that happening at the

Jason Hartman 20:43
VA. That’s very much wishful thinking on the part of government. Okay, so go on, you know, I’m looking at the table of contents, you cover a lot of things in this book, let’s switch gears and, and, you know, grab it in another area that you want to cover. I just want to make sure we get all this out.

Charles Goodhart / Manoj Pradhan 20:59
Well, one of the one of the key things that we get asked, and and you alluded to this yourself, right, which is that the tip of the spear, or the blueprint for an aging society, has already been seen many argue in Japan. So Japan’s been aging for a very long period of time. Like you’re saying the concerns are that they don’t really have much immigration inward. So their population growth is really dwindling into nothing. And if all of that is true, why haven’t we seen our thesis playing out there? Why have we seen in many cases, the opposite. And Johnson? Oh, we’ve looked at this topic. And our argument is that the way Japan has been treated has been symptomatic of a lot of the problems that we see in the analysis of the global economy.

Jason Hartman 21:43
It has been one reason why don’t you see your thesis playing out? You mean inflation, right? inflation is because Japan has huge debt levels, about 230% of GDP, and it has an aging population. But it also has, you know, it’s really like the last three decades, you know, I mean, not not even two decades anymore, when so why don’t you see it playing out?

Charles Goodhart / Manoj Pradhan 22:04
They’re actually actually it’s interesting. You said, and let’s use that as a starting point, right? I mean, the first point you look at is they really did have a lost decade, there’s no doubt after the asset price bubble burst, they really had lost decade. But since then, they’ve had 1% GDP growth, which doesn’t look fantastic at all. But when you consider that the population in the working age population has been falling, the workforce has been falling by 1%. The difference between the two which is productivity is 2% a year. If you offer 2% a year productivity growth through the advanced economies, they bite your hand off today. So they’ve done very well on that front. The second thing to keep in mind is Japan is not an autarkic society, there was no way that Japan was blocking off either the disinflationary forces, or the impact of this massive labor supply shock at its borders. So Japan going into inflation, while China was deflating the rest of the world, is incomprehensible. When we look at Japan, and we look at it as a closed society, and we say, Well, this is what happened in Japan, they went to deflation because of its demography, what we’re effectively doing is we are saying that Japanese corporates and and the policymakers there, disregarded the rest of the world. And they absolutely did not one of our key contributions to that debate is finding new data and new evidence from Japan’s own ministries, that shows very clearly that Japan’s corporate sector looked at the domestic economy and said, That’s not where I want to invest. Where I do want to invest is in China, North Asia, Brazil, Poland. And indeed, if you look at what’s been happening there, the ratio of overseas to domestic production not only of manufacturing, but of employment services, profit, everything has been increasing at a very steady pace for the last 30 years. So Japan behaved in a profit maximizing manner outside within its economies, its labor force was treated as we all know very differently from the rest of the world, you could not really fire those with employment for life contracts. So Japan moved them from manufacturing to services where you could better protect their hours, and they move to part time workers. So I think Japan on our point of view has been mis diagnosed. And using that as a roadmap for what is yet to come is an extremely misleading story, which is why we have market prices where they are right now. And they’re about to be proven wrong.

Jason Hartman 24:30
And when you say market prices, are you referring to the stock market, partly to a low to a large extent, I mean, interest rates.

Charles Goodhart / Manoj Pradhan 24:38
So if you look at where interest rates are, and this is the point you made earlier, which is that, you know, there Japan’s debt has skyrocketed and what has allowed them to remain that high, which is a point Charles, as made many times is that the cost of servicing that debt has fallen to incredibly low levels. And so what we’ve seen for the future is everyone’s expecting interest rates over the next 10 2030 years are going to remain very low, which means there is no pressure on stock markets and the impact on currencies as unknown. If we are right, we’re going to start with those interest rates being at the wrong level. And all of the subsequent changes that will reverberate through the risky asset spectrum will then be a function of that initial change. And we’ve been living in a remarkably favorable time and capital. And with the result that what has happened is being debt ratios everywhere have gone up very, very sharply. But interest rates have fallen just as sharply. So debt service ratios have remained flat or even decline. So the burden of a debt has not been increasing. But interest rates can’t go down anymore, and are very likely to rise somewhat, in the aftermath of a pandemic. And with the reduction in the working population that we see coming. And with the greater protection is at the end of globalization, the return of business to each country is one of the features of the COVID palette pandemic, was it every country became even more national, they, they all insisted on keeping their own drugs and personal protective equipment. The COVID pandemic has moved globalization even further

Jason Hartman 26:24
backwards, the COVID pandemic has really promoted the Trump agenda at the end of day Trump back in 2015. And 16. You know, he This is all the stuff that he was talking about. And you know, he’s getting it through COVID, if not his own efforts, obviously. But you know, I think there’s some sense to that, I mean, countries should make their own PPV and some of their own things and their own vaccines. And, you know, some of that should be done onshore, you know, this is just my personal opinion, we can’t be dependent, you know, every country can’t be totally dependent for emergencies, style needs on other trading partners that need them themselves, right. And

Charles Goodhart / Manoj Pradhan 27:04
you have to be aware of the implications of that. Because in the past, with globalization, any employer could turn around and the workers and say, if you insist on having a higher wage, so be it. But we will move the production offshore, and you will no longer have a job. That is no longer going to be the case I’m the effect of globalization and the massive upward supply shock in the labor force. And the shift of labor out of manufacturing where they were relatively well, concentrated and unionized, to the service economy to the gig gig economy, has absolutely trashed the bargaining power of labor. Oh, I know. And the bargaining power of labor is going to come back.

Charles Goodhart / Manoj Pradhan 27:51
I think, if you just to put Charles’s point in a slightly different way connecting to the initial comment you had is is where do we where do we stop that story? If it is for national and public interest that you produce PP at home, and disregard profit considerations? I would have no objection to that. But then you could take that story on to a few other industries where you could make similar arguments could be endless. Yeah. And that’s

Jason Hartman 28:16
why I’m just saying to, you know, it just seems logical that some of this gear, you can’t be just completely dependent. But the look at that’s neither here nor there. That’s just my opinion. Okay, I could be wrong. But we don’t want. You’ve got a diagram in the book, where you talk about stagflation. And I’ve predicted that that is the era in which we are moving into, I don’t know if it’ll be the 70s style stagflation, but I think we are going to see a higher inflation. And I think we are going to see a real shift in employment and so forth, the you you’ve alluded to it in kind of different ways. And I’m just wondering, do you think that’s what we’re coming into stagflation? And for the inflation component of that, you say inflation is coming? And I agree with you, by the way? How much like, Can you put a number on that? And are you talking about us when you say that, or global or both?

Charles Goodhart / Manoj Pradhan 29:11
I think we’re lucky if we can hold inflation rate of about four or 5% per annum

Jason Hartman 29:17
as an official number, like a CPI number, which most people believe that’s understated, you know,

Charles Goodhart / Manoj Pradhan 29:23
but at the moment, I’m because of the shift in the consumer basket, what people buy the current CPI figures for inflation and almost meaningless and certainly underestimate the true rate of inflation at the moment. They’re not by an enormous amount.

Jason Hartman 29:41
Let me get an opinion from you on that. Do you think the true rate of inflation is is 50% higher than the CPI is a double the CPI CPI of zero? Well say the CPI is at their target rate of 2% when it is okay. percent I understand, but let’s just say it’s two with Ben, is it really three? Or is it really four, you know, is probably live around two. Okay.

Charles Goodhart / Manoj Pradhan 30:10
And that’s that that’s more in, in Europe? I’m not, I wouldn’t like to be dogmatic about what the US situation.

Jason Hartman 30:18
Okay. All right, fair enough. Fair enough. Okay, so but but stagflation is that where we’re coming into

Charles Goodhart / Manoj Pradhan 30:24
the patient? Yes, the question of stag, I’m we’re in some ways, we’re quite optimistic in that we do think that productivity per worker is going to improve, because in order to retain remain remain competitive manufacturers who are able to maintain an enormous profit margin, by shifting everything to low wage countries abroad, will now have to invest in order to make their workers where unit wage costs are likely to rise more productive in order to cut cut down on labor costs. So we think that productivity per worker will rise as he did in Japan, we think that investment will corporate investment will go back up, and then productivity will recover, but will do very well, if we do as well as Japan. And you talked about three last decades. We think that given the demographic difficulties that Japan faced, during the last two decades, they’ve actually done very well. And we will all and that includes US and the UK, be doing very well, if we can increase our productivity per worker to the level that Japan has managed to do.

Jason Hartman 31:38
Yeah, look, Japan is impressive, intellectually and technologically. And in terms of ambition, I mean, their workers are extremely ambitious, they work very hard, very many hours in Japan. So so fair enough, I was sort of including the demographic problem into the mix. And China, by the way, has a demographic problem coming up in a decade or so as well. So you know, the one child policy is about to really rear its head. Go ahead, manouche. But I really want to make sure that I know we’ve been going long, I want to make sure because I’d be totally remiss if I did not ask you a little bit more about good hearts law. So I do want to get to that before you go. But I knew you were gonna say something.

Charles Goodhart / Manoj Pradhan 32:19
Yeah, I was gonna say I mean, if you think about it from an econ 101 point of view, right. I mean, it’s been a very long time since since I taught that class. But if you think about it, from that point of view, it’s interesting to contrast it against something like the 70s stagflation right there, what you would get is a negative supply shock, that would create a negative output gap. So you’d have unemployment at high levels, and you would get the inflationary impact. What we are arguing is different over here is that what you’re getting with a declining labor force is that potential growth itself is going to come down. And real factors in our case, as we have argued, are the ones that are going to lead a nominal variable, like inflation higher. So if you mean by stagflation, that you’re going to get lower growth than we’ve had in the past. That is absolutely right, because inflation will be higher, and growth will be lower. But it’s not the kind that you get massive amounts of unemployment, you get real relocation of labor from one sector to the other. But overall, we think with productivity and employment, it will actually benefit workers not only from a social but from an economic point of view.

Jason Hartman 33:24
Good. So the news is not all bad then right? It’s good in some ways, for sure. Right? Right. Okay. Okay, you want to wrap it up with good hearts law.

Charles Goodhart / Manoj Pradhan 33:34
When the government when the government or anybody in a position of power, makes a relationship into a target, then the previous relationship will tend to break down. Let me give you an example, not an economics. But shall we say from education, let’s say that there is a pretty good relationship between somebody is score in mathematics, and overall ability to deal with success in later life. So the government then targets a mathematical exam in order to try and raise standards. So you know, schools get graded on the result for this particular maths exam. The result of that is that every school then effectively focuses on getting their students to pass that particular maths exam, without necessarily having a grounding in a whole series of other kinds of important educational training, or necessarily knowing much about maths outside this specific areas in which are going to be tested in the exam. As a result, what you would find is the prior relationship between In mathematics ability, as tested by this exam, and subsequent success in life would collapse. Making something into a target changes the way everybody behaves. It changes the way the people who are subject to the target behave, and even changes the way that the authorities themselves behave. Again, to take an example, governments don’t like it, if the targets they have set are not met. So very frequently, they will actually change the way that things are scored, in order to ensure that a sufficient proportion of the population on doing this actually gives the targeted tow

Jason Hartman 35:46
now faster estimating that that’s, that’s really excellent. You know, it almost makes me call the mind to I’m sure you’ll say unrelated things, because I think they are unrelated. But, you know, they’re kind of in that. I want to say like the double slit experiment, and hawthornes law, or the Hawthorne experiment, I guess I should say, I don’t know if that became like a law, if you will. But you know, that you whenever you you make something a thing, then the focus changes and it skews it, it it abuses it, right, that indicator, right. Yeah. That’s very interesting. Very interesting.

Charles Goodhart / Manoj Pradhan 36:19
You remember the Westinghouse experiment?

Charles Goodhart / Manoj Pradhan 36:22
No, no, no, that

Charles Goodhart / Manoj Pradhan 36:22
one told me it’s a lovely Westinghouse experiment was it was a factory, and they tried to see what made the workers more productive.

Jason Hartman 36:30
And they changed. That was the lighting, right?

Charles Goodhart / Manoj Pradhan 36:34
Yeah, are they and then they change the period of the tea break, and they change the period of the of the break to go to the john and examines for every time they change something, productivity went up. And then they thought, well, I wonder what’s happening. And they started changing it the other way, productivity still went up. What was that? What made productivity go up? Was that accurate? People felt that others were interested in right. And because they were interested in them, they they worked actually harder. And and because they will being observed that change their behavior to the very fact of of undertaking changes and changing markets, changes behavior, and therefore changes the relationship.

Jason Hartman 37:20
Absolutely. Absolutely. Very good stuff. Do you have a website you want to give out or I mean, the book is available, of course, in all the usual places, and it looks great. By the way, you’ve got so many charts and graphs in here. I just I love that. Did you have a website you’d like to share anything?

Charles Goodhart / Manoj Pradhan 37:36
We don’t have ever website? I think we’re happy with just a book being pushed out there. Okay, good, legislated.

Jason Hartman 37:42
And the book is called the Great demographic reversal. Aging societies waning inequality, and inflation revival. Charles Goodhart and Manoj Pratt ham. So thank you so much for joining us today. Very interesting discussion. Thank you. Pleasure. Thanks for having us.

Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out this shows 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.

The Price of Panic, The Human Advantage, Infiltrated by Jay W. Richards

In this episode, Jason Hartman interviews Jay W. Richards, Assistant Research Professor in the Busch School of Business and Fellow of the Institute for Human Ecology at The Catholic University of America. They share their thoughts on the response to Covid-19 and discuss the poor practice in handling the pandemic. They also talk about the price of panic, why it happens, and the tyranny of experts.

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 Jay W. Richards. He is a professor at the Bush School of Business and a fellow of the Institute for Human Ecology at the Catholic University of America. He’s located in the Washington DC area. He’s a senior fellow at the discovery Institute and executive editor of the stream. He is also the creator and executive producer of acclaimed pbs documentaries, the call of the entrepreneur, the birth of freedom, and the privilege planet. He’s the author of several New York Times best selling books, including three that we’re going to try and touch on today. One is the human advantage, the future of American work in the Age of smart machines. You know, we’ve talked a lot about automation over the years. And so we’ll dive into that topic a bit, and infiltrated how to stop the insiders and activists who are exploiting the financial crisis, to control our lives and our fortunes. And the new book, the price of panic, how the tyranny of experts turned a pandemic into a catastrophe. Jay, welcome. How are you? Just fine. Thanks so much for having me, Jason. Good. It’s good to have you. And you’ve got quite a resume. So we’re looking forward to learning some good stuff today. Let’s start maybe with your latest book, the price of panic, and you know, that one is really topical, given what’s going on, you know, whether it be the election, the pandemic, the riots, and, you know, the affiliated financial crises. What’s the general thesis of that book?

Jay W. Richards 2:01
The general thesis of the book is that the pandemic of course, and the Coronavirus is a real thing, but that it was made vastly worse, by the way in which we responded to it. And so what happened is, effectively we had a Coronavirus that, for people that are under age 60 is about as dangerous as the flu. If you’re, if you’re just under 20, it’s actually about four times less dangerous than the flu. And it’s more dangerous if you’re over 70. So once it’s not a historic virus or historic pandemic, it’s something like the Hong Kong flu of 1968. And yet, it’s the first time in human history that the entire world shut itself down. I mean, just literally population wide lockdowns which have never been tried before. And that’s why we talked about the price to panic because we think this is a weird convergence of factors in which you have first this idea of population wide lockdown sort of resting as a hypothesis waiting to be tested in the public health sort of bureaucracies around the world. You have now that kind of real time access to social media and media, which tends to panic us, unfortunately, and as and then the speculative computer models that made predictions about a deadly virus is supposed to be that turned out not to be true. So you had this model of the Imperial College London at the end of March, which claimed the virus is going to have about a 3.4% infection fatality rate. That’s where we got these numbers, about 50 million dead in 2.2 million Americans dead. Well, we knew almost immediately that that was off by orders of magnitude just completely off. Unfortunately, that was what inspired the World Health Organization, the CDC, to order the lockdowns was this prediction. And this actually connects strangely enough to what we’re, you know, the debate over the current election, that public opinion polls in the voter polls, all of which claimed that it was going to be a Biden sweep, you know, different polls that had an 810 11 points ahead. They’re all based on these speculative computer models, these statistical models.

Jason Hartman 3:59
By the way, at the time of this recording, it’s the day after the election. So

Jay W. Richards 4:04
we don’t even know the outcome. The one thing we do know is that the polls are way off. That’s the one thing no matter how quite turns out, we know the polls are going to be way off. And the reason is because people imagine a poll is just literally you’ve gotten a representative sample of people, it’s relevantly representative. And so it tells you what people are going to do. In fact, there are very complex statistical models that are only as good as the assumptions that are plugged into them. And when you’re modeling data are only as good as the people answering the polling the pollsters and

Jason Hartman 4:34
I knew in 2016 a lot of people just wouldn’t admit their Trump’s rights because they just know it vilify. They don’t want to be called a racist. These are things used to suppress free speech, those tactics that the left uses, it’s absolutely appalling. But that’s why it is where we are, right?

Jay W. Richards 4:54
No, that’s right. And so any good poll, any model would have taken tried to take account of this okay. gi Trump vote. But we knew the posters for the most part just simply ignored that. And so we’ll have another one of these reckonings where everybody says, Okay, we got to do better next time. But I think what we need to do is step back and just apply a little more skepticism about the ability of these complex statistical models embedded with assumptions to really capture reality, I think they tend to be tools for, frankly, controlling the population, whether you’re talking about the pandemic or the election, rather than tools to accurately model reality. And that’s, that’s the problem, because we think, look, the lock downs happen more or less because of this belief that these models represented reality. And so it’s as if we were cut off our heads to get rid of a headache, that would have been a much more focused strategy that would have been much better with fewer consequences if we’d focused on the population that was most at risk, and not locked down schoolchildren and everyone else. But unfortunately, you

Jason Hartman 5:55
know, you could argue that it’s actually really hurt that at risk population, because we’ve squandered resources into the general population that didn’t need those resources. And of course, no one has tabulated, you know, I like to talk about you can’t hear the dogs that don’t bark. No one has really tabulated although a few have mentioned it in passing. Hmm, you know, the suicides, the depression, the Oh, yeah, you know, the lack of people going to the doctor for a regular checkup, that led a cancer grow or another disease grow or heart disease grow and, and, you know, those people have suffered or died. You know, there’s, there’s no data on that, right.

Jay W. Richards 6:33
Well, there’s actually, so we did the best that we could in the book, we tried to basically calculate What’s the price of the panic financially and in terms of lives loss, we think at the moment, something like 75,000 that we 75,000 excess deaths of despair in the United States in 2020. So that suicide and drug and alcohol overdose 75,000 we think that you know, that’s the kind of general ballpark probably about 80,000 Miss cancer screenings just in that first three months of the lockdowns camp and so that gives you a sense of the kind of magnitude that very quickly the just the response, the lockdowns themselves could end up killing more people than are attributed to the Coronavirus that’s the very definition of a bad well and and also the attribution to Coronavirus is fake largely so yeah, it’s very complex but different string dyeing with the Coronavirus and from it, unfortunately get conflated cases get conflated with mirror positive tests infections, it really is a mess. And so, we wanted to look, we knew we couldn’t stop it. You can’t change the past but we really wanted to try to prevent a lockdown again in 2021, which

Jason Hartman 7:39
is what we’re now talking about, unfortunately. And yeah, and if we see Biden takeover, we’re probably gonna have a lot more lockdowns, you know, let’s talk about coordination and conspiracy for a moment. Obviously, I think we’re all realizing the powers that be have a lot of advantages that have come out of this crisis, like Winston Churchill said, Don’t let a good crisis go to waste. But yeah, exactly. So talk about two sides of the political spectrum right there. But you know, how could they have ever coordinated such a thing? I mean, was it just such a happy opportunity for them? And I say happy in a snarky way. But sure, did did this come around and and like, someone made a call to the who and said, Hey, you got to make this a panic. And and then they, you know, reached out to all these media outlets or started putting out press releases and, you know, started working with the CDC and Fauci to freak everyone out, or what, how would that have happened?

Jay W. Richards 8:46
Yeah, well, and so that was the thing you know, we wanted to try to account for is why exactly did the panic happen? What what would best explain it? We don’t think it requires any kind of centralized coordination. But it did require a kind of groupthink among a very small number of people in the public health sort of bureaucracy. The World Health Organization is the UN’s arm for public health. And you got the CDC and you’ve got Dr. Anthony falchi. Here in the US, they all think exactly alike. And then we learned in mid spring that the World Health Organization was frankly carrying water for Beijing for the People’s Republic of China and the authorities there. And then there was this idea of a lockdown as that was a hypothesis there. The way that we responded from time immemorial for with pandemics is quarantines in which you’ve locked down and protected you know, quarantine the people that are sick and try to isolate the people that are high risk. This idea of a general lockdown though, in the 2000s. It became this new idea that maybe this would work these population lock downs, though even the World Health Organization in 2019 said there’s no good evidence that they would actually they would actually work they thought it probably wouldn’t prevent the spread and it would cause these all this harm. But in March in the middle of the panic, which I really think was a combination of the media’s incentives, which is always to panic us, because that’s more interesting. And people want to click through and you see a scary story. And then the capacity of social media to really magnify and amplify the the panicking effects of the media itself. And so this is, in some ways the first panic since we’ve had this real time access to social media. And so once the pandemic, once a sort of new virus happened, all these pieces were sort of in place to trigger a planetary lockdown, which is what we actually had. But it really I think, more than anything, it’s just, it’s a matter of groupthink, and then what we call the tyranny of experts in which you have a few highly specialized technicians, right scientists with legitimate expertise in a very narrow field, but they have an unbalanced access to the ears of prime ministers and presidents. And that’s what we think we have to fix in the future. presidents and prime ministers and governors need to be able to get a kind of representative sample of the diversity of opinion among scientists when it comes to these things. So they don’t just think the one guy Dr. Anthony falchi, somehow speaks for science, which is unfortunately what we had happened in this case.

Jason Hartman 11:06
So the tyranny of experts, is that your phrase or has that been used before

Jay W. Richards 11:11
it has been used, it’s not widely used, but the phrase is, it was sort of in circulation. And the basic idea is not the problem is an expertise. Of course, it’s a complex word world, you need people to be experts in specialties. The danger is when somebody who’s a specialized expert in a narrow field ends up with jurisdiction over areas over which he or she has no competence. So Dr. Anthony falchi. Okay, he’s an immunologist. So you know, that’s his expertise. He has absolutely no expertise in analyzing the costs and benefits of a public policy in which you lock the population down. That’s a different expertise. That’s something that you’d want an economist or somebody to analyze. Fauci didn’t understand that and in fact, when he was asked, look, maybe you we don’t want the cure to be worse than disease. So I understand lockdowns will be an inconvenience. Well, this is this is a sign of a very naive person that doesn’t understand that no, when you radically disrupt the economy, you kill people, it actually human lives are at stake. And so it was always the lines on either side. And that’s the danger is he or Dr. tedros, the director general of the World Health Organization, these guys are not experts in the effects of the policies that they advise. And they just outside that their expertise. They don’t know anything more than anybody else did. And that’s what we call the tyrian of experts, when a few specialists end up making decisions over large numbers of people over which they really have no business. They don’t that’s not what these kinds of experts are for unfortunately, in this case, rather than being one of 25 experts that would advise a president or prime minister, the media elevated them so that they became it’s like they had the status of these infallible Oracle’s so that Dr. Anthony Fauci said something. Well, that was just the sort of thing that nobody could challenge. That’s that’s what changed. I think the middle of the crisis is what would otherwise be kind of obscure experts, suddenly, or these media figures that nobody can challenge. that’s a that’s a really dangerous thing to have happen.

Jason Hartman 13:04
Yeah, it really is. It really is. But it’s just, yeah. Wow. It’s amazing how this thing played out. It really is amazing. And, you know, you look at a 74 year old man, who is obviously busy and stressed out who got it, right. He was infected with COVID. And obviously, he had good medical care. But he recovered so quickly. It was truly amazing. His name is President Donald Trump.

Jay W. Richards 13:33
And I knew he was honestly he’s robust. Anybody that watches him for 15 minutes knows this.

Jason Hartman 13:38
Wait, he’s stressed his any 704?

Jay W. Richards 13:42
I know. Exactly. So those, those criteria thick, okay, he’s really high risk. On the other hand, he’s clearly kind of a force of nature with a lot of energy. Now, there’s no way to know whether the treatment made a difference, or if he would have recovered. Without it, we can’t know. But I honestly I knew at the beginning, I thought, Oh, boy. Okay. He’s gonna be fine. And sure enough, he is.

Jason Hartman 14:03
Yeah, yeah. No, that’s really it’s really something. So where do we go from here on the price of panic? And then let’s switch gears for a moment.

Jay W. Richards 14:11
Yeah, I think where we go from here is, first of all, we need to learn the lessons, we need to learn that we do not want to put our faith in these speculative models that have not been tested against reality models that have gotten tested so that we know the assumptions fit the evidence, that’s fine. But in this case, the assumptions that were plugged into this original model at the Imperial College London wasn’t really based on anything. And so it should never have been used as a tool for guiding public policy. That’s the first thing and then the second thing is that we need to downgrade the authority of experts like Dr. Fauci so that they’re, frankly, the Presidents aren’t being told by one person or effectively as President Trump said in April, two very smart people came into my office and told me 2.2 million people will be dead unless we lock down the country. That’s not how it should be. They got that number straight. From that computer model, and then two people tell the president something and he has to act upon it that we need to set things up. So there’s a kind of loyal opposition, a body of scientists who are independent of the administrative state who can advise political leaders without the kind of incentives of people that are that are government bureaucrats unfortunate And sure, unfortunately, and so am I good honestly, persuading the population that this was a mistake, and we don’t want to do a lockdown again, that’s what I’ve been spending my last few weeks doing, just trying to persuade as many people as I can that, look, we do not want to do this again,

Jason Hartman 15:32
you know, there seems to be and I’m going to call it a disease because I think it is a disease, a sort of a psychological disease that I’ve noticed on the left side of the political aisle. And that is this concept of you need an academician for everything, you need a cell, you need a. It’s like I was having this debate with a friend of mine on Facebook, I indulge in these once in a while today. And, you know, she’s telling me that all of these riots are full of, you know, Trump supporters and white supremacists and all this stuff. And she starts posting all these articles about it. And, yeah, I’m sure there were like three of them, it goes, Okay, around the country three. And then I simply, you know, I simply search it and find a bunch of pictures. And I’ve already seen these pictures and these videos on doors, every largely left leaning media outlet, it’s no, and I said, you don’t need an article, you just need to use your eyes and your ears, but they were hoarders have stuck microphones in front of these people. And they’ve spoken in chairs, or in Seattle. And in all these places, there. Yeah, I mean, are you going to sit here and tell me that these look like or talk like, these are republicans? You’re gonna believe your lot, believe me or your lying eyes effectively? Yeah, I mean, let’s, you know, she’s got a couple of articles. So you know, it’s like, Why do people rely on some bias, study and article, a report, a treatise, to talk them out of what is right in front of them? And just common sense. It’s a swell phenomena? I

Jay W. Richards 17:14
know. It’s common sense. Unfortunately, it’s not as common as it should be. Because, you know, we got this in the lead up to the election. I mean, okay, you’ve got these massive rallies that President Trump is doing. Joe Biden is has a heart, you know, has a hard time drawing, drawing crickets. And yet, we’re told that he’s going to, you know, he’s going to be trumped by 12 points, based upon these speculative models, and we treated that as data, right. But what we’re actually seeing is if it wasn’t data, and that’s honestly I think we need to we need more faith in discernment and and common sense. But there is this kind of tendency to assume Well, yeah, again, it’s a form of the tyranny of experts in which I have a study that tells me how this is going to go. And so it has this sort of pretense of knowledge and academic without its content. Oh, yeah, exactly. Yeah, exactly.

Jason Hartman 18:03
It’s just absolutely crazy. Okay. Let’s switch gears for a moment. And we’ll we’ll start wrapping it up here. But I just want to briefly touch on the idea of infiltrated you know, how the insiders and the activists exploit financial crises, to gain control. It’s related to this. Yeah,

Jay W. Richards 18:20
absolutely. I mean, infiltrated this sort of narrative history of what happened behind the scenes with the financial crisis, because everybody within

Jason Hartman 18:28
the 2008 financial exactly

Jay W. Richards 18:30
the 2008 financial crisis for anybody those that remember it, within two weeks, the media tells us Oh, it was the result of deregulation and capitalism run amok and the free market and all these things. But if you actually look at it in detail, you realize No, what happened is a series of maybe well meaning government policies, which over that, really decades, destroyed the underwriting standards on loan so that at the time of the crisis, 50% of the mortgages in the mortgage market were subprime or otherwise risky loans. These are loans that could never have been given, you know, 30 or 40 years prior to that they’ve been simply been, in concert, contrary to the law, but there had been actually a political push to give out these these risky loans. And then, of course, Fannie Mae and Freddie Mac, were buying up these loans from private bankers. And so I realized, look, this is actually the result of a series of bad policy decisions. What if not the free market itself in a free market, a banker does not give out a loan unless he thinks you’re going to be able to repay it. So why were banks giving out loans in danger of default, it’s because of the system was able to sell the loan upstream, right to someone else. And so, because of that story, though, that it was really the result of the free market, we ended up with even more onerous regulations. So we ended up with a Consumer Financial Protection Bureau, right, which gets down even more into the weeds. Yeah. And Dodd Frank Exactly. So these really bad kind of, you know, we get a series of regulations, maybe well, meaning that leads to a crisis. And then the crisis becomes a justification for even more government power, right? So this is the kind of what I call the the the danger of crony capitalism as opposed to plain socialism, it looks like it’s free market actors that are doing things. And it’s the kind of governments the government behind the scenes, whereas in socialism, it’s, you know, the government directly owns the factories, cronyism, it’s subtler, because, look, the government’s back, they’re controlling a lot of what you’re seeing. But if something goes wrong, they can break blame private industry rather than the policy. And I think that’s

Jason Hartman 20:29
what government control, but they get to displace the blame. And I see this with the social media companies that are government backed either financially at their startup stage, or they’re back now by allowing them to lobby and gain favoritism, or as they return the favor for the government, they squelch free speech, which the government is not allowed to do, but a private company. So no, and they can and the problem with the social media giants, is they also social media companies as proxies for government speech oppression.

Jay W. Richards 21:02
Yeah. And what’s weird is, of course, they have this benefit that so called section 230 of the communications decency act in which the platforms are treated like neutral platforms, so they can’t be sued like a publisher, but then they get to exercise editorial discretion, just like a publisher. And so I think that’s the way to solve that regulatorily is that they need to decide, okay, you’re going to be a neutral platform, or you’re going to be a publisher right now,

Jason Hartman 21:26
even if they never published one piece of their own content. They are media outlets, just like CNN and the New York Times and all the rest, and should have liability because they can decide what gets seen and what doesn’t. And that is right before realizing in and of itself. Absolutely. Absolutely. And now my prediction is what’s going to come next is we’re seeing a rush toward digital dollar, digital, you won, you know, and governments are rushing to their own cryptocurrency, which is going to give them incredible control over our lives. And we should do a whole nother show on that. Let’s have you observed talk about that. And automation and the future of automation, because I think those are two really important topics. Jay, give out your website.

Jay W. Richards 22:10
Absolutely. So you can check me out. Actually, it’s stream.org, where I write frequently, and also my Twitter is that Dr. Jay Richards if you’re not censored, if I’m not censored, and sometimes, I’ll tell you.

Jason Hartman 22:23
Yeah, well, jack Dorsey is happy to censor anybody he doesn’t agree with. So I think that, Jay, thanks so much for fighting the good fight and joining us today. Appreciate it. My pleasure. Great to be with you.

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 unsubscribe so you do not miss any episodes. We look forward to seeing you on the next episode.

Modern Wealth Building Formula by Ken Van Liew

In the first part of the show, Jason Hartman shares his thoughts on migration trends, supply/demand shock, and the landlords’ pricing power. He discusses the approach of millennials on buying and renting, which gives more opportunities for investors. Then, he talks to Ken Van Liew about modern wealth building. They discuss the shift of Americans away from high-density cities and the possibility of converting a commercial property to residential.

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

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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
Thank you listeners from 189 countries worldwide. Joining us today. And as the crazy real estate market continues, as we experience uncertainty and so many things. One thing is certain the home is the center of the universe. For people worldwide, The home has become more important than ever, possibly more important than ever in human history. I mean, really think about that for a moment. The home is where it’s at. It’s all about the home nowadays, isn’t it? And guess what market is leading the nation in terms of the largest net in migration for the last two years. That is my new while not new anymore. I guess. my home state new as of about two and a half years ago, almost three years ago. Wow. I’ve been living here a while. And that is Florida. It is number one in the country for biggest in migration for the past two years. That’s about 610 people every single day move to Florida, okay, 610 people per day. And that number in total is about 223,000 people, but 610 people per day moving to the state. So like I’ve been saying for the last couple of years, Florida is the new Texas and Texas was very good. And we put a lot of investors in Texas, we help them buy through our platform and experience great returns. I know I did, because I was one of those investors and still have several Texas properties. And they’re great.

So also, I want to I don’t want to forget this. But ask your investment counselor about our new upcoming webinar. That’s not the one we’re running this week that is on Alabama, but we got a new webinar on a new team and a new market. It’s actually everything old is new again, as they say, right. It’s not a totally new market, because we have been in this market a few times throughout the years and my 1617 years of doing this now. And that is Charlotte, North Carolina, beautiful city. I love Charlotte, I’m a big fan. If North Carolina had no state income tax, I would have seriously considered moving there. But it does have state income tax. So I really like it where there’s no income tax. So I pick Florida. So anyway, we will have a webinar coming up on Charlotte for you, I believe next week, we will get that out to you. So talk to your investment counselor about that. This week, though, we’ve got Alabama and updated Alabama webinar for you. And that is playing. We’re doing that one tonight. I don’t know if you’ll hear this soon enough. So we’re also doing it on Sunday. So go to Jason hartman.com. Slash sweet home, like Sweet Home Alabama, Jason hartman.com slash sweet home. And you can check that out. And I think that’ll be great. So property prices up 6.7%, making their fastest yearly growth rate since 2014. That’s according to core logic on a month to month basis values Rose 1.1% for the month. And that was just from September versus August, we saw 1.1% increase in housing prices. This is just reflecting a drastic shortage.

And remember back in February, I taught you about probably what was a new concept. And that was the concept. It’s not a new concept. But it might have been new to you. I hadn’t talked about it on the show before I don’t think and that is the idea of supply, demand shock, supply demand shock. And that is exactly what we’re experiencing now in the price of these commodities that make up the ingredients of a home. Certainly lumber we’ve talked about that a lot on the show the lumber price increases. But all of those commodities that are the ingredients for house, pretty much all of them have experienced a fairly dramatic rise in prices due to this supply demand shock that I predicted back in February and in COVID Yours, February was like a lifetime ago, wasn’t it? Okay, the big institutional builders. I’ve touched on this one before. But you know, again, a lot of lot of faith we’re seeing in companies like trikon, residential invitation homes, American homes for rent, they are all outperforming the s&p in terms of their share prices, because investors believe that they are doing the right thing by trying to gobble up more suburban home inventory. And they have one of the most important things you can ever have, as a business, or as a landlord and a landlording as a business, right. And here it is, you ready. This is one of the most important things you can ever have as a business or landlord, you’re ready for it. It is pricing, power, pricing power. That’s what you want. And that’s what landlords have right now. And these institutional landlords are increasing their rents, they are seeing pricing power, they are experiencing the ability to increase rents, because the demand is so high. And the market just says, look, provide us with more rental housing, will pay higher prices. And that’s what people are doing.

So a very, very significant move. Now, the expansion of rental housing has been very dramatic. So I’m looking at a chart right now. And maybe I’ll share this with you on one of our live events or zoom calls or something. So you can see the visual, but I’ll just explain it to you. And this might end up on the YouTube channel, I don’t know. But back in the prior peak of the market, that was the impetus toward the Great Recession. Okay, back in, you know, 2006 era, there were about 10 point 5 million single family homes as rental properties in the United States. Okay. And now, you’ve got over 16 million. And here’s what’s interesting, you know, when you look at these charts, these economics charts, most of them when they go over time, they will take the span of the recession’s and they will mark them in a light gray. So you see where those recessions are. Now, it has been a steady upward trajectory in the number of rental housing units for single family homes in the US. All through these times. It was a tiny Blip. And this chart shows quarter by quarter, because remember, that’s how recessions are measured. Okay. recession, the technical definition, two quarters of declining two consecutive quarters of declining GDP gross domestic product, and there was one quarter, just one little quarter where it was even where the number of single family home rentals stayed even it did not increase. But overall looking at this chart, a steady upward trajectory. What does that mean to you?

Well, it means a few things. Number one, it means that more and more people are attracted to the asset class, the most historically proven asset class in human history is income property. been saying that for a decade and a half easily, if not longer. But it also shows you that there’s more acceptance of this by the marketplace. Now, you might think, well, Jason, come on, that’s not very significant. I think it is. Because there are more people that want to rent single family homes than ever before. Usually it was considered Okay, you move out of your parents house when you’re a young person. And you know, nowadays that usually means like 35 or 40 years old, you move out. If you’re a slacker failure to launch, you know, just like the movie, you move out, and then you move into what an apartment and maybe have a roommate, and then maybe get rid of the roommate, you’re making a little more money. So you have your own apartment, or you move into a single family home, but you move in with roommates.

Well, now we’re seeing more and more people that do not move out of that apartment to buy a house. They move out of the apartment to rent a house. This is a true cultural shift and a shift in the dynamics of the economy. It has never really been true before, until you know recent years. So it’s a significant trend. Mom and Pop owners and individual investors own most of the country’s 16 million rental homes. They are also raising rents according to The Wall Street Journal, but not as aggressively as America’s mega landlords who use computer programs to match rents with demand and have their own investors to please because, you know, they they’re public many times and they have shareholders to please. And if not in their private, they still have shareholders, September single family rents climbed an average of 3.8% from a year earlier across 63 markets, regardless of the owner. And that’s according to john burns, consulting, john Burns has been on the show many times so of many of his people. But listen to this, folks, you ready for this one? The end of this little Wall Street Journal article says, get this, it says of the 63 markets, right? The average rent increase was 3.8% year over year. But out of the 63 markets, none of the markets declined in price. So every market saw an increase in rents every single market. Okay, now, isn’t that a lot different than the story you hear from the doom and gloom Murs from the folks that were telling you the end of the world was coming, and the complete opposite happened. Be careful who you follow. Be careful who you listen to, it’s always best to do what eine Rand would do. Use your own mind in your own reasoning. And by the way, here’s the tangent alert for you.

If you haven’t done so, already, you must read the book 1984 by George Orwell. And you must also read Fahrenheit 451 by Ray Bradbury, and a movie recommendation. Now, this comes with a parental warning. Because I have interpreted this movie, which I did see in in artsy theater A long time ago. But I’m I watched again starting last night. And this movie has adult content. So you know, put your hands over your kids yours if you’re in the car. I’m not gonna say anything that bad. But this movie is interesting because it’s about two things. And it’s an alliteration. Ready, here it is. Sex and socialism. Yep. What do you think about that? Sex and socialism? Yes, the two s words. Right? One good, the other bad. There you go. And, and the movie is Unbearable Lightness of Being, you may have seen this movie. And it’s online. I think, on amazon prime. Maybe I’m watching it, I can’t remember. But anyway, it’s it’s really about romance and love. And you know, of course, sex and socialism, because it takes place in the 16th set in the 60s. And they are in the Czech while not I was going to say the Czech Republic. But back then it was Czechoslovakia. Right. And it shows the prelude to the Russian invasion. And then you know, it shows the Russians kind of hanging around doing their thing, kind of infiltrating in advance of the invasion. And then the tanks roll through the streets and they take over. And it is fascinating. Now you might also like the sex part. But the socialism part is really fascinating too, because it shows you these communist thugs, right.

And socialism and communism are just, you know, a matter of degree separating the two, they’re the same thing at the end of the day. So there you go. Bernie Sanders, you might call yourself a socialist, but you’re really a communist, it’s pretty much the same thing. As I’ve always said, communism is nothing more than socialism. big ugly brother. So watch that movie. It’s really quite good. It’s a bit of an artsy fartsy movie, but it’s actually quite excellent. I’m not finished with it yet. I you know, when you rent it, you got to finish it in 48 hours. So tonight, got to finish that one because it’ll expire. And then I’ll have to pay $2.99 again, or something, right. But that’s, that’s it. It’s quite a good movie. And it really just shows you how that happens, and how people are thinking about it before it happens. And how people in the socialist communist type of environment, start ratting each other out and betraying their friends. And what’s really interesting about it is what you see today, it’s so parallel to what we see today with these big disgusting tech companies like alphabet, Google, you know, whatever Same deal. Facebook, Twitter, Twitter, the biggest offender of them. All right, jack Dorsey, aka, you know, Charles Manson look alike. If you didn’t see jack Dorsey lately, look it up. I don’t want to say google it because you know, hey, Bing it. Okay, well, Microsoft is a big ugly tech company too. But I guess not as bad because they don’t play in the same space as the others. But they’re totally censoring us, right? Remember something folks? You can’t hear the dogs that don’t bark? What does that mean in the current environment?

Take, for example, the election and voter fraud, right? Everybody is saying, well, not everybody. But the less informed people are saying, well, there’s no evidence of voter fraud. Well, there’s no evidence because you don’t see the evidence, because you’re getting your news from the sources that are censoring it. So it never gets to you. So you can’t hear the dogs that don’t bark. Woof, woof. If the dog doesn’t bark, it doesn’t mean something didn’t happen. It just means that you never knew about it. Okay? So you got to really take a deeper dive, you’ve got to look at alternative media, you’ve got to check out some other stuff. And I’m not saying it’ll make a difference and sway the election. I don’t know, I would just like to have an honest election. That’s my only point. Of course, I would, I would like the smaller government can bait to win over the socialist, and you know, that pseudo communist, right, but forget about what I want. Okay, I just want a fair process. That’s what’s important is to have our institution with stand the test of time is that we’ve got to have a process that people believe in, and have confidence in and are willing to accept the results of, because if we don’t have that, the whole thing is at risk of crumbling, could be fast, could be slow, but it’s still at risk. So the book recommendations 1984 by George Orwell that was written in I believe, 1949, and a very prescient in advance. And then Fahrenheit 451 isn’t funny that both of these book titles have numbers in them. That’s the temperature at which books burn in Fahrenheit 451 and social media companies, Google, they’re doing the same thing, nowadays with their censorship. And then of course, enjoy some sex and socialism with Unbearable Lightness of Being good movie, got to finish it.

Okay, so that’s it. Let’s get to our guest, we have a guest, we’re going to talk about migration trends, New York City, and this guy, Ken van Lew is an interesting guy, because he has done some big, big projects. So back when half the country didn’t hate Donald Trump, and they didn’t have trumped arrangement syndrome. Remember, Trump was a guy people looked up to, I read his book, The Art of the Deal when I was 24 years old. And it really influenced my thinking. It made me think big. I mean, doing deals with skyscrapers and building these giant, you know, properties and these multimillion dollar deals, right. And so, this guest that we have today, Ken is one of those bigger thinkers, that’s done some big Real Estate projects. So I think you’ll enjoy this interview, if you need us reach out Jason hartman.com. Of course, the webinar, Jason hartman.com. Slash Sweet Home Alabama, just sweet home, but you know, it’ll remind you Sweet Home Alabama, like the movie like that song. It’s great song, by the way that’s available to you. And of course, one 800 Hartman, if you’re in the United States, you can call us right up on the good old telephone. All right, here we go with our guests. It’s my pleasure to welcome Ken van Lew to the show. He is the author of the modern wealth building formula. And this book is about thinking big. It’s a, I’m gonna call a mud, you know, and this used to be a positive thing now with half of you it’s positive and half of you it’s negative. I’m gonna call him Donald Trump Jr. Because Because he’s all about developing, you know, high rise properties, big projects, thinking big, New York City crazy stuff like this. So Ken, welcome. How you doing? Awesome. Jason,

Ken Van Liew 19:32
thank you so much. Yeah, I we’ve done some work for Donald, you know, but I’m just like everybody else putting on one leg, you know, pants one leg at a time, you know?

Jason Hartman 19:42
Yeah, exactly. Good stuff. Well explained to us at the core, if you would can what is the modern wealth building formula and how does that differ from the old fashioned wealth building formula?

Ken Van Liew 19:57
Yeah, sure, sure. You know, it’s literally combination of, you know, extensive real estate experience, little bit of hard school of hard knocks on the NBA side, you know, after a few master’s degrees and a lot of personal development with guys like Tony Robbins and jack Canfield and all that kind of good stuff, but you know, starting out with $10 a week, and, you know, after a six pack and washing my clothes, you know, was, was always a challenge for me, you know, thank God, I had the meal plan, but, you know, after a, you know, a six year plan, you know, I, I went out on a journey, and I created a formula that, that created, you know, modern wealth for me early on an age before I you know, was financially free, you know, and had the wherewithal to kind of move it forward. And, and what I really found is, you know, like, you’ll hear the old cliche, it’s about mindset, but when I started, I really didn’t have any money. And I was fortunate to, you know, get a job building skyscrapers early on the waterfront. And, you know, in watching that, I always figured, well, you have to be born into the family, but around 1997, you know, I decided to take a leap. And, you know, was after winning a site design award, you know, like, you know, how would I create modern wealth. So I, you know, I always figured, you know, if Robert Allen could buy a house with no money down, I could build a skyscraper using other people’s money and other people’s experience, but through personal development, and, you know, me being able to find funding, facilitate large deals, and to put together a system where people can use it, you know, it really created a whole new modern wealth process, which included integrity based influence, mastery, process mastery, and sales mastery, which, what I consider what makes it a modern wealth building formula.

Jason Hartman 21:46
Part of that formula, I guess, if we call it the money part, or the business part, the sort of direct part would be syndicating big deals, raising money while finding deals, raising money for them, and developing them. Right?

Ken Van Liew 22:03
Correct. You know, whether it’s a business real estate, you need us, you know, you obviously need a reliable source to find things, it’s easy to find deals, the key is finding profitable deals, being able to fund them because you know, as as most overachievers, you get started to get your first deal, you get hungry, you want to do a couple more, there’s always challenges with funding. So you know, I believe in presentation, presentation, presentation leads on limited funding. And then there’s a whole facilitation process to that all, you know, there’s many cylinders firing at one shot, as you’re finding and, and, and funding deals, you need to be able to execute, especially when you’re going to develop, you know, if you’re buying, you know, large complexes buy and hold, you know, there isn’t as many moving parts of parts, of course, you have the value add component. But when you’re developing real estate during that whole finding, and funding and facilitating when you’re getting into conceptual designs, etc, you really start to build that project on paper. And this is what the modern wealth building formula allows you to do allows you to really look at the entire spectrum, know where you’re at, like in the lineup, I do some references to baseball, and it gives you a great head start in any entrepreneurial spirit, or really just helping people get to the next step.

Jason Hartman 23:15
Yeah, sure, sure. So you have a lot of, and maybe this is a little bit off topic, a little bit of a tangent for a moment, but I’d really I think our listeners would like to know your thoughts. Can you have a lot of experience with New York City, and in the times we’re living in, you know, the tide has definitely turn on? Well, first off business, unfriendly places that are very expensive, and, you know, very intrusive government, New York, California, these types of places. There’s, there’s a sea change going on. And then especially you you add, and that’s been going on for, you know, a couple of decades, right. But they’ve always been able to sort of hold because they’ve got certainly a lot of desirable qualities to write. But in times of civil unrest and pandemic that has caused additional pressure, what are your thoughts about, you know, the real estate market, the commercial real estate market there, and, you know, just the municipal finances, because as we see these migration trends, anyone who’s thinking ahead has got to worry about the tax base. In, you know, you look at California, and its tax base is just eroding. People leave in San Francisco, LA, New York City, you know, there are other places too, but those are certainly the trophy kind of locations that people talk about. So what are your thoughts?

Ken Van Liew 24:36
You know, it is a tough time, you know, and I unfortunate I’m going to the city tonight to visit my daughter, she lives on 170 Street, but you know, about six months things things got turned upside down. You know, I had, you know, some major projects going on in New York City that literally stopped they created a whole lot of essential services process and it was very eerie to be able to, you know, look down Madison And Avenue Nazi like one bus in one car? Yeah, well, and that led to, you know, me really looking at you know, how do I lead the industry through this, that’s just the construction industry struggles, let alone a little bit of what you mentioned, you know, the stuff that’s been going on with, you know, for years and the legislature and devaluing New York City real estate, which is disheartening, you know, especially when things like this occur where, you know, there’s been such an exodus like, and, and it’s a little scary, and I sit here, and, you know, I hear a lot of mutual feelings, because of the surroundings, all my friends being in the metropolitan area and a real estate are just absolutely killing it, because people are leaving New York, but that leads me to, well, how can I help New York? You know, it’s a whole new vertical innovation, you know, I mean, retail has been struggling for a while, you know, after the pandemic, you know, to see places boarded up, you know, brings tears to your eyes, the commercial environment right now, you know, I’m working with a lot of individuals to see, like, you know, what, if? And what would we have to do if, you know, we started looking at commercial, you know, conversions into residential as a cost effective, you know, what’s really gonna happen next year, because you know, more and more, you’re hearing companies that people just aren’t going to go to work. So there’s,

Jason Hartman 26:17
in when you say, commercial conversions to residential, it’s hard for me to think of what would apply to that in New York City, you mean office space to residential? Because it’s certainly not going to be ground floor retail turning into residential? No, exactly. Like the model really, in New York ground

Ken Van Liew 26:35
floors, you know, typically the retail, and then, you know, sometimes you’ll see, you know, some multi fours, a retail, which is always struggled, but essentially, you know, there’s these just towers right now of empty office space on one of my friends runs a large financial institution, he has, like, 70,000 square feet, you know, 1500 employees are working home, what does a company like that do? And then what does a landlord do? Does he does he start going, Well, maybe I should convert my commercial building into residential, you know, but but you know, you know, can

Jason Hartman 27:05
I can’t imagine that would work, because first of all, yes, there is more demand for residential than there is for office. But still, that demand is also declining from where it was before, and the expense of doing that conversion. It just doesn’t seem like it could possibly be economical.

Ken Van Liew 27:26
You’re exactly right. Because, you know, sale rates in New York City are dropping, like skyrocket where you know, what the, in discussing where you used to be able to sell things for 1800 to 2100 Square, you know, dollars a square foot, and you have an existing building that you can convert for, you know, 100, you know, the numbers may still work, but

Jason Hartman 27:46
you know, you’re right, 100%. And then the first conversion would be hotels to residential, because they already have the bathrooms in them, you know, office to residential is a much heavier conversion cost, right, but go ahead.

Ken Van Liew 27:59
No, no, I think you’re onto it. And as you know, it’s really turns into a conversation, because along the lines today, I’m like, you know, how do all these structures? Could they be used for renewable energy in any in any instance? Could it be used for, you know, other things that can create, you know, environment? Can you can you grow food in these places? I mean, you know, right now, you’re,

Jason Hartman 28:20
I mean, that’s, you got to design that from scratch, but the the, you know, the high rise, farming is a thing, and that’s really interesting, you know, for for city use, but I can’t imagine a conversion for that would work either. But, you know, yeah,

Ken Van Liew 28:35
well, you know, you’re right. And the last thing that I have had, I’ve had the time to run numbers, I mean, you know, we’re going to be in a situation where, you know, in 2008, when the city crashed, it was because, you know, the union just drove the numbers, were none of the projects penciled out, I think there’s going to be a, you know, just a massive adjustment, and I’m not sure there’s going to be any market, you know, for discounted real estate in New York, it’s, you know, it’s a depends how badly the crystal ball to be honest,

Jason Hartman 29:04
every everything has a buyer at some price, right? Yeah, but But the problem is, you have this floor set by construction cost, yes. And nobody’s selling below construction cost, or at least not much below construction costs. So the conversions just won’t occur. Because if, you know, the developers will never do it, if it doesn’t make sense, right. It’s, it’s a real tough cookie to, you know, to see how this is going to roll out and what’s what’s going to happen. I it’s just a real question mark, isn’t it?

Ken Van Liew 29:39
Yeah. And, you know, I hope, you know, that it doesn’t get more on rest, you know, it’s just a you know, it’s kind of silly, like we need to we really need to one of the micro distinctions I made yesterday, you know, was, you know, it’s no longer you know, focus in 10% on the problem and 90% of solution, we got to go like 1% of the problem and 99% on solution. Yeah.

Jason Hartman 30:02
Right, right. You know, you mentioned Madison Avenue. Do you think that, you know, the thing that it seems like it would be the decision maker on whether or not those retailers that have had their glass broken and their stores looted? You know, some of these are high end beautiful, or maybe I should be saying Fifth Avenue, actually. But, you know, whatever. I don’t know, New York that well, but Fifth Avenue is where the shopping is more, right. And, and so it seems like it won’t even be a decision of the retailer of whether or not they want to reopen, it’s going to be a decision of their insurance provider, and whether or not they can get insurance again. And I would imagine that if anybody’s going to insure in these areas, they’re just going to charge through the nose, right?

Ken Van Liew 30:43
We have the insurance is definitely thriving right now. And that’s, that’s another whole game. But yeah, I think you hit the nail on the head, because, you know, the other market that’s really getting hammered is is the whole hospitality. You know, and the biggest thing that I keep hearing is, it’s the jumpstart like, you know, just to stop some of these restaurants to get moving again, you got to got to put down 150 grand just to get the liquor stocked up, you know, so to kick these restaurants off again, on the same things happening for these retail stores, you know, and then the market, you know, with people losing their jobs isn’t isn’t pushing them to open either, you know, so, you know, the real decision makers are going to go Are these, you know, flagships cost effective, which in most cases on, you know, on Fifth Avenue, they are, you know, but there, there have been, you know, a lot of retail stores that you see are going under, you know, hand and foot. So it should be interesting, you know,

Jason Hartman 31:37
yeah, like, what, what are we going to do with malls? You know, that’s, that’s, you know, that’s see that didn’t apply to New York City. But in the more suburban shopping mall market. I mean, can I I don’t know, I’m not an expert in this. And I haven’t really had a lot of time to study it. But I just don’t see a very effective conversion for shopping malls. I see how, you know, Amazon can buy the Sears big box in the mall. Yeah, and use it as distribution. You got a lot of parking for vans, you know, you got a big box there, you can turn that into a distribution center, but the rest of the mall? I mean, what are you going to turn that into office? That doesn’t work that well. Residential? Not hasn’t worked out? Well. I mean, I just don’t know what works in there. And maybe I’m not seeing it, or I don’t I haven’t seen the the conversion plans. That would work. Certainly, you can bulldoze it and use the land. But that’s hugely expensive

Ken Van Liew 32:34
to just start from scratch. Right. Yeah. And some of the ideas that I originally had, you know, you know, you see some of the things they’ve done in China, you know, but, you know, some of those places, they’re also vacant. So whether you try to create some type of destination with the footprint that you already have, I don’t think you’d ever hit the highest and best use and it’s not like those, you know, mall sites are going to go cheap, you know, but, um, well, they

Jason Hartman 32:58
go really cheap. We’ll see.

Ken Van Liew 33:02
Yeah, I mean, that’s, you know, honestly, you know, in today’s market, you know, I’m actually happy that I’m in a couple entitlement, you know, deals right now, where, because it’s slowing you down, right? Well, it’s slowing me down, but still positioning for nice value, you know, with markets that I think in are still there, you know, but it’s very select Self Storage is doing real well. industrials, still, you know, killing it in this area. And as kind of falling outside. You know, that’s

Jason Hartman 33:31
interesting. You mentioned Self Storage, I’m glad you brought that up. Because I’ve looked at that asset class extensively. I have not done a self storage deal yet. So far, I really just like housing. But I’d say after housing, self storage is my second favorite. And I like housing in the form of single family the most and then apartments, and then mobile home parks. But, you know, I kind of wonder how Self Storage will fare ultimately. And here’s what I mean, by that, just thought experiment with you for a moment. If we have, you know, millions of people moving from cities to suburbs. Now, suddenly, they’ve got a two car garage, or maybe a three car garage, they’ve got a bigger home with lots of space, you know, they can get their junk out of storage, and now put their junk in their house again, right. So, like, what happens to self storage? You know, I don’t know, it’s sort of hard for me to understand that one. Yeah.

Ken Van Liew 34:25
You know, it’s interesting, because, you know, I’ve studied and I’ve driven in a lot of like, garages and tried to get out of the car and, you know, realize, like, there’s just not a lot of space and, you know, people like creating shelves and, you know, people accumulate a lot of stuff, there is a multiplier that I found, you know, based on residential density. That’s, that’s pretty accurate. I mean, the biggest issue that I’m finding with self storage is that your competition, you know, in this one area that I found, you know, which is quite interesting. It’s kind of like a little island in a very, very rich area, where it will absorb say 30 to 40,000 or Typical storage, but what’s marketable? There is large storage where people can come and like put their five cars or their boat, you know, have a little mezzanine with the bar Hang out, they buy these, you know, for a few $100,000 they allow you to lower your debt on the Self Storage. So, but the climate control and you know, and self storage is is strong, at least in the jersey market, you know, and the Arizona markets I’ve also worked

Jason Hartman 35:26
Yeah, really interesting. Well, what else do you want people to know, anything else you want to share from the book? Or, you know, anything in general? Just share it with us? Maybe questions I haven’t asked you.

Ken Van Liew 35:37
Yeah, you know, I think, you know, if you’re, if you’re interested in real estate, or any type of business, you know, the modern wealth building formula really gives you a whole new outlook on a different approach that works. You know, it enables you to, you know, find fun and facilitate any type of business, any type of real estate. I’ve tested it and proven it with wholesaling, fixing, and flipping, commercial buying holds high rise development, entitlement work, and it’s just, you know, it gives you the motivation and the ideas that just you may not see gives you a new vision and change your vision change your life.

Jason Hartman 36:14
Good stuff. Do you the website you want to share with people can I move you know,

Ken Van Liew 36:18
I’m easy to find Ken Ken van Lew comm go to Ken van Lew comm you can click on discover Now give me some free goodies and reach out to me get in touch with me. I’d love to talk to you.

Jason Hartman 36:30
Excellent. Good stuff. Ken van Lew. Thanks for joining us. Thank you, Jason. Thank you very much.

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COVID-19 Recession, HELOC v. Cash-Out Refi

In this episode, Jason Hartman continues his discussion with Adam regarding the housing bubble and how to be a real estate permabull. Adam explains the US median price and shares statistics on housing prices from 2008 to 2011. They also discuss how to build a real estate portfolio and shares insights on HELOC and cash out refinancing.

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
Thank you for joining me today. And I’ve got some news for you. No, it is not about the big news. The suspense continues on that. And you know what, you might have found it strange that as many complaints as I share with you, and few conspiracy theories here and there, I am not given to complaining that much or being that critical, typically, of the election process in the voting process. However, I gotta say, this one does seem to have some real validity to it. There’s a lot of shenanigans going on folks, shenanigans going on. I’m telling you, there are definitely shenanigans going on here. Yes, it is wrong, what is happening. Wrong, wrong wrong. So we’ll see, you know, the courts get involved. And hopefully, justice will be served, hopefully. But I do have some other news for you. There’s no news there. We’re all waiting. But I got some other news for you. And that and by the way, we may not have an event tomorrow night, or we may for a live stream. But we’ll certainly have one Sunday morning. Either way, maybe just Sunday morning. I don’t know. You know, when there’s just not much to say there’s kind of like it’s a bunch of speculation. So it’s better to have some, some real news. And there are certainly some other news to talk about, because a lot of stuff is known to us. And we got to talk about that. We kind of talk about some of these propositions that went mostly pretty well. So that was good.

But in other news about real estate, there is some bad news going on. For some folks in some sectors of the real estate world, the investment real estate world. I’m looking at a report here. It says multifamily national report rents late vacancies up stress mounts, the COVID recession continues to heavily impact multifamily housing, meaning big apartment complexes. You know, I always found it funny. When someone says to me, Well, I’m thinking about multifamily investing. And then I get into this whole conversation with them and I find out they’re thinking about buying a duplex folks, that is not considered multifamily. I know that technically it is multifamily. But no one considers a Plex duplex triplex four Plex to be multifamily in any real way. What we’re talking about here are apartment complexes with 100 units, 300 units, 400 units, real apartment complexes. Okay, that’s what most people consider to be multifamily. Now there would also be another category of what they call small multifamily, which, you know, might be 30 units, right? 30, a 30, unit apartment complex, something like that. Anyway, anyway, so they’re complaining that the rents are coming in late, the vacancies are up. And you know, who else is complaining? All of those folks that you’re glad you’re not one of all of those folks owning retail properties, you know, they got that little strip center with the dry cleaner and the coffee shop and the quiznos sub place and, you know, couple little, little random stores like that, right? They’re complaining because their rents aren’t coming in or they’re coming in lower, they’re not coming in on time or whatever. And then those folks that have another type of retail property with a couple of restaurants they’re complaining to, and then those folks that have all those office spaces, they’re complaining as well, because guess what, those office offices, they’ve got that office building with several office suites in it, maybe, maybe a few office suites, maybe a whole bunch of them could be big, small, whatever. And you could roll bowling balls down the hallways in those offices, and they’re complaining, but you know, who’s not complaining?

It’s you folks. It’s you people following our plan. Here. We’re raking in the dough right now. Because why? Because as Hartman has said, he said, home is the center of the universe. So I’ll look at a little article here from Ion housing.org. Evan posted this in the content group. Thank you, Rabbi Evan, it says, lack of inventory, higher prices, push housing affordability near two year low, which by the way, that ain’t bad. But when housing affordability gets really, really low, then you start to notice that’s the time the market may well turn. So the housing folks are not complaining. They’re doing great. They’re doing great. So there you go. Yeah, a lot of stuff going on in the market. But hey, we’ve got part two of Adam and I talking about just a whole bunch of things coming up here. So we’ll jump into that. But you know, we’ve got some data we want to share with you coming up, maybe Sunday’s live stream or next week, we got a bunch of great episodes next week. I just recorded one today. That was was a fascinating interview I did with a real estate tech company, who has tons of data, pre mover data, yes, data that is about 60 to 90 days earlier than most of the other what’s considered early data you hear now? Well, they’ve got even earlier data. It’s like they’re reading people’s minds about where they’re thinking of moving to. And then they are sharing it with us, which is what they did. Yeah, I interviewed the Vice President of public relations for this companies today. We thought this would be like a half hour interview. And it was about an hour and 10 minutes, but it was really fascinating. tons of great data. So we will have that coming up for you as well. Yeah, just got a lot of good stuff. Lots of good stuff to keep all of you super, super informed. So you can make a lot of money and profit. And just do really well with your with your investment portfolios. Yeah, here pepper, right. That’s right. That’s right. Okay. Without further ado, let’s get to part two of the interview with Adam. We got a bunch of stuff to talk about. So let’s get there right now.

Adam 7:38
So this, I will grant you This is from the Case Shiller index, because it’s just the US as a whole, very hard to find us data package together. That’s not involving Case Shiller in some way. So this was I looked at what would happen if you were investing in real estate over the long haul, in terms of just everything. Because if you look at since the Great Recession, real estate, for the most part has been on an upward trend, for the most part. So I looked at what was the peak before the Great Recession, the valley. And where are we now? Am I now I mean, relatively recently, because some of the numbers can be hard to find everywhere. So I looked at 2008. And I said, Where was the absolute, and the peak was median home prices. And this is inflation adjusted, were $252,036.85. So that’s all you need to know about this chart is in 2008, the peak of median home values is around $252,000. Now, a lot of people though, would say that the peak was 2006. Just so you know, there is disagreement on that. But it’s fine. I just want to throw that out there. Let’s see, I can go to Oh, six if you want. But it’ll change the calculations, but oh six, so eight before the crash, this is before the crash, you look in. So now, if you want to go to the next one. Now we have the 2011 I would look for when prices kind of bottomed out, and it was 2011, the median home price in the United States was $195,477, a 22.5%. price drop nationwide, from 2008 to 2011. And that’s you’re taking the inflation adjusted, yes, inflation adjusted for both of those, right?

Jason Hartman 9:27
Yes, your apples to apples comparison. Okay. And of course, you know, let’s throw the disclaimer out there that the inflation index is highly manipulated and wrong, but it’s the official number. So just to keep things consistent, you know, at least it’s still apples to apples. And again, Adams put the URL in here for you to go check out properties on our website, Jason hartman.com slash property and now

Adam 9:53
we go to 2017. It was the last year that I can find data across the board without going into like four hours of work. Though I found this, so the 2017 Peak was a median home value of $243,309, which was a 24. and a half percent increase since 2011. But a three and a half percent drop since 2008. So even if you bought and held in a cyclical market since 2008, you’re down home value wise, over that time. So that’s if you’re just going with the, let’s just throw a darkness throw darts at a board and see what market I’m buying in, you were likely going to hit something that wasn’t great.

Jason Hartman 10:35
And and again, we’re talking about 75% of this index being cyclical markets that we would never recommend. Okay, so just understand that I wish there was a linear market index, we’ve thought of creating one ourselves. But you know, we just don’t have the manpower or the staff to do it. Okay. So, you know, it’s, it’s a lot of work to do that stuff and keep it up.

Adam 11:00
All right. So then I thought, all right, well, let’s look at one of our linear markets. And I think, Indiana, because we’ve been in Indiana for the longest, the longest, and I knew we’d been there in 2008. I knew we were there in 2017. And no, we’re still there. So I looked, and I said, Okay, well, from 2008 to 2011, there was actually not a 22 and a half percent drop, there was a 2% increase from 2011 to 2017. There was a 15% increase. Now, if you’ll remember, the other chart, said, oh, there was a much bigger increase from 2011 to 2017. Across the country, median value wise, you’re starting from the crash. So you’re actually performing better in that. And I think I covered that in the next slide. If you want to go to that. No, no, just kidding.

Jason Hartman 11:48
So big quote, quoting himself now.

Adam 11:53
You all know it’s from Pete du Pont, who’s a lawyer, he’s made this quote that, you know, in love, that’s the way it is with entrepreneurial people, you try one thing, it doesn’t work, you try another. So I related that to real estate. And I said, when one market stops working, you move to another. And that is how you can be a perma bowl. In real estate, you invest in one market, let’s say you’ve diversified into three, four or five markets like we recommend, and you keep building your portfolio in those markets. While it makes sense. And then maybe one day, that market doesn’t make sense. And you make your choice I do I sell these properties. Do I hold these properties and buying a different market? You just adjust your market, adjust your strategy, and you can actually be a real estate permeable and have it make sense.

Jason Hartman 12:38
Yeah. And I personally have done that many times. I have ridden the wave in a certain market. And you know, I’ve done this in several markets and several several times over the years and have chronicled those on my podcast on the creating wealth show, where I’ll do a two for one, like the one I can just remember offhand, is I’ll take a Charlotte, North Carolina bought a property there. And then I wrote it up. It was worth about, I think I sold it for about 225,000 bought it for about 150. Don’t quote me on these numbers there on the podcast, but this is my, you know, rough, roughly numbers. And I sold that property did attend 31 tax deferred exchange, which by the way, Joe Biden wants to eliminate. Let’s hope he loses,

Adam 13:27
even if he wins, he’s not gonna be able to do it. Well, I’m gonna push that through a Republican Senate.

Jason Hartman 13:32
Yeah, but wait, in two years, we’ll see what happens. You know, things could change. You know, maybe you’re Indian. And you know, but what Biden wouldn’t be able to be president a second term, because I don’t think he can make it through his first term, with his mental clarity being lost

Adam 13:49
with it. Man, I don’t think he’ll even win the nomination again in four years.

Jason Hartman 13:53
Yeah, that would be interesting. You know, like if he won an incumbent. When’s the last time an incumbent did not get the nomination from their party? I mean, I know LBJ said he wouldn’t accept it. That was way back when?

Adam 14:04
Well, actually, I take that back. The Democratic Party would probably give him the nomination. He may not get the votes for it. But the democratic party would probably give him the nomination or he might not take it. But yeah,

Jason Hartman 14:15
yeah, if Joe Biden wins, basically expect Kamala Harris to be president. Okay. Which is scary. At least for me, do you like Kamala better than you’d like Biden, Adam, because I know you said you didn’t like Biden very much, even though I’m sure he probably voted for him.

Adam 14:31
So Camilla has a weird. So her time in California when she was the district attorney.

Jason Hartman 14:37
It was you mean putting African Americans Yeah,

Adam 14:40
it was terrible. But then she went into the into politics, and has one of the most liberal voting records there. So on the whole I’m not, I’m not a fan. But it leasts more of a fan now than if she were doing this when she was still mean a lawyer in California. That’s my take on her. I don’t know. Better Biden probably because I think Biden’s a worthless political candidate. He’s a conservative, he’s a fiscal conservative.

Jason Hartman 15:09
But okay, all right. Okay. So

Adam 15:11
I think that the three and a half percent drop since 2008. Even if you think that the rise from 11 to 17 was so great, you’re still down on the hole. For the last, you know, nine years, you’ve been holding real estate, that the client and in value and probably getting a total rental value, when you could have put it in a linear market that’s gone up.

Jason Hartman 15:33
And so here is make sure you understand the point I think Adams trying to make is that we’re looking at an index that is 75%, weighted to cyclical markets that we don’t like we don’t recommend, we’ve never recommended them, we wouldn’t touch them with a 10 foot pole, they won’t make sense. And they have terrible cash flow, and their landlord unfriendly almost in every case, and they’re democrat controlled in almost every case to so that’s all interesting that those parallels apply to all of them. Okay, so let me show you a few things, folks. Now, this is just I just took a little a couple of slides from this upcoming webinar we’re going to do on this, okay, this is the median sales price of houses in the US, okay. And this is where we are now of last quarter $313,000, median price as of July 24. There may be a new number out for this now, by the way, but it’s close enough for government work, as they say. Now, let’s look at the interest rate 2.87% as of September 17. And by the way, on these charts, the gray areas are recessions with two or more quarters of flat or declining GDP. That’s the definition of a recession. Let me go back and show you the price one again. So you can see where the recessions are, you can see, you know, Great Recession here down a little bit. And up since then, right and a little bit of ups and downs in there. So then we look at interest rates that have dropped dramatically. Now, here is the thing we’ve got to consider, we’ve got to adjust for price of the home, we’ve got to adjust for the interest rate on the mortgage, and we’ve got to adjust for what else Adam do, we have to adjust for inflation, inflation, because inflation is the insidious hidden tax, that destroys the value of our savings, our stocks, our bonds, even our equity in real estate, because as the dollar goes down in value, and buys less as the purchasing power declines, through inflation, it has all sorts of interesting effects on everything. And people very seldom really, truly understand it. And interestingly, the IRS doesn’t understand it, or doesn’t want to understand it, because the way inflation is regarded on your tax return can either hurt you dramatically, or it can benefit you dramatically, depending on how you play. And I will just say this as a blanket statement, the best asset class, far and away in an inflationary environment is income producing real estate, income property, the kind of stuff that we help people buy and build portfolios with, at Jason Hartman, calm, shame, shameless self promotion. Okay, but it’s true, you got to know this stuff. So we’re going to adjust for house price, inflation and interest rates. Now what we are not including in this analysis, by the way, which we should include, but we didn’t, and it doesn’t make that big a difference. It’s a little bit of a difference, though, but it even makes it better than what I’m going to show you. But once we adjust for this stuff, most people think we’re in a bubble. They think prices have gone up too much. Housing prices now are higher than they were back at the last peak. And look what happened then there was a great recession, and everybody loves money and it was terrible. But when we truly look at the real numbers, not the fake numbers, we see this. Here’s what we see. We see that the $313,000 home at 2.99% which by the way is a little even lower now. Now these are owner occupied numbers, okay, because those are the ones quoted there’s no good charts for investor or non owner occupied mortgages. Okay, so you’re gonna pay a little more for non owner occupied. Your payment is 1300 19 bucks a month 1319. We run around off but if you consider 2006 The peak, okay, and Adam and I were debating that most people say 2006, from what I hear your payment back then was 15 $132. And you adjust for inflation. Remember, since then, according to the official stats, you’ve had 28.9% cumulative inflation, okay? You’re actually saving money on that house today, that house in 14 years, in terms of a mortgage payment principal and interest mortgage payment got cheaper by $657.42, the house is less expensive than it was then, on a payment basis, just understand almost nobody, almost nobody buys a house based on the price of the house. Almost everybody buys it based on the payment based on the monthly cost of that house. And the monthly cost in the last 14 years has declined by $657.42. This is what few people understand, because they don’t know how to do the math. They don’t know how to calculate inflation. And they’re not thinking of the interest rates. So you’ll hear these people in the media, they’ll be on TV, they’ll be in magazine articles, newspapers, whatever, you know, they’re writing newsletters, and they’re just giving you this like stupid amateur analysis of things. where they are. They’re just saying house prices are higher now than they were 14 years ago. And we’re a degree recession. Oh my god, there’s a bubble. And they don’t know what they’re talking about. Houses are cheaper now than they were then. Adam, thoughts.

Adam 21:51
I agree wholeheartedly. I mean, I look back and see all the deals I could have gotten at the prices. I could have gotten them at the payments, I could have gotten them and kicked myself. I wish I wish I’d met you before them.

Jason Hartman 22:05
Yeah. Well, I wish we met soon as sooner to Adam, that would have been very romantical. Hey, so how many properties Do you and your wife own now?

Adam 22:15
We are going to be closing on seven through nine at the beginning of next year.

Jason Hartman 22:20
Congratulations plus your own home. Yes. And you’re in Austin. liberal Austin? Yes. liberal Austin. Yeah, good stuff. Good stuff. Okay. So we’ll wrap it up. We got a few more questions and comments we’ll take but also another website, we’ve got a free little mini book at pandemic investing calm, go there, get your free little mini book report. And it’ll you know, tell you about some of the commandments that we’ve modified for the environment in which we live. Just go to pandemic investing calm, once you realize how amazing it is that we actually got that domain name. And you can check that out totally free. And that’s available to you. Okay, Adam, let’s

Adam 23:02
grab a couple more questions and comments. As you read those, I will change the slide to a better slide. So go for it. So sunshine girl was talking about when she said the rates were down 2.1 somebody asked while you’re getting the rate 4.1%. And she said no. But you don’t pay more than two plus percent in in the Land of Oz. And we have mortgage holidays Commonwealth Bank pledge no for sales until September 21 or September 2021. Minimum and sensible lending rules scrapped from March 70,000 government or government grants to her Aussie dollars, I assume,

Jason Hartman 23:38
Grant, we’ve got a reply from Michael.

Adam 23:41
And Michael said I’m sure different rules apply for foreigners and seeing tight restrictions on what foreigners can buy. And some believe she responded with Yes.

Jason Hartman 23:50
And tinfoil hat says stolen bull. I don’t know exactly what that means, but rather the bull market overall.

Adam 23:57
And then sunshine girl responded with I wouldn’t be buying in AWS if I were a foreigner much better value elsewhere. There are restrictions on what kind of real estate you can buy. You need FIA IRB approval, but that’s easy. Ultimate bargains finds my temple he made me laugh a couple times a day, my tinfoil hat. So adjusting to a tenant that doesn’t pay market. That is something that I’ve talked about with Jason before and on the podcast. It’s actually really interesting. If you look at all the times when they get bad when tenants stop paying. The downside to real estate is that when your value goes down, it hurts. Now, if you’re holding in stocks and all of those things, it still goes down. You’re still losing money, you’re just not selling yet. But let’s say for example, you have your property your tenant completely stops paying, you’re still putting principal into the property that you can refinance out later. You’re still you are losing money on those payments on a month by month basis. But if you look at the amount that you’re losing On a cash on cash basis, from what you’ve put in, it’s usually still better than what’s happening in the stock market. And that’s what I like. That’s what I think a lot of people forget about is if your tenants are in a situation where they can’t pay rent, and you can’t evict them and find another tenant, there are other things going on the economy that are decimating it as well, for the most part, for example, during the pandemic, when our renters were having the most trouble paying their rents, even though that didn’t really happen in the linear markets. That was when the stock market was crashing. 30 40% So you were losing maybe 3% a month, cash on cash wise for your tenant not paying, but like I said, it hurts now, and that’s the downside to real estate.

Jason Hartman 25:44
But the thing is, you don’t really have to notice that if a property goes down in value, just keep renting it. You’re saying if the tenant stops paying, right, but but tenant stops paying is a fixable problem, Okay, anyway, you know, evict them if there’s an and I know you’re gonna say, oh, there’s an eviction moratorium? I’ve heard it a million times. First of all, this is like largely a non issue, folks. Okay? If there is then just go into forbearance and don’t pay the mortgage. It’s Trickle Up economics, as I’ve talked about many times, okay. And also

Adam 26:18
another way to hedge that is to own more than one rental property. You have that way even if your cash flow decreases your other properties are still paying the mortgage for your property that’s not cash flowing. Yeah,

Jason Hartman 26:31
yeah. Okay.

Adam 26:32
So the cold caller interesting comment on the van life on these people the van life people are becoming useless. They single people sole income, no life skills, nothing to offer others. Yeah. I mean, it’s literally just, this is us doing this fun thing. Don’t you wish you were here?

Jason Hartman 26:49
Yeah. Instagram influencer is not a skill set, folks. Like,

Adam 26:53
oh, I’m doing yoga on the beach this morning at 8am. Alright, great. Big deal. The gold healer says please, really Adam and Tifa and all the subgroups payments made by George

Jason Hartman 27:05
Soros had a problem. He doesn’t believe any of that because he’s got his head in the sand. But okay. And Tifa is an idea. Well, it’s actually a pretty organized idea, too. Okay,

Adam 27:18
for my wife, the van life nice van, she offered me a divorce. My tinfoil hat.

Jason Hartman 27:25
Gosh, okay. Question from Fran.

Adam 27:28
Fran, you asked what does it take for first time investor to buy and manage remotely would like to invest in us real estate but confused about a number of properties investment size mentality? So when it comes to buying and managing today’s inventory with what we have, you’re looking at probably needing around 35 to $40,000 to get in,

Jason Hartman 27:51
you can get an inexpensive property for you can get it for 25,000

Adam 27:57
you’re gonna have to wait and find that property at the moment. If you just it’s hard to find this. Yeah. Well, that’s what I’m saying with the inventory we have right now, most of the properties are in the 150 to low two hundreds range. So you can get in anywhere from I mean, our lowest, our lowest price, new new construction property, you can get in for about 30 to 33,000. managing it remotely, you can either do it yourself doing the hybrid self management that Jason has talked about a ton on the podcast, or you can just go straight property management companies, we have management companies in every city that we can recommend

Jason Hartman 28:35
you look at, but I recommend self management, not a brand new person. But you know, if once you get a little experienced as an investor, if you don’t have it already, you know, we can we can really help you with that.

Adam 28:45
Yeah, in terms of number of properties, you can get up to, um, you can get an infinite number if you can qualify for it. But in terms of the government backed securities, you can get 10 loans. And what he means is the Fannie Mae, Freddie Mac, what’s called agency loans, your best rates are going to be they’re there for your first 10 loans, that includes your primary residence if you own one. And if you’re married, and your spouse has income and can qualify, they can get 10 as well. So 20 on the agency loans and the mentality is you just have to get out of the mindset of meeting. I can’t see my property. That’s the mentality

Jason Hartman 29:20
you need to get out of which Guess what, you can’t see your stocks either. Well, I

Adam 29:25
mean, you also think about it how if you own for example, if if I live in Austin, and I own a property in far north Austin, how often Am I gonna go driving by that property? Yeah, maybe once or twice a year at most, I can pay a property manager to send somebody out for 70 7075 bucks, which isn’t that much more than paying for the mileage on the car according to the federal government. And you know, they go out there and take pictures and look at it and send them back to me. So otherwise Are you going to go up to your let’s say you buy one, you know, even four blocks down? even go and look at the outside Are you gonna go knock on their door every couple months and say, let me inside, let me look at your house. It’s just a silly, this is an old fashioned idea that you need to be near your properties. You’ve got all the technology and all the infrastructure and resources nowadays, where you don’t look at, this is what I’ve been doing for the past 1617 years now. Okay, we’ve been helping people invest nationwide. So that’s what we do, we can help you with that bottom line. Okay, we, we can’t talk about all the stuff we do right here or solve all the questions on that. But that’s what we do as a business. We’ve helped 1000s of people do it, so we can help you too. Okay, so start at one unit, the journey of 1000 miles begins with a single step. I started with one unit when I was 19 years old, 20 years old.

Jason Hartman 30:39
I got into real estate when I was 19. But my first rental property at age 20. Your journey to a rental property portfolio is one door, one door at a time.

Adam 30:49
Ramona Griffin thinks they will invoke the 25th amendment to say he is unfit for President.

Jason Hartman 30:55
That’s tried.

Adam 30:56
I don’t agree with that. If they thought he was unfit, if they wanted to kick him out, they would have just had coordinated everybody falling out of the race and endorsing somebody else. I mean, remember it is progress. You know, his his dementia is gonna get worse as time goes on. Right. But if they if they didn’t want Joe Biden to be president, they wouldn’t have orchestrated the whole Hey, everybody drop out right now and endorse Joe Biden, so he can beat Bernie Sanders like they didn’t primaries, beyond kryptos. As I just Bs, I just saw the stats about a week ago, median home value is at about 317,000. Now, there’s a pump period, these guys are very worried. It’s time for these prices to drop cash flow rentals are not. So there’s a reason I didn’t take the most recent median home value of 317,000. I couldn’t find any stats for India, for 2017 to 2020. I didn’t spend five hours making this presentation. I want to my

Jason Hartman 31:48
my my thing said the median home price was 330. Right? He was talking about mine when

Adam 31:53
I was comparing Indiana to the US. Okay, I couldn’t find a good chart for Indiana properties went up to 2020. I could find a good one that went up to 2017. So I just use 2017 numbers. Yeah, that’ll make we need to cover this on the podcast. Okay. Oh, well, maybe

Jason Hartman 32:09
we shouldn’t even talk about this. Folks, you’re adults here. Come on, make your comments adult. Robert Hernandez says after listening to a couple of YouTube business owners, I can tell some people even though they’re successful in a particular business, when it comes to real estate, they have no clue how to use leverage. You know what I am so glad you said that. That is you’re absolutely right. You know, folks too many times in life, we allow people to influence us by the slight transference of expertise. Okay, I have hired you know, there’s this old saying, and I just saw it on my Facebook memories. I was at Ken McElroy, his Halloween party a couple of years ago. Ken McElroy is one of the rich dad authors with Kiyosaki. And you know, he’s an apartment syndicator has like 1000s of units can in his garage, he had a Ferrari and his Ferrari license plate. I posted this on Facebook because I thought it was such a funny license plate. He said, you know, a students work for C students, and then just came up on my memories because we just had a Halloween a couple days ago, you know, I have hired and I’m speaking for myself, I was not like a great student. Unless I was interested in the topic then I was an awesome student. But most topics I wasn’t that interested in in school, you know, I was interested in money and finance stuff, mostly, you know, we trust these people. Like I hire a lot of these a students now, right? lawyers, accountants, management consultants, I hire them in my business. And you know, I’m thinking like, these people are way smarter than me academically. But when it comes to things like money investing, they can be completely clueless and doctors are a great example. They’re kind of in you know, it’s not always a fair, fair thing to say, but it’s a sort of a generalization. They’re notoriously poor business people but they’re good they’re scientist right so different minds are good at different things so yeah, don’t allow this transference of authority or knowledge on things there are certain people are good at certain things and bad and others so absolutely true. Okay, Adam

Adam 34:14
sunshine girl says friend I think Jays team may be able to help you I’m considering it to come on down a lot of forum you can talk to us no harm no foul if you don’t like it. Yeah, there’s our services are free. Okay, so you can talk to investment counselors. You know, we make money when people either buy educational products, we make a little bit of money off that but mostly off of people building their portfolios. Okay. Dan says inflation is pointless. It’s counted wrong. Everyone is getting savvy to this property taxes are going to kill real estate at this point. dm I question to you is where do you think the property taxes go? The property taxes go into the rent. So as property if property taxes increase, rents are going to increase because you’re not going to get a hold? City a landlord saying, Yeah, I guess we’ll start losing money, you know, they’re gonna start increasing rents and tenants are gonna have to pay it, because everybody’s gonna be doing it.

Jason Hartman 35:10
Every Corporation, every business every and that’s what real estate is, it’s a business, they’re all pass through entities raise the minimum wage, and you raise the expenses on the employers, then they’ll just raise the prices to the consumers raise the property taxes, and the landlords will raise the rent prices. And remember, that’s done really pretty much in unison, because property taxes go up in an entire city or state at a time, right. And you know, this, by the way, is on the California ballot, it looks like it’s going to fail, fortunately, at least now, this big property tax increase, but your rental properties are passed through entities who pass that cost through to the tenant.

Adam 35:54
Okay. And you’re also even if the taxes go up, and you lose money for a little bit, and not lose money, necessarily, but your cash flow gets lower for a little bit. I mean, made up for when the rents reset to the market. market value. Yeah. So yeah, your your income might get hit a little bit now, but it’ll get made up for and you’re still getting your depreciation, you’re still getting your your own tax benefit, you know, your equity, you’re still writing off all the wonderful interest that you’re paying, although at this point, you’re not paying that much interest anymore,

Jason Hartman 36:27
while you’re still getting inflation induced debt destroyed. Yeah, for sure which more on the podcast on that. Okay, a couple more questions, and we’ll wrap it up.

Adam 36:35
So Michael is wondering after we close on our third property today, excited for you, Michael, happy to help you find that property, or tomorrow we’ll be running into,

Jason Hartman 36:45
I want to say congratulations.

Adam 36:48
That we will be running into debt to income issues on upcoming purchases, any recommendations for discussion, one of the biggest things is talking to the lender about using the parties to qualify themselves is a one thing you can use

Jason Hartman 37:02
it and then what and what he means by that is that the rental income from the properties add to your income Michael, so they help you qualify. Now, they’re not going to take the rental income at 100%. They usually take it at 75%. So for every $1,000 you receive in rent, your income is increasing $750. It grows, of course, then you take out expenses, just like you take out debt when that’s why you get what’s called the dti, the debt to income ratio that is considered when you qualify for a mortgage.

Adam 37:34
And you can also if you want, like we were talking about the asset protection, it’s possible that your CPA can do something or Bob, in this case, the lawyer might be able to help you hide some things or moving things around to make it look better.

Jason Hartman 37:49
Oh, there’s just good tax treatment use entities properly. So again, the link is below. Check out that free webinar Jason hartman.com. Slash protect Jason hartman.com slash protect, you’ll learn a lot from that. So good question. Thanks, Michael. And congratulations. So centric says what are your thoughts about the great reset that the IMA keep spewing on articles about people owning nothing by 2030? how happy they are, feels like the communist agenda is starting. There is certainly a push for this and an agenda. And it’s a huge topic. I have not had time to cover that a lot on the podcast. I’ve done a little bit on the YouTube channel about that. And thank you for the reminder, because I’ve been wanting to cover this issue. But you know, we’ve had all this stuff going on election pandemic. Just there’s only so much programming time available. Okay, so we will get to that topic. It’s a very good question. There are definite concerns and strategies

Adam 38:48
Kevin says Adam, don’t forget to research and discuss HELOC strategy to pay off mortgage and or he locked to invest property. Thanks, guys. I did have a question about using the HELOC to pay off the mortgage asked me and I wasn’t 100% sure what your thoughts were on that. Jason? Well,

Jason Hartman 39:04
using a HELOC on maybe your own personal residence, a home equity line of credit. Yeah, buy property free and clear.

Adam 39:14
Is that what you’re asking? I believe so. But to me, it seems like you would just do a cash out refi in this environment.

Jason Hartman 39:19
Yes. Well, the cash out refi is probably the better deal because it’s a three decade long fixed rate loan at historically low rates. But you know, everything is worth looking at. Right. I don’t know, you know what he locked terms you’re being offered. But by and large Adam is absolutely right. That usually the cash out refi is going to be the better strategy. Most of the time. Yeah,

Adam 39:46
I agree. dn says thank you miss my point. They’re not increasing wages anywhere near the cost of property tax. They’re using inflation example 2500 in tax went to 6004 years 2% Don’t wage increase won’t help.

Jason Hartman 40:02
Yeah, well, dm, that is not the case. And here’s why. Let me tell you why. I’ve heard this type of thinking and on its face, it makes sense. And I see why you’re asking the question. So I appreciate the while the comment, not question. Okay. But here’s the flaw in this in this kind of argument, okay? People tend to think of this as like this fixed thing. Okay. If my, you know, take, take my sound effect machine, right, this is a house, your tenant rents this house, and they rent this house, and it’s 15 $100 a month and say the property taxes go up, you know, before you had $200 a month positive cash flow on this house. But now the property taxes went up. So you have zero positive cash flow on the house, it’s only a breakeven and you’re thinking like, this deal isn’t so great. Yes, there are other ways you earn your return. But the thing you’re thinking is that this tenant renting this house is this fixed thing. And it’s not, what happens is this tenant has to either take on a roommate to defray their expenses, or not buy a new car to defray their expenses, or they have to move down to a lesser house, and then you get another tenant moving down the socio economic ladder into your house, okay, at the new higher price, where you’ve increased the rent to offset your expenses. So it’s like two ladders, okay. You know, you’ve got tenants moving up and down the socio economic ladder, you’ve got properties that are on certain places on the socio economic ladder, and they will reposition in times of economic change. So it’s not like you have this fixed tenant in this fixed house. And that tenant doesn’t have fixed expenses. If right now they’re living in your house and they’re paying you 15 $100 a month and their wages don’t increase well, then maybe they have to give up that nice car or give up private school for the kids are give up some vacations or shop it cheaper grocery store instead of shopping at Whole Foods whole paycheck, okay, you know, these things are all adjustable, they’re not a fixed thing. Or maybe they just have to say, look, I can’t afford the house anymore. I’m gonna move and you got to get another tenant who can’t afford it. Okay. It’s how many thoughts on that? Now,

Adam 42:28
it’s like it says, in real estate that you can negotiate the deal at anytime. And that includes with tenants. Yeah, bro. Yeah, good stuff. And cannon says, Thank you guys, as always, lots of great information. Have a great day. All.

Jason Hartman 42:41
Okay. Well, with that, we will wrap it up. Thank you all for joining us. Go to Jason hartman.com. Check out more go to pandemic investing calm to get that free mini book. And of course, check out the estate planning, tax reducing and asset protecting webinar at Jason hartman.com slash protect. Adam, thank you so much. And folks, I just want to say I am not sure we are going to do an election livestream this evening. Stay tuned, we’ll see how the day goes. We’ll decide this afternoon. If we don’t do it today, we’ll probably kick it to tomorrow or even Friday. These are horrible lawsuits. And who knows? Yeah, we got we got to let the lawsuits get filed. And see what happens here. We just want to have something more complete to talk about so so that’s our only goal. So make sure on YouTube, you turn on that bell notification. So you get notified when we go live on an impromptu basis. And a lot of you I know have done that because instantly when we’re going live your you know, you’re all joining us. Thanks for doing that. And the rest of you turn on the notification bell as well as subscribe and we love your likes to and your comments. So keep those coming. Alright everybody, happy investing. Let’s see what happens with the election. And thanks again folks. And sunshine girl got one more comment. And thank you for joining us. And we will see you next time everybody. Bye. Bye. Bye.

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.

411: DAMIAN LUPO, eQRP, 401ks, IRAs, Solo 401ks, ROTHs

How to Use Retirement Accounts to Buy Real Estate

In this episode, Jason Hartman and Damion Lupo discuss retirement accounts, taxes, eQRPs, and the importance of leveraging these accounts so they work for you.


Key Takeaways:

[1:50] Jason and Damion discuss eQRPs, and how it’s different from 401ks, IRAs and solo 401ks.

[3:15] eQRPs help you pay less taxes

[6:55] The history of eQRPs and who is using them?

[9:07] The difference between IRAs… speed, control, and taxes

[15:15] Anyone is eligible regardless of income

[9:00] Damion discusses the entities he sets up for clients (LLCs or sole props)

[25:52] Tap into your retirement account earlier and buy real estate, regardless of age

Watch the video HERE.



The WEALTH TRANSFER is happening FAST! Protect your financial future now! Did you know that 25% to 40% of all dollars ever created were dumped into the economy last year???  This will be devastating to some and an opportunity to others, be sure you’re on the right side of this massive wealth transfer. Learn from our experiences, maximize your ROI and avoid regrets.

Free Mini-Book on Pandemic Investing: https://www.PandemicInvesting.com

Jason’s TV Clips: https://vimeo.com/549444172 

Asset Protection, Tax Savings & Estate Planning: http://JasonHartman.com/Protect

What do Jason’s clients say? http://JasonHartmanTestimonials.com

Easily get up to $250,000 in funding for real estate, business or anything else  http://JasonHartman.com/Fund 

Call our Investment Counselors at: 1-800-HARTMAN (US) or visit www.JasonHartman.com

Guided Visualization for Investors: http://jasonhartman.com/visualization

Foreclosure Crisis or Not? Rick Sharga

Jason Hartman welcomes Executive Vice President of Marketing at RealtyTrac, Rick Sharga. They start the episode by talking about the effect of Covid on the housing market and the millennials’ approach in terms of buying and renting. Rick also distinguishes between foreclosures and opportunities and the expectations for each sector of the commercial real estate environment.

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 a returning guest back to the show, and that is none other than Rick sharga. He is Executive Vice President of Marketing at realty Trac, the country’s leading provider of foreclosure information for investors. He’s got a wealth of knowledge. And if you are watching on video, we will be sharing some slides throughout the presentation. But if you are not watching, we will try and make those slides understandable to you if you’re listening in audio only format. So Rick, that’s a hint there. So let’s go ahead and dive in. Rick, welcome. How you doing?

Rick Sharga 1:03
I’m doing well. We have to stop meeting like this every 10 or 12 years.

Jason Hartman 1:07
Yeah, I know. We need to do it more often, don’t we? It’s good to have you back. And now you’re coming to us from my old hometown Irvine, California, right?

Rick Sharga 1:16
Yep. I actually live just south there. But realty Trac is headquartered right, right smack in the middle of Irvine. So we’re out here in sunny Southern California. Fantastic. Good stuff.

Jason Hartman 1:25
Well, you know, everybody is asking Rick, is COVID going to cause a housing crash? Is there a bubble prices are higher than they were at the prior peak in 2006? And look what happened back then? I’m sure you hear all this stuff all day long, like I do. And, you know, I just don’t think there’s going to be a big giant foreclosure crisis, unless we’re talking about maybe New York City, la San Francisco, you know, some of these urban areas I think are really under a lot of stress. But But what are you what are your thoughts? What are you guys researching at realty Trac?

Rick Sharga 2:00
Well, I think you’re spot on Jason, the the, and the cities you mentioned, interestingly, are typically cities where you don’t see huge foreclosure problem, because their homeownership rates very low. If you go to Manhattan in particular, virtually nobody owns a home in Manhattan, it’s mostly mostly all renters. So now there’s a couple things right now you were talking about the housing market, and COVID has not slowed down the housing market even a little bit. And that’s kind of surprising, given the fact that we’ve had the most significant drop in the economy on a monthly basis, really, since they’ve been cracking the numbers, the GDP dropped 31.4%, I believe, in q2, we’ve never seen anything like that. The good news, and there actually is good news is one, it was actually an expected drop. So people saw it coming. And it wasn’t because the economy was bad. It was because of this pandemic and the need to shut businesses down. And the second thing that was good about it is that it was lower than a lot of forecasters to projected, there are people talking about 45 50%, GDP drops, and we went up to 31%. And it’s been recovering since. So from an economic standpoint, about half the jobs that we lost have been recovered. And one of the reasons we haven’t seen housing fall off, like a lot of people would have expected in a recession of the size is because of the nature of the job losses. We really have seen most of the job losses and a handful of market segments travel tourism, restaurants, retail, hospitality, entertainment. And those industries tend to be made up of employees who are hourly wages. So they’re not making a ton of money. They tend to be younger, they tend to be less formally educated. And so they tend to have very low homeownership rates. So this has been a recession that has really hit renters a lot harder than it’s hit homeowners, and a lot harder than it said, potential homeowners. So we’ve seen all those people that were on the sidelines, taking advantage of these historically low interest rates to go in and buy houses that they’ve been thinking about buying. In fact, one of the things that pandemic actually did was accelerated trend. We started to see millennials stop being urban renters and start being suburban homeowners, right. And apparently COVID-19 reminded them that being quarantined in a 700 square foot apartment with a toddler wasn’t as much fun as they expected. Or worse than that. Listen, I

Jason Hartman 4:29
have several millennial friends living in New York City Living in 550 square feet and in a very strict lockdown environment, by the way, where the whole point of living in a city was to have all that great entertainment and the Broadway shows and you know everything and all of that just evaporated overnight, you know.

Rick Sharga 4:50
So so we are one of the things you and I were talking about before we got online is we are seeing a flight to the suburbs and we are seeing it in particular In some of the higher priced areas like New York and San Francisco, I would expect we might see some in the Pacific Northwest as well. Miami is seeing a little bit of that right now. So people are looking for more space, they’re able to work from home now. And that trend probably isn’t going to go away, although it will modify over the years. So they’re not worried about a commute. They’re not worried about being right in the middle of the area. And they’re looking for a place big enough to have a home and office, Home Office, they’re looking for a little bit more space so they can move around. And candidly, there’s a perception that it’s healthier there. So from a geographic standpoint, the fastest growing segment when it comes to home sales right now is the distant suburbs, right up against rural areas. And it’s it’s an interesting phenomenon that we’re seeing that would have been hard to predict seven or eight months ago.

Jason Hartman 5:49
Yeah, so let me run this idea by you. Back in 2012, I started talking a lot about the autonomous vehicle that I’m looking forward to. And now they actually have it in Phoenix, by the way, way Moe launched, it’s fully 100%, autonomous ride hailing service. And there is no human there overseeing that car, this time around, it’s completely autonomous. And so what I said is that that would take the pressure away from high priced real estate markets, because ultimately, and it’s taken a long time to play out, obviously, this isn’t happening right away. But ultimately, it would make the prime location less meaningful than it’s ever been in human history. And with COVID, we’re seeing that too, you know, we’re seeing people move leave those kind of what we call prime areas, to the sort of secondary areas that we you know, people living in Manhattan always looked down on people that lived in the suburbs, right? Not anymore. Now, it’s now it’s what everybody wants?

Rick Sharga 6:50
Well, you can’t underestimate the or you can’t overestimate the impact those those autonomous vehicles are going to have on commercial real estate going forward. And when you start to get into autonomous delivery services, imagine that so suddenly, you’re not gonna need big parking garages taking up, you know, a lot of commercials, you’re not going to need drivers for those autonomous trucks.

Jason Hartman 7:12
You talked about, by the way, just to give you a metric on that, that I read once they estimate that 40% of a typical city 40% of the city’s real estate is used for parking. I have no doubt. I mean, can you imagine if that need goes away? what that would do to the real estate market in those places? Because suddenly you have 40% more land? Yeah, no, it’s

Rick Sharga 7:36
Yeah, it’s great prices vacancies. On the other hand, there might be a mini boom in construction is you’re repurposing all those things. Very true. Yeah. But one of the things we do want to talk about, because you mentioned that, we saw that boom and bust cycle back during the Great Recession, we saw prices spike and and there’s a lot of concern among people that we might be in another bubble, or that home prices are going out of control. And if you just look at a linear progression of prices going up over the last few years, we did hit a new high all time, in terms of median home sales price, both in California and the country in July, I think it was $310,000, nationally and over 500,000, California. But if you factor in for inflation, if you factor in wage growth, and if you factor in interest rates, home buying power is actually much stronger than it was back then. And in fact, if you look at the monthly mortgage payment this year, compared to last year, because of what’s happened to interest rates, even though median prices were an all time high mortgage payments were lower. So there’s there’s some rationality to what’s going on.

Jason Hartman 8:43
You are you’re speaking my language, my friend, I just did my own study. And I did two presentations on this so far. And I’ll tell you, it is absolutely amazing. Now, I did not adjust for wage growth. I simply adjusted for interest rates, home prices, and inflation. Okay, those three things, okay. And guess what? The 2006 median price home was $657 more expensive than today’s median price home, adjusted for inflation and interest rates. So real estate has gotten cheaper. You know, I don’t know what everybody’s so worried about. Now, granted, you know that I’m being a little bit snarky, because, of course, we’re going with the idea that people are buying a house on a payment, not a price, which is mostly true, but you know, the price does matter. And one more thing that doesn’t take into account. So I’m just going to, you know, in, in balance on balance, I’m going to say it doesn’t include property taxes or insurance which will index higher with a higher price home. But just on the principal interest the p&i mortgage payment $657 cheaper than it was 14 years ago today.

Rick Sharga 9:56
Now, it also varies by price here so it If you’re looking for affordable properties at an entry level position, you know, good luck, we’ve seen prices go up on a percentage basis, much higher at the at the lower tier than we’ve seen at the upper tier. And candidly, I wouldn’t be terribly surprised to see some price corrections at the high end of the market in some of the more expensive metro areas. So if you’re looking at coastal California, the Bay Area, Pacific Northwest, maybe some pockets like Austin, and maybe maybe even areas in Chicago and New York, those properties were probably overpriced to begin with, again, would not be surprised to see prices correct in some of those markets. But But in terms of a bubble, doesn’t seem likely we’re not seeing it in terms of prices as a multiple of rental prices. We’re not seeing it in terms of a difference in in median price versus median income in those markets. So it, it doesn’t look like a bubble. Last time. We saw prices go up because of bad lending practices. This time we’re seeing prices go up because of economics one on one. It’s supply and demand.

Jason Hartman 11:03
Yeah, absolutely. And the lending has been pretty darn conservative this time around. So do we do we have a concern for a big foreclosure crisis? Rick, that’s, you know, a lot of lot of my very capitalist vulture capitalist friends are saying, Oh, I’m ready, I got my war chest. I’m gonna buy properties like crazy this time. I’m not gonna miss it. Let’s,

Rick Sharga 11:25
let’s distinguish a little bit between foreclosures and opportunities. Do I think we’re going to see more foreclosure activity? Well, first and pictures scenario, or 40 million people file for unemployment, where we don’t see some more foreclosure activity. Having said that, I mentioned earlier that a lot of the job losses have been among renters, not homeowners, renters typically don’t get foreclosed on. There could be some Fallout among landlords, if they happen to be in an area where there are bands on evictions, and the tenants stop making payments. But so far every study I’ve seen shows the tenants have continued to make payments at almost the same rate they’re making a year ago.

Jason Hartman 12:07
And you know what that amazes me. I think there’s more of this, these rent strikes in larger multifamily properties that are owned by institutional investors. But in our network with our investors, people are paying their rent very nicely. And what’s interesting about it, too, is even though they’re they have these various eviction moratoriums, you can still literally while your tenants occupying the property, go and sue them for to get a judgment for the money, even though you can’t evict them physically. So they know they’ve got to pay and one way or another, you know, the rent is being paid most of the time. So yeah,

Rick Sharga 12:45
so invest investor I’ve known for a long time as at rental properties. He said he’s had to evict one person so far. And that person was fully employed, but was trying to game the system. Yep. And six other tenants have worked out payment plans with him. Other than that, he’s collecting everything on time. And and anecdotally, I’ve heard that same sort of story repeated over and over and over. So will we have more foreclosures? In fact, you’d ask for slides, I have a slide I can show you on this. So my colleagues that Adam and I know Todd data was just on your your program not too long ago, have done a look at what we might be seeing. So if you look at what we’re seeing in terms of potential foreclosure activity, prior to the pandemic, we were at historically low numbers of foreclosures. So in a normal year, about 1% of loans are in foreclosure. Before COVID-19, we were looking at about a half a percent. So that meant about 250,000 borrowers were in some stage of foreclosure, those are all on hold right now. Because of the foreclosure moratorium. The forbearance program from the cares act will put people into a protected state really until next March, when that program finally expires. So we don’t really see much activity coming back to market until the second half of 2021. We’ll see if the moratoria end in January, we’ll probably see those 250,000 properties start to work their way through the system will also we’re already starting to see this will also probably see states relax moratoria on properties that are vacant and abandoned. No reason to keep them in that state. So you’ll be able to foreclose on them. But we won’t really see most of the activity until after the forbearance program. So Adam took a look at kind of a best case, worst case and middle case. And that that would give us an incremental number of foreclosures ranging anywhere from about 200,000 more to about a half a million more on top of the 250,000 that will be released. So in that worst case scenario, you wind up with about 750,000 properties in foreclosure in 2021, which is three times where we were but that only takes us to about one and a half percent of loans being in foreclosure. Right. And at the peak of the foreclosure crisis, that was 4%. So we’re nowhere near where we were during the Great Recession.

Jason Hartman 15:08
And by the way, it cut out for just a moment you said 4% at the peak back during the Great Recession, right? That’s correct. Okay,

Rick Sharga 15:16
so this is 1.5% versus 4%. Is that the number? That’s correct. And personally, I wouldn’t be surprised to see us maybe reach up to 2%, depending, depending on how the borrower is coming out of forbearance, are able to perform and get themselves kind of recent reset. So far, they’ve been doing very well as they exit forbearance. A lot of people who I talked to, are concerned about the fact that there’s still 3 million people in forbearance programs, and doesn’t that mean, we’re gonna have 3 million people in foreclosure? And the answer is no, right? So far, about 8% of the people exiting the forbearance program have gone delinquent? That’s not default. That’s delinquency. Sure. And if we have that kind of success rate going forward, there won’t be a huge influx of those people defaulting on their loans.

Jason Hartman 16:10
I agree with you. And you know, what else economists always seem to fail to account for, is they fail to account for any sort of reaction, of course, the lenders are going to do something, they’re going to do workouts, short sales, loan modifications, you know, they’re not just going to sit there, and especially now, Rick, because we’re better at this. Now. You know, we just went through this 1012 years ago. So now the world is ready and adjusted. And, you know, you look at how quickly the Federal Reserve react, how quickly the government reacted. This is not the old world we lived in, and I’m just talking 1012 years ago. Now the banks are ready to deal with this problem much more so than they were during the Great Recession.

Rick Sharga 16:56
Well, a lot of good news here, really the the industry, the banks, the lenders work hand in hand with the government this time to avoid massive defaults. And anybody who’s been in the mortgage industry for any amount of time will tell you it’s much better, much easier to work with borrowers and keep them out of default, than it is to let them to vote and try and fix things afterwards. And that’s, that’s the problem we had last night. A couple market dynamics are very, very different this time than last time as well. Last time, the market was overbuilt, so there was more supply than there was demand for new housing. This time, it’s just the opposite of most people that I follow. believe we have a net deficit of 300 to 400,000 properties a year, demand is extraordinarily high. And here’s the big thing. We have a record number, a record amount of homeowner equity in the market right now six and a half million dollars, and it goes up every month as home prices go up. That gives most of these Adams numbers suggest that 70% of homeowners have at least 20% equity in your properties. If you’re a distressed homeowner with 20% equity in a market that has a desperately short amount of inventory for sale, humans much better options than ever losing your home to foreclosure auction, which is why I said earlier, I think we’re going to see default activity go up. But I don’t necessarily think that means you’re going to have a lot of foreclosures, or a lot of bank owned properties. I think a lot of these things are going to get resolved much earlier than the foreclosure auction through a traditional sale or in some instances, rarely, I believe short sales.

Jason Hartman 18:31
That’s a great summary. Thank you for that. So think about the differences. Now, folks, we have a housing shortage now versus an excess supply of overbuilding, which we had last time due to, you know, the crazy lending which you know, was also money was lent to the developers who just built wantonly. And then we have a much better equity position for people. We don’t have all the ninja loans and the liar loans in the market, you know all that subprime toxic stuff is not there. And you know, we’ve got people who aren’t underwater in a market where they got 20% equity, and they can easily sell. It’s just not the same thing. I wish it was the opposite. I’d love to see some big giant opportunity because I’m ready to pounce too, but it’s

Rick Sharga 19:15
well, you have to be careful what you wish for people. People think they want that kind of inventory around but they really don’t. Because if that’s there, it means nobody’s buying. Yeah, and so you can buy all you want, but the reading and or selling your problem. One of the other headlines I wanted to let a little little bit of the air out of the balloon on is we’re seeing all these doom and gloom headlines about serious delinquencies increasing. And that’s true, and you’re gonna see headlines saying, you know, more serious delinquencies during the Great Recession and all time highs. And by the way, that’s exactly how the forbearance program was supposed to work. All of those loans that are seriously delinquent right now, virtually all of those loans are in the forbearance program. And not only are they going to be Six months delinquent, but at some point, they could be 12 months delinquent. And that’s still okay because that’s what the program was supposed to do. If you actually look at new delinquencies, 30 day delinquencies, they’re down month over month and year over year. So what we’re seeing is really kind of a bookkeeping anomaly, if you will, even though the borrowers technically aren’t delinquent because of the cares act, their loans are being counted as delinquent because there’s no payments being made. But if you’re in forbearance for a full year, you haven’t made a single payment, and you come out of forbearance and agree to a repayment program, you’ve gone from being a year delinquent to current overnight. And that’s the other reason you’re not going to see a lot of activity until later next year. Because if somebody comes out of forbearance in March, they’re not technically going to go delinquent again for another three to four months. And that’s assuming they miss consecutive payments coming out of the forbearance program. So again, just something for your your viewers, your listeners to keep in mind as they’re going through these these numbers they see in the in the headlines, serious delinquency, this case, doesn’t necessarily equal a lot of foreclosures coming. It’s just really kind of a an unintended consequence of the way the program is set up.

Jason Hartman 21:13
I think that’s a very important distinction. So thank you for that. And this chart is from the Mortgage Bankers Association, the MBA, you know, what else is that you don’t see this same situation of people with with no options right now they’ve got the options. We talked about that a moment ago. So it’s just a very, very different scenario that people are in, you know, these aren’t under qualified homeowners like they were before in legal systems ready to deal with it better.

Rick Sharga 21:43
So you want to talk about options. I think that’s one of the reasons the forbearance program is working as well as it is so far. Keep in mind that historically, if a lender did I did a forbearance, what that meant was, they were going to allow you to miss payments for a certain period of time. When that forbearance was over, you owed all of those deferred payments in lump sum, in a pandemic like this, with unemployment being what it is, if they follow those same rules, you basically just be delaying foreclosures for a few months, right. But that’s not the case. The forbearance program, as part of the cares act, basically stipulates if you have if you have any government back loan, the preferred repayment plan is to just tack on those missed payments, till the very end of your loan. So you’re going to come out of forbearance, and not owe any of that money, until you’re really done repaying your loan, you basically lengthened your loan, that’s a great deal for the borrower, it really is another, there’s some minor, you might have some tax money that you have to make up for some insurance payments, you have to make up. But as people are exiting the program, 92% are exiting in a positive way, either. There’s a loan modification, and you mentioned that we know more about how to do that today than we did. Back in the day, a surprising number of these loans are being paid off, whether that’s because the homes being sold at loans being refinanced, that’s a very positive outcome. There’s other kinds of payment deferral programs, there’s repayment plans that are being put in place, but the majority are just being reinstated, or they’re cancelling forbearance, and continuing to make their payments on time. So I do believe the number of non current loans will increase as the number of people exiting forbearance increases. But again, that even at that point, it doesn’t mean that they’re not going to work with their service, or to come up with a better option, or that won’t be able to sell the property on the open market. So I again, if you just look at the numbers, and you look at the options borrowers have available these days, there’s a lot of reasons to be cautiously optimistic.

Jason Hartman 23:51
You know, one other point we didn’t mention, Rick, is that there aren’t all these adjustable loans in the marketplace. You know, we had we had so many borrowers last time around get payment shock, because maybe in in 2002 or so, you know, they took out a three one arm or a five one arm, and then that adjustment came along and there was it was like looking, you know, I’m sure a lot of people have seen, you know, a snake swallow a mouse or something. And it’s called fat in the middle. It’s pretty disgusting to look at. But you know, I thought once like my science class or something in junior high, I think, and you know, it’s got that big, that big bulge, and that’s what the adjustable rate mortgages were last time around. There was this big bulge there were two of them from the three one arms and the five one arms that were so popular. And when they adjusted, the people got payment shock and went right into default. So don’t have that nowadays. It’s a you know, the new, the new lending regulations eliminated a big problem from those arms, those arms in many cases, those adjustable rate mortgages were given to borrowers who could only afford to move into a property because of that teaser rate that they started with. Right

Rick Sharga 24:58
and now They’d have to qualify based on a much higher monthly payment. So even if they have an adjustable rate loan with a low initial payment, they’re qualified before they get the loan to be able to make the higher payment higher payment. And there’s just not that many people using adjustable rate mortgages lately, right? There really aren’t. I’m actually more can so So two things for investors. One is, if you’re going to be looking at at deals from distressed properties as we go through this cycle, I believe that most of the deals are going to be prior to the foreclosure auction. And that’s part part of the sales pitch here. I hate to do this, but sites like realty Trac and other sites out there will give you access to properties in the early stage of foreclosure is really where you should be focusing rather than at the auction, or at the Oreo category where the bank will have already repossessed though.

Jason Hartman 25:55
One other element to that is now we have a lot of big institutional players in the game. So how do you see that playing out in California, they want to make a law. Gavin Newsome is behind this one. The institutional buyers can’t buy foreclosure properties. Talk about a markets version, they’ve actually already passed that law, they passed that

Rick Sharga 26:18
Oh, my gosh, and then 70 Bill 1079. And they haven’t excluded them. But what they’ve done is put a 45 day hold to allow nonprofits or tenants to go and buy those properties. So right, basically, I have to outbid invitation homes or BlackRock, in order to buy that property, which doesn’t seem horribly likely in most cases. But yeah, that’s that you check with a real estate attorney or somebody who follows that if you’re if you’re looking at at an end, the law has not gone into effect yet. But it’s there. It’s another yet another wonderful move on on part of the California State Government. Yeah. So the institutional buyers, look, there’s the guys that have gone out and bought properties to rent. And then there’s the ibuyers, the open doors, right, offerpad and Zillow, who are probably going to do very well for themselves, once there is more distressed inventory on the market. But if you think about their value proposition to a seller, it’s certainty of transaction and speed of closing. Right now, if you put a property on the market that’s priced properly, in a lot of cases, you’ll sell it in a week, right are less, and you’re gonna have multiple bids on the property from both home buyers and local investors. So the value proposition the institutions have is meaningless at the moment. And the institutional guys, the really big guys who have bought properties, I think their role in the market has been grossly overestimated. I was telling somebody earlier, it’s like one of those urban myths that won’t go away like alligators in the suburbs of New York. If you look at the fact that there are 16 million single family rental units today. Yeah, they collectively they own less than 2%.

Jason Hartman 27:57
Yeah, I mean, everybody thinks, oh, invitation Homes is so huge, they’ve got like 80,000 homes. And that’s true, that is big. as investors, we all wish we could be that big a deal. But in terms of the overall market, it’s a drop in the bucket. It’s just nothing. So I don’t see them being a big player.

Rick Sharga 28:14
The other area of opportunity, though, that I would see for investors is is in the commercial market. So if you have people looking for distressed assets, we’re already starting to see a higher number of commercial foreclosure properties pop up on our website, then we would have expected this early in the cycle will start way more when you say commercial, can you define what type of commercial? I mean, obviously, there’s a huge difference between multifamily hotel office and retail and industrial. So I hate that word commercial like, Well, you

Jason Hartman 28:43
know what segment of it right here point,

Rick Sharga 28:45
I don’t expect to see a lot of industrial foreclosures. Yeah, market is going to come out as a winner because Amazon’s still looking for distribution locations. And we need more cloud computing centers. Now that everybody’s working from home. Retail and hospitality are both getting hammered right now. So if you’re looking even at at kind of low dollar, retail opportunities, restaurants, small shops, all sorts of retail establishments, we’re starting to see pop up and retail was kind of already on the edge before the pandemic. Oh, sure. The hotel industry is looking at occupancy rates below 40%, which is less than half of where they were a year ago. I can tell you from my days at auction calm that we sold a lot of limited service hotels, your Hilton Garden inns and Marriott Fairfield suites to small investors who may not have the capital to get through this this long recession. So hospitality and retail are both going to get hit pretty hard. I think there might be some short term disruption in the apartment sector, because of what we talked about the fact that we have a large number of small investors who may not be able to collect rent for the time being and may have to sell off in order to salvage their their own personal financial situation. offices, I think are going to be protected for a while, only because at least the lease terms tend to be a little bit longer. And I think the landlords are probably going to try and work things out with the tenants rather than go through the foreclosure process.

Jason Hartman 30:13
But with all the remote workers, I mean, are people coming back to the office? You know, you look at the big tech companies, they’ve said, Everybody can work at home indefinitely, or for the next year and a half. And I think people might get kind of spoiled and used to that, you know, but they’re going to need a bigger house, that’s for sure. Yes, to have, nowadays, houses need to home offices and places for the kids to study. So you know, it’s not just like one home office anymore?

Rick Sharga 30:37
Well, again, that’s one of the reasons for that trend acceleration we talked about earlier, with people moving from urban centers out into the suburbs, and even the distance suburbs. jury’s still out on how much office utilization We’ll see. Hard to imagine that New York and San Francisco remain ghost towns forever. But I think the the dynamic will shift quite a bit. If you’re going to reopen an office, you have to manage to have enough space per worker to have social distancing, to maintain health standards. And I think you’ll start to see some regulations come into play there. So while you may have fewer people going into offices, they’re going to be more spaced. Yeah. Yeah. And the other the other thing that I think Mark Zuckerberg, Facebook has been talking about this, since you mentioned the tech companies, I think you’re gonna see more decentralized locations and office workers. One of the trends I saw through the second quarter is, while office sales overall had dropped, we’re seeing more of an incidence of suburban office sales. So you might be seeing more movement towards second and third year offices, as the Facebook’s and Twitter’s and Googles of the world, realize that it might be cheaper for them to have an office in Omaha, and pay Omaha wages and moved to San Jose.

Jason Hartman 31:44
No question about it. Yeah. And also, a lot of the big companies have talked about doing sort of this, like hub and spoke concept like the airlines do with their office space. So we’re obviously reading the same stuff, you know, and so little sort of conference center types of bourbon offices, you know, where people can go and work can get out of the house and have a change of environment and still, you know, have some social distancing, but but not go in as often. It’s interesting, the world sure is changing, isn’t it?

Rick Sharga 32:12
It sure is, in ways that none of us could have imagined in January.

Jason Hartman 32:16
Yeah, this is this 2020 has been quite a year of the year of acceleration, you know, changes, again, that were already happening. But now, it’s just moved the future up 510 years sooner. Rick, one thing we didn’t talk much about is the different price segments of housing or, you know, different types of markets, like our investors like to invest in these linear markets, you know, with lower priced housing, that’s $150,000. Certainly not California type properties. It seems like the shortage is more severe in this lower price, linear market housing than it is in more expensive markets. Do you have any data on that or any thoughts you want to share? Well, you’re

Rick Sharga 32:58
absolutely correct. One of the reasons for that is that none of the inventory being built is being built in the lower price tiers. And one of the reasons for that is it’s so expensive for builders to build a property. Fannie Mae estimates that it costs a builder $80,000 across the country before they break ground $100,000 in California, that doesn’t include the increased building costs, because of raw materials going up, labor costs going up. So you’re just not going to see a lot of new inventory being built at the entry level. In fact, some of the builders have shifted that kind of stock into build build for rent properties. The other problem is, we have a historically low level of existing home inventory for sale. So there are people sitting in those prices, the properties that would sell the lower prices, who simply aren’t putting the properties on the market, because they’re not sure if there’s something for them to buy. They’re not sure how stable their economic situation is because of the recession. And candidly, they may be uncomfortable going out looking for a new house for fear of catching the virus. So until we start to see a little more building activity, that frees up some of the properties at the lower end. And until we see people more willing to list their properties. We’re going to continue to see a shortage of inventory at that part of the price year. And we see the cost of construction materials like especially lumber lately, just some guy rocketing now, that’s going to tone down a little bit when you look at the lug nut lumber futures market, it’s, you know, has signs of toning down a tad but still very expensive. And that’s just going to keep the upward pressure on so we really do have an affordable housing crisis in this country, don’t we? And there are no easy solutions. I was talking to somebody yesterday about Vice President Biden’s notion of having a first time buyer credit tax credit of $15,000

Jason Hartman 34:50
that’ll just make more first time buyers and push the prices up. It’s exactly what I was gonna

Rick Sharga 34:54
say all over again. You know, it’s it’s a well intended approach that doesn’t really Understand the market dynamics. Of course, I keep going back to what Ronald Reagan said the scariest words in the English language are from the government and I’m here to help.

Jason Hartman 35:08
I love it. That’s one of my favorite Reagan quotes. He was so great. He said some of the best quotes there. They’re awesome. Well, Rick, this has been really, really phenomenal. Anything you want to just wrap it up with any thoughts, any advice for investors,

Rick Sharga 35:22
there are going to be investment opportunities I would be looking at at rental markets as short term opportunities, whether it’s traditional rental or Airbnb, I would keep my eye on low dollar commercial assets in the retail and hospitality space in particular. And again, I would I if you’re looking at the foreclosure market, I would be looking at the early stage foreclosures as where a lot of the activity is going to be taking place. So you have to tune your game up and be ready to approach those distressed buyers of those distressed homeowners rather and not wait for those properties come to auction.

Jason Hartman 35:54
Good stuff. And of course, which website Do you want to give out? Just realty trac.com

Rick Sharga 35:58
Yep. So visit us realty crack calm. There’s no k on realty Trac, Arielle t, y, tra, AC, sign up for our blog. If you want to follow this kind of stuff. It’s free, nothing required other than your email address. And if you like this kind of information, feel free to follow me on Twitter, or reach out to me on LinkedIn. I’m not hard to find. It’s just Rick sharga.

Jason Hartman 36:19
Excellent. Good stuff. Rich chakra, thank you so much for joining us. It was a pleasure. We’ll have to do it sooner than another 10 years. Absolutely.

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.

Case-Shiller Index, Housing Bubbles & Permabulls

To start the show, Jason Hartman shares an update from the 2020 election. Adam joins him to discuss the possibility of voter and election fraud. Then, the two talk about the housing bubble and the misinterpretation of the complex US housing markets.

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 0:28
Welcome to all of you people out there in election land sitting on pins and needles as this election is a it is a close contest, isn’t it? Adam, our fellow democrat and team member, we got point counterpoint here today, maybe because we’ve got both sides of the political aisle represented. Adam, welcome. How you doing?

Adam 0:53
I’m doing pretty well. I didn’t pay a ton of attention last night. So I’m doing well.

Jason Hartman 0:58
Well, that was a good discipline not to pay too much attention to the election last night. Because, heck, you know, I had a feeling we wouldn’t know anything. And you know what, I have a feeling we’re not going to know anything for a few days, or maybe even a couple of weeks if the Supreme Court gets involved. But we’ll see what happens as the democrats try to steal the election. I thought you’d appreciate that. Yeah.

Adam 1:22
You know, I was talking with the race. Monday, I think, and we were discussing the election, and he was saying nurses and other investment Council for those who don’t know, and he was saying he’s not sure if he’ll see another republican win the popular vote for the rest of his life. And it’s quite possible. Well, you know, I

Jason Hartman 1:38
think if it does turn out that Biden wins, and they give amnesty to, you know, what 12 to 15 million current illegals, or is Hillary Clinton says workers without papers. You gotta love that one, then that will lock in a democratic vote pretty much for many, many years to come. I am hoping that does not happen. Because I think that would be extremely unfair. But hey, we have what we have. That’s the world we live in. So let’s dive into it. today. Of course, income property is the ideal asset class, because it provides income, depreciation, and of course, we mean depreciation in a good way as a tax benefit. It’s a wonderful thing. The best tax benefit of all is depreciation, and equity growth. That’s obviously good and appreciation that’s obviously good. And leverage, meaning you can do more with less. So let’s go ahead and jump into our talk today is we’re going to talk about bubbles and so forth. But of course, visit our website for privacy policy, disclaimers, and all that good stuff. Reach out to us, Jason hartman.com. Or if you’re in the United States, you can always call us on a good old fashioned telephone at one 800 Hartman, but that’s a US only number. All right, so Adam has prepared some good stuff for us. But before we get into investing content, and talk about income property, the most historically proven asset class in the world. At the time of this recording, Biden is in the lead. Adam, what say you I am really surprised to see Arizona go to Biden that, that just kind of surprised me. Actually, I didn’t think that would happen.

Adam 3:22
I have to give it up my tinfoil hat and just made a comment on our, our, our presentation. Did Kanye win my tinfoil hat? Thank you for making me laugh this morning. I appreciate it.

Jason Hartman 3:36
Kanye did not win. Now. Kanye, I don’t think is gonna win, at least not this time around.

Adam 3:43
Give him four years. Who knows when? Yeah, I kind of I knew it wasn’t going to be the landslide. But, you know, all the pollsters were predicting I actually posted I think the poll the polling business might go out of business after this election, because they’ve been shown to be they’ve been shown to be pretty useless. The last two elections.

Jason Hartman 4:01
Yeah. And pretty biased. I think, you know, polls, actually, they create a self fulfilling prophecy issue and just want to remind everybody about self fulfilling prophecy. One of my favorite quotes comes from the old sleepy California senator si Hayakawa be late I should say, but he was kind of a sleepy guy. But he wrote a book on self fulfilling prophecy, which is pretty interesting. And he said something very telling. He said, the self fulfilling prophecy is something that is neither true nor false, but it is capable of becoming true if it is believed. And, you know, that speaks to the idea of political polls, because they do influence elections. You know, if the pollsters say this or that, it’ll keep people at home, they’ll stay home, they won’t bother to vote, you know, or it will make people just give up and say, you know, Biden won or whatever right? So the polls really do bias people. And I think they should be, you know, not allowed maybe for a week before an election or something like that. But the problem we had this time is you had all this mail in ballots, and I’m sure there’s just massive voter fraud, saying that in a partisan way, I’m just saying that’s just a fact. What do you think about that? Adam, do you think I’m being paranoid when I say Yes, I

Adam 5:23
do. I think they, I think they’ve shown that there’s the number of instances of mailing of ballot fraud in general, is very low. Very, very low.

Jason Hartman 5:35
Okay. So let’s just let’s just slice that up for a moment. You know, would you agree, I’m going to ask you a couple of questions on this as our fellow democrat representing represent. Okay. So would you agree that most postal workers would be democrats?

Adam 5:52
I would say you have a decent likelihood that the people at the desk and sorting your mail are Democrats? Yes.

Jason Hartman 5:58
What about the people picking up and delivering the mail? The carriers probably. Okay. So so you agree that most postal workers probably Democrats, okay. Do those postal workers know which districts are likely to leaning republican or democrat based on you know, their route? Do you think they know that? One would assume that they have a general idea? Yeah. So you know, general ideas, if they’re in a, like an upper middle class area, or a middle class area, or now with Trump, sort of as a populist president, working class sort of blue collar area, which Trump obviously appeals to that vote quite a bit. They know what area they’re in. Right. And the ballot is in the package. You know, you can see it’s a ballot, you know, they don’t have to open it to know what it is. Right. So you agree with that? Yeah. Yeah. So the mail carrier, if they’re in a largely republican district, they could just see ballots and decide to lose them.

Adam 6:59
They could except most states have a way to track your ballot. Well,

Jason Hartman 7:04
tell. Tell us about that.

Adam 7:05
I mean, you can literally in a lot of states, go online and see if your ballot made it and if it’s been counted,

Jason Hartman 7:11
but you can do a text alert. Okay. So first of all, I didn’t know that I didn’t vote by mail. So I didn’t use that system, or president did. Okay. Who did? Trump he votes by mail? Yeah, I said Trump went to the polls. He know what he did. I know milania did know, Trump went to the polls as well.

Adam 7:30
No, he votes absentee all the time. He may have gone this time, but the last election, the voter emailed in his absentee ballot.

Jason Hartman 7:37
Interesting. Okay, so, so you can track whether your ballot was received or not,

Adam 7:42
I did, I did not know that. I don’t know if you can in every single state, but I know in a lot of states, you can,

Jason Hartman 7:47
okay, but someone has to do that. And you know, they have to take an active role and do that and see if the ballot got there and was counted. But you could say

Adam 7:58
the same things about voting machines, though. You’re putting your vote in and who knows what’s happening when the the bits and bytes start happening? Fair, fair enough.

Jason Hartman 8:08
But that’s a lot more complicated fraud to orchestrate. You got to be a tech person and be able to hack the system or run the system. And by the way, just so you know, listeners, I did a couple of episodes on that many years ago, maybe 1012 years ago on the electronic voting machines, and the possible fraud there on my holistic survival show, maybe played those on the creating wealth show years ago, I can’t remember but look in the back catalogue for my old shows, you can learn about that stuff. But yeah, you know, what do you think? I think it’s pretty easy. Or if the if a postal carrier level and the postal sorter level for them to influence the election with these mail and balance. I just think it’s really scary. I mean, there’s more male in this time than ever before. Okay. Yes. We always had absentee ballots and stuff. I get it. But this time, it’s a thing right with with COVID. It’s, it’s all changed.

Adam 9:07
I just I believe in the goodness of humans, Jason.

Jason Hartman 9:10
I don’t think they’re doing that. Oh, my God. Are you kidding me? I believe that most people are good. Well, okay. So I don’t know most people, some people, a lot of people I don’t know, I don’t

Adam 9:23
think ballots are getting lost. magically. I don’t think people are getting bags, full ballots and throwing them out. You might find ballots thrown out. But they’re going to be ballots of people who received them in the mail and decided not to vote by mail, and got rid of it. Well,

Jason Hartman 9:38
we’ll see. We’ll see. Folks, what do you think? Comment below and tell us what you think. And also please tell us where where you’re located. When you’re watching here. We’d love to hear from you, Mike Rinder and

Adam 9:49
one of my clients that every precinct in Washington also has ballot boxes if someone doesn’t feel comfortable mailing their ballot.

Jason Hartman 9:56
Yeah, I know Michael. I was on his podcast a long, long time ago. So good guy. Good guy. So I don’t think I’m showing the right comment he must have no,

Adam 10:04
he commented again, a little bit below that. Okay, so I mean every ballot every area does have ballot Drop Box Texas had lawsuits about that this time around because our governor tried to limit it to one per County. So that would mean that all of Houston, 5 million people had one ballot drop off location.

Jason Hartman 10:21
Hmm. Let me let me get worse. Yeah. Let me just jam through some of these comments here. landslide 60,000 votes. So that’s Kanye. Kanye got a 60k? Did he really? I don’t know. Okay. I don’t know, either. Okay.

Adam 10:35
So most of the voter fraud allegations and lawsuits that have actually happened that they’ve discovered had been republicans

Jason Hartman 10:42
for the record. I’m skeptical about that. Again, I haven’t researched this issue a lot. But it just seems very logical that you know that, based on the questions I asked Adam a moment ago, that that fraud is really and this is not a big orchestrated fraud. It’s just losing ballots. That’s all it is just losing that. That’s just really easy to do. You know, just super easy to do. Okay. Okay, so the gold color. You mean chicom? Charlie, Washington gov, brought up by the Chinese waiting for a Red Dawn event.

Adam 11:13
I don’t know what that means. Adam, if you do, please go ahead. Not sure. Yeah. Okay. All Time bargains of federal postal carriers decided to lose ballots. And that’s a federal felony. Yeah, I agree. It’s not worth it’s not worth the risk.

Jason Hartman 11:27
Good Book. Good luck. Good luck. Finding I mean, seriously, do you know the bar the standard by which it is to prosecute somebody for that? It’s insane. Okay. It’s like how are they gonna? People aren’t gonna chance to Jason they’re not gonna chance it kidding me. people commit crimes all day, every day. It’s all the time. Okay, so hey, sunshine girl, regular viewer from Australia.

Adam 11:52
So sunshine girl says media also lead you to believe things if they repeat them enough. Don’t let them convince you as Americans that you’re so divided that you must degenerate into fighting and civil war stick together.

Adam 12:05
Good luck with that. Yeah.

Jason Hartman 12:07
Good luck with that. Right. But I agree with it. That’s, that’s good. Okay,

Adam 12:12
my tinfoil hat says I find it odd that they’re gonna do digital money. But there’s a question about voting. blockchain. Yeah. While the blockchain would be a way to secure in the future, and you’re in Seattle. Okay. What’s

Jason Hartman 12:25
this one?

Adam 12:26
sunshine girl in the Land of Oz is drinking coffee at bedtime. So she can pretend she’s in the states with the salt.

Jason Hartman 12:33
Yeah, yeah. So a little caffeine. Hey, cheers, cheers. Do you drink in mine? Okay. And, hey, you got a fan here.

Adam 12:43
Ivana says, Go out and my voted by mail and double checked on her ballot in Miami. So you could have done it, Jason. We’re gonna vote by mail and check your ballot. And Julian flash says both sides gonna assume that mail in votes were manipulated if they lose in this race.

Jason Hartman 12:59
Of course, both sides will say that. But I think one is more susceptible to that fraud. And that’s the republicans

Adam 13:07
and Gosling’s nest, that running jelly J. New York. So software can solve all the voting problems a single on your phone that is secure with validation, you can use the vote. This is all BS. What century are we living? Well, I

Jason Hartman 13:21
do agree with that. It’s really amazing how primitive the system is I you know, it really is. But I would like to see, you know, much more voting. If it were more convenient. And we’re done electronically. You know, there would there could be a lot more voting like we could vote, you know, during the debates, and we could vote for 30 people and weed them out in runoff elections. That’s the way it should be done. You know, they do that in some countries, much better system. But we’ll see. Hey, Adam, let’s talk about the potential of a bubble. There’s just not enough to say on the election yet is there? Well, you’ll have a whole lot more in the coming weeks. I feel Yeah. It’s It’s It’s like the old saying t TT too early to tell. By the way. As many of you know, your regular listeners and viewers. We planned in election coverage this evening, at five o’clock Pacific and eight o’clock eastern and I might postpone that because I just don’t think we’re gonna know anything. You know, I think there’s just it’s just gonna be you know, I can’t stand watching the the mainstream news media when they’re just sitting there speculating. You know, they’re just, it’s just like,

Adam 14:36
mostly it was it See, CBS had a little map that they were pushing all the things to change the electoral college votes by state and to go into each individual county and I was like, man, I don’t want to follow this. But I honestly didn’t watch much election coverage last night. I didn’t feel there was a point to it.

Jason Hartman 14:55
Yeah. So folks, just know that we might postpone this evenings. event, and we might do it tomorrow, we might just push it back another day. Well, I don’t know. You know, it’s just I don’t know yet. I don’t know yet. I don’t know yet. Okay, a couple more comments here before we get to the bubble, pick a bubble, find a panic. Yeah. Well, we’re going to talk about that today.

Adam 15:16
Ken says, I am so worried about our country’s economy, if Biden gets elected, more and more is coming. Yeah.

Jason Hartman 15:23
Well, I agree. And I share your concern, Kim. That’s a very valid. Okay, so let’s talk about this. In terms of a housing bubble, you know, everybody, you know, as soon as the COVID thing really hit, and that became a significant thing. People were talking about, Hey, I can’t wait, this bubbles gonna pop, now we’re gonna have a bubble, I’m gonna get my chance, again, the chance I didn’t take during the Great Recession. And I’m ready, I’m going to pounce. And I’m going to, I’m going to make all kinds of money buying cheap houses that are distressed. And you know, I’ve said it before, but I just don’t think that’s going to be a significant thing this time around. We’ll see. But let’s talk about it today. Okay, we’re going to share some statistics. Adam has prepared some good stuff, I’ve prepared some good stuff. Let’s dive into it. So on my side, I’ve been giving a presentation that I have not shared with my broader audience about the possibility of a housing bubble. I have given this presentation, two times to live audiences. And I am going to turn it into a webinar for you. And we’ll announce that here soon. Might as well wait till we know who is going to control the executive branch who’s going to control the White House, because it might change my thinking a little bit. I don’t know. We’ll see. We’ll see. Okay, here’s the guy with a golf gardens obnoxious music going by. So I’ve got my window open. Oh, the weather in Florida is so beautiful right now, folks. It’s just it’s perfection. It’s perfection, absolute perfection. But that’s a housing bubble. So, you know, when you look at a 100 year history, right, and you know, people look at charts like this, and they say, Oh, my gosh, we must be in a bubble, look at what the housing prices have done. Look at what they’ve done. And and and you know, this is the great recession, and then it goes back down. Now, this is the housing price index. Okay. That’s an index concept. So that’s different than housing prices. It is not exactly the same thing. So here’s another index, right. So this is the most widely quoted the Case Shiller index, which has all sorts of flaws and all kinds of problems. I’ve busted the myth with this. And I’ll just quickly say that 75% of the Case Shiller index is based on cyclical markets. As you know, I talked about three types of markets, linear, cyclical, and hybrid markets. And cyclical markets are more volatile markets, they do not reflect the broader country as a whole. in the country. There are almost 400 m essays or metropolitan statistical areas, the Case Shiller index, the primary index, only profiles, 20 cities, all right, and 15 of those 20 cities are cyclical markets that we would never recommend for investment. So you’ve just got to understand that the weighting of this whole index is misleading. And if you’d like more about that, you know, it takes a long time to explain and discuss it, check out my podcast, the creating wealth show where we’ve gone in depth on that topic, and discussed it, but it is what it is. Okay, so this chart is the Case Shiller index as faulty as it is. But you know, it is what it is. So he compares the Consumer Price Index, which is also faulty, the CPI, which is a reflection of inflation, okay, and we’ve talked about that in detail ad nauseum on the podcast. But if you look at the consumer price index, compared to the Case Shiller housing price index, you can see you know, here we are, at that, that peak, that sort of 2006 era, and then we see it come down, we sit, go back up again, and we see where it is now. So people look at this chart, without thinking without understanding. And they think oh, my gosh, we must be in a bubble again, because there’s this big departure between the consumer price index, and the Case Shiller housing price index. Well, I’m not sure about that, and you shouldn’t be sure about it either. This is very, very misleading. And we’re gonna show you why today. And before we get into Adams part of the presentation, I just want to tell you, that your rich uncle, Jerome Powell, and my rich uncle and Adams, rich uncle Jerome Powell, the chairman of the Federal Reserve, the largest, most influential, most powerful central bank on planet Earth, okay. That is backed by the US US government in an unholy alliance a whole different discussion we won’t get into has given Jerome Powell has given all of us a huge gift. And we better take advantage of it. And we’re going to share with you why today. Again, we’re going to do a webinar on with a lot more detail on what we talked about today. But we’re just going to give you a little sample of it today. So, you know, Adam, how do you invest in a bubble? But the first question is, are we in a bubble? Well, maybe you don’t want to answer that yet. It’s your turn.

Adam 20:35
So this was put around whenever I was talking to somebody on the phone, and I kind of got the whole Well, of course, you think Real Estate’s going? Well, because you’re helping people buy real estate. And so it leads into the question of, do we actually think now is now actually a good time to buy properties? Or are you just putting money into assets that are way too expensive? So if you go to the next one, go to the next slide. The question you have to ask yourself is are Jason and I just a bunch of carnivals, and most of you probably know, perma bowls is a permanent bowl on the market and the stock market. You can’t be a perma bowl. You can’t be a perma bear, it’ll get you on TV. It won’t make you a ton of money. In the long run.

Jason Hartman 21:18
I completely agree.

Adam 21:20
So the most important thing to remember, if you’re looking at this and coming at this is the fact as you’re looking at the housing bubble. commandment number five, Thou shalt not gamble, be a prudent long term value investor. Never get rich, quick gambler speculator or flipper by investing only in properties that make good financial sense the day you buy them. So when you’re looking at is this a housing bubble? The answer? Maybe? Yes, there is a national Case Shiller housing bubble. But the question is, is my market in a housing bubble? Right. And

Jason Hartman 22:00
that’s going to be something that I want to talk about today. Okay. And let me pose one much broader issue, on top of everything that Adams said. And I just said, is that the first question is, does it matter? Yeah. Okay. And here’s what I mean by that. Most people view the whole real estate market as this one dimensional asset class, and that is such bad thinking, Okay, it is just faulty thinking. And the reason is, is that it’s not about buy low, sell high. It’s not just about appreciation or depreciation. But that’s the way most people view it. And that is absolutely silly. It’s stupid. It should not be viewed that way. It’s a multi dimensional asset class. And as such, you’ve got, of course, price, you know, appreciation, depreciation, the value of the property, but you’ve also got the income from the property, the tax benefits from the property, the opportunity cost related to what happens when you wait, okay, if you’re trying to time the market, you know, it has been proven over and over again, that in in like, any asset class, the market timers never win overall, whether it be stocks, bonds, real estate, even cryptocurrencies, you know, all of this stuff. Okay. market timing is a fool’s errand. Okay. But, you know, it with with income property, it’s the best because you don’t depend on the price, the value of the asset, because you’ve got that income that sustains you through rough times. And when market declines. And you know, there are different rules for market declines in the real estate world, of course, one is that interest rates might be too high, and housing affordability would be really low. Well, what happens when that happens? You have to ask yourself, what happens? So when that happens, people don’t buy as many houses so they stay in the rental pool. I mean, you only really have three choices you can buy, you can rent, or you can be homeless, okay, someone at one of my conferences, shout it out. No, you can live with your parents. Yes, I guess that’s a fourth option, but in the broad scheme of things, buy rent or be homeless, right. So when the market is, by most people’s eyes not doing well, meaning prices are depressed, and everybody thinks well, it’s not a good time to buy or interest rates are too high or it’s too hard to qualify for a housing affordability is too low. Whatever reason is keeping them from buying. The end result of that is they’re staying in the rental pool. And if they stay in the rental pool, that puts upward pressure on rental prices. Great. Good for you. Okay, landlords sit tight, raise the rent. Gang, you, you won, you won. So good for you. Right? So it’s a multi dimensional asset class. And all you have to do with the beauty of income property, the most historically proven asset class in the entire world, is just adjust your strategy as times change. That’s it. Sometimes you’re in a cash flow market. Sometimes you’re in a capital appreciation market. But you’re always in a cash flow market in terms of the cash flow, it hardly ever goes down. And that almost never happens. Okay? I mean, I don’t want to say never, because it does happen sometimes. But almost never, you got to cash flow market. Sometimes you have an improving cash flow market, though. But you always have a tax benefit market, you always have leverage, you always have all of those ideal as the acronym characteristics we put as the first slide in today’s presentation. Okay. So, like Adam says, My commandment number five, Thou shalt not gamble. You want to be a prudent long term investor, and you buy properties that make sense the day you buy them.

Adam 26:16
Okay, Adam, what were you gonna say? I was gonna say, you need to remember that when you buy the asset of set a floor. And if you buy an asset that makes sense, the day you buy it, then you’re currently standing over the floor. So as you’re able to raise your rent, and raise, you know, the appreciation and all of that your floor is not changing. Your floor is there. And it’s us gives you a bigger and bigger drop that you can have before you reach that floor. And it’s important to remember, even in bear markets, you can make money in the stock market, people make money in a down market. If you make money in a down market in real estate as well. You can make money in a bull market, you can make money in a bull market in real estate, you can make money either way. It’s like Jason was saying you just have to adjust your strategy. So that is why you can be a permeable in real estate. You just have to adjust your bullish goals in a lot in some ways or strategies,

Jason Hartman 27:12
right? Yeah, absolutely. Let’s grab a couple more questions and comments folks be feel free to post them. Tell us where you’re watching from or listening from and post any questions or comments add them it’s all

Adam 27:24
Julian flash does politicians act like they are celebrities? news anchors act like they’re politicians. And that’s that’s true and it’s wrong but you’re it’s a good observation for sure. Sunshine girl or any of you buying real estate I am Australia pledged more QE and cut interest rates 2.1% yesterday gift you haven’t don’t look that gift horse in the mouth. Yeah. foil hat says vans on sale down by the river. Hey, by the way, I

Jason Hartman 27:51
got to mention something about vans. And Adam, you’re a millennial. So you know, I don’t know if you’re aware of this. But there’s like a whole culture of millennials in this country living in vans, traveling around the country living what they call van life. I only recently became aware of this. It’s absolutely shocking. Many of them have you know huge YouTube followings. They talk about our stuff their van how they live in their van, where they go how they do what’s called boondocking, which means not camping at a campsite. So it’s, you know, free they just camp on the street. So when you see vans on streets now there’s a lot of times there’s people sleeping in them. And I don’t mean like homeless people, I mean, voluntarily with the who are like digital marketers, usually YouTube influencer types, living in their vans. It’s absolutely unbelievable.

Adam 28:43
Yeah, and there’s even nowadays, as a homeschooling parent, I can say this, there are people who do what’s called road schooling. And they take their family, and they drive around and go to different

Jason Hartman 28:55
different states, different cities, different venues to show their kids kind of the all about the United States and the history. And so they like they’ll go to Philadelphia and you know, go see the Liberty Bell and study about that. And they won’t go to Philadelphia now because there’s riots. And guess what? They better go and show their kids the country and the Liberty Bell and the statues before they all get taken down. They’re almost all gone now, thanks to the tolerant, loving, compassionate accepting Democrats. All right, Adam, who do you think the rioters are? I’m just curious as a Democrat who’s who’s writing? Actually, it’s both sides. Oh, God.

Adam 29:36
Okay, you’re right there. They have arrested people at the quote unquote, liberal rallies causing trouble who are right wing extremists.

Jason Hartman 29:48
I don’t deny that there’s like three of them. Okay. I don’t deny that there’s a few. But by and large, the writers are Democrats. Okay. There’s just No question about that. I mean, do you agree that at least the majority of the writers are Democrats? Probably okay see Adams a reasonable guy folks that’s why I like him so much. He’s a little bit wrong but he’s reasonable.

Adam 30:18
Okay, so the gold color says Chai calm California the list of sellouts have passed and president of our rights money and everything else is almost gone. Thanks to Pelosi equals Flopsy, Newsome, waters, etc, etc. pops. I don’t know if that’s a typo or if there was a derogatory comment. I’m

Jason Hartman 30:36
not I think it’s derogatory, but I don’t know what it means. I think it’s just kind of a funny who Pelosi is Flopsy and Gavin nuisance and, and so forth. Yeah, California is a disaster. I mean, I think even even even a democrat would have to admit that or at least a democrat living outside of California. Adam, what do you say about California? You think it’s a disaster? It needs a lot of help put it that way, at least, how to get so messed up, Adam.

Adam 31:02
I don’t follow it enough. I have a feeling I know what you want me to say.

Jason Hartman 31:05
Yeah. Okay, I’m not trying to influence.

Adam 31:09
I genuinely don’t know how California spent their their tax money as a state. I haven’t followed it nearly enough to know how they’ve spent their money and how they’ve ended up where they are.

Jason Hartman 31:20
Hey, by the way, folks, scrolling across the bottom of the screen is our most popular ever webinar on estate planning, asset protection and tax planning to reduce your tax bill and, and hey, in election time, there’s a lot of talk about taxes. So you can check out that absolutely free fantastic educational webinar at Jason Hartman comm slash protect that’s at the bottom of your screen scrolling across Jason hartman.com slash protect that as a brand new webinar. It’s about what two weeks old on that topic and people have really just loved that webinar. So go check it out. Jason hartman.com slash protect.

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