On this Flashback Friday episode, Jason Hartman invites Brandon to co-host as they discuss the Peter Diamandis book Abundance: The Future is Better Than You Think and Free: The Future of a Radical Price by Chris Anderson. They look at a video of Peter Schiff’s criticizing Federal Reserve Chairman Ben Bernanke and QE3 (Quantitative Easing). In addition, they look at some of what Peter has gotten right and some of what he’s gotten wrong. Jason emphasizes why he believes precious metals is a mediocre asset class and should be considered storage of wealth rather than investments.
My wife and I were drawn to you because we liked the idea of putting money down qualifying, making sure we can cover the mortgage you know and have reserves like you were talking a language that was very appealing, based on what we had gone through before.
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is hand picked to help you today in the present and propel you into the future. Enjoy.
Welcome to creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine self made multi millionaire who not only talks the talk but walk the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 Cities this program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:23
Welcome to the creating wealth show. This is your host Jason Hartman and this is episode number 278. Wow. 278 episodes, we’re almost at breaking the 300 barrier here. And so many people like Roger Bannister’s, four minute mile, and Chuck Yeager sound barrier thought it couldn’t be done. But here we are, hey, I’ve got a guest host on with me today. And that is Brandon laws coming to us from Portland, Oregon. Brandon, how are you?
I’m doing great, Jason. It’s great to be part of your show. Thank you for having me. Well, thanks and
Jason Hartman 1:55
and you’ve attended a few of our events. you’ve flown down to Southern California to attend a few of our Before I have
Yeah, I’ve been to the creating wealth show, I think a few years ago and then came to the meet the Masters last year.
Jason Hartman 2:06
Right. Right. The creating wealth seminar. I believe he met. We’re on the show now.
Yeah, that’s right. That’s right.
Jason Hartman 2:12
And so you know, you’ve been a listener and follower for a few years now. And you know, you just have some interesting comments. And, and, folks, be careful. I have to warn you listeners, be careful if you send me an email, watch out, because this this thing today that’s happening with Brandon might just happen to you. Here’s what I mean by that. Brandon said, he wrote me an email the other day and he said, Hey, Jason, you know, I think that’s a great idea. Why don’t you talk about some of the good books, you’re reading on the show? And I said, Okay, then Brandon, you are officially deputized to co host that show with me. So here you go, huh? That’s right. Good stuff. Well, hey, you wanted to start I know that when I did the interview, and we’ve talked about it on prior episodes a few times to when I did the interview with Steven Kotler who co authored the book abundance with Peter Diamandis, you were interested in that and you’ve been reading the book or I think you’ve finished the book, right?
I actually have not picked up the book yet. It’s on my list of books I want to read. But so
Jason Hartman 3:10
I’m that big list
was pretty interesting. And I actually listened to the interview as Steven Kotler that you had, and just had some few few questions that I hope you kind of dive into. Sure.
Jason Hartman 3:21
Sure. Well ask away.
Yeah. So in the book, they mentioned that the world is getting better. To me, it seems like there’s a lot of negativity out there. So what do they mean by the world’s going to be better? Long term, and that there’s a lot of abundance in terms of the maybe the goods that we’ll have?
Jason Hartman 3:39
Well, I think that this whole thing, is the the question of will technology save us can technology save us and you know, if you look at if you look at the revolutions that have happened in technology, throughout history, it certainly has saved civilizations before and it could save too, of course, from a governmental perspective, we’re doing almost everything wrong. Not just in the US but but globally. I mean, it’s it’s like an infectious virus, the mismanagement has just spread all over the globe. And we know what I’m talking about there is pandering to buy votes the way politicians do. This is like the tyranny of the majority, which has been talked and written about over the years. And where, where you get, you’ve got 47% of people in the US right now that are somehow on the dole, as it were, that are getting benefits from government. And as soon as that tips to 50%, or God forbid, 51 or more percent, you’re going down to pure socialism as because because the politicians will always pander to buy votes. And as they do, that just means spending giveaway more free goodies. But all of that would cause inflation, dollar collapse and We’re gonna talk about that in a minute when we talk about Peter Schiff here, and Dan Ammerman, but maybe, maybe just maybe, and it is possible, I think some technologies will come along, that make everything so cheap, and so accessible and advanced civilization so much that it would play against some of these very negative factors that are going on out there. One that that you mentioned to me before, and you talked about is education. And I know you have a question about that. Maybe that’s a good one, because I haven’t really talked about it much on on the prior episodes. But you know,
what are your thoughts on that from the abundance book? So my thoughts with that is, how can technology actually produce top tier education that everybody can access? So not just in private and public schools, but how will technology drive top tier education for everybody?
Jason Hartman 5:56
Yeah, well, technology is a distribution point. form. When you look at the Internet, it’s the most incredible distribution platform ever invented. Before that, you know, it was shipping and railroads and trucks and so forth, and, and television and radio and book publishing, all of that kind of stuff. But, but if you look at the Internet, it is the it is the first way really, to distribute things for free. I mean, any idea can be posted online. You know, Brandon, you know what, I really realized this, it just amazed me. I mean, it was about midnight, I think 12 years ago. And I remember the first book that I published was called become the brand of choice. And it’s a book about marketing and relationship marketing, that many people, you know, had asked me about over the years in my traditional real estate career, and I went on amazon.com and it took about seven minutes, as I recall, to post that book online. And I thought what an amazing thing. Here I have just posted my book and exposed it to I think at that time, Amazon had like 30 million customers, okay, they have much more than that now. But back then, it was amazing to me it was about midnight and I thought, I just expose this to the whole planet. Anyone can get the ideas I have in that book for just a few bucks, and they can do it almost instantly. It’s an amazing, amazing thing in the book abundance. The authors talk about the Khan Academy, and the Khan Academy is just a phenomenal thing that anybody listening may want to take advantage of. Right now. It was a person who wanted to teach I believe his nephew, some school lessons and and decided to make a video. And in doing that, they and that’s By the way, that’s k h a n academy.org. Okay for the listeners who are interested in checking it out and basically posted a video and, you know, it was so well received that he started making all sorts of videos. And there have been so far if you look at their website, 189,425,528 lessons have been delivered. And these are short videos that are maybe seven minutes, 10 minutes long, and anybody in the world can go and they can learn about computer science. They can learn about Obamacare. They can learn about geometry, they can learn differential equations, they can learn linear algebra. They can learn trigonometry, they can learn I mean it’s just it’s amazing they can learn finance valuation investing venture capital, they can learn about the credit crisis they can learn about history, American civics art history, they can you know study for their essay t their g mat, it is Brandon, it’s amazing.
Internet is amazing. It’s allowed everybody a platform to to get on there. Think about what you’re doing right now. You’re able To produce educational content via podcast, and deliver it to the entire world is pretty
Jason Hartman 9:06
amazing. And we have listeners all over the world and, and you know, something like the Khan Academy? I mean, it really begs the question, Brandon, is college obsolete? Is college worth it? Maybe, maybe it’s just not worth it anymore. As long as someone is a self starter and a curious person and interested in learning. You can learn a lot of this stuff just online and it’s free. It’s amazing. I’ll tell you something we’re doing in a couple of my companies. We’re creating online courses right now. And you may know about this already, what we’re doing. I’m not sure if you do, but we’re taking my creating wealth home study course. For example, right now this is in production. And that has always been the live course that you’ve attended. You flew down to Southern California to attend that. And then it was a home study course where it’s either on CD or audio download from the internet, along with PDF files or printed workbooks and a transcript book. And now what we’re doing is we’re taking the next step in the evolution of that course. And we’re creating an online course, using an LMS system, otherwise known as a learning management system. And these are the same things that a lot of colleges and universities are using nowadays to teach people and the difference is this. It’s far more interactive. People will watch video, listen to audio, they will watch PowerPoint presentations on their computer screen. But the difference is, every so often, maybe every 20 minutes or half hour in the course they’re going to have a little quiz, and the computer grades the quiz and they have to pass the quiz before moving on to the next section. So it’s interactive. It’s like having a virtual professor and some of the courses that we offer. We’re actually taking this into the financial services industry, the one I criticized so much and worked To offer a continuing education course, for certified financial planners that are interested in telling their clients about income property and real estate investments. And the great thing is, this stuff is inexpensive. It’s totally accessible to anyone anywhere on the planet with an internet connection. And instead of that old version, home study course type thing. It’s really engaged interactive, spaced repetition, all kinds of cool features, and even in the case of the financial planners offers them a certification that they can use to renew their various licenses and comply with regulatory requirements that they’ve taken an online course. So really just incredible opportunities in education, your thoughts?
I think that’s amazing. Anytime you can make it interactive for people, instead of taking a physical course where you can get online, make it interactive, I think. I think that that’s great for people. I think more people will be able to Access to information.
Jason Hartman 12:01
Yeah. And that’s what it’s all about. Everybody can access this stuff all around the planet. So a real revolution is going on in education. Another thing they talk about in the book abundance is they talk about the rising billion. Okay, so we’ve got about 7 billion people on earth, there are economic divides, political divides, but there’s also the digital divide, and the digital divide is closing. For example, one of the best things the UN could probably do is create a global Wi Fi network. If you ask me. Now, we’ve all probably heard about this hundred dollar laptop program. And computers are getting out around the world so that people can access things. But internet connections around the world are expanding so dramatically. And think of what happens when another when the next billion people come online, all of the the ideas they have the money they will soon have to spend, even if they’re impoverished people largely just Small amounts of money and micro finance, access to things like Kiva. By the way, you know, I don’t think I’ve ever talked about Kiva on the program. But I’m a Kiva lender. K, I VA, look that up. Kiva is a phenomenal thing. micro finance, micro lending, where you can go on and loan someone 25 bucks or 75 bucks and, and they can expand their business in a foreign country. And you know, so that’s a phenomenal thing. Really, this rising billion is going to change a lot. It’s a whole new huge market. Granted, they’re not making $100,000 a year, but there are so many of them by their sheer numbers. Okay of people. That will be a huge stimulation to the global economy. There are some really phenomenal things coming up. Now, all this said the one thing that I don’t think changes much in terms of my investment strategy is simple, basic materials like housing. Housing, again, is a low low tech item. It’s made of sticks and bricks, packaged commodities. And as these rising billion become more prosperous, and they will undoubtedly, and as others around the world become more and more prosperous, they will actually use more and more of these materials, driving the prices of them up. There’s not any big disruptive technologies in material science that I can see on the horizon. There are in ideas, education, in bits, computer bits, which by the way, leads us to our next subject. You wanted to talk about the book free by Chris Anderson. Yeah, he talks about atoms and bits in that book. So maybe we’ll jump to that one now. Okay.
Okay. Yeah, that’s great. So in the book free, which, by the way, I’ve read about four times because I loved it that much, isn’t it? Chris Anderson mentions that some things are just simply too cheap to meter. So what sort of goods is he actually talking about? And what actually causes it to be too cheap to meter
Jason Hartman 14:59
will he talk about About in that book and I just I love that book for you. I want to get Chris Anderson on the show. He was, really it’s just a brilliant book. And one of the things he talks about is he talks about a quote, and I think it was back in maybe the 1950s. from, you know, one of the big execs in the electric industry, you know, and electric utilities industry, and they were quoted as saying, electricity will be so plentiful, that it will be too cheap to meter. In other words, it wouldn’t even be worth keeping track of how much electricity someone uses, because it’s just too cheap to meter. And that didn’t exactly happen. However, there are other things that are too cheap to meter. And I think we just really talked about some of them in terms of education and ideas that spread around the internet globally. You know, the Khan Academy is free. What we’re doing right now with this podcast, Brandon is free and we’re sharing ideas with Other people all around the world. Last time I checked, which frankly was a long time ago, I should check this again. We had listeners in 26 countries, from Ukraine, to Andorra, to China, to Kuala Lumpur, all over the world, we have listeners, and this education, it’s too cheap to meter. It’s just free. We’re glad to do it. Because there’s a business model behind it. I want to attract clients to invest in real estate. But even if they don’t invest with us, I want to spread the ideas around because I think it’s a real, it’s a real service to people. And I think people will remember that 1020 years from now, even if they don’t invest with my company, they will notice how it changed their life years in the future. And so Chris Anderson talks about a lot about how companies should just give things away and have a business model behind it. So the things that are too cheap to meter are bits and bits, bits and bytes on a computer. You No data that’s too cheap to meter in so many cases. And so you can give that away. Now, atoms are different, because atoms are matter. Those are, those are hard things, right? A book is made of atoms. It’s got paper, and it’s got ink, and it has shipping cost associated with it. But now with the internet, you can distribute ebooks via Kindle or other ereader devices or just PDF files. And you can do that basically for free. A lot has changed, hasn’t it with the whole open source software revolution and so forth? And I think that leads to your next question about Microsoft.
Sir has Yeah. So with the free model that Chris Anderson talks about, and actually at the end of the book, he gives, I think, the 50 business models you can create on free, which is pretty interesting. So check that out. But how do companies like Microsoft compete with the free model like, let’s say, Google,
Jason Hartman 17:54
well, I can’t really remember because I read free several months ago, and I can’t really remember what He said about Microsoft in the book. However, my sense of it is that Microsoft, it’s an interesting company. Microsoft is vastly overreaching. First of all into way too many things. I think Microsoft, obviously, they’re not going to take over the world anymore. You know, at one time, we all thought they would. But they’re, they’re up to some stiff, stiff competition. If you look at Google and compare Google to Microsoft, Google is the largest company on the planet, based on the concept of free. Think about all of the Google products, any listeners probably using now you are paying for Google and another way you’re paying with your data. That’s a whole nother issue. By the way, I want to recommend I did a show on my holistic survival show with the author of a book called Search and Destroy, and that investigated one of the evils of Google. Interesting that their mission statement is do no evil Google does a lot of bad things, at least according to this author. And that’s definitely worth checking out. But if you think about all of the free products that we use that are Google, you know, most likely you don’t pay for any of them. I paid for a few Google products, but not much. And I think Microsoft has some real stiff competition, I think that company needs to do some soul searching. And I know they have, you know, this is not new, and really figure out who they are and what they’re going to be because the free model is offering them some big competition, the Microsoft Office products I have on my Mac, Microsoft Word, PowerPoint, etc. I use them but less and less, more and more. I’m using Google Docs, which is the Google suite where they have a spreadsheet instead of Excel where they have a word processor instead of Microsoft Word. And they have all kinds of other great products and they’re, they’re free. I think Microsoft has some tough, tough things to think about.
What’s funny about Microsoft is I find myself using micron Soft office as well. But it’s only because as the compatibility with sending files with other people, and because I work in the corporate atmosphere, that’s just the norm. I would love to move to Google Docs. And on the personal side, I do use Google Docs. But it’s just funny how corporate is not going away from the Microsoft products as of right now.
Jason Hartman 20:21
Yeah, well, you know, Old habits die hard, but ultimately, it’s going in that direction. So I think you’ll see more and more move away from Microsoft, every time your Excel crashes and Google Docs, they never crashed, you know, works great. So a lot less frustrating. But you know, you ask another interesting question about who wins with this model. elaborate on that, if you would?
Yeah. So with the free model, I wonder how many profits are you’re able to get the profits out as a business? So who actually wins in this scenario? Do the businesses win in the free model or to consumers when it seems Like, with the consumers, you have access to cheap data, cheap information, but businesses where the profits up,
Jason Hartman 21:06
because businesses if they set it up right and read the book free, they have a back end service or deeper product that they’re they’re selling and that’s where they monetize free. But you know what I’ve found, for example, with podcasting, okay, all free. It’s been a great source of business for my different companies. And one of the other things that actually does is it makes our job a lot easier. Because there was in the old days, Brandon, there was a day where Yeah, you know, had like the slick, cheesy salesperson, kind of, I think everybody thinks of a car salesperson or in real estate. There’s a famous movie about it called Glengarry Glen Ross, where they’re selling I think, timeshares I can’t remember but these like cheesy old salespeople and, and the old philosophy there was pull the wool over the customer’s eyes, deceive the customer. Don’t tell the customer everything. And of course, legally, that’s a big problem. But let’s not even talk about the law. Let’s just talk about business and the way business works. My favorite customer, Brandon is a highly educated, highly informed customer. And I’ll tell you why, because they’re much easier to work with. They get it, you know, we don’t have to educate them. They’ve listened to all of our free content. they’ve listened to 278 episodes of the creating wealth show, or you know, my other shows, and they’re just a really easy customer to work with. The first time I started noticing this is when people would call up and they’d say, you know, I’m interested in investing. What about this area in Texas, for example, they would say, and I’d start to explain it to them why this city is good and what the employment and they go, Jason, stop. I’ve already heard all that on the podcast. You don’t need to explain it to me again. And I thought, wow, isn’t that great? You know, I love it. It’s a time saver for both of us because Because they can the consumer can benefit, listen at their leisure at the time that’s best for them review things multiple times if they wish. And it’s a time saver for me too, because I can just help them engage and get the property they want right away. So I think it’s, I think it’s a true Win win. You know, a long time ago, I read a book by Denis waitley called the double win. And the win win mentality is really where it’s at, folks. If everybody doesn’t win, you just can’t do a deal. Because ultimately, you know, I remember going to a seminar A long time ago, and it was a real estate seminar and the speaker said, the best deals never close. And I thought, Hmm, that’s an interesting statement. What does he mean the best deals never close. And what he meant is that if you if you’re a buyer and you get too good a deal, the seller will usually figure that out and find a way to weasel out of it. And if you’re a if you’re a seller, and you pull the wool over the buyers Eyes and make them pay too much, they will usually figure that out and try and unwind that deal. So it’s got to be winwin. Stephen Covey says Win Win or No Deal. The late Stephen Covey, the late great, Stephen Covey. But you know, I agree with that. So I think both when they really do
so, Jason, will we ever get to a point in our lives where almost everything’s free? With technology advances? I could, I could see where the trends going that way. But will we ever get to the point where almost everything in our lives are free? No,
Jason Hartman 24:28
I don’t think so. I don’t, I don’t think we’d be even close. Because there are still hard costs. Remember, it’s all about the difference between bits and bytes. And atoms. And atoms are physical products and physical products have to be made with somebody’s hands and with machines that somebody builds and maintains. And so that that’s the difference is real estate investors, as income property investors. We want to control resources that are made of atoms. And we want to utilize resources that are cheaper, free made of bits and bytes. That’s information or data. And that’s what you’re doing right now listening to this show. So control the atoms, because atoms are things that have universal needs. They’re the sticks and bricks, the copper wire, the lumber, the labor, the petroleum products, all that stuff in what we call packaged commodities investing, where you’re buying houses. And those materials have universal need the atoms, you know, I think that’s what comes out of this Brandon, control the atoms, use the bits. Okay.
I would agree with that.
Jason Hartman 25:40
Yeah, so good, good stuff. We’ll be back in just a minute.
Here’s your chance to catch up on all of those creating worlds shows that you’ve missed. There’s a three book set which shows one through 60 all digital download, you save $94 by buying this three books set. Go ahead and get these editions. strategies for wealth creation. For more details go to Jason hartman.com.
Jason Hartman 26:09
Why don’t we talk about this recent video on Peter Schiff. You want to talk about that?
Yeah, let’s do it. So basically Peter Schiff talking about QE three and what it means I think he’s definitely selling gold on the back end. But I think we’re going to play the video. Yeah,
Jason Hartman 26:22
we’ll talk a little bit. Let’s do that. Now. This is a pretty long video, we’re going to stop it a few times. But I tell you, I just couldn’t have said it better myself. So I want you to hear what Peter says. And as all of you regular listeners now, I’m sort of a critic and a fan of Peter Schiff. At the same time. You know, I think Peter Schiff has some. He has a great premise. He’s the master of the soundbite. I think his conclusion is largely wrong. I was one of his clients. I’ve had him on the show. I think he was on show number 69 if I’m not mistaken, and you know, I would love to see Peter Schiff as a senator.
Okay, I’m not that much of a fan of his investment stuff. But you know, I think As an economist, he’s great. Okay, so, you know, that’s kind of where I come down on him. But let’s listen to this video and we’ll we’ll pause it a few times for some comments Peter Schiff, it is Thursday, September 13 2012. And as far as I’m concerned for the Federal Reserve, this is a date that will indeed live in infamy, because this is the day that the Federal Reserve went all in on QE. Now, rather than reviving the economy, the Fed has just sealed its fate. In fact, I think it has driven the final nail in the coffin of the US dollar, and with it the entire US economy. What Ben Bernanke has committed to do is supply an indefinite quantity of QE of money printing, Ben Bernanke, he said that he will buy $40 billion worth of mortgage backed securities monthly for an indefinite time period. He also promised to extend offer twist to the end of the year. In fact, as far as I’m concerned, this new policy may as well be called Operation screw. Because if you own dollars, you’re screwed. If you own bonds, you’re screwed. If you have a savings account, you’re screwed. If you’re an American, you’re working for wages or salaries. you’re collecting a paycheck in dollars, you’re screwed. If you’re hoping to retire on dollars, you’re screwed. In fact, Ben Bernanke he was asked a question during his press conference, and I think the press conference, which I’ll talk about a little bit later, was maybe more interesting than the statement itself. But in answering our question, did he think it’s fair to the savers that you’re getting no interest, because the Fed also promised to extend the zero percent interest rates now into 2015. And he said, Well, hey, it’s too bad for savers. But look, it’s good for the stock market. So in other words, if you’ve got your money in a bank, pull it out and buy stocks Otherwise, you’re going to be twisting in the wind as a result of operation screw, in addition to that one comment here.
Jason Hartman 29:07
I think that what is happening here, and it’s kind of a big conspiracy in a way is that this is this is very intentional and Peter Schiff alludes to this here, when he talks about how its operations screw, because what they’re doing is they’ve made it impossible to save money. In other words, if you want to save money, you’re going to just get creamed by inflation and taxes. So saving money doesn’t work. They’ve completely disincentivize good behavior. So what we need to do essentially as income property investors, is we save money in a sense, but we save it in the form of goods. See what Peter Schiff is saying here is buy gold. That’s the way you should preserve your wealth. I’m saying buy things that have universal need buy housing, and buy all of those packaged commodities that come with housing. That is right. really the point because they’ve totally disincentivize savings, you can’t earn anything on it. And this is particularly bad for elderly people who have saved money all their lives and are just getting destroyed. The Fed is trying to encourage and so is the government speculative, bad behavior, they want you to put it into stocks, they’ve reinflated, the stock bubble, which is an illusion, for sure. And now, frankly, I think they’re trying to do the housing bubble again, we can really profit from that on the way up, whether there is or isn’t a housing bubble, if they force housing to appreciate that will create more employment and solve a lot of the problems there. And Heck, let’s ride that bubble up with these bad policymakers. Brandon, any comment? Or can I go on?
Yeah, actually, what they’re trying to do is increase the asset prices but isn’t that simply a an illusion for people as if they have a wealth of they didn’t have before so what are they going to go out and spend a bunch of money they’re going to get their mortgage A piggy bank, or they’re sorry, their equity is their piggy bank and we want to spend more money. It just seems crazy. To me,
Jason Hartman 31:06
it is a total illusion, there’s no question about it, however it works. It’ll just allow them to kick the can down the road a bit. And one of the things we’ve got to talk about here is Who would ever buy these bonds from the Fed? So we’ll get to that, but let’s just go on with the video. Okay.
The Fed promised to keep interest rates low, even after the economic recovery, gain traction. In other words, it’s tantamount to the Fed admitting that he realizes that the only reason the economy is going to accelerate or recover is because of the cheap money, and that the Fed knows that it can’t take the cheap money away, because it will simultaneously take the recovery away. So it is an open ended commitment to keep interest rates at zero. However, it’s not going to be able to keep that commitment. The Fed is saying that it’s going to keep rates low until we get the job growth that we need. The fact of the matter is, the reason that we’re not getting job growth now is because rates are too low. It’s because of all the money that the Fed has already printed, that the economy is so screwed up that it can’t create jobs, and printing even more money is not going to solve the problem. Now, of course, the catalyst for this announcement was the horrific job numbers that we got last week, where not only did we create fewer than 100,000 jobs, but almost four times as many people left the labor force, meaning they threw in the towel, they were so discouraged that they quit looking for work, and they’re no longer even in the labor force. As people who found jobs in fact, the labor force participation rate is the lowest it’s been since 1981. And if you just focus on males, it’s the lowest it’s been since 1948. So the Fed feels it’s back as in a corner and it has to act. In fact, in that press conference that Ben Bernanke he gave in response to a question He basically said that the Fed has one tool, and that’s purchasing financial assets to drive up asset prices, and the Fed is going to use that tool. Even if it doesn’t work, the feds gonna use it. In other words, the Fed has a hammer, and it’s gonna bang everything it sees, you know, even if it’s not appropriate. I mean, maybe a hammer makes sense. When you’re when you’re trying to put a nail into a board. It doesn’t make sense if you’re walking through a Chinese shop, but in other words, he’s got this hammer and he’s gonna swing in and everything in sight, and he thinks is going to create jobs. The only thing is going to create is inflation. And of course, the Fed denied that he was going to create inflation Of course, even as the price of gold was surging over $30 an ounce in reaction to what the Fed said silver up about a buck 40 oil
Jason Hartman 33:47
Peters talking about how the Fed has this one tool to buy bonds, but do dissipate, actually have any other tools that can actually use to try to stimulate the economy to Yeah, they
Jason Hartman 34:00
have other tools, but what they’re basically doing I mean, this is the big tool, okay? The big tool is create fake money out of thin air. And he talks about gold going up $30 Oh, with dee doo. Okay, this is the guy that said gold would be $5,000 by the end of Obama’s first term. You know, I gotta find a video clip of that somewhere. I really should search for it. I remember seeing it with my own eyes. I think he was on CNBC. And it’s always this speculative, oh, gold is on a run, it’s gonna be on a tear. You know, this reason, that reason? They’ve got all their reasons and they’re not wrong about the reasons. I mean, you know, I’ve said that so many times, but the thing they never tell you is that there is so much more in control of the gold market than logic. There are so many forces like central banks that are so much bigger than individual investors wanting to gobble up gold. It’s just a worldwide cartel. You know, just look at the data website, the gold antitrust action committee who says the price of gold is manipulated? Well, of course, it’s manipulated like crazy. And that means don’t invest in it. I think it’s a lame investment. It’s it’s a way to save money. That’s all it is. Okay? It’s better than dollars. But it’s not a real solution. It’s not offensive. It’s only defensive. Let’s Let’s see, hey, Peter, you better hurry. If we’re going to see gold at $5,000 an ounce you only got a few months here of Obama left. And and the question is, even if that happens, even if gold safe state over the next three months, gold goes to $5,000 an ounce. The question is Brandon, did the gold go up? Or did the dollar go down? You talk to any gold bug. I guarantee you they will say the dollar went down. So you’ve only treaded water. You didn’t gain anything. You preserve your wealth in a commodity. Great. I think that’s okay. But why not reserve it in commodities that have have true universal need like housing, where you can get the bank to pay for 80 to 90% of the asset for you, and loan the money to you until 2042 at artificially low interest rates, and then that loan is repaid by the tenant, and then you get a bunch of tax write off to boot. I mean, gold is a mediocre solution at best. Your thoughts?
I absolutely agree with you. But I wonder, are they speaking to the people who just are sitting on a bunch of cash in their bank account? Because buying gold probably is better than just sitting on a bunch of cash? I agree.
Jason Hartman 36:34
Yes, I definitely agree. I think cash is the most dangerous asset class in inflationary times. Cash is just being devalued constantly. You know, it’s amazing that someone can pickpocket you and pull money out of your wallet without physically doing it. See, actually, that ties in with our discussion about Chris Anderson. The dollar is just Bits and Bytes really, it’s not atoms. In other words, it has no intrinsic value. Okay gold does copper wire in your houses, lumber in your houses, all the petroleum products the houses made up of the concrete, the all those materials, the glass, the steel, those are atoms, okay? Those can’t be manipulated so easily. Like like gold camp is easily as the dollar. So yeah, with fiat currencies you can be pickpocketed through Bits and Bytes without anyone having to physically take that money from you. Amazing huh? Let’s go on okay Brandon
$1 barrel, the dollar index hitting new lows for the move. You got a new 52 week I in currencies. I think like the Canadian dollar the New Zealand dollar, even the Euro is now above 129 I think headed much higher against the dollar. That’s how weak the dollar is, is even weaker than the euro. In fact, Ben Bernanke he started off his press conference by saying that the feds printing money and buying bonds was not the same thing as the governor. Spending money. Now what is the difference according to Ben Bernanke, between spending money and buying bonds? Well, Ben Bernanke, you said that since the Fed is not buying goods, that it doesn’t count as spending, what it means if you spend money on bonds, you’re still spending just because you’re not buying an actual product, you’re buying a financial asset, you’re still spending money, you’re spending money to buy a financial asset. Now, the Fed also went on to say that, well, it’s not really spending, because whatever financial assets the Fed buys, it’s going to turn around and sell back into the market when it unwinds the policy. Yeah, right. How is the Fed gonna sell all these bonds, the Fed is the only buyer without the Fed, no one in their right mind is gonna buy who’s gonna buy when the Fed wants to sell who is gonna step in front of that free trade? Who is gonna want to bid for mortgages, when the Fed is trying to unload the mortgages that it owns nobody. In other words, The Fed has basically checked into the roach motel of monetary policy, right? It can check in, but it can’t check out. It can expand its balance sheet, but it can never shrink it. So the Fed is spending money it is spending it on financial assets. And in fact, the goal of the Fed is to make those assets rise in price. And this you know, if this is the craziest part about it, and it’s almost like it’s a fantasy or I’m in a dream, because it’s impossible for me to actually believe that this is actually happening, that I’m actually hearing what I’m hearing or seeing what I’m seeing, but this is the plan that Ben Bernanke he has Ben Bernanke he’s plan to revive the US economy and create jobs is to inflate another housing bubble. That’s it. That’s what the feds got. That’s what it came up with. As if the last housing bubble worked out so well for the economy that the Fed wants an encore now I’m not making this stuff. You know, you can go check the internet, you know, YouTube it yourself, Google it, but basically, this is what Ben Mackey said he is buying the Fed is going to buy $40 billion worth of mortgage backed securities every month. The goal of the Fed is to bring down interest rates. Ben Bernanke, he specifically said the reason he wants to bring down mortgage interest rates is because he wants home prices to go up. Now, why does Ben Bernanke you want home prices to go up? He specifically mentioned two reasons. One, the wealth effect, Ben Bernanke. He said, If we can get home prices to go up, homeowners will feel wealthier, and they’ll go out and spend more money,
Jason Hartman 40:32
that Brandon is exactly the bubble. I want to write up again. I’ve done it a few times in my life, and as philosophically disagreeable as I am with that, you know what, that’s the thing. Like I say all the time. I used to be an optimist now, I’m just an opportunist. And we’re not going to change any of this. We’ve got to, we’ve got to respond to it in a way that enriches us And in a way that that helps create value. So if they create another housing bubble, which they may be doing, you know, you showed me an article about how a 5% increase in housing prices would basically lift, give a whole bunch of people equity. And guess what happens when people have equity, that ATM machine called your house becomes a way to stimulate consumer spending, doesn’t it? I
feel like we’ve seen all this before today’s and it’s like unfolding right before our eyes all over again.
Jason Hartman 41:31
You know, Brandon, as Yogi Berra, who, you know, has those great quotes, as he as he once said, he said, it’s like deja vu all over again. It’s just a, it’s a repeat this, this, this is a rerun, you know, it’s just, I mean, it’s amazing. They just keep, they’ve got nothing better to do than just kick the can down the road. Let’s make another bubble. And all that does is move money around. It creates malinvestment, and boom, boom, boom, here we go. But folks, if you’re listening, and you’re not into writing that bubble up, that they’re going to create, you are going to miss out and you’re going to be dramatically hurt. Because any other asset you have, besides debt, and commodities, will be destroyed in value. debt and commodities are the only safe places commodities keep pace with the inflation. So, you know, when you invest in the real estate, you own a bunch of commodities, a set of packaged commodities. If you invest in gold, yes, you won’t have a commodity there too. And by the way, Schiff is in the gold business, we should say that, but that debt, see you don’t get the debt against the gold, you get it against the real estate, that debt goes down in value. Again, it’s the only safe place and inflation, commodities and debt. That’s it denominate all your your assets in things or as Chris Anderson would say in the freebie Adams, and denominate all your liabilities in debt. That’s the strategy. You ready to go back to the video?
Let’s do it. So he wants the wealth effect. He wants to create the illusion of wealth so that people will go out and buy stuff that they really can’t afford, not because they earned the money, but because their houses appraising at a higher value. And of course, they can refinance. They can pull out equity, they can cash out money, and go spend it. That’s one reason number two, Ben Bernanke. He said, If we can get home prices to go up, people realize that they can make money buying houses. And if home prices rise, more people will want to buy houses because they can make money. They can get rich buying houses. And so that will encourage more home buying. And as a result, we’ll have more home building. If more people want to buy houses because they’re going up in price, then we’ll build more houses and we can create an entire economy of the housing market by the housing market for the housing market. In fact, what the Fed Reserve wants to create is a super housing bubble. I mean, I kid you not, this is their plan. This is all they can come up with. And think about it. In the last housing bubble, it was the government that was guaranteeing the mortgages, but you still had the private sector owning a lot of the mortgages, although with government guarantees, see now they’re going one up. Not only is the government guaranteeing the mortgages, but the government is owning the mortgages. Basically, our new monetary policy, our new policy for economic revival is for the Federal Reserve to print money and loan it to Americans that ultra low rates so they can go out and buy houses, and in the process, push up housing prices. So we can all go on a consumption binge and spend all sorts of borrowed borrowed money on imported products. And somehow all of this is going to create employment, and it’s not going to end in complete disaster. Just like the last time the Fed And create a housing bubble to stimulate the economy.
Jason Hartman 45:02
You know what? I mean? You just gotta say he nailed it. I mean, he nailed it. But here’s the thing, Brandon, you know who’s gonna get hurt in the next housing bubble? It’s the same people that got hurt in the last one. It’s the speculators, the people that aren’t following my 10 commandments. And what is one of the commandments, the most important one relating to this exact concept? Is this one, I think it’s number five, if I’m not mistaken, Thou shalt not gamble, no speculation. In other words, the property must make sense the day you buy it, or you don’t buy it. You know, who’s going to get hurt in the next housing bubble? people buying properties, expecting something great to happen and that great thing is called appreciation. appreciation to us to us prudent investors who listen to the show. appreciation to us. You know what that comes from? It is the icing on the cake. It’s not the cake. The cake is cashflow. The substance of the investment, the thing that makes it makes sense the day you buy it is cashflow, its income. The name of it is income property. It’s not called speculative appreciation property. It’s called income property. And as the name would imply it better produce income or you shouldn’t buy it. So any thoughts about that one, Brandon,
I said perfectly. The deal has to make sense the day you buy it, but the your number one goal should be the cash flow. It shouldn’t be the speculation of the property. Everybody can ride this wave up on speculation, but if you don’t buy the deal based on cash flow, then I think you’re setting yourself up for failure.
Jason Hartman 46:39
Of course you are and the reason the speculation concept doesn’t work is because it’s just like gambling in Las Vegas. You never know when the streak is going to end. appreciation is very unpredictable. Cash Flow, however, is pretty darn reliable. It really is. And, and remember, not only do property prices inflate, but rent Prices inflate. Okay, so you can ride the inflation wave that way. And you can also have your debt destroyed by that same inflation. So, okay, let’s go back to the video.
Now talk about insanity. Right talking about doing the same thing over again and expecting a different result. How can vendor nakki with the memories of the last housing but a bubble and debacle and financial crisis fresh in his mind? How can he think that the solution to the problem is to try to recreate the very conditions that created the problem? How is another housing bubble gonna solve anything? Now one thing maybe Ben Bernanke hasn’t figured out yet. It ain’t gonna work. No matter how much he tries, no matter how much air he blows into that housing market. He is not going to reflate that bubble. There are simply too many holes in it. And there is no precedent for reflating a busted bubble. More likely all that cheap money is going to go someplace else, where is it going to go? Well, if you look at what happened today, 30 year bond prices went down and interest rates went up. In other words, the bond market stuffed that right back in the feds face. Because I think the bond traders are waking up the bond vigilantes, maybe you’re coming out of a coma. And they’re realizing that the worst thing for the bond market is for the Fed to print money and buy bonds, because when they print money, they drive down the value of the currency that the bonds are denominated in. What went up, go up over $30 silver, as I said, the dollar tank. So where is all this money gonna go commodities, it’s going to go to gold is going to go to silver, it’s going to go into oil, it’s going to go into agriculture. It is not going to make the economy better. It’s going to make the economy worse. It’s not going to create jobs, but what it is going to create is a higher cost of living for everybody. Whether you have a job or whether you’re unemployed. And believe me if people are spending more money on food and More money on energy. They’re not gonna have any extra money leftover for discretionary spending. None of this is gonna work. But the amazing thing is people are looking at Ben Bernanke and analyzing what the guy has to say, taking him seriously. Can’t anybody think? Does anybody remember what happened just a few years ago? I mean, how can he not be laughed out of town? I mean, during that press conference, I mean, how come people aren’t just shocked? How come they’re not just saying, say, What? Are you kidding me? How can this be your plant? How can reinflating a housing bubble? be all that you got? I mean, how long did it take you to come up with this idea? How many brains at the Federal Reserve apparently there was only one guy that dissented. It was almost unanimous. I mean, imagine everybody at the Fed sitting around this big table. How do we revive the economy? What’s the plan and somebody comes up with let’s create a housing bubble so we can create a bunch of wealth and people will go out and spend It and we can get people to speculate on real estate prices because they’re going up. And all this is going to create jobs in the housing sector. It’ll cause more homebuilding or home remodeling, we’ll be able to consume more. Somebody came up with that. And then someone else said, Great idea. I mean, didn’t they see that movie? Don’t they know how it ends? Apparently not. You know, I’m going to tell you how that movie is going to end. Right? It’s going to end in a currency crisis. It’s going to end in a sovereign debt crisis. It’s going to end in tears and misery. And the amazing thing is, this has happened over and over again, throughout history, yet we continue to repeat the same mistakes we never learned from the past. And I think the problem is, it’s the politicians who are making these decisions, despite the fact that the Fed claims to be independent. It is not. This is all about politics. It’s not about economics. It’s not about doing what’s good for the economy. The only jobs that are concerned about is the jobs of the politicians. We’re afraid that if the Fed tongue tells the truth, and actually does the right thing for the economy, that they might not get reelected, because the right thing for the economy is bad politics. And even though you can look back in history and see how many times governments have destroyed economies by destroying the currency, they’re going to do it again. Because it’s politically expedient. They don’t care about history, they don’t care about the country, they care about themselves. And so they’re doomed to repeat these mistakes, because it’s the only thing they can do. The Fed can admit what the problem is the cat the Fed can’t take the Punchbowl away. It doesn’t want anybody sobering up. It wants to keep force feeding us alcohol. So we don’t realize how screwed up the economy is, and maybe we’ll reelect the incumbents one more time. All I can say is you’ve got to look through all this smoke. You got to buy gold, buy silver, get out of dollars, get out while you can get into real things, own stocks outside the United States. In currencies with dividends and income that are not
Jason Hartman 52:03
US dollars, here’s the total fallacy of that. What what Peter says is is one third true? And two thirds false if he asked me, okay, is he says, Get into real things. Okay? Yes, I completely agree with that gold mediocre version of a real thing but better than dollars I agree with a mare. But then he talks about stocks outside of the US. Hey, Peter, here’s a question for you. What country isn’t doing the same thing we’re doing? it this is basically a global phenomenon of people that are, you know, or have countries that are that are all subject to the same types of political expediency. Very few countries are actually well managed. And what he’s saying is bet their currency is more solid than our currency. And virtually every currency is now a fiat currency. And so I say it’s just a race to the bottom to create collapse all currencies. I mean, not every one of them. I’m talking metaphorically, but a lot of the currencies, the vast majority of currencies are Fiat. Okay, so it’s a race to the bottom in terms of the value of those currencies. So, you know, and again, having been a client of Peter Schiff and lost losing a bunch of money with him giving his Guy $200,000 a month or two later, I have like, $130,000. With this strategy, it just, you know, it hasn’t worked for me. I mean, I think Peter is great. I want to see him be president. Okay. Peter, I will give money to your campaign. I love your economics, but again, as an investment solution, you know, I just don’t think it really, really works. I think it’s a defensive strategy, which is okay, it’s better than dollars. He’s right about that. No question. Brandon, you have any thoughts about that?
I think a lot of his ideas are pretty spot on and I actually couldn’t help but to laugh at the one part where he said, somebody’s got this idea together and they they brought it to a group of people and they said, Great idea. Yeah, but it to me, it’s like these people actually believe this is gonna work again. Now,
Jason Hartman 54:05
I don’t think they believe that they’re too smart to believe that this is actually going to work. all they’re doing is what is politically expedient. They’re kicking the can down the road, and they’re just trying to make sure things are okay under their tenure and Bernanke, he will probably be gone in 10 years. I mean, you know, he’s the same policy as Alan Greenspan. They call him helicopter Ben, because of his his famous quote, where he said, I’ll get up in a helicopter and throw money down on the people, in other words, create a bunch of fake money and stimulate the economy that way. So you know, he’s it’s Keynesian stupidity. Peters right about that. He’s absolutely right. The question is, what do you do as an investor, you got to buy hard things assets, like he says, Get into real things completely agree that produce cash flow, and use the bank’s money to buy them and that debt is destroyed by inflation. So that that is the real strategy, you ready to go back the videos Almost done.
The most important thing that you can probably do, you know, you got to save yourself first, if we’re going to save our country, you know, that’s the title of my, of my book that’s out now the real crash, America’s coming bankruptcy, how to save yourself and your country, you’ve got to save yourself and you’re going to save your country, we’re gonna go over a real fiscal cliff, we have a real crisis coming because of the Fed. But we’ve got to protect ourselves, hopefully, hopefully, when we have this sovereign debt and currency crisis, when that when we have this giant shock, that just maybe just maybe the Fed will finally and the government will finally have an epiphany. You know, I have the moment where that lightbulb goes off. And they realize that, you know, we can’t keep doing this. We can’t keep repeating these mistakes. There’s something more important than the next election, and that’s the future of our economy. But until then, don’t bet on any political integrity, or anybody in Washington doing the right thing. is we’re going to be heading full steam over the edge of this cliff, a blindfold on. So all you could do is buckle up, prepare for the impact and protect yourself. In fact, one of the craziest things that Ben Bernanke he said, Of course, he said so many, it’s hard to pick which one was the craziest. But he actually said that he believed by printing money and buying bonds, he was actually going to help reduce the deficit. Well, how could he do that? Well, he said that by printing money and buying bonds, we’re going to have a stronger economy, and the stronger economy with more jobs is going to help bring down the deficit. Of course, the exact opposite is true. You don’t bring down the deficit by monetizing it. You don’t bring down the deficit by making it easier for the government to go into debt. You don’t stop the government from borrowing by buying up their bonds and making it easy for them. If the Fed were really concerned about bringing down the deficit, it would let interest rates go up if interest rates went up. The deficit would have to come down, because the government can no longer afford to finance it. It’s the Federal Reserve. It’s the money printing. That’s the reason the deficits are running out of control. And the fact that the Fed has just said, we’re going to have QE indefinitely, we’re going to keep interest rates low forever, we’re going to print definitely to buy bonds, that just basically gives a green light to the politicians to do nothing about the deficit. They keep on borrowing to keep on spending to grow the deficit until it all blows up, because that’s the only thing that’s going to stop this. It’s going to be an all out crisis. Hopefully, we get the crisis sooner rather than later. Because unfortunately, the further into the future it hits, the bigger the explosion. That’s it for today. Thank you, everybody.
Jason Hartman 57:46
So there you go. Boy, that’s long. But you know, Brandon, the crisis is the inflationary crisis. That’s exactly what Peter’s talking about. And we have the best way I think to exploit that crisis. And to benefit from it and to enrich ourselves and the people we care about from that crisis. So very interesting, huh? Very Yes. Yeah, definitely. as well. Hey, I know, we wanted to talk about Dan Ammerman, and we wanted to talk about the article about rising home prices, lifting another 1.3 million people out from underwater. So that’s the bubble. Peter was talking about how branded
it is. Yeah, Peter really hit on a lot of good points. And what’s funny is it all comes back to the these politicians, they just want to spend. And that’s the biggest problem is the spending if they could get their arms around that I don’t think we’d have a deficit issue. We wouldn’t have to be purchasing bonds via the Fed, comes down to spend. Yeah,
Jason Hartman 58:41
but the problem is, it’s just not popular to reduce spending. I mean, who’s gonna vote for you? If the 47% of the people who get free stuff from the government, right, you want to lose 40% 47% of your voting bloc? I mean, it’s never gonna happen.
You bring up a good point. Why Ron Paul is not the republican You
Jason Hartman 59:02
got that right because he’s not part of the big scam and conspiracy. Ron Paul’s the maybe the last honest politician, maybe his son Rand Paul is too, but very interesting. Hey Brandon, I would just want to thank you for coming on and kind of CO hosting with me and helping me talk about these issues and talk them through. So it’s been great and upcoming episodes, folks. We’ve got some callers that have called in. We’ve got to get those on the air with some great questions. We’ve got a whole bunch of great guests coming up like we’ve had in the past. And of course our Atlanta tour is sold out. I mentioned that to you. But we’ve got our meet the Masters event coming up in January. And it looks like we’re going to be back in Southern California for that one. We were thinking of doing it in Phoenix but that’s the hotel rates are just too high that time of year so we’re probably going to be for meet the masters and think the third weekend of January in Irvine, California. And stay tuned for that and enjoy all the free stuff. Because free is a philosophy we believe in at Jason Hartman, calm and Brandon Again, thanks for joining us. Appreciate it.
It’s been fun, Jason, thanks.
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