Investing in Pandemic Times, Note Closers With Scott Carson From In the Hot Seat With Jason Hartman

Welcome to Jason Hartman in the Hot Seat. This is your guest, Jason Hartman. And I have done thousands of other interviews where I have interviewed other people grilling them on a variety of topics over the last decade of podcasting. But this time I am the guest. I've done hundreds of interviews on other people's television shows, radio shows and podcast shows, and you will get to hear me being grilled relentlessly by those hosts on a variety of topics. So the show I am in the hot seat. Listen in and enjoy.

Good morning, good afternoon, good evening, everybody. Welcome to this episode of the Nicholas Show. As always, Scott Carson. Excited to be here, and we live in some strange times. I think we can all agree that the world is a different place than it was a week ago, but we're really excited for this episode. And I've got a guy on here today that I've looked up to for quite a while. You may not know that, but I've looked up to him and considered him really the premier real estate educator and investor out there who's helped so many people. This guy is just a freaking beast when it comes to working with other investors. He's the founder of a beast. There you go. He's the founder, founder of Platinum Properties Investor Network and host of the Creating wealth podcast, plus about another 22 other podcasts to go along. He's at Listeners in 180 countries. He's a genuine, self made, multi, multimillionaire entrepreneur who has 21 businesses in investing, financing, real estate development and SaaS software. He has owned properties and love estates, had hundreds if not thousands of tenants, and been involved in several thousand real estate transactions. So he's also an avid world traveler to 83 countries, enjoys adventure, fitness and lifelong learning and hanging out with his best friend Coco as well. The dog comes along with him a lot of times. There for you. So we're honored to have Jason Hartman joining us today on the Nutcliffe Show. Good morning, Jason.

Hey, Scott. It's great to be here. We are living in some scary times and I want to talk about that today. I've been, you said the world is so different than it was a week ago and it's radically different than it was three weeks ago. I mean, it is just amazing how quickly the pandemic has come upon us. And your background on your green screen with Mars in the background is just perfect because I bet the virus isn't living there and everybody's trying to get away from this and you can't blame them. These are scary times, definitely. But the Question is, how do we invest for this? How do we play it from a personal financial standpoint? Of course, people are scared about getting sick, but most people have taken steps to deal with that. Scott, the problem is they don't know what steps to take as far as money. And let's see if we can dive into some of that stuff today. Are you ready for me to share my screen?

Yeah, yeah. You've got. I love this. I mean, you've got a presentation. So if you're listening to this on the radio or listening to this on itunes and other podcast platforms, you want to jump over to our YouTube channel to go through the slides. I mean, you'll be able to listen to it. Jason does a great job presenting, but if you want to take some notes and pull up the actual slides going over to our YouTube channel, you can access all our videos at Weclose Notes tv. It'll take you directly there. So we close Notes tv. But, yeah, pandemic investing. There is a lot of nervousness in the market right now. There's. I've talked to a lot of buyers, and our investors are just kind of like, where do we go? What do we do? How do we pivot? I think we're all just kind of waiting on pins and needles, so. Jason, take it away, man.

Rightfully so. There should be a lot of concern because there's a lot of reason to be concerned. This is. You can see my screen now, right? Okay, good. This is a total black swan. Look, we knew this would happen someday. We knew that there would be a virus, a disease, a pandemic. I mean, throughout history, this stuff has happened. The last big one, of course, was the Spanish flu, 1918, just over 100 years ago. And it's strangely called the Spanish Flu. The thinking is it probably started in Kansas City area. So I don't know how it got that name, but. Or I can't remember. I did know, but I forgot. But let's talk about some of the macro aspects. Okay? So this is like, big picture stuff. I don't have any stock tips. I don't have any super specific stuff, but you got to start with a big macro picture and go from there. Okay, so let's dive into that, that macro picture on pandemic investing. Okay? First off, I'd like to that most of your listeners and viewers, they understand the concept of monetary policy and fiscal policy and how it affects the three basic economic situations, inflation, deflation, and stagnation. Okay? And right now, we are in an era of absolutely unprecedented money Creation. Ten years ago we had the Great Recession and everybody thought, well, the amount of money we're creating is just crazy. With these trillion dollar bailouts was like socialism for big giant rich companies. And people were upset about it and you know, rightfully so. And you know, should we bail out Bear Stearns? Should we bail out Lehman Brothers? Well, we know what happened there, right? And you know, we did and we didn't, depending on the company. But now I think the amount of money creation we are going to see this time around is going to dwarf anything in the past. We're about to witness the biggest money printing extravaganza in world history. It's just going to be insane what we see. So I call it stimulus Maximus, okay? And this is quantitative easing like we've probably never seen it before. It's going to, like I said, it's just going to dwarf everything else. The airlines want $50 billion. Mitt Romney the other day was saying thousand dollar checks for everybody. Well, that already increased by 20% and it looks like that number's gonna be $12 per person. But that's only going to tide people over. You talk about low wage people. That's about three weeks. You got to have another check right after that or going to be defaulting on everything. Okay? And they're going to get another check right after that. I think this is going to be a prelude to one of two things. It might be a prelude to a universal basic income, and we've heard people talking about that and. Or it might be a prelude to a national type of Section 8 Housing Assistance Program. It might be both, might be one or the other. Philosophically I disagree with that, with both of those ideas. But it doesn't matter what I think, it doesn't matter what you think. The powers that be, government is in our lives and it's not going away. The whole system has been so financialized that financialization basically is the difference between the Wall street economy and the Main street economy, between the real economy and the fake economy. And the system's so financialized that there's so much leverage in the system now that you can't solve these problems in normal ways anymore. You gotta have big bailouts, you gotta have derivatives and all kinds of this stuff just gets worse and worse. It's like you can't make it go away. It's like a, it's like a virus, okay, you know, pardon the pun. It just grows and grows and takes over more cells and, and that's the world we're in, okay? So the Fed, and this is probably out of date by the way, because These numbers are three days old. That's how fast it's changing. Okay, $500 billion per week to the short term money market, the repo market. Most of that's in the repo market. They have other facilities too, but the repo market is the repurchase market that allows the banks to trade short term capital. And you know, most of your listeners are pretty financially savvy and they understand that if that seizes up, it'll be like what they were worried about during the Great Recession. And what did happen for part of the Great Recession before the bailouts came. But spending like this is ultimately inflationary. It has to be. The classic concept of inflation is you have too many dollars or too many yen or rubles or pesos or euros or whatever the currency is, we'll talk in dollars. But you have too many dollars chasing a limited supply of goods and services and that creates inflation. Okay? And so this ultimately leads to very significant inflationary pressure. The thing people are thinking about, as we talked about when we started, Scott, is they're asking, what is this, what is it? And how long will it last? Well, the two elements of it are, number one, the actual virus itself, the clinical part, the health concerns, and we're not really talking about that today, we're talking the second part, the economic impact. And with that you can divide it into two parts. You know, the direct part, which is what, what we see right away, and then the indirect or the induced impact. Right. So right now most of the world is under self quarantine. Some are under official ordered quarantine where literally if you leave you'll be arrested or you know, maybe worse than arrested. Okay. And that quarantine obviously has huge effects. You know, if people can't go to work, if they, you know, the aut factories have shut down. I mean, this is crazy. This is like the fastest shock to the system we have ever seen, ever. It's absolutely nuts. But then after that comes all the follow on effects. All of the suppliers that supply to restaurants that aren't getting any orders, suddenly they're just, the business is gone. Look at the movie theaters, look at professional sports, look at Broadway plays, I mean any gathering, it's over. The whole convention industry, and I know we know a lot of the same people in that industry, the event industry, it's gone, it's over. Can you believe it?

Yeah, they say that I heard somewhere that they expect 50% of the events not to ever recover. Because they didn't have insurance for this time around or they weren't set up in case for mass cancellations or mass refunds and stuff like that. And people just aren't prepared especially. I mean you see some that are using the online. You know, everybody's a virtual summit expert.

It seems these days they're doing what we're doing now. Right?

Yeah, exactly. That we've been doing for years. But yeah, you're right, it's a domino effect of businesses go out, the suppliers go out, the employees go out, the providers to the providers. It's almost a death spiral in a lot of cases.

Yeah, it really is. You know, we had two events planned. Our annual meet, the Masters of Income Property conference. That was our 22nd anniversary event and we announced it and it was about five to seven days later that we canceled it. I mean we had just announced it and then we had to cancel it and the hotel because it was so early. Our hotel venue, they tried to collect from us, say you got to pay us, et cetera, et cetera. And their position was it's legal to have the event. There's no law saying you can't have the event. As we were going to argue over the bill, I said, look, we want to have the event, we'll have the event. We just want to postpone it. And you know, we're not backing out of the deal, we're just postponing the deal. And they said, well, you got to pay us liquidated damages fee. And no later another week goes by and there is a quarantine, an official one. So it's bad. I mean, we didn't have to pay, thankfully, at least not so far. But look at what happens to them. Look at what happens to the audio visual companies that don't get an order. Right. It's the domino that is mind boggling. It truly is in an interconnected economy. But what I want to talk about that's really rare here, that's different than other recessions. And by the way, anybody who says that we're not, we might not have a recession or we're not in a recession is absolutely nuts. We're already in a recession. Get with it. You're crazy to think otherwise. You cannot shut down the economy of planet Earth and expect not to be in a recession. And that's basically where we are. The global gdp, the entire economic value of planet Earth is somewhere in the neighborhood of 80 trillion. That's with a T $80 trillion a year, instantly we're going to knock off 20 trillion out of that number and probably a little more, you know, we'll come back. This is not the end of the world, but it's certainly a hit, there's no question about it. So let's examine what type of hit it is and what you can do about it. Now this is what's really rare. Usually when you have a recession, it's caused by demand shock, meaning that consumers don't have any money, they don't want to buy a new house, they don't want to buy a new car, they're not going out to restaurants, they're pulling in their horns, they're tightening up, they're tightening their belts. They're not spending. And in the American economy, consumer spending is about 70% of the economy. So that's the typical recession caused by demand shock. The demand just tapers off and nobody's spending. But this time it's different. Famous last words of any investor, by the way. This time it's different. I don't mean it in the typical way that that's used, Scott. This time it's different in the sense that we are not only having a supply shock, but we're also. Or demand shock. We're also having a supply shock. And what does that mean? Well, that means that, you know, this started in China. China is the workshop of the world. Almost everything is made in China and China. All you have to do to know that China's economy is in hibernation mode now. Ours is too. And you know, Italy's obviously is and Iran's and many places, most of the world's now in hibernation. And think of how a bear hibernates, for example. The bear will basically go to sleep and all of its bodily functions just go way down. There's a heart rate. I mean, I remember watching this years ago. You know, I think the bear's heart beats like a couple of beats per minute instead of 60 beats a minute. Right. Or something. Don't quote me on those.

In a single day. It's in like 10 or less a minute. You're exactly right.

It's very little. It's just enough to just barely keep the organism alive. It's in hibernation. And that's basically probably a pretty fair assessment as to how the economy is now. It's in hibernation mode. Okay. And it started in China. So the supply shock is that the supplier isn't making the goods anymore. And there's just a huge follow on because when you make the base good and the next part of that supply chain can't get those goods anymore. They can't do anything. They have no widgets to sell either. So if you make auto parts in China, for example, and you ship them to the U.S. well, there you go. And all you have to do to know that China is in hibernation mode is just look at the satellite images of the pollution and the air is cleaner than ever. Okay? So there are some good silver linings and we're going to get to that, by the way. But certainly for the environment, maybe this will make us all a little more conscious about it because we see the difference when the economy goes into hibernation and hey, suddenly the air in the water is a lot cleaner. So we'll see.

Yeah, they're talking about dolphins, dolphins and other animals swimming up into Venice, into Italy where they hadn't been.

I saw that. Yeah, yeah. And, and the water's clear. I mean, when I was in Venice, Italy about, I don't know, 10, 15 years ago, you know, the water, you couldn't see through it. Now you can.

So yeah, it may not stink as bad as it has been known.

Right, right, right. A lot of nature stinks though, you know, a lot of the fish in the plank smell too good themselves. So that's not all man made. But, but look it, in the 1970s we had a rare supply demand shock, okay? And you know, some of people know or remember even the OPEC crisis, right, where we had gas prices rising and people waiting in line in their cars for three hours to get gas. And we had the Jimmy Carter era, which was a very poorly managed economy. And something came out of that called the misery index. And the misery index was a situation where you have a very bad economy. And when you have a very bad economy, you usually have a deflationary pressure where prices come down because nobody's buying. But in that case, you had the rare instance where you had a bad economy, high unemployment, wages stagnant, but prices rising at the same time. And that's what we are probably coming into, a stagnation type of economy. Because if you don't have supply, you're going to have upward pressure on prices. If you have tons of money printing, you're going to have upward pressure on prices. But of course you have the situation right now where people aren't working or not working as much. And so we'll see how it all plays out. But the interesting thing too is this is by choice. This is a self imposed recession. Usually they're not self imposed. So moving on Here, social distance, right? This is a new phrase we've all become familiar with. Stay away, don't shake hands, don't sneeze. You gotta be six feet away from everybody nowadays, right? Okay. That's a new thing. Well, this leads to an opportunity. Home has become the center of the universe. Commercial properties are in trouble because we've already seen, as you know, for the past several years, what's called the retail apocalypse. And retail properties have been just declining and declining as shopping moves online. Okay, fine. Well, office properties, all of the major companies have told people, work out of the house. Okay? And Faith Popcorn wrote a book back in the 90s, and she talked about, she was a futurist and she talked about the concept of cocooning, where people are cocooning in their house. And back then the reason was you didn't have to go to the movie theater because now you could have an awesome home theater system. Well, now you got the Internet, you've got, you know, much more cocooning than ever before. And people can work out of the house. But think about this. Think about the way this influences people. If you got a family of four who normally the mom and the dad went to work every day and the kids went to school every day, now all four of those people are at home and they're tripping over each other. Mom and dad are trying to work out of their home office. They don't have enough bedrooms anymore. The kids are making noise. They can't do their work. And so this increases the demand for housing and the size of housing. Winston Churchill said, never let a good crisis go to waste. Well, there are opportunities that are going to come out of this for investors. Interestingly, I think the response to this whole thing is actually bigger than the problem. I think the problem is real, but with something like a virus, this could really kind of blow over in a month or two. This could be a minor news story a month or two from now. Of course there will be lasting effects. But, you know, there might be a vaccine, there might be a good treatment or just warmer weather in the northern hemisphere. Usually the stuff just kind of fades away. That's what happens every year with the normal flu. And it may happen with coronavirus, we don't know yet. But I think the response really is bigger than the problem and it's very sudden. So there's a push toward virtual everything. There's stronger domestic supply chain push. The world is waking up, or the US at least is waking up to the idea that we should not rely on China to manufacture everything. Like antibiotics and everything else. We gotta have some of this onshore. And Trump has been pushing that idea since he got elected. Love him or hate him, he's been bringing jobs back to the US and this trend is only going to increase as we recover from this, because we cannot trust outsourcing of vital things. Okay. We gotta have more manufacturing right on our own soil so that we don't have to depend on a foreign government.

And that's the thing with China. China's a very in person, building relationships kind of business. It's, it's very hard to do business if you're not over there meeting, greeting, dining, sharing, drinking. Drinking, exactly. And, and when something like this happens, if they're not communicating, the first, first sign for them is to take care of themselves, their family.

That's exactly one too.

Exactly, exactly. So we've got friends have done a lot of manufacturing and products for years over there and that was one. Always one of the biggest things is they were flying over keeping those relationships going. Well, now they can't do it. They're starting to see that pullback and like, well, no, we have to take care of our family first before we do anything with the United States.

Right.

That puts a lot of people not just in the medical fields and the medicine field, it's, you know, production and everything else like you've talked about.

Yeah, yeah, no, this is, this is not good. So one of the good things that's going to come out of this is more American jobs, that manufacturing more and more of it's going to move onshore. There's going to be a lot of government aid and pushes to help make that happen. So look forward to that. Here's a big prediction I've made. I have something I call the Ten Commandments of successful investing. And really it was up to number 21 until last week. Last week I created commandment number 22 of the 10 commandments. Hey, it's government math. I got 2210 commandments. Okay? So that one is, thou shalt invest in low density housing after we recover from the quarantine and this dies down. Might be a month from now, might be two months from now, but it's going to happen. Life will get back to normal. Okay, calm down, don't panic. The world's not going to end here. There is going to be a mass migration, this is my prediction over the next couple of years, to lower density living people that live in New York City or San Francisco, downtown la, downtown San Diego, downtown Seattle, downtown Portland, Boston, Miami, whatever they are going to now desire more of a suburban single family home environment. And you know what? They can do it. They can do it because now most people know they can work virtually. And you don't have to be in a high rise in New York City with a germy elevator button and getting in that elevator with people sneezing on you. This is going to change the way we think for an entire generation. This will pass, but our memory will not pass. And people are going to change their lifestyle in very significant ways. So the rise of the suburbs is. Look at. I help real estate investors invest nationwide and you invest through the paper on those assets. Okay? And so we both invest in a little bit of a different way. But the rise of the suburbs do not invest in high density housing right now, even in the suburbs. A four story apartment building with elevators. The way, you know, if you, you should question your investment is if it has an elevator, the elevator is the danger zone. And that's also the signal of high density. All right, so the other thing is, and I think this is great news, the decline of the university, debt enslavement, complex. Colleges and universities have been ripping people off for decades. And now that they've told all their students to go study at home online, I think people are going to start questioning why am I paying for all this real estate? And you know what's even worse? Stanford University. Shame on Stanford University. Great school, of course, but shame on them because now that they've kicked the students out of their housing, they are still requiring them to pay rent. Pathetic. I mean, every. Everybody's going to realize after this, the emperor has no clothes, that college has been ripping them off, that online learning is infinitely scalable. And one professor, the best professor on any given subject on earth, can teach the entire planet. You do not need. Why is it that in every university town, in every college town, the biggest landowner is the university? That's absurd. They're basically hedge funds. That's what they are. They're not institutions of higher learning. That's a little side note. To be a real estate investment company, it's ridiculous. Enough of that 50 grand a year for college is outrageous. It should.

It totally is.

The price needs to drop to a reasonable rate. So typically now investors, and we're wrecked investors always have to ask themselves, well, what are my choices? What are my investment options out there? And the question is always, compared to what? Compared to what is always the right question. Well, typically, the fear investing assets, as you see on the screen, are gold, silver, precious metals, you Know bitcoin, those would be the typical fear assets and overall they have not performed well at all. In fact they performed kind of terribly. Now bitcoin was up yesterday, but the overall trend I'm talking about has not been impressive. Of course, the Wall street assets. Moving to the next category, stocks and bonds, terrible bonds. There's going to be major bond defaults. Stocks obviously have just plummeted. It's been terrible commercial real estate like we were talking about earlier. I think commercial real estate has a rough road ahead. Office space, retail properties and even industrial properties to some extent. Now there's some industrial that's going to do well like the Amazon warehouses and things like that. But the office and retail sector, I would avoid it. I've always said it's all about housing, housing, housing, okay. And housing could come in many forms. It could come in small garden style, non high density apartments, two stories staircase, that's low density enough that works. It could come in mobile home parks. I own a mobile home park with a client of mine or my favorite single family homes in suburban areas. So housing, housing, housing. Anyway, any questions or thoughts, fire away. There's my info. You can reach me 1-800-hartman or jason hartman.com.

You know, I'm a big believer in exactly what you had good there. I, you know here in Austin, Texas. Austin has been kind of anti high density stuff. You have a lot of people that would rather live 35 miles out of town because they can get three times the house for a third of the cost. 300, 400,000 condos just don't make sense anymore. When you're 700 square foot and now you have something like this to take place. Plus people living online, you hit the nails on that head across the board, that whole coffin is nailed shut based on your hammer. You know, I'm a big believer. I think we're going to see an increase in self storage because everybody needs to share things. I mean that's been a hot trend anyway. I love the mobile home park thing, cash flow. What most people don't realize is that the huge lack of affordable homes, affordable housing is going to drive a lot of this as well too because people are going to be, if they have a job that they can't work remotely from, they're going to be looking to downsize or to get something that is affordable for things, you know. So I think those are some smart plays. Like you said there, I think we are in a knee jerk reaction. You and I talked about this a little bit yesterday when we were Visiting. I think it is a 60 to 90 day issue, but the things that we're doing are creating a year plus issue.

Oh, yeah, definitely.

You know what I mean? So it'll be interesting to see how everything handles. The one thing that came out yesterday, I don't know if you saw this, was some of the stock sell offs days before things were announced. Like the head of the New York Stock Exchange.

Oh, I know, I know. The insiders are, oh my God, I know. Yeah. And a couple of senators, they had a coronavirus meeting and then they dumped a bunch of their stock portfolio. This is disgusting.

Totally disgusting. We could have a whole other episode of that.

I know.

That's the thing is I think the most important thing that I think besides washing your hands.

Yeah, yes, yes. Wash our hands a lot. Not shaking hands. The handshake is over.

It's the Bash brothers. It's the Bash Brothers from the Oakland.

You know what I like? I like the polite Japanese bow.

Yes. Yes.

Yeah, yeah, that's good. Like yoga bow.

That's like the yoga ba.

Namaste. Yeah, Namaste.

I love it.

That's awesome.

Namaste this day. Namaste. Try to remain calm. I think, people, the big thing that I've seen in the housing side is everybody's getting scared of, oh my God, am I going to be evicted? Am I going to be foreclosed on? And we've seen this all across social media. Even some of my most educated friends are starting to say that. I'm like, wait, listen, they're not. The banks aren't going to evict you immediately. They're going to get bailed out. So they're not in a hurry to kick you out the low 0% interest rates, hey, they're printing free money. If you're got a 3, a 4%.

5% loan, stock up on free money. It's. This is like such an opportunity. It's incredible. Get good little pieces of real estate necessity housing, little single family homes in suburban neighborhoods that everybody's gonna want even more than they do now. That's my prediction. And get 30 year fixed rate, cheap debt. It's incredible. I know, I know. Yeah, look at it, Scott. I think you nailed it. This is probably a 60 to 90 day problem that financially the response has been an overreaction and it's going to make it a one year or two year problem. Fine. Okay, so what? You know the trade that's going to work. And I predicted that. I said on my podcast that I think simple, basic single Family income property will be the best performing asset class during this crisis. Because it's multidimensional. You can earn your return in a lot of different ways. And just mark my words, after the panic subsides, there is going to be a mass migration to low density living. That's what everybody's going to want. They're not going to want to live in that overpriced high rise in downtown New York or Austin or whatever. Right. They're going to, I mean, those beautiful high rises you got in downtown Austin, I've looked at those. I thought about moving there for years. And they're great. They're gorgeous, they're sexy. You know, they got great views, you know, but you walk outside, it's a concrete jungle. You got homeless people. San Diego was like one of the worst. You got homeless people everywhere outside of the high rises there. And it's just really not that good a life. You know, get, get some grass around you, you know, and the low.

If you're walking outside and you have a hard time finding 3 square feet of grass.

Yeah. You know, you're in high density.

Yeah. Or let your, let your dog do their business. Yeah. It's time to get a yard and move out. And I think the secondary markets, the markets outside of the bigger cities are going to see a lot of influx, especially with the availability to do online education. And I think that's where probably the better deals are to come from. But we could, we could sit here and look at a glass ball and try to figure it out. Who knows where things are going. I think you, we've got an idea in general direction where things are to go.

Yeah.

I think we should touch base back in 90 days and see what some more predictions are.

Let's do it. Stay safe, stay healthy, everybody. Happy investing. And you got my contact info up there. Jason hartman.com. thanks for having me on, Scott. It was good talking to you.

Hey, thanks so much for coming on, man. So appreciate it. So. All right, guys, that's going to wrap it up. Take heed of what Jason shared with you. Like you said, there's some opportunity to know here where to go. But also more importantly, just be safe. Don't make panic decisions. Be safe in what you're doing. Be smart. And trust me, you'll come out on top by just being smart and educated in what you're doing. So go out, take some action. Everybody be safe from home. And we'll see you all at the top. Everybody. Bye.

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