1428: Shadow Demand, The Next Depression, Repo-Market, Harry Dent

Working with the local market specialists went really well. I feel like I was able to get the type of property that I wanted and happy with the price and the rehab job and the tenants have gone well.

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 free freedom than you ever thought possible. Jason is a genuine, self made multimillionaire 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.

Welcome to episode 1428. 1428. Thank you for joining me today. I have a question for you. How many times, how many times have you, and if you have kids especially, or the rest of your family, how many times have all of you washed your hands today? Yes, we're all germaphobes now. And you know, it's amazing how few people actually know how to properly wash their hands. Go talk to a doctor. Go on YouTube. Get a handwashing lesson, folks. It'll save lives. And now it really matters. You know what's so interesting about all of the devastation coming out with the illness and the virus and so forth? Is this the silver lining that are happening just everywhere, not the least of which are opportunities for real estate investors. Nothing short of phenomenal. Remember, we're going to have an upcoming webinar on my Pandemic Investing. You can go now to pandemicinvesting.com and you can just grab one of many, many, many, many pieces of content. This was early, which means a week and a half ago. Yes, it was in the early days of a presentation I've been working on. And that's it. Pandemic.

PandemicInvesting.com Yes, I know you're thinking, can you believe Jason got that domain name? Yes, I did. So I put some materials there. We will be adding to that. Things are changing so fast and things need to be updated so fast. And we're going to have a webinar that covers way more than that coming up and we will announce that. And you are invited, you are invited to that webinar. I think it's going to be very valuable to you. I am working on some really big, really big stuff for you. Really big, really big. And that has to do with the equations that I have been working on. Yes, I've been doing some calculus here, folks, behind the scenes. You know, it's not like I just come on and talk to you every day. And by the way, speaking of every day, this week we will be running all seven days. So join us this weekend, too. There's just so much to cover. We cannot get it out in five days a week. We need seven days a week right now. So we will be having episodes on Saturday and Sunday this week and probably for the next foreseeable future, I'm not sure. But tune in seven days a week, not just five days a week as normal. And lots more to talk about there. So today we're going to have part two of Harry Dent and many of you told me how interesting this was. And today we'll have part two, tomorrow we'll do part three. And we are going to have a special 10th episode show on Thursday that covers some of the public health and the medical side of this. And I think you're going to find that fascinating, too. But some of the calculus I've been working on is this idea of shadow demand. Yes, shadow demand. There is a huge shadow demand for housing and you already know that before you ever heard the word coronavirus, there was a housing shortage. Yes, that's no surprise. However, I say the housing shortage is going to become much, much more intense after this blows over. And who knows when that'll be. I'm kind of thinking it's going to happen late April, mid May. I think we're going to be past the worst part of this. At least I'm hopeful. Hey, I'm hopeful we're past the worst part of it sooner. We're obviously moving into some pretty tough times here. But the shadow demand for rental housing and purchase housing also is nothing short of enormous. It is a tsunami, a tidal wave. You can benefit by surfing it. You can surf the wave, okay? Surf this wave of massive shadow demand that is coming at you. And that comes from married couples, it comes from single people, it comes from newborns, it comes from the home office trend, and it comes from roommates. Let me just give you an example in one of those many categories. And we're going to drill down deeply on these topics because I've taken out the spreadsheet and I'm no expert at spreadsheets, but I know enough to be dangerous and I've been doing some math and thinking about this from every which angle of how's it going to go? How is it going to go after this blows over? Oh, one more part of that is urbanization or de. Urbanization more appropriately. So I'm going to be talking about all of these things with you on the webinar and we're probably going to turn this webinar into an entire course on pandemic investing because the opportunities are absolutely phenomenal for investors. Out of every crisis comes an opportunity. Remember years ago during the Great Recession. And hey, if you followed my advice then you made a ton of money. So congratulations. I know many of you are still listening to the show that were following my advice back then. And you're probably rich and retired and I would normally say sitting on some tropical, beautiful beach, but you're probably actually sitting at home. But you're in a much nicer home than you you would have been otherwise, right? So that's good news. If you followed my advice back then, you profited handsomely, dramatically, you profited. So let me just share with you just a sliver, just a sliver before we get to part two of Harry Dent of one part of this shadow demand, okay? And it is the roommate component. Okay? Now nationwide, nationwide, back in 2002, 25.4% of the households. 25.4%, let's just call it 25%. One quarter, let's round it off. One quarter of the households in the country were people doubling up. They wore roommates, okay, roommates. And in 10 short years between 2002 and 2012, that number went up by 7%. Well, actually if it's relative, the number that was, it went up by something like 25%. Really? Because 25% to 32% is about, I don't know, give or take 25%, right? So an almost right about 25% increase in the number of roommate households went up to 32% in the U.S. these were adults living in a doubled up situation now that they've been pushed into the home. There's no gym to go to, there's no office to go to, there's no place to go. They're tripping over each other if they are in the type of job or business or career where they can work out of the house. Like I've said before, this is not new. I've been saying it for weeks now.

They need to split, they need to split up. So the one that stays in that house and takes over the lease, or maybe they Own the house and they were renting out a room. Maybe it's an owner. They got to kick the roommate out and say, look, we need to split up because I need that spare bedroom, that extra second bedroom as an office. I'm working at home. And by the way, I don't have a gym to go to. So where am I going to put my overpriced peloton bike or my treadmill or my weight set? You know, I got to stay in shape, right? Hopefully people are using this time to stay in shape, right? It's kind of, I don't know, I'm developing a bit of a dad bod. Frankly. One of the biggest flaws was I learned how to cook.

Now I'm enjoying good food all the time, but gotta be working out a little more. Okay? So think about it. Even if a small number of those roommates, which represents millions of households, millions and millions of households, even if a small number of them split up, you literally double, double the demand for housing right there. Boom, boom, boom. Okay? You gonna profit from that? Yeah, you are, because you're listening to my show. A lot more on that. And this will be in detail with math when I get the math finished as part of our upcoming webinar. So look for an announcement on that. And hey, I want to play you a message. You know, this economic situation has really rattled a lot of people. Billions of people, not just in the U.S. but all over the world. I mean, we've never seen literally billions of people in quarantine. This is absolutely something that I never thought I'd see in my life. And certainly you probably didn't either. But just note that how just engaging in the investments. We recommend the suburban properties where the people from the high density locations will flee to. When this part of the crisis is over, they're going to be reevaluating their lives. They know they can work remotely now. The emperor has no clothes, the cat's out of the bag, whatever you want to say, right? They know they have options and they don't need to live in these expensive high density cities anymore. They want to live in places where they can comfortably socially distance. But even if you don't want to build an empire, even if you don't have the resources to build an empire, maybe you don't want to buy three dozen properties from jasonhartman.com properties. Maybe you just want to buy one or two. Here's one of our clients and listeners who's been listening a long time. He came to the last meet the Masters we had in Newport Beach, California. And this is Kurt. And he left me a message about a week ago and listened to what he said.

Jason, how you doing? It's Kurt. Just wanted to give you an update and a big thanks. Coronavirus update. While this was all developing, I had landed a, secured a job, accepted the offer, put my two week notice in, and it was going to take a week off between jobs. That week turned into two weeks because of a delay in the onboarding process. And then that turned into four weeks between jobs. So now we are in that fourth week and the third and fourth we got added because of the complications of flying and the virus. The theme of all this is that I'm doing okay because of the couple properties that I have. The knowledge I've acquired from listening to you for like 12 years, not only the knowledge on, on real estate and the principles on wealth and real estate, because I also squared away like my spending and my savings, you know, started doing that like three, four years ago. Had this happened five, six years ago, I would, I would be living paycheck to paycheck. That's what I'm trying to say. But because of listening, I've got the properties, I got a little cash flow coming in. It's just two. It ain't much, but it's completely changing how I'm experiencing the coronavirus isolation. And I feel a lot more secure because of every action I've taken on the knowledge you're giving out in every episode. So thank you again, sir.

So that is the difference this can make our investing plan. Just two properties. Not a big deal, Just two, nothing big, Not a huge portfolio. And I want to just say, Kurt, congratulations and thank you for listening to the show for the past 12 years. That is awesome. I'm glad you've been listening for 12 years. And I know a lot of people listening to this have been listening that long too. So keep on listening and we'll keep trying to provide you as much value as we can. Anyway, let's get to part two of Harry Dent. Oh, but first I want to mention, be sure if you haven't subscribed to our humble little YouTube channel, which, by the way, you can see this same Harry Dent interview there with all of the visual aids. This presentation included many graphs and slides and visual aids. Okay. So some of them we kind of simulcast. We put it on the YouTube channel and we also have it on the podcast. So if you want the visual component, you can get it on YouTube. What I like to do personally is I like to listen to things in audio form because it's portable. I can go walk the dog. Heck, people are now running marathons in their backyard because I can't leave. And I know we gotta have a little laugh at some of this craziness that's going on. You know, the audio is portable and that's handy, right? You can move around. You can move around the house with it and have your earbuds in or your AirPods or whatever and listen to the audio. But go back and just skim through the video, skim through the stuff on YouTube so you can see the visual aids. And that extra component will really add a lot to your learning and a lot to your knowledge. Okay? So hope that helps. A short, quick link to the YouTube channel right here. I'll just give that to you, you know, Bitly, right, Where you can shorten links, right? So it's just bit. Ly. JasonYouTube. That's an easy way to get to it. Bit Ly. You know, Bitly JasonYouTube. Or you can just look Jason Hartman up on YouTube and you'll find the channel. Lots of great stuff there. Anyway, without further ado, let's get to Harry Dent part two.

And then. Okay, I mean, so I said the only people buying this one chart here shows the red line is corporations buying their own stocks. The blue line is foreigners, so just barely buying, but less so. The green line is households. They have not been buying into this bubble. They're scared to death. They got killed in the last bubble in 2008, 9, when it crashed 54% and they didn't know why. And then you got the blue, the purple line. That's the smart money. The institutional investors, they have not been buying. They don't see value in this market getting so overvalued. So that's what's happening, and that's what's created this next chart. It just shows. This is. Look.

Okay. And we're still focused on the stock market, so we'll get to the broader economy.

And I'll tell you why, Jason. Because the stock market is the best leading indicator of the economy and gets way more overvalued than real estate in a bubble. Real estate's in a bubble, too, but it's more on the high end and in certain places, as you know, the cyclical markets. Yeah, but the stock market is a good way to say, gosh, are we in a good place or are we about to see the crash of a lifetime? And I'm making the argument we're about to see something worse than 2008 and 9. And we saw what happened to real estate and the economy and banks and people underwater and mortgages and what did. Well, like affordable housing and apartments versus what? High end houses. And what did the worst Bubbly stocks.

Yeah, right. High end houses are like high flying dot com stocks that don't make any sense. They really have trouble in bad times. You know, Harry, when you look at of these charts and we talk about all of these crazy numbers, whether it be the QE numbers or debt numbers or you know, stock buybacks or whatever, are these things adjusted for inflation? Like, you know the chart you're showing now, dates showing. This one's not bubble. Yeah. Okay. The first bubble in 1986, a minor bubble and then another one in the mid, well, mid to late 90s. That's the dot com bubble, I guess. Right.

That was the dot com bubble. And then there was considered, oh my gosh, huge bubble.

And then there's the post 911 bubble. Okay. Which was because of all that 911 stimulation. And now there's the stock market bubble we're in now.

Yeah. So when somebody says in the analyst for any reason, there's a million reasons. This is not a bubble. My response is, looks like a bubble, walks like a bubble, quacks like a bubble. It's a bubble. This makes 1925-29 look like nothing. And look at it compared now. Again, this is not the nasdaq, which is more bubbly. This is the Dow and compared to the bubble back in 95 to 2000. So again, that was a major bubble. We had a minor bubble before, not. And one of the reasons I use this chart also, Jason, I tell people we have four seasons in the economy. The bubble boom is the fall season like we saw in the early 1900s. And this, you expect bubbles. And just Even though that 87 was a small bubble, there was a 40% crash in two weeks that never happened in the entire 1942 to 1940, 1968 stock market boom. It wasn't a bubble boom. The corrections were 20%. They weren't 40, 50% here I'm projecting 70 to 85% when this one blows. So again, the point here though, forget all the complications and if this stock bubble blows anywhere near what I'm saying, you know how much wealth disappears in the economy.

Just the other day when the stock market hit the first coronavirus scare when it started paying attention to that, and then the following day it was also down. Literally everything was down. I can't remember the stat I read, but it was just a monumental amount of money.

Was just 1.1.7 trillion in two days.

Wow.

That's what it was. Look at this next chart real quick. We look at this whole bubble, you see how much more bubbly this is. The blue line is stock financial assets. And it is dominated by stocks, but it's outside of private home. But all of the financial assets, bonds, commodities, stock investment, real estate.

Okay, so like 23 trillion. Okay, wait, wait, wait. Let's talk about the real estate component. Investment, real estate. We're talking about, you know, the commercial real estate sector, like office buildings, industrial properties, maybe large institutional, multifamily housing, but.

Even I think vacation home, you know, not your primary home.

That's what this is interesting.

So we look at the normal range back all the way to 1950 of how much financial assets should, should be compared to gdp. So we're really in this sense adjusting them for gdp. We're adjusting them for inflation. We're measuring relative to the growth of the economy underlying it. We've been in increasing bubbles since the early to mid-90s, right when the tech bubble came, and up and up and up. We now have a hundred just in the US $123 trillion in financial assets owned by households. And if we just go back to normal valuations down 50%. And a note in the chart projecting the Dow the most bubbly stocks. The stocks are more bubbly than these other asset categories like bonds and commodities and investment real estate. If overall assets go down 50%, which would bring them down to reality $60 trillion. That is three times our entire annual GDP disappears from brokerage accounts, bank accounts, blah, blah, blah, blah. Don't you think people would spend a little less money in the economy weak when they lost that much money?

Who's keeping our economy going? This top 20%, the top 1%, top 10%. They're the ones that are going to pull back much more than Homer Simpson this time.

Hang on a second. Let's just explain this a little bit. Okay, so this chart, as you said, goes back to 1950. And what it shows is it shows a range from 1950 on up to really about 1990. About 1999, 95. Okay, fair enough. That, that things are sort of in line from 1950 to 1995. After 1995, they start to get really out of whack in relation to gdp. Okay, so these financial assets, and I almost want to put the word assets in quote when they're financial assets, because they're Sort of smoke and mirrors economy, Wall street economy, not the Main street economy. They are showing that they're in a bubble. Now the top, you said 20% is responsible for most of the spending and the S and they own half the.

Spending and they own 88% of these financial assets.

Got it. Okay, so. And understand how that relates. So when they pull back about 70% or 72% of the entire S&P 500 is based on consumer spending. And so if they spend less, that creates this downward spiral where all those companies that supply all those goods and services, they'll spend less. And so this puts downward pressure on all of those stocks or 72% of them in the S and P. Right?

Yes. And you got to remember this financial asset bubble has created this kind of extra wealth. And it's not all spent. It's not all spent like normal income, but some of it's spent and mainly by these rich people. So the economy is stronger than it would be. That spending wave I showed in the first chart, that big blue wave of baby boomers and then the downturn with the Xers like you, that shows our economy should have been not only not growing at 2%, it should have been declining like it did for most of the 1930s overall. And so even the growth in our economy has been artificial, propped up by this temporary artificial wealth from financial assets. But it's been mainly this top 20% spending the money, not Homer Simpson. So they've been having the boom. They're the reason it's going up. And when they stop spending that, they're going to be the biggest reason. In other words, normally a slowing economy causes a stock correction or crash. What's going to happen this time? A crashing stock market is going to cause a recession on its own and then take us back to where we really should have been in a long recession anyway, when the largest generation in history naturally spent less because they don't have kids to raise and get through college anymore.

Anymore. Okay, let's go to that next chart of the 90 year great resets.

Yeah. Now this is a chart I've had early. One of the first charts I had along with the Kondratief wave four season cycle and the 30 year commodity cycle. This shows now if you go back to late 1700s, right there we got this dotted line saying we're going from British stock prices to us. That is when the stock exchanges started. Before that it's all just a few big government owned stocks like the South Seas Company, the India Trading Company, stuff like that. This is the real stuff.

The Dutch East India Company. Yeah, we're going back a long way here since then.

You can see now first of all, this chart is adjusted for inflation and it's also adjusted for exponential growth and it's still exponential. The stock markets have grown so much in this era that you can't even compare it to anything. First of all, we didn't have stocks much before that, but this is already adjusted for exponentiality and for inflation. And look at stocks go up and up and up and they keep bubbling more and more. But note, every 90 years, like a clock, you see a more bubbly stock market and a bigger crash. If you look back in the early the 1800s, 1837, the panic of 1837 led to the biggest crash in stocks in US history, down to 42. And I'm telling you, back then, Jason, real estate was the center of that bubble. Everybody moving to government was giving away free land, free loans, overstimulating a lot of speculation. Chicago became the next New York in a matter of decades and then crashed 90 some percent. So the biggest real estate crash, that was the biggest depression before the 1930, 32. So you see, okay, then stocks after that, big, big, long time to get over that. Then they go up more normal rates. Oh, oh, they're bubbling into 1929. Oh, and then big crash, 89% crash, Great Depression, even greater than that one back then. And here we are, then we go up, note this time even faster than before. But then we get really bubbly here and then we're right here coming 2019-20. That 90 year cycle, I've been warning about this for a long time is due to hit. And what central banks have really done is play into this bubble cycle by goosing financial assets again, not by lowering interest rates or a little fiscal stimulus, you building dams or something, or running government debit, literally pushing trillions of dollars into financial markets to make them go up way more than they should, as my model shows. And so this bubble is getting ready to crash and cause the next Great Depression. Not recession, not 2008, 9. That was a deep recession. This will be more like a depression. But good news for me. Our fundamental indicators show that we should be done with this by 2023 and back up again. It's between now and then that am concerned in warning people to get out of bubbly real estate, out of stocks altogether. Bonds, high quality bonds are good junk bonds you got to get out of if you're in affordable housing that can rent out if you're in apartment buildings, you're in medical buildings and that sort of real estate investment. Only high quality bonds and the best rental real estate hold up in a downturn like this. Everything else, stocks, commodities, speculative real estate, vacation home, Everything else else goes down.

Yeah. Wow, that's something. Now what's interesting about it is this is a pretty quick downturn, right?

It should be over three years.

Why is it so quick? I'm glad it's short lived. That's good, but why?

Because when these bubbles burst, it's a chain reaction. Because there's so much leverage in the markets. I mean again leverage being put in by these s and P500 executives buying their own stocks. They're leveraging their stocks. People can borrow money cheap and they can buy real estate. Everybody buys real estate with low money down and all that sort of stuff. And uses profits from existing real estate to roll into even more speculative real estate. So you build these bubbles. There's a lot of debt and leverage behind it. When these debts fail, it just exacerbates the whole thing. So 29 to 32 in 2.7 years, stocks. And again we're talking blue chip stocks, not penny stocks, not small cap stocks, not Zimbabwe stocks or EM countryside blue chip U.S. and European stocks. And in case in the U.S. went down 89% in 2.7 years. And you know what? Never saw that again, did nothing. Look at the chart. You go back to the 30s, that great reset from the three to the four kind of thing. Then in the early 30s stocks did nothing but go up. If you'd have bought stocks, then you'd have made money forever. If you'd have bought real estate, stocks bottomed in July 32. The real estate market bottomed in March of 33. And from then if you'd have bought real estate or stocks, you'd have forever. You'd have bought them at the lowest price ever and you would never see that again. That's why this is. People get scared when I say this, but this is a huge opportunity.

Yeah. Okay, let's look at the NASDAQ and the Fed balance sheet. It's the balance sheet of the Federal Reserve versus the Nasdaq. What's going on there?

Yeah. Okay, so that 90 year cycle right now is the most important provable cycle. It's actually two 45 year technology cycles building. That's another part of my model. I've got my demographic model, my technology model. Technologies create these bubbles. And what's the biggest bubble now? Microsoft, Google, Apple, Netflix. These tech leading Technologies since what happened here recently. The Fed had been doing all this quantitative easing into 2014. Then they just kind of held off and just kept it even. They didn't reduce their balance sheet and stimulus, but they didn't increase it. But then in 2018 they did. They started selling their bonds instead of buying. That means you're taking money out of the financial asset pool. And things got down, the bank reserves went down and stuff. Until all of a sudden the repo, the overnight lending market for banks to banks, especially banks that are on leverage, speculating and stuff and hedge funds that sort of stuff dried up and the Fed had to step in. The Fed said, oh, we're gonna taper. And you know what? We're confident tapering cuz we think the economy's so strong we don't need all this stimulus anymore. And I've said from the beginning, no, without this stimulus this economy will die so fast cuz it's so artificial.

And that just compared to what? Again, that's every economy on the planet.

Every economy on the planet. In fact, we're not. Japan's way worse than we are. China's way more overleveraged. Europe's got worse demographics. Yeah, we're still the best house in a bad neighborhood here. And I'm showing how bad it is here.

That's the really amazing thing. Harry, you so aptly pointed out that Japan's got a huge demographic problem it's been suffering with for a long time. Japan has got weird stuff going on. You know, there's just, that's just a strange economy.

Like young people not having sex.

I know, it's totally weird. Like women in Japan marry themselves. They have weddings with just them, no groom.

They can't afford to have a man. I can't afford to have a kid.

It's just weird. Yeah. Japan is a different kind of bird, but China and I mean we're not even discussing coronavirus or anything like that, or maybe we won't at all. But China has a demographic problem due to the one child policy. Now that starts to show itself in about 10, maybe 15 years.

No, no, no, no, no, no. Back up, Jason. No. Their workforce already peaked in 2011 and has been declining. The second thing they've been doing is overamping urbanization, moving people from rural to urban areas. The price of real estate from all their stimulus and overbuilding and growth and the pollution, traffic are so bad that these rural migrants are actually turning around, going back.

They want to go back to the country. Yeah.

Now they have two Things, their demographics have been weakening. But if you keep building stuff and urbanizing, well, now the urbanization has stopped and nobody sees that. I dig out this data and say, hey, the demographics peaked in 2011. The first emerging country to peak, like Japan was the first developed country to peak back in the early 90s. China is the first emerging country to peak in demographics. And now their urbanization is backfiring on them. They are gonna go down. It's gonna be the biggest bubble burst.

I remember in the late 80s, all of the xenophobia about Japan, everybody was worried, oh, Japan's buying the U.S. they bought Rockefeller center, they're buying the movie studios, they're buying everything. And turns out all that really happened is they bought that stuff at the peak of the market market, paid taxes on it for several years and then sold it back.

We got it back at a bargain. I know, it's like the s and P500 people, they're leveraging in a bubble, these s and P500 companies. And then people are going to be able to buy their stocks back at a bargain when they bought them at the highest prices and screwed their own shareholders.

I know. And then if anybody listening is worried about if they're like in the US or in the west and they're worried, oh, China's going to take over. I think if you look at the 10 largest economies in the world, the US is like you said, it's the best looking house in a bad neighborhood. Okay, the US is in pretty good shape comparatively, isn't it?

Yes. We're going to come out of this the best in the developed world outside of Australia. It's got stellar demographics because they're getting all this Asian immigration. But let me quote something else because I just got this the other day, China, they finally had a study by the University of Hong Kong which is more independent and can do this thing and show that China's been over reporting their GDP systematically imag. So first of all, when you look in U.S. dollars, their economies only 65%, 64% as large as the U.S. after all this massive expansion and high growth. But when you adjust for the real growth rates, which they said were 1.7 percentage points lower for the last decade, they're only 54% the size their GDP per person, which really counts because they got four times the population, 9,800 under their reported GDP statistics, but under the new ones it's 8,000. So they are a sixth of our standard of living. So China. And they also said China. Now even if their Growth rates double ours in the past decade or something. They won't surpass us as the largest economy till 2036. I think they're going to have a bigger downturn than anybody thinks. So I think it's going to be 2040 or later, and their GDP per capita will never surpass ours. So, yes, I came up with my indicators. That spinning wave I showed you and many others in the late 80s, finally, formally, and it showed me Japan was getting ready to collapse. They had a bubble that we didn't have. And their baby boom was getting ready to tank, which would trigger that bubble burst. And everybody said back then Japan was gonna overtake the U.S. economy in two decades, which back in that case, unlike China, with such massive population urbanization, that was not even possible. The Japanese would have to have three times the GDP per capita to make up for a smaller generation. So it shows you how economists just project trends and don't understand cycles and don't adjust things. Remember when you said before, is this adjusted for inflation? Well, yeah. And are things adjusted for the size of the economy, gdp? If you don't make these adjustments, then statistics don't make sense.

It's really something. It really is. Harry, are you finished with the charts?

Well, just one last chart. The biggest short term thing happening is the Fed because the repo crisis was forced to inject money. And they say, oh, it's not quantitative easing, we're just buying repo every time you inject money into the market.

Wait, wait, wait. What you're talking about is the repo market, okay? Which has been talked about a lot lately that has been in the news big time. Explain the repo market just so our listeners have some context there. Harry, if you would.

Yeah, yeah. Banks, you know, especially in this bubble boom, do a lot of speculating. Hedge funds, so Wall Street's always doing a lot of speculating on leverage and stuff. So banks and financial institutions like Merrill lynch and all these sort of stuff, they are basically, they have certain margin requirements and things they have to meet. And overnight. Sometimes a bank, oh, we're not meeting our regs, so we need to just borrow money. So they just borrow overnight. And what typically happens is the really big banks like JP Morgan and stuff and bank of America, the really big bank. Banks have so much assets and reserves, they'll just do these overnight loans to make 1.5%, 2% and blah, blah, blah. Well, when their reserves got down, when the Fed started shrinking their balance sheet, which shrinks reserves twice as fast. And I don't want to get into that, but that's what happens. These banks all said well wait a minute, we don't have enough liquidity here to keep doing this. And the Fed had to step in and I'm telling you how much? $424 billion since mid September when this happened, they have put into the market to keep it flush. So basically they had to go back to injecting money into. And I don't care if they buy T bills or bonds or Japan's even buying stocks, they're so desperate to put money in. Doesn't matter what you buy, it's increasing the money, chasing all financial assets because it's its own pool. It's not going to the bank lending, as I said before, and it's not going to consumers. If you wanted to really stimulate the economy, you would send a check to consumers and then it would be spent and it would go into bank accounts and bank lending potentially. So the Fed basically said oh, with taper everything be all right. And I warned no way. The repo crisis was the first sign of many to come. The economy cannot live without crack. It's a market's on crack, they're living on stimulus. All this additional liquidity, all these super low rates which make stocks and real estate more valuable. Just the low rates alone. Without, without it all this thing comes down in the economy class. So this is the first warning. Oh no. If the Fed shrinks their balance sheet, well now I'm telling you, within months the Fed's going to be back at their peak before they tapered. But the point is I now have an indicator on a two and a half week lag. So it gives us a little notice. Two and a half, three weeks. Stocks are following, we're in this final strength, they're following this injection by the Fed, Fed right front. And I've been saying we're due for a correction which we're now getting because that has been moving sideways because the repos have gone down in need but the Fed still pumping money in addition because they don't want this repo crisis to come back. And the Fed and all central banks are reacting to the coronavirus. Oh my God, if this thing blows up, we better have a lot of liquidity in the economy so the economy doesn't blow up with it. So, and this is why stocks are going up now and why they're going sideways now. I think that central banks and the Fed are going to keep stimulating more. But at least now if they do start to taper, if this indicator the blue line will go sideways or down. Then stocks are going to go sideways or down. If it starts to accelerate, which I expect is more likely to happen in the coming months, they're going to go right back up again. So this is the short term saying, okay, here's what's happening short term. This is how the final bubble is being stimulated by this Fed injection. And the same thing happened in the tech bubble in late 99, the Fed suddenly put in $150 billion, which now would be like 300 billion and equivalent, adjusted for inflation turn. And that goosed the last six months of the tech bubble, and then it burst as soon as they pulled that back. So this repo bubble is playing into this final bubble. And I'm just telling people, as much as I know this is gonna crash, it ain't time to go running from stocks yet. Until you see the Fed pulling back, we're gonna be telling our subscribers, hey, you know, we'll let you know when it looks more dangerous. Right now, this correction's probably not gonna go a lot lower.

Pretty interesting.

If they step up more stimulus, then it'll go up again.

Okay, very interesting, Harry. This will be continued on the next step. Thank you for listening and happy investing.

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