Jason Hartman opens the show with a discussion on home prices in the U.S. He discusses the strong summer sales and how long he believes this will last. He examines The Federal Reserve and how much they have lent to other countries. Then he gives us an idea of why urbanization has occurred and why those reasons are changing. In the interview segment of the show, he chats with Bryan Taylor to discuss the Spanish Flu and the economy before, during, and after the flu.
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 0:54
Welcome to Episode 1522 1522. Thanks for joining us today. As we discover the second half of 1000 years of global financial data with our guest, Brian Taylor, and we will get to that in a few moments. And you know, so many people are looking at such short term stuff, you got to look at the longer term, you got to look at the longer thing. And really, it’s very hard to understand history without a longer context. And we’ll talk about history if we have a moment today, because some whack job area leaders in Illinois are calling for people for schools to abolish history. Yes, history is bias. It’s not fair. I mean, we live in a world of snowflakes. It is unbelievable. Unbelievable. So niresh one of our investment counselors posts In this article, it says Chicago area leaders call for Illinois to abolish history classes. Yes. State Representative LaShawn K. Ford said current history teachings overlook the contributions of women and minorities. Well, we have revised history so many times in these textbooks. I can’t imagine that they overlook anybody except the people we mostly learned about, you know, now it’s like, oh, Columbus was evil. The founding fathers were evil. I i is where does this end? It just I’m telling you folks, I am calling on an equal rights, affirmative action movement for five foot 11 inch people. We do not have enough rights. We are underrepresented. Yes. If you’re 511 reach out to me. Let’s create a website and a campaign and hire somebody. lobbyists and go demand money from Congress. They need to give us money because we’re 511. And, you know, the most successful people, the people running the world are usually taller than us. It’s just not fair. It’s just not fair. Okay. So we start off today with something from Diana olek. She She does a great job reporting. I gotta say, home prices see strong June balance, but economists warn, it likely won’t last. And I agree. I agree. It’s not going to last. But we don’t really care that much, because we invest in a multi dimensional asset class. So we’re not worried about prices on a little bounce or a little decline. That’s not what rented for. We like yield, baby. It’s all about yield. Okay, let’s listen.
Bryan Taylor 3:57
Welcome back everybody. blockbuster report that comes out. The housing market is just there. Now let’s get to blockbuster one morning. Good morning Becky have a first read on June home prices is a big one. They jumped a full percentage point nationally, which is the largest monthly game for June in seven years. And that’s according to corelogic. Annually, prices jumped 4.9% compared with a 4.1% gain in May. Now home prices got a boost from record low mortgage rates tight suppliants strong demand, much of that demand pushed by the pandemic. The expectation is that prices will moderate over the next year at least according to core logic. But of course all real estate is local, even now.
Jason Hartman 4:36
I love it. See why I like her. She said all real estate is local. You’ve been hearing that from me for 16 years. All real estate is local, so important. A lot of the people interviewed on CNBC and another media. They just forget that so quickly that all real estate is local. Harry dent forgets that All these people talking about real estate or housing with that broad brush. I You’re driving me crazy folks stop saying that all real estate is local. Yes, that’s true. So stop talking about the nationwide housing market and the nationwide real estate market. There just ain’t no such thing.
Bryan Taylor 5:20
Delphia sale prices up 8.4% annually at thanks just fleeing New Yorkers,
Jason Hartman 5:26
but price. So Philly Dooley up 8.4% san francisco down point 2% I bet a lot of these, these foolish people thought San Francisco could never go down. Ha. They never learned about linear cyclical hybrid markets because they never listened to this podcast. Yes, he should have been listening
Bryan Taylor 5:50
or slightly down in San Francisco as tech workers and now or from wherever they want. forecasts are also split Las Vegas, which depends entirely on tourism. Fred’s economy could see home prices fall more than 11% in the next year, according to economists, but in San Diego prices are expected to gain over 4% because again of that tight supply, and supply is the key word looking.
Jason Hartman 6:13
And by the way, remember this is a forecast. Okay, so some of the numbers she talked about, we’re actual numbers, summer forecast numbers. So be careful. You know, make sure you understand that. But San Diego, again, a tale of two markets, right in San Diego, all cyclical, right. That’s all cyclical for sure. But But San Diego, a lot of it very suburban, but some of it very urban, very downtown ish. So in the downtown area, if you have the stats to split that up, I’m sure you would be seeing a much different picture. That’s people fleeing downtown to suburban markets, that’s what’s causing that
Bryan Taylor 6:58
or you’re seeing huge demand. From the homebuilders because there’s so little existing home supply. So if the builders really pushed construction and prices couldn’t take a breather, but new construction has been well, not so much lately, because the builders are hamstrung by lack of land, labor and material.
Jason Hartman 7:15
And so what she said is true, yes, home price appreciation could take a breather. But it’s very unlikely because what would have to happen? Well, the cost of all of the ingredients with which they build a home would have to decline and that could happen. Now remember, the one commodity that is somewhat not completely but it’s somewhat of an indicator for other commodities not completely. And it is copper, as they call it. Dr. Copper, you know, they call it Mr. market and Dr. Copper. I’m sure there will be complaints that they were Where is Miss market, I’m sorry. not miss or Mrs. It would be Ms. Market. Whereas ms market in there Oh, yes. But to be sure someone is offended. Yes. So driven by low inventory median home prices are reach record high in July. She was just talking about June, this is July this article, I’m looking at housing wire, and it said California sees a 50% drop in listings year over here. So even some of these cyclical markets like, you know, you just saw San Diego, okay, having some good times, but again, not likely to last in my opinion, because those markets were already in trouble. And they will continue to see what Meredith Whitney talked about on the show years ago, the state of the states where there is an outward migration from these business unfriendly places who, who also happened to be or that also happened to be In many times, cyclical markets are also business unfriendly, many, many of the times not all of them, not all of them. So interesting stuff to metros that actually saw declines in median listing prices. Now that just is what listings are coming on the market. Or Miami, Fort Lauderdale, West Palm Beach at a negative 1.5%. So yeah, you know, interesting, interesting and see Florida, as hot as for day is and as well as it’s been doing real estate wise. You know, it’s had some had some bad news as far as COVID-19 84 recently, where numbers are high, and it’s so funny how the media is and what what makes people think people from all over the country all over the world. They reach out to me and they say, hey, Jason, are you okay, I heard there’s lots of infections in Florida. Well, yeah, I’m fine. It hasn’t affected my life. one iota. But you know, that’s how people are. That’s how that’s how people think. They don’t look at the real picture. They look at the crazy stuff, the media paints, and they just get really, really confused. So we’ve got to talk about more, there’s more on the work at home revolution. I’ve got some really interesting graphs. Well, let me just share one of them with you. And I got to jump to a conference call here, and we’ve got to get to our guests, but this one is fascinating. This will be the last thing then we’ll get to our guests. Okay, lender of last resort. So, as you might have learned in your history classes, don’t call them history, it’s history. If you learn this in your history class, then you would have heard the expression the lender of last resort, which really became known in the Great Depression in the 30s. Well, 1929 starting and you know, JP Morgan and all of this. So that’s the Federal Reserve, the private Corporation controlled by who knows who nobody knows, get your tinfoil hat out, Rothschilds, etc, etc. They’re the lender of last resort. But they are just on the American team. They’re propping up a lot of the world, because the money lent by the Fed to other central banks. This is other central banks in other countries, not in the US. This is billions of dollars. So, the Federal Reserve our US Federal Reserve, not a government entity, mind you, just a private corporation, but a pseudo governmental whatever. Nobody knows exactly, but we’ve talked about that before. So they’ve learned about 400 and 40 billion with a B almost half a trillion with a t to the Bank of Japan, Japan central bank, they’ve lent About 200 and 30 billion to the ECB, the European Central Bank. And they’ve Lent, maybe I’m looking at a graph chart. So it’s not an exact number, about 80 billion to the Bank of England, and about 60 billion to the Bank of Korea. That would be South Korea, clearly. And then they’ve lent a whole bunch of money about another 50 billion to a bunch of other central banks. So there you go, folks, that includes the Bank of Mexico. This was now National Bank, the Monetary Authority of Singapore, the Reserve Bank of Australia, and central banks of Denmark and Norway Now, why the heck, Norway? would need a loan from the US is beyond me. Norway is so rich. They’re just, I mean, that’s ridiculous. Why are we loaning them money? Why is our Federal Reserve loaning the money and you know, same as real True of Well, a lot of these countries I mean, South Korea is really rich. Australia is doing pretty darn well. Singapore is doing well. You know, Switzerland. Yeah, they got the cheese with the holes in it. I don’t know maybe the banking system has the same problem. Not sure. But you know, that’s that’s a famous banking system in Switzerland, right Swiss banks. Alright, let’s get to our guests. What else do I have to announce to you go? Yes. Be sure to join us for the live stream on Sunday. Coffee talk. Let’s do some coffee talk Sunday morning. 8am Pacific 11am. Eastern on Livestream on Facebook in YouTube. We look forward to seeing you there. We’re gonna have some interesting stuff coming up for you. And also, we have well we got a lot of spam. I’m not gonna go into it right now. I told you we get to our guest. Here he is. Take us through history a little bit and especially because your data goes from So far, and that’s what I just love about what you do. Too many people are looking at such short term analyses of everything. Let’s just look back 102 years. We don’t need to go back 1000 but talk to us about the Spanish flu and, of course started in Kansas City, probably. So I don’t know why it’s called the Spanish flu. But we would have happened economically. And what was the recovery like from that? And does it apply to our world today? Or is it just a completely different thing?
Bryan Taylor 14:29
Well, in a lot of ways, it is a completely different thing. Because you have to remember the Spanish Flu not only happened throughout the world, but it happened in 1980 in the middle of World War One. And World War One acted as a tool to spread the Spanish Flu from Kansas City, to Europe and to the rest of the world. So if you want to look at it from an economic point of view, I mean, prior to the Coronavirus coming into play, you had internet National trade, you had huge amounts of imports and exports throughout the world, but the world in 1980 was more of a closed economy because of World War One. And so on the one hand that did help the Spanish Flu to spread, but on the other hand, part of the worry is that now there’s less travel, there’s less interaction with the rest of the world. And that’s what’s really hurting us badly. But in that’s why the economy went down so dramatically. But you know, some people have said, this is good first government induced recession right now. And that’s just the reality of it, because at some point, you have to stop the flu from spreading. Europe has been effective in doing that the United States has not and until we can find a way to stop the flu from spreading with a vaccine. It will continue to hurt the economy now, the stock market has not responded in the way that I think a lot of people have expected. But that’s mainly because the stock market is looking out several years in the future, when the stock market is anticipating that we will have dealt with the Spanish Flu rather than looking at the immediate picture, which is quite dire, and you meant to say Coronavirus, I think
Jason Hartman 16:22
becomes viral. Yeah, right. Okay. So, in other words, the stock market is showing optimism, or is that just a result of the massive money pumping printing that is going on? Is that real optimism or is it, you know, just induced by the Fed and the government?
Bryan Taylor 16:40
Well, it’s definitely induced by the Fed and the government. However, I think what the stock market is doing is trying to anticipate what the post Coronavirus world will look like. What will be the companies that are successful? What will be the sectors that will not do well? No energy is doing very poorly. consumer staples in a lot of cases are doing poorly. So there’s this massive reorganization of the economy that’s occurring. And the stock market is trying to anticipate that now they’re probably overestimating the good side to companies like Amazon, apple, the thing stop, and under estimating the negative impact to companies like JC Penney and others. But I think that that’s what’s going on. The stock market is trying to anticipate where we’re going to be five years from now what sectors are going to succeed, and which ones will fail?
Jason Hartman 17:39
Yeah, so when we look at that, actually, let’s just talk a little bit more about the Spanish Flu if we can, what was that like? Post Spanish Flu 1918. In 1920, we had the roaring 20s. And for a decade, everything was roaring, if you will. And then of course, the Great Depression is that How we’re gonna come out of this is that is that going to be that, you know, are we gonna have the roaring 20s? Again, you know, starting in a year or so?
Bryan Taylor 18:07
Well, I mean, it’s certainly possible. I mean, the night after the Spanish Flu was controlled, back in 1918, the stock market did start to bounce back. I mean, if you look at the Dow Jones Industrial Average back then it really sort of tread water 1918. But then once the war was over, the Spanish Flu was taken care of, then the market bounced back. And I anticipate that that’s what’s going to happen here, that once we find a cure for the corona virus, and people can see that you can have music concerts, again, you can go out you can do things that the market will bounce back. You know, I’ve been predicting for decades that we’re going to have a great bull market in the 2020s. Because if you look at the 20s for every decade in history, you have had a massive bubble. You have the South Sea bubble in the 1720s. You had the bubble for the South American stocks in the 1820s. You had the roaring 20s in the 1920s. And, you know, you’ve had sort of a plateau here in most of the world. So you have laid the foundations for a large amount of growth in the 2020s. And so that is our prediction that we will have a bubble in 2020 separate several articles on that path.
Jason Hartman 19:36
So just to be clear on that prediction, the prediction is Coronavirus, sees either treated or there is a vaccine and everybody feels safe again, and then we go into a booming economy. And how long would that last?
Bryan Taylor 19:52
I think it would last several years. So it lasts you know, probably for most of the decade and you know, especially since The Fed now is feeding money into the economy. Bonds do not provide an alternative. And so people will put their money where it works and the stock market and real estate is where it’s working. I mean, you’re going to have a massive realignment of the real estate market, because now people more and more people will work from home. And I mean, that’s what’s happening in our company. And so people don’t want to be stuck in a place where you’re in an urban environment that you hate to be in, why not be out here in San Clemente on the beach, if you can work from home. I totally agree with you about that. That is a massive shift. And that does not bode well for high density, urban environments. Cities are really going to hurt very badly, you know, as I’ve been saying the past several months, you know, the two biggest danger zones are elevators, and then mass transit. Yes, those are the things that all the environmentalists want they want people in high rises and little boxes and taking mass transit. And I think there’s going to be well, I think there already is a huge rebellion against that. And a major, major push, just a mass migration really, to the suburbs. And no, I agree completely. And that’s just going to be the reality and the readjustment that’s going to take place. Yeah. So it can’t be reversed. Do you think that continues though? After there is an effective treatment or vaccine? I think it will. Yeah, I mean, because most people prefer to work from home. I mean, that’s just the new reality. Right?
Jason Hartman 21:39
Right. And not just the half though, I think there’s going to be a level of PTSD, Post Traumatic Stress Disorder about this because even when the ones just remember folks even though it didn’t affect most people’s lives, it was nothing like the doomsayers had predicted but you know, remember the your thoughts about swine flu and H one m one. And you know, even mad cow disease and everybody knows there’s another thing coming. This is just the history of the world, there’s always something. And, you know, say there is no virus concern. Maybe it’s just civil unrest. And now we’ve got that and guess where that is? It’s in all the high density urban areas. So get another reason to get out of those areas. And people have discovered that they just don’t need to live in a city anymore, because the technology has solved that problem for us.
Bryan Taylor 22:33
And there’s just going to be an anticipation What if it happens again? Yeah, I’m going to be prepared. I’m not going to take a chance. Right?
Jason Hartman 22:41
Yeah, I agree with you. I agree completely. Well, what else can you tell us about history of the last thousand years? I mean, it you know, most of my guests cannot talk about that effectively. They can talk about what happened in the 70s. And, you know, the great recession in 2008, but They’re not going to talk to you about the robotic plague. There’s another one right or, or whatever else,
Bryan Taylor 23:05
right? And we actually have data on robotic plague. We have data on housing prices, they go back to the 1200s. And what’s interesting was during the bubonic plague, of course, one third of the population got wiped out. But of course, one third of the housing did not get wiped out. So there was the largest drop in housing prices in history, and 12. That’s 1200 ad. Okay, so you lost a third of the population or in the 1300s. Okay. And you lost a third of the population. And you didn’t have I guess, a housing shortage back then. So now there’s a significant loss of demand. And then the existing supply was still there. Tell us more about that. Yeah. And so it actually took several centuries for housing prices to go back to the level that they were at prior to the bubonic plague. Wow. And you know it really if you were a worker, you were just living in heaven. Yeah, because you were in high demand because there were not as many workers available in the labor pools there had been prior to the robotic plague. And so that everything shifted feudalism came to an end, in part because the bubonic plague. And those are the long term impacts that you can see. I mean, you’re talking about low interest rates. Well, the last time that interest rates were this low, was back in the 1800s. And so if you really want to study what’s going to happen in the future in the economy, you have to go back to before World War One, when interest rates were low, and see how the economy reacted when inflation was slow. I mean, the anomaly really has been over the past eight years, when interest rates and inflation increased dramatically from The 1940s to the 1980s, and then decreased dramatically, you’re just simply not going to have that pyramid that you’ve had in the past, you have to look out what’s going to happen in an environment where there’s little increase in demand, because there’s little increase in population. And your interest rates are low, your inflation is low, it’s going to need to have a complete change in the mentality. And the only way that you can understand this is by looking back to the pre World War One World, which we collected data on, our data for the stock market goes back to 1601. So we can look at four centuries of the behavior of equities throughout the world to understand how they have responded to different environments. And that’s really the advantage of having several centuries of data is that you can look back to what happened 100 years ago or 200 years ago, when you have circumstances that come up, that haven’t really occurred for centuries or decades, if you’re only looking back over the past 20 years, you don’t have a full picture of the world and how financial markets are going to react to new circumstances.
Jason Hartman 26:21
Now, but that almost seems to contradict what you were saying at the beginning of the show. I mean, interest rates are actually lower now, but they weren’t they were very low than I guess. And now they’re even lower. Right? Correct. Yeah, right. In those two instances, you talked about 1800s. And pre World War by World War One, I think you said,
Bryan Taylor 26:38
Well, yeah, well, interest rates were low and declining throughout the 1800s. They bottomed out of about 1900 and then steadily rose, really for most of the 20th century, and then they decline towards the past 40 years, and we think it’s going to return to the situation in the 1800s we You’d have low interest rates, you’d have to look at how commodity markets, how real estate markets, or other markets existed in an environment of low interest rates and low inflation, which we anticipate is going to happen in the next 20 or 30 years. So reliability
Jason Hartman 27:17
of data when you go back over such a long time, I mean, you’re talking about housing prices in the 12th century. How do we know you know, I mean, that data just cannot be very reliable, right? How do we even know?
Bryan Taylor 27:34
Well, there were months back then. And monks keep track of all of the prices that their monasteries had to pay. And that’s our source of the data for, you know, the 1700s, the 1800s all of these data is available from newspapers. And so we go back to the London Times, or the Quran, or other papers and we take the day directly from the newspaper. Oh, so it’d be similar to going to the Wall Street Journal today. Sure. So we have gone back to the original sources that monks have provided us that newspapers have provided us, collected the data, organized it into a digital format, and then provided us the centuries of data that we have.
Jason Hartman 28:22
Fantastic. So, so 800 years ago, it would be monks that we’re talking about, and they weren’t all over the world when we talk about, you know, housing prices, in what areas? I mean, it’s a big it’s a big world, obviously. What areas are they addressing that can’t be addressing a worldwide
Bryan Taylor 28:42
market, right? No, it’s mainly Europe, family, friends and lenders where the data come from coffee was monasteries collected this data back to the 1200s. There were local city governments in France as well as monasteries. They collected it. So yes, I mean, the data localize to France and England and Italy. And then we use that to extrapolate to the rest of the world. Sure. Very interesting.
Jason Hartman 29:09
That’s fascinating. What else do you want to share with our listeners? Maybe something I haven’t asked you just just anything?
Bryan Taylor 29:16
Well, we just know that it’s important to have an understanding of the past in order to anticipate the future, that the world today is similar to where it was 100 years ago. And if you don’t look at the past, if you don’t look at stock market, commodity prices, other factors over a long period of time, you’re not going to be able to anticipate where we’re going to be over the next 10 years. I mean, I think everyone’s prediction of higher interest rates and higher inflation is just wrong. I think that we have a new era in which the government is trying to ensure that we don’t have high inflation. We do keep things under control. And that’s my contrarian analysis of the market.
Jason Hartman 30:06
Yeah. And you see it’s contrarian because usually low interest rates create inflation. You’re saying this time it’s different, right?
Bryan Taylor 30:14
Yes. This time, it’s different. Okay. And just
Jason Hartman 30:17
just to completely understanding why is it different this time
Bryan Taylor 30:20
is different this time because interest rates will remain low,
Jason Hartman 30:25
right now would cause inflationary pressure. No.
Bryan Taylor 30:29
What? No, no, okay, the lower interest rates are response to low inflation, not vice versa. So we anticipate that inflation will remain low. If inflation remains low interest rates be main low, and that’s in part because of the lack of demographic growth that is out there, and the lack of GDP growth that will come from that.
Jason Hartman 30:51
Bryan Taylor 30:52
stuff, give out your website. Our website is global financial data.com. And there are hundreds have articles and blogs that I have written that are up there under the insights section for people to look at read and understand and learn from the past to understand the future.
Jason Hartman 31:13
Good stuff. Dr. Bryan Taylor. Thanks for joining us. Thank you.
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