Jason Hartman and his mom take give us a holiday greeting and talk about how the United States was able to go an entire decade without going into a recession. This is something that has never been done before, so why now? At the end of the episode, Jason’s mom talks about her recent 3 day property tour of the Space Coast and how it reminds her a little bit of California.
I have to say that meet the Masters is what really sold me on your group and just the turnkey world in general.
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 multi millionaire 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.
Jason Hartman 1:00
Welcome to Episode 1353 1353. And Merry Christmas Eve. This is our Christmas Eve episode. My mom just arrived at my house the day before. First we are going to talk a little bit about how the US has avoided a recession for a decade. That is a miracle. And one of the things we will talk about is how I have said for quite a while in discussions about the business cycle, that we are coming off a very significant low coming out of the Great Recession. So that’s one of the reasons that justifies a longer business cycle. Because it’s relative, right? It’s where you’re coming from, versus where you are today. And so we’ll see how this continues to go and see how long the US can stay out of recession. The question is not if there will be a recession. Question is when there will be a recession always. It may be next year, it may be five years away. Who knows. But this is definitely the longest span of economic growth ever recorded in US history. So it’s a pretty big miracle. And then mom is going to talk about her last three days. Because the last three days she has been touring properties, working with our market providers, and our local market specialists in the greater Orlando area and many of the outlying Orlando areas, and also the very, very exciting maybe it’s a longer play, admittedly, but the very exciting Space Coast of Florida. I tell you, the space industry is going to be huge. It’s going to be a big deal. We are on the verge of an amazing, amazing time to be alive, and an amazing time to witness what is going on with space travel. Okay, so Before we get to all that, let’s talk about the recession. I have a clip from CNBC that I want to play for you. We’ll do some stop and go commentary on this. And I think you’ll find it very interesting
CNBC Narrator 3:14
are the first time ever or at least since official Italian began, the US economy has started and ended an entire decade without entering a recession. That means this economic expansion is now older than the iPad, Instagram and the Tesla Model X from the end of 2009. To the end of 2019. The US economy has added more than 20 million jobs, we have launched an economic boom the likes of which we have never seen before. It’s been the longest economic expansion in the country’s history taking place in a decade marked by the memory of the Great Recession. And by unprecedented access to information about the state of the economy. Both consumers have been more cautious and businesses have also become more cautious simply out of fear that we might experience something similar to what we saw today. years ago, but just because it’s the longest expansion doesn’t necessarily mean it’s the strongest overall economic growth over the past decade has been slower compared to previous boobs. And not everyone is reaping the benefits
Jason Hartman 4:12
today. Now, of course, remember, they keep messing with the stats on those kinds of things. So you can take that with a grain of salt. As always, by the way, the clip you’re about to hear is from Bernie Sanders. And it was so funny because one of my friends posted on Facebook yesterday saying, What are you afraid of? And people were putting down their deepest fears. And I put Bernie Sanders that’s who I’m afraid of Bernie Sanders, because he would be a disaster on wheels. Anyway. Yes, I didn’t tell you that mom and I are drinking some wine here. Okay. What do you think
Jason’s Mom 4:57
we have to celebrate Christmas a little early.
Jason Hartman 5:00
Mom says she didn’t want to record a podcast, of course. So I twisted her arm and she said, Well give me another glass of wine so I can be more loquacious.
Jason’s Mom 5:09
Jason Hartman 5:11
Okay, so here’s, here’s Bernie,
Jason’s Mom 5:14
and America, you got three people owning more wealth
Jason’s Mom 5:18
than the bottom half of America.
Jason’s Mom 5:21
So how did the us get through this historic decade? And will it last? The simplest explanation for how the US economy has avoided a recession during this decade is that it was coming from a very low point at the end of the last decade, as some economists have put it, the deeper the hole, the longer it takes to climb out. None of us anticipated the full
Jason Hartman 5:41
ramifications an extent that’s been Bernie Anki, otherwise known as helicopter Ben or former Federal Reserve Chair, who said, if the economy needed stimulation, he would get in a helicopter and just throw money down the Keynesian ideal, right the Keynesian Last week, priming the pump
Jason’s Mom 6:02
of the crisis the economic picture from 2007 to 2009 was so gloomy. It’s called the Great Recession. Many experts define a recession as two consecutive quarters of negative GDP growth, GDP or gross domestic product is one metric to gauge the overall health of the economy. In the US, a nonprofit organization called the National Bureau of Economic Research or MB er decides that the economy has entered a recession. The nd er takes into account GDP and a wider range of measures like income employment, industrial production and wholesale retail sales. US government agencies like the Treasury Department and the Federal Reserve go by the envy ours definition of a recession. The most recent recession according to nvrs definition was the great recession from 2007 to 2009. US GDP fell 4.3% the unemployment rate doubled from 5% to 10%. And house price
Jason Hartman 6:56
and of course you know that that unemployment rate is completely Lately maligned reference the episode we did with john Williams of shadow stats, and of course many other episodes. Many think that during the Great Recession, the real unemployment rate approached the rate of the Great Depression of 20% or even higher, of course, so many ways to measure that unemployment under employment. Of course, when the disaster known as Obamacare hit, many employers cut their full time workers to less than 32 hours a week so that they wouldn’t have to call them full time and give them the same health care benefits. So you know, all these either intended or unintended consequences of every one of these fiato rulings. They all have their their consequences.
Jason’s Mom 7:51
And stock markets crashed.
Jason’s Mom 7:52
People were hit, essentially
Jason’s Mom 7:54
both in terms of losing their jobs. And a lot of people were also hit very significant in terms of losing their homes and home prices. Going down on this dock my way down. The only other time the economy was in worse shape during the Great Depression in the 1930s. a stock market crash and a series of banking panics put an end to the economic boom of the roaring 20s. Millions of Americans lost their jobs and livelihoods as the downturn lasted an entire decade
Jason Hartman 8:21
in the Great Depression of the 1930s unemployment picked it now. That’s Mark Zandi. He’s been on the show before. He’s chief economist with Moody’s. I think he’s been on twice before we should have him back on. I hope our producer is listening so he can reach out to Mark Zandi and have them back on the show. Remember, only 10 years ago, we had the great recession, the worst economy in seven decades. So if you are measuring your real estate portfolio, or anything in your life economically, by remembering that decade ago, during the Great Recession, remember you majoring during a once in a lifetime event, at least so far. So hopefully we’ll see everything much better than that going forward and much lighter recessions as we had in the 70 year span before we had the great recession, almost 25% there were booms and busts and every decade after World War Two, but one notable things started to happen. Economic expansions lasted longer. The period from the mid 1980s to 2007 became known as the Great moderation prices remained stable. And while there were occasional dips on the whole the economy chugged along, prices remain stable. Now that one we could pick apart zillion different ways. Of course, the inflation rate is massively understated. But why did prices remain supposedly stable and why was inflation under control? Well, look at what happened. That was the great outsourcing they call it the great moderation it was the great outsourcing that was The rise of China, the workshop of the world, if all that manufacturing would have been done in America, there would have been a lot more inflation. So remember yesterday, I talked about Nixon’s historic trip to China. Right? And how he opened up China. He had a lot of foresight. You know, I think that was really quite brilliant. Nixon
Jason’s Mom 10:20
Jason Hartman 10:21
Okay, now we got mom commenting.
Jason’s Mom 10:24
Okay, next it was exceedingly brilliant.
Jason Hartman 10:27
But wasn’t he tricky? Dicky? He was the crooked president, right? I wait. He’s not o’clock. Remember his famous checkers speech? I love it.
Jason’s Mom 10:38
Look at some of these republican presidents have been so maligned by the newspapers and people. It’s just ridiculous. Nixon was a very brilliant guy.
Jason Hartman 10:49
He was definitely a brilliant guy. He was a very intellectual president. And he had the foresight to see that after taking us off the gold standard, which you No, that’s debatable probably had to be done because I don’t know if that’s a complicated whole subject for like 10 episodes, but he saw the inflation coming. And he said, Let’s open up China. We need inexpensive labor markets. And what they don’t mention what CNBC completely fails to report here is really glaring. Okay, we have the great moderation. But what happened to American wages, they were totally stagnant for four decades, basically, give or take, you know, 1977 till about just a few years ago, we had the first real increase in real dollar terms in American wagers. Okay. So yes, we have the great moderation, but we had all this offshoring, that led to a huge suppression of wages. Now, the offshoring is one component, but sometimes you need labor domestically, you need things to be done here. You can’t outsource and offshore everything in a factory in China or Sri Lanka. What else do you do? Well, maybe you decide not to control the borders, so we can get cheap labor in the US, and we can get cheap goods from overseas. So you have both of those trends going on. And what does it lead to a massive suppression in wages for the American worker. That’s the great moderation, folks. So yeah, prices were stable, blah, blah, blah. But wages stagnated to
Jason’s Mom 12:33
this is that officials at the Federal Reserve got more effective at responding to changes in the economy. And because inflation
Jason Hartman 12:40
Oh, not to mention outsourcing and immigration, right. Just completely ignore that.
Jason’s Mom 12:45
Let’s study policymakers could act aggressively when the next crisis came along.
Jason’s Mom 12:52
When the great recession hit policymakers in DC took unprecedented steps to try to get the economy back on track. Their actions was Started in trillions of dollars of economic stimulus, a very important reason why the US has had such a long and very protracted expansion is the US fiscal policy and monetary policy me the Federal Reserve, and politicians were much more quick out of the box.
Jason Hartman 13:15
So remember, fiscal policy is basically controlled by the House Ways and Means Committee. It’s the government that’s controlling fiscal policy, how much should we tax? How much should we spend? monetary policy, on the other hand, is the Federal Reserve’s role. Okay, so you have monetary policy, should we expand the money supply or contract the money supply? And then fiscal policy? Should we increase taxes or should we lower taxes? Should we increase spending or lower spending, those are the two sides of the monetary issue, fiscal and monetary policy. But what’s interesting about this video is they just act like oh, this was such a good thing. Let’s pat them on the back that the Federal Reserve and Yeah, that’s why we’ve had this expansion. But there are always consequences. Many accused the powers that be the Fed and the government, fiscal policy and monetary policy of Okay, like in the Great Recession to a fire. Well, how do you fight a fire instead of throwing water on it, you throw gasoline, meaning more money supply, that has consequences. And those consequences will actually benefit us as investors and they already have significantly, but they will continue to benefit us as investors.
Jason’s Mom 14:33
They’re supporting the economy.
Jason’s Mom 14:35
In 2008, Congress authorized the Treasury Department to invest hundreds of billions of dollars to try to revitalize the country’s ailing financial and auto sectors as part of the Troubled Asset Relief Program, otherwise known as tarp.
Jason Hartman 14:47
So the TARP program and the other two big bailouts nearing a trillion dollars each. Those were what they call the corporate socialism, right? bailout the big companies bail out the banks and bail out all the criminals, not a single one of them went to jail. Amazingly, their logic for that was it has a multiplier effect. You know, if we if we give the money to the people, it doesn’t have a multiplier effect as much. So we got to give it to the crooks and the corporations and the Goldman Sachs of the world. It’s just totally disgusting. But hey, those are the ones that have all the lobbyists. Right. So you know, the people didn’t really have lobbyists, the big banks and the stock brokerages and the Wall Street folks, they have the lobbyists. So that’s why you didn’t see a check as part of your bailout.
Jason’s Mom 15:37
A year later, in 2009, President Obama signed the American Recovery and Reinvestment Act, the law pumped hundreds of billions of dollars into areas like infrastructure and clean energy, the biggest stimulus effort was underway and another part of Washington at the Federal Reserve by the end of 2008. The central bank had already lowered its key interest rate to essentially zero so and undertook an unusual effort called the quantitative easing or QE.
Jason Hartman 16:02
So QE is monetary policy as opposed to the government and its bailouts being fiscal policy.
Jason’s Mom 16:08
David Wilcox worked at the Federal Reserve Board during the crisis and the division of research and statistics, the Fed was able to come in, purchase about $4 trillion worth of securities, drive up their price, and therefore bring down the interest rate at which businesses were able to borrow households were able to take out a mortgage. Do you think that that those QE efforts help the economy recover and get to the point where it is today? There’s no question in my mind. And there’s no question in any of the academic literature that absent those steps, you would have had an implosion of the economy by the likes of which we hadn’t seen since the 1930s.
Jason’s Mom 16:51
The Fed has kept borrowing rates low throughout the decade, gradually raising them at the end of 2015 through 2018. And then quickly cutting again and 2019 two Try to fend off any instability in the economy this past decade has been
Jason’s Mom 17:03
characterized by very low interest rates, and generally, fiscal stimulus means lower taxes higher government spending.
Jason’s Mom 17:12
In December 2017, President Trump signed into law the tax cuts and JOBS Act which slashed corporate tax rates for American companies. The effect was a boost to GDP at the start of 2018. Regulation rollbacks by the Trump administration have also cut down some costs for businesses. There’s no denying the American economy is in better shape at the end of this decade than the last as of December 2019. It expanded for a record 126 straight months while the unemployment rate was near its lowest level in 50 years. Even though the last 10 years brought the longest expansion ever in the US. It hasn’t exactly been an economic boom by historical standards. Many Americans still feel left behind and this decade has been marked as much by the growing economy as increasing inequality.
Jason’s Mom 17:58
There are pockets of the country and and important groups of individuals, communities, families households, who still are not enjoying anything that they would describe as economic prosperity GDP growth during this recovery has been slower than in previous economic expansions. Some investors point to many recessions over the past 10 years, where GDP growth has just barely exceeded zero percent. We’ve had a number of milliseconds within this expansion. But generally speaking, if you look at GDP over the last 10 years, it has really, and it looks just amazing been
Jason’s Mom 18:33
2% for a very, very long time, so it has been relatively flat. The memory of the financial crisis has made consumers and businesses more cautious about spending money and more tuned to the next recession. Unlike in previous decades, the internet has given consumers access to the latest news and economic indicators, potentially making them hyper aware of any changes in the economy.
Jason’s Mom 18:54
I think because there was so many things that we all missed in the financial crisis. both before and when it was going on in terms of the speed of the slow down. I do think that both the press and consumers and the Federal Reserve and also in financial markets are basically much more alert to what’s going on
Jason’s Mom 19:11
that caution has meant there aren’t imbalances in the financial system which has helped the recovery go
Jason’s Mom 19:16
on for longer, typically expansions and because they overheat What I mean by that is the economy is rip roaring, booming, you know, you see a lot of construction overbuilding. You see a lot of borrowing high leverage. You see a lot of speculation and markets, but in this expansion, we never really got going. We don’t have that overbuilding problem. We don’t have over leverage in general.
Jason Hartman 19:40
He’s mostly referring to real estate when he talks about that. And I would have to agree compared to last time around. It’s pretty conservative as far as the real estate side of the equation goes. But there are other concerns. There’s the student loan debt problem. There’s household debt, corporate debt. General auto loans. You know there’s more to it than real estate but real estate’s the big one of the bunch. And so it doesn’t appear that we have a real estate problem in the works, at least not this time around.
Jason’s Mom 20:14
But some of the steps policymakers took during the crisis have only made inequality worse. One glaring blemish is the gap between the haves and the have nots, look no further than the stock market. US markets are near record highs, but many Americans have missed out on the bull run. by one estimate, the wealthiest 10% of Americans own more than 80% of the stock markets well,
Jason Hartman 20:38
as the stock market rises, you know that this benefits that the top 20% and really and you know, they talk about the stock market, but the same could be said for the real estate market because the poor don’t own real estate, the poor don’t own stocks, so they’re not part of the game. So that’s why when you have the government controlling fiscal while the Federal Reserve controlling monetary policy and the government controlling fiscal policy to such a big extent as they do nowadays, both of them have too much influence over the economy. They’re basically picking winners and losers with the policy. And so of course, that’s going to be uneven, because the winners will always be the folks with lobbyists. Okay, if you have a lobbyist, you’re going to get the benefits, you’re going to get the benefits that are being doled out by the powers that be. So what I say as part of my investment philosophy is complain about it all you want, but align your interests with these very powerful forces governments and central banks. Mom, you’re awfully quiet over here. Any comments?
Jason’s Mom 21:42
I just think that all you have to do to find out what is going on is ask a real estate agent. Ask them if people are having to be evicted from their properties because they are losing their jobs. them if they are able to raise rents every year, if they are not, then the economy is in a slump. It is just so simple. There was a point in time where I was going to California all the time, because people were not paying their rent. I had to either a Vic people, or they simply vacated the units.
Jason Hartman 22:25
And so what you’re referring to is your California properties when you say that, yeah, got it?
Jason’s Mom 22:30
Well, it’s not necessarily California. I’m sure if this was happening all over the United States.
Jason Hartman 22:35
Yeah, yeah, of course, of course. But you know, you’re just referring to the properties there. So the young, Okay, got it. 10% and really the top 1% and really the top one 10th of 1%. So, the wealth distribution has gotten much more skewed. The other thing that’s happened is homeownership rates have declined, right. So homeownership was key to the wealth of middle income. And if you think the wealth inequality problem is an issue today, just wait till automation Really enters the the fray. I mean, especially in the world of vehicles, and deliveries and self driving cars and self driving trucks and drone deliveries. I mean, all those ups people, all those FedEx people, all those Uber drivers, all those lift drivers, all those taxi drivers. This is very hard to figure out. But, you know, even my most libertarian friends that don’t believe the government should give anybody a handout that the government should provide the most bare bones basic services, and that’s it. They really do think that universal basic income is going to be the only way to deal with the future of this massive technological revolution. We’re on the verge of
Jason’s Mom 23:55
just being communism. I mean, my God, this will be Be a disaster for our country. I
Jason Hartman 24:02
knew that would get a reaction out of you. It’s not just our country, it’s every country. But you know, I don’t know, maybe, maybe it’s different this time. I mean, this, this level of automation that we’re about to experience is insanely significant. Yes, we’ve had progress in the past, but the I don’t know this one is, is just like every area, every sector will be impacted. There won’t be any exceptions.
Jason’s Mom 24:33
Yes, but there will be a lot greater need for the so called psychological or social services. And people in those fields, there will be a boon because they will have to counsel the people who have lost their jobs to the world.
Jason Hartman 24:48
But I know the problem is the 47% of the workforce that’s in some sort of driving related field. They can Do counseling. So, I don’t know, you know, they’re not going to be robotic technicians. It’s a complicated subject and we’ve addressed it before on the show, and we’ll continue to, we’ll see,
Jason’s Mom 25:11
oh, we’ll have some faith, Jason. Okay. The American ingenuity will come out and let itself be known and something will happen. I mean, we won’t just become nation controlled by robots and people will be sitting at home on their couch watching their TV set. I don’t I mean, that is not going
Jason Hartman 25:33
there. There are movies that show that exact feature.
Jason’s Mom 25:37
Yes, that’s the Hollywood agenda.
Jason Hartman 25:39
Well, make sure have you have you all seen idiocracy? That’s That’s good. Okay, here we go. Let’s finish this up. That obviously got creamed in the financial crisis and the housing bust. And so homeownership rate today is meaningfully lower than it was when it has it should be. I’ve always said the homeownership rate was way too Hi, and should be 50 to 55%. Take it from me, I know, years ago, and that means that Americans just haven’t been able to.
Jason’s Mom 26:11
Economists like to say expansions don’t die of old age, maybe there’s no time limit for how long a period of growth could happen. But there are still warning signals that could be pointing to the next recession. record low interest rates have fueled record high debt levels. Some economists and investors fear us public debt, which totals more than $23 trillion is the next ticking time bomb. That debt is only set to go up in the next decades as America’s population gets older and you know
Jason Hartman 26:40
what that means inflation. So take advantage of my strategies. I DD IBD is inflation induced debt destruction.
Jason’s Mom 26:51
As rates go up, it will be even harder for the government to pay off
Jason’s Mom 26:55
a lot of discussions whether the expansion can continue or not is all about We vulnerable in the expansion because of student debt being so high are we vulnerable in the expansion because of corporate debt being so high
Jason’s Mom 27:07
political and trade uncertainty are also creating unease about the future health of the economy, as the US enters a new decade, the trade
Jason Hartman 27:14
war that could really screws in the trade negotiation. Businesses are very nervous, particularly larger businesses, multinational operations,
Jason’s Mom 27:23
others look to technical indicators like the yield curve, which has been flashing recession signals, we know there will be a next recession. We just don’t know when it will be. We don’t know whether it’d be six months from now, a year from now or three years from now. We haven’t seen the last economic recession and in US history,
Jason Hartman 27:43
but maybe as the chairman of the Fed has said, There can’t be a bust when there hasn’t been a boom in the first place. And what we’ve seen is three of the four longest business cycles in US recorded history have been quite recent. So we’re seeing that and if you look at today’s look at today’s economy, There’s nothing that’s really booming that would that would want to bust. In other words, it’s a pretty sustainable picture. And by the way, I agree with that. That’s pretty interesting. That was Jerome Powell talking just then. Okay. Hey, let’s wrap it up. Mom. Just give us a couple comments on your three Bay property tour. Tell us about it. You went to Orlando metro area, the Space Coast. What do you think?
Jason’s Mom 28:24
I think that Florida is booming like California was booming. years ago. Well,
Jason Hartman 28:31
you’re you’re talking about like the heyday of California when it was kind of their heyday. Yes.
Jason’s Mom 28:36
Jason’s Mom 28:40
That’s when I first became a real estate agent. And I was investing in properties and it is so similar. The outlying areas like San Bernardino counties and Riverside counties. There was just huge building there. And now I see huge building in Kissimmee and point seanna Which is
Jason Hartman 29:00
which has Orlando metro area. So what you’re describing is you’re describing the path of progress concept where the development is pushing out further and further and
Jason’s Mom 29:12
there. And the people who want to have nice newer homes have to invest in the outlying areas, and they have to spend time commuting to their jobs. And it’s just like a repeat thing that happened in California. It’s very interesting to look at No,
Jason Hartman 29:28
yeah, it is. It is definitely. So the Space Coast. You know, I think the Space Coast is is a huge opportunity for real estate investors. I think it’s a longer play. I’d say one of the one of the flaws about the Space Coast that I don’t like is that proximity to a big airport. There are little airports. Yeah, but I mean, there’s going to be so much growth and so much development on the Space Coast, as we see the commercialization of space. And we see it really from mobile Engels, of course Bezos, and musk and Richard Branson, I mean, these three billionaires are going to be doing amazing things. And you know, that like one of the epicenters for that on the planet is the Space Coast of Florida, just north of where we are sitting right now.
Jason’s Mom 30:19
Yes, but the bigger player is the US government. And if they do a cut back, they have the most money at all. It’s the only thing that will stop that development.
Jason Hartman 30:30
Yeah, but but that’s always the big player. So that didn’t need to be mentioned, what I’m talking about is how what we’re seeing that we’ve never seen before is the privatization of space travel, the commercialization of all i agree for the $250,000 you can get your ticket on Virgin Galactic and go into space. You know, I got a couple friends who own those tickets and and put that money down. So I think it’s actually right around the corner. Finally, it really is quite interesting. Certainly An amazing time to be alive and more to come. And we will be back
Jason’s Mom 31:06
if we’re going to develop into space. So who cares if a bunch of robots are doing all the work on earth?
Jason Hartman 31:13
Well, I think they’ll put the robots in space first, probably. But hey, we’re going to be back tomorrow, we’re going to bring you a little short Christmas episode, we’re going to talk about the economy of a region that never gets much attention at all. Very, very little attention to this economic region ever. And it is one that relates to Christmas. Yes, you might have guessed it, it’s the North Pole. So we’re going to talk about the economic region and the economy of the North Pole for Christmas Day. Okay. We’ll talk to you them. Thank you so much for listening. Please be sure to subscribe so that you don’t miss Any episodes, be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.