CW 1061 - $200,000 House Payments, Fractional Reserve Banking & The Business of Redemption with James Arthur Ray, Part 2

I really appreciate that you created Platinum Properties. It's improved my life, the life of my family, and as far as I expect, you know, it will continue to do so for years to come. I'm just really appreciative of the impact that this has had and will continue to have on my life. And so I just want to thank you for what you do.

Welcome to the Creating wealth show with Jason Hartman. You're about to learn a new slant on investing, some exciting techniques and 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.

Thanks so much for joining me from beautiful Denver, Colorado. This is your host, Jason Hartman and I am coming to you today from charming Cherry Creek. Now this place is just dripping with atmosphere and the housing prices, well, they're not that bad considering how nice and quaint the area is. But wait until the thick of winter and the Mile High City, 5280ft will be chilly, chilly, chilly. So right now it's like this nice fall type weather, warm in the day, but crisp and cool in the morning and the evening rain. Really nice. After being in Florida for a while, you really begin to love weather like this, I tell you. So what is in the news as we do the second half of our tenth episode show the second half from yesterday. This is a bonus episode this week that'll be the second half of James Arthur Ray. I think you'll be fascinated by some of his principles. We, we talked about the tragedy in Sedona, Arizona in the sweat lodge. And today we're going to talk a little bit more about some positive stuff as we talk about harmonic wealth and the law of attraction and all that kind of good stuff. So hey, what's in the news? Well, did you see this article in the Wall Street Journal of how the ultra wealthy, the wealthiest people among us are following yours truly and his advice to use leverage in a prudent fashion? Well, I don't know if it's prudent. That remains to be seen. I think it probably is prudent. Because remember, as I tell you, as we have seen some horrific disasters recently, right? The wildfires in California, Hurricane Florence in South Carolina, North Carolina just destroying property and, and really destroying many lives. Sadly, with the trillions of gallons of water and the flooding that is still occurring in North Carolina and South Carolina, we see. Again, my philosophy, my statement from many years ago, I said this before and after Hurricane Katrina back. What, what is this now? Thirteen years ago, something like that. The best insurance. The best insurance is a high loan balance. Jason Hartman words. The best insurance is a high loan balance. Because when you have a high loan balance, you have room to maneuver in case of the nuclear option being needed. You will be the one during any of these natural disasters that gets relief. If you have a low loan balance and a high equity, you will not get relief. You will get stuck. Okay? So when they put the moratorium on mortgage payments, sometimes the lenders do this out of the goodness of their heart, sometimes the government mandates them to do it. You will not get this help when you have a lot of equity. So use leverage as much as you can. And guess what? The ultra wealthy are doing that. This is about the super. They're not even super. They're super duper, duper jumbo loans. Okay, yes, the ultra wealthy with. Get this. You ready? You sitting down? $200,000 per month mortgage payments. Yes, $200,000 per month in mortgage payments. I'll share with you some things of this very interesting article in the Wall Street Journal. It says, forget cash. Some of the world's wealthiest buyers are taking out massive loans to buy luxury homes. Entertainers, Beyonce and Jay Z and billionaire hedge fund executive Ken Griffin have something in common. They are among a small but growing number of ultra luxury home buyers who are borrowing tens of millions of dollars for home purchases. Okay, the article, it talks about Beyonce and Jay Z and how they financed their 88 million dollar purchase of this sprawling contemporary mansion in LA last year with a $52.8 million loan from none other than the folks at Goldman Sachs. That's what the public records show, right? And look at how smart this is, folks. This $52.8 million loan. Jay Z and Beyonce must be listening to my podcast because they got an interest rate, an initial fixed interest rate of 3.4%. Now that does become adjustable in 2022. But hey, if you can get 3.4% for just five years.

On $52.8 million, that ain't a bad deal. I'll take it any day of the Week. Not bad at all. Not bad at all. Okay. Their mortgage payments will be more than $200,000 from the outset. Right now Ken Griffin, okay, he's the billionaire hedge fund manager, has taken out more through an LLC. He took out two mortgages for a combined total of approximately $114 million for the construction of his Palm Beach, Florida. Hey, I live in Palm beach county in Florida, right.

Mansion, right. In 2016. And JP Morgan Chase financed them. Okay. Darrell Katz, the billionaire owner of the Edmonton Oilers hockey franchise paid $85 million for a Malibu, California compound. Earlier this year he took on a $47 million loan, $47 million mortgage, a 30 year loan from UBS, right. UBS Bank. You just see how these billionaires, these ultra wealthy people are using debt, my favorite four letter word. They are using leverage and they are getting phenomenal, phenomenal interest rates. And they're looking at these mortgages I think as an asset. So here's a couple quick facts. There's a little graphic here in the Wall street journal. It says 233 mega loans priced between 10 million and 20 million with balances currently outstanding across the country according to CoreLogic. Okay. 123 of these 233 loans were in California. 40 of them were in Florida. 40 of the mega loans. I told you Florida is dripping with money. Very business friendly state. I mean compare the population of Florida to California and on a per capita basis I really should do this. I don't have those numbers off the top of my head, but I'm guessing that that's actually about proportional. You've got 123 of these mega loans in California, 40 of them in Florida and you've got 31 of them in New York. Okay. So yeah, population wise that's probably pretty consistent there on a, on a sort of a per capita proportional basis. So interesting stuff, used debt. It is a very positive thing. Well look it, it's been 10 years since the Great Recession, right? And they kind of mark this at the point that Lehman was allowed to fail. I say that with very specific choice words, allowed to fail because the others were bailed out with your tax dollars. Yes. Your tax dollars at work, less the 12 million plus Americans who got relief in the form of loan modification, short sales or foreclosures. It's interesting that I would say foreclosure would be a form of relief. And I do mean that that was a form of relief. See, that was a feature, not a bug as the software people say. Right. A lot of Times the software folks will say, hey, this thing is wrong with the system. You know, it's actually a feature, it's not a bug. And that's how you should look at these various things that happened during the Great Recession and will happen again probably by the mid-2020s, if not sooner. We will see this cycle repeat itself, probably to a lesser degree, but a repeat nonetheless. Because, hey, look, no matter what, there's always a cycle, right? Some would argue that we are on borrowed time, but I don't exactly think so because I think, hey, the comforting words from every investor who's delusional. This time it's different. No, it's not really different this time. Well, it's always a little different. It always has a slightly different flavor, and that's why it's hard to predict. But the bailouts, government failure to help homeowners after the 2008 crisis fueled populist anger at the finance sector, right? And this is just from the opinion section of the Wall Street Journal. And I would agree, I would agree. Look, they bailed out the institutions, not the people. And it was massively inefficient. And do you remember when I broadcast from Washington, D.C. and I got to play lobbyist for a day? And, and this was just about, I don't know, maybe nine years ago, we were in the thick of the Great Recession. And I went and I went and I met with Arlen Specter, right? And I met with. I saw John Kerry in the hallway at Capitol Hill. I went and called on a bunch of these lobbyists. I went to Nancy Pelosi's office. Nancy Pelosi, the biggest hypocrite in Washington, possibly.

I went to her office and, boy, her office was beautiful. She had, like, one of the nicest offices. Well, hey, I guess that's how it works in the crony capitalist world for Nancy and the like. But, you know, we called on them and we pitched them. And I remember, I remember possibly an aide to. Who was it? I told you at the time, go back and listen to that episode. But I did tell you, I want to say it was Arlen Specter, one of his aides, who said, the reason they literally said this to us, there were several of us playing lobbyist for a day, and I went with a national RIA group to do this. Maybe there were like four of us and a couple of his aides were there, and one of them said the reason they gave the money. And I'm talking about the three big omnibus bailouts, right? The insanely Large trillion dollar bailouts. The reason they gave them to the financial institutions rather than to the people, because there were many studies on this, right, that said, look, if they just wrote everyone a check, they could have written them a check for, like, on average, and forgive me, I don't remember the numbers at all for like, $80,000, right? Or something like that. They could have written every homeowner in America a check for, like, 80 grand, and it would have cost less than it did to bail out the institutions. But they literally said, one of the aides said this and I mean this word. These were like choice words. I wish I had a video camera in there. They said the reason we gave it to the banks instead of to the people is because it had a multiplier effect. And that. That is true. Sadly, it's true. A multiplier effect, an inflationary effect through the. The magic or the evils of fractional reserve banking and fractional reserve lending. And that goes back to the idea. Well, not the idea, but the reality that money is lent into existence. That is how money is created, is lent into existence. And we've talked about this many times over the years. You know, goes back to G. Edward Griffin, the creature from Jekyll island, all of the other earlier episodes that I've done in talking about this. And, you know, depending on where you are in your studies of how the economy works and so forth, the way the whole system is structured is amazingly complex. And it's very, very hard to get your head around these ideas, to really understand it. And I'll be the first to admit I don't really understand it. I mean, look, Bill Bonner was on the show. Bill Bonner, the head, the founder of Agora Financial, and who I believe is really one of the most interesting and brilliant financial writers. Right? He was on the show and he said that he can't even get his head around it. And, boy, he's brilliant. I mean, that guy is so smart. Way smarter than I am, okay? And he couldn't even get his head around. He said that right on my podcast. Go back and listen to the episode with Bill Bonner. Fascinating guy and really an excellent financial writer. His books are great. His conclusions. I disagree. You know, he's mostly just, hey, buy gold. I disagree with that. I think gold's pretty lame, but talked about that many times in the past. Okay, look, I'm looking forward to seeing you all in Hawaii. Our upcoming event is first week of November. Be there or be square. You'll hear a little message about that. At the end of this podcast today. But without further ado, let's get to part two of James Arthur Ray and talk about some tenth show kind of philosophical mindset, ideas for wealth creation and leadership. Then tomorrow we will be back with a regular episode, probably with George Gilder. I don't know, maybe we'll have a client case study. We'll see tomorrow. We'll be back. Okay, here's part two of James.

Many might say wealth is not what you have. It's, you know, your abilities, your ability to get it back, your relationships. You know, people would say things like that, right? What do you mean? It's what you have when it's gone. Elaborate on that.

Well, what you're left with when all you have is gone is who you are. And so some of the things you reference are certainly part of who you are. But you know what we have to realize, particularly in today's disruptive world where it's Fortune magazine is telling us 50% of the salary jobs are going to be gone in 10 years or less. I mean, AIs are going to take a vast amount of jobs, artificial intelligence, they're going to do it better than human beings are because they don't ask for raises, they don't whine and complain, they don't call in sick and they don't need vacation. They just get the job done. And so that's very disruptive, obviously. And what it means is that a lot of people are going to be displaced. And it's hard, Jason, to reinvent yourself when you're in your 30s. It feels next to impossible when you're in your 50s. And believe me, I know. And so that's what we have to build our foundation upon. Because our true security, like our wealth, is not in anything external. Our true security resides in our power to produce and to the degree that we invest in continuously, our power to produce and our ability to reinvent and to be flexible and to learn and to grow, then we have tremendous opportunity. A lot of people are frightened right now, but the fact is Forbes also tells us that 1700 people a day are becoming millionaires in today's world. So there's tremendous opportunity for those who will seize it and not wait until it gets dropped on them. If you follow.

Okay, I asked you about maybe the wrong book first. That's your big book, but what about the newest book? Because you've had quite a few experiences since then, of course.

That's correct. The new book is called the Business of Redemption, and the subtitle is the price of leadership. And I've already, you know, alluded to some of the principles that are in the business of redemption. And if you look at the word redemption and find its original definition, which I'm a big student of language, it means to gain or regain something by paying the price. And I'm going to suggest to you that we all need redemption because most of us have sold out on our true heart's desire. Most of us have sold out our meaningful life for money. Most of us have chased the money in the market. And yet Gallup poll tells us that 71% of the people surveyed are miserable in their daily work. That's damn near 3/4 of the population. Our country needs redemption. Our current president is talking about making America great again. But nobody wants to pay the price. How about let's make the world great again? Because there's always a price for the prize. And who's going to pay the price? You know, that means I paid a tremendous price for my own redemption and for bringing. Bringing back what I once was or what I once earned and what I once created. And I'm still not completely there. But the price is always has to be paid first. That's what the book is about. It kind of, it's a amalgamation, if you will, of my life experiences through this whole what I call tsunami in my life, as well as the lessons learned and how they apply to leading a business, because I had an entire team there, yet I was the leader. And as I said earlier, the leader has to take absolute responsibility for everything.

So when you say pay the price first, can you be more specific about that and talk about maybe the mechanics of that in a typical person's life, if you will? You know, we know your story. That's certainly a tragic one. And nobody listening wants to go through something like that. But what's.

I wouldn't wish it. I wouldn't wish it on my worst enemy.

Right, right. But what's sort of the typical example of paying the price first? I remember a statement that influenced me very much at age 17 when I was lucky enough to discover four of the great motivational speakers, Earl Nightingale, Dennis Waitley, Zig Ziglar and Jim Rohn. Talk about good mentors at age 17, huh? It's pretty lucky to discover. But Earl Nightingale said I shared the.

Stage with Zig Ziglar.

So did I, years ago. Ye on a little tour with him. It was pretty cool. You know, one of the great things I thought Earl Nightingale said is he said, among many great things, he Said, don't be the person sitting in front of the empty fireplace and saying, give me heat and then I'll put in the wood. Obviously. Obviously we have to put in the wood first. Right. That's paying the price, you know, but so many people expect gratification without any paying of the price, without any work. Right?

Well, particularly in today's world, you know, social media is both a blessing and a curse. I think it's a great medium for marketing and for connecting with clients and those type of things. But it also is a curse in that, particularly with the millennials. And let me just say before I go any further, I firmly believe the millennials can potentially be some of the greatest leaders our countries have ever seen. And for them to do that, they're going to have to really shift their mind dramatically because there's so much mentality out there of I'm going to be the next Justin Bieber and just throw up a YouTube video and become world famous, you know, or Kim Kardashian or whatever. The fact is, you know, Bill Gates didn't take one day off for six years while he was building Microsoft. Not one, you know, Elon Musk works hundred hour weeks. And I could go on and on, but I, you know, built a $10 million business. It was like, whoa, you know, Inc. 500 company. Wow. How cool is that? Well, it's cool. And I worked seven day weeks for the better part of 20 years to make that happen, and then it was gone in a heartbeat. So there's a price to be paid. And if you're not willing to pay the price, as far as I can tell, Jason, the only place you get the reward before you pay the price is in a restauran. You know, you go into a restaurant, you get the meal, and you pay after. Everywhere else you got to pay first.

Yep, good points, good points. Well, what else do you talk about in the newest book?

Well, all the qualities of leadership that are necessary. I think one of the things that's really, really vital for leaders to understand is that leaders make decisions, and I had to make some decisions in a crisis zone, you know, when things were going sideways and we realized that people are in trouble, I was the leader. I had to make judgment calls with limited information. Well, such is life. You know, leaders had to make decisions and sometimes pray that there's a forgiving God, because we know we're making decisions based on limited information. We know that we may have to change those decisions. We know there is an outcome and an effect of those decisions. And yet you still have to make the decisions. And that's tough because some people want to gather more data and, you know, wait around and analyze something until they get it perfect. And that's the surefire methodology to failure in a Mach 10 world in which we live. I'm not a political person, but I love the quote from Ronald Reagan, and I think it's appropriate here. He said, when I gather enough information to make a decision, I don't take a poll.

Right.

I make a decision.

Yeah, that's good. That's good. You know, one of the quotes that's influenced me a lot. And I know we got to wrap it up, James, and I'll ask you to give out your website in a moment. But it goes something to the effect of Successful people make decisions quickly as soon as all the facts are available and change them very slowly if ever. Unsuccessful people make decisions very slowly and change them often. And it's interesting to see the difference there. Right. Successful people have, you know, they have the guts to make the decision. You know, get the facts, make the decision, and stick with the decision. Whereas unsuccessful people, they never can make a decision, and then they, once they do, they change it all the time. Right. Wishy washy.

Yeah, I fully agree. I mean, ultimate performers make quick decisions. That doesn't mean they're imprudent. What I would add to your point, Jason, is that sometimes we know that we don't have all the facts, which I kind of alluded to before, because if we wait for all the facts, then we've waited too long. And going back to my situation, which I talk about in the business of redemption, is that I had to make some very fast decisions based upon the information that I had. When we realized that there was a problem, I had to start saying, do this, do that, do this, do that. And I took some real hits, frankly, in the media and in my trial for the decisions that I made. Now, if I had not been in a crisis zone and if I had had more time, would I have made some different decisions? Possibly. But the fact was, you can't. What if. If you. What if. Then you end up living your life miserably for the rest of your days, and so you do the very best you can do with the information that you have. And, you know, the fact is that many times, and I'm not talking about the sweat lodge situation, because that's extreme, but if you look at a business, many times the decisions that you make with the information you have can be made. They can not work as you'd like them to. You can step back, analyze, make an adjustment and act again before an amateur analyzes to perfection.

Yeah, yeah. And I think.

Does nothing.

Yeah. And I think to be fair, that quote about as soon as all the facts are available. Look, I think we all, any mature person listening hopefully knows that all the facts are never available. You will never have every fact. Right. But you get the idea. I mean, that's a judgment call also. I mean, you know, if you wait for all the facts, you're going to wait till the thing already happened and then there's nothing to make a decision on. You're just a spectator. That's obvious. Yeah, good stuff. Good, good points. Anything else you'd like people to know and give out your website and we'll wrap it up.

I will get my website, which is just James Ray r a y jamesray.com and we do a whole host of, you know, one of the things I'm probably again, best well known for, the Secret. But what a lot of people don't realize is that I cut my eye teeth at AT&T as a C suite consultant. There's working in leadership and performance and communication and sales and all of those type of things. So my team and I provide a whole host of live events still around leadership and performance. And we also do coaching and we do business consulting work. And if I can be of help, then I would love to do that. And you know, from my perspective, there's no one that's better equipped to help individuals who are living through this massive disruption in the market that we live in than someone who's been through massive disruption. And it doesn't have to be necessarily me, but there's a lot of people out there who are kind of giving theory and book reports and that's not nearly as powerful as experience. And so while it still haunts me and hurts me to this day that I lost three clients, which I never would have wished for, I have to also suggest to all of your listeners, sometimes life deals you sucker punches and things you would never imagine. And yes, you grieve and yes, you hurt. But at some point in time you have to ask yourself, okay, how am I going to get up and get back in the saddle and get on with it? And that's, you know, how has this brought a gift to my life of learning and growth and expansion and that is an empowering life.

Thank you for sharing all that, James. We appreciate your candor and thanks for being on the show.

Hey, thanks for having me. I really appreciate it.

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