CW 355: How Self-Directed IRA Ignorance Ruins Retirement Dreams with Jeff Desich CEO of Equity Trust

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Welcome to the Creating wealth show. This is episode number 356 and this is your host, Jason Hartman. I've got Naresh Visa with us today to do the intro portion with me. Our guest today will be John Stossel, a name you have certainly heard before. One of the great authors and thinkers and news commentators, of course, and investigative journalists who will talk about some good stuff too. So. So Naresh, how you doing?

I'm doing great, Jason. Happy New Year to you. I'm looking forward to Nice 2014.

Yeah, yeah, I think it'll be a great year actually and you know, a great year but with mixed disclaimers attached. And so we'll talk about that a little bit. And I didn't know when our Last episode number 355 was going to be posted, so I may have neglected to wish everyone a merry Christmas. So I hope everyone had a great Christmas out there and certainly wish you the best in 2014. We'll probably get another episode out. Well, not before the new year because, but, but right after the new year of course and many more next year. And yeah, we've just got some great stuff coming up for the show, some good guests. Our Meet the Masters event is coming up in just a couple of weeks here in Irvine, California and we do that once a year, so that'll be great. But you know, Naresh, one of the things I wanted to ask you about and I appreciate you joining the show today, you haven't been on before. We did have you on the Speaking of Wealth show talking about your background in info marketing and so forth. And yesterday you saw the movie which I have been dying to see, all three hours of it or so, and that is the Wolf of Wall Street. So tell us a little bit about it, will you? I hear it's great.

Oh goodness. Well, if I could sum it Up. In one word, it would be outrageous. It's probably one of the top three most shocking films I have ever seen. And to give you an idea of the types of movies or how many movies I watched this year alone, 2013, I probably watched more than 200 movies.

And you actually keep track of this?

I don't know the exact number, but probably more than 200, given that I pretty much watch a movie every day or one every two days. I have a Netflix account, and it's just something that I enjoy doing. And I don't watch garbage movies, but I can actually learn a lot and get some great ideas from films. And this movie, Wolf of Wall street, it crosses so many boundaries, so many moral boundaries, ethical boundaries, financial. It's a must watch, but you have to be able to handle it. There are people who are walking out in the middle of the movie simply because my guess is they probably couldn't handle the amount of sex and profanity and drugs that was in it. But if you can handle it, definitely check it out. You won't see anything like it.

It's basically about the debauchery of these. These traders. Right. And how much money they're, in essence, stealing from the public and the investors.

Yeah, it's not really traders. They're. They're mostly brokers, so salespeople. And the beginning of the movie starts with the main character, Leonardo DiCaprio, selling penny stocks. And anyone who has invested money before knows how crappy penny stocks are. I mean, they're literally like the worst of the worst. And DiCaprio makes 50% commissions off of getting people to invest in some terrible, terrible penny stock companies. So that's how the movie starts. And they work their way from penny stocks to even more crappy securities and insider. Not insider trading, but just pump and dump scheme, securities fraud, things like that.

Yeah. So. So what, what happens? I mean, they're just. They're. They're just doing all kinds of bad deeds and they're spending their money on. On drugs and hookers and. And just this totally debaucherous lifestyle. Huh?

Yeah. So. So the main character, DiCaprio, plays Jordan Balfour. I believe that's how you pronounce his name. He starts out at a big brokerage, kind of almost a too big to fail type of brokerage. Well, it ends up failing due to the 1987 crash. So after that, DiCaprio kind of goes out on his own, starts his own company, finds a partner, and they build their business up from there. Now, they end up making a Lot of it's essentially a sales business. So they're selling stocks and then they add IPOs a little later. And they're making so much money, by the time Balfour reaches 26 or 27 years of age, he's making nearly $50 million a year. And this is in the early 90s at the beginning. This is in the early 90s at THE beginning of the tech boom and the stock market boom. And what do they do with the money? They spend it on lavish pockets parties. Hookers. When I say hookers, I mean every day, just tons and tons of hookers. They almost had several hookers on staff at the company whose sole job was to spend time in the bathroom for these brokers.

Oh, my God, this is disgusting. I mean, this is unbelievable. The complete debauchery. It's just ridiculous. Wow.

Yeah. And then, and then the drugs, that's another big issue. Everyone almost just snorting cocaine. I mean, some of these drugs I don't even know much about, they're now banned. One was called a lemon before my time. And that apparently gave you. Apparently gave you the biggest high in human history. So it's a three hour movie and about an hour is just spent on drugs and sex, which, which I guess keeps the viewer interested for the entire three hours. It's almost every other scene has something to do with that. And the women are very pretty in the film and I'm sure in real life they're probably pretty as well. But yeah, it's basically about Balfour, his partners, the people who work for him, them making all this money. Then they start getting into some pump and dump schemes, into some securities fraud, you know, cheating on their spouses, getting hookers into the office, throwing lavish parties and the Hamptons with these hookers with midgets. I mean, it had the whole deal. Drugs, sex, hookers, midgets, you name it.

Wow, this is just unbelievable. You know, Naresh, I'm always talking on the show and you listen to pretty much, you know, every episode. So I'm always talking about commandment number three, thou shalt maintain control of my ten commandments of successful investing. And the first thing is you might be investing with a crook. The second thing is you might be investing with an idiot. And assuming they're honest and competent, they take a huge management fee off the top for managing the investment or selling you the investment. And it sounds like these, these scumbags were doing all three. I mean, they're probably, you know, they're probably crooks. They're probably idiots because they're they're drugged out all the time and sexed up all the time. And probably not very rational in that sense. And then, you know, of course, they're taking these giant ridiculous fees that are these middlemen are just skimming all the profits away from the investors. It's kind of like I heard someone say about government. People look at government as this noble entity. Well, not everybody, obviously, I don't, but some people do. You know, people, idealistic people on the left side of the aisle usually do. Government is like this noble ethical entity. And I don't think that's true at all. Government always looks out for itself first to keep its entrenched power structure. And that's exactly what Wall street does. It looks out for, number one, itself. That's who they take care of.

Well, two things. Number one in this film, government is actually the good guy, at least in the eyes of the viewer, because you see Balfour and all his associates and what they do, and you kind of want them to go down, and it's the government and takes them into custody, charges them and all that. So that's the first thing, which is kind of ironic. The second thing is you talked about these salespeople and the commissions that these brokers are making. The business model was when they started their company, they would get people to buy blue chip companies at the time, like AT&T, IBM, and then they would funnel them into the penny stocks. The commissions on the penny stocks were 50%. On the blue chips, I think in the film, there were less than 25%. But the goal was to get people to invest large sums of money, you know, $40,000 plus, which is a lot of money in the early 90s, into these worthless penny stocks. I mean, these are absolutely worthless. And the other thing is these sales guys, you can tell they know absolutely nothing about what they're talking about. They know nothing about the companies. They don't even know anything about the blue chip companies. They're just talking out of their behinds, trying to sell them something. And something that we can all learn today is little has changed. You know, I've talked to life insurance agents who are probably the biggest scumbags out there. And before you put your money anywhere, whether it's life insurance and investment, make sure that the person you're talking to knows what they're actually selling. They know the insides and outs, and that touches on one of your commandments.

You know, I think the key is maybe this is really just a good rule for the new year and for life in general. Is simplicity. If it's, if it's complex, that's usually designed to hide something and scam the unaware person. Investments should be simple. Real estate, being a direct investor in real estate, it's simple. Everyone can understand the way real estate works. You know, you buy a property, you make sure it's a good property in the right market, you structure the deal properly, of course, you rent it out to people. This is a simple concept. The people I have had tried to sell me life insurance. And I think life insurance is largely a rip off. Now granted, if you're young, you know, usually if you're young and you have no assets and you have children, you probably should have some simple term life insurance. Simple cheap term life insurance. But these universal life and whole life policies and you know, whatever new name they've made up for one of these things, they're so complex. I mean the contracts and the disclaimers are these huge, outrageously complex contracts and they just pull the wool over people's eyes. I mean, do you think all of these financial engineers that work at these big giant insurance companies that are really quants, they're brilliant mathematicians, they're people that should be doing something that creates actual value in the world. They should be in engineering. But Wall street and banking and insurance has sucked up all these people that would be actually inventing things and they've brought them into the financial world where they're inventing financial products and they're engineering the products so the institution selling them cannot lose. They are like no lose deals for the institution and they're always losing deals for the consumer, the little investor, the middle class investor that buys them. So it's unbelievable. I'm no fan of life insurance. I do think that basic term life insurance is needed for some people. But even better than that is if you have some assets and you have children and you have dependents that you need to take care of in the event of your passing, well, that's easy. Just create some wealth and leave it to them. That's, that's better. But if you're young and you haven't created that wealth yet, then a simple term life insurance policy is what you need. That's it. Simple, Simple.

Yeah. Well, like you mentioned, life insurance is so complex. There are now so many different products out there. So, you know, definitely do your research whether you're young, middle age old, do your research and make the best possible decision out there and make sure you go with an agent who is honest and knows what they are talking about, who can walk you through the product and how it works. Because a lot of these guys are just, I don't even know what they're saying.

So, Naresh, I think the listeners, they probably heard me talk about the scams of Wall street and life insurance so much by now, they're probably a little bored with it. But there was kind of one more kind of major theme or part of the Wolf of Wall street you wanted to mention, I think before we go to our next subject. Right.

Yeah. Being that I know you're a libertarian, Jason, and recently with Stephen A. Cohen being charged by the SEC and forced to pay billions of dollars in fines. One thing about Wolf of Wall street, that got me thinking. So, yes, Jordan Balfour, he participated in, knowingly participated in securities fraud pump and dump schemes when he took Steve Madden, when he took the Steve Madden IPO public. The biggest issue I have is in 2008, Angelo Mozilla with Countrywide, Franklin Raines with Fannie Mae. Right, Fannie Mae. These are guys who, who admitted to wrongdoing and who were successfully charged and they didn't spend any time in jail.

I know, they're total crooks. Mozilla got, you know, he paid 60 million, I think. Yeah, he paid like 60 million, which is like me giving you a dollar. Nothing to him, it means nothing. And the problem with these fines that the government levies, usually it's not really the CEO that actually pays them. It's the shareholders of the company that pay the fine. Well, the CEO has already gotten away with all the loot. It's such a major scam. I cannot believe it.

Yeah, so. So Jordan Ball 4 in the movie gets three years of jail time, which is, you know, you can say that it was. But Angelo Mazzillo, fdr, these guys brought down a global economy. I mean, they threw the world into a depression knowingly they lied about what they did. And they did all this just to make a buck for themselves. So it really baffles me that the government, you watch this movie and you say Wall Street's bad, this Jordan Ball four is bad. But look at people within our own government. Franklin Reigns is Obama's buddy. He helped Obama with his campaign for two straight 08 and 2012. And that just kind of got me ticked off. And that goes for Stephen A. Cohen, who was recently fined, what, like $1.5 billion? Stephen A. Cohen, he didn't knowingly participate in the insider trading charges. It was two or three bad apples within his company who did. So he started his own company with his own money back in the early 90s and created great value for his employees and for his clients. And yet now the government's making his firm turn into a family office. So it just kind of shows the hypocrisy with the government. You're going after these little guys like Jordan Balfour, like, yeah, what he did was wrong, but these big guys who created depressions and recessions get all free, and who knows what they're doing now?

Well, Naresh, it's the best justice money can buy. That's. That's always been the way of the world. And, you know, my contention is that it's really the government that they come in and they always look like the hero because they come in and they nail these guys at the end. Maybe like in the case of the wolf of Wall street, they did. But in the case of Mozillo and reigns, of course, they gave them a pass. And so many others, of course. But the government creates the problem by allowing these companies to get so big. And how do they do that? Well, they. They allow them to get so big because they allow them through their lobbyists. Their lobbyists pay off the government or there's exchange of favors. So they get this protectionist legislation that makes it hard to compete with the big guys. And so the big guys just get on this road and they have just smooth sailing to just take over and rape the world, basically. And they become so big that they become too big to fail. And, of course, we saw corporate socialism rear its ugly head in this last crisis, and the government creates the problem. What if the government regulated less? Because I say all those regulations are just favorable to the big fat cats. They complain about them acting as though they're against government regulation, but they're really for it because it helps them. It allows them to maintain their monopoly. And that's what the little guy never understands. They never see the bigger picture here. They only see the little picture of, oh, God, there's a crisis. We need more regulations to stop these crooks from ripping the world off. Well, guess what? If you didn't have Fannie Mae in the first place because Fannie Mae was invented by the stupid government, you wouldn't have Fannie Mae. Corruption. And guess what? If the government was smaller, everybody will agree on both sides of the aisle that the government is corrupt and inefficient. I think everybody will agree with that. You know, whether you're democrat or Republican or somewhere in the middle or somewhere outside of those two opposites. Right. Everybody will agree that the government is inefficient and the government is corrupt. Right. Well, guess what? If it's smaller, there will be less inefficiency and less corruption. So just. It'll always be there. It's just any human organization will have inefficiencies and will have corruption and will have bad apples. I think we've got to resign ourselves to that ugly truth. So my opinion is let's just make it smaller, because if it's smaller, the corruption will be smaller and the inefficiency will be less pronounced. And, you know, maybe you disagree with me because you're not as much of a libertarian as I am.

So I think you certainly have a point when it comes to freedoms like that. I'm all for more freedom. I'm all for more business, more jobs, and everything that you mentioned would help create more business and more jobs. So it makes sense to me.

Yeah. Well, okay, so let's turn our discussion here a little bit before we get to John Stossel. Let's talk about real estate investing more specifically, if we could. And Naresh, you do some work for some precious metals companies. And you know, on my show that I'm. I'm not much of a gold bug at all, although I think it's an interesting indicator and it's always worth talking about and looking at because it is a. It is a yardstick, it is a measuring stick, and it's a litmus test for things. So. So it's good in that way. But as an investment, I think it's. It's pretty weak. And, you know, you're of course welcome to disagree with me, but there's this constant debate of what will the future look like? Will it look like inflation? And admittedly, a lot of my investment strategy is based on inflation, especially the concept of what I call inflation induced debt destruction. And the regular listeners for the last 355 episodes have heard me talk about that ad nauseam. But the question is, what if that inflation doesn't come? How does it work then? And I mean, your thoughts are that we won't really have that much inflation. Right. What do you think?

Yeah. So I'm probably going to take a contrarian view on this. I don't see inflation coming. I was very worried in 2008 with all the bailouts and the stimulus plan and then the QE1, the QE2. It made sense to think, okay, well, you're printing money, you're stimulating the economy artificially. So inflation is going to come, but five years later, five and a half years later, we have not seen it. And now the Fed is going to taper.

Now, I want you to make one distinction, though, before you go on, please. I mean, you say we have not seen it. Of course, you're talking in very broad, general terms. We have had some inflation, just not the massive inflation that many have predicted.

Right. So the inflation that I'm talking about, of course, every year the inflation goes up by a little, but the inflation I'm talking about is. And the Gerald Talente, the Peter Schiff type of inflation, they say the world's.

Going to end with inflation.

Right, right, exactly. So I actually am a fan of Ben Bernanke. I think he's done a very good job. I'm not sure how.

Okay. Boy, I don't know if I'm going to have you on the show again.

I think he's done a great job at keeping the economy under control because we were in dire, dire straits back in 2008. I'm not sure about the new woman who's taking his spot. I don't know enough about her. But, you know, I think Bernanke's done a great job. And now the question, or not the question, but inflation is going to come. So all this money has been printed and it's, and it's in the economy. The question now is, okay, that the Fed is tapering, where does that money go? It's going to go to certain asset classes. I don't see it being spread out across all asset classes. And who knows, maybe real estate could, could be the, the byproduct of this inflation. Maybe it's a certain commodity, maybe it's something else. I don't know what it is. But we are going to see inflation in certain areas of this economy. I just don't see it being very widespread.

Okay, so, so here, here's the thing. And the real answer is we don't know. You know, nobody knows. And I agree with you to an extent, because all of these doomsayers, all of the Peter Schiffs and the Gerald Celentes and really the most economists believe, at least as I look at it anecdotally, I haven't formalized a survey or done a spreadsheet on this, but most believe that inflation is in the future and it's going to be significant inflation. And many believe hyperinflation. And if, if you just had to do math, like you said when you started doing the math and looking at all the quantitative easing and, and the bailouts, we should definitely have a lot of inflation by now. But we don't we have some. But it's not this sort of hyper runaway inflation that that many doomsayers have been talking about. And by the way, let's just remind everybody that Peter Schiff predicted gold at $5,000 an ounce before the end of Obama's first term. Although nobody seems to remember that except me. That's why I keep saying it. Okay. And I'll tell you, I have, I have been wrong too, because I predicted higher interest rates by now, and I've been very wrong about that. And I've been very open admitting that. And, and, and Gerald Celente is now predicting a total economic collapse in the first quarter of 2014. And he of course predicted that in the first quarter of 2009. 10, 11.

Yeah, I mean, he's been predicting that for the last 30 years.

I know, and eventually he's going to be right, I guess. And listen, I've had Gerald Celente on this show and on my holistic survival show as well. And you know, I like listening to Gerald Celente. I think he's pretty interesting and he's very convincing and you know, I like hearing his rants. And Peter Schiff is also very good in terms of, you know, he's like the master of the sound bite zinger. But the thing none of these guys seem to understand, Naresh, is that when it comes to the United States of America, it's a vacuum. We don't, we don't have to obey the laws of gravity or the laws of math or the laws of physics when it comes to monetary policy. Guess why? Well, I've said it before. We have the world's reserve currency, number one. Number two, we have the world's biggest economy. And number three, and possibly most importantly, we have the world's biggest military. So we can, we can force people, other countries to buy our debt. They, the rules do not apply to the United States of America. Do I think that's fair? No, I don't think it's fair. Am I glad I'm on the beneficiary end of that? Yes, I am. I'm much happier being a lucky American than an unlucky Chinese or Japanese person. Okay? Because I think they and much of the rest of the world are getting screwed by our spending and our monetary policy because they're the ones that suffer by buying our debt and basically being forced into it, whether it be through outright military might or the more subtle approach of the John Perkins economic hitman concept. And the other thing I didn't even mention, in those three things that America has that allow it to defy the laws of physics, defy the laws of math, defy the laws of gravity, are that America has the biggest brand. And that should not be underestimated. The power of the American brand name. And granted, I think we are going in the wrong direction. I think we are making, like, every mistake in the book. I, it, it upsets me greatly. I don't like it. But we can probably kick this can down the road for decades and decades to come. And all these purveyors of collapse and hyperinflation, they're probably going to be wrong. Okay.

Well, yeah, there are two things I want. You talked about kicking the can down the road, and there are two events that I see happening within the net, really within the next decade. The first one is the Jobs act. And I know you've talked a little.

Bit about possibly the only good thing Obama's ever done in my eyes. And you probably even like Obama, don't you?

No, I'm actually, I'm not an Obama fan.

I thank God he likes Ben, but not Obama. That's good. Okay, we got one half of the naresh equation down. Go ahead.

Yeah, well, the Jobs act, for the listeners who aren't so sure about it, basically the goal of the act is to spur entrepreneurship and small business, so it's going to be easier for small businesses to raise money. Right. And what this can do is essentially create a new industrial revolution. It's going to incentivize people to start businesses, to grow their businesses and to hire people. So I think that's a huge, huge plus. And 2014 is when it's going to be fully implemented. And over the course of the next decade, I think we'll see the fruits of all that work that's been done. The second thing is the amount of shale and natural gas we have in this country. There's so much down there and we finally have the technology to get it out through hydro fracking and all that. Now there are various political hurdles that the government and that these companies are going to have to go through over the next few years. But there's so much energy down there that the United States could become, or today it could be energy independent if we just tapped all those reserves and resources. So within the next 10 years, I think that's going to be another huge, huge force that's going to help the country and our economy, thus mitigating the chance of us kicking this can down the road and borrowing so much and spending so much in other words, that.

Bodes very well for the United States and allows us to keep spending like a drunken sailor and get away with it, which is basically what we're doing.

Yes, we absolutely are spending like a drunken sailor. It's not just this administration. Pretty much most of the.

Bush, Bush did it too. Democrat George Bush for sure.

Yep. Yeah, yep, yep. So I'm not, I'm not as gloomy and pessimistic as a lot of the libertarians out there. I think if you look at some of these other countries, you'd be thankful that we live in the United States of America, so.

Oh, yeah. And when you look at it in terms of a competition, the US Is just so well positioned. I mean, the whole concept of the JOBS act and you know, I talked about all of these incredible new Internet oriented business models and the sharing economy. Yesterday I used Lyft L, Y, F T, which is like Uber. And I talked about Uber on the show before and I just wanted to try Lyft out. And Naresh, there is literally no reason for anybody to be unemployed anymore. There is so much capacity in the system that can now be put to productive use. And this is actually an anti inflation concept here. So I'm going against, you know, a lot of my own speech okay here. But, but it's, it's a good thing. And the Lyft driver was telling me about another thing called Relay Rides and that's where basically what you can do is you can rent out your car. And the company that does it, Relay Rides, has, you know, all the insurance stuff covered. I guess I just downloaded the app on my iPhone and all of these companies now with the Jobs act are going to be able to raise money so much more easily and you know, the crowdfunding revolution and it, we are living in an amazing time and it literally gives me goosebumps when I talk about it. I have goosebumps right now. I mean, there are so many incredible opportunities coming our way that just bode well for the economy and for real estate investors and all of that. But, but let me not leave this conversation before we get to John Stossel without telling investors what it means to them. Okay? So if we have, say, for example, we have inflation and now it's not whether we do or not, of course we're going to have some inflation. Okay? That's just. Every central bank, every government, every economist believes that a little bit of inflation is good, usually around 3%. This is the whole concept of the Phillips curve and that concept of how inflation Creates jobs. And it really does in a way. And inflation is philosophically, is bad, but in many ways it's really a great business plan for governments. Deflation is very scary because what it does is it causes people to delay buying. And when you delay buying, you reduce the velocity of money and the economy just goes into this downward spiral. So nobody, but nobody wants deflation. And one time I was, I was doing a radio show on KABC in Los Angeles and the host asked me, well, Jason, what's so bad about deflation? That just means everybody pays lower prices. I mean, wouldn't that be good if everybody paid less for things? No, it would not be good because everybody would just wait till they got cheaper. I mean, when, you know, you know, look at, it's right after Christmas, right? You know, there's going to be a lot of sales right now and in January until about late January, they have all these big sales. So you wait. Your buying behavior as a consumer is that you wait for the sale and then you buy. Well, what if you knew that in, in a month things would be cheaper than they are now and in six months they'd be even less expensive than that? You would just wait, wait, wait, and that would be terrible. That's disastrous for an economy. We don't want people to wait. So there's always going to be inflation because frankly, it's just a good business plan. But the question is, will there be 1 or 2 or 3% inflation, reasonable inflation, or will there be 10 or 20% inflation, which is still considered relatively low compared to the historical examples of Hungary, Greece, the Weimar Republic, Russia, you know, after the Soviet Union fell, you know, any place, right, that's still very low. Or Zimbabwe, of course, the poster child, I can't fail to mention them. Or will we have hyperinflation where it's a thousand percent annually, Right? Well, maybe we won't have that because we can defy the laws of gravity. But think about it. Here's what, here's what this means for a real estate investor, or any investor for that matter, in anything. So if you have high inflation, my strategy of financing what I call packaged commodities, which are the ingredients of a house or an apartment building, wood, concrete, energy, petroleum products, copper, wire, glass, steel, those commodities that are traded and needed globally, not attached to any one currency, financing those with long term fixed rate, cheap debt below the cost of real inflation. Now that's what you do when you get a mortgage and inflation basically pays off the debt. And the double inflation arbitrage, as I call it is that the commodities appreciate at a rate slightly higher than the rate of inflation. And that's great. That's what the simpleton thinks is, is how they benefit. But the sophisticated person understands that the real benefit is the inflation induced debt destruction. And then you combine those two together and get this double inflation arbitrage. It's, it's the most wonderful thing ever. But what if that doesn't happen? What if we don't have very much inflation inflation? Well, then we will live in a world where we probably have fairly low interest rates and very low or almost zero interest rates on savings or on bonds. And the stock market doesn't do much of anything because the stock market responds to inflation. Gold and silver really don't do anything. And then the question becomes, Tina, there is no alternative. T I n a the acronym. Tina, there is no alternative. Where are you going to go to get yield? And in, in the interview I had recently with Harry Dent and Naresh, I think you booked Harry on the show actually for me. And, and you probably listened to that interview and you know, he, he at first sounded really bearish on real estate, right? But then when you got to really dissecting it and drilling down, he's very bullish on real estate. Because it all becomes a question of where are you going to go to get yield in a low inflation environment or a deflationary environment. You just can't get yield anywhere. There's nothing that performs. All you've got is the income property. It's the only thing that really works because you get the cash flow every month from the rent and you get a little bit of hedge against a little bit of inflation. You know, a tiny bit of 1, 2, 3% inflation. And historically real estate appreciates a little above the consumer price index, which is the, the official quote unquote indicator of inflation. Okay, so, so either way you'll hit a home run in an inflationary environment that will just put you so far ahead of all your friends and neighbors, it's unbelievable. But if you don't hit a home run, everybody else is going backwards because they have nothing there. There's nothing they can do to get yield in an environment of very low inflation. And, and you as a real estate investor in the properties you can find@jason hartman.com you can get projected cash on cash returns, meaning no tax benefits, no appreciation, just amount of money in versus amount of money back of. You know, those properties are typically performing at on the lowest, probably 8 or 9% annually up to on the highest, about 15 to 18% annually. So, Tina, there is no alternative. What else are you going to do? Where else are you going to get yield in a low inflation environment?

Yeah, and just to add to what you said, you talked about the difference between inflation and deflation. I guess he can put me in that hairy debt camp of I'm way more worried about deflation. I think it's easier to get deflation than it is to get inflation. Kind of like it's way easier to fail in life or to fail in business than it is to succeed. That's how I see the deflation versus inflation argument.

Yeah, but see, the government is in control of that question now. Japan is not. Because they don't have the biggest brand, the biggest military, the biggest economy and the world's reserve currency. They're not in control. America is. And, and so you know, when you talk about Japan's lost decades, number one, that came from a ridiculous inflationary cycle, at least in their real estate there in the 80s, to a huge 18 year long hangover. Okay, 18 to 20 year long hangover. So there is no way a government that can create money out of thin air, that is in massive debt, that has all those great characteristics America has, putting them in the catbird seat will allow any real deflation to incur. It's just, they're just, it's a terrible business plan, it's terrible for the economy, it's terrible for their debt because all the debt America owes mostly to China and Japan will actually increase in value in a deflationary environment. Why would they let that happen? They want to debase the currency and reduce the debt in real dollars. So yes, if, if math and gravity and physics were the things we had to live by, that could happen. But we don't have to live by those things. We can outdo those things with the disgusting magic. I'll put in quotes, in snarky quotes, okay, of our monetary policy and our, our money creation machine. So deflation, I mean, you agree that deflation would be a terrible thing for the economy and a terrible thing for the government. Right? Like the government does not want deflation and the government's in control of whether we have deflation or inflation. So what are they going to do? They're going to create inflation. Whether it be a nominal amount of 1, 2 or 3% annually, or, you know, maybe it gets out of control and the genie gets out of the box and it's 10, 20, 30, 100% annually. I don't know. No, nobody really knows. So you gotta be in asset classes where you can win either way. And I just can't think of another asset class that you can really win either way in.

Agreed. Completely agree. I think one of the few explanations that ties it into real estate and helps people actually put their money to use, so. I agree.

Yeah. Yeah. Well, good stuff. Well, Naresh, thank you for bringing some of this stuff up. And, and now that you've outed yourself as a Ben Bernanke fan. I don't know, man.

Yeah, well, just, just looking at the numbers, looking at where we were in 2008 and where we are today, I think he's done a good job. I can see why Obama asked him to stay a little longer than whatever his term was. And, yeah, I know I'm probably not very popular with your listeners right now. You're okay with you, but you're okay.

I'm just giving you a hard time. I, I appreciate you coming on the show and discussing some of these things because, you know, we really had to get them out there and, and keep booking these great guests. For me, I mean, you've. You just had some great ones. And upcoming we'll have leftist Noam Chomsky coming up. And then we'll have leftist Bill Ayers, who describes himself as a communist with a small C, not a capital C. Love it. But he, he was a great interview. I got to give Bill. Bill credit. He was. He was really a good interview. Noam Chomsky. Yeah. I don't know. I'll let the listeners be the judge on that one. But, but yeah, we got a lot of great stuff coming up. Listeners, be sure to get your tickets while they last for Meet the masters@jason hartman.com and, and check out the properties that are offering some of those great returns@jason hartman.com as well. And, and Naresh, thank you so much for joining me today. We've been talking for a while. Let's get to John Stossel. Okay.

Thanks, Jason. Thanks, everyone.

All right, well, we'll be back with John Stossel in just a moment. It's my pleasure to welcome John Stossel to the show. That's a name you've most definitely heard. I'm a big fan of his work. And, of course, he's with the Fox Business Network and he's out with a new book, and we will talk about that today, as well as some other pressing issues in government. John, welcome. How are you?

I'm good, thanks.

Well, good, good. It's good to have you here. So tell us about your Latest book, How many do you have now?

I had three. Give me a break. When I talked about how I finally woke up. But this current one, that was the first. And this one is no, they can't. In response to the big government cheer of yes, we can, which was, of course, the Obamacare campaign. And frankly, we can. We have done amazing stuff in America, but they took we to mean the state government and government can. Hence the subtitle, why individuals succeed but government fails.

It's amazing, John, that they keep trying this big government experiment. It's failed every time everywhere throughout history. What is it about the human psyche that we just want to, like, give up our power and have the nanny state take care of us? Steve Forbes was on recently and he said. He said that, you know, it's because in people's mind, government occupies the high moral ground, which, of course is completely untrue. But government doesn't want anything. It just wants to help us. But all that help seems to end up in disaster.

Well, true, and Forbes is right. I would add that we grew up in a family where mommy and daddy made decisions for us and protected us. And we evolved in a society where if you didn't follow the leaders of your clan and harvested the fruit at the wrong time, you probably starved and you didn't give birth to you. So we're trained to want to follow some leader and central planning makes sense if you. We have lives. I can't get my brain around how you design a sewage treatment plant. Obama went to Harvard and he's got all these experts and they have all this time to work on it. Instinct is when there's a problem to say there ought to be a law. They specialists who get elected, therefore the people vote on them, they'll fix it. And the alternative is the invisible hand. And it's invisible. So unless you're economically educated or you grow up in a part of the country where somehow people just get this, people don't get it.

It's amazing that you get it and you're in New York City. Talk about a place that doesn't get it right.

But I didn't used to get it. I used to be a liberal, and I only got it because I was a consumer reporter and I stayed on the beat and I kept watching regulation fail. Most people don't have that opportunity.

Yeah, that's certainly true. Well, give us your thoughts on this Obamacare mess. I mean, I just can't believe that the left isn't saying, gosh, they can't even launch a website for $100 million and have Michelle Obama's classmate, of course get the contract, which is ridiculous. But they can't even do the website. How are they going to run healthcare, for God's sake?

It's just crazy because the website will get fixed. I was already able to register in New York finally. And I think they just rationalize it that there are all those bugs on the layout. The detailed truth is a little more the fact that this Michelle Obama, Princeton classmate working for this company, cgi. Why does CGI get the contract? It's not an expert in software. It's an expert in getting government contracts. And to get a government contract, there's a 2,000 page booklet that tells you the hoops you have to jump through. And then for Obamacare, there's another 6,000. And so working in government, you end up hiring people who are experts at obeying those 8,000 pages. And Google is now coming in. I bet they're breaking all the rules in those pages and nobody will call them on it. And it's a good thing, but they have all these rules and you can't succeed under that environment. This is central planning. Central planning rarely works. You can say, well, airflow. Air France isn't bad, but Air France has to compete against private airlines. And Obamacare starts to ban private competition, yet instead still says, oh yes, healthcare is complicated. And as I'm having a heart attack, I'm in the taxi and I'm going to be shopping for which hospital to go to. There can't be a market in health care. But that's folly because you don't need to make a decision when you're in the taxi, when there's a market and word just gets out and which is the better hospital. And the bad ones decay and the good ones grow.

Yeah, but you've got these entrenched interests. That's why you were mentioning that there ought to be a law concept. And government just never gets smaller. No congressman comes aboard and repeals laws. They only make more. And you did a fantastic program on all of these laws and regulations. I lived in California most of my life, and until two and a half years years ago, I just couldn't stand it anymore. And every year it's another 800 laws on January 1st. I mean, I was raised with the idea that ignorance of the law is no excuse, but no one can possibly know the laws. We're all law breakers, especially if we run our own business. We're just breaking laws left and right because there's no way we can know them. And some of them are so nonsensical.

And every week they pass another thousand pages.

What do we do, John? What are we ever going to do?

It's not so clear. This could kill us off. And it's very hard to stop. You think about why Germany and Japan succeeded after World War II. Because we blew out all their guilds, we bombed them, the smithereens. They had to start over and then they prospered. It's very hard to get rid of this stuff. Thomas Jefferson said it's the natural progress of things for government to grow and liberty to yield. And that is what tends to happen. On the other hand, there's now a Tea Party movement, and I never thought welfare reform could happen. And the animal spirits of clever young people and capitalists often can grow the economy as fast as government. Thank goodness for Silicon Valley. I don't think it's an accident that the computer revolution happened in the two capitals farthest from Washington D.C. and before they had time to regulate them to death, they grew wonderful things like Google and Facebook. In France, the central planners said, this is a great thing, the computer. We're going to make sure France is the leader here. And they created Minitel and they spent a lot of tax money, gave everyone a computer, replaced the yellow Pages, the phone book. And the intellectuals cheered the foresight of the French government. But of course, they couldn't compete with the spontaneous order of the competition in Silicon Valley. And Minitel is a joke.

Yeah, very, very good point. Very good comparison, too. Well, what are you following most nowadays? I mean, what is on your agenda?

Hit on it.

Yeah, well, okay.

I've come to think that as I'm at Fox and I obsess over taxes and Catherine Sebelius, if she'll be fired, and I say, who cares? What really counts is this regulation. The constant increase of the spider web of little rules which strangles us.

What do you see the future looking like? I mean, this regulation and all of these problems, it may be our death knell. But I think if that happens, I think people are just going to migrate to places. I mean, people are moving to states that are more in sync with their political beliefs. That's a somewhat new idea, I think. I mean, usually it was for a job or, you know, and of course it's for jobs because the places with the most libertarian political ideologies tend to be have better business climates, of course, and more jobs. But, you know, it might be for jobs for weather, for family in the past, but now it's really for political ideology. So that's not the exact same thing as the job issue, although it parallels a lot. Do you think we'll see secession movements again? I mean, I don't know what can happen. This federal government is so intrusive.

I don't presume to know what's going to happen. I don't think many people would move for political reasons. I'm tempted. I live in New York City and I hate the political climate. People do move for jobs and there is a cool website now that shows you where people are moving and where the job climate is better. But even in those states nobody goes to. The better states are Florida, Texas, North Carolina, some in the West. Nobody goes to the state capitals in those states on a class tour and says, Mr. Legislator, what laws did you repeal this year? It's all about what laws have you passed. And they think that's their job. And then they appoint these big regulatory commissions and they think they're not doing their jobs unless they add regulation. So I don't know where people are going to move. In Europe, growth has stopped, but it's not that bad. And lots of people just ignore the laws. And unless the politicians want to get you, you don't get in trouble for it. The guy who wrote the book three felonies a day says someone like me who's active probably commit 6, but I don't know what they are and I won't get caught on them unless some obsessive government worker or left wing hater wants to dig it out and get some prosecutor to go after me for it. And then the prosecutors have unlimited time and unlimited money. Once they come after you like they're going after the banks, you have to pay up or your life is wrecked.

It's a form of extortion, it really is. And the scary part, the scary part now is that they can put it all together. You know, with the NSA looking at all of our traffic, all of our communications, it's not like it's any mystery. Of course for you or me it's pretty obvious what we think. But for the average Joe citizen, you post something on your Facebook page and gosh, you just worry about 10 years from now if that isn't going to come back and haunt you in a devastating way.

Well, I've always been aware that I had enemies, maybe because I became someone on the liberal network who was questioning the orthodoxy and people started to take me on. So I've always been pretty careful what I post on Facebook and so on. I think that's just the world. That's nothing to do with the nsa. Really.

It's a scary time. It's a scary time.

It's not a scary time. Let's not be old codgers wishing for the good old days because the world keeps getting better. We're living longer than most people used to die. By age 30 we have more pain relievers than we have Facebook and Google. In many ways it's a better time.

Well, fair enough and I agree with you. And you know, that's what I always wonder if, if with all of the debt and all of the unfunded entitlement obligations and so forth, if technology can't save us, you know, maybe technology will save us. Just progress with all of these weights hanging over our head with the generation Y situation and with these just massive obligations coming our way that we cannot possibly at least mathematically pay for.

Well, that's a good point. Title bust. This is really ugly. I don't know how that's going to work out because we're. When it comes time to stiff somebody, they say they don't want to default. But you're not going to stiff the Chinese, then you're going to stiff the old people who vote. I doubt that.

Stiff people through inflation. You know, it's just this progressive or.

That the third choice.

Right, right. And that seems to be the business plan of governments throughout history. You know, it's the most politically tolerable thing to just have the currency devalue. And you know, you mentioned old people. I mean they're the ones that get hurt the most because they've got savings instead of debt. The people with debt actually fare pretty well. Inflation pays the debt down, if you will. But people with savings and no debt, boy, inflation just destroys them. It's a really awful thing.

On the other hand, we old people have greater assets than the young people who are going to be told they have to pay for my health care.

Well, that's another way to look at it for sure. You probably. I'm sure you know about this report. I think it came from Darrell Issa that only six people signed up the first day that the website was open. And you know, a very small number after that in the, in the following days. Do you have any thoughts on that or comments? It just came out last night.

Yeah, it's ho hum. And I know people are making a big deal about that. But to me the greater threat is just the mental, the concept that I have it on my desk on my show this week. A two foot High law can micromanage health care and make it better. People believe that the government can't even count votes accurately. We take it for granted that in the private sector, you can go to a foreign country, stick a piece of plastic in the wall, and cash will come out and you can give it to a total stranger and he'll rent you a car for a week. And when you get home, visa and Master Mr. Card will have the accounting correct to the penny that we don't complain if they don't. Government can't even count votes once every four years without all kinds of snafus. And yet the instinct of people is to elect politicians who passed Obamacare. The website is the least of it. What happens when it gets to micromanaging the doctors in the hospital?

Oh, absolutely. And we see doctors that say they're leaving the business.

I mean, this may be a good side effect. We're not leaving the business. But if they're leaving Obamacare, we have doctors in Oklahoma who are now advertising prices. They're getting new customers from Texas, people who pay themselves. That's what makes a market work. In health care, for some reason, we've counted on other people to pay for us. And that's socialism. It never works for long. It takes a while to break down. It took the Soviet Union 70 years, but only a market works. And people are becoming more precious. Price consciousness. Now, because of this Obamacare debate, health saving accounts are up.

Yeah, that is a great side effect, you know, is the price consciousness. And I remember John, last year when I went in for my annual physical, I took my dog in for his annual physical right around the same time. And it was amazing. When I went to the doctor's office, there was no discussion whatsoever of what anything cost. I had no concept of it. Yet when I took my dog to the vet, I had to make decisions. You know, do I want to do the. The bigger blood panel and test for more things or the more basic one, There were decisions and costs attached to it. When I go to repair my car, it's the same way. Why is it with healthcare that it's. We can't talk about money. Nobody knows what the price of anything is when they go in to manage their health care. It's.

It's crazy because insurance companies pay for it. That directs the market. I mean, you need insurance for catastrophes. But it's the worst part of capitalism and the tiny piece of medical care where you do pay yourself. Lasik eye surgery say prices go down, quality goes up, and the doctors give out their email addresses and cell phone numbers.

Right. You can reach them and they're reviewed on Yelp and other places, you know, so you can find out if they're a quack or they're good. I mean, what's wrong with any of this? This is great. That's the way it should be.

What's wrong with that is you have to pay with your own money, but it's not like it's not your money when the government pays for it. You can say, oh, it's fairer because the rich people have to pay for the weaker, but it destroys the market.

Yeah, I know. We shall see how it all plays out, but I don't think it will be positive or good. Hey, I just want to ask you real quickly before you go though, about your career. When did you change your position? I mean, you changed your political position along the way at a certain point. And tell us about some of the fallout of that really quickly, if you would.

I won 19 Emmys being a liberal bashing business. And then I watched regulation fail and I started to criticize government. I stopped winning Emmys. Peter Jennings wouldn't look at me in the hall of abc. It was like I betrayed the objectivity of ABC News. And it was ugly there for. I mean, they did grudgingly, partly because of market competition. I got another job offer and to keep me, they agreed to give me primetime specials, but they just didn't like them. And, you know, I shouldn't complain that nobody was shooting at me.

Why is the media so far to the left? Most of the media, it's just, it's. It's the monologue media, what I call versus the dialogue media. The new media is more center right, but the old media is so, so liberal. I mean, why is that? I mean, you know, Peter Jennings, etc.

Well, it's funny that the now Peter Jennings and. Well, not Peter Jennings, the late Peter Jennings, but most of the HC people, Martin Bashir who were presented there is down the middle people. They're on freaking msnbc. At least now they have to acknowledge they were on the left before they said, oh, we're in the middle and only fossils on the right. Why does it happen? I think it's some left brain, right brain thing. And the kind of people who are analytical thinkers tend to go into science business. The people who want to micromanage your life and have this feeling that central planning can work. They go into law and journalism.

Yeah, it's interesting. Well, hey, of course the book is available in all the right places on Amazon.com I think you've got five stars with like almost 300 reviews. So congratulations on another great book. Give out your website or your Twitter or whatever you'd like as a resource so people can find out more.

Johnstossel.com Works or no, they can't.

Is the book fantastic? Well, John Stossel, thank you so much for joining us today and keep up the good work.

Thank you.

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