1868: Staggering Year-Over-Year Inflation Destroying the Middle Class: Skyrocketing Rents, Travel & Auto Loan Troubles

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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 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 1868-1868. You know what that means. On Monday, we will have a 10th episode show coming up where we talk about a topic of general interest and life success. We're not all about finance and investing on this show, but that's a big part of life. And today I want to start by tackling life's most important question. And of course, you know what that is. Yes, you do, because we talk about it all the time. So let's go to that question, but let's apply it to history, because you know what they say about history. Those who do not learn from it are doomed to repeat it. Right. Okay, so we're going to do that right now. And we're going to start with one of my favorite favorite historical characters. He was potentially the greatest president in modern history. And here he is.

How do you do? I have a brief opening statement here before I take your questions.

Yesterday, Secretary of the Treasury Donald Regan sent to the Congress a request to raise the debt ceiling to $985 billion.

Did you hear that number? Did you hear that number? That was a big deal back then. $985 billion. He didn't even talk. In trillions. Not even a trillion. Oh, my gosh, those quaint times. The good old days. Frankly, it's kind of cute.

Let's go on.

This represents a dramatic jump of $50 billion over the previous debt ceiling. The administration took this action with great regret because it's clear that the massive deficits our government runs is one of the root causes of our profound economic problems. And for too many years, this process has come too easily for us. We've lived beyond our means and then financed our extravagance on the backs of the American people. The clear message I received in the election campaign is that we must gain control of this inflationary monst. Let me briefly review for the American people what we've already done. Within moments of taking the oath of office, I placed a freeze on the hiring of civilian employees in the federal government. Two days later, I issued an order to cut down on government travel, reduce the number of consultants to the government, stopped the procurement of certain items, and called on my appointees to exercise restraint in their own offices. Yesterday I announced the elimination of remaining federal controls on US Oil production and marketing. Today I'm announcing two more actions.

Can you imagine our current idiot, I mean, administration doing that? It's the complete opposite. Everything is the complete opposite. What a disaster. But I just want you to think of the perspective here. Here it is, the early 80s, right? It's, you know, 40ish years ago. And Reagan, rightfully so. I mean, he is worried about the debt and the deficits and spending beyond our means. What is the lesson here? We'll hear a little more of him in a moment. Okay, we're not going to obviously hear all of it. We got a lot to cover today. I've got a lot of stuff for you. But the lesson is what I have been telling you for easily 15 years, if not longer, and that is that we've never been here before. Nobody knows how long or how far we can kick this can down the road. Back then, 40ish years ago, they thought the jig was up. They thought a debt ceiling approaching a trillion dollars was insane. Right? I mean, they just thought everything was out of control back then. And relatively speaking, Reagan was right. I mean, he was right. He did a lot of really good things. Certainly not perfect. Okay. You know, Reagan had some failures too, like any president does, but, you know, he was right in concept. But the point is that when you're in it, it's so easy for the Chicken Littles to go out there and say the sky is falling when nobody knows how long or how far they can keep this game going. And I say they can keep it going for a long, long time. And what happens with that, we will cover in a moment after we listen to a little bit more of Ronald.

Reagan to reduce the size of the federal government. First, I'm taking major steps toward the elimination of the Council on Wage and Price Stability. This Council has been a failure. It has been totally ineffective in controlling inflation and its imposed unnecessary burdens on labor and business.

That's basically price control.

The wage and price program of the Council. I am eliminating the staff that carries out its wage pricing activities and I'm asking Congress to rescind its budget, saving the taxpayers some one and a half million dollars a year.

One and a half million dollars a year? Like that wouldn't even be a discussion. A president wouldn't even mention such a small number today.

One and a half million. That's hilarious. Here's a quarter, kid, you know, send the kid on his way. Here's the quarter, you know, like it's nothing. It's nothing. It's a non, it's a nothing burger, right? It just doesn't even matter. But back then, hey, one and a half million. A president would mention that. It's relative, right? It's all relative. Of course you can adjust any of these numbers for inflation and that would be a smart thing to do. Real inflation and CPI inflation. Sure, but just notice the perspective. Like I'm always saying, watch old movies, watch old TV shows, listen to old presidential speeches, you know, read old books, listen old music. It's all good.

My second decision today is a directive ordering key federal agencies to freeze pending regulations for 60 days.

Good idea.

This action gives my administration time to start a new regulatory oversight process and also prevent certain last minute regulatory decisions of the previous administration, the so called midnight regulations from taking effect without proper review and approval.

And remember when they passed Obamacare and Nancy, Nancy Pelosi, the complete fraud that she is, we gotta pass the bill to read what's in it, you know, and they did that like Sunday. I mean it depends what time zone you were in, but I think it was like 2:00am Eastern time or something. I mean it's just unbelievable. And of course the Federal Reserve was created, you know, right before Christmas when nobody was paying attention. That's what they always do. That's what they always do. It's a complete scam. Scam. Everything has become a scam. It's just so, it's so discouraging. Folks. You hear me on the show. Yeah, I know I rant and complain stuff, but listen, I sometimes get really disheartened at this stuff. I mean everything's become a scam. It's sad, it really is. But we know what to do, at least for part of our lives to protect ourselves from the scam. What do we do? Well, going into times we're having, I'm going to say it again, I said this the other day. Increase your credit lines, go to jasonartman.com fund and bulk up on your Credit lines. Okay, Check out that free class we have, Jason hartman.com fund. Do that for sure. And do it right after you listen to this. And also protect your assets. Jason hartman.com protect. These are two things you must do and you must invest for inflationary times. Because what really happens here is it's just a gradual, gradual thing, right? That's always what, you know, it's like. What is that quote? The universe does not end with a bang. It ends with a whimper. And that is so true. You know, as I've said before, the peak of civilization was 1990. 32 years ago. 1990 was the peak of civilization. Don't believe me? Go test the theory. You've heard me talk about it before. Look at how the music changed. Look at how the culture changed. 1990, that was the peak. Before 1990 it was cool to be a winner. It was cool to be a good citizen. It was cool to be going somewhere in life. Now it's cool to be a loser and a gang banger. And you know, it's just unbelievable how everything has changed. How the media has indoctrinated a couple generations of people now. It's absolutely incredible. Everything has become a scam. But we know how to invest for it. Because the whimper that the world ends with is this progressive inflation. And. And we take advantage of that through inflation induced debt destruction. But I'm going to show you a couple things after we get done with the GPR here and I think they're going to amaze you. Let's listen to a little bit more.

All of us should remember that the federal government is not some mysterious institution comprised of buildings, files and paper. The people are the government. What we create, we ought to be able to control. I do not intend to make wildly skyrocketing deficits and runaway government simple facts of life in this administration. As I've said, our ills have come upon us over several decades and they will not go away in days or weeks or months. But I want the American people to know that we have begun.

Such a great speaker. And by the way, look at Helen. I mean, is she still around? She was around for a long time. It's amazing. Okay, so let's move on here. Let's take a look at the first chart of today's episode. And it's about rents, folks. If you think rents are high now, just wait because rents are getting a lot, lot higher. Okay? Rents are going to get a lot higher. Take a look at this. Single family attached versus detached rental price growth. So what do we see here, we see we've got the attached homes like condos, townhomes and detached homes. And you see how they play differently. The detached really sprung up a lot faster. They're about even now. But that rent growth was much more significant much sooner. Detached prices were up 13.7% in April compared to attached prices. Price home price gains for rent up 13.5%. And by the way, for those of you struggling to come around to the idea that rents are still cheap. Yeah, I know you think that's crazy. All you need to do to understand how cheap rents are in the United States. And I'm not talking about New York City or Los Angeles or some of these crazy cyclical markets, okay? I'm talking about America. Right? Broadly speaking. You know, mostly the linear markets and the hybrid markets. Right. If you think rents are expensive, now, I'll prove it to you that they're not that expensive at all. Let's take a look at this chart before we dive into that too too deeply. Okay, so this chart is single family rent change for select geographical areas. Of course, you got the top, not too far from where I live, and that is Miami, just south of me about 90 minutes. Rents a staggering 40.8% increase in one year. That is just unbelievable. It's truly shocking that you would see rents go up that quickly. Orlando, Kissimmee, 20. I'm just going to round off, for interest of time, 26% increase in a year. Phoenix, Scottsdale, 18% increase. San Diego, 17% increase. Las Vegas, Henderson, 17% increase. Dallas and Plano and Irving, Texas, 14.3%. Round Rock, Austin, 14%. Boston, Massachusetts, you know, Paklika and Harvard Yad. You know, I wish I were good at accents. That would be a good skill to have. I don't have it. Okay, so Boston up 13%. Atlanta, Sandy Springs, Roswell, Georgia, 13%. Tucson, Arizona, 13%. Charlotte, North Carolina, 12%. Seattle, almost 12%. Los Angeles, 11%. Chicago, 10.3% in Chicagoland, which is Naperville, Arlington Heights, Chicago, all that Chicagoland area, it's pretty sprawling. Houston and the woodlands. Sugarland, Texas, 10%. Almost. New York, New Jersey, White Plains, 8%. Washington, D.C. 8%. St. Louis, 8%. St. Louis, 8 percent. I mean, that's incredible, right? Incredible. Philadelphia, 7.8% and urban Honolulu, Hawaii, 7.7%. So that's what you see in terms of rent increases, right? And that's single family homes. Now, why do I think rents are cheap? Well, because not only do I have a historical perspective which I've drilled into all of my listeners more than enough times. But I have a worldly perspective. Having been born in Europe and visited 87 countries, some of them many, many, many times over and over, some of them probably easily a dozen times over and over again. I can't count that as another country because it's the same country just over again. Right? But here's the thing. Rents are so much more expensive when you go around the world. You realize how cheap rents are in the US and how cheap houses are in the US when you look at the United States. And by the way, I wish I had a visual aid for you on this, because I was just looking at one about two or three weeks ago. The United States is one of the cheaper real estate markets in the entire world. I know that amazes people, but that only amazes us because of hedonic adaptation, because our expectations have risen to such a point where our expectations are only relative to what we used to have or what our neighbors have or what. But go around the world and you see how cheap real estate is in the United States. And I mean for sale or for rent, either one. It's truly, truly amazing how cheap rents are here. Remember, rents lag prices by a minimum of two years, probably three or even four years. So the rent increase is still have a long way to run. They are going to keep going for quite a while. And by the way, I talked to you about the percentage increases in these markets. I didn't talk to you about the median rent price. In Miami, it's 2,500 bucks. In Orlando, it's almost $2,000. In Phoenix, Scottsdale, it's $2,200. San Diego, $3,500. Las Vegas, $2,100 in Las Vegas. I mean, that's really amazing. In Dallas and Plano, Texas, $2,100. I'm rounding obviously, just the way you're supposed to round. In Austin, $2,000. In Boston, $3,000. In Atlanta, $1,800 in Atlanta. Come on. Like Joe Biden would say, come on, man. In Tucson, nineteen hundred dollars. In Charlotte, North Carolina, $1,800. I mean, it just goes on and on and on. It's nothing like what we used to think of rents. And no matter what you think now, you're going to be amazed at the future of rent increases as an investor. So here's a meme. I got two memes for you today. One, this one says potential buyer. Hi, I'm looking to buy a house. How's the market? Me and this is like a realtor saying this. Now this is a little old, this meme. Remember back in May when you were looking for toilet paper? Yeah. It's just like that.

And that's going to persist for quite a while. All right. On last episode, I talked about several things and I talked about how as the Fed tries to tamp down inflation, you know, they do it with raising interest rates and so forth. And we talked about that. But what I didn't get to talk about is this quick thing and that's about king dollar. It is absolutely shocking that now the euro and the dollar are at parity. That's amazing. That is truly amazing. The dollar is so strong.

Comparatively, it's getting weaker as we perceive it to ourselves. Right? Because we go to the grocery store and we buy food and we buy gas. Thank you. Let's go brand. I mean, the prices are insane. So we would think, well, the dollar is weaker. But the question is, compared to what? You look around the world and you think the inflation is bad here, it's much, much worse in other places because the dollar is strengthening and strengthening in comparison. Compared to what? Hey, Peter Schiff, where's the dollar collapse you've been telling us about for decades? The complete opposite has happened. Remember the decoupling theory he talked about? Complete opposite happened. Now maybe you could argue that some of that decoupling is happening now, but not for the reasons he originally stated 15, you know, 16, 17 years ago. Right. It's a good theory. Super intelligent guy, no question about it. But even really intelligent people can be wrong, wrong, wrong over and over again. You gotta just take the data, take the information, think for yourself, make up your own mind. Remember, it's never just about math. There are so many things going on besides math. Reagan in the early 80s thought the deficit was going to destroy the country and the, and the national debt was going to destroy the, you know, debt, deficit, whatever, you know, it's all, it all goes to the same problem at the end of the day, right? They thought that was such a problem, but look where we are now. It's so much worse and they're still kicking the can down the road, as I've been arguing for many, many years. Over a decade, easily. They can do it for a whole lot longer. They can do it for decades, decades, decades. They can do it for lifetimes. More than your lifetime, more than my lifetime, more than maybe a few lifetimes. Nobody knows. We've never been here before. We have not been here before. Okay, now it will be a slow Change, right? As we see, the standard of living just declines. How do you boil a frog? Right? You put him in the pot with some nice warm water. He's in a nice little Jacuzzi bath. And then it gets hotter and hotter, and the frogs just boiled. Right. If it's too hot, all of a sudden, the frog's gonna jump right out. Okay, so let's talk about the auto industry for a moment. You might think, well, how does that relate to real estate? Oh, it does. Don't worry. There is another subprime crisis going on. And it's not the subprime mortgage crisis this time. It might be the student debt crisis. We'll see how that one plays out. But today I want to talk about auto loans. Do you know the typical auto loan is about 140% loan to value? Yeah, the LTV ratio. You know, when you finance a house, you get maybe an 80% loan to value or LTV ratio. Well, the typical auto loan is 140%. So these cars are just underwater everywhere you look. And what I've talked about many, many years ago, you've heard me say it before, is that. And I feel bad saying this, I really do, because it just sounds so callous, but it's true. It's reality. Look, if we go into a massive recession again, I mean, certainly there's going to be a correction at some point. The stock market has already corrected. And while it's still correcting, the crypto market has suffered a bloodbath and is probably still correcting. Real estate is the last carbon based gender neutral life form standing. I didn't say last man standing. No hate mail this time, right? Anyway, it'll correct. Eventually there'll be some correction, but when the correction in prices happens, it'll put upward pressure on rents. And that's the beauty. See, these other asset classes don't have those great multidimensional characteristics. Multidimensional characteristics we have with income property. That's why it's the most historically proven asset class in the entire world. Okay, I say these two things. Traveling and owning a car, or at least a late model car, will become a huge luxury. Yeah. Just as to all you millennials and gen zers out there, moving out and having your own place will become an unheard of luxury. I moved out of the house when I was, what, 21 years old right now? I bought my first rental property when I was 20, but I didn't live in it. I bought that place and I rented it out to somebody else and I Stayed living at home with mom because that was free. I moved out early and that was, you know, somewhat normal for a Gen Xer like me that people would move out right pretty early in the olden days, you know, they got married very young, so they move out even earlier many times, right? But nowadays you got people that are like that movie, remember that movie Failure to Launch? That was supposed to be a bashing of 40 year olds, right? But now you got all kinds of 40 year olds living with their parents, right? So it's a luxury to have your own place. Soon it will be a luxury to have your own car. Because of course, the government wants to push us all into mass transit. And if we're not in mass transit, they want us to drive a proletariat electric car even though the electrical grid could no way power all those cars. Everything's a scam. I mean, just everything's a complete scam. It's unbelievable. So looking at the auto industry here a bit, right? But now I'm going to tell you another thing that's going to become a huge luxury that's going to be rare that people get to do it. It's coming up. Just wait. Wait for it. Got a minute on the auto thing first? Okay, so here's what we've got in the auto business, right? These overvalued over leveraged cars, just like we had overvalued over leveraged houses in 2005 and 2006. And we know what happened, right? This time the subprime bubble is in the automobile market, okay? A record 12.7% of people who took out a loan on a new car last month agreed to a monthly payment of at least $1,000. According to Edmunds, that is nearly double the 7% that agreed to that. In other words, 12.7% have a payment over 1,000 bucks, but only 7% had that payment a year ago and more than six times the 2% that had that kind of payment in 2010. Now it makes me wonder if this is inflation adjusted. And that's the question you always want to ask. I don't know if it is. I do not know. It doesn't say that. Why aren't these people writing these articles required to say whether it's inflation adjusted or not? Because you can't do it. Compared to what? Right? Price of a new vehicle. Average transaction price was up 13% year over year to $47,000. My first car when I was 16 years old. Now that wasn't a new car, of course it was A used car, but it cost $700.

I bought it from an LA County Sheriff's deputy. It was $700 and I paid cash. You know, when I was a kid, I saved up money and I worked hard and I had money. You know, it was kind of cool. I mean, I went out and earned my own money. Okay, so that's that part now. Lucky Lopez. Boy, what a name. A car dealer who specializes in repossessed vehicles told Barron's that the share of subprime auto loans that end up as repossessions almost doubled since 2020 to 11%. Overall, 5.36% of the subprime auto loans were severely Delinquent in May. 138 basis points higher than a year ago, according to Cox Automotive. Even more concerning, Lopez said, is that prime. So these aren't subprime auto loans. These are prime auto loans. Good borrowers, okay, Good borrowers. Normal auto loans, like, you know, and I assume they include leases in there, like my car lease. Right. I've got good credit, I've got a good lease rate. So these prime repossessions, where borrowers had high credit scores is at a 4% rate, double the usual 2% rate. Wow, that's just amazing. So mark my words, it's going to be a luxury to have a car or at least have a late model car. Now what did I want to say before that I said sounded callous? Here it is. And I. I've said this before. Look at economics is a relative game. So if there's a big economic recession and everybody gets poorer, now it's never even because, you know, the people listening to the show have figured out how to game the system. That's what I'm teaching you. You got to have financial self defense. You're learning that here. So I'm glad you are. But most people will get poorer. And by comparison, by answering the compared to what question, all you have to do is be ahead of them. It's like that old story of the two hikers who are hiking in the woods and they see a bear. And the bear starts charging at them and one of them stops to tighten his shoelaces and his friend says, hey man, come on, you can't outrun a bear. Why are you tightening your shoelaces? And he says, I don't have to outrun the bear, I only have to outrun you. And that's the sad but very true reality of the way economics works. Okay? All you have to do is be better off than most of the Others, because the prices of everything in the marketplace will adjust. Goes up, goes down. You know, recession, economic boom time, stagflation, inflation, deflation, whatever, right? It always just adjusts. So all you've got to do is be ahead of everybody else. You know, be ahead of the. The. On the bell curve, right? Look at it like a bell curve. That's maybe a good way to look at it. Okay, now here's my other meme for today. And if you're only listening on audio, it's funny. And it's this complete moron with, you know, big weird piercings all over the place and tattoos in all the wrong places. They say my generation will start a revolution. You know, they're upset, right? And then the old army guys, your generation couldn't even start a lawnmower. I love that. It's so true. I mean, it's just so true. So sadly true. All right, here's the other luxury that is going to become a rarity as economic times change. The middle class is continuing to be hollowed out. The destruction of the middle class has been underway for decades and it's coming to a real inflection point. We all see it, right? Travel. Travel is the other big luxury. So having your own house, I mean, you should get your own house when you're in your early 20s. That's the old normal right? Now, hey, you know, you'd be 40 something and still living at home with your parents, right? Having a late model car or any car at all. Another big luxury. Travel. Here's an article. Getaways have become costlier than ever, except maybe for travelers looking for a cruise. Hope writes why it matters. Cruise lines are still rebuilding from an industry wide shutdown in 2020 State of Play. The average daily rate for a U.S. hotel room was $153 between June 26 and July, up 19.7%. So hotel rates have skyrocketed. Hospitality data and analytics company STR tells Axios. This is an Axios article, by the way. Okay. Meanwhile, airfares have climbed about 30% higher. Boy, have you tried to book a flight lately. It's a lot more expensive. Let's go, Brandon. Okay. Fuel cost is a huge component, and staffing cost too, because there's no workers, there's a nationwide labor shortage, Right? And so these airlines have really struggled to get staff. It takes a lot of people to run an airline. But average cruise prices for the month between June 11 and July 11 were 17% lower, according to Tynan Smith of Cruise Sheet Driving the deals, older travelers A core chunk of cruisers have been harder to lure back. I think they're concerned about COVID Covid 1984. Okay, so cruise operators have also increased capacity on their ships and loosened their COVID protocols. By the numbers, there are 230 cruises under $60 a day, including taxes. Even some higher end routes, including, according to Cruise Sheet, the price difference for inside cabins and balcony rooms has fallen to just 50% down from 150% now. What does that tell us? That's interesting right there. It's interesting. Okay. The delta between the inside cabins and the more desirable balcony cabins has fallen to just 50% where it used to be a big premium of 150%. So the premium for the better cabin is now much lower than it used to be. But of course when you get on that cruise ship they plan to sell you a lot of other stuff like drinks and gambling and Wi fi and you know, souvenirs and shore excursions and all that stuff. That's how they make their money right now. The nice thing is I've got, I'm going on a cruise soon. I got a cruise coming up and I'll be reporting from the cruise ship as usual. And I got a good deal, I thought. And I don't gamble. I'm just way too conservative to be a gambler, you know that. And so they don't make a penny on me from the casino. I drink a little bit, you know, I like to have some fun, but not much. And so, you know they're not going to make a bunch of money from me there. Right. So I really do get a good deal going on a cruise. But some people, you know, like to gamble and drink a lot, you know they're going to pay for it, right? They'll pay a lot more than the room rate. But it's interesting to see that the delta between the cruise fares and the hotel because of the industry situation has really, really changed quite a bit. And I think there's a lot of things that are going to be there were formerly expected like normal things that are going to become huge, huge luxuries. So what's the moral of the story for today? Well, you know what I'm going to say. Don't wait to buy real estate. Buy real estate and then wait. Income. Property is the most historically proven asset class in the world. Mortgages are below the rate of official inflation and dramatically below the rate of real inflation. You're getting paid to borrow the money. You're automatically getting officially stated inflation induced debt destruction. So Enjoy it. Go to Jason hartman.com we're here to assist you in your investing journey. Be sure to do what I said earlier if you haven't done it already. If you've not attended our classes on credit lines and getting up to $250,000 in funding, you need to do that now. In these uncertain times, that is really important to beef up your credit lines because when things change, that's unlikely to be available like it is today. So go to jasonhartman.comfund for that. And if you want to get your asset protection program taken care of, go to jason hartman.com protect and we are here for you. Any questions, reach out through our website. We're always happy to help. Our team is available to you. And until next time, happy investing.

I just want to say thanks to you because I would never been able to retire if I hadn't got hooked on to you 10 years ago. And I really owe this to you that I've met my goal, you know, to retire early and not work for the man and kind of be my own boss and. And I would never be able to do that had I not. I guess I was a little discouraged 10 years ago. But hooking onto your podcast and learning from what you were teaching has made this all possible.

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