CW 749 - Gary Pinkerton - Change How You Think About Real Estate Investing & Client Case Study

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Welcome to the Creating wealth show with Jason Hartman. You're about to learn a new slant on investing, some exciting techniques and fresh new approaches to the world's most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine, self made multimillionaire who's actually been there and done it. He's a successful investor, lender, developer and entrepreneur who's owned properties in 11 states, had hundreds of tenants, and been involved in thousands of real estate transactions. This program will help you follow in Jason's footsteps on the road to your financial Independence Day. You really can do it. And now here's your host, Jason Hartman with the complete solution for real estate investors.

Welcome to the Creating wealth show. This is your host, Jason Hartman with episode number 749. 749. Thank you so much for joining me on this very last day before. And yes, next time I speak with you here on the show, we will know who the new President of the United States of America is. Wow, what an election it has been. Probably, you know, is this the most entertaining election in U.S. history? I think there's a high likelihood of that. I don't know how it was in the old days, but certainly in modern history, the. This has got to be the most amazing and I'm going to say entertaining election of US History, certainly in my lifetime. So we shall see what happens. We shall see what happens as the continuing revelations come out about the Clinton crime syndicate. It is, doesn't it just disgust you the way Wall street people, the way banksters, bankers, banksters, politicians are just basically what we have. You know, when you look at those ratings of corruption of different countries around the world and, and how corrupt they are. Ecuador is always up in the top of the list. You know, as a very corrupt country. They say Russia would, would be, you know, certainly on the list. Many of these banana republic type countries, you know, are on the list. Right, but, but in the US Our corruption is different. Our corruption is what I call legalized corruption. It's basically how many lawyers, accounting firms, PR firms, spin doctors, how many of those people can you afford to hire? Or can you become too big to fail either as a person or an institution so that you can commit crimes? And, and basically the, the Clinton crime syndicate is an example of this. And listen, I'm not giving Donald Trump a pass because he's got his own Sets of baggage for sure, you know, this Trump University thing. But, you know, Trump is just your typical greedy businessman. Right. And he hasn't had, you know, partnership and shareholder scandals the way the Wall street people do. I mean, the Wall street people dramatically worse than Donald Trump. You know, no matter what side of the political aisle you're on, I mean, you just have to admit Hillary is a criminal. I mean, this Clinton crime syndicate has gone on for decades. It is mind boggling to me. It is truly mind boggling. And we shall see, you know, very close race. Certainly there's lots of evidence that it is rigged, as they say. And remember, I want to do this documentary still called Rigged Movie. And the, the tagline is heads they win, tails we lose. Yes, it is a bit of a pessimistic headline. And if there are any people out there who could help me get this documentary project that, you know, admittedly I have not spent much time on this or tried very hard because I got so many other things going on out there. I would like to do a documentary on the rigged financial system, how it is rigged against the little guy. The rigged legal system, how it is rigged against the little guy. Rigged elections, you know, as a documentary series. The pharmaceutical industry is rigged. The overall healthcare industry is rigged. The voting booth is rigged. There are so many rigged things in our society. That is just, it is just appalling. It really is that. Yeah. And you know, I could see how this kind of stuff could happen in the old days when people weren't connected and communication wasn't phenomenal like it is today. It's an amazing time to be alive. I always say that and it is certainly true. But, but today, when the world is so interconnected and the secrets are out, the jig is up, the monetary system is rigged. I didn't even mention that one. A moment. As we often talk about the Federal Reserve and, and fiat money and the way that whole thing is rigged. The episode, just the Last episode, number 748, Jim Cramer, you know, a well respected guy in the, in the world of the stock market. Again, his own statements, talking about how it is rigged, the words from his own mouth, how he basically brags about fooling the SEC and manipulating the market. It's just mind boggling, isn't it folks? It is absolutely, positively mind boggling. Now I have talked many times before about how the next 10 years of demographics and psychographics, in other words, people's state of mind, not just demographics and also economics, how they bode so well for us as Real estate investors. How there is this tsunami, this tidal wave, this absolute avalanche of great news for us as real estate investors coming at the rental market over the next decade, maybe longer. Really? Really? Maybe this is a 15 to 20 year, maybe this is a decade and a half, two decades of phenomenal opportunity for us as real estate investors. I don't know, it remains to be seen, but certainly the near future, the next three to five years, and I would even venture to say the next five to seven, the next decade, it looks pretty darn sure that we are in a phenomenal, phenomenal position as real estate investors investing in the most historically proven asset class in the entire world, income producing real estate. Well, here is a recent survey and I believe I shared a little bit of this with you on a prior episode. But I'm going to go into a little more detail this time because we've got one of our clients coming on the show today and that is Mr. Gary Pinkerton. Yes, Gary Pinkerton, the now retired Navy submarine captain. Yes. This guy can actually run a nuclear reactor. Pretty cool, huh? He's going to be back on the show today talking a little bit about some different issues in the economy, some different data that I think you'll find interesting and a bit of his client case study as a real estate investor. So I think you'll like that. But before, before we get to that, this is about the American savings rate and again, this is one more piece of evidence just proving how phenomenal the opportunity is for us, for real estate investors, for income property investors. And it is overall sad news. But you know me, I am a realist. I am realistic about this stuff. I do think it's an amazing time to be alive. There are so many incredible things going on and at the same time there is this divide. There is the digital divide, there is the economic divide, there is the concentration of wealth divide. There are a lot of problems obviously at the same time, and this is one of them. But as the Chinese say, crisis is an opportunity riding the dangerous wind. Every problem is an opportunity. In the Chinese language, the symbol for crisis is identical to the symbol for opportunity. So literally translated, crisis is an opportunity. Riding the dangerous wind is the way that works. Right? And so this is a crisis. But, but it is an opportunity for us as real estate investors is an opportunity to serve a huge segment of the population. And when you hear a couple of these stats momentarily, you're going to see that this segment is ginormous. Ginormous. Yes, I know that's not a word. Listeners. I know, it's not a word. It's one of those made up words, but it's ginormous. That would be gigantic and enormous put together. There you go. I don't think you needed me to explain that, did you? But anyway, I'm kind of a literal person. Okay, so 62% of Americans have under $1,000 in savings. And this is a survey. Who did this survey here? God dang it. Well, it's on go banking rates gobankingrates.com, which I guess is a website like bankrate.com. it looks like. And they've got some cool charts here, colorful graphs that illustrate all this stuff. But let me just share with you the first one before we get to our client Gary Pinkerton and our guest today and talk to him. Okay, so 21% do not have a savings account. 21% of the population, mind boggling. Okay, 28% have zero dollars. I guess they have an account, but they have no money or maybe no money to speak of in the account. Maybe if they have a nominal amount of money in that account just to keep it open, it's counted that way as $0.14% have, hey, this is considered great. Now I'm sure people listening will think this is, you know, no big deal, right? But 14% of the population over $10,000. $10,000 or more in savings. Okay, let's go to the bottom rung again. That's the top rung. Over 10,000. 10,000 or more. Just the minimum balance requirement. 9% of the population, less than $1,000 in the bank in savings. 13% of the population, 1,000 to $4,999. 10% of the population, 5,000 to 9,999. 5% of the population, 14% of the population with 10,000 or more. Can you believe that? That means that 62% of the American population. Now, I assume, of course, this is the adult population we're talking about. You know, a little baby wouldn't be counted in this. Right. But 62% of the population have less than $1,000 in savings. Do you think they're going to be able to move into the homeownership pool anytime soon? Do you think they're going to be home buyers? Not likely. Folks, this is a huge market. It is a market of opportunity. It is a market that needs to be served. Hopefully our country will get its act together and we will start moving away from these idiotic left wing policies that I would argue because we've had five decades of left leaning policies in this country. Okay, forget about who the President is, right? Just look at the Congress. The Congress has largely been controlled by the left for the better part of five decades. And in many ways you can argue that this problem relates to our left leaning social policies because it causes an anemic economy through government spending, through inflation, admittedly low in recent years, but overall over the last five decades, very high, especially since 1971. You know what happened in that year of course went off the gold standard. So this is just mind boggling. It really is showing once more, once again that there is a massive opportunity and a massive market that needs to be served for us and by us as real estate investors. Okay, without further ado, let's get to our guest today. Let's talk to Gary. We're going to talk about some charts and some data and a little bit of case study. Make sure you visit Jason hartman.com make sure you check out our new website by the way if you haven't done so yet. It's newly revised website. If you looked at it too early, there were a lot of things that we fixed on it. So go take another look. Maybe you looked at it too soon, but take a look at it. A lot of great resources there, some great products in the store and also@hartmaneducation.com and we are planning a phenomenal Venture alliance weekend in very easy to get to Phoenix. One of the well voted actually the not one of but the friendliest airport in the United States which I would agree with. I love the Phoenix airport. It's, it's real, real easy. Really short lines, really fast to get, get in, get out. It's a great airport. Love it there. So join us in Phoenix for the Venture alliance weekend. That's the first weekend of December. Visit Venture alliance mastermind.com or Jason hartman.com click on events and make sure you join us for that. You can come as a one time guest or you can join. We've got a couple of great new members and we got some free fantastic speakers that were lining up for this event. One of them an excellent guest who's been on our show before. I'm not going to tell you who he was but he was phenomenal. Really amazing insights on the economy and the markets. He will be speaking at our Venture alliance event in Phoenix first weekend of December and we're going to have some other fantastic guest speakers and some fantastic fun first class events. So be sure to join us. Venture Alliance Weekend first weekend of December. Let's go to Gary. Hey it's my pleasure to welcome one of our clients back to the show. He is also a Venture alliance member. And that is Mr. Gary Pinkerton, who sent me a fascinating article on Vox.com last week, and it's entitled 27 Charts that Will Change how youw Think about the American Economy by Timothy Lee. And this is just a fascinating group of charts. Gary has picked out some of his favorites he wanted to chat about and maybe ask me some questions about. See if you see if he can stump me on any of these. I always have an opinion, even if it's wrong. That's my disclaimer. And Gary, welcome back to the show. How are you?

Thank you very much. I'm doing great and I'm really looking forward to talking again. I always love being. I think this is my third one, maybe second one. I think I did an intro with you. If I count that it's the third one. But really enjoy it each time and certainly love talking about these topics.

Yeah, yeah. It's great to have you back on the show. And Gary, give our listeners a sense of geography. You're an east coast guy. Where are you located exactly?

So I'm in New Jersey, Belmar, New Jersey, which if you're ever heading up the New Jersey Turnpike, you'll see the, the turn for Six Flags and 195 and it says shore Points. And so we're basically halfway between New York City and Atlantic City there on the coast of New Jersey. Just a beautiful place. And it was the epicenter for Hurricane Sandy a few years ago.

Yeah, yeah. Massive, massive rebuilding project there for sure. But you've been a Venture alliance mastermind member from the beginning and I thank you for being involved in Venture Alliance. It's been great to have you there and you always contribute such great stuff and you've got such a good financial mind and, you know, very analytical. You are a recently retired Navy submarine captain. So you, you know how to run a nuclear reactor in your spare time, right? I do.

I've done a few of those. Yeah. It's, it's not easy work, but it's certainly challenging and, you know, very satisfying. You know, just a great, a ton of great memories. I just finished, actually, my 25th reunion at the Naval Academy. Saw a bunch of submarine buddies as well as, you know, pilots and surface warship guys and Marines and some great Americans that I kind of lost touch with. So great times. But, yep, did do some times in nuclear reactors.

Wow, that's, that's amazing. And you know, the sad thing about that Whole deal with your, your, your naval career for me is that whenever I want to ask you questions about these nuclear submarines, you can't tell me anything because it's all secret, it's all classified. You know, you won't tell me how deep you go, how fast you go nights, Just nothing. Right.

Well, the good news is that the longer I'm out, the less relevant I become. And, you know, I'm getting older, like all of us, right. So eventually they'll think I'm senile and I'll be able to tell you the answers.

There you go, There you go. Yeah, that's how you'll blow your security clearance. Okay, got it, got it. Well, hey, Gary, what got you interested in real estate? And how long ago did you discover my podcast and become a client?

So it was 2011, just about mid-2011. I was leaving command. I just taken over a position, a great job at the Naval Academy, a two year position there, and had a lot more free time than I did on my submarine, as you can imagine. And I was searching for a way to shift active income into passive. I'd read Robert Kiyosaki's books over the years. I really just, I mean, they just spoke to me. Rich dad, poor dad and most of the others, you know, his prophecy, it all just made a lot of sense to me. So I was looking for following his model of shifting into passive cash flow income. And I'm a mechanical engineer. And the thing that made most sense to me, not buying the coin laundry machine, although I think that facility may be a great idea too. But for me it was about real estate and buildings. So I was looking into that. You happen to have a great podcast. And I started listening in the teens, I think it was, and I've certainly listened to all of them. And I just kept kind of become a junkie of that and have, you know, real estate guys, radio, I listen to them quite a bit as well. And I, you know, so I got my first property in the end of 2011 in St. Louis. I bought a few more there. I'm up to eight and my wife Susan is today. In fact, we'll, we'll get her first three and we'll, she'll be at six by the end of this month and hopefully, if all goes well, we'll have Susan topped out and then we'll go back and start focusing on Gary again.

And what you're referring to is the 10 loans for each spouse, the 10 Fannie Mae, Freddie Mac loans for each spouse. I got a question for you about living on a submarine and working on a submarine. Maybe you can actually answer this one. And I have a feeling I already know the answer. Are you able to download my podcast when you're underwater?

So technically, no, not very far underwater. We consider periscope depth underwater and. And we can actually do that nowadays in certain circumstances. So it's when you're basically on training missions, you know, you're not someplace where you need to be really covert to. We do have satellite capabilities and. Yeah. So, I mean, we can get Internet. We can, you know, chat back and forth with family members now. It's totally different than it was 20 years ago when I started this process.

Yeah, that's great to let all the people, you know, in the military be more in touch with their families and so forth. That's got to really be a moment morale booster, I'm sure. So that's. That's fantastic. Well, hey, these 27 charts are fascinating. This is just a really interesting article. You wanted to talk about some of them with our listeners. You're an economics wonk and you're really into this stuff, as am I. Which ones would you like to go over? Maybe let's pick a few of them and talk about them.

So I think we should talk, you know, just about the first few, and then we'll jump forward a little bit. But the first one, you know, number one, is kind of an eye catcher, probably on purpose, but he says he starts things off here by saying that, yes, America still makes things. And he's talking about the manufacturing sector, real output. He shows a trend from 1987 to the present. And as you would expect, it went down pretty substantially in 2008 and 9. But it's back up and it's at the highest level of production since they started recording, or at least since the beginning of this chart in 1987. And I think that does surprise people. But I believe also that I'd be interested in your thoughts. But I think the perspective is that no one works in industry anymore. And that's somewhat true because he talks.

About it in here because it's automated.

Right. The efficiency of the companies. But bottom line is that America is still producing quite a few goods.

Right? Right. So if you look at the manufacturing job sector, it is suffering dramatically. But if you look at manufacturing output, it's still very strong. So this is the paradox of automation and robotics and technology in general. And what it may be leading to is the fact that, you know, even some of my most, and I shouldn't say as the fact that. But maybe it is a reality, a harsh reality that some of even my most libertarian friends are beginning to face is that maybe we are going to have a large segment of the population, population that is just permanently unemployed or massively underemployed and maybe the government will have to provide a living wage of some sort to these people to keep the world stable. But you know, that isn't as bad as it might sound because all of this technology makes goods so much less expensive that maybe you can do that for a lot less money. And then it goes to the question of my investing philosophy. That is, I say inflation is the home run, that's the best of all scenarios. But a lot of this is anti inflationary, the monetary and fiscal policy, very inflationary. Technology is its opponent. It is not inflationary. So we shall see which way it will go. But there's a couple charts that actually relate to that as well, right, Gary?

That's right, yeah. So one of them is, you know, even just going to Chart 2, still talking about manufacturing, you know, it shows that the jobs in the service sector have been steadily climbing while the jobs in manufacturing are flat or going down a little bit even while, you know, US population is growing. And my question was, is that really bad? You know, kind of. Back to your comment. I'm not sure it's bad. You know, manufacturing jobs are not, you know, a dream in my opinion. I've done a few of them and they're hard work and people don't live really long lives and, and in general they don't enjoy, you know, the back, back breaking work that comes along with that. So, you know, people will often reminisce about the good old days. I'm not sure they were good old days in the factories, you know.

Yeah, that, that's a very good point. And many experiments and issues and labor unions and child labor and the Hawthorne experiment and working conditions, conditions and so forth speak to a lot of that point that you raise about manufacturing jobs. The other thing it says, if you look at the other side of this issue and you look at it not from the producer and the job and employment side, but you look at it from the consumer side. Generally speaking, manufacturing jobs to me represent needs, but largely, not completely, but largely they represent things people consider necessities or needs. You know, having a car, having clothing, having a house, having all the, all the goods that we buy. Right. But services really represent wants and they represent a higher level of lifestyle. So when it comes to massages and going out to Eat at restaurants, you know, concierge type jobs and all of these service oriented jobs, even the lower Lyft and the Uber driver, these are sort of higher level things. They're things that really indicate a degree of progress in that life is getting better and people are more prosperous. I mean, I was talking to my mom somewhat recently about the obesity epidemic and she says, you know, Jason, maybe it's just the fact that just people go out to eat so much more often. I mean, when she was a kid, nobody ever went out to eat. You know, you just didn't do that. It was way too expensive. And when I was a kid, certainly the restaurant world was not nearly as big as it is today. And so that represents a huge growth in the service sector. Right? I mean, would you agree with that? Do you, you know, like, service jobs are a sign of prosperity.

I think I agree. And it's prosperity and a lot of those being type, elective, elective type services that you, that you go for. Like you, like you mentioned, you know, being able to ride around in an Uber. But they're also, I think, an indication of longevity because I think there's a lot of service industry coming from, you know, all of the retired baby boomers and for those older than the baby boomers that need those kinds or desire those kinds of services and have the ability to pay for them. You know, I mean, the cruise ship industry right now is booming. Some of it, I think is because of lower fuel costs. But I think a lot of it is the fact that the people who want to go and travel now are still healthy enough to do it, have, you know, service providers to help them through that and thankfully have the financial ability to do it. And, you know, cruise ships are service industries. So, you know, I think as you look around, it's an indication, like you said, of a wealthier, healthier, happier society. I don't think this is a bad thing.

Yeah, it's an amazing time to be alive. Yeah, good stuff.

It is.

Okay, so anything else you take from chart number number two, Manufacturing employment is dwindling while more and more people provide services?

No, I don't think so. There's a couple more that relate to that. And Those are. Number 12, labor force participation rate. And then I'll kind of lump them together. And then like 15, you know, teen summer employment and then both are, you know, are dropping off. And you know, I think the labor force participation rate, that's somewhat to do with the crash that we had in 2008 and nine and the one in 2000, both of them caused a significant drop and clearly we haven't come back from that. But again, I think it's about increased efficiency as well right now in the industrial world. And I think people are struggling a little bit. We have this impression that service jobs are lower income jobs and they're jobs that, you know, I'm beyond having to do that kind of a job and I think that's unfortunate. I think service jobs provide a great benefit like we just talked about. And I think if we could change the mentality on that and perhaps change the pay structure for that.

Well, I think one of the interesting things about that is, you know, when you talk about service jobs, most people think of, oh, working in a restaurant or a coffee shop or something like that. They don't pay very well, those jobs certainly. But you know, it's not that we have to just talk about this as though it's two things. It's either a service job or a manufacturing job. What about a corporate job? What about a management, a middle management type of job, you know, the information worker, the people working in the offices. Right. They don't fall into either category. And those tend to be higher paying jobs and they tend to be more pleasant jobs than manufacturing or service. I would say, you know, they're using the brain more than the brawn in either case.

Yeah, I agree. But regardless, chart 12 people have been dropping out of the labor force since about 2000 is a bit of a disturbing chart because if you follow that arrow further, I wrote Greece at the end of that era where for whatever reason, the labor force, whether it be entitlement, whether it be disenfranchisement, whether it be taxes are so high they don't bother, you know, that is the direction I think America is moving on this chart in the direction of Europe, where for whatever reason people don't go to work. And that's not a good thing.

That's very unfortunate. And folks, the labor force participation rate is far more accurate than the unemployment rate because as we've talked about many, many times, and I'd say the guest that spoke to this the most was John Williams, the founder of Shadowstats.com a website I would highly encourage all of you to visit shadowstats.com which has, you know, sort of made its name on the, you know, the reality behind the numbers that the government is publishing. The labor force participation rate really shows you who's working and who's not. Right? Whereas the unemployment rate, because people fall off the unemployment rolls, that is A very misleading number. So let's just share some actual number. Okay. In 19. Well, let's take 1997ish to 2000. It looks like we had a labor force participation rate of 67, and now it's down to less than 63. And the last time it was this low was, you know, we're in the era where the misery index was created in the 70s and the mid-70s. Things were very, very tough back then, obviously. Yeah, it's just interesting to look at this, isn't it?

Yeah, it is. It certainly is. And hopefully we turn that trend. But the other thing to kind of keep in mind, and I learned this in my master's program, my engineering master's program, is you have to take charts with a grain of salt, meaning that you kind of need to know what's behind them, like what the data set was, what the entering constraints were. But the other part is that, you know, the scale on these things, you have to look at it and kind of evaluate it. I mean, this. This looks like a very dramatic scale, but, I mean, a very dramatic curve. But if you look at it, it's going from 59 to 67%, which is substantial with a country this large. But it's not like it. I mean, you first look at it and you think, oh, my gosh, we were at 10, we went to 100, and we're back down to 50 or so. You know, it's not that.

That's one of the old how to lie with statistics things. You show someone a chart, and depending on the scale in which they did the chart, they can make it look much more dramatic than it really is. So that's a very good point.

Hey, two that are on real estate, Jason, I thought we ought to touch charts 18 and 19 right back to back. And 18 is the current recovery, is an urban recovery. And it shows. It breaks up the chart into four different groups. Communities of less than 100,000, between 100 and 500,000, between 500 and a million, and then over 1 million. And what it shows, early 90s, most of the growth was in the very low population areas. You know, in 2000, 2006, it was pretty flat and low across the board. But then now the trend from 2010-14, following the mortgage crisis, all of the growth has been, you know, in the larger cities.

Yeah, that. That's interesting. You know, and this is a really complicated one to look at, because one of the other issues that you have is some of these actual cities have grown, like growth Begets growth. Right. And so if you look at where I spent most of my adult life in Orange County, California, I remember when I first started selling real estate in Irvine, California, the population of that city was like 70,000. Okay. And those are misleading too, because these cities are contiguous. You know, they're right next to each other. And you go from one, you go from Irvine to Newport beach or Irvine to Santa Ana or Irvine to Tustin or Mission Viejo or whatever. It's like, like you're in the same place, you know. So some metro areas are isolated where there's a distance between them, there's a buffer of nothingness, if you will. And then there's another metro area. Right. But when they're all clumped together, it really makes it hard to do statistics. But I would say, you know, and I don't, I haven't kept up with it, but I'm guessing that the size of the Irvine population Now is about 2,220,000 or something like that. So. And I could be wrong about that, by the way. Maybe under 200,000. I'm not sure. It's interesting to look at this. Yeah. So this would, would, would lead one to believe that the, the growth is in the cities, right? In the, in the bigger. Well, this is county size, right? You know. Yeah. And, and you know, if you look at it on county, like LA and Orange county are right next to each other, you know, you don't notice when you come, go from one to the other, they're completely adjacent. So it's hard to tell. But go ahead with what you're saying.

Well, what I was going to say is that this really speaks to the logic behind what you do in your company, in that you pick areas that are surrounding major cities where it's rural enough or outside the city enough that the numbers still work, but you're close enough to the city to, to grasp this population and job growth. People can still commute from where we're buying properties around Atlanta or where I bought properties in St. Louis or the other major cities that we're concentrating on. They can still go into where that large growth is occurring for jobs.

Yeah. So they've still got the job opportunity without being in the expensive market. And Gary, I think this is like the ultimate formula. I don't know how expensive it is where you live, but I know your property taxes are some of the highest in the country that I do know in New Jersey, you know, when you can live in a place that offers a good economy, a good entrepreneurial, environment, good entertainment options, good weather, and you can do that inexpensively, you know, I mean, look at the difference between like and we're not doing anything in this market lately because it just got too expensive. But, but relative to the comparison I'm going to make, it's incredibly cheap. And so I would compare Denver and Austin, right, Two cities that we've done a fair amount of business in. Both a little too expensive now to be recommending to our investors. But compare them to a place like say San Francisco, right? These are both called creative class cities, as is San Francisco, and they're dramatically better values. And I just think that the uber high priced cities are, I don't think they have as good a future, relatively speaking to the low priced cities that have a lot of the same offerings, you know, and people are very mobile nowadays as we've illustrated before. But yeah. Any thoughts on that?

No. And you know, over a million in a county is not a lot. Right? So this is not just New York City. I think there's great counties here that demonstrate again that I just believe. I think you're right. I think there's a lot less opportunity in the super, the uber rich large cities. But I think this, this chart speaks to, you know, the strategy that we've been using for many years with your company. I think it's great.

Right? Yeah, yeah. Let's talk about inflation adjusted housing prices.

So what I did, Jason, is I went back and looked at this and here's a case of a chart that includes tremendously more information. Right? So this one goes back to 1890. Most of them have been 80, 1980s or 1990s, maybe even 2000. Very small sample size. This one is, you know, since they started recording this information 130 years ago. And I took inflation and adjusted it by 1% higher than they show here. And essentially this thing flattens out and the guy's argument goes away. His argument is that since World War II that housing prices have consistently climbed. And he even calls into question whether the 2008, 2009 bubble was significant or not. I mean, you can even look on his chart and it was huge. So that's a kind of a weird argument to make. But even just his point is that you can see kind of an upward trend, but for that many years, you know, we're looking at 70 years. If you just add 1% to the reported inflation, it flattens this thing out completely.

I tell you, I have a lot of disagreement with Robert Shiller. And this is of course the Yale economist And the Case Shiller Index is named after him. And he's written several books. He talks about irrational exuberance. He took Alan Greenspan's famous quote and talks about that. And he, he doesn't really give the whole picture on a lot of things. And I think that can be kind of misleading. Some of his data is great, of course, but the thing that is so misleading about charts like this is that it assumes that the house is the same house. See the house in 1890. I'm just going to venture to guess, I'm going to make a wild guess here. Is not as nice as the house in 2010. Right?

It might have been if they included the outhouse as part of the house.

Right, right, exactly. So it's not as nice a house, for sure. I mean, the, the houses today are much more energy efficient. Well, they even have energy. You know, my grandmother in upstate New York, rest her soul, but when she was alive and I used to go visit there, I mean, all the wiring, all the electrical wiring was on the outside of the walls, you know, so you would see wires running around the inside of the house to an outlet. And, and because the house was built before electricity was wired into homes, and so the homes are obviously much better. But here's the kicker, and if you look at like one one stat, I hear a lot is that, you know, American Americans are just living much more prosperous lives nowadays. And they'll say the average house built after World War II in the baby boom was about 900 square feet, and the average house today is like 2,200 square feet. Okay, but you didn't talk about the density of that house. You didn't talk about the fact that that house Post World War II was a third of an acre or a quarter acre lot in famous suburban places. Like, I'll take Lakewood, California as an example, which is a Long beach area. Long Beach, California, where I went to high school. You compare that to today and yes, you might have more square footage on the interior of your home, but you're living in a townhome or a high density cluster home with zero lot lines. So there's more to everything than meets the eye, isn't there?

Absolutely, there absolutely is. Yeah. But I thought that was a fascinating one. And you certainly cannot discount the bubble that shows even on this inflation adjusted chart. But I believe that consistent climb that it shows from the 1970s on, ironically, if you add 1%, like I said, to the inflation adjustment, it'll flatten it out. And what I meant by ironically Is that. That's where we started messing with the consumer price index. Right. That's where we started taking out volatile things. Shadow stats will tell you that it's a couple of percent higher than that. And when you add that in, it's flat. It's just following home price inflation is long term, with exception of the 2008 bubble there. It's just following inflation in America.

Yep. Fascinating stuff. A long time ago, and I wish I could find that episode. I did an episode on this where I played part of an interview that was on, I believe, on Bloomberg News. Tom Keene on the economy. He's an interesting reporter. I really like his stuff. And I actually played part of it on there where they interviewed the Fed chair. Who was. Who was it? It was right before. Gosh, it was the. No, it was before Greenspan. And it was before the guy that broke the back of inflation, who I always talk about. Why can't I. I think of his name right now. Volcker. Paul Volcker. Thank you. Little senior moment there it was. Before Paul Volcker. There was a Fed chair in there for just a couple of years. And he was talking about how they started manipulating the numbers and how they started using weighting, substitution, hedonics, all of the ways in which they understate inflation. And that was fascinating. I got to find that one and play it as a flashback Friday episode because it's. It's really interesting to hear it right. Right there from the inside as to what went on. But. Yeah, yeah, good stuff. It's. It's an old one. It's up there somewhere. But finding it is another. Another challenge. Okay, so did you want to talk about chart number 20 at all, Gary?

20? I was.

Housing prices have grown a lot faster than construction costs.

Right, right. So one of the things I was going to do is say that this is a tribute to. I'm not sure, Jason, you haven't really talked about yet things changing in your life, but it came to mind to me, the turtles. You'd mentioned this before in the past, that some have actual masses around them, like geography, mountains and things that cause prices to rise. Water around New York City. Some we just manufacture them. Like one that came to mind for me was Las Vegas, where they have famous. They have endangered turtles that we've decided will prevent you from, you know, expanding. And so home prices go up in places like that as well.

Yeah. Right, right. So in other words, you're talking about constraints on building. Right. That cause housing prices to go up a lot faster than real construction. Costs.

Exactly, exactly. So that's, that's one huge part about this, I believe.

Yeah, yeah. And this is something, by the way, just to tell the listeners what this chart shows is it shows from 1980-20, 2012. And you see during the bubble period, you know, 2004 to 2006ish, or while the run up started happening in 2000. But you see that house prices, real house prices adjusted for fake inflation statistics. So everything's got a, you know, you gotta adjust it twice. Right. But they went up dramatically faster than construction cost. Right. And that's what this chart shows, which is quite interesting, but that doesn't tell the whole story. And I think that's Gary's point. Correct me if I'm wrong, Gary, but in places where you have constraints on construction, that's what causes places like the Socialist Republic of California to have these incredibly high prices. And my opinion that I've stated many times before when I talk about the self driving car and how geography is less meaningful than it's ever been in human history, it's still meaningful, it's just less meaningful. I think this kind of thing will be under attack. It'll still be there, it'll still be a factor. Of course, everybody would rather have a home on the water in Newport beach or La Jolla or wherever than inland of it, Right? I think that'll pretty much be unanimous. But will the Delta be as large as it it is today? If transportation becomes a lot cheaper and a lot easier, self driving, ride sharing, et cetera, and also technology like virtual reality even, that's another component I believe that Delta will compress.

I think you're right. But this is a nice chart when you're talking about the concept of land value and cost of construction. It shows that. I mean the blue line, the real housing price is essentially the changes in land value, right? I mean the people that will pay a premium for a specific location over what it costs to build on that location.

Right. But here's the amazing thing about this chart though. That point is well taken until you get to the peak in. According to this chart, it would be about 2006 or 7, I think it was really before that, but there's always a lag in these stats anyway. And then you see the dramatic fall of real housing prices, but you see real construction costs increase during that same period. The red line versus the blue line. And I almost wish the listeners could see this, this is really telling. So you see that land prices, when there's a bubble just get this massive Run up and they're artificial. It's just built on a. A tulip bulb mania. It's built on a mob mentality, a scarcity mentality that doesn't have any real intrinsic value. And this is why the Hartman risk evaluator, I think is a very valuable lesson here that took me 19 years to discover is that you should be investing in low land value markets because you don't have that type of volatility. Isn't that fascinating how you see the blue line drop sharply and the red line continues to go up?

Right, right. It absolutely is. It kind of drives it home. It's such a visual chart. It's something you'll remember, I think, when you start looking at different areas to invest.

Yeah, that's amazing. That's amazing. Any others you want to share before we wrap it up, gary?

Yeah. So 2424 is one that shows the way Americans retire is changing. And this one is not Ret really probably news to most people, but it shows the difference between the percentage of Americans that are covered by defined contribution plans, or 401ks IRAs, self funded, if you will, and then those that are covered by defined benefit, which is just a pension system. And this chart is really one of those things that I'm kind of dedicating the next part of my next chapter of my life towards with Patrick Donahoe at Paradigm Life is trying to get people in a position where they don't fall victim to this, because this is a tragic occurrence. And you can see that it's been happening since we started, since we made that shift in the late 70s, early 1980s, and it's just getting worse and worse. There's a comment at the bottom. He says that this shifts a lot more risk and responsibility onto the employees. So back with a pension system which is really just an annuity, the company would outsource to someone like an insurance company the commitment to pay income to their previous employees in retirement for the rest of their life. And so that individual had quite a bit of security there, but it became expensive to the companies and they found an opportunity. They found that Congress would allow, or that the governments would allow them to shift this over to the employee. So I would argue that it doesn't shift more risk. I think it shifts all the risk to the individual. Because, you know, recent studies, you know, in 2015 there were a couple really big studies that showed that. And he talks about it in here as well, that, you know, actually goes over to the next chart. The median family has just $5,000 saved for retirement and those.

Wow, that is, that is so scary. That is just mind boggling. When I hear those studies about how the average person in America has this, and I don't know the amount, but this tiny little amount of money in their, in their bank account, it is just shocking. But you know what it means? It means they're going to be renters for a long, long time.

So you know, I find that to be, you know, pretty rough, pretty harsh statement about how many people are going to be completely beholden on the U.S. social Security system. You know, less than 10% of the people right now that are over the age of 55 have more than 130,000 saved and 130,000 with today's interest rates. If you're planning to use, you know, a spend down of your retirement money is just a couple hundred dollars, you know, a month. So it's not a good plan and it's something that's going to result in people, as we said, being really beholden on Social Security and also working probably longer than they originally planned.

Yeah, yeah, but you know, I mean, as terrible as that sounds, and I agree with everything you've said, I, I don't know that working longer is a terrible thing either though. You know, I mean the concept of a 65 year old retiring, that really needs to be redone. Now granted, you know, that's a sign of how things aren't going as well as they should be. Right, I agree with that part. But also, I just think in general, as I've said many times before, working is good for you. You know, it's good to be a productive member of society. It'll make you live longer, you'll be healthier and you should work longer. I mean, you can. When the arbitrary 65 number was created, on average, I think they said, and Gary, you'll know this better than I will as your next career. I'm sure you studied this a lot, but people lived about four years in retirement. They lived to 69, now they live 20 years, 30 years. And that means we, we gotta plan for that, we gotta invest for that for sure. But also, you know, I think working is good for you.

I agree completely. You know, I think most people should, well, all of America should reevaluate what we think of as retirement. You know, I think perhaps retirement is maybe a change in lifestyle. If you want to transition into, you know, a little bit more travel or, you know, I mean, to everyone it's different, but I think, you know, this process of today, you Know, baby boomers have the ability and many of them have done this of, you know, the first 20 years of their lives has been consumed as obviously being a child and learning, going through education. You work for 30 years and then in your mid-50s you have amassed enough and have the ability to retire. And if you retire after 30 years.

Of work, that's if you've done it right.

Right.

You know, done it semi. Right. Hopefully you did it even sooner. But yeah, right.

So 20 years not working, 30 years working and the ability to do another 30 or 40 not working if you know the advances in healthcare continue, that's just not a survivable model for a society to contribute for 30 and not contribute for 50 or 60 plus. It's just hard on the individual. Like you said, the people who live really long lives in general, I think the studies will show are very active both physically and mentally.

They're always working on a project, they've always got something, something going on. And I think that's very, very good and very stimulating. So folks, look it, if you're listening to this and you're thinking you're at retirement age and you're complaining about how bad things are because you, you know, you have to keep your job as a greeter at Walmart, quit complaining. No, I'm just kidding. I doubt any of our listeners are greeters at Walmart. But it's good to work. I think that is just good for you. And maybe it's part time. Hopefully it's freelance type work where you can make your own hours and you know, you can take a month off here and there if you want but people should be working a Good, you know, 10 years longer and by choice, not by necessity, just by choice because they, they want to be engaged and involved. So yeah, good stuff, good stuff. Did you want to talk about any others before we wrap it up? There's some amazing charts here.

No, I think those are the highlights. You know, those that certainly covered, you know, the major trends in, I would say personal economics and real estate and the job market. And I think there are, as we said earlier on, there are some things that can sway studies like this. He cobbled together some amazing charts from many different studies and locations and so it's a challenge for him to put them all into one article. But I think it told a great story and I think it's eye opening story on a lot of those charts.

It really is, it really is. Gary, give out your website.

So my, the best website to find me is paradigmlife.net about and then backslash. Gary Pinkerton and I just wrote an ebook that covers some of these topics and I'd love to pass that to anyone who would find abuse.

Is that ebook available? There it is.

Yes, sir.

Okay, fantastic. Gary Pinkerton, Client, Venture alliance member and former submarine captain and hack economist. How's that?

The hack Focus on hack.

Hack economist. Yeah, absolutely. That was a very interesting discussion. Thank you for joining us today and we appreciate your business and appreciate having you on the show.

Thank you. It was a pleasure.

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