1793: Creating Wealth Virtual LIVE conference, Forecasts for 2022, Cantillon Effect, Inflation Induced Debt Destruction, Mortgage Hoarding, Housing Shortage

This show is produced by the Hartman Media Company. For more information and links to all.

Our great podcasts, visit hartmanmedia.com.

I've known Jason for about 10 years now and his company does amazing things for their clients. I found his knowledge on real estate unsurpassed. He's straightforward, honest about his approach and gives you the information you need without any bs. He's the real deal. I highly endorse him.

Welcome to the Creating wealth show with Jason Hartman. You're about to learn a new slant on investing, some exciting techniques and fresh new approaches to the world's most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine, self made multimillionaire who's actually been there and done it.

He's.

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 1793. 1793 and today we have part two of my speech in Houston where you will learn a lot more about what is coming in the New Year and beyond. But the question I have for you today is have you registered for our upcoming Creating Wealth Live virtual event? Be sure you get your tickets right on the front page of jasonhartman.com the Big Red banner at the top. You can click Register now and grab your tickets for this event. We've got a reception on Friday, January 28th and then the event on January 29th and I'm pretty sure we are going to add a follow up implementation session to the event at no additional cost. So be sure you register for this. It is coming up quickly and you don't want to miss it. Now this is the longest running teaching event I've done. It's been running for about 18 years now and we've got some great macroeconomic Concepts, Understanding Markets, Understanding Market Dynamics, Understanding the Hartman Risk Evaluator, which we haven't talked about very much in a long, long time. Of course, the Ten Commandments of Successful Investing and just a whole host of other great content including virtual networking with other investors. So it's going to be a lot of fun, a lot of education. Be sure to get your tickets, they are very reasonably priced. It's a virtual event so don't miss this one. Register@jason hartman.com and for today, let's get to part two of my talk in Houston and look at what's coming up for this year and beyond.

Nancy Pelosi is by far the best investor of all because of course she has insider trading knowledge, right? 69%. And by the way, follow this Twitter. It's pretty interesting. This is the Nancy Tracker.

It posts all of her trades. So if you want to learn how to be a great investor, Nancy Pelosi is your model. She's a criminal. I mean, this is unbelievable, this woman. And she makes no bones about it. I mean, she just doesn't apologize, has no remorse.

Yeah, if you could get $193,000 a year salary and have a net worth of almost 200 million bucks, that ain't bad. That is pretty good math. Good job. But don't worry, the other people running the world, we're in good hands. You know, in 2008, Uncle Helicopter Ben, he said, we're not forecasting a recession. Then we went into the biggest great recession in over seven decades. But then Janet told us, I don't believe we'll see another financial crisis in our lifetime. And that was 2017. And she's behind the big CBDC movement and the unified global tax structure. She is one of the big people behind the idea of you can't vote with your feet, no place to run, no place to go. They are trying to shut the door on all of these options globally. And we gotta be very conscious about this. 15 European countries are developing an euro right now. Their CBDC. Of course, we know what China's doing. I won't even talk about China. They're the leader in the cbdc and they're going to tie it to social scores and all kinds of stuff. You know, five countries have already launched their own version of dcash digital cash. And the digital dollar is certainly coming. And they are going to be able to exercise an unprecedented amount of control over all of our lives. So you got to have a plan B, because, I mean, just imagine the world that it probably seems crazy now. Maybe after the last two years it doesn't. Or maybe after what happened January 6th a year ago, it doesn't seem crazy because of the insane censorship that's going on. But just imagine a world where you post something on Facebook.

And the next time you have to pay for your Internet access. Your CBDC won't buy Internet access or phone service because they have cut you off from communication. You'll have to figure out another way to pay for Internet access. And maybe the big companies that are in bed with the government won't accept cash if there's any around, or gold or anything. The only thing they will accept is the cbdc, the central bank digital currency. So, yeah, this is problematic for sure. And Janet is a big proponent of all of this. I'd say one of the. One of the people at the forefront of it. But then there's Jerry. Jerome Powell. Okay? Very unlikely we'll see US or 1970s style inflation again. Hey, guess what, Jerome? We're already there, okay? We are already there. And by the way, this is not even current. You know, at the bottom it says rents 3.5%. Rents went up way more than that last year. So, yeah, it's just crazy. So we have arrived at 1970s style inflation. And remember, of course, we all know that the consumer Price index is fake news, okay? It's easily the real inflation rate. Now I say is 14, 15%. No problem at all. Right? Do you agree? Yeah. Who thinks? Give me the highest inflation number in the audience. Anybody think it's north of 15% real inflation? Yeah, some people do. North of 20%. Anybody? Yeah, a couple. Few hands. Yeah, several. All right, so as they are dropping the helicopter money, they are making sure they're taking advantage of the Cantillion effect. Richard Cantillian, the guy that came up with this idea, would be like 342 years old this year. And he said the people closest to the money get the biggest benefit from the money printing. And that's certainly true. And we see the elites getting the lion's share of it. The concentration of wealth is insane. And if you watch old movies and old TV shows, a show I used to like because I thought this guy was really smart. Was Columbo ever listen to Columbo or watch Columbo years ago? Yeah, that. That, you know, sloppy detective that he asked really good questions. Columbo did. And Columbo would go and investigate a murder in the home of some super rich people for the day when the series was made. And the idea of super rich back then compared to super rich now is vastly different. I mean, the wealthy are becoming insanely wealthy. And this concentration is going to make for a very unstable country. Unfortunately, a big middle class makes for a stable country. And the middle class is obviously under attack. But don't worry too much, because in the Chinese language, the word for crisis or the symbol for crisis, is the same as the symbol for opportunity. And literally translated, it means crisis is an opportunity riding the dangerous wind. Crisis is an opportunity, riding the dangerous wind. So we can philosophize, we can complain, we can do all of that stuff as much as we want. But at the end of the day, we've got to make our money. We've got to protect our financial futures and protect our freedom ourselves. It's a do it yourself project. Nobody's going to do it for us. I think one of the best things we can do is align our interests with the two most powerful entities the world has ever known, governments and central banks. Can't beat them. Join them. So in what ways can we do that? How can we do that? One way we definitely do it is through my strategy of inflation induced debt destruction. And let's just look at this example of home prices, interest rates and mortgage payments in 1985, 2000, and not even today. They're even lower than that now. So this isn't even current, this little chart I found on the interwebs, but I thought the graphic was good. So if you wanted to keep your mortgage payment under $1,000 in 1985, you could buy a $95,000 house and pay 12, a little over 12%. But what did that feel like to those people at that time? And keep in mind this is only based on official inflation rates. So the reality is much more significant than this. Okay, it felt like a $246,000 house. And that mortgage payment of $1,000 a month felt like $2,580 per month. In 2000, the $132,000 house felt, based on the official CPI, like a $214,000 house. And that thousand dollar mortgage payment felt like 1612 per month. And this helps answer the question, or at least make us think about compared to what? As the Hartman Comparison Index really teaches us, that's the last presentation in Miami, so I won't keep you waiting too long. Here's a couple predictions. I think prices this year will go up about 12% for real estate for income property. Now, keep in mind, you can't compare this to the S and P or any other investment because with income property you're leveraging it. And leverage means debt. And debt is bad if you have to pay for the debt yourself. But with income property, we outsource or delegate the obligation of debt to people called tenants. And then we tell them, not only should you pay my mortgage for me, but you have to give me extra every month. And I'm going to call that positive cash flow. And so a lot of it, like the iceberg, a lot of the Returns on income property is below the water and they're not apparent to a lot of people. That's why it's so important to use the free software and watch that video and learn the math of income property. So many people, and I've seen this over the last 18 years of helping investors buy properties nationwide. So many people can be in a position where they think they're losing, but they're actually winning because they just don't know how to do the math. Right. They just don't understand it. So learn to do the math of income property rents, I think they will increase by 8%. Now, one question I hear a lot from our investors and you know, we have thousands and thousands of investors is, hey, Jason, if the rents keep going up so much, who's going to be able to afford to live in my property? $15 minimum wage. Yeah, well, that's, that's true. And that'll push all wages up because it's, it's a trickle up economics. You know, hey, look at Socialism is trickle up poverty. That's a good quote. Say that to your friend and family member, Fred. Okay.

You know, socialism is trickle up poverty. That's all it is, right? Okay. So as the rents keep going up, something has to give. And here's what gives. Just remember the socioeconomic ladder. Look at it like there's two ladders that are side by side. And these two ladders, people move up and down these ladders at different rates from different experiences. And we've seen this over the past 10 years, 20 years. Right. If you talk to your tenant, how many people own rental property now? Okay, yeah, most of the room. Smart audience here. Great, Good, good job. So if you talk to your tenant today and you assess their standard of living, basically, and then you continue to own the same exact property and you have a new tenant five years from now, and you talk to them and assess their standard of living and where they came from, you will likely hear that they moved down the socioeconomic ladder, that they used to live in a bigger house, in a better neighborhood, in a better school district. Right. So people will just accept less. That's what gives. It's like moving from an inexpensive city to an expensive city. I mean, if you move to New York, you're going to live in a closet for the price that you could have a three bedroom, two bath suburban home in many areas of Florida. Right. That's inflation. That's the standard of living going away. It's not going to be the same tenant in this house. It's going to be a different person who has moved down the socioeconomic ladder, sadly. And this is terrible, but it is the way it is, so I'm practical. All right. Okay. So how many people like Apple products? Okay. How many people. Okay. Are you really participating? Let's ask another question. How many people are married? How many are single? How many aren't? Sure? Yeah, we've got to get everybody to vote if we can. So how many people like Apple products? Okay. Yes. All right. Apple's almost as disgusting as the other big tech companies, but not quite as bad. So Apple is the world's most successful company, right? And Apple gets a big share of our wallets. Every year they have a new product launch. They come out with a new phone, a new watch, maybe some new laptops, new stuff, new earbuds, AirPods, whatever. IPad, people buy them. So you probably spend a lot of money with Apple. How much do you spend? Do you buy a new iPhone every year and spend $1,500 or $1,200 every three years? Do you get a new computer and spend $2,000? You know, on average, if you're. And, you know, this could apply to Samsung or whatever, right? It's just the point I'm making. How much money do you pay every year for your favorite tech brand? Maybe $2,000 on average per year? Anybody? You gonna raise your hands again?

No.

Yeah, come on. You buy a new iPhone. I know you're buying a new iPhone every year and a half. Okay? The statistics say that, right? And maybe you don't do it every year, but you do it every couple years, so it averages out. So I just want you to think of it this way. Every company, every business, including your businesses, if you have your own business, wants to get a bigger share of the consumer's wallet, obviously, right? This is the goal to get your customers to spend more with you, to offer them more products and services so they will open up their wallet and spend more with your company. Well, when you're a real estate investor, I want you to just really think about the share of wallet, the share of income that you get as an investor. Oh, more than that. Typical tenant will pay one third up to 40% of their income every month for rent.

So that means for the first 12 days of every month, they're working for you. They're paying that money to your business, your rental property business.

For the 146 days of every year until May 27th.

They'Re working for you. Isn't that incredible? When you think of it that way. They're paying down your mortgage, they're paying this money to you. Housing has the biggest share of income of any other consumable. So just realize how important this customer is to you and take good care of them because they're sharing a lot with you. Okay, so mortgage rates, they're the lowest they've been really in history. If you read this great book by the late David Graeber, it's called debt the first 5,000 years. I didn't get to interview him on my podcast, but I did talk about the book quite extensively on my show before. You'll see that we have the. Well, I mean, not exactly because we've had slightly lower rates in the past year and a half. Right. But overall we have the lowest rates ever.

Period. And this is toxic. I don't think this is a good thing. I think money has to have a cost to have a legitimate economy. If money doesn't have a cost and there's no time value of money, you have a very dysfunctional economy. So I don't think this is good, but I do think you should take advantage of it. My prediction, mortgage rates will rise by about three quarters of a percent this year. We'll see. I kind of think the Fed will do two increases. And they don't control mortgage rates directly, but they certainly influence them. And then they'll chicken out. They say they're going to do three increases, but I don't think it's going to happen. But here's one thing that everybody's missing that nobody except yours truly is talking about. And this is really, really important. It is the hoarding of mortgages that is coming. There is going to be a significant hoarding of mortgages headed our way. One reason these low mortgage rates are toxic to the economy. And the housing market is good for you if you're an investor, but for society, it's not good. Here's why. The mortgage is a huge part of the income, property, asset, because you get the inflation induced debt, destruction, et cetera, et cetera. The mortgage is a big part of the asset. As mortgage rates rise, as they must, they absolutely must increase. Who knows how quick it'll be, but it will happen. The people with the cheap mortgages locked in for three decades, the people that got a mortgage today, that don't make the last payment until 2052, just think of the significance of that 2052. How much will the world change in the next 30 years? How much inflation will occur? How much of our freedom will be lost? You Know, probably not looking great unless a new administration comes in. But the people with these cheap mortgages will hoard them. They will not want to part with their properties. They will beg, borrow, and steal to keep that cheap mortgage. So instead of moving, they're likely to renovate their house. If you're in the home renovation business or sell building supplies, it's probably going to be a pretty good business in the future. Or, well, it is now, obviously, but it's going to be even better in the future as people stay put and they do whatever they can to keep these houses. Now, some might be shaken out by a big recession, but with these incredibly cheap payments, they're not likely to give up these mortgages. And this is going to exacerbate the housing shortage going forward because it will keep supply that should come on the market from coming on the market, and that will cause increased upward pressure on rents and prices and make the housing shortage even worse if they don't make it easier to build houses. So that's a big deal that nobody's talking about. Okay, so inflation induced debt destruction, very, very important technique. Let me just show you how your different assets perform versus inflation, the strength of those assets. And I got to go through this pretty quickly. I'm running behind. I only got two hours left. So.

In the top, the green bar, these things perform the best against inflation. Now, updating this chart, I'd probably put bitcoin in there too. Okay. But the chart's older than that, where bitcoin wasn't as popular when I made this chart. But, you know, gold certainly performs well against inflation. So there's Lynette's stuff. Mortgages perform really well against inflation because the debt gets cheaper to repay over time. The value of real estate hedges inflation very, very nicely. The income from your job, medium. Hopefully you get a cost of living increase. Rental income medium. You know, the rent keeps pace with inflation, but it doesn't outperform it in any big way. Stocks, you know, hopefully the S and P goes up with inflation and the things that just are cash, bonds, pension income, and taxes. Interestingly, because the IRS doesn't calculate inflation correctly, most of the time it benefits them, but not always with income. Property benefits us because they don't get it. Okay, I'm going to skip these next two because I want to get to this other stuff. But, but I go through and just listen to the podcast for, you know, strength versus deflation and strength versus taxation. Okay, there's, there's more to this, but let's get into the Hartman comparison index and look at a measuring stick for value. Okay, Answering life's most important question. Compared to what? Compared to what? So the index was something I created because I think this compared to what question is really the most important question of life. And we have to understand before we go into it that there are three types of markets. And most of you have heard me talk about this. There's a linear market, steady and profitable. Boring cyclical market, like a roller coaster. And then there's the hybrid market that's in between the two. So we sell a lot of properties in Memphis. This is what a chart of prices looks like in Memphis, Tennessee. Very linear, has small declines, small increases. Overall, it's pretty nicely, in a good way. Boring. Indianapolis, another big market for us. You know, we've helped hundreds of people buy properties in these markets over the years. And very linear and boring. Now, my hometown in the socialist Republic of California looks like this psychotic, right? That's Los Angeles. That is a cyclical market. It's a roller coaster ride. So we want to avoid these cyclical markets and gravitate toward linear markets. So the question I always say is compared to what? So the Hartman comparison index answers these questions. Here's real estate prices versus gold. We kind of have to throw out 1970 because the price was controlled until 71. So let's just look at the year 2000. If you wanted to buy the median price house in the year 2000, it would cost 520 ounces of gold. If you wanted to buy the median price house today, it would only cost 196 ounces of gold. So priced in gold, is it cheap or expensive?

Cheap. Cheap. Cheap. Cheap. You sound like birds out there. Cheap, cheap. Okay, so oil. Oil is one of the most important commodities in the world, bar none. Doesn't matter what the tree huggers say, the world runs on oil. 1970, oil was four bucks a barrel. It took 6400 barrels of oil to buy a house. In 2000, it took 5300 almost. Today, it only takes about 4500 barrels of oil. So priced in oil, is it cheap or expensive? Okay, good. How about rice? Rice is the basic food stock for two thirds of the human race. It's important. Rice prices are very important. So in 1970, and I'm just picking some times here, to get 52 years of history, you can look at any decade you want. Okay, it took 42,000 weight, which is 100 pounds of rice, to buy a house. 31,000 in 2000 and 25,000 today. So, priced in rice. Is it cheap or expensive? Cheap. Okay, Standard and Poor's. How many shares of the S and P does it take to buy a house? 1970, 249 shares. 2,112 shares. Today, 74 shares priced in shares of the S and P Housing is the cheapest it's been in 52 years. Now Forbes has its own Consumer Price Index. They call it the Cost of Living Very well index. Okay, this is the rich people's cpi. Okay. And we all have a different cpi. That's why it's a little murky and hard to calculate. So compared to the Forbes Cost of Living well Index, housing is almost the cheapest it's ever been in 52 years. Except for 2010, it was cheaper. That's how many shares of the Forbes CPI it would take to buy the median price house. Okay, how about haircuts? How many haircuts do you need to trade for a house? In 1970, 9200 haircuts. To buy a house. In 2000, 6700 haircuts. Today, 9800 haircuts. So price in haircuts housing is a little more expensive, isn't it? Yeah. Only time I felt better about losing my hair. All right, the Goldman sucks. Commodity index.

The GSCI is an interesting measure. 1970, the house cost 188 shares. By 2000 it was 46 shares. Today it's 128 shares. Not the most expensive it's ever been. But it's more expensive certainly than it was 22 years ago. Right. To buy a house. But who cares about the price of the house? That's not important. What's important is the payment on the house. This is mortgage payments adjusted for fake news inflation. The CPI now know that in 1970 if you bought a house, your typical mortgage payment for that median price house would be $127. Adjusted for the artificially low CPI inflation rate today it's 164.

That's not bad adjusting for house price, inflation and interest rate. Right, got it. Okay.

But what if you adjusted for real inflation? Yes, the house is free. Just ask John Williams. Okay. Or how about ounces of gold to make your mortgage payment? I'm not going to go with 1970 because it's an anomaly. Controlled 2000. 2.8 ounces of gold every month to pay your mortgage today 0.7 barrels of oil, 36 barrels in 1970. 28 in 2000. Only 15 barrels today. It was cheaper 12 years ago. In 2010 in barrels of oil, but it's pretty cheap today. Okay, how about shares of the S and P? How many shares of the S and P do you need to pay your monthly mortgage? 19, 70, 1.4, 2000.6. Today 0.3.

How about average wage? How many hours do you have to work at the average wage to pay the mortgage? 41. 52 years ago in 1970. 22 years ago it was 69 hours. Today it's only 46 hours.

Almost the cheapest it's ever been. I would call that a wash, actually. From 52 years ago. Interesting. So I tallied this up for you and priced in gold. It's cheaper in 1970 and 2000. Oil. Rice SP, Forbes Consumer Price Index. Copper. No, not cheaper than 1970. We didn't go over copper. But it's on the chart. Yes, for 2000. 22 years ago, it's cheaper. Haircuts?

No.

Goldman Sachs Commodity Index. Yes and no. And then the payment. There you go. It's yes, yes, yes. Except for hours worked, slightly more. But I would even give that a yes because it's a wash. So is housing cheap or expensive? To know anything, we've got to compare it with something because there's a massive amount of data in the price of anything. And if you've read that great book, A Random Walk Down Wall street, okay, that tells you that the data is in the price. There are billions of people making decisions that price all of the things we just discussed. And as those billions of people make those decisions, you have got the best survey in the world.

The real survey is the price someone will pay. That's the real appraisal. And that's what we share in the Hartman Comparison Index. There's a lot more to it. We've got a free white paper@hartmanindex.com you can just go there and this will be emailed to you. This white paper, and I think it's like 17 pages long. It's got charts and graphs and all this great stuff. So you can read to your heart's content and stay on our mailing list because we update the index quarterly. Some of the things for year end of last year, we had to do estimates because the data doesn't come out till the 15th. Literally, we're right on the precipice. But those are estimated, some of them. But the white paper will be revised as we go forward. And that's totally free for you@hartmanindex.com Anyway, I want to thank all of you very much and wish you happy investing. Protect your freedom, protect your family, protect those you care about and share this message with the world. This is a movement folks, so share it with everybody and Happy Investing.

As an Income Property Investor Imagine being able to tap into a nationwide network, actually a worldwide network of investors who share your same challenges and successes. Imagine being able to leverage the experience of experts and learn from their achievements and their mistakes. The Empowered Investor Inner Circle is an exclusive community of like minded and successful investors who help each other invest smarter and avoid common setbacks and pitfalls.

Join us today and take your portfolio to the next level.

Level up and learn from the mistakes of others.

Level up and effectively self manage your portfolio.

Level up and increase your peace of mind and your profits. Level up and and gain greater control.

When you join the Empowered Investor Inner Circle, you are joining a network of accomplished, experienced and knowledgeable investors. Investors who will help you take control of your investments while saving you time and money. Managing a portfolio of income properties in a diverse range of markets across America has never been easier with technology. Almost every aspect of income property investing can be done from the comfort of your own home. Join the Empowered Investor Inner Circle for monthly live training sessions with Jason Hartman and special guests to discuss which investment strategies will work the best with your unique life situation and portfolio. Get regular real estate updates and articles so you're in the know and up to date with what's happening in the world of income properties. You will also receive inside access to Jason and his team of investment counselors who will quickly answer any of your questions. Access our Rolodex of vetted resources including property managers, contractors, plumbers and electricians so you know you're getting someone who does high quality work. Act now and we'll include one free year of access to Property Tracker, a web based program that will help you manage your income expenses, legal documents, contracts and all contacts associated with administering income properties nationwide.

A one year subscription to PropertyTracker costs $347 per year, but if you sign up for the Empowered Investor Inner Circle today, you will receive one year of property tracker access for free. Don't let this unique opportunity pass you by. Join the Empowered Investor Inner Circle today.

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 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 you on the next episode.