2061 FBF: Nick Sargen - GLOBAL SHOCKS, An Investment Guide for Turbulent Markets, Morgan Guaranty Trust, Salomon Brothers, Prudential Insurance & J.P. Morgan

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Welcome to the Creating wealth show with Jason Hartman. You're about to learn a new slang plant 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 the Creating wealth show. This is your host, Jason Hartman. Episode number. What episode is it today? I think it's765.765. Thank you so much for joining me today. Listeners from around the world, 164 countries listening in, hopefully as they usually are. So today you are going to enjoy this guest. This is a very fresh interview. I just did it yesterday. I think you'll enjoy it. Some good insights on the market, the economy, housing market, where is real estate going? As I've mentioned before, I am pretty bullish. But there is some urgency. There are some signs for concern, no question about that. Interest rates are up and you know, it's a, it's a dynamic thing. So I would say there is urgency to get in and invest. I, I do have fairly significant concerns actually about the cyclical bubble type markets around the country. The ones that we don't care about, that we don't really invest in. But those I, I think are showing some real signs of being overheated. So we shall see where it all goes as we move into this new year and this new presidential administration. A lot of stuff changing. So one of the great things that I think our new President elect Donald Trump could do is outlaw call centers overseas. I know. Here, here you go, Jason. Another one of your rants. Yes, another one of my rants. I had this absolutely pathetic experience with a disgusting company at and T regarding my cell phone. I believe they, they basically stole my money. Stole my time and stole my iPhone. Yeah, it's really disgusting. It's unbelievable. And you know, the interesting thing about the corporatocracy and when you're dealing with big companies is that they, they all act as though they are responsive to their consumers. Like they want to be helpful and do the right thing and so forth. So they just say, call us. Well, the problem is, of course calling them isn't so simple, right? Oh, just, you know, you'll talk to their reps and they'll say, just call us back, you know, if you need anything. Oh, well, that's only two hours of my life. Right. It's the most valuable commodity we all have is obviously. What is it? It's time. It's not money. It's time. So they make it so difficult to deal with them that, you know, you just don't bother. And most people just accept getting ripped off repeatedly by these big, disgusting, unethical companies. Yeah, I'm thinking Trump, he talks about keeping jobs in America, right? He recently saved a bunch of jobs with carrier. He, he's kind of this gumshoe politician in a way that gets on the phone with these companies and tries to keep jobs here. And he's not even president yet. So, hey, you know, maybe that'll work out pretty well. I like the idea, certainly. I'm sure you do too. How about outlawing Philippine call centers and these drone humans that just read scripts. Hey, look, they do it everywhere. They do it in America too. You know, when you're, when you, when you're doing overseas call centers, it's just that much worse. Isn't it amazing to you? It certainly is to me. How these mortgage companies dealing with the level of each mortgage being on average, I'd say a couple hundred thousand dollars. You get a call center with a two dollar an hour person in the Philippines, when you call Aquin bank of America, any of these disgusting, terrible companies. Right? Not that I have an opinion about this, but you know, hey folks, it's like my leaf blower thing. I was walking the dog this morning and tangent alert. This guy had a leaf blower. Of course, a terrible invention. The leaf blower needs to be outlawed. Not that I want another law, but I'm just saying leaf blowers are, are pathetic, terrible device. And so not only was he blowing dust around, making a lot of noise and polluting like crazy because of course there's no emissions controls on those little motors on these leaf blowers and they just pollute, pollute, pollute like crazy. But it Was worse this morning.

Right.

We have these beautiful trees. There's not many of them. In a place like Las Vegas, my new hometown, you don't see much in the way of fall colors, but there are a few trees, and I don't know what they're called because I don't know much about plants, but these beautiful trees with the leaves that were, you know, in fall colors. Well, he was aiming his leaf blower up at the tree to make all the leaves come off and go on the ground so he could blow them around. I mean, just pathetic. Anyway, back to call centers. Yeah. And outsourcing jobs. Keep the jobs here in America. Use American call centers. And I think that is a good deal. But it amazes me, mortgage companies, especially now when you call a disgusting company like AT T and, you know, have my terrible experience that I recently had with them and, you know, of course, none of this is worth my time because I make much more money in that amount of time than it's worth. But it's just the principle of the thing. And, you know, you're being a proxy for millions of other people who are getting ripped off, but don't do anything about it. Millions of other people are suffering at the hands of these companies that just completely rip people off. So when you call and you make it an issue and you hold them accountable, or at least you attempt to, you know, you're doing a favor for your fellow citizens, hopefully you are a proxy for them to get better care and better service. By the way, have you noticed I moved around? Yes. I moved out of the closet where I was recording into the living room. So the sound changed and I've got a new microphone set up coming because since I moved, I have not been able to find my microphone. So I just bought a new one and I'm excited about getting it. So look for sound quality improvements in the podcast here. You know, I've never been that much of a sound hound like some of these other podcasters. I think it's more important to have good content and good information than incredible, perfect sound with. With bad content. Anyway, so you are being a proxy to help people that are getting taken advantage of with these companies. But mortgages? That's the part where it especially amazes me.

Welcome to this week's edition of Flashback Friday. Your opportunity to get some good review by listening to episodes from the past that Jason has hand picked to help you today in the present and propel you into the future.

Enjoy how many billions, hundreds of billions of dollars could have been saved during the mortgage crisis. Crisis. And even today as people still engage in strategic defaults where they are letting their properties go at times. I mean, you know, this is much less than the millions of people who did it several years ago during the Great Recession. But people are still doing this where you have these drone humans in the Philippines reading scripts rather than thinking, you know, this is, this is hundreds of billions of mortgage dollars that we're talking about, yet it all is dependent on a two or three dollar an hour. Yes, that's what they pay them. Employee in the Philippines reading a script instead of a thinking person. Unbelievable. Truly unbelievable. This is so irresponsible. It is just nothing short of ridiculous. Anyway, someone asked me about cap rate the other day when I was speaking at. Well, it was after I did a speech at one of these conferences I just came from, had three conferences in a row, did three speaking engagements, multiple ones. At one of the conferences, actually someone asked me about cap rate and why I don't talk about cap rate more often. Now, this is not new, you've heard me mention it before, but I'll just mention it again here real quickly. Remember, cap rate is an evaluation of a property's performance without considering two vital components. Well, really three. But two that would be mainstream and one that is Jason Stream. Yes, my stream. Jason. Yeah, that's me. Okay, so the two mainstream metrics or elements that this metric does not consider are appreciation and leverage. That is why cap rate, in my humble opinion, is a flawed metric. It is used widely in commercial real estate investing. Why? Well, because these properties don't have very good leverage and they generally don't have very good appreciation. Why? Well, the financing for commercial real estate is much less desirable than it is for residential investment grade real estate. And, and.

Why don't they appreciate as much? Well, because they are the performance. The valuation of the property is tied to income performance and income performance in commercial real estate is far too logical. Yes, Mr. Spock, logical. I don't like logical in this case because when you have a bunch of leases in say an office building or a retail center that an investor might own, or an apartment, well, even an apartment complex, although those less so those have more aggressive rents and appreciations than the other types of commercial property. But when you have a bunch of these leases with increases indexed to what, what are they going to index them to? The cpi, the good old consumer price index. Right. That understates real inflation and is not a valuable measure. So if inflation by the official understated statistics is 1.8% annually, then your rents are going to increase by 1.8% annually. Well, compare that now that that drives your value. It drives your cap rate for your property, your capitalization rate, this widely used metric in commercial real estate. And then you compare that to good old residential real estate, where only a small portion of the residential real estate, those good old trusty single family homes, the most reliable, most historically proven asset class in the entire world, single family rental properties, those are sold mostly to illogical people, home buyers who are emotional. And those emotional buyers do not consider cap rates or ROI or cash on cash return or any such metric like that. And that is why you see that over the decades, the historical average appreciation for single family homes is somewhere. And it depends how you segment it, how you argue about it, you know, whatever, between 6%, it's somewhere around the 6% mark on a national average. Now that national average has probably been dinged up pretty bad during the Great Recession, but when you look at it over many years, 6% is a reasonable number in my humble opinion. Before the Great Recession, most experts would tell you that single family homes appreciate at about 6.7%, 6.7% on average nationwide. So of course you've got the linear and the cyclical markets all and the hybrid markets all going into this pie. And then what index are you using? Using the very flawed Case Shiller index that only considers 20 markets. Are you using a wider index by like the Otheo index? You know, you've got a zillion ways to slice and dice this obviously, right? But suffice it to say, this is why cap rate is not my favorite metric. It is a flawed metric. Now what is the third thing? Remember I talked about the two mainstream things and then I talked about the Jason Stream thing. Well, you know what I'm gonna say, Regular listeners, regular followers of my work, inflation induced debt destruction. Inflation, inflation induced debt destruction. That is a very, very important metric to consider. If you don't know what that is, that very important thing, then go back and go to Jason hartman.com and type in inflation induced debt destruction on our search bar there, which by the way, we have upgraded, we're experimenting with some different search engines for our site. I really want to have something good there that makes our very content rich website a very powerful resource for you listeners and investors. And go there and type in, in the search bar inflation induced debt destruction and listen to those podcasts where I have discussed it in detail. Because cap rate does not consider this at all. In fact, any of the ROI metrics on our performance. Do not consider this at all. This is a huge, huge, huge bonus in terms of your return on investment. So we've got our Meet the Masters event coming up. It is going to be phenomenal. We're going to have some great speakers flying in from all over the country, attendees flying in from many parts around the world. And this is only once a year, folks. Go to jason hartman.com click on events and register for our upcoming annual Meet the Masters of Income Property event. Meet the Masters of Income Property and join us for a live event. Meet our clients, meet our followers, meet our speakers, meet our experts, our local market specialists, our property managers. This is an event you do not want to miss. We only do it once a year. It's coming up in January in Irvine, California. A great place to visit if you are, if you live in a colder climate, great place to visit. Irvine, California, Southern California in January. You can't beat that. And hey, there's lots of recreation around there. If you want to make it a little vacation, take your family to Disneyland, go to San Diego, not too far away, lots of attractions there, Los Angeles, of course. And we will look forward to seeing you at our Meet the Masters event. That is filling up quickly. Price increase is coming. So get your tickets today. Get your tickets today. Go to Jason hartman.com and check that out. And let's get to our guests. You're really going to enjoy this interview. As we talk about all the things I mentioned a few minutes ago.

It's my pleasure to welcome Nick Sargent to the show. He is senior vice president and chief economist at Fort Washington Investment Advisors. He's a former economist at Morgan Guaranty Trust, Salomon Brothers, Prudential Insurance and J.P. morgan. He's author of the new book Global An Investment Guide for Turbulent Markets. Nick, welcome. How are you?

I'm very good. Thank you for having me on your program.

It's good to have you on. So, gosh, a lot is changing. As you said when we were talking off air a little bit, talked a little bit about the incoming Trump administration, you said something that interested me, which I'd like to have you expand on. You said Trump might be the, the most pro business candidate or well now soon to be president in the history of the Republic. Tell us about that.

Yeah, well, you know, obviously in the campaign the campaigned on corporate tax cuts, reducing the regulatory burden the businesses face, creating incentives for companies to bring funds from offshore. But then in the subsequent period, now you look at his appointees and a number of Them all bring business experience, their CEOs and the like, and, you know, basically taking, I think, a pro business stance and less government interference stance. That's what I was referring to.

Right, right. But is he more pro business than say, you know, the gipper Ronald Reagan?

You know, that's an interesting question. Here's the difference that I see. I believe that Ronald Reagan was a true philosopher. His philosophy was that government is best, which governs least. So he believed in small government. He believed in allowing market forces to carry the day. The difference that I see with Trump is he has some similarities in the sense that, you know, as I indicated before, get the regulators off the backs of businesses kind of, you know, so in that sense, he is similar. The biggest difference is that, you know, Trump believes more in interventions such as carrier, you know, et cetera. He wants to make sure that companies are not moving jobs offshore. Whereas I think Ronald Reagan would say, not my job to point out individual companies. I have to create the environment so that they want to stay in the US of A.

That's a great distinction, Nick. I'm glad you mentioned that. You know, Trump is. He just picks up the phone and he calls these people and I mean, like a, like a, like a gumshoe salesman. It's kind of, it's, I gotta say, it's, it's pretty impressive. But it could be problematic too, because, you know, the way he. And we're, you know, we're making what we want to be evergreen content, really time timely here. But the way he called out Boeing last week, I don't know. You know, that's a little, you know, that puts fear in the boots of every executive.

No, no. And I think you nailed it. It's you. I think the difference again is Ronald Reagan had core set of beliefs, he had a philosophy. Donald Trump, in my view, is a pragmatist and a negotiator. So everything is a deal in his world. And, you know, that's fine. I think we could use a little bit of pragmatism in Washington. I think it became too ideological.

And a little deal making, too, is kind of nice when it's pro business deal making, not crony capitalism, hopefully.

Exactly. But at the same time, it's possible that some of his policies will be very inconsistent. And, you know, that's why I say I'm not rushing to judgment. I'm sitting here saying, I'm a baseball umpire. I gotta call it like I see it.

Yeah, very interesting. Okay, well, you know, what about trade policies? What about your view on inflation or deflation or, you know, just sort of the status quo. To me, Trump seems like he might be pretty inflationary, which, I mean, philosophically, I hate inflation, but as a real estate investor, I love it. It's the best thing of all. What are your thoughts there?

Yeah, I think that again, Reagan and Trump inherited two different worlds. Ronald Reagan inherited the world of double digit inflation, and therefore his number one goal was to bring down inflation. And along with Paul Volcker, they succeeded. And that was good because that brought down bond yields. As bond yields came down markets, real estate rallied. So the difference I see is Trump has inherited this very, as you allude, low inflation world globally. But he's a spender. He wants to spend on military, he wants to spend on infrastructure. He doesn't want to curb entitlements, which I think is a mistake. So I do believe you run the risk that with tax cuts and spending increases, you get outsized budget deficits down the road. And either that could be inflationary, depending on what the Fed does, or it could lead to significantly higher interest rates.

I mean, it's pretty odd because like Trump's formula, as you alluded to there seems like it's going to be pretty popular. I mean, you know, he doesn't want to curb entitlements. He wants to spend a trillion dollars on infrastructure, which is going to create a lot of jobs, obviously. Yeah, I'm no fan of government spending, but you know, we'll get to that. Then he's going to do all these sort of protectionist trade policies that create more jobs and higher wages in the US if he builds a wall, or at least in one way or another gets immigration under control, which is an absolute disaster, obviously wages will just rise. I mean, you don't need Bernie Sanders to legislate $15 an hour minimum wage. The market will take care of that. It will just happen naturally as a result of, you know, more Americans having job opportunities because they won't be taken away and undercut. And I know some people say that's kind of an old fashioned view, but look, it's a pragmatic view. You know, it seems like everything bodes for a lot of popularity. I mean, I think even, you know, the staunchest liberals on the left or feminists that love to hate Trump will be pretty pleased with their bank accounts. Am I wrong about that?

No.

You know, I had to do an assessment when, you know, we had the surprise out. And my knee jerk response was.

What will go well with the markets? I mean, and the Answer. I think number one is, you know, businesses will like corporate tax cuts, individuals will like reduction in personal tax rates. You know, most people, I think, feel that the last administration went way too far on regulation. So the deregulation is good. So in my judgment, those have been the main forces.

Behind the stock market rally, plus a government that likes business as opposed to a government that doesn't like business. So those are the pluses. But I think, Jason, when you were talking the big uncertainty for me is his trade issue. I heard him in New York and he believes trade deficits are bad, surpluses are good. But I think what he's got to do, he has to go back and look at the history books. Under the Reagan years, we wound up then with outsized budget deficits, and I think we're headed there again and outsized trade deficits partly because we spent more. As you grow America, we import more. We aren't a big exporting nation. Two, have you seen where the dollar is? It's at its highest level across the board since 03, and I believe headed higher. Well, that's going to make it more difficult for Americans to compete. So my argument is, well, yeah, and.

I want to make sure I get to that strong dollar things, but go ahead. Yeah, I want to just make sure.

If I just close the loop, where I am is I'm saying first round, market loves tax cuts. Dereg second round, I think this market rally will be tested at some point next year. You never have a market that goes straight up. And I think it will be if we see a continuation of rising interest rates, rising $, then people are going to say, wait a minute, what's more powerful? Stronger corporate profits or higher interest rates and a stronger dollar? When almost 50% of US corporate profits or, excuse me, revenues for the s and P500 companies come from abroad. So stronger dollar makes it tougher for businesses in that respect.

So how can the dollar be strong when there's a whole bunch of government spending that would ultimately bode for inflation? Because don't you always have? I mean, aren't those sort of obvious? That inflation means a weaker dollar, the dollar buys less. Right. If there's inflation, if we debase our currency by spending ourselves into oblivion, as we've been so good at for several decades, doesn't that mean the dollar gets weak or does it mean something else?

I think here's the missing ingredient. I would argue again, I think it's, you know, in my book I have a chapter devoted to Reaganomics. And so the interesting thing at that time was Reagan came in and we wound up with record budget deficits. He wanted to cut entitlements, but the Democrats wouldn't let him. So that's what happened. But, you know, so then people thought, uh, oh, we're going to be stuck with very high inflation as we had. But that was wrong. Budget deficits did not equal inflation. Why? The reason was we had. The Federal Reserve went in and allowed interest rates to rise high enough that it choked off the inflation. So you actually had in the Reagan years, record budget deficit, record trade deficit, but yet declining bond yields. And I'm arguing because basically the policies of the Fed, they weren't going, if you like, they weren't going to finance the government at super low interest rates. So whether we go back to inflation or not, a key call is what the Fed does. In my judgment, you know, it's almost a certainty we're going to get the Fed to raise rates this month. But I think next year the market thinks maybe two rate hikes. My hunch is if there's, if it's wrong, we could wind up with more.

Is that going to mean higher mortgage rates? I mean, the Fed doesn't directly control long term rates, but it's certainly they have an influence.

No, it doesn't directly. But I think that the answer is, again, not the real estate investor that you are. But I've done a pretty good job over my career and refinancing and the like. And I would certainly, my advice to people is if you've been thinking of refi, do it now, do not wait, because the trend is going to be rising mortgage rates.

Now, would that also mean, if you've been thinking of buying or investing, do so now. And one of the things I've been talking about that it seems like nobody's really talking much about is that Trump is our first real estate president. I think that's kind of significant, but no one seems to be saying that. It kind of seems like with the Apprentice and the campaign, we all kind of forgot about the fact that this guy is steeped in real estate. That's really his thing. It's not being a movie star on the Apprentice, it's real estate. That's what Trump is about. But that seems to have been kind of obscured, at least in recent years. Yep.

And no, I think you're absolutely right. But I think at the heart too, he's a pro growth guy. And so therefore, again, you asked, so if you were thinking of going into the market, what do you do? My attitude is if you're thinking about the real estate market because obviously it depends on the location. So I'm going to let you determine what the right location is. But I do believe sooner rather than later because you're first going to get the growth pop that should help the real estate market. But at some point we don't know how high mortgage rates go. A lot depends on how big does the budget deficit grow, et cetera. So my inclination is, you know, right now I think everybody's kind of in a optimistic mood. That usually helps the real estate market initially, but at some point we are going to face more of a challenge in the rising mortgage rates.

Yeah. So what that means, and I talk about something that is, I think really important for people to understand is that income producing real estate. First of all, I like the linear markets, the boring markets that aren't the high flyers, that don't have the big swings. Like this is not New York City or the west coast or South Florida, just the Middle America and southeastern markets where they're very stable. They don't have big swings. They do have swings, but they're not huge and they produce good income. And income property is a multidimensional asset class. So when you see rates go up, that has the effect of reducing the money supply and softening the price of real estate. Right. So that's bad. Most, most investors would say, well, that's bad, the market is bad. Right. But what they never talk about really is that in that type of market, since there are fewer people buying and as long as the population keeps increasing, it puts upward pressure on rents. And that's good if you're already in the game. Right. And especially if other investors don't buy or don't invest because rates are higher, that keeps the supply from increasing of rental properties and it keeps the buyers or the renters from entering the buyer pool. So in two ways that really helps investors who are already in the game. Would you agree with that assessment?

I mean, what you're describing makes sense to me. As you said, I think you made the right distinction. I actually was just in New York City, have three sons that live there. So they're all renters. And I keep going to them, when are you going to buy? And you know, their own assessment is that the New York market is just off the charts. So it's possible that they could, but you gotta, you gotta move outside of New York City to get something practical. But in the meantime, I just shake my head at the rents they're paying.

Yeah, yeah, very Very true, very true. Okay, so, gosh, what else did I want to ask you? So the optimistic bump at the beginning of the Trump administration and then after that, you know, this is the problem with all of this stuff with the economics and arguing about politics and, you know, who's better for the economy, a Democrat or a Republican, and all this kind of stuff. Right. Is that, you know, these, there's a long lag time between the policies and the results of the policies. And you were alluding to that earlier, Nick, when you talked about like there'd be this initial juice that juices the market and then, hey, someone's got to pay for this. After a party, there's a hangover. Right? Would you expand on that idea with Trump a little bit?

I think you put your head on it. I think right now, Jason, the way that I characterize it is the market is moving under the expectation that all these policies are going to basically boost growth. Historically, in the United States post war era, our trend growth rate of our economy was close to 3.5%. And then of course, in the last decade with post financial crisis, it got down to two. And so the big debate was many economists think we're stuck now in a low growth 2% world. And basically I think that the excitement about Trump is he's taking that issue on, you know, saying, I believe if we unshackle business from the regulations, we have the potential to increase the productive potential of the economy. You know, and right now the market says, I like that. But ultimately, you know, I'm pragmatist. The proof is in the pudding. And so we're going to find out, you know, in a year or so, are these expectations indeed being validated? If so, you can sustain the rise that we've seen, or do we, do we see disappointment, we don't get the growth we expected? Or, you know, again, if you go to me and you say what's worst case scenario? And I come back to, of all the policies, I don't have problem on the, on the domestic side, it's on the internationalist of trade side, do we basically get into a trade war with China? And you know, I don't know about you, but for me, that would add tremendously to market uncertainty. Markets don't like that. So my downside scenario would be if that were to happen, what I'm hoping is, as you said, is Trump is a negotiator, so he talks a tough game to extract concessions from the Chinese and that's the happy outcome. But we're playing A little bit of gamesmanship and too early to tell how it plays out.

Yeah, he's obviously pretty darn bold, there's no question about that. Talk to us a little bit about your book, Global An Investment Guide for Turbulent Markets. And you know, you've got some interesting chapter heads here. You talk about Bretton woods, you talk about oil shocks, anti inflation policies, intended and unintended consequences. Just, you know, let's kind of dive in. Start where you want to start on that.

Well, you know, you know, I guess the. What was I trying to write about? And you know, I've studied economics, finance. And what do they always talk about is about markets or economies that are in, quote, equilibrium. That's fine if you're doing a text, you know, that's the core concept. But if you go to me and you say, when were the best opportunities to make a lot of money or to lose your shirt? They weren't when markets were at equilibrium. They were when markets were disagreeable. Let's call them crises. And so my book is basically saying through my career, I went through two sets of crises. The first was in the high inflation era of the 70s and the 80s, and it began with the breakdown of Bretton Woods. That was unleashed the inflationary forces not just in the US but around the world. So we have a series of currency crises involving the US dollar. And so what I'm trying to figure out is, are there any patterns that as an investor I can detect? Well, guess What? In the 80s, when I was at Salomon Brothers, my colleague and I, John Lipsky, started to see some patterns in the way that the dollar was moving and interest rates were, and we could take advantage of it. That was the good period. Well then move to the second period, which is, I'd say the 1990s on the central banks learn the error of their ways, they get inflation under control, and you say, okay, this is good. And it was. But all of a sudden we start having asset bubbles. Japan, Southeast Asia, technology, the 208 bubble, the Euro crisis. So what I'm basically saying is policymakers thought, hey, if I tackle inflation, I will have stable markets. And that proved to be incorrect. We've actually had much more volatility and the like. And the bubbles, I contend, are harder for policymakers and for investors to deal with because they go on a long time. Like, let's take the tech bubble. It went on for five years and there were rational investors who said, this is a bubble, this is a bubble. But if you went in too early, you got Wiped out. So my main message is, how do I survive a bubble? And then how do I capitalize on it once it bursts? That's the theme of the book.

Okay, well, tell us about that real quickly. I know we got to wrap up soon. Yeah.

My bottom line.

My bottom line is the following. What do I look for when I see a bubble? And it's interesting. Two things. One, very rapid buildup of debt. And two, Jason, it's usually in the property sector, not the stock market. It's usually the property sector. Why? Because that's where a lot of people have their wealth. And guess what? That's where a lot of financial institutions have their exposure. So if you say today, which country is flagged as maybe the next bubble? China. Because after the 08 crisis, they went wild on creating credit, and they've got a huge property boom that many people think is a bubble. Okay, so that's what I look for in terms of am I getting close to a bubble or not? But then what I say is my job as an investor is survive the bubble. They're tricky. Just stay in the game. Don't do anything. Don't be a hero. And what you can do is you make your money after the market has sold off, but you've got to have a plan. And I want to give you the example. In our case, my firm, then I was chief investment officer. Okay. In 08, I was scared. I didn't know if the financial system would survive. But then Ben Bernanke came in and did his unorthodox policies to stabilize the financial system. I go, I think he's going to do it. And then when I saw we passed the stress test. So what our firm did is we didn't redeploy assets all at once. We staggered in. We first went into corporate bonds because I could get 10% yield investment grade. Then we went into junk bonds because I could get 20% interest rates. And then in April of 09, we began to dip our toes back into the stock market when we said the banking system is going to make it. So my bottom line is.

Bubbles are tricky, but watch debt and watch the property market. So the two most important things to monitor if you're in one, survive it. And then make your money when markets get oversold because most people are afraid to go back in. And you just have to have the courage of your conviction. If you think policymakers.

Figured out the mistakes that they made, that's the key. Judgment call.

Very interesting stuff. Give out your website if you would, and tell people where they can find the book as well.

Yes. You know, basically the. It's on Amazon. It should be under my name, Nicholas Sargent Global Shocks. You can find it there. I also have a website, www.nicksargeon.com, where not only am I promoting the book, of course, I write regular commentaries. And for example, right after the election, first question that did come up was when you asked me, what does Trump's victory mean for the markets? Markets. And I caught a lucky break. I heard him in New York at the Economic Club in New York in September, so I could hear what his policies were. So I had already written up, if Trump wins, here's what you should expect. And, you know, I think I made a pretty good call. I said, stock market will like it, bond market won't like it, dollars going higher. And that's, that's been the pattern.

It's going to be an interesting time. I am bullish as a real estate investor. I think things are going to be pretty darn good. Of course, that doesn't mean perfect. There will be issues. But, you know, the one thing we didn't talk about, which maybe you would just want to comment on quickly, you know, if this is in your wheelhouse, is Dodd Frank. And the Dodd Frank bill has just been this disaster for real estate. It's had all sorts of unintended consequences, as all, you know, policies tend to have. And, you know, it's just illogical in so many ways. Of course it's designed to protect people, but it never really does. And, you know, all of this stuff. And Trump has specifically addressed Dodd Frank as a, you know, he's a real estate guy, right. So he has said he wants to repeal Dodd Frank or at least, you know, gut it and modify it significantly. I mean, look at if Dodd Frank is repealed or at least modified in the right way, I think that's going to unleash a fire hose of money that flows into the real estate financing market. And wow, that, that's going to have a real upswing for at least for a while. It'll be a ride. It may not last forever, of course, but. Your thoughts?

Yeah, well, you know the real estate market better than I do. But I would say, you know, you go look right now and see which sector. We've had this very powerful stock market rally. What sector has led the way? And the answer is financial institutions, because the argument is that it takes the monkey off their back. And as you say, you know, here's the way I look at it is go back to the 1930s. We went through the worst crisis in, you know, in 100 years. Then what did we do? We came up with Glass Steagall. So you said, well, what did Glass Steagall do? You could answer it in, you know, 25 words or less. Basically, it separated what commercial banks could do in the way of their activities from what investment banks could do. Okay, so that made sense at the time. Dodd Frank, 2000 pages of legislation. That is.

A bunch of do's and don'ts that it's almost impossible to, you know, say to your point on unintended consequences when you have that much complexity, you have no idea what you've unleashed. So, you know, I certainly am in favor of pulling back, you know, a good part of it. And that's why I think the financial sector is leading the charge on the stock market rally.

Very interesting stuff. Well, Nick, it's going to be for better or worse, and I think better for real estate investors at least. It's going to be a fascinating four years. Thank you for joining us and giving us some insights about this stuff. It's very interesting to talk about. And come inauguration time, I think it's going to be very busy. I think things are going to change quickly. Trump is a doer, you know, he gets stuff done.

Absolutely. Usually the first hundred days is when you got to get it all through because then the honeymoon period is over. So I agree with you. There's going to be a lot going on.

Yeah, yeah. Very interesting. Well, Nick, thanks so much for joining us today.

Thank you.

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