CW 116: A Free Sample From Jason Hartman's Financial Freedom Report

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Welcome to Creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven't thought of before. And a new slant on investing fresh new approaches to America's best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine self made multi millionaire who not only talks the talk but walks the walk. He's been a successful investor for 20 years and currently currently owns properties in 11 states and 17 cities. This program will help you follow in Jason's footsteps on the road to financial freedom. You really can do it. And now here's your host, Jason Hartman with the complete solution for real estate investors.

This is Jason Hartman welcoming you to another edition of the Creating wealth show. This is show number 116. Thanks for joining us. Joining me today as we do something a little bit different today we are.

Going to talk about.

Well, we're not going to talk about anything actually. I am just going to play for you a free copy of our subscription based audio newsletter and it comes in a print and an audio edition each month and it is the Financial Freedom Report. And here you will hear and of course this is available@jason hartman.com you will hear a free sample of our July edition. You can Yes, I know July was a little while ago. Well about a month and a half. Month and three weeks ago. Right. Well, you'll hear the July edition. This is not too timely so it won't matter that much. One of the things I love about creating wealth with income properties is, you know, it just doesn't change that quickly. It's not like the crazy stock market. But I wanted to play for you the professionally narrated version of the newsletter because I think you'll really enjoy it and just give you kind of a free sample as to what it's all about. Of course, we hope you'll go to jasonhartman.com and buy a subscription Description where you get the monthly PDF printed copy. Our last edition for August was 20 pages long of really insightful information. And of course each month we do it in the audio and the printed format. Your subscription entitles you to both copies of that. Be sure to join us for the masters weekend on October 10th and 11th here in Costa Mesa, California. We'd love to have you. We have our furthest guest away still is Richard from England flying out for that. And again that event is only twice a year. So we hope you'll go to jasonhartman.comevents and register for that right away while you still get the early bird pricing. Another thing I wanted to mention, many of you have purchased our loan modification kit and you know, one of the feedback that we had that wasn't super positive and it kind of concerned me a little bit, was that it did not specifically address investment properties. Well, here's why. The reason it does not specifically address investment properties is, is that there are no specific rules for investment properties. Virtually all of the loan modification, the governmental stuff, the Fannie Mae guidelines that came out a while back, et cetera, et cetera, were really designed for homeowners because the whole push is to keep homeowners in their home and it applies for investment properties. I was able to modify 11 of my loans so far and and I'm still trying to modify more of my loans. It is like free money, folks. It is unbelievable how nice that is when you can do it. But the kit, the same rules really apply to both. Now, of course, it's the lender's judgment whether they want to modify your rental property loan, but you really take the same exact path. So it's not any different in terms of what you do for an investment property versus doing for your own home. You still write a hardship letter, you still provide financial information, so on and so forth. The only thing you might do differently with an investment property is, you know, plead problems and poverty. You know, whenever somebody runs into a bump in a road on their investment property, I tell them, you know, tell the lender in your hardship letter that you've had vacancies, the rent has softened a little bit. When you renewed the lease, you had to lower the rent 25 bucks. Of course, if it's true, you do that. And so there's not a whole bunch of difference, folks. It's really the same set of information you need to know with just a few minor tweaks in terms of investment properties. You can buy that kit at the DIY.

Or@Jason hartman.com just click on events and store One more thing I want to go to, I want to tell you about before we go to the audio newsletter is that you should be sure to check out on itunes, our video podcast. It's 100% free. And if you're an itunes user, just type Jason Hartman in the search bar. You can subscribe to the Creating wealth podcast. That's the one you're listening to now, and that's free. You can subscribe to the Creating wealth video podcast for free on itunes. And and those are little short videos. The most recent ones. We're putting one up virtually every single weekday now. And they're only four or five minutes long, most of them. So they're really short little videos. And they, they've got visual and audio, which is really nice. A lot of you learn better that way. And then you can also subscribe to the Holistic Survival show and the Speed of money show. Four things, 100% totally free. All right, enough of my talking. We'll hope to see you at the Masters Weekend. And let's go to the audio newsletter. We're going to the July edition. But all of this information, pretty much, except for a few of the stock market quotes, is totally relevant now. So we wanted to give you this free sample. Okay, listen in.

Hi, this is Rich Roszel.

And this is Penny Haynes.

We're bringing you Jason Hartman's Financial Freedom.

Report, Financial Self Defense in Uncertain Times, brought to you by the Platinum Properties Investor Network, offering a complete solution for building real wealth in the current economy.

In this July 2009 issue, we'll talk about why conventional 401k investing is almost like gambling, why buying and then holding onto property is better than quickly reselling it, and why now is the time to learn the ways of holistic survival.

But first, we want to wish all of you a happy Financial Freedom Day, also known as the Fourth of July. Rich, what's our first story?

Well, Penny, our first story is called Taking why the Stock Market Can Be Dangerous in the Current Environment. Conventional wisdom has long held that the way to become wealthy over the long term is by compounded investment in the stock market. Now, the reason for this was quite clear when one looked at the chart of historical returns. By making very modest investments at regular intervals over a long period of time, small investors could create very large amounts of wealth. This line of thinking is what has prompted most employers to source their 401k retirement plans with mutual funds that invest in the stock market. Unfortunately, the movement of stock market investment into the mainstream of America has caused it to become less of an investment vehicle and more of a gambling casino. The primary purpose of the stock market is to provide companies with a means to raise capital for business investment by selling a partial ownership stake, also known as a share of ownership. Typically, investors were rewarded for their investment by the payment of dividends from the company profits. Thus, stock market investing was originally based on the notion of finding a company that was likely to make sufficient profits to pay healthy dividends. This sentiment changed as the secondary market for trading stocks became more popular. A primary issue of stock Happens when a company issues more ownership shares. A secondary stock transaction happens when one investor exchanges an existing ownership share with another investor. This is where the stock market turns into a casino. When the focus of investment shifts away from the ability of the company to viably pay dividends on a consistent basis toward the probability that the secondary market will pay more for the company's stock at a future date. Stock investment becomes much more akin to gambling. When returns are primarily based on price appreciation. Continued growth in market value requires a perpetual stream of new buyers. This phenomenon is true for both stocks and real estate, and it explains the recent booms and busts very thoroughly. The only factor that can push up the entire stock market is if there is an aggregate increase in investment capital. Similar to how increases in the money supply from the Federal Reserve drive price inflation. When corporate profits grow, it's natural to assume that more capital will be attracted to the market. However, when market values rise faster than corporate profits, the only cause can be a net influx of investment capital. In the United states, there were two sledgehammer events that sparked a colossal 25 year bull market for stocks. The first was the passage of the Employee Retirement Income security Act, or ERISA in 1974, which created standards and stability for company sponsored ST investment plans that dramatically increased the supply of equity capital. The second was the paring of tax cuts in the 1980s and a significant reduction in the cost of debt capital that spurred a rapid growth in corporate profitability. These two events combined to generate a massive increase in stock market investment that pushed values sky high. However, these massive gains came with a bit of a shadow. This problem has been created as investors stopped directly buying stocks of individual companies and started investing in funds where a manager buys and sells the stocks. Now, these brokers and managers have control over incredible amounts of other people's capital. This control gives them the power to create or destroy tremendous amounts of value based on the decisions that they make. It also channels market activity more and more toward gambling as managers seek to maximize value appreciation. This set of incentives is very adverse to investor interests as managers have incentives to take insane risks since big gains mean tremendous bonuses and losses only mean that they get fired. Furthermore, most managers charge very hefty fees for their services which cut into the net investor returns. Now, thus far, we've assumed that the fund managers are honest. When the crook dynamic is factored in, the risk increases significantly. Fundamentally, there are four principal risks implicit in this kind of stock market. One, your broker may be a crook. Two, your broker may be incompetent three. Even if your broker is honest and competent, he'll take a big slice of your profits in the form of fees and commissions. 4. These problems are not limited to your brokers, but include all of the middlemen like stock promoters, CEOs, bankers, and all other flavors of hucksters or salesmen. On top of all these risks, there is a bigger dynamic to consider. Currently, corporate profits are taking a very steep tumble relative to their prior levels. In addition to this, most of the working population is already invested in the stock market, so there is no large pool of capital to attract so that valuation can continue to inflate. Finally, the current market price per earnings ratio is well above its historical average. This means that the market is discounting in a future increase in corporate earnings. If that increase does not come or takes longer than expected, it will most likely result in market values decreasing. Finally, there is a longer term risk of very average performance. Even if the anticipated recovery happens as expected, there is no looming influx of capital to push the market up at explosive growth rates. This means that future market appreciation will look very average by historical standards. Granted, nominal values will be pushed up by inflation, but real returns will still be very much in the average category. Ultimately, the stock market is in the midst of a return to reality from the large rates of return in prior years. The fundamentals are pointing toward difficulty in maintaining prior growth rates out into the future, including the risk of more near term price compression if the forecasted economic recovery does not materialize as expected. Granted, there is a probability that the stock market will recover better than expected and produce favorable returns. However, prudent investors should seek to diversify their investment activities into other emerging areas of opportunity to limit exposure to the stock market. Situations such as prudent real estate investing with a small to negligible downside and significant to infinite upside are what economists call a free option, principally because the investment volatility runs mostly in the up direction because of the downside risk mitigation. Needless to say, these are the investments that we would like to create.

Does your investment portfolio have termites? By Mark McVeigh, M.D. do your investments have termites? It may sound like an odd question, but if you're like many Americans with typical savings accounts and mutual fund stock portfolios, then you are subjecting yourself to the ravages of a specific type of termite, which is slowly and clandestinely devouring away at your financial portfolio, taking away the prospects of a secure retirement with it. What type of termite could do such a dastardly thing? You ask this termite is called inflation, and it is both the scourge of financial security and the product of our current monetary system. Allow me to explain. Most of us have been brought up to believe that saving and investing are good and getting into debt is bad. While I certainly agree with this general sentiment, it contains one important fallacy. It presumes that the money supply in our economy is static. The reality could not be further from the truth. The money supply is increasing at an ever faster pace. You see, every dollar added into the economy cheapens those already in existence. And the Federal Reserve, in conjunction with the government, are increasing the supply of dollars and credit at an alarming rate. This means that your savings and portfolio accounts are being reduced in value, and as the dollars they convert into buy progressively less and less. Sadly, this termite assault on your wealth is ongoing and relentless. But you ask, I heard on the radio that inflation was under control, that the CPI Consumer Price Index was relatively low. What gives? Suffice it to say that the CPI is sufficiently manipulated by the government to give the public a much more benign view of inflation than actually exists. To see just how ravaging this inflation termite is, simply look around you. Oil, commodities, health care, education, housing, food, and now even postage have been going up substantially in the last few years. These increases far eclipse the relatively modest gains in the stock market over the same time period. Now, at this point, I presume you're scratching your head and asking, well, how do I eliminate this termite? How can I secure my financial house from this destructive insect? The truth is that there is no Orkin man, no Terminix for this type of pest. That would require a major overhaul of our monetary system. Alas, we are stuck with this troublesome termite for the foreseeable future. However, and this is where it gets interesting. While you can't eliminate this pestilence, you can use it to your own advantage to maintain and grow your wealth rather than have your wealth eaten away. How you say, by properly turning the tables on our financial system and becoming a debtor? Heretical, no? If you recoiled in disgust, I understand, as it runs counter to the way many of us have been brought up. But allow me to elaborate. By debt, of course, I don't mean going out and indulging yourself on fancy meals, cars and vacations. There is no long term benefit of purchasing those items using debt. In contrast, by selectively purchasing tangible assets which throw off cash flow, and by buying these assets with the bank's dollars in the form of a mortgage or loan, you achieve the financial equivalent of a double play. Long term, your asset most likely increases in price as more and more dollars flood the economy. Just as importantly, you are paying for that asset year after year in progressively worthless dollars thanks to the inflation termite eating away at the dollars you're now repaying to the bank. Not only is this a shining example of leverage, it can also be thought of as a form of financial martial arts. You are harnessing the energy of your opponent inflation and using it against him. Of course, one of the best asset classes with which to follow this path is is investment real estate, a proven path to wealth for many and a good hedge against inflation. In the interim, your tenant helps pay your debt obligations while you allow the aforementioned economic forces to work their magic. Of course, you have to do your due diligence and choose your properties and loans carefully. Nevertheless, this is a powerful technique to build long term financial wealth. How ironic that the best defense against the termite of inflation is an investment property with a big mortgage.

Keeping an Eye on Wall Street Financial Market Update Market index Standard & Poor's 500 index for June 19, 2009 $921.23 as compared to June 19, 2008 $1,342.83, a drop of 31.4%. Dow Jones Industrial for June 1909 $8,539.73 compared to June 19 of 08 $12,063.09, a drop of 29.2% the recent stock market rally has inspired a rising tide of hope and optimism within the investor community. Evidence of this is seen in the gentle step up in market values from the floor of their recent decline. This optimism seems to be discounted into the price to earnings ratio of The S&P 500 index as well, since the current price of $921.23 represents a price to earnings ratio of 31.2 times the next four quarters of forecasted earnings per share for the index. Since the historical valuation for this index is significantly below the current level, the it stands to reason that the investor community collectively believes that the government initiatives will create a market recovery in the near term. At the Financial Freedom Report, we are not yet convinced that the fundamentals of the market justify such an optimistic valuation.

On the MONEY Monetary Update Comparing the money supply in billions of dollars from May of 09 to May of 08 the monetary base for May of 09 $1,770,000,000,000 compared to May of 08 of 827,000,000,000 that's an increase of 114%. M0 + checking for May of 09 1,596,000,000 compared to may of 0813-730000-00000. An increase of 16.2% M1 + savings for May of 09 8,327,000,000 compared to May Of 08 7,637,000,000, an increase of 9%. Analysis of the key monetary indexes shows that the current Federal Reserve policy of hyper increasing the money supply is still in effect. The desired result of this policy is to stem the current asset price declines from large amounts of selling and deleveraging from credit tightening. The implicit danger is that when the credit markets eventually normalize, it will create a massive net increase of circulating dollars chasing after a static or declining mix of products and services. Traditional monetary theory predicts that when there is a sharp increase in the net effective money supply without a corresponding increase in output, then the result must be price inflation. More dollars chasing fewer goods. At the Financial Freedom Report, we are convinced that this inflation is looming on the horizon and will hit many people by surprise by destroying their savings, stocks, bonds, mutual funds, equity and real estate, and thankfully, the value of their debt. So the key strategy we recommend is to denominate perceived liabilities in dollars and assets and things that have universal.

Need.

Best investment during financial Armageddon. If you were to sit down with a very large book of matches, an inexhaustible supply of meals ready to eat, and burn up $1 million every day, it would take you 3,000 years to turn $1 trillion into ashes. So a trillion dollars is a whole bunch, right? But are the trillions of dollars the federal government is racking up in debt going to send the United States into financial Armageddon? Well, that's a pretty strong word. We don't think it's likely there will be a complete collapse of society. But it could get hairy for a while. And at the end of each day, every human must still meet three basic food, clothing and shelter. Ah, did we say shelter? Yes, we did. As a property investor, you will control the asset everyone needs. They still need a place to sleep and are going to have to rent it from someone. Why not you? Housing is a universal need that's not going anywhere.

It's the economy. Macroeconomy Update Economic Indicators U.S. unemployment May 2009 9.4% May 2008 5.5% Change + 3.9% all items 12 months May 2009 Negative 1.3% May 2008 4.2% Change - 5.5% CPI less Food and energy 12 month in May 2009 1.8% May 2008 2.3% Change - 0.5%.

One of the most dramatic pieces of news in recent months has been the sharp increase in unemployment. May 2009 figures showed the national unemployment rate as 9.4%. This represents a 3.9% increase over 12 months, which ultimately means that unemployment is 71% higher than it was in May of 2008. During this period of time, the Consumer Price Index fell quite considerably due to dramatic reductions in energy prices from the demand disruption that was caused by the global credit crisis. We believe that energy prices will regress back to their long term equilibrium as credit markets normalize. This is likely to contribute to a double whammy with the monetary inflation that is expected to result from the Federal Reserve policy to expand the money supply as a tool for fighting deflation. In addition to this, it is unclear how much more employment will contract as the economy grapples with the new realities of tighter credit and.

Increased government intervention.

Borrowing from Peter Credit Market Update Credit Indicators Prime Rate for.

June 09 3.25%.

Thank you for listening to the Creating Wealth Show. This is Jason Hartman, your host and we appreciate you following the show. We have many many episodes, hundreds of episodes and some of the older episodes have been archived and placed in our members section and that applies to this one. So we include a sample that's about 25 minutes long and then fourth rest of the show you can go to our members section@jasonhartman.com. many of the other shows are still in their full length complete version. However, some of the shows like this one are in our Members section where you can hear the show in its entirety and again you just need to go to jasonhartman.com and you can get the full show there in the Members section plus a whole bunch of other great members benefits and resources, whether it be documents, forms, contracts, articles, other video and audio content. Just a great resource. So be sure to join as a member@jasonhartman.com and thanks again for listening to the.

Creating Wealth Show.

This show is produced by the Hartman Media Company. All rights reserved. For distribution or publication rights and media interviews. Please visit www.hartmanmedia.com or email mediaartmanmedia.com Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network Inc. Exclusively.