2331: Crisis & Opportunity: John Mauldin's Predictions for the Next Decade (Debt, AI, Robotics)

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Hey there.

I'm Russell Gray, Main Street Capitalist show and the founder of the Raising Capitalist Foundation. I'm here at the Jason Hartman Empowered Investor Live event. It's my first time being here, having a great time. I got a chance to see Sharon Lechter speak. I've never seen her speak. I've known her for years. Never heard her speak. She was amazing. Of course, Tom Wheelwright was amazing. Jason had a lot of great things to say. What I really like about it is the big picture stuff, tax strategy, legal strategy, but they also get down in the weeds is how do you actually execute, how do you find properties, how do you manage properties, how do you automate, how do you keep yourself in the 21st century? So if you're serious about your real estate investing, your real estate portfolio, this is a great place to be. Lots of great resources, lots of great energy, a lot of great information, and hopefully I'll see you at the next one.

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.

Bill Gates just launched a contraceptive that lasts eight years in Kenya, one of his favorite testing grounds. This guy's just obsessed with reducing the global population.

Now, if we do a really great.

Job on new vaccines, health care, reproductive.

Health services, we could lower that by perhaps 10 or 15%.

His foundation just committed $2.5 billion in what they like to call women's health. Who the f. Are you kidding? His investments in vaccines and pharmaceuticals did nothing but hurt women and children. Look at the birth rates and how much harder it got for women to get pregnant. In what world will anyone believe that doing these projects from the kindness of his heart, from his foundation. The agenda is to make us weak and sick and infertile as part of a long term plan for Population control. The cat's out of the bag. Don't get fooled by the pink sweater and the glasses. He's a little demon rat.

It is my pleasure to welcome a returning guest back to the show, and that is none other than the brilliant economist John Malden. John, welcome. How are you?

Jason, it's good to be with you again. We shouldn't be waiting as long. We need to do this more often.

We should do it more often. And let's plan to do that. And you are coming to us today from Puerto Rico, one of the many people that's taken advantage of the fantastic tax benefits there. But there is so much going on in the economy, the housing market, the political environment, the geopolitical environment. John, where do we start? Since most of our listeners are real estate investors, let's talk about the housing shortage and the tariff impact on homebuilders.

The housing shortage is basically local. I mean, there's places where there's plenty of houses. There's a lot of places where they aren't because it just takes a lot of regulation or it's too expensive to build. I mean, we're not building as many new homes. I'm sure that you're familiar with the problems that California has. There's more homes coming onto the market. There's a huge backlog now. That's days and days. It costs more to buy a home. Mortgage rates are not historically high, but they're relatively high.

They are compared to the housing prices.

Compared to the housing prices. And so it's this double whammy. We were talking before we started about here in Dorado Beach. I bought my house and then the price went up and you know, I wouldn't buy that my home today at this price because the cost would be exorbitant and interest rates would be higher.

That's what's pushing people into and keeping people into the rental market. But interestingly, John, in the single family home market pretty much across the US we had last year a record number of new apartment deliveries.

Right.

Apartment construction got crazy during the COVID.

Yeah, it just blew up.

Yeah. Now that's subsiding and correcting and that inventory is getting absorbed and probably within the next, I don't know, I'd say eight months. It's hard to know exactly in the next eight months or so that inventory will be at equilibrium in terms of the apartment market, but that the apartment owners have been stealing some of the rental demand from the single family home investors. And so this kind of weird point where housing prices haven't been doing much. You know, nationally they're up like 3% over last year. It's nothing too exciting. Some markets are slightly down, other markets are slightly up. You know, it's just a muted market right now. Right. But normally in this type of situation we would see a lot of upward pressure on rents because people aren't buying, but the apartments have sort of muted that effect.

Right, right.

So it's this interesting dynamic and I think right now investors just need to be kind of disciplined to just wait it out a little longer.

I mean, personal feeling is that in many markets if people want to sell, they're going to have to reduce their expectations. Now what you've got is a kind of a real odd barbell market in the sense that if I remember right, and you got the numbers off the tip of your tongue, but it's like a third of the people don't have a mortgage at all based on their homes, right? Yeah, you know, 40%. And then there's another almost third that finance their homes, you know, or more, more than have financed their homes at low rates. And you've got a 2 1/2% mortgage rate and your propensity to move from that rate into a home that's going to cost more and your mortgage, your interest rates are going to more than double your propensity to move. Unless you just had some type of, you know, real economic spur or you've got to move because your job has moved you from, you know, Charlotte to Dallas or whatever that drive, that demand is not there yet. I think demand is going to continue to be somewhat soft because of that until interest rates go down. I think they eventually come down. Nobody knows when.

Let's just talk about that for a moment. So, you know, Trump has been at war with Powell. There's a lot of talk about him trying to undermine Powell. You know, he's definitely. Powell's going to be out.

Powell doesn't have any influence on mortgage rates. Well, he can affect the short term directly. They do, you know, very indirectly. Besant. If Besant wanted to start letting the 10 year run off, okay, we're just not going to sell any more 10 years, let the supply go down. There are a number of businesses, insurance companies, pensions, so forth, that actually need to have 10, 20, 30 year bonds, either by law or by designation, they have to have that long term government debt. So they're going to be buyers. So if you reduce the supply and if you went to shorter term rates, that's going to lower the interest rate costs. I mean, you've got three, three and a half percent, 10 years rolling off and you don't want to be replacing them with four and a half to 5%, 10 years. So they're going to, they're going to move that into, you know, as Besant will say, they'll move it into shorter term debt. The 10 year is what the mortgage rate set off of. And as the 10 year goes, that's.

Why they call it the bellwether rate.

Yeah. And so, so is that 10 drops, then the mortgage rates will drop. And that's not something you can turn on a dime, but it's something that could happen over a year. And in the meantime, that's why Trump wants short term rates go down, because they're going to be buying more short term debt. If you look at, you know, the betting odds, not the betting odds, the, the actual. Here's our options, here's our market predictions. The market has something like an 80% shot of two rate cuts between now and the end of the year, starting in September.

Yeah, right.

There's something like another 30, 40% of three rate cuts this year, which frankly, three rate cuts, if you get a September, October and December or what, whatever those rate those months are, that would actually say the economy is pretty soft. I don't know that we want an economy that needs three rate cuts this year. So Powell starts cutting rates, Trump gets what he wants and he gets replaced by either Scott Besant, who I'm told is not that thrilled with the idea. Kevin?

Yeah, I saw the CNBC interview with Scott just today actually, where Maria Bartiromo asked if he wanted the job and he, he was, he kind of clammed up. But, you know, he has to be quiet about that type of thing. Well, I mean, I mean, Trump looks.

At him, says, I'd rather have you, you know, when he looks at Scott. But for Besant, if you look at his career path, if you look at his opportunities, if you look at when he leaves the Secretary of Treasury, he'll be in demand. And why do you want to take a 250, $300,000 a year job that's going to be nothing but grief, nothing but headaches for six years. The person that wants it is Kevin Warsh, and Kevin's basically a dove, as long as inflation's not wearing them.

Kevin, by the way, let's make a point for the listeners, though, the point is that when Powell is replaced, we will see a dovish Fed chair that is pro Trump because he's going to appoint him and that will mean looser money. Right. And lower rates.

You have to look at what the inflation rates are going to be doing.

Sure.

I mean, Jason, lightning strikes. The last person in the world that we ever thought to be Fed Chair will be Jason Hartman.

I mean I'm not qualified and I'm not applying for the jobs.

But in February or actually be the March meeting of the fomc. Your first meeting, Chairman Hartman. Inflation is three and a quarter percent. We've already made two rate cuts. So the fed funds rate is down in the the 3% low 3% range. Now do you cut rates below inflation?

Well, probably not.

I'm asking you, Chairman, what are you going to do?

Chairman, we, we saw negative rates during the COVID era and that led to a lot of inflation. So probably not. But you know, look, there's a lot.

Of that, that is, that is the problem. And I can't imagine wanting a more thankless job because whatever you do, half the country is going to hate you. Yeah, well, and my personal opinion is the Fed ought to be focused on inflation and nothing else. You know, put it on and put it on a machine and stop having all this FOMC fetish.

Yeah. So just to help people understand where you stand on a few things just so they can kind of understand your context. You're pro gold, right? In metals?

Oh yeah. I mean my goal is sitting in a vault in Dallas.

I'm curious, how are you on the evolution of that? Some people would say bitcoin.

I unfortunately been a bitcoin skeptic and didn't put $5,000 into it when it was under a dollar. When two sophomore kids from some college came up to me at a Pizza Gold conference. I mean like bitcoin had been out like six weeks, eight weeks and they were just, they wanted to interview me at this conference and I'm going, this is the first time I'd ever heard of it. And I'm saying no, I can't, you know, and I should have just said they were so enthusiastic. I should have stoned 5,000 I hadn't forgot it. And today I would be living in a 40 million dollar home in Puerto Rico.

Of course, John, the question is though, how do you feel about it now? And look, I mean it's still got a very short history. I mean gold has a 5,000 year history. Real estate has a 5,000 year history. Bitcoin's got a 15 year history. I mean folks, let's keep it in context.

I'll just say that I don't have any bitcoin? Do I wish I bought some cheaper? Yes. Am I wanting to buy it now? Do I feel a need? I've got other investments that I'm doing. I have my gold because I don't buy gold as an investment. I don't think. I think it's insurance. I've always said it.

I agree.

And it's central bank insurance.

Yeah.

I mean, Chairman Hartman could do crazy things in 2029 and we don't know what he's going to do. Or we get the new president comes in and says, I need the Fed to monetize this debt. We get into crisis and, you know, what do we do? That's my insurance.

I agree with you. And I think the precious metals need to be viewed as insurance, not investment. There is a difference on that. And that's true. You know, I have talked to times about my experience with a gold dealer years ago. And the one major flaw of precious metals investing when it comes to gold and silver, and that is that it does not produce income. But what if you could make gold and silver work for you just like your income property? Well, you can. Our new sponsor is Monetary Metals and people who own gold as a hedge against inflation, like that feature. But the gold just sits there. It's collecting dust. Right. But with their leasing program, you can actually earn a yield. So check out our new sponsor, monetary metals. It's monetary-metals.com hartman and you can learn more about this opportunity. Instead of paying to store your metal, you can now get paid to own it. Earning passive income. Paid in more ounces of real physical gold every single month. With Monetary Metals, you can earn up to 4% in their leasing program immediately upon funding your account. Yields are paid monthly in ounces of physical gold or silver, which you can get in addition to any price appreciation from your gold and silver over the holding period. Fund your account with metal you already own or purchase it from them at less than 1% over spot. I liked this product so much I signed up myself. Gold and silver are a great insurance policy. Again, I never really treated them as an investment. They were just kind of an insurance policy. But now you can earn a return of up to 4% on that insurance policy. So it just got a lot better. Visit monetary-metals.com and learn more about this program. So, stock market, where do you think it's going? Overvalued. It's going to continue. What do you think?

It's a very different world today than it was in 2011 or 12. Stocks had relatively Low valuations. Today I've moved a lot of my portfolio to a money manager that basically buys high and growing dividends for half of his portfolio. And so they just flipped out two days ago of a large dividend paying stock that everybody likes. So these guys run $8 billion. This is not a small group because the company decided not to raise their dividend after dozens of years and quarters doing that when they had plenty of money and plenty of capital to do so they elected to do stock buybacks and they didn't cut their dividend, they just didn't raise it. And that sent a signal to this guy that says, okay, whoever's running this board is more interested in stock price than they are in returning money to investors. So they're. There are plenty of companies out there that have 20, 30 year histories of raising their dividend every quarter for 30 years. And you can buy them where they're paying three and a half to 4% dividends. You get a 4% dividend, the stock goes down 12% over two years, you've got almost all your money back. You're not just relying on capital appreciation. Market valuations for a lot of stocks are nosebleed. I don't want to buy the S&P 500. I don't want to be buying indexes. I don't want to be passive investor. I want to be rifle shot. And you just can't say, well, I want to buy all the dividend stocks because of ETFs out there. Here's all the dividend stocks in the S&P 500. Well, your average dividend is like 1.2% on that. There's a lot of companies that'll pay a dividend and they've even been growing their dividends, but the yield is just not that high. For instance, let's talk about Broadcom.

Yep.

If you bought Broadcom 10, 11 years ago, you're up like 7, 8x on the stock. The dividend is up like 200%. 3. I mean, it's just really gone up over that time. Except it's gone from paying 4, 5, 6%, whatever it was back then to paying way under 2. I mean like one and a half. It's no longer a dividend growth play. The stock grew so much that the value of the stock, it rolled in all the future dividends. So there are other places to put your money if you're a dividend growth investor. There's plenty of opportunities out there that are good ones that you can create a high quality, high value portfolio. I mean McDonald's is a boring company. The big marketing decision for them is to whether to bring the McRib back or not. You know, I mean it's not, I've got to be the greatest chip that beats Nvidia, but they pay a dividend to their machine and they got assets.

John, let's compare this because you know, we started off talking about inflation expectations. What are your inflation expectations over the next couple of years? We've got 37 trillion.

I expect over that two year cycle I expect inflation will go down because I think growth is going to be constrained. Government debt is crowding out private debt and it's even crowding out the state local debt. If you, if you look at all other forms of debt over the last four years, they're decreasing. US government is exploding. And what's happening is that that debt either finances consumption through credit cards or whatever or it finances business expansion. State and local government debt nearly always is infrastructure related, school related, roads, whatever, which is long term infrastructure. We need infrastructure for growth in our economy, for growth in gdp. That US government debt is crowding everything out. And it's fundamental economics and it's. Rogart and Reinhardt explained this in their masterful book this Time is Different. As debt gets over 90% then over 120%, it's a constraint on GDP growth. I mean we can run deficits as long as the deficit is below nominal GDP. And nominal GDP today is running like 5%. But we're growing a deficit at like 7. That's catching up to us. You know, at some point we're going to have to both raise taxes, which I hate, and we're going to have to really cut spending, which a lot of people hate. I mean, I get a nice check every month from the Social Security Administration. When I was in my 40s and 50s, I never expected to get it.

And now, at what age did you start taking it? Did you wait?

I was 71 and a half.

So you took it really late. That's why you're getting big.

I took it as late as you could. And you know, I've written about in my letter, I think it's going up. But as of January I was getting $53,000 a year. Now I paid the maximum every year.

That's almost the median household income.

I mean, you know, as a return on investment is a lousy investment for all the money that I paid in. But I think we're going to have to means test this stuff. We're going to have to means Test Medicare and Social Security, all of this stuff. If you look at Medicaid, we've increased Medicaid by almost 100% since 2019. I mean, some huge number that happened during the Biden administration, they just, anybody could get on it, including illegals. Now, you know, you want to try to pull that back? Oh, you're cutting Medicaid? No, let's go back. If we could go back to 2019, that that'd take a half a trillion off the deficit right there. I mean, I don't recall anybody saying in 2019 we're not spending enough on Medicaid other than, you know, far left guys. So, I mean, it's, we're going to have, we're going to have to put some sanity into the process, and it's going to be extraordinarily painful and nobody's going to like the outcome. But when the bond market just finally, and I think it'll happen later this decade, I mean, it'll probably go longer than we think, but the bond market will say, you know, at 150, 160% of debt to GDP, we'd like a little bit higher interest rates. Well, then that starts cranking up the deficit till we make a concerted effort to say we're going to control the debt, we're going to control the deficit. It's a problem. And that actually is deflationary in a big macro sense.

Okay, yeah, tell us about that.

That's not going to put us into deflation, but it's going to limit inflation.

It's disinflationary.

It's disinflationary.

Yeah. Okay. What else do you want to say as we wrap up here, John? You know, any. Anything. I didn't ask you. We didn't talk about the geopolitical situation. We didn't talk about a lot of things.

But most of the geopolitical situation now is just noise. I mean, as far as markets are concerned, the one geopolitical situation that we should be paying attention to is how tight are they going to be on Iran and Russia shipping oil? Are they really going to put, I mean, true barriers there that could be significant, that could have an effect on the energy markets, on oil, I think the price of gas is going to continue to rise. If you look at our energy situation in the US And I look at it a lot, we're going to need more natural gas simply to power our AI factories, our cloud factories. I mean, it's now consuming 5, 6% of our electricity and it's going to Be consuming more. And the only way to power that really, if you, I mean, you're building a $5 billion factory, you've got to power it. Well, they're buying, they're buying gas turbines, you know, to power it. We have plenty of gas in the U.S. that's the good news. And the more LNG terminals that are built, and there's one that comes on like every year now, then that means we can, can take that three and a half, four dollar gas. I think it's in the three and a half range now and arbitrage it onto the global markets for 11 or 12. I can do that math right now. Those, those, those terminals are at capacity. It'll balance out over the next, you know, four or five years. But in the meantime, I think the price of gas is going to go up, means electricity is going to go up.

All of the stuff you're talking about now is inflationary, though.

That is inflationary, by the way. I think tariffs are inflationary.

I agree.

I mean tariffs are.

I'm just kind of, I was, I.

Was writing about, I was writing in 2001, 2002, somebody asked me about my worst fears. My worst fear was back then was protectionism and tariffs because frankly, people talk about, well, globalization cost this, it costs that. It's been very good for America. We have, our GDP has just doubled and doubled again. We are a very lucky, very rich country that we're lucky that people actually want to use our currency as their reserve currency. It is an exorbitant privilege. But it's made us all wealthier on the margin now. Yes, globalization has cut jobs. And by the way, we don't need to be making T shirts in this country. We don't need to be assembling iPhones. Nobody's going to want to assemble an iPhone. Nobody's going to want to pay $3,000 for an iPhone. We need to be careful about what we wish for. Now, do I want to bring more of the pharmaceutical business back to the US Back to Puerto Rico where a lot of it used to be made, because there are some pharmaceuticals that are so important and we just don't make them anymore. I mean, we don't make ibuprofen in the U.S. that's silly. It's cheaper to make it overseas. And we may need to figure out a policy that makes it more reasonable to make ibuprofen in the U.S. i mean, something as basic and as common as that.

Right, But John, what I, what I wanted to ask you though is, you know, you were talking about disinflation before.

Right.

But you're talking now about a lot of inflationary things.

The tariffs are inflationary, but remember our imports are only in the, in the range of what, 7% of GDP? Okay. So if those prices go up 20%, that's 1% total inflation. That's going to get absorbed over time. Once it's baked in, then it doesn't go up again. It's not going up 20% every year. It's kind of a one time cost. Now am I happy about that? Hell no. I like consumption taxes. I prefer a value added tax like the rest of the world does. Not a half ass VAT like a tariff is. Even then to put a VAT in you'd have to phase it in over time because of the impact of the graph. You just could to dump it on there. I want people to be able to adjust. But we're going to have to do some extraordinary things when we have that crisis to get our budget under nominal GDP and nobody's going to be happy. Everybody's going to hate it.

All right, John, wrap it up with just any general thoughts or advice for investors.

I would suggest even when we've been talking about all this negative stuff, the American experiment is live and well. Free markets work. We're going to look up and we're going to have a crisis. I really believe that in the latter part of this decade. Fourth turning Peter Turkin's book Overpopulation Leaf. There's a bunch of books, Dalio's talking about it and they're all talking about the same time frame. George Friedman's got his book.

Does he have a new one? He was very optimistic in his last couple of books. Who, George Friedman?

Yeah. I mean he believes we're gonna have a storm and then we'll come, we'll have the calm. His title book of the Storm before the Calm.

Oh, that book. There's not a new one though.

Yeah, but they're all talking about we have this cathartic moment, this crisis and I personally think it's going to be triggered by a debt crisis. All of this comes together in the clash of cultures, if you will. And in the middle of crisis we've got to make decisions, we've got to figure out how to work together. And then I believe in the2030s we're going to see the AI. I'm not as worried about it taking jobs as creating new jobs and new opportunities. It's going to make us more.

I think what's interesting about that is, you know, isn't the whole point to do less and have fewer jobs, more leisure time? I think AI is going to create a ton of prosperity. You know, in the early I, I, you know, I remember, I remember those predictions in the early 70s about how with automation, people will only have to work three or four days a week. And the complete opposite happened because everybody just decided they wanted more stuff. Right, right.

And people have overhyped AI a lot. I mean, it's doing some amazing things. I'm working on a computer here, but you could take an AI, put a focus the camera and watch a million apples drop. And AI will never say, ah, I'm going to discover the theory of gravity. I mean, Newton had his apple bounce and gravity. But AI is a mirror. AI is a mirror of ourselves. It takes everything we've done and it holds, it shines. That takes that mirror back to us. Well, that's useful because it's a fabulous search engine. It's a fabulous productivity enhancer. You can say, give me this. And it summarizes and it codes, it does all sorts of wonderful things, but it's, it's not creative. That's, Humans are going to take that. I think robotics is going to change the way our lives are done. And I'm not worried about it taking my major AIDS job, though it may. But it's also going to be a million entrepreneurs say, wait a minute, I.

Can remember, you know, I can buy.

Four robots and they can do this.

We're going to have billions of robots, too.

Yeah. I mean, and we're going to live longer. You're young enough that they're going to be reversing your age. You have a really good shot at being 150 years old.

Wow.

I've got to, I've got to make another 15 years, 17 years and be in the right place. 20 years. I mean, we're going to see amazing things, you know, after we solve this fiscal issue. So I'm very optimistic. Long term. I want to be long American. I'm Warren Buffett. So I'm not wanting to dig a hole and pull the covers over myself, but just, you know, I'm a cautious optimist. Yeah, I recognize there's going to be a crisis, so I try to figure out how to get through that crisis. Second plug. My letter's free. John Malden. Google it. It starts from the front line. And send your inbox every Saturday morning. You're one of my one million closest friends.

Fantastic. You've got a million subscribers here in newsletter.

Well at one point it was. It's down from there.

But yeah, fantastic. Good stuff. And where do they find that John Malden.

They can find it Malden Economics. If you go to johnmalden.com it'll take you to Malden Economics. But just google my name and you know we've got other other writers as our service but thoughts from the Front Line is mine.

Excellent. John Moulton, thanks for joining us.

Thank you Jason. It's always good back and let's not wait to Sloan for the next app.

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