Asset Protection, Rent Growth & MMT

Jason starts the show with investment counselor Adam as they discuss the growth of rent and home prices across the US. Different markets have been going and different speeds and they discuss how this impacts you as an investor. Later on the show, Jason plays a clip of Garrett Sutton talking about what asset protection is and isn’t. In the last segment, he chats with in-house economist Thomas about MMT, Modern Monetary Theory.

Investor 0:00
Do your research. There are some providers out there. I mean, this is true not just in real estate, but in general and sales that just wants you to get information from them. Do your research, and you’ll come to see, I think, at least for me that Jason, you, you look out for your clients, you I mean, I with my investment advisor, there were things that I was looking at initially, and there was absolutely no pressure there was okay, yeah, keep asking questions, do that research it. And not only is it better sales, because you have a competent client, but also you become more knowledgeable. So I do the due diligence, constantly investigate, ask questions, and also just look at the big picture. I think about that all the time. You know that they’re going to be hiccups. I’ve already experienced some hiccups, and I haven’t been investing that long. But overall, even with those hiccups, it’s still profitable.

Announcer 0:45
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 1:36
Welcome to Episode 1268 1268. Thank you for joining me today. And I’ve got Adam here with me. We’ve got a big show for you with a few things going on. Adam, welcome back. Good to be back. Thanks for having me. I also want to welcome our listeners from our top countries. We we went from a bottom up with our smallest number of listeners. While back What do we have listed In 186 countries now I think right so it was a whole lot it’s a lot It was more than we thought we only thought we had 165 so we were very excited and want to welcome everybody from around the world but the us is our biggest listener market. Canada number two, the UK number three Australia for Germany five South Africa six the UAE we took a venture Alliance mastermind trip to the UAE that is number seven, Sweden number eight, Japan number nine and Mexico 10. So that’s our top 10 markets right there. I think I got them all. We should do it backwards like David Letterman go top 10 and go up right.

Adam 2:39
I guess we pretty big jumps between number two and number one though.

Jason Hartman 2:42
That is true. Fair enough. Fair enough. It is Yeah, mostly us. But our lowest ratings are in Madagascar. Folks, listeners in Madagascar. Please tell your friends about the show. So they will come and listen. Okay, we need more listeners in Madagascar. Okay. This is so cool. I just love it. You know, it’s truly an amazing time to be alive, that you can talk to the whole world. It’s really cool. You know, speaking of an amazing time to be alive, drew our client who has been on the show many, many times talking about self management. He watches a lot of YouTube. And so he kind of inspired me I’ve never been much of a YouTube consumer. And we’ve been trying to sort of develop an audience on YouTube and you know, it’s going moderately well, I guess. So anywhere in the world. Please subscribe to my YouTube channel. That’s what we really need some help with. We’re not able to retire off the income from the YouTube ads yet. So keep watching. We don’t have any ads on our YouTube channel. No ads. But yeah, if we did, I would be starving. Anyway, the point is, Drew is a big consumer of YouTube content. And so I thought, you know, there must be something to it. And I really started Benjamin watching YouTube in the last two weeks, it amazes me how much great content there is out there. And I’ll share some of my favorite YouTube channels. I like that bright side channel pretty well and business casual. Those are good. And it amazes me how talented some of these people are. They just post this content and they put a lot of effort into it. So I’m just really impressed. So hats off to the it’s a wonderful world of ideas that circulate around the world, we really get to learn from each other. It’s an amazing time to be alive. And it’s also an amazing time to see some rent growth with income properties, isn’t it? Adam?

Adam 4:41
Well, depending upon what part of the country you live in, but if you live in the southwest, or if you own property in the southwest, at least you’re looking a whole lot better now than you did last year.

Jason Hartman 4:51
That is true. That is true. And how much better is it?

Adam 4:54
Well, if you’re in Phoenix, which some of our clients aren’t bleep

Jason Hartman 5:00
Many of them I mean, we were recommending Phoenix, we’ve been in and out of that market as prices have gone up and then up too much. And then down, that is a hybrid market. You know, there’s three types linear cyclical hybrid, Phoenix is a hybrid market. And right now, it’s just too expensive. Nothing makes sense in terms of rent to value ratios. And you know, that RV ratio is something we really, really look for as a prime metric. But I think we stopped recommending Phoenix in around 2014, I want to say, because the RV ratio started getting too out of whack, but a lot of our clients are there and they’ve got stabilized properties and they’ve made a lot of money. So let’s pat ourselves on the back end. Right.

Adam 5:46
So that went up. Just a little over 7%. Tucson went up just a little under 7% and your old stomping ground Vegas, went up just under 6%, which all sounds really good in some words. Until I went on the National Association of Realtors site and looked up home prices. Yes, and that is where the kicker comes in. So the single family rents over the past time have fluctuated about right around 3% growth rate, it looks like nationally. Here’s the problem. If you look around the country, home prices, the Midwest went up 8.1%. The South went up 5.2%, the West went up 3.7% and the Northeast declined 2.3%. So if you compare those numbers to rent growth, we’re not there.

Jason Hartman 6:38
Right. So the fallacy of something like this is that the typical low information investor looking to borrow a political phrase, the low information voters that just doesn’t really understand how things work. They read an article like this and they think, oh, wow, if I want to make the most money with my rentals, I’m going to invest in Phoenix. But that would be a mistake. And by the way, Phoenix is also my old stomping ground. I lived there for six years, only lived in Las Vegas, Nevada for a year and a half, which I really miss Phoenix, I tell you that was that was one of my favorite places to live. But you can’t invest there and make any sense of it. Just too expensive. Now, it’s certainly much better than the cyclical markets, like the expensive Northeastern markets, Miami, which by the way, we’re going to talk about Miami in a moment, and that one’s really have the double whammy of bad news, in a sense. And then, you know, the West Coast of the US, these markets are totally out of reach. But an investor might think, well, Phoenix ain’t too bad. But really, it just doesn’t work. From an investment perspective, from an rent to value ratio perspective. You become more of a speculator in a market like that.

Adam 7:52
If your AR and your V are going up, but your fees going up higher. You got a problem with your ratios there. And that’s what’s happening lately. I mean, The rents just aren’t able to

Jason Hartman 8:01
keep up. Oh, I like the way you said that. So the RS rent, and the V is value to value usually outpaces the rents. And that’s why these markets become a bad deal over time. And so you don’t want to be too late to the game when that ratio is really out of whack. Because that will make your investments unsustainable. So very important. Good. I’m glad you brought this up. Anything else you want to say about this?

Adam 8:27
I don’t think so. At the moment, I think it’s just the good news is it’s continuing to go up. I mean, you that’s the good news is we get farther and farther away from the Great Recession, and we start expecting pullbacks, at least we’re still in a phase where prices and rents are still going up. We’ve got that going for us.

Jason Hartman 8:46
Now. I was going to say something about Miami. So when I think Miami was mentioned in this study, wasn’t it?

Adam 8:53
Not in a good way? Yeah, it’s uh, I believe the term is dead last.

Jason Hartman 8:58
Yeah. It had the lowest grant. growth, the lowest, okay. And San Diego and Houston had the largest deceleration. Okay, so that’s low growth, okay? It doesn’t mean rents are going down. It just means deceleration and rents. So really out of whack markets and you know, we’ve never recommended places like San Diego and Miami, but Houston. That was great for a long time. We did lots of business in Houston over the years, but don’t have any anything great there now, so we haven’t been talking about it too much. But we do have, as you heard our special announcement on Sunday, we do have some great new construction properties in Atlanta from one of our favorite teams. We’ve talked to you many times about how the team really arguably is more important than the market. I’ve always said I’d rather have an A team of providers of local market specialist and the B market over In a market and a B team, because that team is going to make or break it, you know, Adam with all the properties you’ve purchased through our network, and of course, I’ve purchased her network. I have definitely found that to be true personally, as well as with our clients.

Adam 10:15
And I’ll also say that’s very true and this provider and the team will be at profits in paradise. Yes, you want to come and meet them yourselves before you purchase a new construction in Georgia or in they still have some in Florida as well new construction, they will be at prophets in paradise come and meet them and learn for yourself how great

Jason Hartman 10:34
their I just want to say something about that though, you said before you purchase these properties may well be gone by that time unless he is trying to buy another plot of land there. And I even offered to finance the deal for him. I said, Look, if you need money so you can build more houses there. I’ll loan it to you and I loaned money to a lot of our local market specialist that said nothing new. I’ve been doing that for many, many years, just so our clients Have more inventory. I have another company and I use my own money in that company to finance deals so that we can provide more and better inventory for our clients. So yeah, I’ve heard finance that deal just so he can buy it, but he doesn’t know if he can get the land. So, you know, I want to say this is fairly limited opportunity. And we’ll see where it goes. So, talk with your investment counselor, if you don’t have one, go to Jason Hartman, calm and reach out there. And we have a contest. Well, for we get to the contest. We’ll talk about that in a moment. Let’s talk about today’s show. What do we have coming up? I believe our first one is going to be a little person people know named Garrett Sutton. And he has, he has allowed us to use some of his clips that He has for people to learn about asset protection. And you want to talk about which one we’re gonna play. Yeah, absolutely. So Garrett was gracious to give us permission to play a lot of his paid content. He sells this stuff. But here you get a year for free. Okay, so beautiful thing friendship is it’s a beautiful thing. Thanks for being friends with us. We’re very generous to our friends and listeners and clients. So here you get it for free. You don’t have to pay $200. And we’re going to play a little clip about what asset protection is not a lot of you hear about what it is. It’s just a short clip part of Garrett’s series that he he sells, you know, to lots of people and they pay for it. We’ll be playing some more clips from his series as things go along. And of course, you’ve heard him on the show before. Look for more of those. So we’re going to play that little clip. And then we’re going to talk with our in house economist Thomas, about one of Adam’s favorite topics. Adam, what could your favorite topic

Adam 12:45
be? Well, what a topic that makes you believe that I’m a raging socialists, and that is modern monetary theory.

Jason Hartman 12:50
Yeah. mmt. You are a raging socialist, but

Adam 12:55
I still think it’s because you’re confused about what mmt is. But hey, we’ll talk about that. Another day.

Jason Hartman 12:59
Thank mmt thing when we had Mike Norman on a while back, he hung up on me. First of all. He hung up on me. I’ve only one other time had a guest hang up on me.

Adam 13:12
I worked with him at a radio station years before I met you. And him hanging up on people was not an uncommon occurrence.

Jason Hartman 13:18
Yeah, well, okay. I don’t feel that special

Adam 13:22
on me. Oh, well, but it had probably been several years since he’d hung up on somebody. So you got that going for you?

Jason Hartman 13:27
Oh, okay. Okay. Well, I’m in I’m in the more recent hang ups. Yeah, he just he just slammed the phone down on me when I started asking him questions. And he said, I’m not doing this interview. And I called him back and I kind of begged him and he did the interview. And all of you said, you really enjoyed that interview. So if you want to see you know, anything from our back catalogue, we’ve got well over 1200 episodes for you just on this show, not including all of our other shows about 5000 episodes in total. You can go to Jason And you can search the website and you can Look up Mike Norman, modern monetary theory or mmt is it’s called and get that there. But Thomas and I are going to talk about it today, after we hear from Garrett Sutton and let’s talk about the contest. Okay, so this is the biggest, best and most generous contest we’ve ever done. We’ve done a few over the years, and we haven’t done one in about a year or maybe it’s been a while. Oh, no, it’s been two years since meet the masters of 2018, I think was the last one we did. Well, that was the video contest. But I think we had some little giveaways and things since then. I don’t know Maybe, maybe not. Maybe Yeah, maybe they were before but I want to do more of these. Time is what it is time it is time and this one is going to be particularly generous. So why don’t we talk about the prizes first. We talked about the prizes and you have come up with some absolutely fantastic prizes. I would say some of the most expensive prizes you’ve ever given out. These are the biggest prizes. We ever done. So here they are, there are three prizes and there is potential for a big huge bonus. Okay, so that’s the way this works. It’s it. I’m really excited about this contest the empowered investor contest. The third prize is one ticket to our upcoming profits and paradise event. That’s a two day conference in Orlando. And then the second prize is two tickets to profits in paradise. And first prize. drumroll that’s gonna say drum Ah, but you know, I thought we should save the drumroll for the bonus Sir,

Adam 15:37
we got a super get a super drumroll for the bonus. There you go. Okay.

Jason Hartman 15:42
So the first prize is two tickets to profits in Paradise, upcoming event in Orlando or two day conference, and then a one year free membership to the empowered investor community. And I’m very excited about the empowered investor community. So putting it mildly Yes, yes, I know. I’m like jumping out of my shirt. I’m so excited about that. So can’t wait to talk more about it. We’re just working on the tech and the Tech has been a hassle as as technology can be. But Adam, there is a super bonus super bonus. He’s a super germinal. Hey, I didn’t know you were a talented drummer. That’s pretty cool. Okay, so the super bonus prize is if you win first prize Now remember, this is based on a blend of how awesome your video is. and awesome does not mean professionally produced although it could be. It could be we won’t cry

Adam 16:39
if you do.

Jason Hartman 16:40
Yeah, yeah, you can. You can professionally produce it if you want, but you don’t have to. It can be a homespun video, as long as the content is good. So awesomeness could mean great production value, great content blend of the two plus views. Remember, we want you to share your video and help us get the word out and the better The video the more traffic it will naturally get. So the super bonus foreign way, the biggest prize we’ve ever given out is a $3,000 allowance for our upcoming cruise a $3,000 allowance. Go to Jason Hartman calm check out the details on the cruise. You know if your videos just been awesome. And it gets over 1000 views on our YouTube channel because we’re going to post these on our channel selected videos and over 200 views on your channel. So you post it to YouTube, you get over 200 views, which should be easy. And then it gets over 1000 on our channel, and then you get a $3,000 cruise allowance. In addition to the prizes mentioned before, I do have to mention, there is no cash value to this. These are all prizes that we’re giving out for our events. It is going to be super exciting, biggest ever and you know what even if you don’t win a prize You can learn a lot by doing this. There’s huge power in committing to your goals in sharing your knowledge, talking about how you’re becoming an empowered investor and declaring it to other people. So it’s very powerful anyway. So do this for yourself. And look at the prize as the estate or the prize is, I should say, as the icing on the cake. Adam, what else should we tell them about that?

Adam 18:28
Give them a little guidance, I would tell them that first off, keep it under 10 minutes, as we said in the thing, because it’s important not to go off on too big of tangents like Jason would know about tangents. But to keep it short, and kind of to the core of it, because you don’t want to try to plan out all of the little details that are going to happen. You want your big, broad ideas here, kind of what is going to make me an empowered investor, kind of what is it that’s standing in my way that I need to learn in order to be a better investor and talk about then you look at how you’re going to Are you going to find mentors in your area? Are you going to make it a mission to read more books? Make it a mission to listen to all 1200 podcast episodes,

Jason Hartman 19:09
you know what a mission to come to all of our events

Adam 19:12
to come to all the events. So just what are the big things that are going to help you because if you start going too nitpicky, you can get lost in the weeds, but look at the big building down the road, that is your investment goal, and make that road to it.

Jason Hartman 19:27
Good point. So keep it like the big plan the big broad strokes of the plan. And remember, you could just make a five year plan video, or a 10 year plan video, like before, it could be that the five year plan, that last contest we did is really part of being an empowered investor. But this allows you to be more broad, okay, where you could talk about technology or using in your real estate investing. You could talk about another component of your business. Or how you’re dealing with your property managers, or how hopefully, you’re not dealing with property managers and you are self managing your plans to refinance your property or maybe you’ve already done refinances with such low interest rates, or how you’re going to benefit from at the last meet the Masters what we call the big boring idea, ROI, a return on amortization. So that’s the plan, make it posted to YouTube with the hashtags Jason Hartman and the hashtag empowered investor two things. We will select certain videos and upload them to our YouTube channel. And here’s the reason that’s important is because the winners will be judged on a blend of two things, the quality and content of the video and by quality I don’t mean it has to be professional and slick. You don’t have to be a great video producer for this. I just mean the quality of of your plan. Okay. Are your ideas, okay? And the content, right the quality and the content and then the number of views. But if we choose your video and post it on our channel, those views will count. And we will add the views you got and the views we got up. And we will count the two together for number of us category. Okay, so basically two things quality and content number of views. So you’ll want to share it and show off to your friends of how awesome your plan is, and they will all be very envious, and they will seek you out as a guru and come to you for advice. So that’ll be good too. And then, you know, hey, maybe you can become a guru too, right? So look forward to this. We’ll have more details as the contest unfolds, but get busy making your videos. And Adam We better get to Garrett Sutton

Adam 21:48
ready? Let’s learn what asset protection isn’t.

Garrett Sutton 21:51
Welcome to start your corporation or LLC get protected now. My name is Garrett Sutton. I’m an attorney and an author and employee you’re considering taking this important course. I’m sure you have several questions. So let’s answer the main four questions I’m sure you have. Is this the right course for me? Am I going to learn the right stuff? Am I the right instructor for you? And am I rightfully going to be bored to tears? No, but we’ll get to that. So let’s answer the first question. Is this the right course for you? I built this course for entrepreneurs, business owners, real estate investors, and those with assets to protect, as well as for those with the drive to acquire assets that will need to be protected in the future. Hopefully, you’re part of this group. Now, they don’t teach corporations or LLCs in school. Heck, they don’t even teach asset protection in law school. This is important information that you’ve got to get on your own. So I hope that this is the right course for you because it’s important information. that most people need to be able to understand. Am I going to learn the right stuff? I really hope so. I’ve based this class on a course I taught across the country over a four year period. in teaching that class, I came to understand what people did and did not understand about our legal system, and about asset protection. So this course evolved according to the needs of the students. And that’s what you’re going to get a course that will teach you what you need to know about asset protection. Am I the right instructor for you? Yes. Let me give you a little background. I tend to Colorado College for two years and then graduated from Berkeley with a degree in business administration. I went across the bay to Hastings College of the law, the University of California law school in San Francisco. I then practice law in San Francisco and Washington, DC See, but I spent all my summers as a kid up at Lake Tahoe and really liked the idea of living in the mountains. So in 1989 and moved to Reno, Nevada, and it’s just been the perfect town for me. Along the way, I became associated with Robert Kiyosaki and the rich dad advisor group. And in that series, I’ve written a number of books, including start your own Corporation, run your own Corporation, loopholes of real estate. These books are also on audio, you have to listen to my voice, but we have mall on audio, and we’ve printed a couple of them in Spanish. This one start your own corporation is available in Spanish. So I’ve written books on the topic. As I mentioned, I’ve taught the course over a period of years. So I sincerely hope that I am the right instructor for you. Now, will you rightfully be bored to tears? Well, I’ve got to be candid here. There are no entertaining cat videos in this course. I tried to be true to the material. So, as part of the material, what we’re dealing with is protecting your assets, or losing them all at once out of the blue, a concern that keeps people awake at night. So the course won’t bore you. It may motivate you are in lecture 50 we have a right now service and with your certificate of completion of this course, you’re entitled to a discount on forming a corporation or an LLC. But more importantly, this course will enlighten you as to how our legal system works, how others have protected themselves, and how you can easily do it too.

Jason Hartman 25:43
And now let’s talk with Thomas our in house economist about modern monetary theory. I want to welcome art in the house economist Thomas young back to debate something

Jason Hartman 25:58
that is well maybe not debate That might be the wrong word. But to talk about something to enlighten us on something that you’re hearing a lot of nowadays, you’re hearing a lot of this from those folks on the left side of the political aisle. Those folks who believe in socialism, those folks who I say, want something for nothing. Am I wrong? Or am I right about that? I don’t know. Let’s explore it. We’re talking about em. MT. A lot of you really, really gave me some great feedback on my show. The first show I did about that. I don’t know what was that about a year ago with Mike Norman, talking about modern monetary theory mmt Thomas, this kind of seems like you know, you can get something for nothing to me, what is mmt and, and can you get something for nothing? Or is that even what the whole theory is, in essence promoting

Garrett Sutton 26:59
so nmt supporters, they’ll say, Well, people that don’t like mmt, they kind of think we don’t know what we’re talking about or we don’t. You know, we think we can just print money and nothing will happen. It’s okay to print money. You know, I think the theory has some ground in actual practice in the, you know, the developer of mmt Warren Mosler. He’s a financial theorist. And back in the 90s, he thought, well, is Italy going to default on its debt? Would it actually default? And he bet that Italy wouldn’t default. Well, how could that work? So he bet against what other bond traders were betting on and he made 100 million in the process. And obviously the way Italy did not default is it came up with a bunch of money that was not tax revenue. It was basically money that came out of the air right. I think the main disagreement between mmt the supporters and empty and those That are more mainstream is that mmt supporters think that debt doesn’t matter. They kind of think that demand is what governments and central banks should be concerned about demand for their currency. The first answer is, well, where do we have lack of demand? And the answer is, well take the case in Japan. They’ve been printing a ton of money. And for a long time, and it hasn’t led to strong inflation.

Jason Hartman 28:30
Okay, so so let’s kind of set this up for just a minute, maybe let’s just back up a step. So I believe that most economists will tell you, in fact, Milton Friedman said it Well, I think he said something to the effect of inflation is everywhere and always a monetary phenomenon. Okay, I think that was Milton Friedman. I hope I’m attributing that right. And I agree with that. I think that you know, when you create more money More currency, I should say more dollars in this example, you have more dollars chasing a limited supply of goods and services. So of course the price goes up because the sellers raise the price, the suppliers raise the price. Now mmt says, Hey, you can just create more dollars without causing inflation.

Garrett Sutton 29:22
Right? Yeah. And they say that because, you know, it depends on which mmt supporter you talk to. But in general, I think mmt thinks that there’s a lack of demand,

Jason Hartman 29:32
right. And the demand is for currency,

Garrett Sutton 29:35
right? demand for government services. So, you know, AOC will go out there and say, well, we don’t have to tax for the spending priorities. We can just go out and spend the money. Okay, and then we’ll never have to pay it back. We’ll just issue more money and it will create demand where there is demand for government services. And, yeah, basically have your cake and eat it too, right? You get something for nothing.

Jason Hartman 30:04
Okay, so the government says, Okay, we’ve got to provide more services. How are we going to pay for them? Well, instead of raising taxes, we’ll just create more of our currency and do what I mean. So they create more currency. Well, usually the counter thing to that is someone has to buy a government bond, a treasury, right or no, that’s the traditional thing.

Garrett Sutton 30:27
Yeah, that’s the traditional thing. Okay. The way it is now is the Treasury Department is separate from the central bank. Yeah.

Jason Hartman 30:33
But they’re, they’re working together. They’re colluding.

Garrett Sutton 30:38
I think that’s kind of empties insight is that mmt supporters say, well, they’re not really independent. They they work closely together, they know what each other is up to, so that they they can collude. I shouldn’t say glue. I don’t know what you call it, but to me, it’s collusion where they’re working together to issue more debt to finance government expenditures.

Jason Hartman 31:01
So look at the folks on the left would love to have more government goodies or handouts, politicians would love to have more goodies to hand out because that’s how they either get elected or stay in power. So they’re all going to be happy with this idea. But it seems like any rational economist or business person is going to say, Well, hey, if you create all this money to pay for these government services, then the value of the money is going to go down. Because the way something is valued is by its rarity and its utility. Look at diamonds are rare. Sand is abundant, sand is cheap, diamonds are expensive. Okay? I mean, that’s pretty simple to me. If you create more currency, the currency becomes less valuable because it’s less rare. Is that not true? any of that?

Garrett Sutton 31:48
Obviously, that is true. It’s going to be true, or else markets would respond, I think. I think an mmt supporter would say, Well, why isn’t there inflation? Now then

Jason Hartman 32:00
well, because it’s a matter of degree. I mean, he used the example of Japan when we started. So Japan has been creating a lot of currency. and Japan has a massive debt obligation. And it’ll likely default somehow or another. So that’s a mess. But Japan has a whole host of other issues. It’s not just about the money. If they created more and more and more, eventually, the value of their currency would be meaningless. I mean, if mmt were true, why not just give everybody everything? Why not have the government do everything for us? Why not? Have the government provide free health care, free food, free transportation, free housing, free everything? You could just print money and they could just provide everything we don’t need to pay for anything at all. How about if the government just gave us all free, you know, accounts and said we could spend a million dollars a year on Amazon They’ll just print currency to pay for it all. It’s a silly idea. I mean, just Am I missing something? Am I oversimplifying?

Garrett Sutton 33:08
No, I think the only way mmt could work in practice is if foreign governments or if any government was never honest about what they’re doing, right? If they say, oh, we’re just going to print money forever and never pay our debt back the currency markets and anyone buying the government debt would wouldn’t ever buy it. That’s the end this thing’s worthless. But they don’t ever say that. Right. Japan is always out there saying, no, we’re not printing money. were right. They mentioned raising the value added tax to pay for their additional spending. So they I think that’s part of the public relations strategy of central bankers is maybe they write the issue money, that probably a bad idea. But then with the other side of their mouth, they’ll Talk it back and saying, well, we got to fix our fiscal discipline. You know, so one hand is doing one thing the other hand is doing another. governments can do that until markets say, Hey, what’s going on here? Eventually currency markets will say, Japan, they’ve got a giant problem. We’re not we don’t we have no interest in their debt. That’s not the case yet.

Jason Hartman 34:25
Okay, well, interesting. What else do you want people to know about mmt.

Garrett Sutton 34:29
So there are really five assumptions, six, maybe that that would make mmt valid or invalid. And the third one, that unemployment as a result of government spending, you know, an empty supporter of US government spending as a way to reduce unemployment, but I don’t, you know, government spending from 2009 to 2015. It was declining. And, you know, unemployment rate kept ticking down after the recession even though government spending was declining, I didn’t really see that unemployment is a direct result of government spending. Yeah, the another one, inflation is not related to government spending and poor tax decisions generally. So obviously, that can’t be true over the long term. supporters will say, well, in the short term, it’s fine. I think the big one that you mentioned that solvency is irrelevant.

Jason Hartman 35:26
minor detail. Definitely deficits don’t really matter. Okay. You know, it is a fair question, though. I will throw this back in their court. It is a fair question to say how much is okay? Because we’re obviously testing the waters, we really don’t know. We really don’t know how much you can have in the way of deficits and debt. You know, how much national debt is okay and how much annual deficit is okay? And nobody really knows the answer to that question. Because we’re in uncharted territory, at least with a country with a, you know, reserve currency, at least right,

Garrett Sutton 36:06
I’m sure hope I don’t die before this gets resolved, but advanced and so called developed, I don’t like to call them advanced and not advanced, you know, just countries will eventually have to figure out how they’re going to deal with the giant amount of debt. And you know, I haven’t heard a good solution.

Jason Hartman 36:25
Well, that’s funny what you just said about death. Not to be morbid here. But it’s an interesting thing. I mean, one of the great reasons to live a long time and to listen to my longevity show podcast is so you can just stick around long enough to see how it all plays out.

Garrett Sutton 36:43
I really, I do want to be alive when this gets played out, you know?

Jason Hartman 36:46
Yeah, yeah. It’s any economist, they want to know what’s going to happen with all this. Yeah, very interesting. Alright, so deficits don’t matter, according to the mmt folks, and I guess that doesn’t matter either. It’s kind of you know, one leads to the other Tax and bond sales come after government spending. What does that mean?

Garrett Sutton 37:05
Yes, this is that yeah, this is the mmt I guess this is the main mmt. Inside is the government spend the money and then taxes and bond sales come after the appropriations, you know, and traditional models, the two are decided simultaneously, right, revenue is decided and then government spending comes but, you know, I think they have a point, right? government spending happens, and then they figure out what they’re going to do in terms of paying for it. Well, that’s true, but so what?

Jason Hartman 37:35
That doesn’t mean it’s okay. That’s like saying, Oh, I’m gonna go run up my credit card debts, get myself into a massive hole, and then I’ll figure it out. mean, that doesn’t mean it’s okay.

Garrett Sutton 37:47
All right. No, I agree with you.

Jason Hartman 37:49
Yeah, it a treasury auction. That just means that foreign governments won’t buy our debt. And then, you know, eventually that’ll be a mess.

Garrett Sutton 37:58
Oh, that would be a great Yeah, I can’t I can’t wait. No, I won’t be afraid

Jason Hartman 38:03
it won’t be a great day. You just want to see it happen and

Garrett Sutton 38:05
see how it plays out. Right? Yeah, there’s this famous physics professor that I forgot his name, but he was dying. And he said it was a shame that he had to die in the day of relativity. He was living at the time of Einstein. Yeah. You don’t want to die when something bigs happening?

Garrett Sutton 38:21
Yeah, well, Weinstein

Jason Hartman 38:22
and Stephen Hawking are gonna miss out on some new things that come down the pike. So, Higgs boson, right, you know, the God Particle. Yeah, there’s just a lot of stuff. Well, Thomas, thanks for coming on and talking about this and mmt folks, what do you say go to Jason Hartman comm slash ask Jason Hartman comm slash ask and tell us what you think or ask us a question. Thanks, Thomas. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and terms of service. Remember that guest opinions are their own. And if you require specific legal or tax advice or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.

George Gilder’s on Economic Theory and Tal Ben-Shahar on The Happiness Studies Academy

Jason Hartman starts the show with an update on Meet the Master’s keynote speaker George Gilder. He goes into a new idea on economic theory and how he’ll present it during the event. Later on the show, Jason hosts Tal Ben-Shahar, co-founder of The Happiness Studies Academy and best-selling author of Happier and the new book, Short Cuts to Happiness: Life-Changing Lessons from My Barber. They have a wide discussion of happiness- how is it measured, predictors of it, and how generations differ in their pursuit of happiness.

Investor 0:00
started listening to the podcast did that you know for probably a couple years before I connected with your investment counselor Sarah, she did a great job of kind of holding my hand through the process. I’m probably one of the more needy clients she worked with, but ended up buying my first property in 2011 in Atlanta, and then waited a couple of few more years until my next one, but 2014 purchased in Memphis. And so that’s where I am at this point.

Announcer 0:30
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states. Hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors. Welcome to

Jason Hartman 1:21
Episode 1150 1100 and 50. This is your host Jason Hartman and today we have a 10th episode show where we are going to talk about something of general I’m not going to say interest but super high importance. We are going to talk about shortcuts to happiness with our guest tal Ben Shahar. Great interview, I think you’ll really enjoy this and get a lot out of it. You can kind of hack everything in life, right? You can hack happiness, so why not do that. So we’ll talk about that today. Our upcoming meet the Masters event we are totally sold out of VIP tickets, but we still have a few Actually, I can tell you we have exactly 10 seats left, because two more just registered a moment ago. hope you’ll join us for that. It’s not far away. It’s just the week after this one, or the weekend after this one, I should say that, of course is in Newport Beach, California, beautiful place to have an event. So we have 10 seats left general admission and elite admission only. No, VIP left. Get your tickets for that at Jason Hartman, calm and I had another talk with George Gilder today one of our speakers for meet the masters. And before we get to the interview on happiness, I just thought it would be worth spending about three minutes with George. Just hearing a little bit about what he’s planning to talk about it meet the masters. He’s on a bit of a little mini speaking tour through Caltech and doing some other engagements in Pasadena with various science people. Then he’s going to come and speak at our event and so here is George Gilder I am very excited about the upcoming meet the Masters event. And of course we have George Gilder speaking. I had the pleasure of meeting him many years ago on a Forbes investor cruise in Scandinavia and Russia, and I’ve had him on the show several times. George, it’s great to have you on the speaker roster. Meet the Masters, we really look forward to it. Tell us about the new economic theory that you’re working on.

George Gilder 3:29
It’s really based on information theory. This is the theory that underlies the entire internet. Most of computer science it originated with could girdles incompleteness theorem, where it showed that every logical system is necessarily dependent on propositions that are not provable within the logical system and turning out Entering extended to computer science and said that all computers are necessarily dependent on outside or articles, or essentially programmers, Claude Shannon extended it to a whole wider net developed the definition of information that allowed you to calculate the capacity of any telecommunications channel. And Shannon also showed that his information theory was applicable to biology. And that’s cued me to the idea that if it’s applicable to all communications and computer technology, it certainly was the foundation for an economics that had real scientific roots rather than the somewhat speculative Keynesian theories that tend to prevail today. Very interesting. New economics based on information theory, and it’s being explored at the London I just got a communication from the London mathematical laboratory, which is an economic think tank and London, very influential with the Santa Fe Institute and other pursuits and they’re pursuing information theory of economics and they’ve discovered knowledge and power, which was my first book and that feels

Jason Hartman 5:30
you have such a fascinating history. I mean, you know, as a speech writer for speech writer for Reagan, I believe,

George Gilder 5:36
sort of, I mean, I helped write his acceptance speech at the republican convention and wealth and poverty was such a success at that point that I really couldn’t afford to write speeches. Yeah, and and I gave a hundreds of speeches for wealth and poverty and became President Reagan’s most quoted living Author, I remember that.

Jason Hartman 6:03
And I introduced President Reagan to Mike our chapter. And my cousin Josh Gilder wrote the Moscow State University speech. And that really began with me showing President Reagan a 64 k DRAM, from micron technologies, and explaining the capabilities, semiconductor technology Microchip Technology, and how it could enable a really successful strategic initiatives. Amazing how much things have changed since the 80s, and the talk of SDI and Hey, now we’ve got Trump talking about a spaceforce, a new division of the military. So it’s an amazing world. But George, I can’t wait to hear you speak at our upcoming event. It’s going to be great. You’re going to be talking about the big tech companies, namely Google how that sort of new relationship with Thoughts is changing and how you theorized that Google is now at the height of its power. That’s fascinating. I hope you’re right about that, by the way, and the information theory of economics, so I can’t wait to hear more and, and right before that you have a bunch of meetings and interviews and speeches at Caltech in Pasadena. Right? Right. Yeah. Good for come to Newport bit indirect light from beza, Dean and Caltech. Well, we look forward to seeing you in just over a week. Thanks again for joining us at the upcoming meet the Masters Well, thank you so much, Jason, for the invitation. It’s really exciting to meet the masters. So we will look forward to seeing all of you at meet the masters of income property, our 21st anniversary of this event. And by the way, if you tried to book a hotel room, the hotel room block closed, but if you talk to your investment counselor, they might be able to get you and accepted I know they were able to do that for one of our attendees just yesterday. So, you know, reach out to your investment counselor for that. The event starts at 9am. On Saturday morning, that’s when our conference begins. So registration at 830. We may open up an early registration on Friday evening. We haven’t made the decision on that yet, just to sort of lessen the strain on Saturday morning, but I think we’ll be a little more organized than we were last year on Saturday morning, so it should be fine. Come down, have a cup of coffee network. We start registration at 830 on Saturday morning, and then we go to about 6pm will take a break for two hours for dinner. And then we will have our band and we’ll have a concert on Saturday evening from about eight to 930 or so. And then we got to get you all to bed so you’re bright eyed and bushy tailed and on Sunday morning where we start again at 9am Networking at 8:30am. And we go to about six. So look forward to seeing you there in Newport Beach. But without further ado, let’s get to our 10th episode show and talk about shortcuts to happiness. Join us March 23 and 24th for the 2019 meet the masters of income property. Let’s break this down and look at some of the strengths of income property as an asset class. And I found that this event is really helpful because I am totally

Jason Hartman 9:26
a newbie to real estate investment. And so

Jason Hartman 9:29
I picked up so much information one

Jason Hartman 9:31
of the great things about it is it’s so fragmented, right? embrace the fragmentation. actually been learning a lot about the tax benefits to real

Jason Hartman 9:44
estate and a lot of I’ve been investing actually well over 10 years now. And I learned a lot of new things today. The other advantage of this weekend is networking. Meeting new property managers meeting new area specialists and seeing the product they have to offer that changes. Register now with Jason slash masters. It’s my pleasure to welcome tal Ben Shahar. He is the co founder of the happiness studies Academy and potential life. The New York Times best seller of happier learn the secrets to daily joy and lasting fulfillment and choose the life you want 101 ways to create your own road to happiness, and his newest book shortcuts to happiness, life changing lessons from my barber. Tell welcome How are you? I’m doing very well. Thank you. Good. It’s good to have you on. So here is a subject with talk about broad, wide ranging appeal, right? Who doesn’t want to be happier? Right? You actually participate in the I think it’s called the happiness summit. This is something believe sponsored by the United Nations. And this is where we see all those rankings of the world’s happiest countries, right?

Tal Ben-Shahar 10:53
Yes. So the United Nations for the past few years has looked into the happiest nations in the world. The findings are quite interesting. We don’t find the countries we expect to be at the top there so countries that regularly appear the top are Denmark, Norway, and then Colombia and Israel and Costa Rica. And the interesting question is is always why why these countries and not the wealthiest countries before began I get this, I totally get that they’re not the wealthiest but before we address Why are these to happiness?

Jason Hartman 11:29
I’d like to know how they rate such a thing. I mean, it’s a soft subject,

Tal Ben-Shahar 11:32
right? It is. Now that’s a very good and important question. If you’d asked me this question 30 years ago, I would have had a problems responding today though we have very good measures of happiness, some of them objective measures, we know we look at people’s brains, we scan them we know what a happy brain looks like. We know what a compassionate or a depressed brain looks like. While we mostly still today use questionnaires. There is a significant overlap correlation between or among the different measures, the direct brain measures, other physiological measures as well as the self report and you’re talking about

Jason Hartman 12:11
fMRI, you know, functional magnetic resonance and exactly Mr.

Tal Ben-Shahar 12:15
Eyes or fMRI, PET scans, he, jeez, they can all give us a hand. And you know, what’s it what’s very important when you do research is to use different methods, whether it’s direct brain scans, whether it’s self report, whether it’s other people reporting about levels of happiness.

Jason Hartman 12:34
How do you know what a happy brain is from a scan? How can a scan tell you that? Is it like a questionnaire and then the person gets into the machine and then you scan them and say, Okay, this person says they’re happy. And that’s what their brain do, how their scan looks? Is that what they do?

Tal Ben-Shahar 12:49
Yes, you could do that. However, the way people measure happiness levels is they look at what what areas of the brain are more active. So for example, we know that people with more activation neural activation that is in the left prefrontal cortex such as the front side of your, your brain, they tend to be happier people with more activation on the right actually tend towards depression.

Jason Hartman 13:13
That’s interesting. So So what is activation? Is? Does it just mean keeping oneself busy and engaged in life for does it mean something else?

Tal Ben-Shahar 13:22
No, it means that this place is is working, that the neurons there are firing. So, you know, just like you have you work at something, neurons are also working, they’re either on or off. And these particular neurons, particular areas of the brain are working well, that means you’re happier or less happy, or experiencing empathy or, or sadness. Okay. All right, go ahead. So the interesting thing about the finding of our national levels of happiness is that there’s only one thing that predicts happiness levels on a on a national level. And that is relationships. So countries that emphasize with the with the people emphasize social connections, real relationships where they prioritize it. These are the countries that are happiest. And again, these are the, you know, interestingly, in Denmark 93% of the population are members of social clubs. This could be this is active members could be in their church or Sailing Club or or my Zeon club, it actually doesn’t matter. But there are active members in countries like Israel and Colombia, you know, countries you wouldn’t expect people to be happy with all given the political issues that these countries had to have had to endure. In these countries, friendships and family relationships are very important are central to the ethos, and that’s why they’re among the happiest countries in the world consistently. In contrast, countries like the United States or the UK, Germany, Singapore, Korea, are far from being at the top of their ranking. Because relationships very often are taking a backseat to other pursuits. Yeah, yeah.

Jason Hartman 15:06
So are they taking a backseat to capitalism, then

Tal Ben-Shahar 15:09
not specifically to capitalism, specifically to success. And you know, people don’t realize, unfortunately that it is possible to have the best of both worlds. So to cultivate relationships and to be successful, in fact, in the in the long term, if you do focus on relationships, you will have more fuel more energy for the road ahead. Right, right. And those relationships also, you know, from maybe a business perspective, represent networking and connections, maybe, maybe they can turn out to do something for you in your career as well. But, hey, I guess maybe to broach this subject, everybody needs to get rich enough and successful enough to be able to afford to join a country club and then they’ll be happy, right? Well, that’s one way of looking at it. You don’t need to be a member of the most expensive Country Club right. Just having a nice dinner. At your, you know, local diner with friends or at home that generates just as much of what I’ve come to call the ultimate currency new the currency of happiness. Sure,

Jason Hartman 16:09
okay. Okay, so actually taking time for connection, drill down on that is there there’s got to be more to it, right? It’s not just about connecting and having relationships. I mean, what else

Tal Ben-Shahar 16:20
before I drill down, you can go, you know, from national level to to individual level. So like Harvard conducted by now a famous study over a period of 75 years where they followed their graduates as well as community members for 75 years. For most of them it was their entire life. And they collected literally millions of data points. And what they found was that the best predictor of both happiness as well as health, in other words, both mental and physical, health number one predictor relationships. Now the interesting thing about this industry where we can dig a little bit deeper The interesting thing was that it didn’t matter what kind of relationships meaning for some of them, it was a romantic partner whom they spend their life with. For others, it was, you know, family, For others, it was close friends. For others, it was business relationships. But these relationships were, here’s the thing, they were real, they were authentic. And this is especially important in today’s world, you know, unfortunately, 1000 friends and social media are no substitute for those, you know, one or two, intimate real

Jason Hartman 17:32
relationship means, in fact, it might be making you less happy, because there’s all kinds of studies, which I’m sure you are well aware of, that show that people that spend a lot of time on social media develop a lot of very envious traits, and it actually deepens separation from people. Oddly, you know, it’s sort of a double edged sword. I mean, it is good, but like anything in life, right, it needs to be kept in its place. I guess

Tal Ben-Shahar 18:00
Yes. So every Kleinberg, who’s at NYU is a sociologist has shown that the more time people spent on social media, the lonelier, they in fact are. So that’s one area, as you pointed out, that that leads to unhappiness. The second element that you also point to, is the social comparison. What do we see on social media? We see everyone being perfectly happy, right? With the perfect job, perfect family, perfect vacation, perfect life. And we compare ourselves to it and we fall short of that. And then this upward social comparison we engage in is making us miserable. But doesn’t

Jason Hartman 18:38
everybody know that? I mean, maybe it hits us at a different level, subconsciously versus consciously, right. Because I always I was like to say, you know, we live in an era where everybody is basically running their own self styled PR firm, and it’s pretty ridiculous and you talk about keeping up with the Joneses. It’s worse than ever now. You know, all the things people post You know, they, they sort of have a positive band because people don’t want to be negative and, and Hek negative people aren’t very attractive, right? So, you know, maybe we want to be attractive to each other and be positive about things, right. But the person who’s looking at their newsfeed has to know because they they’re probably doing it too. They don’t just think, oh, everybody else’s life is perfect, and my life is lousy, because I don’t post stuff like that. I mean, you know, I don’t

Tal Ben-Shahar 19:27
know, you know, yes, we know it on a on a conscious level. However, as Freud’s metaphor is, you know, the, the conscious is only the tip of the iceberg. Yeah, the subconscious he’s not doing that processing that you just went through. In other words, what’s happening is that that subconscious is thinking everyone is these having an amazing time and I’m feeling miserable. Right now that that is the inner implicit conversation going on. And unfortunately, it’s like, you know, you you look at the magazine covers or you know, a couple of my students have done research on this and salsa. theme and yet girls and women know that these are photoshopped images and that they’re only you know, a handful of you know, supermodels and yet this is what the subconscious is comparing them to, and it’s hurting their self esteem. Same with social media.

Jason Hartman 20:14
Tell us about your barber. What are some of these lessons that you learned from your barber?

Tal Ben-Shahar 20:18
Yeah, I must say the first lesson that I learned from my barber is that you can learn lessons from your barber. Okay. You know, for the past 30 years I’ve been an academic have delved into the academic journals and ancient texts and modern research. And here, you know, I went to my barber and I realized that I was actually feeling great after a haircut and great not just because he made me look better because he made me feel better. And I started writing a book about him and basically collecting his his pearls of wisdom over a period of two years, and many of these pearls of wisdom I then found similar ideas in Aristotle Lao Tzu 2500 years ago, or Marty Seligman and Sonja Lyubomirsky, were doing research in positive psychology today.

Jason Hartman 21:09
Talk to us about, for examples, a lesson on relationships from your barber.

Tal Ben-Shahar 21:14
So my barber again didn’t read the Harvard study on relationships or others, and yet he understood that in order to lead a happy life, he needs to, to spend quality time with people he cares about. Moreover, when we came into his salon phones were off, he encouraged us to be engaged with one another. And he didn’t need fMRI to show the impact of social media and social comparison. He understood it. So relationships was one thing the other thing was also interestingly silence and the value of silence. So there is one of my friends is who writes in the area of leadership talks about how silence is the sound of Thinking. And that’s so important. It’s so important for managers and leaders to spend more time in silence. And it’s not something that’s done enough because we feel very uncomfortable. You know, we even have the phrase, awkward silence. And yet these periods of silence are critical for self development and self growth. Yeah, I love what is that line from the Prophet by Kahlil Gibran. Of course, everybody knows the book. He says, you know, you talk when you cease to be at peace with yourself, talks about the importance of silence, so very, very good point. What else? So maybe another lesson add, how about anger? Does anger serve a useful purpose? Or is it all bad? You know, so anger, first of all, is natural. And, yes, it has an evolutionary reason and basis. However, most of the time when we get angry, it doesn’t serve us and you know, and reminds me one of the stories that I tell in the book about Ozzy is happened when I was having my hair cut in and a woman Walked into her haircut and she was saving. And Avi the barber answers What’s wrong? And she said, You know, I just got cut off by this idiot. And you know, I can’t believe you did that. And she went on and on. And then he says, Can I share with you? What would I do when when I’m cut off? And she said, Sure. And he said, you know, if I’m waiting for a parking spot, and the car comes out, and I’m about to go in, but then an SUV comes in, cuts me off and takes my spot. What I do then is and you know, we were waiting for probably I beat him up or something like that, because obviously strong guy says what I do is that I imagine that a cow just cut me off. Would you be right? Yeah. And we said, What? And you know, both of us were laughing. He said exactly, no, because if I think of a cow, I start laughing. I don’t get angry. Now, this is a very simple technique that Baidu I’ve been using, ever since. And it’s a technique where you didn’t know it, but there’s Actually research showing that we can’t experience two conflicting emotions at the same time. So I can’t experience amusement and anger or empathy and hatred at the same time. And then what happens? When you think of a common you experience amusement, you’re no longer angry at it and at that person, and it’s not worth being angry at the person and we can use this in a work situation when we’re with, with a client who’s upsetting us, or we can use it with our children when they upset us or our partner. So it’s a very simple and useful technique. Think of a cow cutting you off.

Jason Hartman 24:35
Yeah, okay. All right. Well, just the other day last week, a giant and I mean, giant and forgive me if I get it wrong, but I guess it wasn’t a Guana. I don’t know this huge prehistoric looking creature cut me off on the road and I had to wait for it to walk by. And it was a scary, ugly looking creature. But you know, I took a picture of it and thought who And I moved on. I didn’t get mad. If that was a person I might have. I admit, I was it. I was in a rush when it happened. And you know, I’m in Florida. So we have that kind of thing down here. And I would have probably, if nothing else sort of slapped my hand on the steering wheel, like, what is this guy doing? You know? So So yeah, that’s a that’s a good point. The cow, the cow is a good one. All right, what else? Maybe another topic area from your barber?

Tal Ben-Shahar 25:26
Sure. So one of the things that he often will talk about is raising children, and then he would bring it to the level of business as well. And one of those things was praise. Now, it’s very important, of course, to praise children, it’s important to praise our partner, it’s important to praise our employees. And yes, how we praise them is even more important because there’s research again, he didn’t know about this research he that he does this intuitively, this research by Stanford professor Carol Dweck, on praising and what she shows is that When we praise children, for example for how smart they are, or how beautiful they are, that’s actually unhelpful in the long term. Why? Because define praise for how smart I am, all I have to do is protect myself image, and then I won’t take any risks. And then I will not necessarily try, I will just try to avoid seeming not smart. In contrast, phrasing for effort for hard work, that’s helpful. It’s helpful for children. And it’s also helpful for employees. Because when I’m praised for hard work, I can always work hard, I can always invest, I can always work harder, or usually. And that’s helpful. And when I saw him, you know, praise His children for their effort rather than for their accomplishments or how beautiful or how smart they are. That was an important reminder of this research by Carol Dweck that can really make make a difference.

Jason Hartman 26:54
What are you praising them for real effort or is it more like the constant Up to the participation trophy. And,

Tal Ben-Shahar 27:03
you know, I got

Jason Hartman 27:04
up maybe maybe I’ll play devil’s advocate here for a moment. But it almost seems to me like we have, in many ways ruin degeneration. And I’m talking about the millennials, maybe the Gen Z after them to probably every generation thinks this about the one that comes after them to some extent. But we have just catered to these kids, we have made them feel good. We have told them, they’re great. And you know, a lot of them just aren’t that great. Okay, they’re really not putting forth a lot of effort. There are a lot of spoiled brats out there who do not exert themselves do not they’re not rigorous with themselves at all. I mean, it’s like does everybody just deserve a compliment all the time and, you know, an award for just showing up? I mean, you know, that sort of leads to the world owes me a living type of attitude, doesn’t it? I couldn’t

Tal Ben-Shahar 27:57
agree more. I think this is a huge issue. issue with the young kids. And then obviously, it spills over to the workplace later on when they leave home. Praise has to be first of all, it has to be real. If there was no effort, then obviously don’t praise for efforts. You know, they asked jack welch and I remember reading this article back in 2020. He was elected as the CEO, the manager of the 20th century, it was Fortune magazine. He was asked, What advice do you have for managers? And he said, My advice is learn to face reality. And if parents don’t teach their children to face reality, then they’re setting them up for failure, failure in the conventional sense, also failure, emotional failure, in the ultimate currency, parents role is to be a mirror to reflect reality for the children. So absolutely. First of all, based on reality, then if there was efforts and success, focus on the effort,

Jason Hartman 28:58
right, okay. Okay. So I guess Maybe the key to that is whether it be your, your friend, your partner, your kids, employee, whatever, you know, be sensitive enough to find the areas and maybe it takes some effort, right? Where they really are making an effort and then make the praise real. But don’t just arbitrarily do it. Because, you know, in a sense, that’s lazy on our part, isn’t it? When we’re just sort of arbitrarily saying, oh, you’re making such a great effort when they’re really not

Tal Ben-Shahar 29:31
lazy. And it’s also you know, it’s the easy way out, because, you know, Casey enjoy. So the short term when they’re told they’re good, but in the long term, we’re really hurting them and I see it so often. I see it with my students. I see it with also the young working adults.

Jason Hartman 29:47
Yeah, absolutely. Okay. Let’s talk about a couple more questions here. Just before we wrap it up, is happiness a currency?

Tal Ben-Shahar 29:54
Yeah, it is a currency by which we take measure of our life whether we do it consciously or not, you know, if you ask someone if you give someone a billion dollars, but a billion dollars, and these are Martian dollars that you will never be able to actually use, then it’s worthless. However, in the same way, money is only worth if it can be translated into happiness. If I told you, I will give you a billion dollars now, but then you’re guaranteed misery for the rest of your life. Now, if you actually believe me that that’s true, you won’t take those billion dollars because ultimately what you want is happiness. The reason we want money is because we truly believe that it will make us happy again, beyond survival, of course, right. And that’s why I call happiness the ultimate currency. Because it’s the currency by which we ultimately take measure of our lives, every other currency, we translate explicitly or implicitly, to the currency of happiness

Jason Hartman 30:58
now, so I think people get Very off track and confuse their when they think somehow pursuit of money to any degree at all will make you unhappy. And that’s just such a silly idea. You know, they use these few examples they’ve heard well, money doesn’t buy happiness. Well, neither does poverty, right. But there is a prudent middle ground in there somewhere, isn’t there because you don’t want to be a slave to anything, you know, money should not be the master.

Tal Ben-Shahar 31:28
That’s right. So, basic needs are critical for happiness. You know, we talked earlier about national levels, happiness countries that are poor, contrary to what many people think they’re actually in general, very unhappy. They’re people who have no money and when you give them an extra $1,000 a month, money will make them happier. For sure. However, beyond basic means, additional money does not make us happier, right?

Jason Hartman 31:55
Yeah. What else should people know before you go? Just Any questions? My haven’t asked you

Tal Ben-Shahar 32:01
perhaps the first step to happiness is allowing in unhappiness to there’s a common misconception today that the happy life is a life devoid of painful emotions when in fact painful emotion, sadness, anger, envy, disappointing frustration, anxiety. These are all natural human emotions. We all experienced them. The question is what we do when we experience them, one thing we can do is reject them and chastise ourselves for experiencing them and then they only intensified it only grow stronger. In contrast, if we accept them, embrace them as part and parcel of our life of any life, in fact, then they don’t overstay their welcome. So it’s when we allow in unhappiness, embrace painful emotions as natural, give ourselves that permission to be human. That’s when we open ourselves up for pleasure and in fact, kaleo libran from Ukraine quoted earlier talks about that you were you were making me think of it you know, the deeper though. You know you cars, though. Yeah, go ahead and say that I can’t remember it but I do remember I don’t remember the exact quote, but it’s the deeper the sorrow the more open you are, the more you can accept and take in.

Jason Hartman 33:20
Yeah, the joy of life. I always found that interesting that the more hardship one and doers and you know, you don’t want to intentionally go out and endure hardship, obviously, right. But if you don’t have you know, some of that in your life, you just don’t have a reference point to appreciate when it’s good, do you.

Tal Ben-Shahar 33:40
The point also is that you learn a lot when you experience hardship, and one of my ex colleagues and our biston said the following she said never let a good crisis go to waste. Well run. rahm emanuel said that to in a political way. People didn’t like it. Right, and we learn and grow from hardship. Clay Christensen talks about how the best leaders are the ones who do experience hardships and difficulties earlier on in life. There’s actually a strong correlation between failure difficulties, hardships, and ultimate success. One of the sound bites that I repeat to my students, and to my children, as well as to my clients is learn to fail or fail to learn. There is no other way that how we learn how to walk. That’s how we learn how to eat. That’s how we learn to be in a healthy relationship. And that’s how we learn to manage. I couldn’t agree more. That’s excellent. And, you know, Seneca said one must wait until evening to see how splendid The day has been. So having that point of comparison, I mean, we’re just full of quotes today, aren’t we? Having that point of comparison is is very important.

Jason Hartman 34:54
Give us your website and wrap it up for us.

Tal Ben-Shahar 34:57
Yes, so my website is at tal Ben Shahar. De KLVMSHH and there you can find links to my books on leadership on happiness, as well as links to my online classes.

Jason Hartman 35:14
Fantastic tell thank you so much for joining us.

Tal Ben-Shahar 35:17
Thank you very much.

Jason Hartman 35:20
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe. So you do not miss any episodes. We look forward to seeing you on the next episode.

AMA 347: Digital Human & Digital Bank, launch a digital bank by Chris Skinner

Jason Hartman is joined today by Chris Skinner, Chairman at the Financial Services Club and founder of Finanser. Chris has authored the books: Digital Bank: Strategies to Launch or Become a Digital Bank, Digital Human: The Fourth Revolution of Humanity Includes Everyone, and Doing Digital: Lessons from Leaders.

Jason and Chris talk about the future and the role that technology plays in it, or the lack of a role for humankind. This tech-talk touches on modern banking technology, how to start a bank with $50k. Lastly, robotics and philosophy. What is our purpose when work is in the hands of robots? 

Key Takeaways:

[2:15] Banks have been challenged technologically because they have not updated their systems

[4:00] Antiquated banking systems are often referred to as spaghetti structures that need updates recently forced by COVID-19.

[5:30] Big banks are too big to fail.

[8:00] What makes Stripe such a standout business regarding FinTech Companies?

[12:30] Everyday living is in the new hip and cool bank. 

[13:45] Can anyone launch a digital bank?

[17:00] Switching gears to robotics and technology in the future.

[20:00] There have been two significant behavioral shifts immediately since this lockdown.

[23:00] On robotics and essential work, what happens when people no longer need to work?




Negative Interest Rates & The Mass Affluent

Jason Hartman starts the show talking about negative interest rates. He talks about why this would actually happen and the reaction of people if it were to happen. He ends the discussion with a look at Dan Kennedy’s thoughts on the mass affluent and the impact on the middle class.

Announcer 0:02
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 0:52
Welcome to Episode 1267 1267. Thank you for joining me today. Want to continue today, talking About the mass affluent population, what that means to investors. But first, there is a lot of Well, I don’t know if it’s a lot, but there’s some talk about this amazing phenomenon that we have only touched on previously throughout history. And that is the idea of negative interest rates. We did some stories on this several years ago. And it is back. This is just a strange financial world in which we live. You know, the, the Chinese have that saying, may you live in interesting times, right. And we certainly lived in interesting times during the Great Recession 10 years ago, but there are some odd oddities with the way central banks are acting. Now. The way the bond market is acting, and this concept of negative interest rates, I mean, it is just unthinkable Some ways that this would make any sense. But I want to play a little clip for you before we start and talking about the affluent, the mass affluent class. And this is from financial times, we’ve had some financial times reporters on the show. I like reading financial times when I’m abroad when I’m in Europe, because you just get a different perspective. You know, of course, you can consume all this content of every publication and everywhere in the world nowadays, but it didn’t used to be that way. It’s still different when you pick up the good old fashioned Financial Times newspaper, when you’re in Europe somewhere, versus reading the Wall Street Journal here in the States, right? So it’s kind of a different take on things, and I like to get some different takes. So let’s listen to these great British accents. Talk about negative interest rates for a moment.

Dan Kennedy 2:50
We’ve lived through low interest rates and zero interest rates, but investors are not sure how comfortable they feel about negative interest rates since the talk is a bank, charging people to Look after that money, so on negative interest rates going to fade and die, or get deeper and wider with me to discuss this is Peter with

Jason Hartman 3:07
so banks charging people to guard their money. I mean, think about that. That’s an almost unthinkable concept. But, you know, it has a certain amount of logic to it. Look, maybe all of you listening have a safe deposit box. And that safe deposit box, you have to pay rent on it. And you know, if you stuck your cash in the safe deposit box, which would be a terrible idea, but say you did it, you pay rent for the security of using that safe deposit box, right. So this is a similar concept, but it’s it’s pretty unusual,

Dan Kennedy 3:46
but head of investment strategy at the asset manager Vanguard, Peter, remind us why do we have negative interest rates at all? Well, the reason we have negative interest rates is the central banks in some countries fighting ISIS. salary to provide additional policy stimulus, they start by cutting rates lower and lower, and they hit zero. At that point, they can either start printing money by doing quantitative easing, or now they’re starting to move rates into negative territory as well.

Jason Hartman 4:13
So what does that mean? That’s when the central bank using the metaphor of the bullets in the gun, right, that’s when they’re out of bullets. Okay, because they’ve eased so much already. And this is why, as we’ve talked about on the show before, they try to raise rates because they got to reload. They need to reload so that they’re ready when a recession hits, you know, clearly, they don’t think they can do it. So that’s why we’re moving into this crazy, almost, it’s not totally Uncharted, but it’s almost uncharted territory of negative interest rates.

Dan Kennedy 4:47
Central Banks want us to do. Central Banks, effectively are trying to get us to spend more money because by doing that, we increase economic activity in the economy, and that pushes up inflation, which is what they want, but is it really the case of people going to be charge for these people to hold their money in their banks. And this is going to be charged for the privilege of lending to governments. It’s not quite the case, not many banks are yet charging negative deposit rates.

Jason Hartman 5:15
Think about that crazy idea the government wants to, you know, and not just the US government, any government, the government wants to borrow money from other people within its own borders, its own citizens, and foreigners, foreign institutions, foreign people, so they sell bonds, right treasury bonds, and when they sell those bonds, can you imagine paying the government for the privilege of loaning the money? I know that seems totally backwards, doesn’t it? It seems bass ackwards as the saying goes, and it is it’s a strange phenomenon. But here we are.

Dan Kennedy 5:54
And interestingly, as a result of that, that means that probably the pass through from these negative interest rates, isn’t getting through to the boring rates. So the effectiveness of these negative rates in encouraging people to spend more is probably a little bit diluted. Okay, so let’s look at our first chart, which tells us how prevalent negative interest rates are at the moment. This shows that around 30% of the the current issue issues out there for sovereign, developed market bombs are are in negative territory. Now, that’s a slight over estimate of how much government’s actually getting a good deal because of course, some of those bonds were issued, while rates was still positive. And they’ve since moved into negative territory in the secondary market, but even so, any government like Germany’s Switzerland’s going to the market now to raise money is getting a negative view, which means in effect, we’re paying them for the privilege of us giving them money. Peter, why would investors?

Jason Hartman 6:48
Wow, we pay for the privilege of giving the money

Dan Kennedy 6:52
to invest in a negative year. Let’s have a look at your second shot. Yeah, I mean, I think the really important point to remember here is Why do you have bonds in your portfolio in the first place, and you’re not holding bonds because they give you fantastic returns equities in your portfolio for that. There’s really two reasons. One, they provide you a bit of a dampener stability. But second, and most important, they provide diversification relative to equities. So what this chart shows you is that if you take the worst core title of stock market performance over the last 14 years from 2001, to 2014, so when equities fail 6% This tells you how different duration bonds apply during those same periods. And what you see is that typically, bonds will go up to counteract it. So diversification would still happen in negative. Yeah, I don’t think I mean, I think a couple of years ago, we were beginning to think that this diversification had run out of road but was still happening is that as interest rates are falling and falling, where we’re seeing that there’s almost no limit to it, but the criticism negative interest rates is being stepped up. We’ve had Larry Fink of BlackRock saying people are going to have to save for longer. It’s Correct. Yeah, I think that basic point is correct. But I think it’s mixing up two slightly different issues. I think it’s definitely the case that because we’re moving into a low interest rate world, investors are going to have to save more to to earn the same income in their retirement as they would have done a few years ago. Now, that’s partly been affected by the low interest rates and the negative interest rates that central banks are implementing at the moment, but let’s remember why central banks are doing that they’re doing that in order to try and persuade people to bring consumption forward from the future to the present. That’s just a standard thing that policymakers do during a period.

Jason Hartman 8:37
Okay, so that was kind of a key statement. By the way that rustling noise is is his suit. He’s moving his hands and making noise with his his suit is making noise and his microphone is picking that up. But what’s interesting about that is see how the central banks are right and the government’s they both want you to do this and of course, the retailer’s love it. They want you to bring future consumption. to the present day, and they’re saying by now, because that has a stimulative effect on the economy, right. And when you do that, of course, you defeat the whole concept of wealth creation, which requires capital formation. They’re saying spend for today don’t save. And how are they doing that? Well, they’re saying, if you save, you will be punished. And if you spend, you will be rewarded. So it’s an absolutely crazy backwards thing. And it creates a lot of malinvestment, I shouldn’t even call it malinvestment, I’ll call it now. spending habits, you know, it’s just bad spending habits, but it is what it is and you need to know about it.

Dan Kennedy 9:44
economy’s in a big downturn. But even when this downturn is behind us, it’s still going to be the case that returns are going to be lower going forward and people are going to have to send disable. So poor old investors are really the people that are caught in the middle here between a bad long run out And policymaker actions, just very quickly, Peter, finally, how long we’re gonna have negative interest rates. I think we’re gonna probably have them for the next year or two. Peter Wesley, thank you very much. Thank you.

Jason Hartman 10:10
Well, that’s pretty crazy. So that’s the Financial Times YouTube channel, go check it out. It’s great. I am a subscriber and learn some good stuff there. Okay, let’s get to that mass affluent economy. We were talking about this on Friday, I figured we would continue just a little bit more of this. It is truly amazing, but sad at the same time. I personally as your guide, I am a huge fan of the middle class. In any country, every country, when you don’t have a large middle class, you have a lack of stability. It is not good for society. And one of the things for the last 15 years as we’ve been dealing 100% with investors before my experience in traditional real estate that I’ve always been saying Is Look, the middle class is disappearing. And the danger that you have is you have the danger of sliding down. Right? We all have that right? The danger of sliding down the socio economic ladder, and none of us want that property right. We want to move up. So now, I don’t know what’s the best metaphor for this. For some reason, I want to say it’s like getting out of the swimming pool, right? When you get out of the swimming pool. A boat is a better metaphor. So last year, we rented a yacht. We chartered a yacht last year in Croatia for yacht week. So some friends of mine, we were on the boat and I remember when we would go for a swim in the ocean, or the GNC, I should say, we would jump in and then getting out was pretty difficult because that swim step. You know, you got to reach up there and, you know, a couple times we let the dog jump in and swim and it was really hard to get the dog out. Okay, the water she had a life jacket. Don’t worry, Coco has her own life jacket. It’s hard to reach from when you’re down in the water. And so this would be like the middle class, right, the middle class is in the water. But the handle to the swim step on the boat keeps getting higher up and harder to reach. So you want to grab that handle as soon as he can. And you want to pull yourself up as quick as you can, so you don’t get left behind. As the middle class deteriorates and is hollowed out, you want to move up, and you want to be in the upper middle class or the wealthy class. So that’s one of the key things that we help you do here by investing in the most historically proven asset class in the entire world income property, of course. So let’s learn a little bit more about the mass affluent now. Remember from Friday, this audio I’m about to play for you. This is geared toward businesses and how they need to position their price strategy and their marketing, but it has a lot to say to us as investors That’s why I want to share it with you. So here we go Continuing from Friday,

Dan Kennedy 13:04
there are two considerations that should govern your strategy dictate where you sell and who you sell to. One is comparative ability to buy. The other is comparative willingness to buy, nothing else matters more. Look at comparative ability to buy. Consider three households, the Joneses with low wage jobs combined, putting just $30,000 a year into the coffers. The Smiths with one at a good paying job the other at a low wage job combined at $65,000 a year and the barons who own a very profitable business from which they each draw a good salary and bonuses and who have significant investment income totaling $300,000 a year. All three households include two kids. What is the same about all three? The amount of money they have to spend on necessities? It goes up a little from Jones to Smith to Baron by choice, ground beef steak from the grocery store, premium steak ordered from and delivered by Omaha Steaks But basically, all three families necessities are virtually identical. The Joneses in the barons need the same amount of toilet paper use the same amount of water and electricity have to ensure their cars feed themselves and their kids pay doctor bills and so on. Again, by choice of premium quality or by having three cars instead of one, the amount spent may vary, but it will vary proportionately, the Baron household won’t spend 10 times what the Jones household spends on necessities. That means that the percentage of income spent on necessities varies a whole lot, allow for the increase in amount spend for premium choices more and bigger.

Jason Hartman 14:34
And this is one of the many reasons that generally speaking, the rich get richer and the poor get poorer As the old saying goes. And it is because inflation hurts the poor the most. When Obama, his stated goal was to increase gasoline prices. Of course, that inflation In gas prices that he was very much in favor of his stated goal as a candidate back in 2007 or eight. He said, I hope gas prices will be $7 a gallon. I think he said something to that effect. That just, it’s terrible. I mean, the example of where I used to live in Orange County, California, right, in Orange County, California, you have all these wealthy people, upper middle class people. I mean, not not all of them, but that’s certainly a good percentage. They call it orange, the Riviera, the OC, and you have these people of lower socioeconomic status, that are driving every day for their job from the Inland Empire, Riverside, San Bernardino, and they’re doing more menial jobs, lower paying jobs, but they’ve got a long commute because the old thing in real estate is drive until you qualify, right? The cost of living is so much lower in the Inland Empire than it is in or Orange County or Los Angeles, they’ve got to spend a lot of money on gasoline. And for them, it’s a big percentage of income and also car maintenance and so forth everything that goes with commuting, I mean, what is the IRS rate, it’s like 58 cents a mile. I mean, think about how significant that is. When you do that five days a week, back and forth, it’s pretty awful. And you really beat your car. And you really spend a lot of money on fuel, especially when gas prices are high. So that percentage of income issue keeps the poor down. And if you’re teetering, it makes you a lot poorer, it makes it harder for you to move up. This is the same thing I talked about when I talk about why you should make a plan to live in a low income tax state, and hopefully a lower cost of living city state. That’s because all of these things really just impact your ability to move up in the world and they don’t really make you Your life any better. If you’re going to spend money on something, hopefully it makes your life better in some way. But not always, sometimes you just spend money in it, it doesn’t make it better or even worse than that, it makes it worse. So these fixed costs overhead, that attack our wealth, they really caused the rich to get richer and the poor to get poor. Okay, so you want to empower yourself with as many tools as possible to get richer, and that’s what we do here. So let’s continue,

Dan Kennedy 17:28
say that the household basic and essential needs can be met for $25,000 a year. So that’s what the Jones has been. The Smiths spend 50% more $37,500 and the barons of splurt spending twice that $75,000 Some do. Some don’t. By the way, look at this in percentage of income terms. The Joneses spend 85% of their income on basic and essential necessities. There are few choices in this spending. The grocery cart will feature low cost film up food. brand loyalty is supplanted by coupons and sales. The trip to Walmart pretty predictable. They have only 15% of income left for you to spend flexibly on home improvements on entertainment, on recreation on elective healthcare, etc. And to save or invest as long as nothing goes wrong. They have only $4,500 for all these choices for the entire year $375 a month, one car water pump blown one furnace repair, one kid toppled out of a tree and taken to the emergency room, and a month maybe two months discretionary spending ability is erased. The Joneses that I’ve described are actually in better shape than most at the low wage bottom of our economic pyramid. Most spend 100% 110% 120% of their income just on necessities. They are in debt, stay in debt, get deeper in debt. This is why the payday loan business exists. The undesirability of aiming your businesses at the Joneses should be obvious. You have to win a war of base commodities where prices are reverse elastic, constantly pulled in and pushed down. Customers by by price often only By price, so creating quality or service superiority has little value, a lot of money extraction has to be done in a predatory way that you may find unseemly. And that is subject to disruption by Consumer Protection.

Jason Hartman 19:11
Again, look at the payday loan business, the tote the note dealer financed car business, by the way, the payday loan business. There is a fantastic documentary I watched about what a complete scam that industry is, especially by the leader in the industry. That’s what the documentary was about. I cannot remember the name of it. I’ll try and get back to you on that one, but just amazing how they would structure these quote unquote loans to charge absolutely insane interest rates, just incredible. So a lot of people prey on the poor and they prey on the lower middle class too. I’m here doing my part and getting the word out. Okay, spread the word on this stuff and try to keep this stuff at bay because it is really just pathetic how that happens.

Dan Kennedy 19:57
The furniture and big screen TV and appliance riddled with business. Selling to poor people is a grimy grinded out business. You already know you don’t want to be there or you wouldn’t have bought this book. I just want to emphatically confirm your own instincts. The Smiths spend 58% of their income on the same necessities. The Jones spend 85% of their income. The spirits have a wider margin for error and for extra choice of spending. They can be sold an expensive night out at the ball game, a Disney vacation and new school clothes for both kids. With financing they can be sold a new car or even a kitchen remodel. In dollars, they have $27,500 a year to use this way, nearly as much in discretionary spending ability as the Jones’s entire income. That’s $2,291 a month of flexible spending, saving and investing power. A blown water pump a broken furnace and emergency room bill for Tommy may take quite a bite, but there’s quite a bit left afterward. Also should the Smiths choose to live beyond their income a blessing thing for us marketers, they can get a lot more credit than the Joneses and they can serve us a lot more consumer debt. This writing the credit card debt bubble is at an all time high. In some ways a concealed cancer growing inside a seemingly vibrantly healthy economy. All bubbles burst. The question is when and exactly how now if. So, this group’s ability to spend is artificially inflated and their willingness to spend subject to abrupt disruption. When I wrote this in late 2018, interest rate increases from the Fed were happening and more threatened in reaction to a to good economy that increases interest rates and therefore minimum monthly payments on all these credit cards. It also increases monthly payments on variable rate mortgages and the costs of trading in a car. Oops. This is the danger of having your business tailor to and dependent on the Smiths. They can go sour on you with little warning, the ability and or willingness to buy rises and falls with winds and Todd

Jason Hartman 21:48
over with so he’s trying to make the case that you own a business you want to focus on the affluent because there’s more opportunity there and more stability or the mass affluent I should say not the affluent affluent The mass affluent, interesting angle right

Dan Kennedy 22:03
to you and they have no control. Now the barons, they only spend 25% of their income, covering the same basic and essential necessities that take 58% of the Smith’s income and 85% of the Jones’s income, just 25%. That means 75 cents of every dollar stays loose, no one locked in commitments in dollars. The barons have $225,000 to spend, save or invest flexibly. If they wisely split that in half, they can plow $112,000 a year into tax deferred retirement savings plans, like 401k into stocks and bonds into real estate. So that in less than 10 years, about seven years, and every seven years, they accumulate another million dollars. By comparison, the Smiths can save or invest very little, the Jones is zero. And even if the barons act that

Jason Hartman 22:53
responsibly, so remember, as I’ve talked to you about the idea that the millennial generation can Not Enter. In most cases, of course, I’m some massive stereotype. I’m talking about 80 million people, I get it, but many of them cannot enter the investor class. And he was just talking about that, you know, if you can’t enter the investor class that really limits growth opportunities over the course of 510 Hey, do your five year plan, you know, we got that contest coming up, right. More on that tomorrow. They can enter that investor class of 510 1520 years, 3040 years, massive difference in the overall financial health of one’s life.

Dan Kennedy 23:38
They still have $112,000 left over to buy all sorts of unnecessary goods and services and gifts and trips. A big fat $9,333 a month. Should the barons choose to throw all the same behavior to the wind and live beyond their means of blessing thing for us marketers. They have the ability to get a whale of a lot more credit and services than the Smiths in BIG thumbs. terms, the Joneses can handle almost no debt service and are likely maxed out with their debt. The Smiths can handle about $200,000 of consumer debt tops, but the barons can handle $1 million of debt or irresponsibly even more. Simply put, if your customers are low wage or middle wage earners, the Joneses or the Smiths, you are in very serious peril. Think of these customer populations as a place you live or you have your business in this place. Once it was a nice neighborhood with well kept homes, safe streets, salt of the earth type people gradually it changed. Homes declined in value got bought up by landlords more renders less homeowners. Soon, drug dealers were on corners with unsafe streets. Such decay rarely reverses. You have to get out you can where to go. While the middle class collapse happened and is in recovery the affluent population has studied proved resilient and reliable and even grown from 2011 to 2013. The number US households with incomes exceeding $100,000 grew by 6%. Better. The average household income among these affluence also grew by 5%. net worth also increased by 2% to an average $1.1 million. The Royal Bank of Canada’s big annual wealth report, released in June 2014, stated that the number of high net worth households with multi million dollar network rose by 11% from 2011 to 2012, and rose again by another 16% from 2012 to 2013. The wealth of those households rose as well, nominally but a 2% boost to $5 million is not chump change. Throughout the top 5% of the pyramid. There is a growing number of customers to sell to and they have growing spending capability. More recently, even more wealth has risen to the top tiers. And since Trump’s election, truly amazing things have been occurring to the benefit of the affluent corporate business and personal tax reductions, record breaking stock market gains, and with this almost unbridled opposite Muslim, if you are going to choose your customers as you can and should, why not choose ones with strong ability and willingness to buy broadly in diversified categories with price elastic decision making and imbued with optimism or if need arises resilience, consider comparative willingness to buy, obviously ability links to willingness, but there is a broader optimism versus pessimism. A Gallup poll in late 2014, showed 56% of Americans saying the economy was continuing to get worse. Only 39% said it was getting better. And NBC News poll had a whopping 70% saying the economy was headed in the wrong direction. Within these numbers, there are biases by bottom, middle or top of the pyramid. optimism about the economy and about one’s personal economy favors marketers pessimism about these things stands solidly in the way

Jason Hartman 26:50
by late 2018. And it really goes to show you also how we talk about how economics is a very relative game. If during the Great world session, for example, or the next recession, and it’s coming, okay, it’ll be here, gotta prepare for it. And we talked about that a lot. And we’ll talk about that a lot more to make sure you’re prepared and we’re all prepared. But it really goes to show you how it’s a very much a relative game. If you have a little more money to spend and a little bit more net worth, then you’re okay, you’re still going to ride out the recession and that economic cycle in good order.

Dan Kennedy 27:29
The situation reversed, holding on consumer optimism and business leadership’s optimism. We’re at record highs. It was hard for people not to feel this way. Unemployment hit a 50 year low. The stock market hit mind boggling highs and the daily economy news was virtually all positive. President Trump exuded optimism, unlike any president since reagan, and before him Kennedy. pessimism is a headwind against willingness to buy with all but those have significant affluence and enough age to view negative economic situations as temporary optimism is a tailwind that spurs a much broader demographic swath of the populations willingness to spend, it is fine to take some advantage of times of optimism, but also smart to reinvest that extra money that flows into organizing higher income and higher net worth customers. So that when the next wave of mass pessimism washes through, your business will be on higher, safer ground. A collection of Gallup, The Wall Street Journal, and other surveys and polls that I re examined when writing the new edition of this book revealed something most instructive about consumer attitudes from 2004. Good times to and through the crash of 2008. Through the slowest recovery in history, to the present boom. The greatest fluctuations, the most erratic moves from pessimism to optimism to pessimism occurred with middle income consumers. low wage earners in the working poor stayed pretty steady from pessimistic only to barely better than pessimistic through all those years until late 2016. When they began to show a significant lift of optimism. high income and high net worth people also stayed pretty steady, never dipping much below optimistic and at times. more optimistic. Those in the middle we’re most subject to big mood swings, to excess exuberance and to fear and despair. Ensure the middle income consumers are least reliable with willingness to buy. There’s a very nice neighborhood to move your business into where you can be welcomed by a growing number of consistently optimistic consumers with fat open wallets is the affluent consumer population. This book is the roadmap. It gives you the insight, information, inspiration, and practical

Jason Hartman 29:28
Alright, so I think he got the point there. There is a mass affluent class around the world, not just in the US. I mean, look at all of the wealthy Chinese, the wealthy Middle Easterners, Europe, sadly, is just descended into disaster in so many ways. But certainly there are many wealthy people in Europe and around the world. The rich are getting richer. The poor are kind of doing about the same usually government programs rescue them. Least To a large extent, but the middle class, the middle class is the class that is under attack. I’ve cited many times on the show over the years, Lou Dobbs book war on the middle class, but highly recommend that book, it’s older probably came out in like 2004. At least that’s when I discovered it. Just be prepared for this, adjust your strategy for it, understand it. And with all of this said, though, I don’t want you to think that this is something of a rental strategy. It’s not It has nothing to do with that. Because the best rental properties are still the bread and butter rental properties, the necessity housing, so no one’s going to give up their house unless they absolutely have to. And the necessity housing is critically critically important. The other side of that equation, though, is that with this booming mass affluent class and the hollowing out of the middle class You’ve got a massive amount of capital in the world, all these people who are in the investor class who are looking for assets. And remember I talked about that, Michael Milken Jeremy Siegel article years ago. am I creating wealth seminars in 2004? In 2005, I was talking about it, how there’s this looming asset shortage. And you know, I would argue that that prediction has already come true to a significant degree and will even become more true in the future. Because they don’t just want to consume. They want to consume assets, not just consumer goods and travel and things like that. But assets, they need a place to park their money. And guess what, if you own a lot of these assets, you’re going to be in great shape, those assets will appreciate in value, those rents will go up. It’s just all good. It’s all good. So go to Jason Armand Calm, check out the properties we’ve got there. But really, you got to work with an investment counselor because the properties sell too quickly. The website is not totally up to date by any means, work with an investment counselor, connect with one through Jason Hartman calm. And also, be sure you talk with your investment counselors about our brand new construction properties. In Atlanta, Georgia, we haven’t been in that market for a while because it appreciated so much. It became really really hard to find good properties there. But we’ve we’ve got some, the inventory is pretty limited. Check those out, but all of our other properties as well. So we will talk to you tomorrow. And until then, happy investing. 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.

Rent Control and Housing Affordability

Jason Hartman and investment counselor Adam start the show discussing some troubling trends in the real estate market. They open with the state of California enacting state-wide rent control. They discuss how this will lead to other negative policies for real estate investors. They look at the housing affordability issue that’s been prevalent for the past few years.

Investor 0:00
started listening to the podcast did that you know for probably a couple years before I connected with your investment counselor, she did a great job of kind of holding my hand through the process I probably wanted to the more needy client she worked with, but ended up buying my first property in 2011 in Atlanta, and then waited a couple of few more years until my next one, but 2014 purchased in Memphis. And so that’s where I am at this point.

Announcer 0:29
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants. Bed involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 1:19
Welcome to Episode 1282 1282. Thanks for joining us today. We’ve got a lot to talk about. If you haven’t heard the news, it looks like the Socialist Republic of California is really, really getting close to state wide rent control. Of course, as always, this will be an absolute disaster. But we’ll see. We’ll do kind of a point counterpoint here on it. I’ve got Adam here with me who has been listening to NPR over the weekend. So you know, we’re going to have some opposite viewpoints. Adam, what have you been hearing about communist rock and roll

Adam 2:01
So one of the things that stuck out to me whenever I was listening, is they were discussing some of the things that landlords were going to have to do to get rid of tenants. And it absolutely blew my mind and made me wonder who on earth was going to be willing to be a landlord in that state? Because one of the things that the bill talks about as potentially doing is landlords who want to evict their tenants might have to pay for their tenants first month in their next

Jason Hartman 2:29
lodging in their new place. Yep. So in other words, it’s kind of the way California really, is it always against the employer? You know, they make it very difficult to lay anybody off to adjust to the economy and your business. And so now, if you want someone to move, you got to go find them a new place and pay for it, right.

Adam 2:49
It’s like, he’s on steroids.

Jason Hartman 2:51
Yeah. Yeah, just to give you the context, what Adams referring to which are a common expression that came out of the Great Recession, cash for keys when lenders would foreclose on properties. They couldn’t get the tenants to move out, or the former owners, I should say, or maybe it was investor that let a property go to foreclosure. And they had a tenant in there, whatever the case tenant former owner properties foreclosed on, they would let her literally give them cash if they would agree to move. And usually that was, you know, somewhere in the ballpark of maybe $3,000 or so saying, hey, look, if you’ll just get out of here, I’ll pay you to move so I don’t have to go through the eviction process. So in a rent controlled environment in California, here’s what really happens in real life. While many dynamics crop up the gray market, the black market. There’s even a Seinfeld episode about this, where you know, people are waiting for people to die in rent controlled apartments, where landlords are doing all sorts of nasty things to make it so unpleasant for the tenants that they will just hopefully move. They want to get them out. So badly. There’s lots of stories like this in San Francisco, Santa Monica. I remember a guy knew moved to Southern California, and had a rent controlled apartment in San Francisco that his friends were leasing from him. Of course, the landlord didn’t know this. And you know, it’s completely illegal, right? But they’re trying to keep that incredibly low rate. There’s just all sorts of bad dynamics that occur. The same way things did with getting things done in the former Soviet Union, or trading food and clothing and shoes on the black market and the Soviet Union. It’s just crazy. What happens here and this is probably going to happen this time. I mean, Gavin Newsom is in favor of it. And all he has to do now is sign off. And, you know, California has now statewide rent control. Yeah, I’m only playing about his tweet on September 12, where he said, you know, counting it saying he’s about to enact the strongest renter, protect And the nation, because there should be a cap on how much you pay for rent, because your landlord shouldn’t be able to evict you for no reason. It’s about time. The thing is the landlord’s not trying to evict people for no reason. There’s usually a reason if they’re trying to evict you, most people don’t just come along and February and say, Well, you know, your lease is up in five months, but it sure would be better if you just got out of here now. And so I’m going to go through all these court proceedings and pay all this money to file on, you know, these people who are getting kicked out of their place, there’s cause and so the fact that there should be a cap on how much you pay for rent, that depends on who you are and what your priorities are. It is absolutely dysfunctional. It will ruin the market and it will harm the people they say they’re trying to help. It will cause a massive housing shortage. You think the housing shortage is bad in California now, or in many places around the country, and we’re going to talk about that. In the second part of today’s episode, you Institute rent control And every apartment developer will decide, oh, look, let’s just finish whatever we have in the pipeline in California, but we’re not gonna build anymore. Every apartment owner will try and convert their units to condos. They will look for a way out of this disaster, it causes the market be totally stagnant. It will reduce the business for real estate brokers for apartment finders for property managers. Everybody will be hurt by this. Everybody will be hurt by it. It’s a disaster everywhere. It’s right and every time it’s right. You know, I remember reading back then real estate developer Donald Trump’s book when I was 24 years old. And he was talking about how all of these celebrities had these which by the way, his book art of the deal, even if you hate Trump is really quite good. All these celebrities and wealthy people in New York City have these rent controlled apartments right around Central Park at best areas, and they wouldn’t have them up. The rank and form was not helping the people. It was supposed to help. What ends up happening is, is this totally dysfunctional market where there’s under the table payoffs and all sorts of things and just a massive construction of supply. When I interviewed our one of our video producers on the show a few years ago, Patrick is his name, you can go to Jason Hartman, calm, use the search bar and listen to that interview. He lives in San Francisco and a place that’s probably worth, like 1.7 million or something like that. Now, he and his wife and his wife’s an attorney pay like 20 $400 a month or something like that. And they really want to move and they can’t move, because they can never come close to duplicating the deal they have now. So you might think in one hand, oh, well, that’s good. They’ve got a good deal. And they’ve got you know, if you’re on the side of rent control, they’ve got a good deal, and they’ve got protection. So the rent since they rented that place, I think in the late 90s. He said their rent has hard gone up at all. But because the market has become so dysfunctional, and nothing is priced to the market, because of all this construction of supply due to rent control, they’re stuck. They want to move but they can’t move. So guess what happens? The market for new furniture, new appliances, home improvement, rehabbing of properties, real estate brokers, lenders, it all becomes totally constricted. And it becomes really like this zombie market where economic activity is just massively suppressed. It’s just weighs on the whole economy and suppresses everything. I mean, why do you think there’s such a shortage of housing and all these rent controlled areas is because nobody wants to come in and supply housing. When you have the government looking over your shoulder saying, You can’t do this. He can’t do that. You can’t price your properties based on the market is just Unbelievable.

Adam 9:00
It’s the ultimate treating the symptom and not the cause in this respect, I mean, if you want to really do rent control, build houses, yeah. Right? If you really want to know how to solve your problem, because I mean, you can rent control all you want, there’s still more people looking for housing than there are houses available. That’s your problem. You have too many people for not enough places. So either the prices are going to go up, or you need to build more simply closing the price down isn’t a good solution. I mean, it just doesn’t work. It’s one of the few things that actually unites economists and all those other people who have different disagreements on everything else. But they’ll agree you know, rent control is not the way to go.

Jason Hartman 9:34
Adam, I want to congratulate you. I think you’re becoming a capitalist. This is great. I’ve always been a capitalist. Oh, gosh, oh, gosh. Well, we’ll argue about that one later. But basically, this bill will cap annual rent increases at 5%. Which sounds okay, including the rate of inflation now depends what the rate of inflation is. percent total, probably What’s up?

Adam 10:00
Just call it probably 7% total.

Jason Hartman 10:02
Yeah. So now in California, one of the nation’s prices housing markets is following Oregon’s footsteps. In enacting rent control in March, Oregon approved the law, placing an annual limit on rent increases of 7% plus inflation. So there will be a ton of complexity in this. It’s never this simple. I’m sure this bill is probably hundreds of pages long. And landlords will have to hire lawyers to make sure they’re in compliance. Just just be a disaster. Ultimately, it’s it’s something else. Now the next thing by the way, and we have talked about this over the years, they are starting to attack, prop 13, Howard Jarvis, who basically was the guy that made prop 13 happened in the late 70s in California, which is one of the reasons that market was able to do as much as it’s done. Over the years without prop 13, California will really really suffer. And that’s of course, limiting taxes us the state component of taxes to 1% on property taxes, but they are whittling away at prop 13. And that’s the next thing to go. This is going to be quite something, Adam, let’s take a quick break and talk about our contest. And then we’re going to come back and talk about affordability overall, and where renters are moving, why they’re moving to these certain metro areas to the certain cities. And let’s dive into that topic.

Adam 11:34
Alright, so we’ve got, as most of you have probably heard by now, we’re all about the empowered investor in this podcast and the company. Everything we do is about empowering investors. And so we have the empowered investor contest going on which you know, fitting name. So the contest, really simple. You make a YouTube video, you talk about how you’re going to become an empowered investor. What you’re going to do what steps you’re going to take over the next one to 510 whatever you need to do to figure out how you’re going to become empowered, and that is that number of years, you didn’t say 125 10. Yeah. number of years, what are you gonna do in the next two days? It’s gonna make you hard for the rest of your life. What are your plans? Like? How are you going to make yourself a better investor and more empowered investor and march yourself towards your ultimate goal, whether that’s financial independence, whether it’s just a little bit of independence, you know, however, whatever your goal is, how are you going to strengthen yourself to be able to reach that goal?

Jason Hartman 12:30
Let’s give some examples of that before we talk about making the video. So it could be as simple as your five year plan, like the contest we had a year and a half ago for meet the masters. And we had some great entries for that. We’re going to play one of them for you here in just a moment to give you an example. And that is Adam Franz Adam, thanks for submitting your video. So we’re just going to play an example of that. So it could be just a matter of outlining your plan, writing down your goals and sharing them on a video, it could be talking about how you’re going to view your investments, evaluate your investments, how you’re going to manage your property managers, or how you’re going to self manage your properties. There is really sort of that we’re leaving it kind of just an open playing field, whatever you are doing to empower yourself to be an empowered investor. You have a lot of free reign in this contest. Okay. And we got some great prizes do so go ahead.

Adam 13:28
So once you make your video, like we said, we want it to be the big thing. So no more than 10 minutes because

Jason Hartman 13:34
it could be three minutes, it

Adam 13:36
could be three minutes, but no more than 10 because and by the way,

Jason Hartman 13:39
short, yeah, listen, listeners will be surprised. 10 minutes goes really fast. You might think make a 10 minute video that’s too hard. Well, usually the hard part is once you get started, it’s making it concise and not going off on tangents like I do.

Adam 13:56
So you post your video to YouTube. Then you go to Jason slash contest. And you need to tell us who you are. What, what where your video is. Yeah the link the link to the video because we’re going to post it on our YouTube channel too. And then you just get everybody you know to go and watch your video. Because if you want to win some tickets, the profits in paradise or your membership to the empowered investor community, you’re going to need all the views you can get.

Jason Hartman 14:23
Yeah, well actually, you’re not going to need too many views to win that. But if you want the super bonus prize, which means a $3,000 allowance toward our cruise, that’ll pay for one ticket and most of the second ticket to the cruise if you want to bring a guest that’s our October New England fall foliage Canada cruise that is in while just about a month from now. So we want to get your videos in and the deadline for entries is 11:59pm. Eastern, September 23. So yeah One week from when we’re recording Yes. And so get your videos in any video that gets over 1000 views on our channel and over 200 views on your channel we’ve heard her we’ve got some traffic for you will qualify for the cruise bonus as well. But first prize two free tickets to prophets in Paradise and a one year membership in the empowered investor community. second prize is two tickets to prophets in paradise. third prize is one ticket. So yeah, some great stuff. And like we said before Adam, you shouldn’t even do this for the prizes. The real thing, just look at those as the frosting on the cake. The real reason to do this is for yourself, for your own benefit in outlining your plan, cementing how you’re going to be the empowered investor. And that’s really the big reason to do it. Okay.

Adam 15:55
Don’t do it for the money but the money is nice.

Jason Hartman 15:59
It’s a nice bonus Okay, let’s share an example. Adam friends and thank you for submitting this video. This was about a year and a half ago. Let’s share this example. And then we’re going to come back we’re going to talk about the Trump administration response to rent control, and the prey stout issue on where renters are going, and home buyers are going because the rent is too damn high. The prices are too damn high. And this is a good opportunity for investors to notice. So here is one of the entries from our last five year plan contest and we will be right back after this.

Adam 16:38
Hey everyone, so I wanted to put together my five year plan. I figured I should put it somewhere where I’ll see it on a regular basis. So welcome to my bathroom and I’ll take you into my closet where I written my five year plan on this giant mirror. That way, every day I go into the closet to get ready for the day, and that’s where I’ll see it started off at the very top with with year five, I figured it would be best if I had that as my main goal. And so I’ll go through those year 432 and one. I put this together last night on the mirror, and then realized it’s incredibly hard to read. So I went ahead and also put them up on the wall right next to me, I’m going to keep them up on the mirror. That way, it’s always staring me in the face, but wanted to come over here. And I’ve got starting again, at year five. I in 2022, I will be turning 39 and would really like to make it onto the 40 under 40 list here in Utah. That’s just a recognition list for those who have accomplished some good things. Want to be in a relationship with someone who inspires me that we’re working on currently add 15 doors to investment portfolio, own 50 doors, and I averaged out. If cash flow was around 333 per unit per month, that should be around $200,000 per year cash flow. Want to be working on a buyout strategy for a tech company that I invested in a few years ago? They’re doing quite well. And hopefully, we will be looking at a buyout. A really healthy buyout in about five years. Want to be a venture Alliance member, that would be a great startup this year would go to Palm Springs and then just continue that on for the next five years. And then after learning and growing in the last five in the next five years, I’d love to be taking a role where I help others in the creating wealth and obviously have fun doing it.

Adam 19:08
year for

Adam 19:11
I want to be able to take my parents on an amazing vacation. My parents have done so much for me in my life and and they lost so much in the recession. And so as far as the retirement goes, they don’t have much going for them. And so I I would love to be able to help them out and and take care of them. I work in real estate and I’d love to do hundred million dollars in sales in 2021

Adam 19:45
and 35 doors

Adam 19:48
that would be adding 10 doors from the previous year. So what I did is I just worked backwards. So as we get to year one, we’ll see that and then augment my life insurance. policies for tax free growth. I am getting started with paradigm life this year. Well, starting in 2020 2018. So year one, I’m working with Gary Pinkerton over at paradigm life. And I’m really excited about what, what we can do to move my 401k and, and other life insurance policies over to something that will actually give me the benefit of being able to also do real estate investing, and then want to expand the charitable outreach programs that the tech startup company has been working on.

Adam 20:38
year three,

Adam 20:41
want to add 10 doors to my investment portfolio with the Jason Hartman group on 25 doors at that time, with an average of hundred thousand dollars per year of cash flow, actively be dating and building good relationships and then You know, sometimes we get so involved in, in the financing and and work and jobs and so I have to remind myself to also be actively dating and building good relationships,

Adam 21:11
travel and explore new country.

Adam 21:15
I’ve, I’ve traveled around the world, but I would love to continue that on and, and my job as of late has kind of made it so that I haven’t had the free time to do so. And I’d love to get back into that. At this point, I’d love to be able to network with the venture Alliance members and create amazing opportunities with them and do $75 million in sales volume that windemere the brokerage that I’m working at here to add 10 doors to my investment portfolio, own 15 doors so it obviously it’s counting down as we’re going down the years but do 35 million in sales volume, visit my siblings and spend time with family so As my siblings have all gone off to, to different colleges and to pursue their careers, we’ve, it gets harder and harder to see them. And so I love my family and I’m excited to go visit them and need the time to do so. attend all venture Alliance events. So, we’d love to you know, as as I become a venture venture Alliance member to attend those events and, and grow from what I learned from others there, learn a new skill. I love that one because I do really, I find, trying to do things that make me nervous or scared. They build build me up and doing those things that scare you are, are exciting. So I want to mentor some of the youth. That’s a turtle give back and mentor youth at the incircle program in Provo, Utah. This one is near and dear to my heart. It’s a group in Provo, Utah that helps young adults as they’re navigating their way through through college and their teenage years and year one, take time, date and build relationships mediate for meditate for 45 minutes, three days a week, go to bed before 11pm week before 6am. And read four books. These are all mostly just building good habits and some of them I’ve been working on for quite a while. And then so just kind of maintaining some of these habits attend venture Alliance, meet the Masters in Palm Springs definitely have that on my list of goals to do in year one, own five doors and make about $20,000 that year in cash flow. I’m currently opening up my life insurance policy through paradigm life like I mentioned, and the initial investment will be around 100,000 dollars that I’m putting down and then doing something around $40,000 annually of putting into the life insurance policy. So I’m excited things and exciting things. And I’m looking forward to, to reaching these goals in five years.

Jason Hartman 24:17
Okay, so hope you enjoyed that just as an example. And remember, you’ve got a lot more latitude than we did last time on the five year plan. You can make your empowered investor video about a plan, or you can just make it about anything that’s going to help you become empowered. Adam, the Trump administration does not like rent control do thing.

Adam 24:38
I would say that if I had to put it on his list of things that he likes, it would not be too high on the list because the Treasury released its housing finance reform we saw here on housing wire, and they’re looking at curbing Fannie and Freddie multifamily lending in areas that adopt rent control and when you’re talking areas and you start talking an entire city That’s gonna make it even more interesting. Yeah,

Jason Hartman 25:03
yeah. So one of the big sources of capital to finance apartment projects, whether they be brand new projects that are being built, or resales that are being, you know, purchased by investors is that Fannie Mae, Freddie Mac, the government sponsored entities that are big part of the mortgage market, the biggest part of the mortgage market, it’s not just in single family homes. The Trump administration says that they will curb any lending for projects in rent controlled states or cities, they will curb this opportunity to obtain this type of financing in these areas. Wow, that is going to even further disincentivize and restrict the motivation of investors to either build or buy in these areas. You know, you could look at this as like tit for tat But look, the federal government shouldn’t even be in this business anyway. Okay, and it is going away. In general the movement is and we talked about this many times in prior episodes, the movement is away from this government sponsored entity type of financing. Okay, the movement is definitely away from it rent control or not. But the position is that if it’s in a rent controlled area, to curb it even further and faster, because they want to disincentivize these crazy politicians in places like California, my former home from instituting these absolutely silly laws, rank and roll is a disaster. Every time it’s right everywhere it’s tried. It’s never been a success anywhere ever. And there’s just no argument against that. By the way. I should open this up once one second. If you think I’m wrong, You think avoid, go to Jason slash ask for anything. We talked on the show to talk about on the show. Leave your comments, tell us we’re crazy. Tell us we’re brilliant. Tell us whatever you want. We’re always happy to hear your feedback. Jason Hartman comm slash ask Adam.

Adam 27:16
So this is going to be one of those things, that’s kind of like runaway inflation, because as soon as they start restricting these loans and housing gets built, even less than it’s going to be, you’re going to see the the quote, unquote, need the feel for the need for rent control, to kick and even more, and people are going to become even more afraid of, you know, not having a rent control place, because they’ll just say, Oh, my rent will skyrocket. So this is something that it’s going to create a hold. It’s hard to come out of these states because I mean, can you see a date where California says, you know, what, we have a need of, I don’t know, 3 million homes in the state. So we’re just gonna throw off all of our building regulations and go for constructors. That’s never gonna happen. The road out This is gonna be is absolutely brutal.

Jason Hartman 28:03
Yeah, it’s almost impossible to get out of an atom, what you’re referring to is it’s just this vicious circle, you know, because one thing leads to another leads to another. The real thing that caused this problem is unbridled immigration control, you know, allowing massive amounts of capital from China, the Middle East, but really anywhere, coming buy up all the California properties make prices increase radically, having Fannie Mae and Freddie Mac and having the government sponsored financing the way they the way Sallie Mae sponsors student loans. Of course, there’s just massive inflation in anything that the government subsidizes and a subsidized housing and that subsidizes college. So inflation goes rampant. What a surprise. And then the fact that you just have building that’s too restricted and then they create all these laws trying to The problem, they’re just a band aid, they’re hacking at the the weeds rather than the roots, the branch rather than the root, you got to hack up the root. And the root is there’s a shortage because of those root problems as well as some others. And so it won’t you don’t undo this very easily. You really don’t. And then let’s shift to kind of how just generally speaking, a lot of people are viewing affordability as a national crisis. Now, rent is rising rents in larger metro areas, the renters want out, don’t they? They’re just moving to these tertiary markets because they cannot afford the expensive places. Right, Adam?

Adam 29:40
Yeah, well, basically, it should be saying people are waking up to the fact that there’s a housing crisis in the country because, I mean, we’ve been talking about it here forever, you know, good quality rental housing is hard to find these days. And so there was a study done or survey done for hot pads and it showed that 45 or 44 out of 50 of the largest us metro areas, renders are having to start looking outside the areas that they mostly want to live in. because they can’t afford to pay the rent that

Jason Hartman 30:10
is wanted in the area they live in. So one of the things we have in real estate it when it comes to home buyers, is the same drive until you qualify. Okay, so in other words, keep driving further and further out, away from your job until you can qualify for a loan. Okay, dry drive until you qualify, right. And then as you’re doing that commute, you see these signs up on apartment complexes that say if you lived here, you’d be home by now. Okay. And so that’s what happens. And generally speaking, you find that renters or tenants aren’t willing to drive as far as homeowners. You know, if you can own a home, the way you kind of look at is you’ll drive further out to own but renters they don’t drive as much. They’re just not willing to drive. That’s the one benefit renters usually have is that they’re a little closer to work, right. But they have to take a step down and their standard of living and lifestyle. And, you know, arguably, if you think owning is better than renting, then they’re not building for their future, which is the American myth or the American dream. We’ve depends on appreciation. Yeah, well, a lot of other things. I mean, we’ve talked about that ad nauseum. But we’ll leave that for another day, or or a past day, just go to Jason Hartman, calm and search one of our many episodes on that topic. But you know, the median rent in the United States is now 1500 and $60 a month. That’s crazy. Okay. Wow. And that’s got to be in the large metro areas. I think that that survey number has to be a little flawed. I am so country but

Adam 31:47
I actually did a little quick back in the napkin math on that. And if the median rent is $1,560, if everybody spent 40% of their income on housing, which would be Pretty high over a whole year, you would need to make $47,000 to qualify for that to be 40% of your income. So I mean, that’s the median rent is getting to the point where that’s a really pretty good income.

Jason Hartman 32:12
Yeah, to be able to reach and that’s at 40%. I mean, if it was it 30 or 33%, you’re looking at even more. So. I mean, it’s getting to the point where everybody’s getting priced out. It’s not just the people on the low end, everybody is, yeah, and think of that from the perspective of what I’ve said before, if you want to have a whole slew of people, basically working for you, investor listener, if you want to have a bunch of people working for you, one thing you could do is go start a business and hire them and do all that babysitting. You’ve got to do right and take all that risk. But the other thing you can do is simply just own a bunch of rental properties, and 40% of every month 40% of every year, those tenants will be working for you because that The amount of rental income they’re going to give you, they’re going to take 40% of their income. So if they earn $100,000 a year just for round numbers, they’re going to pay you 40 grand a year. And if they don’t pay quite that much, then they’re going to pay you at least $33,000 a year 33% of their income. So what a deal every single month, they’re working the first 10 days, 1213 days of that month for you investors, that is a phenomenal opportunity. You know what, you’re going to return the favor by providing them good rental housing. So that is a great way to go.

Adam 33:40
And you don’t even have to give them a W two or a 1099.

Jason Hartman 33:43
Yeah, right. You don’t have all of that complexity. You don’t have to manage their payroll and all kinds of stuff. But if if you do all those properties in California, when you want them to move out, you probably got to go rent a new house for them to pay their first month’s

Adam 33:55
rent, maybe build one

Jason Hartman 33:56
so so don’t do that. Yeah. Okay, we got to wrap it up because Sure to go to Jason Hartman comm slash contest. Get the details on our contest, put the link to your video there. We can’t wait to see it. We also look forward to seeing you at our upcoming events, our crews event and our profits in paradise. Those are right on the front page at Jason Hartman calm. Thanks for listening and until tomorrow, happy investing. 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.

Colorado Real Estate Market with Mark Ferguson of InvestFourMore

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

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

Announcer 0:31
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties. 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Jason Hartman 32:27
massive. A lot of

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

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

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

Jason Hartman 33:06
Fantastic. Thanks Mark.

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

Jason Hartman 33:12
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.

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

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

Key Takeaways:

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

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

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

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

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

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

15 plastic



Jason Hartman Quick Start

Jason Hartman PropertyCast (Libsyn)

Jason Hartman PropertyCast (iTunes)

Jason Hartman’s Blogcast

Inflation as a Business Plan for Governments and Central Banks

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

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

Announcer 0:15
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. Here’s your host Jason Hartman with the complete solution for real estate investors.

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

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

Jason Hartman 5:43

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

Jason Hartman 9:25
people stop at three.

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

Jason Hartman 9:47

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

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

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

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

Jason Hartman 24:54
for saving city

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

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

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

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

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

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

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

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

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

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

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

Jason Hartman 43:17
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice of any other specialized area, please consult an appropriate professional and we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.

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

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

Announcer 0:02
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution for real estate investors.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Jason Hartman 37:48
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.

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

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

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

Key Takeaways:

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

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

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

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

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

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

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

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

[30:00] Gold has been trending.

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

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

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

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

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


Twitter: @hendry_hugh

Instagram: HughHendryOfficial

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