Jason Hartman starts today’s show with a clip from a PBS News Hour story on the late Paul Volcker. Later on he brings oh Rabbi Evan Moffic to discuss where we might be in the business cycle as we continue moving along in the longest economic recovery in recent history.
So far I haven’t had any issues in the sense of with the turnkey vendor or the management company. The management companies have been exceptional, you know, responsive, quick, professional. It’s great. You know, for somebody who’s really busy, this is a great way to invest. Now, I have to say that being a skeptic, we went outside of your network. We did go to another turnkey vendor. We went to, you know, the place where they did their work. They had this beautiful binder with pamphlets, and we looked at it, and then they went to show us the houses. And it was not what I expected. You know, the thing that scared me is we went to an older house like this, this is a great investment property. They went into the basement, and there was literally a electrical junction box with four wires coming out and one of the side hanging in midair, hanging in midair. So at that point, it was well we’re not doing anything with this team of people and and we went back, we went back to the organizations because I hate to say I’m a commercial, but they’re just quality people.
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 1:53
Welcome to Episode 1349 1349, thanks for joining us and Happy Holidays and upcoming Merry Christmas to everybody. It’s right around the corner not too far away. What are we a week out? I think we’re a week out. Right. So hope you are ready. Hope you’re ready, folks. Anyway, I’m back from the two day conference in South Florida just drove down there and and drove back. No airline flights on this one. I was going to take the train. We have this cool thing in South Florida called the bright line train, which it’s really not that cool, but it’s pretty cool. It’s kind of neat to take the train, and they have this sort of luxury train luxury lounge experience. I took it a couple weeks ago when I went to the art festival there in Miami Beach. You know, it’s it’s kind of a fun thing Too bad the US doesn’t really have legitimate good train travel. It’s it’s really, really a bummer. And by the way, you know that happened. It’s really, you know, capitalism. It has its flaws as much as I hope we all love it. I hope it’s not just me, right? It does have its flaws. And, and one of the flaws was that a lot of these train routes, not just the track, but the track is not just the track itself. It’s a route because those tracks were old and would need to be changed over the years anyway and hopefully widen because you can run the better trains and wider tracks much smoother, and so forth. You know, they were torn up the tire companies and the automobile companies as the heyday of the American prosperity Revolution and the baby boomers and America’s love affair with the automobile which, hey, you know, it’s got its place too. I, I’m okay with cars. I’m not a mass transit freak or anything, but it would be nice to have some options, you know, all those tracks and routes got torn up. And that was because of the lobbying from the tire companies and the automobile companies. Yes, that is one of the reasons we don’t have legitimate train travel in the United States. I mean, yes, we have Amtrak and it’s not good. Actually, I should say it actually sucks. Because that’s the truth. But yeah, it’s really too bad that worked out the way it did. But hey, you know, that’s the way things are. Okay. So we just recently lost paul volcker, former Fed chair. And I mentioned that to you on the show on an episode recently, when he passed. He’s an interesting Federal Reserve Chair, because he’s the one of maybe in a class by himself, okay, because Paul Volcker had the guts to do what I say needed to be done at the time to break the back of this incredible inflationary spiral that was going on. Well, during the time of the Jimmy Carter presidency, in the late 70s. Had he not done that, we always have to ask ourselves compared to what how would it have been Turned out, had he not taken very, very bold action. I mean, very bold action that probably nobody else would have done. Certainly Alan Greenspan, Ben Bernanke, Janet Yellen, Jerome Powell, none of those fed chairs would have done it. Okay, what Paul Volcker did. So I just wanted to share with you a little news clip here. So the PBS news clip about Volker it’s it’s very short PBS news hour and I think you’ll find it interesting. And former
PBS News Clip 5:32
Federal Reserve Chair paul volcker died today. His passing came 40 years after he drove interest rates to record highs to tame double digit inflation. economics correspondent Paul Solman looks back at Volkers life and work as six foot seven paul volcker was known as tall Paul, and indeed, he towered over economic policy for more than 60 years. President Jimmy Carter chose Volker to head the Federal Reserve in 19. 79 when the US faced runaway inflation, to bring prices under control, Volcker, never without a cigar, choked off the money supply, driving up interest rates to discourage lending and borrowing. Volker defended the policy on the MacNeil Lehrer report in 1981 way you’re going to get those interest rates down is by persisting and policies that will indeed continue to bring the inflation rate down. some point this damn is going to break and the psychology is going to change and see. And so what he’s saying there is he’s saying, you know, the way you’re going to get interest rates down. In other words, he’s saying, Look, it’s like, he’s almost talking to a kid, like if you clean your room, I’ll give you your allowance, right? Or the teenager. If you clean your room, you can borrow the car keys, right, you know, and so he’s saying, look, we got to get the inflation down, and then I’ll ease up on the tightening. I’ll lower the interest rates at that point and sky high interest rates he figured would have the desired effect, as they did, but cause deep recession and unemployment that reached nearly 11% homebuilders and Volker their protests, scrolled on wooden planks, but Volkers stood tall. You know, you can’t deal with a problem by simply saying we’re going to let inflation Go ahead. Focus policies may have caused Carter the 1980 election. But in a statement released today, the one term president said although some of his policies as Fed Chairman were politically costly, they were the right thing to do. By 1983. Inflation had come down dramatically, and President Ronald Reagan reappointed Volcker, a lifelong Democrat as Fed chair, but the to assume clashed over the growing federal deficit, which Volcker feared might reignite inflation. Volcker left the Fed in 1987.
Jason Hartman 7:53
Now, interestingly, number one, I want to give Jimmy Carter some props because I’ve said bad things about him on the show, you know, over the years. I don’t think he was a great president. But I do think he was a good man. And did you notice that statement that he made about Volcker? Look, it was politically costly, but it was the right thing to do. Now, that is the sign of a person with some integrity. Got the world needs some more of those, don’t they? I mean, it’s just, it’s just amazing how the culture has just sunk. I mean, it constantly I’m complaining about it, you hear me complain about it listeners. And you know, but yeah, you know, two people of integrity, Volcker and Carter, you know, so there we go. And then what’s also interesting is when reagan and Volker clash, you know, Reagan was running up the deficit, right, the deficit and the debt he was doing both right, Reagan was the spender and mostly on the military, which we can argue about that lover hate Reagan. Most people liked Reagan, you know, much more than Trump, of course, but you know, Reagan, he had a business plan. And the business plan was to put the Soviet Union out of business, which he did. I mean, I would argue that that was a good deal in the long run. Because compared to what, you can’t hear the dogs that don’t bark, what if Reagan wasn’t there, and we didn’t have the arms race, and the Soviets weren’t forced to spend and spend and spend to keep up? If that didn’t happen? Maybe the Soviet Union would still be chugging along. They never really flourished, of course, because communism was a disaster. We all know that. Well, there’s like two of you in the audience that don’t know that. But you guys, really, I appreciate you listening. You should probably be finding another show. Those two people, two out of our 10 listeners, right. But yeah, you know, communism is a disaster, quite obviously. And it’s amazing to me how some folks seem to want to bring it back. But that’s another topic for Another day. What’s amazing here though, is this part. You know, Volcker and Reagan clashed over the deficit issue and the increasing national debt as well. And Volker rightly thought it would cause a lot of inflation. But why didn’t it? Okay? Yes, there was certainly some inflation, the roaring 80s was a time where we certainly saw some inflation and decent amount of it, right? Because the economy was booming. I mean, under Reagan, it was just a massive boom time. And then we went into recession. And then it started picking up again. And I’m not giving Clinton much credit for this. Now there was bush in between there, but I’m just jumping to Clinton. Because when Clinton came into office, he was about to just benefit from this huge expansion in the economy due mostly to technology, namely, the Internet and how it increased trade and the velocity of money and change the world, of course, and Clinton just got lucky and presiding over that. But one more thing I will give Clinton credit for is that he didn’t get in the way a lot, even though I don’t agree with Clinton’s policies. He didn’t kind of get out of the way. You know, he didn’t interfere too much in the economy. Now, his wife much more socialist than slick Willy. I did not have sex with that woman Miss Lewinsky. Bill Clinton. did. She would scare me if she was president for sure. Okay. But you know, Bill was, you know, he didn’t mess it up. I’ll put it that way. So that’s definitely to his credit. Okay, back to Volcker and Reagan, and this is 1987 that Volker left as Fed chair,
PBS News Clip 11:50
his last legacy, advising President Obama after the 2008 financial crisis, pressing to restrict commercial banks from making risk. risky investments, a controversial reform known as the Volcker Rule. For the PBS NewsHour, this is Paul Solman.
Jason Hartman 12:08
So there you go a little bit about Paul Volcker. I think I would be remiss if we didn’t talk about him a little bit, because of course, he had a huge impact on what real estate. You know, Obama hired him during his administration to help with coming out of the Great Recession. I didn’t follow that very much. Although I did think it was pretty surprising that he hired Volcker. But then later when I learned that Volcker was very democrat and his leanings, I wasn’t surprised. But initially, I thought well, wasn’t vulgar. Come, you know, in with Reagan and and reaganomics? No, that was really Arthur Laffer who, by the way I met, I had a drink with Arthur Laffer, and he was really the guy that shaped the reagan economic policy, because he had something he created called the Laffer curve, which was basically sketched out on a napkin. We should talk more about the Laffer Curve On a future episode, I’ll leave it at that. But you know, just had to share a little bit about Paul Volcker, I think very important, a very important Federal Reserve Chairman, in the history of Federal Reserve chairs, as you know, most of you know, I’m not in favor of the Fed. I don’t like the Fed. I don’t think we should even have a Fed or central bank. But hey, you know, that’s a big, much longer topic. I do think, though, this particular Fed Chairman, a very, very interesting one. And also the one that came after him who was Fed chair for a long, long time, Alan Greenspan, another very interesting for the completely opposite reasons. Greenspan, we’ve talked about a lot over the last 1300 and 48 episodes, we should talk more about Greenspan, given that we’re having a little bit of a Fed conversation now. All right, hey, let’s wrap it up with that and get to our second segment of today’s show. But before we do that, of course, Jason Hartman calm and You can call us pick up the phone. You know, I tell you, even if it costs us as a company a little bit more to help customers on the phone, I don’t care. I get so frustrated in dealing with these companies that just it’s like, Can I call you? Can I talk to a human please? Not a robot? Yes, it’s so refreshing. And you can do that one. 800 Hartman, just call us anytime one. 800 Hartman, if we don’t answer we’ll get back to you soon. At one 800 h AR t ma n. And of course Jason Hartman, calm. Okay. Our second segment today is with Evan, one of our clients who has been more and more involved in the show lately. He has also heading up some of my guest hosting, sometimes on my Solomon success show as well. biblical principles for business and investing. He is a rabbi. He’s a client, and I have a little talk with him here that I wanted to share with you. So let’s jump to that. Evan is here with me as we cover the current events.
Evan Moffic 15:09
Evan, what’s in the news? Jason, there is so much in the news. And I thought we would start with had another Federal Reserve interest rate cut. And since that time, there’s been a lot of news about recession, fears are fading. The yield curve is steepening, once again, meaning that longer term interest rates are higher than shorter term. In other words, it’s not out of whack where you get paid more on a shorter bond than a longer one. That just doesn’t make sense.
Jason Hartman 15:37
That’s right. And so I wanted to get your thoughts we there was an interesting story released by Wells Fargo, which I know is your very favorite bank. Oh Wells Fargo the modern version of organized crime Wells Fargo Yes. scandal a week at Wells Fargo. Those scumbags are just ripping people off left and right, but go ahead. He said fears about an imminent recession have faded considerably different has shown that it will do what it takes to offset the headwinds from slower global economic growth and continued uncertainty around US trade policy. What are your thoughts on this? And what does that mean for us? income property investors? Well, you know, I mean, all of these will there be a recession? When will it come? Well, first of all, I can tell everybody, Evan, there definitely will be a recession. The only question is when it will happen. It’s inevitable. There are always cycles in the economy. That’s just the Austrian School concept of the business cycles, right? They’re always going to be there. However, it’s interesting, certainly in the real estate market, this is very unlikely to be another real estate lead recession. Okay, that’s the first thing that’s, I think, good news. It’s more likely to be a student loan debt, credit card debt, auto financing. You know, maybe those things are our problem areas that we would we would consider, of course, we see some signs of manufacturing slow down for sure we got the trade war, etc, etc, really called the trade negotiations. But I think if you’re invested in these bread and butter properties in these linear markets, you’re pretty safe. You were pretty safe last time around. And that was the worst economy in seven decades. Sure, it hurt a little bit. But it really wasn’t that bad if you were focused on cash flow. Now, if you’re a speculator, if you’re buying properties that don’t have good fundamentals, that don’t follow my commandment number five, Thou shalt not gamble. And you purchase properties that make sense the day you buy them. Cash Flow is pretty reliable, even through a recession. appreciation, however, is not at all reliable.
Evan Moffic 17:49
Just to sort of conclude this discussion about when a recession comes and how difficult it is to predict it. We’re in the longest running or one of the longest running bull markets and stocks and I remember you making the went on a podcast A while ago that because the recession was so deep, the kind of recovery is going to be longer, because it’s just coming from such a much lower base. Do you still think that’s true? I mean, do you think we’re in the fifth inning or the eighth inning? Clearly that’s played out what you said before that this recovery is going to last longer? Yes, they’re nice sense of timeframe. I was saying that in 2016. And it’s now 2019. Okay, and I was right, again.
Jason Hartman 18:29
I was right. I’m gonna pat myself on the back. Interest rate. Yeah, no, I was I’m terrible at predicting interest rates. Don’t listen to me on interest rates, I suck. Okay. But I’ve been pretty good about a lot of stuff. And that’s another one of them that I really haven’t thought to brag about and gloat about. And so what I was saying there is that during the Great Recession, things got so low that we just had to sort of get back to par if you will. Back to sea level. Maybe is a way to say it right? And then build from there. And the build up from there when you ask yourself, compared to what? We were coming out of just a very low trough. And in coming out of that, once we got to part like if people say, Oh, the business cycle only last six or seven years, right, and then there’s always a recession, which many people would tell you that the business cycle can’t go on forever. And that’s a fair statement. But it’s always a question of compared to what? So I would say that really the recovery when we sort of got back to par, if you will, started maybe in 2013 ish. Okay. If we go from 2013 to 2020. Well, that’s seven years. Okay. Then maybe we have the recession after the presidential election. You know, certainly if a democrat wins and I’m not being political But just saying democrats aren’t good for business, okay, Republicans are good for business that’s just historical. It’s not a political statement in the least. It’s just a fact. We could see the recession after that. And that would still be in line, I say, with a normal business cycle, when you take an event that only happens once every seven decades, meaning the Great Depression in the 30s, starting really in 1929. And the great recession starting in, I would say, 2007. There’s a little debate on that most people say the fall of Lehman Brothers was the start, but whatever you consider it to be, you know, that’s a more accurate way to look at the business cycle. Would you agree with that, by the way?
Evan Moffic 20:43
I would, it makes a lot of sense that we really start the recovery in 2013. Plus, I mean, I think the Trump effect is undeniable. I mean, when you have a massive tax cut, and you have a massively pro business, I mean, you’ve got you know, john Maynard Keynes, who we don’t like Some ways on economic policy, but he talked about the animal spirits of capitalism, and that was truly unleashed. And I mean, Trump kind of embodies that it’s the the risk taker, the pro business, take more risk and grow the economy. And that’s certainly happened under Trump. So that may make it a little bit longer, in
Jason Hartman 21:16
some ways, kind of like World War Two, kind of help lifted us out of the depression. You know, this sort of the Trump election may have accelerated our growth and maybe kept that cycle going a little longer. Yeah, more and more stimulus. And there actually may be another text cut coming. There are talks about that in the Trump administration. So we’ll see if that happens. I tell you that last tax cut was phenomenal for the economy. So well,
Evan Moffic 21:43
it he would be a real estate president. I was just watching a show this morning that you know, it used to be that artwork had a sort of 1099 kind of function where all the 1099 type functions were eliminated except for real estate. Thank
Jason Hartman 21:56
Yep, very, very interesting. We will see how it all plays out. Thanks for the question, and we’ll talk to you on the next episode. 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 Hartman. 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.