Jason Hartman finishes up a two-part interview with Drew as they continue discussing self-management. They go into some economic headlines. Then Jason discusses a tweet from Peter Schiff and how interest rates are impacting the economic landscape. He gives listeners suggestions on what they can do in the current economy. Lastly, Jason discusses ways to collect rent and what its worth beyond the dollar amount you receive each month.
Investor 0:00
I’ve been investment for about two years. I have six investment properties. Why in Kansas City? Three Memphis and 22 rock? Oh, I started investing because I listened to Jason’s podcast. I said it makes sense to me. So I make a very quick decision. I think maybe one month I decided attended the Mythbusters event, back to some six thing. And then yeah, I started to buy properties since then, before that, I’ve been trying to do some study on stocks, but doesn’t make sense to me. So I hold a lot of cash I didn’t deploy to the stock market. So finally, I get to the Tetons podcast, everything he said. makes sense to me and I have a lot of agreement with he his opinion. So I decided to kick came to the event in the master And then I decide to make the investment. I think the first thing is real, you have a real good return. It’s not a scam. But if it’s true, be careful. What I recommend is joining a network like Jason’s network and get some education and start to buy the properties. Don’t wait to learn.
Announcer 1:24
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 2:14
Welcome to Episode 1189 1189. Thank you so much for joining me today. I’ve got drew back on the show. First off, let’s make sure we talk about how the internet works and how we’re all becoming more like ourselves. But I don’t want to forget before we do that, let’s go to Peter Schiff for a minute, you know, he’s the master of the soundbite. As I always say, I would not be investing with him I lost money investing with him, would not recommend it, but he makes some very good points. Now, a recent tweet from him. It says between 1800 and 1900, the US consumer price index fell by 50%. In other words, deflation, right? So we had 100 years of deflation. This includes the Gilded Age, the strongest period of economic growth in US history. If falling consumer prices were good, then why does the Fed think they would be such a problem now? and 107 people retweeted this at the time I got the screenshot. And it got 339 likes. So what say you to that drew?
Drew 3:30
Well, I think it would be a major problem, even though I liked the tweet. The problem is, is that the whole system is based on debt. And back in the 18, and 1900s. The whole system was based on savings and investing and not borrowing up to the hilt. So if you have deflation in a leveraged economy, it’s a death now. So I think that it’s well intentioned and I think that it is something that needs to happen. I mean, the markets are done. Desperately crying for deflation because, you know, you have a 30% increase in GDP over the last decade, and equities have run up 300%. So, the system is crying saying we need some deflation. And you know, the printing presses keep going, but I agree I held it. Wait, wait a
Jason Hartman 4:21
second. I just want to parse out some of your statements there. You said 30% GDP growth in the last decade. 300% equity price growth in stocks. Right. So right, you’re saying that’s out of balance, right, that multiplier of 10? Is that what you’re saying?
Drew 4:40
Yeah. And I mean, if you look at the central bank’s I mean, you know, 10 years ago, nobody, maybe except me, predicted that the feds were going to pump $10 trillion into the system. And so you look at where that money when is it when got parked on the balance sheet of these big banks, that it never touched? bottom rung of people. And so you have issue with just the fact that that money is now just sitting on the balance sheet and the banks are paying zero percent in interest. But if you try to get a loan, they’ll charge you, you know, for a car and they’ll charge you four or 5%. So they’re taking that big spread. And the only people that benefit from it are, you know, executives and all that money is getting shoveled into the stock market. I mean, I was reading something that one of the I think it was like one of the Icelandic countries live in Norway. I don’t remember at the last dis Scandinavian countries,
Jason Hartman 5:33
you mean
Drew 5:34
Yeah. Well, they took their sovereign funds and invested it all in stocks.
Drew 5:41
$18 billion, and the last couple months in December, that could have gone the other way. Oh, well, you know, the thing that’s so nuts is you have all these retirement pension funds that are issuing bonds to buy equities. I mean, it’s crazy.
Jason Hartman 5:59
That is That is what you’re saying is that is highly risky behavior, right? That’s what you mean by that. Oh,
Drew 6:06
yeah. Sorry. I might be talking a little shop here. So sorry. I’ll try and make it more clear.
Jason Hartman 6:11
So, in other words, they’re issuing bonds to raise money to buy stocks. Right. That is, yeah. breeziness
Drew 6:20
that is Yeah. Well, the thing is, is that you have artificially low interest rates that the Federal Reserve has created. So it creates all these bizarre unintended consequences, right, because it incentivizes bad behavior.
Jason Hartman 6:36
investment, you know, absolutely.
Drew 6:38
You know, so it’s like, I think that’s the problem with Peter Schiff is like, he is so right. But the problem is that the government is so wrong that it creates this situation where someone like Peter Schiff, who should be right isn’t under that’s my job.
Jason Hartman 6:54
Yeah. Peter Schiff in the rest of his ilk, the other gold bugs And the doom and gloom, Murs, and all the rest, right? That whole crowd right in Listen, you know who I want to include in this gym records. Okay? Jim Rickards, his books are awesome. Okay, I love them. They’re super interesting. They’re really wonky too. And, you know, a lot of that’s just way above my pay grade. But they’re always predicting the end of the world, and it never happens. And, you know, the problem with all of these guys, is they just do the math. And it’s not just the math. There’s so much more to it than that. You know, there’s so much more to it than the simple idea of, Oh, we’ve got too much debt. But that’s just like the same people like that idiotic Berkeley Professor I had on years ago. I don’t think he was on this show. I think I had him on the holistic survival show. But, you know, he kept saying, well, the world’s overpopulated blah, blah, blah. You know, I’ve heard that Malthusian thing for, you know, a couple hundred years, right? We’ve been hearing that they don’t know when it’s actually overpopulated I, because I asked him the question, I said, Well, how do you know that 7 billion people are too many people? And he says, well look at all the environmental damage, right? And all this stuff. And I said, Well, okay, fair enough. But how do you know that one of those 7 billion people isn’t going to come up with the solution to our problems? Why don’t you view them as a resource, rather than a cost? People are not only a cost, they are also a resource. And how do you know that the planet can’t sustain 10 billion, or 20 billion or 40 or 70 billion people? You don’t know because it’s never been done before. And that’s the problem with all of these guys. They don’t know how much debt is too much. They don’t know how many derivatives are too much, because it’s never been done before. So it’s fair enough to say hey, it’s grand experiment and Michael really
Drew 9:01
badly,
Jason Hartman 9:02
but nobody knows. Nobody knows.
Drew 9:07
Yeah. And I mean, I think you I think me, definitely Peter Schiff thought that the everything bubble would have already cracked a little bit by now. I mean, it’s it’s pretty insane I mean what is the longest economic expansion in history? So I mean just based on statistics everyday marching forward gets closer to the next downturn. So you know that analogy of a stop clock is right twice a day or
Jason Hartman 9:34
twice a day. Yeah,
Drew 9:34
yeah. So I mean, I think that there is some merit there and the debts going to be an issue. And you know, we’re right now playing musical chairs while the Fed raises rates and keeps taking chairs out. So eventually you’re going because we have a debt based system. You know, the whole issue is, is that eventually people are not going to be able to service the debt up a quantitative tightening. So I don’t know what’s going to happen but I think that when you people, look at the last recession. I think the last recession had a lot more to do with the people on Main Street, as you know, they’re getting their homes taken away. And of course, that had nasty implication of the banks being insolvent. But I do wonder in the next recession who’s going to get hit the hardest? Do you have any thoughts on that? Well, we shall see right now, right now, interestingly, in terms of the real estate markets, in many places around the world, certainly around the country, the wealthy are getting hit pretty hard, because these high end real estate markets are getting. I don’t want to say hammered that might be a little too strong, but they’re definitely getting hit. Okay. And, yeah. Well, I have I have a theory about it. I don’t know if I’m new. You’re right. But my theory is, is that the next big issue is going to be a global issue with everyone outside the US because we have the world’s reserve currency. So as people attempt to get more and more dollars globally to service their debts, because that’s what everybody wants and needs, I mean, a lot of these places have created their own private loans based on dollars. So it’s going to be a liquidity issue. And some people foresee a short squeeze on the dollar as that problem unfolds. So you’re going to have higher rates here, everyone else getting tortured. I heard in China that they like lowered the reserve requirements for dollars, and they’re only paying out like half as much in dollars. Now, without scrutinizing it in the system, the banking system, so they’re running out of cash. And as they try to peg their, you know, currency to the dollar. It’s creating all these issues in their system. So I think that China does have the appearance of abundance, but it’s all based on debt. And I mean, you we were talking about Kyle,
Jason Hartman 11:55
Kyle, you know what, we don’t have time to do the Kyle bass video today. So we’ll do it for Another episode but now we did it on Monday, I went through that myself, I went through the first two thirds of that video, which are excellent. By the way, he makes some great points. Andrew, you and I will cover that on another episode, the last third of it. But the point being that he talks about China’s faulty statistics, and the smoke and mirrors economy, the Wall Street economy versus the main street economy is really the point he’s making. And when you said China’s running out of cash, I think you really meant to say China is running out of dollars US dollars, reserve currency, dollars that they can spend abroad. You know, cash is they can create their own
Drew 12:40
Chinese cash, obviously, right? Yeah. Talking about dollars. Yeah,
Jason Hartman 12:44
yeah, good point. Okay. Hey, we got to wrap it up. But I just wanted to touch on that topic real quick, because we did say we would, and that’s about the way you know, this point. I think maybe I’ve talked about it before, but this one concept is pretty interesting. And I think People really need to think of this. When we look at how, you know, in many ways we consider the country to be very divided and, you know, people to be have really strong opinions about this political thing or that political thing or that candidate or the other one. And what’s happening Drew, and we talked about it off air before this is this, the way the algorithms work? And what we see on the internet, never before in history, have we had a situation where we are so much becoming more like ourselves. And I realized this about 20 years ago, when the company double click had a bit of a scandal, a privacy scandal years ago. You know, we’re seeing all this content that is served based on our profiles of what we look at our viewing habits are surfing habits, our buying habits, etc. And all these marketers are pushing content toward us ads toward us based on our own habits. So we don’t even see the rest of the world anymore. I talked about how you can’t hear the dogs that don’t bark, and boy, our opinions, our whole life, our whole worldviews are shaped by these patterns we have and we keep seeing more of the same in our various news feeds, ads served up to us anything. So do you want to make
Drew 14:30
a comment on that before we go, Drew? Well, yeah, you know, I think it’s kind of a little toothpaste in terms of what you’re talking about. Because you have on one side, you have this issue where, you know, it’s a little bit of an echo chamber and confirmation bias where anytime you go on YouTube or any search results, you know, as it learns more about you, it refines its what it feeds you so that you’re like the mouse clicking on for more food, right what interests do right but at the same time, those large search engine are manicuring and censoring information while they’re selling your privacy at the same time? So you have this weird situation where they’re censoring certain voices classifying it as hate speech, which I think is so broadly defined. So scary. Yeah, that’s nice. Yeah. So it’s like filter. Yeah, I find it ironic that you’re not allowed to think a certain way. And the thing is, is that when you create this situation where certain people are not allowed to have certain ideas, I think that creates a far more dangerous situation, because it pushes those people out to the fringes and creates these nasty consequences. Where is if you let people have opinions in the public, they are going to get retaliation and feedback, maybe retaliations the wrong word but they’re going to get feedback that’s, you know, going to refute their bad ideas. But I think that’s kind of issue that’s going on right now. And so we have to kind of define these public spaces, these public forums, are these platforms that are monopolies like anytime somebody gets big enough to compete against these Google Amazon Facebook type situations, they just get bought out by them or crushed. No, it’s like, it’s kind of like that Mexico thing. Do you want silver or lead? You know, do you want to be shot or do you want to get the money and leave? And so when these monopolies have control of the online marketplace and common area that people communicate, and they don’t allow that freedom that we are deserving, you know, in the Constitution, me as a libertarian where I think that like you know, private companies have a right to do what they want with their platform.
Jason Hartman 16:48
Not these these, these, these companies are not private companies anymore. They are square and they are bigger than many countries. We are living in an era of tech tyranny. These companies are disgusting. And they need to be held accountable. They are way too big. And Drew, like I’ve talked about before, they either need to be regulated like utilities, they need to be split up under antitrust laws into smaller parts. And or they need to make their algorithms public and open source so everybody can see them.
Drew 17:25
Well, yeah, I mean, the thing is, is that like, what if the utility company the phone company didn’t like what you’re saying on the phone, so they decided to turn off your phone service? I mean, that would be a scandal. And the thing that’s so disgusting Is it like recently I think Facebook Banned a few people and they shadow banned them or what know what they did was they sent out a press release, saying, here’s a bunch of people that we’re going to ban. And they sent us the press on a policy that they couldn’t talk about it beforehand. I don’t know what it’s called. We’re basically they say it’s like something we’re announcing this, but you can’t tell the Public till this date. And so they told all the press, they were going to ban these people before the people that even been banned. And then and so then they banned them. And the thing that’s ironic is they didn’t follow their own terms of service. Yeah. So it’s this kangaroo court that they determine the outcome.
Jason Hartman 18:20
Yeah. You know, I remember many years ago, I registered a domain name because I was so upset with the abuses of homeowners associations. So I registered the domain name and I was going to go on my one of my little campaigns against all of the, you know, evils that Hoa is commit, right? And how, you know, these are like these unchartered governments that you basically have very little recourse against them. And boy, the tech companies, the big tech platforms are so much worse. And it’s something we got to watch out for folks. We got to pay attention to this. It’s important It’s really important stuff
Drew 19:02
that circles back to real estate. I think doing self management, the thing that I’ve kind of considered is that these customers that I have, they’re renting my properties. This is other people call them, I love it, you call them customers, other people call them tenants, they will make sure you consider them customers. Yes. Well, you know, the thing is, is that, you know, with the property management company, before, the accountability was only one direction, if the tenant didn’t pay on time, they got a late fee. There was no accountability for the property management to perform. And so, you know, the thing is, is that the way I try to handle it is like, if they have an issue, I’m accountable to be timely, and the same way I expect it from them, right. So you know, in the ways that these tech platforms don’t abide by their own rules. You know, I think it’s always important to have that golden rule when you know, dealing with someone and I think that the repercussions of not having that approach will ultimately lead to its demise, yeah.
Jason Hartman 20:02
Well, let’s hope so, you know, there’s a lot of women about this now, around the world, you know, the European Union has caught on Facebook just got nailed with a big fine, things are changing. So let’s keep up the talking talk to everybody needs to be talking about this stuff, because it is vitally important to the future of our world. These companies have done great things, but they have also committed great abuses. And you know, talking about the real estate thing, yeah, it’s, you know, it’s the golden rule. Okay, do unto others as you would have others do unto you. I mean, we have just lost sight of that in our culture. You know, I’m constantly saying it’s an amazing time to be alive. But at the same time, as far as the culture goes, it’s a disaster. I mean, it’s just I am not impressed with the culture war in the way it’s going home. Fully the pendulum will swing back throughout history it usually has, you know, it goes too crazy one direction, then it, you know swings back the other way and it needs to swing back a bit. Because there’s some really bad cultural stuff, you know, this quick buck, instant gratification mentality is just, it’s just got it and it’s it’s
Drew 21:20
one thing certain certain things about the past we can reminisce on and certain things about the future are going to be bad. But the thing is, is always a given take, you always have certain things that are bad from the past and certain things that are good from the past. So you have to consider that the same as with the President. So it’d be sort of cherry pick out the data. There might be a trend there but you know, you have to also like you say be happy for where you are now. So it is an amazing time to be alive, I will say is definitely and you know, I’ll leave the listeners with one other thoughts. If you’re thinking about starting your real estate investing career or You’re thinking about expanding the size of your portfolio, you know, a year from now, two years from now, five years from now, you will be happy looking back and saying, Hey, I’m glad I did that, you know, so get started or expand your thinking on your your portfolio’s and your activity there it’ll it’ll be to your benefit or even save your life. But I was gonna say, I was listening to an investment type video and I thought something that was interesting was they said that your investment time is more valuable than your money because when you consider the compounding effect, is really you want time when your side and so if you let a decade roll by you don’t do anything, versus doing something you’re gonna look like a genius if you’re done something I mean, and so, if you pick one of these asset classes that produces income, and you’re not speculating, you have to consider this as like a little business but also something that you’re investing herself in And, and then you’ll reap the reward. So I’m right there with you.
Jason Hartman 23:05
It is amazing how and I remember Earl Nightingale many years ago giving me that example of the airplane versus the cruise ship, right? We get in a commercial jet, and we fly it may be 555 miles per hour. We get on a cruise ship and we sail along at 20 knots. And the cruise ship though it just it’s so consistent. It’s so persistent. Just 24 hours, seven days a week. It keeps chugging away. And you know, before you know it, you’re at the airport, right? You have a few drinks, you enjoy some of the onboard activities on the ship, and you’re at your new port. And it seems slow, but it’s so consistent. And it’s really it’s like income property. It’s just always working for you. It’s just always chugging away. Basically Think of it this way again, I’ve mentioned it before. But if you’re qualifying tenants, based on the concept that they can’t pay you, more than 33 to 40% of their income can’t be spent on rent every month, then you basically have them working for you every month for 33 to 40% of the month. They are working for you. They’re giving you all of Wow. I mean, isn’t that an amazing way to think of it? You know, that that’s the typical rent to income ratio that’s allowed by landlords, they don’t want a tenant to go above 33 to 40% of their income every month on rent. I mean, can you imagine that? It’s like if you own 10 houses, you have 10 households, giving you 33 to 40% of all the income there.
Drew 24:56
You have 10 part time employees are paying You
Jason Hartman 25:00
Yeah, and you and you don’t have to manage them as much as you’d manage regular employees if you have a business, and they don’t get to just walk out the door and quit and steal your client list and steal your intellectual property and your trade secrets. Believe me, I deal with this crap all the time in my business, right? It’s just such a great asset class. It’s just always chugging away. So I want you to think of it this way investors every month, the first 10 days of the month, go to you, the landlord, right for all your tenants. Maybe the first what 13 days of the month go to you it’s it’s 40% of their income, right? So that’s pretty awesome.
Drew 25:44
Isn’t it true? I’d never thought that way. In fact, what I had done in the past was I figured out like, and I can’t remember what it was, but I just thought about how much rental income I have. And I divided by 24 hours. And I’m like, it’s funny how this stuff is working for me while I sleep. Yeah, I remember what it was, but it was more than a minimum wage job for sure, you know, and just somebody is they’re constantly, you know, churning out income. And I love the idea of sort of reinvesting dividends that you get from your rental properties. And you know, maybe right now, if you have a small portfolio, you might only be able to get one property every few years. But as you start to scale up, you might be able to start getting one property for two years, and then every one year, you know, so it is exciting when you’re able to make bigger moves as you move further along. But yeah, time is the most important thing.
Jason Hartman 26:39
It is no question. You know, I never really thought of it that way. So just taking a calculator out right now, if you have a 1200 dollar a month rent on your properties, then you divide that by 30 days, that’s $40 a day and rent and if you divide that by 24, that’s $1 66 per hour. You’re getting in a Rent. So every hour, that money is coming in. Now, you some of you listening might be thinking something crazy. And I just want to, I want to hold that thinking for a moment because what you might be thinking is, well, Jason, well Drew, what are you talking about? That’s not the amount of my positive cash flow. That’s the gross rent. I hear you, I get it. But the way you should think of it is by the gross rent. And here’s why I say that, because you got that asset. With debt. You bought that asset, probably not for cash, and you only put up maybe 20% of the cash. So the other 80% was finance. And remember, the big boring idea that we shared at meet the Masters just a month ago or so was the idea of equity build up the idea of amortization, the idea of that return on your investment that most people don’t even see, when the principal pay down of that mortgage happens over time, you get the what I call the R o A, not ROI, not return on investment, but our Oh a. And that’s the return on amortization of your loans, where the tenant is constantly paying them down for you. It’s a pretty incredible asset class and has so many awesome characteristics. Drew, thanks for joining me today. Yeah. Thanks for having me. All right. Happy investing everyone. We’ll talk to you tomorrow. 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
Drew 28:50
and our general website heart and Mediacom for appropriate disclaimers
Jason Hartman 28:54
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