2414 FBF: Dr. Robert Johnson - Invest with the Fed, Maximizing Portfolio Performance by Following Federal Reserve Policy & What to Expect When You're Electing, American College of Financial Services

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 handpicked to help you today in the present and propel you into the future. Enjoy.

This show is produced by the Hartman Media Company.

For more information and links to all our great podcasts, visit HartmanMedia.com. 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 the Creating Wealth Show. This is your host, Jason Hartman, episode number 762. 762. And wow, I will tell you, we had a phenomenal Venture Alliance weekend, another phenomenal Venture Alliance Weekend here in Phoenix, Arizona. There is just something about the speakers we are getting. You know, we've all been to events and we've seen big-name speakers and people that are really doing amazing things, and we all want to learn from them. And you know, what are their secrets to success, right? And what can I learn from them? What can I implement in my own life that will bring me a similar success. But there is something very, very different when that speaker comes to speak to a group of 15 people in an intimate setting, and they sit on a bar stool and they just sort of talk to you, and you can ask them questions in this intimate environment. And that's the power of a mastermind group. So we started off our mastermind with our usual Friday evening dinner. And then Saturday morning, we had Charles Goyette kick off the meeting. After that, we had Tom Wheelwright, who wrote the book Tax-Free Wealth in the Rich Dad Advisor series with Robert Kiyosaki. We had him talk to us about taxation and real estate investing and so on and so forth, and, you know, how we can save money on life's single largest expense, the largest expense any of us have. Taxes, taxes, taxes. And then we did our afternoon activity on Saturday, and this time it was the Amazing Race, kind of a geocaching scavenger hunt, if you will. I guess sort of a hybrid of those things where we, we walked around town, downtown Phoenix, and looked at different statues and did different things. We broke up into 3 different teams and it was a lot of fun. And, and then we all had drinks and then we all went to dinner and had more drinks and, you know, just fantastic conversations and a really, really good time. And then Sunday we kicked off the day, we talked about some business, we did some more hot seats. Oh, and Saturday afternoon we did hot seats over lunch where we, we got— had our lunch at a private room in a restaurant and we did hot seats there. And then we We did Hot Seats Sunday morning, and then none other than one of really the biggest names in real estate besides our president-elect. And interestingly, I gotta just make a comment on something about the Trumpster, okay? It's funny to me that I just don't hear a lot of people talking about how Trump is our first real estate president. You know, I, I keep saying that, and I was speaking on a panel yesterday here at another conference in Phoenix. I'm at the IMN conference here with several hundred institutional real estate investors and people from just all different parts of the real estate landscape, meeting with a lot of our local market specialists who are already here at the same conference and just doing that. But I was speaking on this panel yesterday, and the panel was about financing and a lot about hard money lending and creative financing of real estate transactions. And I made the remark, I said that Trump is our first real estate president. And everybody looked at me like, oh wow, that's an interesting idea. Really? How come I'm the only one talking about that? I think it's rather significant for us real estate investors that we have a real estate president. Love him or hate him, I think he's going to be good for real estate. And I got to tell you, That is the sentiment here at this conference. You know, I just had lunch with a bunch of big institutional players here at this conference and just, just people from all over the real estate spectrum. I sat down with an investor who owns, get this, 4,000. Yeah, you did hear me right. 4,000 single-family homes. There are people doing huge things in, in the single-family home real estate business, which I, you know, I never really saw that before in the last couple of cycles in the economy. That is a relatively new thing, or at least to this scale, that our business is becoming more institutionalized than it's ever been. But still, I am maintaining my prior prediction that institutional investors by and large don't love our business because why? Well, they have a difficult time embracing the fragmentation, embracing the fragmentation that I've talked about so much. Anyway, some interesting stuff there, but lest we go off on another tangent, Jason, what you were going to say is that our Sunday speaker at our Venture Alliance meeting was none other than one of the biggest names in real estate as an individual name, you know, not as an institutional name, obviously, but as an individual individual, and he authored now 3 of the Rich Dad Advisor Series books with Robert Kiyosaki, and that is none other than Ken McElroy. And a couple of our Venture Alliance members, Elizabeth and Patrick, set that up and got him to come in and Tom Wheelwright to come in and speak with us. And Ken just sat down, and he's just so giving and sharing. And, and you know, Ken's been on the show a couple of times before 4 and just has some great stuff to share. And he just talked all about his career and how he basically, you know, had this, had this rags to riches story. And, and he just sat there with our group, and, and then afterwards everybody kind of cornered him while standing up after his sort of more— well, I don't want to say formal because his presentation wasn't very formal at all, which was what was so great about it. It was so just intimate and so genuine and just full of gems that all of us could learn so much from. But after that, people kind of cornered him and talked to him. And I said, hey, Ken, why don't you come to lunch with us? And he said, sure, I'm hungry. 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 handpicked to help you today in the present. And propel you into the future. Enjoy. And so Ken McElroy went out to lunch with us, and we sat at a big table at a restaurant in downtown Phoenix and in the Palomar Hotel. And, you know, he just learned about everybody. You know, one of our members, Brandon, is a fighter pilot, and he was sitting next to Ken, and Brandon kind of said, I'm kind of giddy sitting next to Ken McElroy. And I thought that was a great remark. And Ken was talking to him about flying jets and what it's like to be a fighter pilot. And, you know, we just got to learn more about his incredible real estate career and how he's really built just an amazing, amazing empire. So that was great. And Sunday afternoon, we just spent more time doing hot seats and networking and supporting each other and so forth and doing some business and planning our next trips. We are working on some great great stuff in 2017. We will probably go to either Hawaii or Cuba. If we don't do it next year, but we might do it next year, I'm not sure yet, maybe the Ice Hotel in Sweden. Yes, that one that was in the James Bond movie. You know, these are just once-in-a-lifetime experiences, and that's what we hope to bring everybody at the Venture Alliance. So look, I don't mean to make this some big promotion for Venture Alliance because we got a great show lined up for you today, but since we just came off that meeting I had to share that with you and, and just how much I absolutely love our members and love what that group is growing into. I just think it will just continue to get better and better and better. So we're, we're thinking of the Ice Hotel in Sweden, Hawaii, Cuba, you know, just some fantastic trips. And then, you know, of course, some, some local stuff. We've got Las Vegas, my new hometown, coming up as a, as a meeting place for Venture Alliance as well. So check out VentureAllianceMastermind.com. And get involved with that. Also go to JasonHartman.com, click on the events section. There's information in two different places about the Venture Alliance. And our Meet the Masters event is coming up and filling up quickly, so hurry up and get your seats. We've still got some early bird pricing on that. We're going to have a new— another price increase here pretty quickly, so get your tickets for the Meet the Masters of Income Property, our annual event. It's in Irvine, California in January. You do not want to miss that. It is the one everybody asks about and talks about all year long, and we just keep trying to make those better and better for you as well. That's going to be a phenomenal event. We've got several speakers lined up already. We're working on more and more to come on that. But today we're gonna— our guest today will talk about aligning our interest when we invest. And this is a theme that I've had in talking to you for the last 12 years, really, right? You know, you've heard me talk really the last 13 years, ever since I really started doing seminars almost exclusively on real estate investing. And that theme is, look, it boils down to this: the powers that be are so powerful that you can, you can deride them, complain about them, whine about them, but at the end of the day, you and I do not have the power to change them. They are too big, too powerful, they have too much momentum. So what we need to do is we need to game the system. Game the system. We need to align our interest with their interests. And when we do that, that's how we will win the game, and we will actually beat them at their own game. And that's why I say we will game the system. So we need to do that. We need to align our interests with the Federal Reserve, with the powers on Wall Street, not in terms of being investors in their terrible investments that are such an epic scam But in terms of aligning our interests with how they influence the lending markets, the financing markets, on that panel that I spoke on yesterday here at the IMN conference in Phoenix, we talked a lot about privatization of Fannie Mae and Freddie Mac and how that possibility might change the market. And I've talked about that on the show before here many times, and it our prior Meet the Masters events. Undoubtedly, I mean, look, Meet the Masters this year in Irvine, right? Or, well, next year technically, in 2017, our Meet the Masters, our annual event. It is the day after the inauguration of the strangest president we have ever had, possibly, or at least in modern times, and that is Mr. Trump, president-elect. You know, our first real estate president. I think he's going to be very bullish for real estate, and that is definitely the sentiment here at this conference. I think Trump is inflationary. I just read an article yesterday about how his trade policies could have this massive effect on his daughter Ivanka Trump's business. She has a $100 million business. He wants to institute 35% percent tariffs. Oh my God, what does that mean? Wow, that is so significant. It is, it is literally mind-boggling to even think of it. If that happens, or if even a portion of that happens, uh, that is so inflationary because— and, and, you know, I'm not philosophically— I hate inflation, you know that. But from a practical perspective, when we align our interests with the powers that be, hey, inflation is a home run for us, isn't it? Yes, it is. It definitely is. That is something we're going to be talking a lot more about. You might notice over the past couple of years, since inflation tamed a bit because of this massive Ponzi scheme and house of cards that our whole global economy, and certainly the US economy, is built on, I haven't been talking a lot about it, but that conversation is going to change on upcoming shows because there's a lot of significance. So protectionism, tariffs, non-free trade, the Trump ideology is going to, I believe, be inflationary. So in what ways is that inflationary? Well, certainly If China wants to sell products into our market, the largest economy in the world, the US economy, well, if they have to pay a 35% tariff, they either have to figure out how to be massively more efficient and do things better, cheaper, faster, etc., than they're doing them now. And they— I gotta give China credit, they do a pretty good job of delivering high-quality products at very, very low prices. So it's inflationary there because they'd have to charge more for their products and also be more efficient at producing them. But there's another angle to that, and this is on the positive side that really people don't talk about, and that is the fact that it will encourage more American companies to onshore their production, their manufacturing. And what happens then? Well, that means wages go up, unemployment goes down. This is all great. I mean, this is exactly what everybody wants, right? And why Trump was able to win over so many long-term Democratic constituencies. I mean, he spoke to them. The, these, these people that are union members in Rust Belt states, they're not stupid, okay? They get it. They get it that the Democrats, although they say they're for them, they've sold them down the river with Clinton's NAFTA. I mean, it's not his exclusively, but, you know, and Ross Perot's giant sucking sound prediction, which absolutely positively came true. Ross Perot was absolutely absolutely right that that would happen. And Clinton brought it into life. I'm talking about Bill Clinton, of course, not Hillary. And so that all came about, and here we are. All of these people lost out. So Trump won them over, longtime Democrats, Rust Belt Democrats. It was truly the most amazing election, presidential election, probably in American history, or at least modern history, right? So this means that these people are going to be more employed and they're going to see higher wages. See, the thing I've always said, and you've heard me say this, when you hear this idiotic socialist agenda from Bernie Sanders and Hillary to a lesser degree because she tried to straddle the fence a little more, but Bernie was just an out-and-out socialist, right? You know, we got to have higher minimum wage, we We gotta pass another law. You know, $15 an hour should be the national minimum wage, right? That just doesn't work because the companies and the businesses, they all react to it and they automate and they downsize and then there's just more unemployment and that democratic idea just hurts everybody they say they wanna help. It always works out that way. It just, you know, in the short run it seems like a good quick fix. It's like drinking caffeine when you're tired. You know, you'll, you'll get a burst of energy, but then the hangover from the caffeine when it wears off is worse, right? You have a crash. And that's exactly what has been happening for decades now with a largely Democratic Congress that has basically run the country for the better part of 5 decades. Okay, I'm not talking about presidents here. I'm talking about Congress, which is arguably more powerful than the president. And in many, many ways, because where is the Ways and Means Committee? Well, it's not in the White House, okay? It's in Congress, and that's where the spending happens, right? And so this is the thing: this will just naturally happen as part of a Trump administration. I believe we will see higher wages, we will see lower unemployment. But the wild card about Trump, and the thing that scares me and I think scares quite a few CEOs right now is that, you know, like today, he started picking on Boeing. And, you know, he picks on people and he's got his Twitter account. And this is going to be the most interesting presidency ever. And that's not a value judgment. It's not saying— I'm not promoting him. I'm not saying he's good, bad, or indifferent. He's certainly not indifferent, okay? That we know for sure. And so this is going to be a darn interesting presidency because no president has ever used Twitter the way Trump uses Twitter. And no president has ever been as blunt as Trump. So we will see, you know, there's just more to come on all this, right? You know, this is certainly not meant to be an exhaustive discussion on the Trump administration, what it means to us as real estate investors or, or the economy in general. But I tell you, at this conference where there are some very smart, very successful real estate people, the tenor is very positive. And I think with our first real estate president, we are going to see good things for real estate. And of course, it's a multi-dimensional asset. Asset class. So when you say good things, what exactly does that mean? To the uninformed person, it means, well, prices go up instead of going down. That's not what I mean. I mean good things overall for people who are in the know, who are smart, who know how to adjust, who know that you're either in a market where you're working on your cash flow and you're raising rents, or you're working on your capital gains as prices are increasing, or you're lowering your cost of ownership by restructuring debt and refinancing debt using my Refi Till You Die plan. You might be pulling cash out. There are so many dimensions to income property, and that is one of the wonderful things about it. But listen, I am rambling as I always do, so let's get to our guest today because I think you'll find this to be very interesting. As a discussion on many of these things I've mentioned here in the intro portion. But be sure you go get your tickets for our upcoming Meet the Masters event in January. We're gonna have a price escalation soon, so do not wait. Waiting will hurt you. It's like, you know, you're thinking of taking that trip and should I buy my airline ticket now or wait? Maybe the price will go down. The price will not go down. So you're much better off buying now. The prices will only go up as the room fills and as we have to make arrangements with our hotel and so forth. And so get your tickets at JasonHartman.com today, and let's get to our guests. It's my pleasure to welcome Dr. Robert Johnson to the show. He is president and CEO of the American College of Financial Services, Author of the book Invest with the Fed: Maximizing Your Portfolio Performance by Following Federal Reserve Policy, which by the way, investors, that is a great topic. You know, we talk about aligning our interests with the powers that be quite a bit on the show, so I can't wait to dive into that one with him. He's also author of a book that gained a lot of notoriety because Warren Buffett recommended it, and that is entitled Strategic Strategic Value Investing, and he's author of the new study, What to Expect When You're Electing. So I think we're going to talk about the election and what our new administration means to us. Bob, welcome. How are you?

It's great to be here. I really appreciate it, Jason.

Yeah, it's good to have you. So boy, a Trump presidency, a lot of us just don't know what to expect, do we?

We certainly don't, and the conventional wisdom It's really interesting, the conventional wisdom going into the election was that a Clinton victory was impounded into stock prices and that a Trump victory would lead to a lot of volatility and a fall in equity prices. And I think the October surprise was really a November surprise, and we got just the exact opposite. You know, Jason, it's really interesting, I have a good friend who was one of the few of the few people I know predicted a Trump victory, and he adjusted his portfolio. He sold out of equities the Friday before the election. He was looking pretty good early in the morning on Wednesday when the futures were diving, and we all know what happened since.

Yeah, yeah, we sure do. So this is our first billionaire president. It's our first real estate president, which a lot of our listeners are real estate investors. I mean, Trump is a total outsider. He doesn't, he doesn't owe a lot of favors to people. What does that mean to investors? What does it mean to Fed policy? You know, certainly on the, on the trade angle, I think a lot of us can make some predictions as to what it means. I think there, there will be some inflationary pressure if We have more protectionist trade policy, certainly. Your next iPhone's gonna cost you more money, probably. But what else does it mean? Let's dive in.

I don't think we should just limit it to Trump being elected either. It's that the Republican Party controls the House, the Senate, and the presidency. And when there's political harmony, I think there is a greater likelihood to have policies enacted that are change agents. I think what we're seeing with Trump is certainly a belief that there's going to be some fiscal stimulus, there is going to be some reduction in taxes, and what that combined— what that's going to mean certainly is an inflationary environment. I think it all but cinched the fact that the Fed will raise rates at their December— after their December meeting. They meet, I believe it's December 14th. There will certainly be a rate rise, and, you know, I think we're going to see some, you know, significant upward movement in inflation. What it means to me is that, you know, interest rates are going to move up, bond yields bond yields are going to go up, and there will be a point at which bond yields are going to start again looking attractive to yield investors. And that's probably going to have a negative impact on the stock market over the next few years.

OK, so here is the interesting thing, and I don't know if these always move lockstep. I'm only a hack economist. But, uh, you know, to me, Trump, he's so kind of like pro-America that it seems like Trump will mean a strong dollar. And maybe not, feel free to disagree. But at the same time, more protectionist trade policy, which will bring, you know, the idea is it'll bring more jobs back to the U.S. and bring higher wages certainly if you, if you build the wall, you're probably gonna see wages inch up a bit, which is, you know, good news for American workers that are here already. And higher prices of goods imported from especially China, but other countries too. Can we have that at the same time? Can we have that inflationary pressure in our goods and higher wages in services, which is also inflationary, and have an even stronger dollar at the at the same time, or is that not even possible?

Yeah, I think that there's a lot to be determined. One of the interesting aspects of the recent movements in the markets is I'm convinced that one of the reactions in the markets has been that the US equity markets have been strong at the, uh, at the cost of some of the foreign equity markets. In other words, I think that what a lot of international investors have done is that the trade has been from, for instance, some foreign markets into the US. Perhaps Trump's strategy is going to be make America great again by weakening some of the foreign countries. I think there have been inflows into the US markets from foreign markets in the recent days.

Okay. What is this going to mean in terms of investments? Strategy? What should someone do?

Well, I think what we— in Invest with the Fed, what we looked at is we looked at how different asset classes and different equity sectors in particular, how they performed during different interest rate environments. That is, how did they perform during a rising rate environment? How did they perform during a falling rate environment? And we found some real— had some really interesting findings. First of all, the overall market, the S&P 500, had a return of approximately 15.2% from 1966 through 2013 when interest rates were falling. So robust return when interest rates were falling. When interest rates were rising, the same S&P 500 only returned 5.9%. So rising rates are bad— is bad news for investors, for equity investors. And what I think most people agree on, I think the consensus of the markets is that interest rates are going to rise. Now that doesn't mean all sectors are affected equally. In a rising rate environment, the best-performing sectors in the past have been energy, food, utilities, and financials. So those sectors have done reasonably well in rising rate environments. Some of the sectors that have performed particularly poorly in rising rate environments: autos, durable goods, retail. So, and if you think about that, it actually makes a lot of sense, Jason, When money is cheap, when money is easy, a lot of the non-discretionary, or I should say, a lot of the discretionary spending increases. People buy new cars, people buy expensive suits of clothes, people buy a new washing machine. They delay those purchases when interest rates are rising and money is a little more dear. So I think that you are going to see see some of that over the next few years because I think we are going to have a, what I would call, more of a normalization of rates, that rates are going to rise. But, you know, they've been at such historically low levels that they just can't stay at those levels forever.

Inflation, deflation, you know, just sort of a nothing, like a stagnation type of environment? I mean, it seems to me like Trump is going to be good for the economy. I mean, better than Hillary at least. I don't know. I mean, that's probably a partisan statement, but you know—

Well, I don't know necessarily it's a partisan statement. I just don't know what— We certainly aren't going to be able to compare it because the Hillary administration never happened, but I think what you're going—

But we knew the gist of it. It's a Democrat. It's a— you know, Democrats traditionally aren't as business-friendly, high on regulation.

I think that's a little bit of a misnomer. If the stock market is any kind of indication as to whether a particular political party is good for the economy, bad for the economy, during Republican presidents since 19— since 1929, the stock market has advanced about 7% when a Republican has been in office. When a Democrat's been in office, it's 15.5%.

Right, but you also have to take into account Congress, of course, because, you know, that's—

No, absolutely, and that's my point, is my point is that political— and the funny thing is, Jason, there's this old adage out there that gridlock is good for the markets. I don't know how many times I've heard that, and I always— my head wants to explode every time I hear that, because that's simply not the case. Political harmony historically has been better for the markets. The markets have performed better, the equity markets have performed better in political harmony. The bond markets have performed worse under political harmony, and if you think about it, that makes sense too, because Under political harmony, typically a party can get their agenda passed, and in gridlock it's more difficult. So when there is consensus, there is an agenda, and it typically involves, it typically involves some fiscal spending, and markets have performed, stock market has performed very well. So if that's If that's any indication, and by the way, these analyses, when you simply look at the party of the president and how the stock market returns, those are univariate analysis. That assumes that's the only variable that matters, and of course there are all kinds of variables that matter. All I would take from that statement, though, is, you know, in the words of Lee Corso, the football analyst, So when you say the Republicans are the party of business, not so fast, my friend.

Okay. So is business the stock market? You're kind of begging for me to ask that question. I mean, are those one and the same?

I think over the long term, they certainly are.

Yeah. Okay. All right.

I mean, I think when you take a long-term perspective, there can be certainly times at which the economy and the stock market are moving in different directions. But Warren Buffett is always the person that I've looked to for wisdom in investments. I grew up in Omaha, Nebraska. I grew up in the shadow of Berkshire Hathaway and Mr. Buffett.

And we do have to note that Buffett is a raving Democrat.

Absolutely. But over the long run, I think when you look at how markets perform I think they are a reflection of the underlying economy, and long-term market returns have been pretty good when there have been Democratic presidents. So, you know, I think that kind of— and I think that what's interesting, Jason, is how markets react to elections. Both Obama elections, his initial election and his reelection, The markets reacted very negatively the next day. Well, what happened during the Obama years in the stock market? Stock market performed very well.

Oh yeah, very well. But remember, I mean, that's such an anomaly though when you look at the Great Recession and how the stock market just tanked. We were out of that, Jason.

We were out of the Great Recession in 2012.

Right, right, right. But I'm talking about The first Obama, okay.

Okay, but the second Obama, it net— big negative. What's happened in the last few years? In other words, the stock market is basically random over short-term time periods. Mm-hmm, okay. And I wouldn't take too much— I wouldn't pay too much credence to the Trump— what people are calling the Trump rally. I'm not suggesting that the markets won't do very well. But I'm suggesting that if history is any guide, short-term reactions to markets are almost a random variable. There's a much greater long-term element in this, and, you know, wait and see. I certainly hope things turn out very well under Mr. Trump and that he's very good for the economy. A lot has to happen.

Yeah, right, right. Okay. So, what would you be doing now given where we are? Here we sit just very shortly after the election, a big surprise to many. What's the best strategy?

I think the best strategy is that if you had an investment plan the Monday before the election, that investment plan should not have changed at all as a result of the election. You know, I think that, that people need to take a real long-term perspective in, in, in their investment strategy. So many people want to game things in the short run and attempt to time the markets and do things that they think are going to improve their performance. And what we find is that the typical individual investor underperforms storms the markets because they can't get out of their own way. The best strategy in my opinion, Jason, is to just do dollar-cost averaging into a low-cost index fund and enjoy the ride.

Nothing better than that, than just good old dollar-cost averaging?

You know, if you can earn returns to the markets, you're going to do just fine for the average investor. Now, there are folks who want to attempt to outperform, want to be very active investors, and you might want to do some of these things— sector rotation and so forth. But too many people are their own worst enemies.

Yeah, well, you know, it's human nature. We all want instant gratification. That's not a new phenomenon, and that's what I I do love about the Warren Buffett philosophy is, you know, buy quality, hold it. As a real estate investor, I basically follow that strategy, you know, as it applies to real estate.

And the interesting thing about real estate, you mentioned real estate early on in our conversation, and what we have found that during rising rate environments, the returns to equity real estate investment trusts are, uh, are very robust. Trust. In fact, equity real estate investment trusts do very well during rising rate environments. So, uh, for your real estate investors, that's pretty good news, right?

Right. But you're talking about real estate investors that are doing it through funds and Wall Street-type vehicles. What about just real estate in general? I, I know it's not your beat per se, but, you know, you, I'm sure, have some opinions on it.

It's just hard to get data on that. I'm an empiricist. I, I look at what, what has happened. I look at what relationships have been in the past, and it's very difficult to get any real estate data other than real estate investment trust data. So that would just be pure conjecture. But if you think about it, if you own real estate and rates rise, and you can— if there's a way to pass along, you know, rent increases to the occupants of the rent to renters, then real estate should have pretty good returns during a rising rate environment.

Yeah, and I agree with you. You know, it's a multi-dimensional asset class. So you're either in the booming economy when rates are low and prices are increasing, you hope to be a capital gains investor. And then in the higher rate, tighter money environment, you hope to be a cash flow investor. And you're just constantly adjusting your strategy as time goes on through those different economic cycles. Also, what are your thoughts about small business, about kind of Main Street America, if you will, in a Trump administration? I wonder if— I mean, this is all such a wild card. We just don't know. But for example, will small business financing become more plentiful or less plentiful or just be about the same? You know, what will happen there?

Well, I think the cost of financing is definitely going to go up.

Yeah.

And what—

and, and, and by the way, you've mentioned that a few times, and I'm sorry to interrupt, but I just want to ask you why again, just make sure we drive that point home, why do you believe rates are going to rise? And, and I know that a lot of people think that at the moment, but just because they've been so low for so long, or, or what?

Well, I think that's one one element, but a big element is that President-elect Trump has stated that he is going to increase infrastructure spending. So I think there's going to be a lot more fiscal spending, which is very inflationary.

Okay, and just explain that relationship, if you would. Why is infrastructure spending inflationary? Because it creates more jobs and there's more spending and more money cycles through the economy? If it's, you know, this trillion-dollar infrastructure.

It's kind of the Economics 101 idea about there is another big demand for funds, and when there's another big demander of funds, the federal government, interest rates are gonna have to go up to have supply meet demand. So it's a pretty simple relationship in terms of you've got another big borrower in there, the US government.

So it's financing the infrastructure project, obviously, right?

Oh, exactly.

And, you know, you gotta float bonds and you gotta sell those bonds at the auctions, and that's what happens.

If we take him at his word, it's going to be exacerbated by the fact that the tax rolls are gonna decrease. That, you know, if tax rates are lowered, at least initially, you know, the government—

Revenue will decrease initially Right. So you're not— you don't— in other words, it sounds like you don't completely buy into the theory that it's just a zero-sum game where you decrease taxes, you decrease revenues. It sounds like you're open to the supply-sider idea that you reduce taxes and ultimately, but it takes some time to trickle through, you may increase revenue because there's more economic activity to tax, right?

Yeah, I think that's a tough argument to make. But I think definitely if you couple that with increased infrastructure spending, I just don't know how that can happen, at least in the short run, how that can happen.

Yeah. Okay. Okay. Good. What else do you want people to know? Maybe just anything I haven't asked you.

Well, I think that it's really interesting to focus on the election and that— a great deal of change is taking place. And, but there are 4 words in the English language that I believe are the most detrimental words to investors, and those 4 words are, "This time is different." I love that.

I say that all the time.

And I just don't, don't— it— there's a— and I'm gonna go back to a golf analogy I always make. There was a very famous golf pro, Harvey Peenick. Harvey Peenick was Ben Crenshaw's golf pro, and Harvey Peenick died, and Ben Crenshaw was a pallbearer at his funeral. And then Crenshaw flew immediately to Augusta, didn't even play any practice rounds, and won the Masters that year. You know, it was a famous golf event. But Harvey Peenick used to say that when you take a golf lesson Take an aspirin, don't take the whole bottle. In other words, don't change everything. And I don't know how many of your listeners are golfers, but when you're a golfer and they say do something, you kind of tend to overexaggerate it, and then it really damages your swing. I would do that with this, this election. Politically, it may be a seismic event. But for the financial markets, assuming this time is different and wanting to make wholesale changes in your portfolio, I don't believe is a prudent strategy and one that I'm not advocating and that I'm not doing with my own portfolio.

And Bob, I am going to agree with you on that one. You know, stay the course. Overall, that, that Patience wins the game. That's the Buffett philosophy, and it sounds like it's yours too, so that's fantastic. Give out your website. Tell people where they can find out more about you.

www.theamericancollege.edu. We are a nonprofit accredited degree-granting organization. We're based in Bryn Mawr, Pennsylvania. We deal in financial services, and we have about 26,000 students. About 4,000 students in our various designation and degree programs.

Excellent. Bob Johnson, thank you for joining us.

I really appreciate the chance to talk to you. It was great.

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