Jason Hartman starts this Flashback Friday episode by interviewing his mother. They talk about tenant self-sufficiency, fostering an ownership mentality with tenants. In the second half of the show, Jason features Scott Shellady, Senior Vice-President of Derivatives of the Trean Group, who talks about derivatives. Mr. Shellady also devotes time talking about the reality of retirement for Generation X in today’s goofy financial climate.
Hey Jason, its Mark, living here in Europe, the Czech Republic. I’m down at my Airbnb in Austria right now. And I just wanted to congratulate you on the thousand show. Congratulations on all the shows, you probably don’t hear from only a fraction probably don’t hear for most people, just how much the shows have helped, how much we listen to them, how much we appreciate them, and just all the best Congrats.
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 has hand picked to help you today in the present and propel you into the future. Enjoy.
Welcome to creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine self made multi millionaire who not only talks the talk but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom, you really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:30
Welcome to the creating wealth show. This is your host Jason Hartman. This is episode number 363. And I want to apologize in advance if the audio quality isn’t as good as usual today, because I am recording just simply directly to the computer. But I’ve got a special guest back for the third time and that is my mom. We’re here at her McMansion. This ridiculous McMansion Tara in Alabama. And I was at a conference in New Orleans as you know what, on the last episode, and so I’ve been here for a couple of days. And I know you regular listeners and attendees of my seminars have been interested in hearing the story about how she builds this house. But we’re going to talk about one of her tenants today and some of our different property management experiences. And we’re going to play for you A almost hilarious phone message that she got from one of her tenants. And what I really want to focus on with you today, before we get to our guests, who by the way is Scott Halliday talking about derivatives. Not sure if I mentioned that or not. But anyway, that’ll be our guest here in a few minutes. But what we want to talk about today is fostering an ownership mentality with your tenants. And what I mean by that is this, sometimes you have to train your tenants, sometimes you have to train your property managers. And that, of course, depends if you’re self managing your properties, or if you’re using property managers, but you have to ultimately train either the manager or the tenant to understand that when people rent a single family home, or a unit in a duplex, or a four Plex, or even in a large apartment complex that you might own, we want to foster a mentality of ownership like they’re the owner and they should be doing a lot of things to the property. And you shouldn’t have to deal with every little thing. I remember one of my property managers in a Pensacola, Florida property that I owned, emailed me and they said there are ants, will you authorize paying for an exterminator to come over for you know, to exterminate the ants? And I’m thinking, no, this is ridiculous. I mean, that’s a ridiculous request. Now, just so you know, I gave up ownership of my own home about two and a half years ago, and I rented a really swanky high end penthouse in the Phoenix Arizona area when I moved. And you know, I kind of like being a renter in a lot of ways, especially, you know, from a large institutional landlord where they, you know, if, if a light bulb burns out, they come and change the light bulb for me. I mean, it’s, it’s like crazy, mom. Thank you. Yeah, so so but that’s not the kind of experience I’m going to provide for a tenant who’s renting a single family home from me, I want them to act like a homeowner, I want them to take care of things and fix things and, and not call me for every little thing. And when I’ve talked in the past about the idea of self management at a long distance, which I have successfully done, and my mother, who you’re about to hear from has definitely successfully done for many years. I understand that self management is not for everybody. It’s only for some people, the rest of the people will want to have a property manager But in either case, it’s important to train the manager or train the tenant so that you are not bogged down with little tiny issues. Okay, and this is easy to do. It’s not difficult to do at all. So here’s my mom, Joyce, and how you doing
fine, Jason. Good.
Jason Hartman 4:56
Well, I’ve enjoyed staying here at your McMansion for the last couple have days. And I’ve told our listeners and I’ve learned my lesson from you that I never want to build a house. This is like a ridiculous project. And and since many of the regular listeners, you know, they kind of ask about your house all the time here. How long have you been building this place three years, four years,
the original builder started in the end of 2008. And then we had a Parting of the Ways in tooth at the very end of 2009. And I came down here and I had to find everybody to do everything. Because a couple of days ago, I was going through old pictures. And I happen to find a picture of this house as it was turned over to me after he left the job. All it had was drywall. Yeah. So you obviously know it did have plumbing inside of those walls, which leaked like crazy one time and destroyed a whole bunch of flow of stuff. Anyway, that’s why I just take could be someone because obviously I’m not a builder.
Jason Hartman 6:00
Well, and you’re you’re a perfectionist, and you want it a certain way, obviously, because this has always been your dream to build your Southern mansion. But I tell you, when I owned that traditional real estate company, and we served a lot of clients, you know, wealthier clients in Irvine, Newport Beach, California, Southern California, we see actually, it wasn’t funny, it was tragic. But we would see these couples, you know, who were wealthy people they buy, you know, a very expensive lot in, say Newport coast California, and with the intent of building their dream mansion, you know, and the whole project altogether would probably cost them 810 million dollars and variably that that is something that will massively increase the divorce rate. Because building a home is not for the faint of heart. What would you say about that?
I would agree with you. 100%? Would you do it again? No, Good. I’m glad you said I would take any house and rip off the front do whatever it took, but I would not go from scratch again.
Jason Hartman 6:57
So it’s easier to fix something up and rehab it and build it from scratch. I think so yeah. But what I really think because I’ve talked about on the shows before and I’m trying to convince you have is that, you know, if it’s an expensive home, it’s just such a better deal to rent it because the rent elasticity is just not there. A $2 million home can be rented for 4500 to maybe five $6,000 per month. So that’s about a quarter of a percent rent to value ratio, when you’re the tenant, it’s favorable to you to rent the high end home. But if you invested $2 million through my network, in in the different areas that I’d recommend people invest. Ideally, they’d get 1%, if not even a little bit better than that. So they get $20,000 per month. So sometimes it’s better to rent that home. And that’s that’s been my philosophy since I found that swanky penthouse bargain in Phoenix, you know, because, you know, I sold my home in Southern California was in Orange County, and I sold that house for just under a million dollars. Of course, it was a pretty downtime in the market. And I thought of putting it up for rent and the most I could have gotten for rent for that house that was almost a million would have been about 4000 per month, maybe 4200. If I was lucky. And I thought, Gosh, if I just want to deploy a million dollars through our network and buy 10 $100,000 houses that rent for $1,000 a month each. It’s better to rent my high end home for myself, and rent a lot of lower middle houses to other people, right?
Yes, just because the expenses and fixing up the lower end houses don’t cost as much when you have repairs to a high end house. Those repairs are expensive. Yeah,
Jason Hartman 8:39
yeah. I mean, all the fixtures and fittings. It’s this the first time I actually stayed here I saw your house before is it’s been in the various stages and it’s very long construction project. But you’ve got 14 foot ceilings moldings that are about a foot
thick. Like all dentals Yeah.
Jason Hartman 8:55
dentals Dental moldings, and it’s just incredible. You know, the amount of money you spent on this. I think you’ve over improved. Would you agree with that too?
Well, not in my mind.
Jason Hartman 9:07
But I think you have you got you know, 9600 square feet here and we’re sitting on the back patio now but looking at the unfinished backyard now what are you gonna finish the backyard bomb?
Well, I had to do the inside stuff first. Now, tomorrow, my chandelier is arriving.
Just means we’ll be gone. We’ll be gone. Yeah.
Jason Hartman 9:25
So anyway, interesting. Okay, well, hey, anything else you want to mention about why people shouldn’t build a house or have this experience but then let’s talk about, you know, the tenants and investing.
I just think it’s better to have some very good builder do all of this stuff for you, rather than you get involved.
Jason Hartman 9:42
And it’s better to buy it on the resale market and then fix it a little bit the way you want it. But, but even better than that is to just read it.
Yeah, I would agree.
Jason Hartman 9:52
you’d agree. Okay, good. Well, so you’ve had some long term tenants in your properties. The longest one you’ve had has been there. A quarter Have a century. Yes, you did hear that, right? 25 years, since 1989, you’ve had this one tenant, we’re about to play a phone message from this tenant, which I think you’ll really get a kick out of listeners. Because Because you have really fostered a culture of like an ownership mentality with the tenant, where he’s doing all kinds of stuff to improve the value of your property. It’s really amazing. Maybe we should start out by just playing the phone message. Okay. Yeah, I was amazed with what he had done. And then and then tell the background, but you know, he’s been there, this one tenant, 25 years, you’ve had other tenants for 789 years. I know, you know, maybe you can give a little more detail on that. But But here’s the phone message. Okay, just listen to this, I think you’ll, you’ll all get a kick out of this.
Jason Hartman 10:48
So just so you understand, this is the tenant calling my mom to give a report on what he’s done to improve her property. Okay, so that’s just giving you a little context. Here we go.
Jason Hartman 11:02
across 1400 bucks, he put a front yard in for 1400 dollars, as
you say, we couldn’t just throw some say down. So anyway, that’s in and I just cut it right now. also put a brick wall and on the west side of the house, because the neighbors had pit bulls and fans that was up there, they wouldn’t think we can take a chance on their dogs getting over in our yard, when I’m not there and attacking our dogs. So
Jason Hartman 11:37
so your tenant put in a $3,000 fence at his expense.
I I nearly fell over when I heard this phone conversation.
Jason Hartman 11:49
He’s giving you a full report. I just love it. Okay, let’s go on
the sink faucet in the kitchen, the one that you have the guy next door do because it wouldn’t stop leaking. I cost 50. Some books. The Mailbox, I haven’t got I got it. But I haven’t put it in yet. And there’s one or two other. And last but not least, there was an earthquake. I don’t know I guess two weeks ago, and looks like it. Damaged water heater. Because now I’ve noticed when I was back there cleaning that there was water leaking out of that room. So I open the door and it looks like the Water is leaking out. From the water meters dripping, snap, pour and out. It’s just a drip. We haven’t noticed it because so I haven’t been back there. But I went back here today. And I noticed it. So that’s what’s going on. I don’t know what you want to do about it or how you want to deal with this or whatever, but probably going to need a water heater. So I can put it in if you get one. I put the last one in. So shouldn’t have too much. So it doesn’t have to be today, I’m pretty sure we haven’t noticed loss of water or anything. So probably can be the weekend or something I have to truck has got a dead battery in it. I’ve got to get us started today in a one star. So I had to go get a new battery for today. So I’m gonna do it today anyway. So I’m on my own. So anyway, that’s what’s going on. I thought I’d let you know. Have a nice day.
Jason Hartman 13:36
I love the toodaloo at the end. It’s funny. He’s a funny guy. So he replaced the last water heater for you. Well, and now he’s replacing the new one for you.
Yes. I mean, I was going to have you know, someone do it. And he got anxious. And he says, oh, I’ll go pick it up and do it myself. Isn’t this great?
Jason Hartman 13:55
So how do you get it? I mean, I’ve had some tenants like I remember my I think one of my best people was my guy in Houston, in one of my Houston properties and, and he was I talked about this on a prior episode. He was an engineer, and he helped design oil drilling platforms for the oil companies. Now Houston is Houston is a great place to invest. I love Houston, because it’s got that transition, highly paid tenant base, you know, where they move there for a couple years. And then you know, like this guy, that guy I’m just talking about, I think his name was Paul. Yeah, Paul was his name, I’m pretty sure. And you know, he was married. And it was he just he and his wife on the property. But he got shipped off to some foreign country. I think he’s in the Middle East. Now. You know, he works. It helps them design, maintain these oil drilling platforms. But he was so handy. He did everything for me. It’s like he moved in with a couple things that were unfinished and I didn’t have a property manager. I was self managing that property and listen, I knew I live nowhere near Houston. Okay. At the time I lived in Southern California or maybe I just moved to Arizona. About two, two and a half years ago. Anyway, he got me quotes and like fixed a bunch of stuff, there was only one thing he couldn’t fix. It was an electrical thing he couldn’t figure out, he tried to figure it out. And he just couldn’t figure it out. So, but but he was fixing all kinds of stuff for me. I mean, I thought this is great. And don’t look at folks, this is what people should expect, a lot of life comes down to setting proper expectations, right. And in a single family home type of rental scenario, they it’s not like you’re going to come out and change the light bulbs for them to use that metaphor or spray for ants. I mean, if someone calls me and says, there’s some ants, I say, you go to the supermarket, and you buy some fogger, and some raid or black flag spray. And I mean, this is not like this. It’s not like being in a hotel or an apartment building. Okay, what do you say about that?
Well, I that’s absolutely correct. And there’s nothing that would bother me worse than having some tenant called me up and tell me that the light doesn’t work. And what it really needs is a light bulb, a new light. I mean, that is just ridiculous. So you know, you kind of have to set that pace with a tenant, the day you sign the lease. And I always inquire as to whether or not they are kind of handy. That really helps me know what, what, what, what’s going to happen in the future. But with this tenant that has done so many things. Now, none of these things that he called me up and talk to me on the phone that he had done the $3,000 for the fence and
Jason Hartman 16:33
1400 dollars for the
for the front yard and the faucet was 50 bucks. Yeah. I mean, we had not discussed any of these expenses beforehand. So by right, I would not have to pay any of these expenses, because they were Yeah,
I mean, he went ahead and did them entirely on his own. And don’t believe me, I am highly appreciative of what he has done. But the water heater, I will gladly take care of Sure. There’s just no problem. But right but but all you’re gonna end up doing and when we were at the movies yesterday, he called just before the movie started. I remember, we saw what did we see a Winter’s Tale? A Winter’s Tale?
Jason Hartman 17:11
Yeah, this movie was pretty good. And anyway, he called and he said that he was doing the What? Are you just gonna pay for the parts? Is he gonna do all the labor?
Well, he’ll he will pick up the water heater, the water heater, so I won’t have to pay the store to deliver it. And if he needs any parts course they’ll pay for them?
Jason Hartman 17:30
Yeah, yeah. So but he’s doing the labor. You got free labor? Yes. Wow. That’s fantastic. And by the way, this tenant we should mention is a truck driver. Yes. Okay. That’s one thing that’s setting expectations, when you have the tenant kind of set the pace, as you say, but what if you have a property manager, let’s talk about training them a little bit. Now, I have some tips on that, I think what’s really important with a property manager, and with most things in life is the way you begin the relationship. That’s the that’s sets the tone, usually, and you can fix it later if you didn’t begin the relationship, right. But it’s a little bit harder to do that. Because you’re, you know, it’s kind of an uphill, you’re swimming upstream, if you will. So with a property manager, what I do is I’m always careful whenever I have a new property manager. And keep in mind, just so you know, some of my properties, I’m self managing from a distance. And some of them you know, some of them are 1500 2000 miles away from me, and I’m self managing. But sometimes I have a property manager and my rule on that again, and I’ve talked about this at length and other episodes. So look back in the archives, and, and listen to some of my talks about self management, if you’re interested in that. But if there’s a property manager, I make it a point to really, really look carefully at their statements in the very beginning of the relationship, especially that first three months, I want to look and I want to nitpick, and I want to be picky, and I want to email them, and call them out on every little thing. Even if I don’t actually object to it. I’m gonna make up a fake objection. So they all know I’m paying attention. They’ll know I’m not a client who’s a pushover. And that’s what I want them to know. Any thoughts on?
Absolutely. Because that was one of my tennis shoes before I started managing everything myself.
Jason Hartman 19:13
Yeah, and by the way, we should say you’re 100% self managed. And you have properties. And oh, I got to tell another funny story. I took a picture of this. You picked me up in New Orleans, which is about three hours away from from here. You know what I’m gonna say, right. And where were we driving by we drove to Mississippi, yeah. to come here and you have a property in Gulfport, Mississippi. Yeah. And what did we have to do? Mom, we were
we had to just take we had to stop at this exit because people keep calling me about this sign and I’m sick of answering the phone or not answering the phone, which is the rude thing to do, you know, because you never know. Maybe you want to rent to that tenant eventually. Anyway, I had to stop and go take the sign off. The telephone pole at Walmart.
Jason Hartman 20:03
No, it was it was Home Depot. Home Depot. Yes. So basically, we had to get off the freeway and golf board on the way here, because she had one of her for rent signs was still on a telephone pole there. And I love how unprofessional you are. What I mean by that is you take a big thick magic marker, a sharpie, you know, a big thick one. And you you take plain corrugated plastic signs, and you just wait 18 by 2418 by 24 inch signs and you write in your own hand how home for rent, I think is what you said you didn’t say house you say home home for rent. Yeah, yeah. And then you you write the address? Yes. And you write telephone number, your Anything else? I can’t remember nothing. Yeah. So So I got out of the car and I tore the sign off the telephone pole, it had two nails in it, and you just got yourself.
But it’s so inexpensive to do that. And it is so convenient. You don’t have to take stuff to a printer. You know, they make mistakes in your phone numbers. I mean, they charge you a whole bunch of money to do that. All you do is find a local printer who will sell you these little corrugated 18 by 24 plastic things for 99 cents.
Jason Hartman 21:17
So you buy these white signs for 99 cents each. Then you write on them with a magic marker. My folks, I just got to tell you I’m not like this. My mom is the ultimate do it yourselfer. She really is. And I don’t necessarily recommend that I’m a hands on person. Yeah, you really are. So we had to take down the sign because people kept calling about the house for rent. And it was already rented, right? Yeah.
So what else but the point is, when people start calling on your house for rent on your home for rent signs, always ask, Where did you see this sign? Because then you will know the most profitable places to put the signs up in the future.
Jason Hartman 21:52
Right. Good point. Good point. Okay, and what what else should we say about setting the tone or setting the expectations with either your tenants or your managers?
Well, this manager went out and replaced the outside light bulbs in it, you know, and so anyway, I said, I am refusing to pay for that. So they took it off the next month. Mm hmm. Yeah, I mean, you just you just have to let them know that some of these things are absolutely ridiculous. Now the tenant is responsible for replacing the light bulbs, whenever they burn out, whether they’re inside or they’re outside, this is not these are not 300 unit apart luxury apartment complexes, where, you know, it’s treated like a hotel would be treated, right? If I was staying in a hotel, I would certainly expect them to replace the light bulbs in my apartment building, the built in lights, they if one burns out, I just email the landlord, and they come and replace, which is, you know, I would never expect that if I was running a single family home. It’s just not what we do. Well, the other thing is, you need to instill a sense of pride in that tenant. For example, if the dishwasher goes out, if that person is handy, I say I am happy to buy you the new dishwasher to make it convenient for you and your wife. So you’re not dealing with an old incompetent dishwasher, but you put it in, and I’ll be happy to buy one for you. Yeah,
Jason Hartman 23:21
so you sort of make a deal. And that’s another thing I do, by the way is not exactly like that. But another thing that I’ve done is I’ve you know, when there are sort of things that are like these borderline requests, like the tenant would like to do, I mean, I don’t get as good a deal. Nobody gets the deal to get okay. But I remember one time they wanted to build a fence or make a higher fence or something like that. And you know, the land manager, I had a property manager on that one. And they said, you know, will you pay for it? I said, No, I’m not gonna pay for that. It’s not what you’re telling me? Why should I but I did offer to pay for a portion of that. I think I paid like 30% and the tenant paid the rest. So the tenant is paying to improve my property. And of course, I always want to see pictures of before and after. And you know, I want to see the actual receipts from for any parts or
Oh, they, they must send the receipt. Yeah, of course.
Jason Hartman 24:10
And so that’s what what you need to do. Okay. So instill a sense of pride, a culture of ownership mentality. Anything else?
Yeah. You You say look at this is your home. Nobody is going to come and disturb you in your home. I don’t bother you. I don’t come around and plant no flowers and keep looking at what you are doing. This is your home, and you feel up sense of pride living in it. And obviously, you should be taking care of it.
Jason Hartman 24:41
Yeah, good. Good point. Any other tips you can give on any property management things, just anything in general or anything more on this topic.
Just act in a very businesslike professional way. Always with your tenants and be concerned about them. But don’t be overly friendly. It’s it’s a business proposition, you expect your rent on the very first day of the month. There’s absolutely no leeway. Three days, five days, anything like that, because it’s just like you’re receiving a paycheck. It’s just like when they receive their paycheck, if their boss tells them, gee, I can’t pay you till three days later, that doesn’t work with them. So therefore, it shouldn’t work with you. I’m receiving your rent, know what also With that in mind, what do you do? As far as I mean, you’re you’re managing all your properties yourself nowadays, and they’re scattered all over the country. Okay, these are not near you. You don’t own any in your city. Right.
Thank goodness. Now, why do I have a p o box that everyone mails to? Yeah.
Jason Hartman 25:47
Oh, no, that’s what I was gonna ask. But you have most of your tenants do deposit right into your bank account?
Yes. Yeah, that’s, that’s the convenient thing. There’s no longer anything? Well, I put it in the mail. Within within seconds, you know if that deposit is there, so they just walk in you bank with a national bank, and they just walk into a branch, and they deposit it. And you just look and see that that money is in in there. Right.
Jason Hartman 26:13
Right. And you always prorate for the first of the month. Okay, so yes. And when it’s when they first move in, right, right. But they don’t always move it on the first of the month. That is correct. Right. So you, you make the proration. Now, talk a little bit about that, because that’s interesting. When you rent to a tenant, you always get certified funds, right? So there are cash or cash. And so you take cash, actually, oh, Christ, Oh, wonderful, gosh, or something else. I can see you walking around with $3,000 from the tenant while you immediately get to the bank, deposit it. Okay. So when you do the proration say, for example, they move in on the 13th of the month, right? Well pick a lucky number lucky 13. Right? And they move in on the 13th. How do you do that proration, you get the security deposit Plus, you get a full first month rent and then prorate the second month, so that you get
the rent goes from the 13th of the month, they move in till the 13th of the next month Wait, but then on the next month, on the very first day of that month, they pay you that smaller amount of rent, right? So so up heads always based on 30 days don’t try to
Jason Hartman 27:25
be collections or are always 30 days, whether the month is 28 or 31. It’s 30 days is how operations always work. But what I want to say is that so you get a full first month up front, even if they moved in on the 28th of the month, and there were 31 days you get a full month. Yeah, good. Absolutely not three days where some people have Oh, no, oh, yeah, no. Okay. And then you get a full security deposit. Now, how do you calculate your security deposit? Usually?
Well, if the person would really have bad credit, and I would be leery of them somewhat, I would charge them more than one month security. And that came in good stead recently, when I had to do an eviction in Long Beach. Anyway, always get at least a month a minimum of one month.
Jason Hartman 28:13
Yeah. So you get one month security plus a full first month rent you prorate the second month. Now, you know, I used to get sometimes, although don’t do it all the time. But even more than one month’s rent
of oil, if you can,
Jason Hartman 28:24
yeah, fight for the security deposit. Oh, absolutely. And I never collect last month’s rent because the other thing that landlords need to understand. And of course tenants need to understand is that the security deposit cannot be used as the last month’s rent. That’s your security deposit. So the tenant doesn’t get to, once they give their notice, say hey, I already gave you that security deposit for 1500 dollars. that’ll cover me. No, it won’t. If you don’t pay the rent this month. I’m going to file an eviction. Now
look at this a whole illegal situation. It’s its first month rent plus security deposit. There’s no such thing as letters that went by the wayside. years ago. Yeah.
Jason Hartman 29:06
So never do that. Talk to us about credit. You said you would rent to people with bad credit. I want to talk to you about pets, because your tenant when we played that funny phone message did mention his dogs. So let’s talk about pet rent. Let’s talk about credit reports because a lot of otherwise pretty good tenants have very bad credit nowadays because of the financial crisis. And you know, as landlords we have to look at that from a positive perspective. That is going to keep them in the rental pool for years to come. So right
Scott Shellady 29:36
to Shea. Absolutely don’t not rent to a tenant, because he has bad credit. And I tell the tenant I look we’re going to run a credit report. We are not going to turn you down on the basis of that alone. We are interested in two things, how much you earn and that is enough. So that you can pay your rent every month, and how well did you pay your last landlord? Those are the two things that I am most concerned with the fact that the tenant has bad credit means that he can’t go out and buy a house and move out of your rental right away. And so that that bad credit is going to keep him as a very good tenant for you for quite a while.
Jason Hartman 30:20
So what do you do with with bad credit? Like, do you really look at the FICO score? Do you look at specific derogatory is on the credit report? Or how do you make the decision as to how much the security deposit will be? And I’ll give an example before you speak because I remember many years ago, you gave me this idea. I had a tenant, and it was in a California property many years ago, which turned out to be not that great a deal, unfortunately, but But anyway, I had this tenant and he had recently declared bankruptcy and the maximum rent I could and I you know, remember I was just a kid back then I didn’t know anything. But I just remember, I had to call and research and figure out you know, this may actually be for the internet. So I had to call and research and figure out that the maximum legal amount I was allowed to collect was three months rent on a furnished place, and two months rent a security deposit on an unfurnished race. And this was unfurnished. And what you said to me, as you said, You know, I came to you for advice, and he said, Jason just haven’t paid rent in advance. And he did. He paid me now get this, folks, he paid me six months rent in advance, plus the maximum legal security deposit. And after the six months was up, you know, he just started paying. So it worked out. Yeah. What else would you say?
You can do that?
Jason Hartman 31:42
You can accept advance rent in most places? Probably all I’m not sure. But laws vary from city to city, state to state. Okay. So
I think I actually did that. Also, I don’t remember the details. But they they had bad credit. And I don’t remember the circumstances, but I think I did, except about four months rent
Jason Hartman 32:02
four months. Yeah, plus the maximum allowable security deposit. So that’s one thing you can do. I mean, some of these tenants really oddly, almost have enough down payment for a house, they’d like to buy one. But their credit won’t allow them to buy one. So that makes them a great tenant for you. And it’s a win win situation, because they need housing, and they can’t do it any other way. And you’re gonna provide it for them. Just make sure that the deal is equitable, of course. Now, let’s talk about pets. We both are animal lovers, you and I. And I remember when I was a kid, I had a couple of cats and then dogs. And we both like those a lot. But we’ve never seen them improve the value of one of our properties.
Jason Hartman 32:44
So So what do you do about pets? Now what I try and do, although some property managers frankly think this is like a crazy foreign idea, and I again have to educate them, I charge pet rent. And institutional landlords do this all the time, they’ll charge $40 a month, if you want to have a dog, and they’ll limit the weight of the dog, usually to 30 or 40 pounds. They just do it by weight. And they will also say it can’t be younger than one year. Because then you know, with a dog you got a puppy is obviously gonna go to the bathroom. Right? So what do you do about pets?
Well, until I had a conversation with you earlier today, I was just charging
Jason Hartman 33:23
you were just charging a security a really a one time fee for the path. Correct. But right. But I said charge it every month.
Yes, I’m going to do that.
Jason Hartman 33:33
Well, I taught you something. Good. Any other things you want to close with? Before we get to today’s guest, which is Scott shall today to talk about derivatives.
I just think that it’s easy to manage your own properties. The longer you do it, the easier it gets. And why pay all that money to a manager. But I know some people aren’t as hands on as I am.
Jason Hartman 33:52
Yeah. And in the interest of full disclosure, we should also say you are retired, you don’t have a day job anymore. This is your day job, right? Yeah, is managing your properties. So managing your properties and building this house, which is a ridiculous project. So if you’re working full time, which most of our clients are, use a property manager now I’ve self managed from afar and done it successfully without, in some ways. And I just want to say this one more thing before we go. I have mentioned that in past episodes, but in some ways, oddly. And it took me doing this to realize what was what was going on what the dynamic was. But in some ways, I think that when there’s not some amorphous company managing the property, the tenant sort of wants to maintain a good relationship with the owner. And they don’t ask for a lot of stuff when it’s when they got to come to you directly. You know what I mean? They don’t bug you. They want to maintain a good relationship. When it’s a management company. It’s sort of like the government. It’s like when you know what I always say about government when it’s everybody’s money, it’s nobody’s money, nobody cares, right? So they don’t care. They’ll just like it. Ask for everything and they’ll just bug the manager incessantly you got to do this you got to do that spray for and so I’m not going to lift a finger type of mentality change the light bulbs. But when it’s a person and they’ve got to call a person or email a person, they kind of don’t ask for as much a lot of times,
right. What do you agree with that? I think so. Yeah, I think so too, when it is somewhat impersonal out there, like the property manager, like, Who is he? Who’s this company? Right. But when you have to personal one on one with somebody, then you’re a little bit shyer, I think,
Jason Hartman 35:32
Yeah, I agree with you. I think that’s true. So, so some good tips on management, whether you’re a property manager or self manage, we have a lot of content on past episodes for that. And in the members section at Jason hartman.com. We have even more because we do those monthly conference calls where we’ve talked about property management and self property management as well. So without further ado, let’s get to our guest. And we’ll talk about derivatives which I affectionately and kind of call in a silly way. I call them the thing about the thing. That’s a derivative. How do you like that for high tech, sophisticated MBA from Harvard explanation, right? The thing about the thing, that’s what a derivative is, and that’s what we’re going to talk about with Scott Halliday. And we’ll be back with that in just a second. I’m here with Missy, our newest provider, and she has a great free offer for you, Missy, what does it
take? And it’s a copy of my manual landlording without losing your mind.
Jason Hartman 36:27
Fantastic. What does landlording without losing your mind teach our listeners? It’s a great tool for teaching them how to pick out great rental properties and how to make sure they cash flow. And it’s free. And it’s available at Jason hartman.com slash cashflow again, Jason hartman.com slash cashflow.
It’s my pleasure to welcome Scott shell today to the show. He is Senior Vice President of derivatives for the treon group. And treon is Irish for strength. He’s coming to us today from the Greater Chicago area. And Scott, welcome. How are you?
Scott Shellady 37:12
I’m good. Thanks for having me.
Jason Hartman 37:13
Well, good. Good. It’s pleasure to have you on the show. Just in our little discussion before we started recording for the show, I can tell this is going to be an interesting interview. And maybe I’d like to start off first by asking you people talk so much about the at least the doom and gloom I talk so much about the derivatives bubble, and how there are hundreds of trillions of dollars in derivatives out there. And I have never reconciled my mind as to why that is a doom and gloom scenario because there’s a Counterparty to every transaction. And you had a great way of explaining that. So first of all, maybe Scott, do you know the estimated size of the derivatives market?
Scott Shellady 37:56
Now it’s I think it’s hard to even ask me because there’s a lot of OTC transactions that aren’t registered or released on a listed exchange, so hundreds of trillions is right, but the total size is going to be very difficult to get your head round.
Jason Hartman 38:11
I was just gonna ask you also, and I probably should have asked this first. Maybe you can just explain what is a derivative? I mean, I kind of simply say it’s the thing about a thing is the thing about the thing, not the thing itself, just sort of jokingly but explain to listeners, like
Scott Shellady 38:27
what is the derivative, while you’re writing is the thing about a thing, the best way, the best way to the best way to explain it would be if you’ve got say, corn, there’s derivatives on corn, you can trade puts and calls and those things are kind of complicated. And they get more complicated than that. But you can get, you know, buy the right to buy the right to buy or buy the right to sell. So they’re, although they can be very difficult. But a lot of times it’s just like trading insurance. So I can buy something that protects me to the upside, or I can buy something that protects me the downside and every product out there, whether it be fixed income, commodities, or even equities has something like that. And maybe some of them actually have a derivative of a derivative. But we won’t go into that that gets more complicated. But really, it’s just kind of like insurance. But a lot of people use it as a way to, I think, add more return or like, you know, create more return for what they actually have in their portfolio.
Jason Hartman 39:19
And so estimated size of the derivatives market derivatives market. I know it’s hard to tell, because some are over the counter transactions here. But any any thoughts on the size?
Scott Shellady 39:28
Well, I think if you said something like 500 trillion or something like that,
Jason Hartman 39:33
I’ve heard as high as 700 trillion. Now, just to put that in perspective, of course, a billion ain’t what it used to be. Now we talking trillions, absurdities, you know, think thanks to the omnibus bailout programs. That’s how we have to talk nowadays. But just to give the listeners some perspective, I mean, the GDP the gross national product or gross domestic product of the United States of America, the largest economy in the world, by far is about I don’t know 12 $13 trillion, maybe the GDP of the entire planet every year is about $60 trillion. Our unfunded mandate or unfunded entitlements, looking forward about 20 years, has been estimated between 60 and $200 trillion. So I’ve heard derivatives market is as high as 700 trillion. I mean, that’s just insane. How can we even think about this?
Scott Shellady 40:22
Well, I think that the reason derivatives markets are there is order in order to create leverage and boiboi. They have done that. I mean, that’s been there that’s been their namesake. And they’ve been successful in doing so. And there’s been a lot of money lost and won on both sides of that. So yeah, that’s what the therefore better return, maximize return and somehow get some more bang for your buck for your portfolio.
Jason Hartman 40:43
All right. Well, well, should people be worried about when you’re worried about the broader economy? Should you be worried about how many derivatives are floating around out there? Or is it really a red herring?
Scott Shellady 40:55
Another good question, I would say, you know, as an old trader would have said to me, you know, if you bet on the sun exploding, and you win, and what do you really win? Good point. So I think that maybe you can get really worried about the size of the derivative markets, but also, I think, you’d probably be better served, if you just go with the flow and manage your own finances with it, because you could, you’re just going to be a, you know, a fly on the windscreen of of the derivatives market, if you decide to kind of try to get in front of it. So it’d be safe to say that it’s better off seeing what you can do and how you can make money living with it, rather than kind of putting your head in the sand in front of fight it. So it’s, it’s something that we Yeah, it’s big, and it can be very ominous, but at the same time, it can also allow a lot of investors a great way to add more and more money to their portfolio. So
Jason Hartman 41:43
okay, so it shouldn’t be something that people spend a lot of time worrying, worrying about.
Scott Shellady 41:48
Is that correct? Yes, I think you’d probably have more, but you better spent worrying about getting in the car or an airplane every day, then you would about the size of the derivatives market.
Jason Hartman 41:55
We talk about derivatives, a lot of people view those as like these thin air sort of smoke and mirror asset classes. Where should people start when investing in tangible assets?
Scott Shellady 42:05
Well, tangible assets, I mean, there’s kind of two separate questions there. I mean, tangible assets, or, you know, a lot of times people will be as simple as to say that they’re things that hurt when I dropped them on my foot,
Jason Hartman 42:15
that’s a good way to look at it.
Scott Shellady 42:17
And those are the things that are would be deemed inflation proof or inflation hedges against the dollar losing its value over years, against the dollar, or against the Fed printing more and more money. So it’s something that I’ve talked about with other people, but I’ve got a little acronym called swagger. And it’s silver wine, art, gold, energy, and real estate. And all of those things would be inflation hedges, and you’ve started to see some of them bubble up in recently and some of the press and is actually looked up what the wine markets doing, and that’s on fire as well. So here we sit worrying about how many dollars are being flooded in the market. And it’s 85 billion a month, according to the Fed, that’ll be a trillion dollars a year, we’re adding to that balance sheet to try to stimulate growth in the economy, with no growth really around the corner. But when we do start to see that growth, that’s when there’s inflation will start to take off. And that’s why these some of these investors have started paying record prices, ie 140 $2 million for Francis Bacon painting a week or so ago. And that’s going to continue because that can be a good store of wealth. At the same time, you can actually have that the the object you bought go up in value. Now, you mentioned something earlier before we went on. But you know, they’re also very illiquid. So it’s something that you have to be very careful about. But going forward, we’re trying to inflate our way out of this problem. And in doing so, hard assets are going to gain in value, as well as stocks, the two things that have been gaining in value because of this Feds inflationary pumping of money have been the real estate market, and equities. So keeping that in mind, there’s a few things other than real estate like silver and gold, which golden silver both come off as of late, but those inflation hawks are still there to buy it will continue to rally over time when that dollar starts to lose its value because we’re printing so many of them.
Jason Hartman 44:05
Yeah, no question about it. And so real things. I mean, what I always say is that things matter. They have intrinsic value, you know, money or we should say currency to be more accurate, is just a symbol of value. And it’s backed by nothing anymore. So be careful of it. Oh, you know, own and control things that have universal need intrinsic value. Those kinds of things are good. Now you have this interesting acronym, swagger. Can you tell us about that?
Scott Shellady 44:34
Yeah, it’s that silver, wine, art, gold, energy and real estate. And those are the things that you just mentioned, those things have value those things may be a store of value for folks that have extra money and are a little bit say weary of the stock market here. But it’s also a way that really any one of those things if you dropped it on your foot may hurt depending on how big your silver or gold bars are. But that could be a way of saying hedging yourself against the devaluation of the dollar and why would the dollar devalue? Well, the dollar devalues when we continue to print so many of them. And then internationally, they don’t look as attractive just because of simple supply and demand in our own currency. So, with our currency being flooded with new currency or new dollars, these types of things are a good store of wealth or a good store of the dollar value. Because, quite simply, if I paid $10 for that bottle of wine, and the dollar wasn’t worth $10 anymore, the dollar was worth 50 cents internationally, then it would cost me $20 to buy that wine. Well, 10 I sell it at 20. I make money that way. See, it’s a store of wealth. That’s that’s pretty much why you’ll see folks diving into that art market. You see gold bugs diving into gold, you’ll see real estate people, both farmers and real estate speculators hoovering up land, because they think that the dollar is stronger today. So they’ll be able to buy more with it today than they can next year or in five years time. So those are the types of things that a lot of people that have the extra money or want to maybe say they’re worried about their dollar being worth less than the bank today, or in five years time than today, they’ll buy something where they can store that value. Yeah, yeah, very good point.
Jason Hartman 46:18
Well, a lot of people are arguing about whether we will have inflation or deflation. I mean, the vast majority of people say inflation and I happen to be in that camp. But do you need a recovery to have inflation? I say you don’t. Because if you look at inflationary economies, throughout history, I mean, I don’t think anyone would argue that Zimbabwe or Argentina, or hungry or the Weimar Republic, were really recovering economies. But they still had massive inflation. Right?
Scott Shellady 46:52
And ultimately, you can argue that it led to their decline. Oh, of course. Yeah. And you’re right. So you don’t recovery is not a needed part of that recipe. But what is needed is just a ramp and printing or money where this loaf of bread, and we all heard that German, you know, the German, the loaf of bread is $1 today, and it cost me $100 next month, that’s rampant rampant inflation. And if you own that bread, rather than the dollars, you’re gonna, you know, insulate yourself from that devaluation. And that’s what a lot of people are doing with swagger. And you’ve seen that happen both in the gold market, a big rally now it’s come off a little bit, but definitely with real estate, and definitely energy prices. And as well as the art market.
Jason Hartman 47:37
Yeah. So what is going on in the art market? Is it is it? Is it going crazy?
Scott Shellady 47:41
Yeah, I mean, they’re seeing all time record highs for art. And it’s, it’s partly because the one percenters and this is a another big discussion, but you know, there, there’s a place that they can put, or people that have that capital, want to put it to store it, keep the dollar strong, or at least heads themselves against that inflation. But at the same time, they’d also like to maybe benefit from a rising price. So there’s two things going on there. And they are they say, only ever buy art, if you really, really like it. But I think that with some of the things I’ve seen being sold at some of the prices, I think it’s more of a store of wealth than something that’s actually a pleasing to the eye. So we’ve got to ramp up art market, we’ve got a very healthy wine market. Silver and gold have also gone up over time, they’ve backed off as of late. And energy, we all know what’s happening with those prices, and you’re a real estate expert. So those types of things are really where people are looking to continue to put their money because they don’t trust the stock market. See. So there’s a lot of flow in that area. And that’s something that’s unregulated and illiquid. So those things need to be put out there to be good, those are danger signs, but at the same time, they also can be very good places to put some of your money, but not all of it.
Jason Hartman 48:51
And I think the distinction that has to be made in art is that it has to be really to have liquidity. And the market is small for it. But it needs to be really exclusive art. There’s a lot of this, like middle market art, there’s this huge middle area of art that just it just really has no market. I mean, if you go to the website, like art brokerage, calm, you know, you can see the same pieces that have been sitting there forever offered by the same sellers. And it’s just it’s kind of crazy. Like, I just don’t think there’s much liquidity in that you know, the value, they say, Well, okay, the value for your painting is $30,000. But is there a buyer?
Scott Shellady 49:31
Well, that’s, that’s another old trader saying I, and nothing’s worth anything unless you’ve got a guy that wants to pay something for it. So it’s only worth whatever the next bid is so
Jason Hartman 49:40
Right, exactly. That’s the ultimate appraisal. It’s not having an appraiser come over and speculate.
Scott Shellady 49:46
Right, so you’re right, you know, it’s gonna be up around things and you know, the you can go I mean, even, you know, it’s the Leroy mnemonics things that might get a little bit of a bit that way. But you’re right, there’s a lot of stuff in the middle area that you know, is either replicated or isn’t it exclusive, but those are the types of things that you know can help. Maybe the average everyday investor puts a little bit of money towards something like a Neiman or you know, but at the end of the day, we are putting so much money to work here, that maybe when this inflation does pop up pops faster than we all think, or at least we don’t see it happening when it finally really does. Very interesting.
Jason Hartman 50:21
Well, what are your other thoughts on the economy in general? I mean, you don’t believe that we’re in a real recovery. Do you
Scott Shellady 50:27
know and you know, I, I’m kind of in my own camp on that i a lot of people really want to see the world through rose colored lenses, and why we have one good jobs number last November, the eighth, and we have a retail sales number that was okay the other day, and all of a sudden, we’re on a road to recovery. Well, every other economic figure that came out was bad. It was worse than expected. So we’ve got a situation here where we’re putting $85 billion to work. And I’ve said it a bunch of times, but I want to stress how much money that is. And the best we can do is a one and a half to 2% growth rate. Yeah. I mean, aren’t we embarrassed? I mean, if I would have told you the inputs, about what we’re doing to stimulate this economy, and put you in a vacuum room, you would have come on thinking, you know, we’ve got to be growing. It’s five, six, maybe even 7%. But we’re not. But we’re not. So we should be embarrassed me. This talk of paper frustrates me. Because of worse, we’re still in such dicey ground. So
Jason Hartman 51:24
what you’re talking about is, you know, the talk about the said, tapering, you know that that has been the the theory or the threat, and they’re not going to do it now. Now, we’ve got a new Fed chair coming on board. And I want to ask you about Janet Yellen, too. But I mean, there’s they’re not going to taper, are they?
Scott Shellady 51:39
anytime the tapering is of the 85 billion, are they going to pull that away or how they’re going to pull it away, but if they pull the the party, the Punchbowl away from the party, per se, and we’re only managing one and a half to 2% growth. Now I, the argument would be that the reason that they pull it away is that we’re doing better and the economy can stand on its own. But I don’t think anybody can sit here and say that the economy can stand anywhere on its own because of a 7.3% unemployment rate. 48 million people on food stamps. I mean, we were setting some records here, which are the opposite of the stock market record we set today. So we’ve got two different worlds we’re living in. And unfortunately, we’re trying to bring the gap between rich and poor, closer. But by accommodating the economy, with this money that we’re doing every month, every month, the people that own stocks are the people that own real estate, or maybe the people that can afford to invest in swagger are the ones that are benefiting from all this money being put to work. And I think it’s leaving a lot of us other people behind, I think it’s leaving Main Street behind. And that’s why a lot of these economic figures are coming in so poor, those are all Main Street numbers, you know, foreclosures, I know that they’re declining, but that just means less people are going bankrupt. That’s not really a good thing. I mean, it’s starting to heal a little bit. But you’ve got other economic figures that are showing that, you know, we’re just not really getting off of our chairs and getting this thing back to work. So a large part of the economy, which could be arguably the 99 percenters Steelers feeling that the doldrums of 2009. So we’ve got two economies happening here. And unfortunately, what the feds doing is really only benefiting one of them, which is very interesting about how that’ll all end in the next five years.
Jason Hartman 53:22
Yeah. So that’s interesting. So do you think do you think Janet Yellen will be more loose than Ben Bernanke and Greenspan, the ultimate Keynesian? Well, really? Maybe Bernanke? He is I don’t know who’s worse. But do you think she’ll even be more liberal in her quantitative easing? Or, or do you think she’ll pull in the reins at all? I mean, just even a little bit.
Scott Shellady 53:43
Yeah, you know, the, everybody wants her to pull the reins in, and, and everybody thinks they know who she is. And I think for every Fed chair, we all thought we knew who they were. And the end The end, we didn’t. But I will say this, she’s entering. I mean, she’s entering a situation, we haven’t even touched on obama care is arguably between 18 to 22% of our GDP. If that doesn’t go, Well, she’s gonna have 20% of our GDP take a little bit of a knock. The same time, we’ve got the high unemployment rate, maybe we’re going to need to see a bunch of jobs numbers in a row to change any of these bad feelings. There could be a, you know, there could be a situation or an argument made that she might even put her foot on the gas and accommodate the economy more now, on a percentage terms basis, Japan’s putting more to work and their economy percentage wise than we are for hours. So you’ve got some dubs that will doves or people that think, Hey, we can put more economy and more money into the economy, we can cut interest rates more. Those folks think that, hey, we can do just that. Because look at what the rest of the world is doing. All these central banks are on a race to cut interest rates to zero and accommodate their economy with all this cash. So there could be a chance. I mean, there could be a chance it’s not talked about wildly right now because the market wants her to taper but or at least pull back Those money being put into the system, there’s a chance that she actually puts more in.
Jason Hartman 55:04
Yeah, so that means more inflationary pressure, folks. You heard it right there. So what do you think about the stock market? I mean, the Dow recently hit new highs. What’s such a joke about this CNBC and putting the big notices on the screen as they never adjust for inflation? It’s so ridiculous. I mean, when it just got over 15,000, I said, Hey, nothing has happened yet. It’s got to be at 15,800. By my calculations before you even breakeven from the right.
Scott Shellady 55:35
Yeah. And I’ve been doing it for 26 years. And you know, in 1996, we heard Alan Greenspan is in irrational exuberance speech, right? Well, I’ve renamed 2013, irrational apathy. There were no media, there was no news trucks, we didn’t have anybody really cheerleading the rally, because a lot of folks and rightfully so they can make an army, they think they feel as though because of the money being put to work in the economy. And the money managers that have your 401k, my 401k, everybody else’s 401k feel this pressure to get involved the stock market, they don’t want to be left behind. So we have this self fulfilling prophecy of this rally to the upside, and it feels manufactured. And I think that’s what most people are really out there feeling. But just because it feels manufactured, and you and I both make think that doesn’t mean it can’t continue on for another two years. So like I said, about, you know, what we were talking about earlier, sometimes, knowing what you think should happen versus what’s going to happen. You can you can save yourself a lot of money by trading, what’s going to happen, or at least working around what’s going to happen and trying to benefit from that, rather than be the fly on the windshield, and be dead. Right?
Jason Hartman 56:43
Very good point. Very good point. So what do you think the strategy is for baby boomers and, and really Gen Xers now need to start thinking about it. I mean, if they’re older Gen Xers, they’re they’re getting close to to where they have to start thinking about getting serious with their their money and protecting their retirement. What can they do to shore up their finances? So that they’re just not left empty handed at retirement?
Scott Shellady 57:09
Oh, gosh, the answer is one anybody want is going to want to hear because it affects me as well. But at the end of the day, you know, I own a money management firm. And we’ve talked to people all the time. And folks that are baby boomers are now starting to retire, we’ve got a wall of baby boomers that are be coming through, and they can’t really afford to have the stock market backup 20 or 30% of them have some cataclysmic catastrophic crash. So they’ve been backing money out of the stock market. And really, the only place they can put it to keep it safe is in bonds with a 10 year bond is high today at 2.8% for 10 years, which is still ridiculous, ridiculously low. So I’ve written a piece about this as well. Unfortunately, we’re going to see more 90 year old serving us ice cream with Dairy Queen, and I might be one of them. But the best way, the best way to shore up some of these these portfolios is that we’re going to have to work longer. I mean, there is no there’s no easy way out because I can’t look a 77 year old person in the face and say I need you to be 5050 stocks bonds, because that would be just a disaster to their portfolio. If we had a real big backup in stocks,
Jason Hartman 58:15
some you know, there are even people out there now predicting dow 2002.
Scott Shellady 58:21
Jason Hartman 58:22
that would be a complete collapse. I mean,
Scott Shellady 58:27
I don’t know, I don’t think they’ll ever allow that to happen because they can just print more fake money in, you know, my 2000 real value in real dollars, but not a nominal. While I mean, and where those two lines crossing those lines are this, when the government’s continuing with it’s, it’s, it’s a combination versus one that growth comes, you know, so they’re gonna, they’re gonna accommodate to some degree until we can finally see that growth and then things will get safer. And then I can save the seven year old. Well, you know what, you can add a little bit more inequities now because I think this is healthier. But right now, there really is no good answer. I mean, the best answer is that you’re going to have to put in your plans working longer, and longer than you ever thought in order to save and be able to be okay in your older years. Because I’m one of them. I’m not trying to tell anybody that I’m not I’m 50. So we’re going to have to do that in order to stick around because I can’t really take a huge hit in my 401k now, you know, if I’m getting out in 15 years, so the kids that 2025 30 but they don’t have a ton of money, but they’re the ones that are going to be invested heavily in stocks right now. And there really isn’t a cheap answer, except for we’re gonna have to work longer and I hate to say it, but that’s, that’s, that’s
Jason Hartman 59:37
why I really don’t think that’s such a terrible thing. I mean, the whole concept of retiring at 65 was created, you know, as an industrial era. It’s an artifact. Okay. I mean, it shouldn’t be that way people should be working longer and I don’t say that is like an obligation they should want to you retire you die. I mean, people know that. It’s proven When people retire, they don’t have a purpose. They don’t have a sense of purpose, usually. Now sometimes they have some other big fulfilling sense of purpose. I mean, but the point is to stay engaged, stay interested and to work because you want to not because you have to, because it’s interesting, because you feel you’re contributing to the world. you’re contributing to yourself, you’re growing, you’re thinking you’re engaged. And you know, it keeps you sharp, hopefully not because you’re an indentured servant, and you’re a Walmart greeter. Okay?
Scott Shellady 1:00:33
You know, to your point, you know, that the industrial age retirement thing, you know, as a percentage of the of life expectancy, we should expect to work longer, because we live a lot longer now, you know, back in the days when they, you know, when social security was put forward, you know, those, we need to start making those expectations. And we’re building those into our customers plans as well. And generally speaking, I think a lot of people have come to accept that anyway. So here, we sit in an environment where we’ve got a manufactured stock market, we’ve got very, very cheap money for 10 years. So it’s going to be difficult for you to pile all your money into the tenure interest rate, and your bond ladders are going to look not good. So that’s going to be pretty much the common sensical solution, where you’re going to be able to, you know, store some wealth, you know, maybe, maybe if you can afford it, buy some those other things that we talked about with swagger, but at the end of the day, you’re gonna have to work with a lot, you don’t have to work your, you know, your 80 hour workweeks, but you’re gonna have to keep some income coming in. It’s not, it’s not something, you’re gonna have to have a ball and chain around your ankle, but you’re gonna have to keep some income coming in.
Jason Hartman 1:01:34
Yeah, right. Right. Exactly. Well, any other points, you’d like to make predictions on the future? Just ideas you want to close with? Any other thoughts?
Scott Shellady 1:01:42
Yeah, I do think I do think that we need to talk about and this could be another talk sometime later. But we need to talk about that inflation problem, which I think could rear its ugly head before we actually know it, because there’s going to be some point time where things do catch fire, and maybe it’s three or four jobs numbers and, you know, three or four months of good jobs numbers, where that does finally happen. But people have got to be ready for that, a and their borrowings because a lot of people might be going month to month on some sort of interest rate, but you’re gonna see those types of things, make sure that your borrowings can handle a doubling of the interest rate. See, that’s, that’s, that’s a big deal. percentage change versus the actual change. Well, two to 4% doesn’t seem like a big deal. But it doubles your payment. So you have to keep those types of things in mind. So keep keep in mind a sudden change to inflation, I think it’d be okay. Because that really is the thing, I think that’s going to erode people’s wealth going forward.
Jason Hartman 1:02:36
So so long term, fixed rate debt, hopefully attached to some of the swagger items. I love it when it’s on real estate, because inflation inflation actually works for you. It pays your debt off for you, you know, in that case, it devalues your debt, which is, which is awesome. That’s what we want, right? But but it’s got to be fixed rate, folks, because it’s just too risky to have adjustable rates in this kind of uncertain market. Good stuff. Scott, give out your website, tell people where they can find you.
Scott Shellady 1:03:04
Well, we’re at WWW dot the train group.com my face will be on the front page there. You can get in touch with me on that one. That’d be probably the best and most easiest way.
Jason Hartman 1:03:16
And I just want to I just want to spell that for everybody. It’s it’s tr EA n group.com. Yes, good stuff. Well, Scott Halliday, thank you so much for joining us today.
Scott Shellady 1:03:26
All right. Thank you, Jay.
Jason Hartman 1:03:33
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