CW 736 FBF - American Demography from Baby Boomers to Generation Y with Ken Gronbach Author of ‘Age Curve’

This show is produced by the Hartman Media Company. For more information and links to all our great podcasts, visit hartmanmedia.com welcome to the Flashback Friday edition of the Creating wealth show with Jason Hartman. As he rapidly approaches 1000 episodes of this podcast, he has hand picked individual episodes that he feels is going to be good review for you. To prepare you for the future by listening to the past. Let's dive in.

Welcome to the Creating wealth show with Jason Hartman. You're about to learn a new slant on investing, some exciting techniques and fresh new approaches to the world's most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine, self made multimillionaire who's actually been there and done it. He 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.

This is your host, Jason Hartman and I've got several things to talk to you about today. But before we dive into all of that, as you know we've got our Meet the Masters event coming up. We only do it twice a year and I've got our very renowned speaker Mark Kohler here with me and he's going to cover four or five good topics in a very short talk this session of Meet the Masters coming up this Saturday. And I wanted to just have Mark on to talk about what he's going to talk about. Mark, how are you?

I. I am awesome and thanks so much for having me. I think we're going to be talking about our bracketology for the big dance and the March Madness. Is that right?

No, we're not going to be talking about that, but we are going to be talking about some financial topics, not professional sports. And we're going to talk about the sport of real estate investing. Mark, I really like this first topic scams, the big scams that are going on out there in the marketplace now and how to avoid being scammed as a real estate investor. Tell us what you're going to talk about. There's a.

You bet. I love it.

Jason, I'm so excited to come to the event. This is a huge topic. As a CPA and an attorney, I get clients come in all the time asking, Mark, is this for real or this strategy or that Strategy. And what can I do in this situation? Am I getting taken advantage of? And there are so many different scams out there that I want to cover that I know alone can save you thousands of dollars in just lost tax strategies or terrible lawsuits. And so really we'll prob have four or five that are just in the nuances of them. And I just want to make sure everybody walks away with more protected when they go out to the investment world.

Yeah, no question. I just got off the phone. I just had a 40 minute conversation with an investor who got scammed on a property with a wraparound mortgage. Well, actually several properties that this investor bought with under wraparound mortgage guidelines. And the promoter of that just really, it looks like they got really, really burned. Really scammed. And you know folks, the most exp seminar you ever attend is the real life seminar this person that I mentioned lost. It looks like they're going to lose probably about $160,000. So again, come to meet the masters and learn how to avoid this stuff. It is the cheapest seminar you will ever have. Mark, you're also going to talk about scams as they relate to entities, NV corporations, Ponzi schemes, things like that. But then beyond the scams and the kind of negative stuff there, you're going to talk about how to use one's HSA health savings account, not just their IRA to invest in real estate.

Right, Exactly.

Not only can these scams hold us back from investing in real estate or really going on and doing much more with our American dream that we all have for ourselves, it can hold us back from some real strategies that actually work. And I want to break down Obamacare as it stands right now and what strategies work best for small business owners and investors and these health savings accounts and health reimbursement arrangements and how can I write off my health insurance and how does real estate give me more opportunities for healthcare planning? Many, many people are amazed with this, Jason.

So we'll have a few minutes to.

Break that down and point people in the right direction too.

Remember, you're listening to Flashback Friday. Our new episodes are published every Monday and Wednesday.

Yeah, and then you're also, you're really going to cover five topics and then the next thing you're going to talk about is some of the nuances of the real estate professional laws. Now that that has been around years and people are going through audits and there's, there's just a lot of nuance there. And you know, of course we've, we've talked about it at every master's event. However, as more audit dictates tax policy, there are some nuances that people need to know. So it's there's constant updating on this topic of this great deduction where people can get the best tax deduction in the world. Income property, the most tax favored asset class depreciation being non cash write off. Tell us more about that.

A lot of people are really surprised to find out that their CPA doesn't understand this. And if you're trying to figure this out on TurboTax, it can be a nightmare. And not every CPA understands by any means the nuances of an active real estate investor, a passive investor, a real estate professional. What is active versus material participation? Does my LLC or S Corp have to play a role? Do I have to have an entity? All of this plays into and I'm going to give you the perfect equation so that you can determine if your tax advisor really knows what the heck they're talking about.

Well and that is so true. You know, the problem is we're liable for the mistakes our professionals make. So that's critically important. And you know, good old turbotax Timmy, the head of the treasury department, he couldn't figure out TurboTax himself. So he says.

So don't fall victim to that now. You know the other thing, Mark, is you're going to talk about hot deductions and every year this changes and maybe some old deductions that you can use in new ways, but also some new deductions that are available to us as real estate investors. Anything more in hot deductions you want to mention right now, before Saturday?

Well, you bet.

And this is one where you can walk away with real strategies again that are going to save you money come Monday after Masters. Because being a real estate investor opens the doors to a lot of tax write offs the average American can't take advantage of. We are going to hit home, office, travel, dining, entertainment, real estate, education expenses. I want you to know how to write off your master's event and your travel there, your lodging and we may even talk about throwing your kids on payroll. All these different things are the hottest deductions in 2012 to save taxes. And if you're going to be a real estate investor, you want to at least know what they are in general. Even if we don't dive into all the detail, you're going to have a great checklist to go work with for the rest of the year.

Taxes are the single largest expense any of us will have in our lifetime. And we have got to learn how to save on taxes because that is our biggest life expense. No question. And then lastly, you know, Mark, my grandmother a long time ago said to me, Jason, the hardest ship to sail is a partnership. And you know, I agree with her. That's true. And it's especially true in business in things that are really complex with a lot of moving parts. But you know, in real estate, I've had really good partnerships in real estate because the asset is arm's length. It's pretty simple. It doesn't have a lot of moving parts. And for those of you who are interested in joint venturing, if you're interested in partnering with other people, you're going to talk just briefly on how to create the perfect joint venture agreement, right, Mark?

Yes.

And of course, as many of you can imagine, it's a huge topic. We could do a whole day's workshop on this. But there's some certain things everybody needs to know because like you said, Jason, a partnership can be the best thing for your business or it can be the worst thing for your business.

So I want to talk about some.

Basics of what to look out for when partnering with others, what to type of agreements you should have. And folks, it's not a napkin at Denny's in the middle of the night. That's not going to cut it.

So we're going to hit a few of those points.

It's got to be a little more involved than that. Well, good. Hey, Mark, we look forward to seeing you on Saturday and we're going to have a great Meet the Masters event. For those of you who haven't registered yet, do so@jasonhartman.com click on Events and you can still get the very last of the early bird pricing if you register really, really quickly@jason hartman.com Mark, thanks again. I'll see you Saturday. Look forward to your talk.

Thanks.

I'll see you then.

I hope you found that interesting. We've got a great Meet the Masters coming up and if any of you sign up this week, you still get the last of the early bird pricing. It has escalated a bit. But in order to offset that, I'll tell you what I'll do for you. I will throw in to anybody signing up this week to join us. I will throw in a free Creating wealth home study course in the digital version that's $297 value and I will throw that in for you for free if you already own that course, will work something out and give you a $300 credit in the store for something else at Jason Hartman dot com. So we'll have our guest here today in just a moment. But you know, I gotta tell you, I talk about it all the time and you've heard me rail about Wall street and Goldman Sachs and all of this stuff. But two of our listeners, Ruben and Rodney, both totally separate parties in separate parts of the country, sent me an interesting article about a Goldman Sachs executive who resigned. And you may have seen this rather scathing and public letter that was in the New York Times and other places by Greg Smith. And thank you again, Ruben and Rodney, and if anyone else sent this to me also, thank you as well. Pardon me for not recognizing that, but I get a lot of articles from a lot of people and I love that. I appreciate that. So keep sending them on over to me. And many times I'll talk about them on the show. Many times I'll just digest them for my own edification and bring them back to you in some other form on the show in terms of good income, property investment advice or economic advice. But you know, this is really telling. And I just recorded an interview today that will be broadcast on a future show, a guy who's the founder of a site called Investor Watchdog. And you know, he talked about all the fraud and the antics on Wall Street. You know, he's been in the financial services industry for over a couple decades and it's just amazing. But I just thought I'd share this with you. And again, this is the resigning executive from Goldman Sachs that happened just last week. And this doesn't sum up not just Goldman, but the culture of Wall street in general and why we need to be direct investors so that we follow commandment number three. And we own and we control our own investments and we don't relinquish our financial future to anybody else. That's why income, property investing, trustee investing, private lending, hard money lending is the way to go. Or running our own business, those things. So we don't relinquish control. So I'll just share this with you. If you didn't catch it in the media, or even if you did, it wouldn't hurt to hear it again. It's not too long. It says why I'm Leaving Goldman Sachs by Greg Smith. Today is my last day at Goldman Sachs after almost 12 years at the firm, first as a summer intern while at Stanford, then in New York for 10 years now in London. I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. I can honestly say that the environment now is as toxic and destructive as I have ever seen it. To put the problem in its simplest terms, the interest of the client continued to be sidelined by the way the firm operates and thinks about making money. Goldman Sachs is one of the world's largest and most important investment banks and is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for. It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs success. It revolved around teamwork, integrity, a spirit of humility and always doing right by our clients. The culture was the secret sauce that made the place great and allowed us to earn our clients trust for 143 years. It wasn't just about making money. This alone will not sustain a firm for so long. It had something to do with the pride and belief in the organization. I am sad to say that as I look around today and see virtually no trace of the culture that made me love working for this firm for many years, I no longer have the pride or the belief. But this was not always the case. For more than a decade, I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people out of a firm of more than 30,000 to appear in our recruiting video, which played on every college campus we visit around the world. In 2006, I managed the summer intern program in sales and trading in New York for 80 college students who made the cut out of the thousands who applied. I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work. When the history books are written about Goldman Sachs, they may reflect the current Chief Executive Officer Lloyd C. Blankfein, and the President Gary D. Cohen, lost hold of the firm's culture on their watch. I truly believe that this decline in the firm's moral fiber represents the single most serious threat to its long term survival. Over the course of my career, I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle east and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave. How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm and are not currently an axe murderer, you will be promoted to a position of influence. What are the three quick ways to become a leader? A Execute the firm's axes, which is Goldman speak for persuading your clients to invest in stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. B Hunt elephants in English. Get your clients, some of whom are sophisticated and some of whom aren't, to trade whatever will bring the biggest profits to Goldman. Call me old fashioned, but I don't like selling my clients a product that is wrong for them. C Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three letter acronym. Just a reminder, you're listening to Flashback Friday, our new episode. Episodes are published every Monday and every Wednesday.

Now.

Just my commentary. You know he's referring to CDOs and all of the other acronyms we all learned right after the financial crisis hit on with the letter here today many of the leaders display a Goldman Sachs culture quotient of exactly 0%. I attend derivative sales meetings where not one single minute is spent asking questions about how we can help clients. It is purely about how we can make the most money off of them. If you were an alien from Mars and sat in on one of those meetings, you would believe that a client's success or progress was not part of the thought process at all. It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as muppets, sometimes over internal email. Even after the sec. Fabulous five abacus God's work. Carl Levin Vampire Squids no. Humility? I mean come on. Integrity. It's eroding. I don't know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with clients goals to Absolutely every day. In fact, it astounds me how little senior management gets a basic truth if clients don't trust you, they will eventually stop doing business with you and it doesn't matter how smart you are these days. The most common question I get from Junior analysts about derivatives is how much money did we make off the client? It bothers me every time I hear it because it is a clear reflection of what they are observing from their leaders about the way they should behave now. Project it 10 years into the future. You don't have to be a rocket scientist to figure out that a junior analyst sitting quietly in the corner of a room hearing about Muppets or ripping eyeballs out and getting paid doesn't exactly turn into a model citizen. When I was a first year analyst, I didn't know where the bathroom was or how to tie my shoelaces. I was taught to be concerned with learning the ropes, finding out what a derivative was, understanding finance, getting to know our clients and what motivated them. Learning how they define success and how we could help them get there. My proudest moments in life, getting a full ride scholarship from South Africa to Stanford University, being selected as a Rhodes scholar, a national finalist, winning a bronze medal for table tennis at the Micaiah Games in Israel known as the Jewish Olympics have all come through Hard work with no shortcuts. Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn't feel right anymore. I hope this can be a wake up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people no matter how much money they make for the firm and get the culture right again. So people want to work here for the right reasons. People who only care about making money will not sustain this firm or the trust of its clients for very much longer. Greg Smith is resigning today as a Goldman Sachs executive director and head of the firm's United States equity derivatives business in Europe, the Middle east and Africa. Well folks, there's an insider saying it for himself. And you know, it's really interesting because I'm gonna get my guest booker on the show that books all of the great guests for the show. And I had an interview set up with an author who's a former Goldman Sachs employee about a week, maybe a week and a half ago now. And it was booked and I called him and he didn't answer the phone. And I called again a few minutes later thinking he might have been on another line before our interview. And he didn't answer the phone, never returned my call. I called my guest booker and she said, well, he was kind of hesitant when he committed to the interview and he said he wasn't going to criticize Goldman Sachs or answer any tough questions about them. So, you know, I'm actually going to have her come on and just talk about that experience. But the moral of the story is be a direct investor. Wall street is the modern version of organized crime. It's the new mafia, folks. So there you go. But you probably already knew that if you're a regular listener. One more thing before we get to today's guest 1. These other investment clubs out there had a property and they happen to have the same vendor as we do in one particular market. And it's interesting because they're using the same software we're using, too, and our performa for the same property. Same software, but different numbers. Because we are more stringent about the numbers, we make our local market specialist, our providers of inventory use. When doing these performas, we are more conservative. We put in numbers that make the investment look inferior to what our competitor is doing. And here is an example. This is their pro forma. And I won't tell you the exact details because it's too easy to figure out who it might be and what the property might be. But I'll just tell you a couple things. Their performa shows this property, by the way. It's a fourplex, okay? So you understand why the numbers are the way they are. Their performance shows, and this is a great property either way you slice it, no matter who you buy it through, them or us. But I just want you to see how much more conservative we are in these performas. They show cash flow of being positive. Cash flow $996 per month, or almost 12,000 per year. We show same property, mind you, cash flow of being positive, only $847 per month. About 150 bucks per month less, or almost $2,000 per year less on our pro forma for the same property, mind you, we show the capitalization rate at 14.9%. Damn good no matter how you slice it. They show it at 16.9%. We show the overall return on investment at 46%. They show it at 51%. We show cash on cash return at a whopping 32%, but they show it at 38%. And the reason is because the assumptions that they use to drive this pro forma and those numbers. Now, granted, this is a phenomenal property. Not all of them are that good. But it is an older property, so the maintenance costs are higher. And we perform on a property this age a whopping 8% maintenance. They only put in 3% maintenance. We put in a vacancy rate of 8% or one month per year. They put in a vacancy rate of only 5% less than one month per year. So there you go, folks. These are the reasons that you want to be investing with a prudent company who is going to, you know, I've always tried to live by the motto promise less and deliver more and be very realistic about these investments and what they can bring. Let's get to today's guest and we will be back with that in just a moment. Be sure to join us. Starting this Friday, we've got a dinner hosted by us, a very nice dinner at the Hyatt Regency Irvine, 7 o' clock Friday evening at the Six Park Grill restaurant there. And that will be the start. Just kind of fun networking. That'll be our dinner reception hosted by us. We'll drink some wine, we'll have a nice meal. And then Saturday morning we will go starting at 9am all day until 9pm and then Sunday 9 to 6. So we'll see you this weekend. I may get one more show out before Meet the Masters, but if not, we'll see you Friday. Hang on. We'll be back with our guest in just a moment.

Have you listened to the Creating wealth series? I mean, from the beginning? If not, you can go ahead and get book one that shows 1 through 20 in digital download. These are advanced strategies for wealth creation. For more information, go to jason hartman.com.

My pleasure to welcome Kenneth Grohn back to the show. He is a demographer and author of the Age how to Profit from the Coming Demographic Storm. And you know, I think demographics are destiny and I think you will learn a lot from today's interview. And I read his book a few months ago, enjoyed it quite a bit and just wanted to get him on the show because I think when you're looking at economic trends and Ken made the disclaimer to me that he is not an economist, but a lot of them are determined by demographics. So, Ken, welcome. It's good to have you on the show today.

I'm delighted. My pleasure.

Tell us what's going on in this demographic storm. I mean, when you say demographic storm, what is it you're referring to?

Well, there are many, many changes that are taking place. The the boomers are beginning to retire. Boomers born 1945-1964, about 78 million of them live births in our nation with a little bit of immigration thrown in, are beginning to retire. So they're moving out of the labor force. You have Generation X born 1965-1984 is a smaller generation. Wherever they go, they can't keep up with the consumption or production or anything of the boomers because they don't have the critical mass. They're actually smaller. And then the most wonderful thing about our nation is we had kids starting in 1985 after the diminutive generation X, which we can talk about, but 1985, we began the generation Y, and generation y was born 85 to 2004. They're bigger than the baby boomers. They're consuming at record levels. They're a very, very exciting group. But the most important thing about them is the United States is the only Western culture and the only industrialized nation that has a generation Y, because we are the only industrialized nation, the only Western culture that has above replacement level fertility. We had kids. EU did not have kids. Eastern Europe did not have kids, and especially China did not have kids.

Well, would it be fair to argue, though, that we did a lot of that, really, through immigration?

Generation Y, it doesn't matter to me.

Well, yeah, okay, fair enough. It's just numbers, right? As you said before. Yeah. It's your opinion.

Sure. Well, I'll give you an example. In 1957, we had a record year for babies. 4,300,000 babies were born in 1957, and that record held for 50 years. We broke the record in 2007 with 4,317,000 babies, 25% of which were Latino. So I tell people all the time, I say, listen, you have a criticism of Latinos. You don't like immigrants. I said, without the Latinos, our fertility would be below replacement level, and in 50 years, we wouldn't have a country and you wouldn't be collecting Social Security. So go find a Latino, kiss them on the lips and thank them for coming.

Well, because you got to have. And what you're pointing out there is you've got to have the younger workers there to support the older ones who are on Social Security and so forth. And that is the big problem that Japan and Europe face. They just don't have the fertility. Russia, too, you know, I mean, you look at Russia, I mean, that's just a dying country. Literally, by demographically, it's going out of business.

My perspective, you nailed it. And that is when you don't have children, when you don't. I'll put it this way. Every nation needs heavy lifters. Now, the heavy lifters. I don't care if you're a Polynesian island with 10,000 people or you're the United States. There's a part of your population that cares for the elderly and cares for the young because they actually kill more than they eat. They produce more than they need. The heavy lifters. Heavy lifters in our country are essentially defined by the Bureau of Labor Statistics as being between 40 and 60. Defined even further, it would be, if you wanted to narrow it down, 45 to 55. Right now, we have baby boomers superimposed over that age group, and we have a really good body of heavy lifters. So we made a recovery from 2008. If the boomers weren't in the heavy lifting stage during 2008, we wouldn't have recovered. What's going to happen going forward is Generation X, born 1965-1984, 11% smaller than the baby boomers, is going to be superimposed over the heavy lifting stage, and we're going to have issues.

So. Yeah, yeah, yeah. Generation X. I remember taking a marketing class at UCI, and it's interesting that we've both had, you know, lives in California at various times, and I was taking this marketing class, and I remember Generation X was such an oddball generation, and I'm a Gen Xer as well. But they divided it into, like, that cohort into six segments. I mean, tell us a little bit about Gen X. And by the way, my understanding was Gen X was only like. And I know all this depends who you talk to, but only like 46 million. So really, really small.

No, it's. Gen X is thinking about 69 million. I don't have it in front of me.

Oh, okay.

No, it depends on. Again, it depends on. Not on who you talk to, but because the census data is available and it's very accurate.

It just depends where you do the cutoff of the years.

Yeah, yeah. If you, you know, and you essentially tipped your hand when you said people divided into six categories. Well, what's that? If you. If you read it closely, it's probably all about personalities. And that's psychographics. And I'm sorry, but psychographics from. From a demographer standpoint is. Is subjective. Somebody's opinion. Yeah, somebody made that up. Yeah. No, I. You can't make the numbers up.

Either the babies were born or they weren't. And between 1965 and 1984, we started a trend based on an attitude in this country called zero population growth, and that was that people were the problem. All we had to do is reduce the number of babies born and we could solve all our problems. If you go from 65 to about 74 and then back up to 84 right after Roe versus Wade. We had from the peak of the boomers to the bottom of Generation x in about 1974, a 25% free fall. We weren't producing babies. So how is their personality shaped by when they were born? They've been in demand, absolute demand, since they were born.

Well, you know, that was a really interesting thing you just said. I mean, Roe v. Wade, abortion, how much responsibility did that take for our declining birth rate? Or was it just the sort of the, the liberal ideology of ZPG or zero population growth and environmentalism and that whole people are the problem thing? Which, by the way, I don't subscribe to that because I think it's scary. I think that's reminiscent of Nazism.

But thank you very much, because that is exactly what it is. It is downright frightening. Jason.

If you take a look at, and this is a little bit of an aside, but if you take a look at global warming, do you know what the ultimate solution for global warming?

Well, less people. Let's just kill everybody.

Yeah. Is a worldwide one child only policy. You know what that is? That's the end of mankind. No, you can't do that. So back to Generation X, Roe v. Wade. We've aborted about 1 million babies a year ever since. So it's a significant number in the last almost 40 years.

Yeah, it sure is. I mean, I mean, if the birth rate at the highest birth year you said was what, 4 million or 7 million?

It was 4 million.

4 million.

4,300,000 in 1957 and it dropped to, you know, around 3 million. So. Yeah. Was it, was it, was it a significant factor? But Roe v, remember, Roe V Wade was 1973, and then in 1974 we hit the bottom. But then it started to creep back up as the baby boomers started generating babies. So did Roe v. Wade cripple the United States? No, I don't think so. I mean, I wouldn't support it because demographers would never support anything that would artificially influence a birth rate. It's just, you know, that's who we are. We're just numbers people. So would I indict Roe v. Wade? I think Roe v. Wade was probably more of a contraception than it was a birth control. I mean, total birth control control. So I don't know.

I look at it, I draw conclusions, but my conclusions simply are Generation X is 11% smaller than the baby boomers. And when it comes to producing, that is income. And then Taxes, owning big homes and then paying taxes. They're not going to be able to do it. At the level of the boomers, it's impossible. But there is a silver lining to that, and that's the Latinos and a couple of other things that are going on too.

You made the disclaimer that you're not an economist. Just really quickly. It may sound overly simplistic, but what's a demographer?

My daughter's in the backseat of our car, I'm driving. Her friend leans over and says to her, what does your dad do? I mean, I can hear it. And my daughter says, he's a demographer. And her friend thought for a moment, bright kid. And says, is that like an economist or an accountant? And I could see my daughter, she's thinking. And she said, no. Economists and accountants count money and stuff. My dad counts people, and people are more important than money and stuff. So that's my basic explanation, because I share the platform routinely with economists and I tell people selfishly that demographics precipitates economics. It's not the other way around. We were first, then money.

Okay, yeah, makes sense. And your background? It's in marketing, though. I mean, when you got hired out of college, Volkswagen, Porsche, Audi, that was a marketing position, right?

Absolutely. What I did is when I bailed out of California, just like you did.

I came back to Connecticut, I married a wonderful girl in California, and we just packed up and came here the day after our wedding. A few years later, we started an advertising agency and ran for 20 years. We did consumer and retail based advertising, which is kind of unusual. One of our clients was American Honda motorcycle. We had 140 dealerships in the Northeast that we were responsible for and we printed money with them. American Honda was a wonderful client. It was going along swimmingly for years. And then in 1986, suddenly the bike stopped selling and American Honda couldn't figure it out. It was the same for Kawasaki, Suzuki and Yamaha. No one could figure it out. By 1992, the sale of Japanese motorcycles had fallen 80%. And they closed all the dealers. All the dealers closed, with the exception of those that carried lawnmowers or outboard motors. And no one knew why. And it wasn't until 1996 that I made a discovery. And that was, I'm reading about.

The political involvement of Generation X in an editorial in a major newspaper. And the gist was that Generation X, born 1965-1984, was a bunch of lazy slacker couch potatoes and they weren't going to involve themselves in the political process, and what's the United States going to come to if this is our future? They said they didn't vote at the level of the boomers, they didn't give money at the level of the boomers, they didn't run for office at the level of the boomers, and they didn't give their time at the level of the boomers to the political process. And I said, you know What? I have 40 people working for me in the ad agency, and 30 of them are Gen Xers, and I don't have any lazy people. So I called in a research department and I said, find out everything you can about Generation X, because there's something missing here. This is not correct. Came back a couple days later and he said, it's true. I said, so they're lazy? And he said, no. He said, There's 11% fewer of them. And I did some math, and I'm thinking to myself, 11%. So when the boomers pass through a market, motorcycles we knew, we sold to men 16 to 24 years old. That was it. 25. They sold a bike, bought a ring, got married at 26. That was the macro assumption you could make accurately. So I'm looking at this and I'm thinking the baby boomers passed out of the motorcycle market, and along comes a generation that's 11% smaller. And we're working with businesses that run on 5% after tax profit. I said, this would erase any business. So we started doing. We did our homework on Generation X and we found out that they shut down maternity wards, that they closed toy stores, that they shut down 30% of the public schools. They didn't shut down colleges because they went to college at a higher rate than the boomers. They shut down the motorcycle industry. Detroit could not figure out how to sell enough cars to them, so they punished Detroit. And in 2008, when it was the turn of the baby boomers to sell their homes to the generation right behind them, for every eight homes there were. Excuse me. For every 10 homes, there were only eight buyers. And I know there was a lot of. Certainly a lot more complexity that went on in the decade before, but that was certainly a tipping point for the financial crisis or the housing crisis. How about that?

Yeah, well, that's Generation X, Sure. Yeah, that's. That's part of it. One of the other things. And I know you count people, but do you count their status in terms of married or single? Because there are more single people than ever nowadays. I mean, literally half the country is Single. And I think the politicians are just starting to understand that this is a demographic group as well, even though it's spans different ages and socioeconomic levels. But I noticed that it's making a real difference in real estate investing. I mean, years ago, for example, as a real estate investor, you wouldn't want to buy a one bedroom property very much because you know, you would consider that to be a really transient tenant. And you know, it still is a more transient tenant, no doubt, but less so. Smaller units are actually more popular nowadays because, because you've got so many singles. Do you have anything to say about the singles market?

Yeah, well, I can tell you this, and that is that generation y is currently 8 years old to 27 years old and they're just now bumping up against the age where we historically have our first marriage. So you're going to see the number of marriages or the number of couples increase dramatically because generation Y is significantly bigger than the generation who got married in front of them. And then you have the baby boomers, of course, that literally, and I had to bet this almost on a bet, but baby boomers suffered a 50% divorce rate. So that's probably the answer. But I think you're going to see the number of couples increase dramatically as Gen Y starts to marry because it's a huge generation.

Well, yeah. Okay, so what you're saying there is that because it's the largest demographic cohort ever in American history, and that's Gen Y. That is now the, the oldest Gen y are now 27 years old. So they're bumping right at the age where they're going to start to couple up. But you've still got baby boomers with a very high divorce rate. What about Gen Xers? What do they do in terms of marriage?

It's kind of a mystery group. I believe they have the same problems as the boomer. I don't have those statistics in front of me, but I do know that one half and the current census data, one half of all first time of all marriages end in divorce. A half.

Yeah. So it's not necessarily. And by the way, it's kind of interesting to compare that with supposedly the highest divorce rate country in the world is Austria. And Austria has a 69% divorce rate. I remember reading about that about two years ago. So ours is 50%. We're not doing so bad.

Yeah. But in Germany, Germany, Austria, Germany. I believe the statistic I've seen recently is one in seven couples get married. So I, we have certainly the world is Changing?

Well, you mean one in seven people get married? Not couples, but well, yeah, I guess they're couples before they're married.

Yeah, yeah, no, I think that's accurate. One in seven couples. Jason, the world is changing. The EU has stopped having children. Eastern Europe has stopped having children. Things are changing. Dramatic things regarding the breeding of human beings is changing significantly. But in the long term, that bodes very well for this continent because I believe that people are going to bail out of Eastern Europe, out of the EU and out of Asia, out of Africa and come here to this continent and bring their brains and bring their money. And I think the economy of this, of the Americas is going to go straight up.

Yeah, yeah. Well, you know, that's interesting that you say that, that you think our best and brightest days are really ahead of us. And that's because the U.S. although it's becoming more, you know, now this geopolitical statement here, but it's becoming more socialistic, many would argue, but less so than Europe for sure. And so people have always viewed, I mean, as long as I can remember, and you know, I'm not old enough to know everything, but they've always viewed the US as having far more opportunity than any European country. I mean, there is no ceiling in the US as to what you can achieve. You look at all of the incredible entrepreneurs and innovators that this country has generated and all the wealth it's created, created still that way. I mean, people want to argue that China even is more capitalistic than the US and there's more opportunity. I say, bah humbug. I think still the us it's a bell curve, it's comparative. Yes, there's a lot of things wrong with the U.S. but man, compared to what?

Well, here. Can I give you my perspective on that?

Sure, yeah.

Just Quickly, last year, 2011 recently saw statistics that about 21,021. So it's in the tens of thousands high net worth Chinese have moved into the country. And where they've moved, they actually began in western Canada, Oregon, Washington, Northern California. Chinese are flooding into this country. Why wouldn't they? One, they worked hard, they achieved some wealth and they would like to raise a family. And those are two things you cannot do in China. So China has 1.3 billion people. China also has under 30 years old, a deficit that they have created through an artificial birth control system called the one child only policy. They have a deficit of 400 million.

People, which means they have in about 20 years, I mean, China's going to be in big Trouble, right?

No, it's less than that. It's starting already because it doesn't take. Once you start artificially tampering with your population, you create enormous problems. Yeah. They're not going to have a labor force, they're not going to have taxpayers, they're not going to have producers, and they don't have Social Security. So they're going to have in 15 years, a half a billion elderly with nothing to fall back on because they have literally obliterated the family. Also, China does not have an organizational structure in their corporations like the United States. They run corporations literally on family and they've destroyed that. My take on China, they have 10 years before they're very serious economic issues and in 15 years they're not going to be able to feed themselves.

So what does that mean geopolitically? Yeah. What does it mean for us?

Well, I'll tell you what it means again, from my perspective. I look at the globe and I look at Canada, United States, Mexico, Central and South America, and I look at the fact that it's surrounded by water and I think of the fact that we have the biggest navy in the world, bigger than all the rest of the navies in the world combined. And I think that is for a reason, because we don't have stupid people running the CIA. So I believe that what's going to happen is the best and the brightest are going to bail out of the EU because the EU will be Muslim. Not an indictment of Muslims. But the Muslim culture and the Western culture are not homogeneous, period. Anybody with half a brain that enjoys the Western culture is going to leave the eu. Eastern Europeans, that's a disaster. You know, the average age a Russian male dies now is 58.

It's the alcohol problem in Eastern Europe and Russia. I mean, really, Russia and Ukraine, I should say it's not. I don't know that it's fair to throw Estonia and Latvia in there. I'm not sure. I don't think it is. But Ukraine and Russia just. That alcohol has just destroyed those countries.

Exactly. That's a very astute observation. And then when you take a look at what's. Do you know that in China that between the ages of 20 and 30, their numbers, they have 30 million more men than they have women, which means that these men cannot find mates and young men who cannot find mates get cranky.

Well, yeah. Okay, tell us more about that.

Maybe I'm a little cranky because I can't find a mate either.

Are you single?

I'm single, yeah. But but you know, I got to tell you something funny about that because one of my friends, and I've said this before on the show, so I hate to kind of keep mentioning it, but it's just an interesting story. He's got companies, he's a client of ours, of my real estate investment company, and he's got offices for a couple different companies that he owns. One in Southern California and Orange county, another in Ireland, and he just opened one in China. And you know, they all sort of do similar things. It's different parts of the market. But he loves China. He's, he's literally spend like all his time there. He goes past his six month allowance every time and has to get like special clearance from immigration over there because they actually pay attention to their immigration novel idea. And you know, he loves it. And he's, he's an, he's an older guy and he's always saying, oh yeah, there's all these gorgeous young women, you know, I mean, he likes Chinese gals, but he just loves it. He thinks single life is awesome over there. And I've heard that about the shortage of females. And so I sort of wonder, you know, I guess they just like American guys.

I don't know, maybe so, I mean, that's. But there, if you take a look at demographically, the shortage of women from the age 0 to 30 years old, you're talking about a shortage of 90.

Million girls out of 1.3 billion people may not seem that bad, but what you got to realize is that when you segment that by age, it becomes hugely significant. Right?

Yeah. And the bottom line is you don't want to do that. You just simply do not want to do that. And when it comes out, and I think it will probably come out if I'm certain that Obama is going to win because demographically he cannot lose. But if Romney gets into a position of power and takes on the Chinese over the one child only policy, it will come out exactly what the one child only policy is. And it is a heinous process. Totally heinous. You don't want to know about. It's gonna be very interesting.

Do you want to expand on that? What do you, what do you mean? I mean, I've heard stories of peasant farmers killing their daughters and so forth and all kinds of really ugly stuff.

Jason, sonograms are illegal in China. So if you're, if they're, if you have 90 million extra men, how'd they know they were men? Sonograms are illegal.

Okay, so the answer is they're killing a men.

And so, so what our research is showing is that China sees no difference between infanticide and abortion. And their argument is, what's the difference? You kill millions of babies in the United States through abortion. We kill them as they're born.

Well, and you know, I mean, Obama, I guess, is in favor of partial birth abortions. So, you know, there is a fine line there. But boy, that's just really ugly, scary stuff. When, when, when governments get in the position where they just do not respect human life. You, you have, in my opinion, a recipe for all kinds of just heinous, ugly things. And that's just really sad to hear. It really is.

It's beyond sad. If you are a young couple and you have a child and your wife discovers that she's pregnant and the state finds out about it, they will forcibly abort your child and sterilize you.

Unbelievable.

And then, and then, and then beyond that, they will give you the dead fetus because you are responsible for disposing of it. Now, I don't, I just, I can't comprehend that. I don't have any place to log that. What kind of, what kind of system can do that?

Well, that is disgusting, of course. But you know, I heard that that really wasn't the case anymore. I mean, these Chinese must know that they've got this demographic problem quickly approaching. I mean, are they really limiting births the way they used to? I know that's the olden days, and by that I only mean 20 years.

Ago, but Jason, it's too late. You can't fix it. No, it's impossible. In fact, if you started having kids right now, see, China back in the 60s was producing 40 million babies a year, and then now it's down closer to between 10 and 15 million a year. Well, that's a, that's a 65, 70% reduction in your fertility. You can't do that. It simply means that over the last 30 years they had this 400 million person deficit. When it becomes the turn of that group to do the heavy lifting in the country, they don't have the people, they don't have the labor, they don't have taxpayers, they don't have producers.

I got you there. I totally get that, what I'm saying.

And you can't fix that.

How are you going to fix that?

No, no, no. I know it can't be fixed and I know those things can't be fixed, but what I'm asking you is, do they still have those same policies today? Are those Current. Those are contemporary things you're talking about. Wow.

I am talking about. I have a research team in Nova Scotia and we are on the one child only policy. Every single day we read everything we can possibly get and nothing's changed. Whenever there's a scare about this being public, then you hear about policies are in some stages of discovery where they, you know, they're thinking about it but they don't do it. You see what they've done. It's called a demographic dividend. There's a. You've heard of the term dink D I n K?

Yeah. Dual income, no kids.

Dual income, no kids. What's the benefit of that? Well, the benefit is you don't have to raise them, you don't have to feed them, you don't have to educate them, you don't have to clothe them and both of you can work. Well, the Chinese did that on a monstrous scale, a huge, huge scale. And economically this has been a boon. This has been a huge thing for their economy. But now they're going to pay the price because it was a short term decision. I mean, that's all.

Let me take a brief pause. We'll be back in just a minute.

Now you can get Jason's Creating wealth in Today's Economy home study course. All the knowledge and education revealed in a nine hour day of the creating wealth boot camp created in a home study course for you to dive into at your convenience. For more details, go to jasonhartman.com.

Now, I want to talk about two potentially contradictory things depending on what side of the political.

Jason, you agree? No hard question.

Yeah, no guard questions. But you all, you already alluded to these, so these are easy. I want to talk about two contradictory things depending on what side of the political spectrum one finds themselves. First of all, you say Obama can't lose demographically, so he's going to win in November. Now, if you ask me, I think that bodes poorly for America because that means too much spending, it means too much debt, it means inflation, all of this kind of stuff. But then you talk about how America's best days are ahead of it because we are going to just attract all the best and brightest minds around the world, really, as we always have. And I'm so glad to hear that you think that's going to continue. But tell us why Obama can't lose. Get into that more. You alluded to it.

Okay, this is my daughter. I have a daughter, 19, who wants to be a CEO of a major corporation. That's her goal. And she's an amazing kid.

Ambitious kid.

Yeah. Oh, just wonderfully empty. She's a capitalist and she's also a Republican. And she just looked at me. She said, dad, when are we going to stop putting up old, fat white men with short ties?

Newt Gingrich.

Yeah. So I said, I'm sorry, Lib, I really don't know the answer to that question, but it sure looks like we're headed that way. She said kids love Obama. And she said the kids in college love Obama. They love.

But they love Ron Paul now, too.

What's that?

They love Ron Paul, too.

Yeah, maybe so. But he may not make it to the election.

So what's happening is kids are becoming voters at the rate of. Get this. One every eight seconds. One every eight seconds. That means that in a macro sense. And kids tend to. To vote liberal and they tend to vote from a subjective base. They're not protecting their assets because they don't have stuff yet. So Obama in the last four years has picked up a significant base. I'll give you the actual number. But I want to tell you about Republicans. The conservatives are losing voters because elderly people tend to vote Conservative. One every 16 seconds. So when you do the math, Obama has picked up a differential over 2008 of about 20, 24 million votes. And I don't think he can overcome that.

Yeah, that's very interesting. Yeah. Yeah.

So that's. Now, that being said, I am certainly. I'm a conservative and I'm a Republican Party leader here in Connecticut, which makes me a rare person in a blue state.

You know, I have to comment on that because in reading your book a couple of months ago, I didn't really think that. I thought you were. I thought you were a little of the road.

Huh?

Yeah, well. Or middle of the road. Some of you were left. Some of the things you said in there. But anyway, go ahead. I didn't know what I was in for today.

Well. But I am a Republican leader. But I believe in the Republic. I believe that our nation is extremely strong. I believe that our forefathers in structuring our government the way that they did with the political parties and with the factions that fought continually, did so knowing that this is what would make our country strong. We didn't invent politics. The politics right now, see, we seem to be mired in politics and things are bad, but we didn't invent politics. Politics was here at the very beginning, and our system deals with it. So I don't think any one president, including President Obama, can Bring a nation down. I believe the nation's the nation and the system is the system, and it's very strong and we will be fine. He may cause the pendulum to swing in the wrong direction for another four years. Years, but it will correct.

Yeah, well, I agree with that. Whenever I talk to all my friends who, you know, are the kind of Obama haters and government haters, and they're complaining about Nancy Pelosi and the whole gang and Harry Reid, I don't disagree with them. Okay, I pretty much agree. But how much better was really the prior administration anyway? I'm not sure there was much of a difference, to tell you the truth. I think it's two sides of the same coin. But I will say that America has an awfully long way to fall before I would ever lose faith in it. I think it is an incredible country. It's got an incredible system. And the thing like, I do another show that you may not even be aware of called the Holistic Survival Show. And I always say to people jokingly, you know, if you. If you suffer from depression, please don't listen to that show because it's very negative. And I hear all these disaster scenarios and interview all of these people about that. But I think there is certainly possibility to be pockets of that. You know, like the LA riots and various Occupy Wall street locations and such. Yeah, of course we're going to have that. That's just part of human life in any culture. It happens all the. All the time, everywhere. But what's interesting is that people paint these really ugly pictures of America's future sometimes. And one of the reasons that I just don't think it's possible is it's more than just a system. It's that implanted in the minds of the population is this deep down. And I don't know that this really exists in other countries. And I've been to 64 countries and I haven't noticed it. Like, I've noticed it here. In talking to people that live elsewhere around the world. There's this deep down, like, ingrained ideal of fairness and democratic ideologies. And I just don't see things falling apart the way some people do. I think there will be problems, certainly, but I don't know. I'm not quite that pessimistic.

Look at the immigrant gene. Look at who we are. One of the questions I ask when I keynote, I look around at audiences. I just recently spoke to a group that was 300 people. I said, any Native Americans here? Raise your hands. I got one One person was a Native American. They said, we are a nation of immigrants. And we always complain about the last people in, which is why we were complaining about the Latinos at one point. It was the Irish. I mean, look, they turned out.

And the Polish and, you know.

Yeah. And the Italians. But I said, we are a nation of immigrants. Think about what our ancestors went through to come here. We're an ambitious people. We're a hardy people, we're a fearless people. Genetically, we are, quite frankly, the best people on earth. And we've congregated here.

With all of our faults. This is the best place in the world to live. I wouldn't want to live any other place. And if you want to enjoy life and enjoy freedom of religion and enjoy your family and enjoy your wealth, this is it.

Yeah. And I want to make a comment about what you just said when you said we are the best people on Earth. That is not braggadocious because it doesn't mean we are. It's that we've attracted so many of the best people from around the world. It's, we've, we've created, you know, our founders created the system and it's been perpetuated, at least to some extent that has brought those people here. It's not that they're from here. They're the, you know, just like you said. One Native American. American in the audience. Yeah, exactly.

You're pretty smart for accommodator.

Thank you.

You really are. I have to tell you, I'm not sucking up to you because there's nothing, there's nothing in it for me.

But I'll still let you give out your website. But go ahead, tell me.

I'm sorry, are we done?

No, we're not done. Go ahead.

On my website.

Yeah. No, no, no. I, I just want to hear how smart I am.

Oh, you want me to continue?

You have a handle on it and I appreciate that very much.

The best days for the United States ahead. Back to a more micro issue. As soon as we clear the roughly 6 to 9 million bad mortgages that we discovered in 2008, 2009, the housing market is going to come back. And the housing market right now is set up for the, what I call the perfect storm. Because you have pent up boomer demand. Because boomers want to retire. Did you know that in 2007 the feds tell us that we had $14 trillion in equity in our homes? And in 2011 we had 7?

That's amazing.

That's how bad it is.

Yeah, that was Largely vapor anyway. So, you know.

Correct. Yeah, I would buy that. But it's going to return. What is going to happen is once we clear the foreclosures, and I'm very sensitive to what's going on in Arizona. I also speak a lot in Michigan. You should see Michigan.

Oh, what a disaster.

Yeah, yeah, yeah. They bulldoze houses. I mean, houses that, you know, five, six years ago sold for over half a million dollars. But we will get a handle on that. And once we take the foreclosures off the market and prices start to go back up and boomers start selling their homes to move south because they don't want to be up here in the north, places like the Carolinas, Florida, Georgia, Alabama, Mississippi, Louisiana are all going to see a huge influx of baby boomers, and that will boost their economy. And for every house that sells, essentially you create a job. For every house you build, you create four. You have a whole new crop of Generation Y people are going to be buying houses. You have a whole new crop of Latinos that are going to be buying houses because they're. Socioeconomically, they're advancing very rapidly. You have the African American culture that's off the bottom rung. And finally, finally, this whole bigotry thing is being put to bed by Generation Y. So there's so many good things ahead. I mean, I could just go on and on.

Yeah, that's really inspiring, and it's great to hear that. So do give out your website and tell people where they can buy the book.

Okay, well, they can buy a book on Amazon, and it's called the Age how to Profit from the Coming Demographic Storm.

You can get it at any number of places. You can get it at your local bookstore. If they don't have it, they'll order it.

There's some great stuff. The way you divide up the table of contents. You talk about silent virtues, case studies, and the graying of America and why that's a myth. I think that one has been overplayed because I get a lot of people that want me to invest in assisted living facilities, and I think we've built for that. I think we're. The demand has been met. That's just my very anecdotal perception, but if you want to comment, feel free.

No, well, our research group just did a white paper on it for somebody that has 27 facilities in the United States. And I can't go into who, obviously, but we looked very hard at the assisted living business, and my advice is that you don't want to be there. Yeah. No, it's not good. Because their average customer, the best customer, an 83 year old woman. And instead of us seeing the graying of America right now, the elderly people in the United States is being supplied by the smallest generation of the last hundred years. And a lot of demographers miss that. For some reason they just thought the baby boomers would suddenly age and they didn't.

One thing I didn't ask you about, and I know this isn't your specialty, but you probably have thought about it and that's the whole thing of longevity and the fountain of youth. And I've just kind of been interested in this subject because the problem people are going to have nowadays, they're just going to outlive their money. And with mapping the genome, I have read articles and heard people talk about how we are like eight years away from discovering immortality. Not really, but major life extension. Any thoughts there? And the impact of it?

And we still, majority of us still die between 70 and 80.

The average age has moved up and the average age we die is probably around 77 years old. If you look back in biblical times, it was three score and 10. Well, that's 70. So have we moved a great deal? I don't know.

Well, yeah, I'm just saying that if you look at a typical 40 year old nowadays, how long can they, are they going to be 120 or.

No, I don't think what's going to happen is the average age that we die is going to, to drop like a stone. And the reason for that is the baby boomers are just now bumping up against the dying age. We get the early dyers. The people that are dying early are making up 10, 15% of the people that die of the roughly 2.5 million people that are dying per year. And so once the baby boomers start to die en masse, and that's going to be about 2015 is when it will start. But I think you'll see a lot of the boomers will die early because they just didn't take care of themselves.

Well, there's certainly a lot of obesity, diabetes, health problems related to that, no question about it. So interesting. Well, Ken, this has been a very interesting conversation. Again everybody, the book is the Age how to Profit from the Coming Demographic Storm. And I agree that a lot of good stuff ahead.

My website is KGC Direct. KGC Direct.com fantastic.

Ken Gronbach, thanks so much for joining us today.

My pleasure, my friend. Take care. Bye bye.

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