Jason Hartman starts the show talking about shadow demand and shadow inventory. He explains why there is a high shadow demand explaining a chart from Pew Research displaying how many adults live with their parents. Later, Jason Hartman interviews Mark Moss, an investor and cryptocurrency expert. Mark joins from Mexico where he explains why south of the border has better utilities than California. Later they discuss climate change and the California market crash.
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 multimillionaire 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 on Now, here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:53
Hey, everybody, good afternoon. It is Monday afternoon, and I am doing my podcast intro for today’s episode, Episode Number 1555. And I thought what the heck, I might as well just go live and talk to all of you. This will only be for the intro portion part though, the rest of the episode will be on the YouTube channel. So I’m just doing the intro with you. And I’m glad you could join me for it. All two of you who are watching on this surprise, spontaneous I intro Hey, actually, now it’s four of you. And by the way that only counts one of the platforms. So anyway, just go through this real fast. Just a couple things I wanted to share here. Want to make sure a lot of you did yesterday on the live stream, I announced this, go to pandemic investing.com. And be sure to get your mini book on pandemic investing that is 100%. for free. It’s a great little primer on some of my 10 commandments of successful investing. But reengineered just a tad for pandemic investing, because this is a time of crisis and a time of change. And we want to make sure that you are ready and equipped to deal with that. So again, free mini book at pandemic investing.com. And let’s go ahead and dive into a few of these slides. For those of you listening to the podcast that will be released later today. If you want to see the visual aids, feel free to just go to the YouTube channel. You can see them there. But I briefly talked about this before. And I think this is so critically important. It’s the concept of shadow demand. And during the Great Recession 1012 years ago, we heard a lot about shadow inventory, or shadow supply. Well, now I’m talking about shadow demand, Shadow demand for housing. And this is a big, big deal. Here is one, just one of those shadow demand elements. And that element is young people who are living at home with their parents, and just see how significant this is back in the 30s during the Great Depression 1929 to 1939 43% of young adults aged 18 to 29. So that’s their age 18 to 29 year olds lived at home with their parents. Now, that number went down, it was at a low point in the 1960s. And the generation of free love the flower children taking LSD probably didn’t want to live at home doing that. So they moved out on their own. Some of them lived in a commune in Northern California, right? or wherever, right? So went down to 29%. Then in the 70s. Obviously, you know, we all are pretty familiar with the economic hardships of the 70s. The era that stagflation was with us that time where the Jimmy Carter misery index was discussed a lot where you have high unemployment and high inflation at the same time. That absolutely stinks. It is a really bad economic scenario. So you know, it’s going up, right 31% of the people are living at home. But remember, housing was still very affordable back then. Then in the 80s. A little more even during the good times of the roaring 80s. The 90s got a lot worse. 2000s got even worse. And during the financial crisis, the Great Recession, the GFC global financial crisis, whatever you want to call it 10 to 12 years ago, depending on how you look at it. 44% of these young adults aged 18 to 29 years old, lived at home with their parents. Well guess what? Now, a whopping, the biggest in recorded history, a whopping 52% live at home with their parents 52%. That is ginormous, that’s a big, big number. And guess what, of these millions and millions of young adults, they will not always live at home, they will move into the housing market, they will rent houses, they will buy houses. And that will be a very significant factor. We’re looking at the last hundred and 20 years of data here, folks. And now, right now is the largest number of these young adults living at home. All right, that is not going to last it is not going to hold, it is not going to continue. And remember that these young adults really represent two generations. They represent Generation Z, the youngest of them. And they also represent Generation Y or more commonly known as the millennial generation. 80 million Americans in total. But this is the younger side of that generation, right? The oldest millennials now are 40 years old, they’re turning 40 this year. And we thought they were so young, they’re not so young anymore, right. And they’ve moved into the housing market, but they’ve done it much more slowly than my generation, the Gen X generation, right? It’s just interesting to watch this, I just really want to drive this point home. Because this is a big, big deal. This generation of people living at home that represents shadow housing demand. In other words, it’s a shadow, it’s not really there yet. We haven’t seen it yet, we can see that it’s casting a shadow that will come into the housing market, and drive more demand in a market where housing supply is really, really short. Now listen, I know that at any time in history, and especially now, there’s no shortage of people predicting the end of the world, the Zero Hedge website, which by the way, I love to follow. I think that’s a fantastic website. They got some really interesting reporting. They’ve been predicting the end of the world since they started. Howard Ruff, late now late Howard rough, I’m pretty sure, sorry if I got that wrong, but I’m pretty sure he was on my show a few years back, and really interesting guy to listen to had a huge newsletter following back in the 70s, the 80s, the 90s, the 2000s he was predicting the end of the world currency collapse, you know, deflation, inflation both at once. Yeah, I’m just telling you, what I’m trying to point out is that it’s always these purveyors of doom, that get a lot of media attention. who wasn’t ravi batra, who wrote the Great Depression of 1995, which the complete opposite happened, by the way, and he was a hugely famous professor at the time for writing that and writing the book on that and all that kind of stuff. So look at you got to understand something, we are definitely in challenging economic times, unemployment has skyrocketed, there is no question about it. We are in serious problems. But at the same time, you’ve got to peel the layers of the onion, you’ve got to isolate that to really understand what parts of the market are truly affected. Remember, three types of housing markets, linear markets, cyclical markets, and hybrid markets. And I wish I had my chart of that here to share with you I don’t, but linear markets, obviously slow and steady. This is the the, you know, the parable of the tortoise and the hare, where the cyclical markets, the complete opposite. I do believe we will have significant real estate price adjustments in cyclical markets, especially high density cyclical markets. Here’s the problem. Did you get that? Did I make my point by yelling? I hope so. Here’s the problem. All of these people talking about market crashes, never bother to isolate what they mean. They just talk about the real estate market or the stock market or the economy in general. And I don’t know what that means. We are in a country with 400 real estate markets 400 real estate markets actually more than that, that’s just looking at it as MSHA or metropolitan statistical areas, and I believe the numbers like 392, close enough to 400 400 but in those areas, there are All kinds of different neighborhoods, price segments, density types, product types, condos, single family homes, high rise condos, low rise condos, garden style condos. You know, folks, you know, people just do not isolate this stuff. They make these sweeping, frankly very stupid generalizations about the real estate market. And what they don’t talk about is that over the past 12 to 14 years, virtually nobody has been building, entry level workforce housing. It’s completely absent from the market. All of the focus in new home construction, as there has been this dramatic housing shortage with us, really, for decades now, there have been a couple times where the supply demand curve has shifted. But overall, we’ve had a housing shortage for decades. And you know, look at the price of housing, it’s gone up, up up. But interestingly, now, with interest rates, so low housing has gotten cheaper for a lot of people. And that’s why the market is booming. Then you add to it shadow demand, you add the mass migration, from urban markets to suburban markets, out of high density cities, out of unfriendly jurisdictions like the Socialist Republic of California, my former home state, you know, the Socialist Republic of Connecticut, New York, Massachusetts tax issue says, you know, all of these things, and if you are doing what the famous Wayne Gretzky said, You are skating to where the puck is going, you are going to be in very good shape. And that’s what our investors are doing. And that’s what we’re helping people do more on that, you know, listen to the other podcast episodes, follow our other YouTube channel stuff. And you’ll find more about that. Another thing I want to tell everybody be very cautious about. And this really isn’t hitting it on the head, this chart, this chart says COVID-19 set to decimate global airport revenue. This has already happened. I don’t need to, you know, tell you this, you know, the travel industry is on the rocks. It’s been absolutely devastated. But airports in particular, are a big expense and a big revenue generator for many municipalities. And what we are going to see in these high tax business on friendly landlord, unfriendly civil unrest, friendly, everywhere where they want people to ride in the streets, which is basically a Joe Biden political rally, that they won’t stop because you can’t these are, these are joe biden’s voters. Okay, you know, if you’re gonna put the kibosh and tell them they can’t have the riot, then, you know, that’s not going to be good for Joe Biden’s campaign promises. And by the way, I just got a comment on good old sleepy Joe Wright, who it’s so hilarious. This political race has got to be the funniest here, we’ve got Trump, who on offense, everybody on purpose, then we’ve got Joe Biden, who is such a complete massive hypocrite. It’s just comical, frankly, Joe Biden, who likes to call himself middle class, Joe, and exactly what he likes to call himself middle class. Joe. Do you know what his adjusted gross income was last year for middle class? Joe? It was over $4.8 million. Yes, middle class, Joe, over $4.8 million. Last year, almost 5 million bucks. Not bad middle class, Joe. Not bad. But here’s the reason I want to show you this airport chart, because it is just a proxy for the bigger thing that’s happening. If you are invested in municipal bonds, or any kind of security, that depends on the success of a municipality, a city, a county, even a state, watch out, make sure you are extremely careful A lot of you own these securities already. They’re just buried into some fund that maybe your retirement plan is invested in or some mutual fund that you have or some managed portfolio of some sort. And in many of these areas, you are going to see massive, massive defaults. One other area that I want to really caution you about cmbs market, the commercial mortgage backed securities market. So there is almost no appetite right now for lenders to lend on certain types of commercial properties. Because they know that there is just a massive default risk. And a lot of these securities attached to these commercial property mortgages, specifically in retail properties, while retail is probably the hardest hit of the mall, okay. But second tip would be office properties, right retail and office, you’re gonna see just a massive amount of defaults. And you watching or listening to this may well have a lot of these securities already in your portfolio. And you don’t even know they’re so do a checkup from the neck up, and make sure that you are moving your money around to where it is safer, very important thing to be doing right now. Also, if you’re new to my content, I just want to say again, go to Jason hartman.com slash start. That’s Jason hartman.com. Slash start. Of course, here today, we’re on episode number 1555. So if you’re interested in our content, our analysis of the market of economics, personal finance strategies, etc. And you know, you might not have time to listen to the last 1500 and 54 episodes of our podcast right now. Right? Okay, fine. So don’t do it. Don’t do it. Just go to Jason hartman.com slash start and listen to some selected episodes that discuss sort of some of the fundamental issues, okay. And you can you can do that there. Just wanted to share that with you for people newer to our content, or people who want a rehash some of the fundamentals. Now, last thing before we get to our guest today, and our guest today is my friend, Mark moss, who will be with us in a moment, if you’re just watching the live stream right now, this impromptu live stream, you’re not gonna see mark here, he will be on the YouTube channel and the audio version on the podcast, really interesting episode. So that’s coming up. But before we get to that, I want to just share this chart. And this is public records of and it’s Redfin, the real estate company analyzing MLS data. And this chart is very significant. Why is it very significant? Number one, it’s totally current just came out last week. And it says, home price gains in August in August, are the highest since 2014. And this is a year over year change in national median home prices. Why is that important? Well, as we were coming out of the Great Recession, and the market was starting to gain steam, you saw it starting to gain a lot of steam in 2012. That was still pretty early for a lot of people, a lot of people, number one couldn’t get financing. A lot of people had been foreclosed on. And so their credit was really beat up. And a lot of people were just plain fearful. They were scared. What is fear? False education appearing real the acronym false education appearing real or false evidence appearing real. To make it more contemporary from that old acronym. We’ll just call it fake news. Fake News. You know, we hear that one a lot nowadays. So, you know, the market really didn’t start ramping up in a hugely significant way until 2014. And then it was really getting some major, major momentum. And then of course, we saw it Bumble along you know, sometimes it was up sometimes it was down the Fed was experimenting with, okay, is it time to raise rates yet? Is it time to tighten up the money supply yet, because we’ve got to recover from all the quantitative easing programs, and all this loose monetary policy, right? Remember, the fed the Federal Reserve, our central bank, or any other central bank around the world, like the ECB, the European Central Bank, or any other country’s central banks, they all work to some extent in lockstep coordinating their efforts. But our central bank, the Federal Reserve is, of course, the largest and most powerful central bank in the world. And, you know, they’ve got to have some ammunition for downturns. That’s why low interest rates are so risky, they’ve got to get to a less accommodative policy as quickly as they can. Because then they have ammunition to fight the next change in the economy. And they were doing that they were doing that pre COVID they were stockpiling. They were you know, in essence stockpiling. I don’t mean that literally, but they were they were sort of trying to draw that loose money. accommodative policy in a little bit. You know, the Fed controls the monetary policy, and fiscal policy is controlled by the government, mostly Congress, mostly the House Ways and Means Committee to be very specific, very powerful committee that controls Well, the ways in the means as the name would apply the spending in the in the savings, right of the government, and the tax policy. So, as we see this happening, amazingly, during this time, where everybody thought everything would be half price, everything would be super cheap. Guess what? They were wrong. And I don’t want you to miss this opportunity. Because a lot of people right now are thinking, oh, there’s gonna be a big crash. But they didn’t bother to segment that. Yes, there will be a big crash in New York City and Los Angeles, and Seattle. And San Francisco. Actually, you don’t even have to say there will be there already. Is, is it is happening now. But it’s going to continue. That’s my prediction. Okay, it’s going to continue. And non necessity housing in general, but especially high density urban core. But in August, the year over year change in home prices was the highest it’s been since 2014. That was an 11% upswing, and this is this is just incredible. One of the things the the market timers never account for in their analysis. They say, Oh, well, I’m gonna keep my powder dry and wait for the next downturn. Great. Good for you. Okay, fine. And you may be right, there may be a big downturn. Okay. Sure. But you know, what they never calculate. They never calculate the cost of waiting to time the market. Let’s assume their predictions are exactly right. They nail it, they buy at the lowest point. And then they rent their properties for a few years, and they sell them at the highest point. But guess what, in waiting to get to that point, they lost return on investment. So if you go to Jason hartman.com, right now, and you click on the Properties page, and you see what small number of properties are available there. And you see, okay, well, here’s a property with a projected annualized return on investment, overall return on investment of, I’ll just say 24%, annually, all things considered. Remember, income property is a multi dimensional asset class. So you earn your your return on investment, your ROI in many forms. So say all together, it’s 24%. Or maybe it’s 28%. Okay, so say the, this collapse in the market starts next year, and great, it starts to decline, but you’re keeping your powder dry. So you only lost 28% return on investment waiting one year. But now you’re still waiting to write it to the bottom. So if you’re looking at this chart, you’re here, and you’re waiting to write it to the bottom. And then you get to the bottom and say that takes another year. So now you lost 28% annually times two years. So you lost almost 60% return on your investment over those two years. But then you got to the bottom. And guess what happens to your psychology at the bottom? Wow, things are looking really bleak. I’m really scared. I don’t know. Maybe I better wait a little bit for the news to improve. Okay, so say you you wait six months, and you lost now another 14% return on investment. So now you’ve lost like, What? What’s it 72% return on investment if my math off the top of my head is right. Okay, fine. Now your powder that you’ve been keeping dry all that cash, you haven’t done anything with? You now flooded into the market, and you buy everything in sight, good for you, your time the market. And you got it right, pretty much pretty much maybe you could have purchased six months or six months earlier, but you got it pretty close. And then you did great, right? You lost 72% waiting. But because you got such a bargain, and you don’t know what interest rates are then. So maybe you’re paying a higher interest rate probably won’t be much lower than it is now. likelihood. And then you really scored. And then you just got to figure out when to ride it to the top and when to sell. But what if you’re wrong? What if that never happens? That decline that you were expecting, then you simply lost that 72% and you’re they’re paying the same price now and the same interest rate now or you’re paying a higher price on a higher interest rate. This is why market timing is a dangerous activity. Okay. You know, Warren Buffett, commonly thought of as the world’s greatest investor, he doesn’t do market timing. He just buys value and hold on to it. You know, we can argue about Buffett’s strategy, whatever. But it’s it’s been pretty good over the decades. All right. So that’s it for today, Jason hartman.com. For more we’ve got to get to our guests. I know a lot of you on the live stream are making comments asking questions. I don’t have time to get to those today. We’ll save them for the next live stream oral just to answer him on the podcast. And on iTunes. Just look up the creating wealth show or go to Jason hartman.com. Click on podcast and you’ll find all the links there for it. Alright, without further ado, let’s get to our guests. And let’s talk to my buddy Mark about his predictions. We’re going to talk about cryptocurrency, we’re going to talk about the real estate market, the economy in general monetary and fiscal policy. And here we go. By the way, just a reminder, again, if you’re seeing this live, go to the YouTube channel, go to the podcast for the rest of this interview. If you’re listening on the podcast, here we go to part two with Mark. Hey, it’s my pleasure to have my friend Mark moss back on the show. He is an investor and entrepreneur, a crypto expert, and just an all around great guy who’s very well informed about so many things in life. Before we started, we were just talking about the craziness going on in California. He just got back from Mexico looked at property there on on two recent trips. And it’s great to have him back on the show. Mark, welcome. How you doing?
Mark Moss 26:23
Yeah, I’m doing great. Jason, always a pleasure to sit down and talk to you.
Jason Hartman 26:26
Thank you absolutely feel the same way. So you got back from a surfing trip. And you notice that in Mexico a what some would call a third world country or more politically correct. developing country, right, the power state on which was not the case and the fifth largest economy by GDP in the world, the Socialist Republic of California, where you live and where I’m from. So So why is it that the power stays on in Mexico but not in California?
Mark Moss 26:53
Yeah, you know, it was a definitely a very glaring difference. I am from California. I can’t seem to leave the beach in the surf here. Plus all my family’s here, the weather’s great, but man, they’re making it hard to say we’re in San Clemente. Just so just
Jason Hartman 27:05
for the record, right?
Mark Moss 27:06
Yeah. Yeah. A little in a nice little bubble down here. Kind of insulated, not insulated from the taxes in the crazy policies and whatnot. But yeah, you know, as you just said, Right. I mean, California is the richest state in the nation. It’s the fifth largest economy in the world if it was a governor in a nation. I mean, obviously, Hollywood and Silicon Valley are here we have the highest taxes, state taxes in the nation, not only the highest, but double the highest. Yeah, we have the highest energy. I think it’s six times the average our energy and highest
Jason Hartman 27:33
Don’t forget gas prices. I mean, that’s energy, but you know, yes, typically gas prices.
Mark Moss 27:38
And what was interesting is while I was in Mexico last week, we had rolling blackouts, the electricity was shutting off over and over and over.
Jason Hartman 27:45
In California, not Mexico.
Mark Moss 27:47
No, in California and California. Yeah, I’m gone. And we had a heat wave. It’s September. So heat waves in California are typical. It was extremely hot. But it was not hotter than what is normal for this time of year. So yes, it was hot. But not it was not hotter than what is normal. So we weren’t having like crazy global warming, extreme temperatures, it was just normal for this time of year. And that being said, Our next door neighbor, Arizona is way hotter, like 20% hotter. But while we are gone, not only was it hot, then we had the raging wildfires, which made the air quality really, really, really bad. Even where I’m at probably 100 miles away from any fire, the air is bad. So the air is bad, it’s extremely hot. People are having to work from home, kids are trying to do school from home. And yet we have no electricity. And of course, that makes you think about a third world country that can’t keep the electricity on. I do spend a lot of time in Mexico, I’ve had two recent trips in the last month, month and a half. And where I was at in Mexico has one paved road and everything else is dirt roads. It’s not It’s not a big town. It’s not a resort town. But the air conditioner, or I’m sorry, the electricity stayed on no problem there. And so I’m like, I’m with my wife. And I’m like, man, do we even want to go home to California right now, like the air quality is bad. The electricity is not on, we can just stay here and have electricity and air conditioning. And so stay in modern in modern Mexico. No, this is ironic that we’re even saying that. But yeah. And so you know, it makes you It makes you think and you know, I am a market analysts, right. I’m on YouTube. And so I’ll do a study the markets and commentate on them. So you know, I pay attention to these things. And the thing that I think most people are missing is that what’s happening in California one is coming for the rest of the country and coming for the rest of the world. So Mexico seems to be doing better now. But I believe his problems come into the world. And the reason why I say that is because the problem that we’re having with electricity is not an accident. It’s actually by design. It’s actually been done purposely to get us to this point. And that’s why I say it’s happened, it’s going to come to the rest of the country because the rest of the country is starting to adopt or wanting to adopt the same policies that that California is. And then of course the rest of the world will also adopt them. We’re already seeing it in some of the developed nations like in Germany, for example. And so what I mean by that is that California is leading the charge on fighting back against climate change used to be global cooling, and then it was global warming, and now they can’t get it. Right. So it’s just climate change, if they keep changing their mind like is if the climate never changed before, right. But I mean, I admit that there is probably some climate change going on. But you know, the question is, what’s the reason there’s so many things to that onion, you’d have to peel back 1000 layers to really dissect that argument. So it’s just, you know, it’s just mostly being used as a political football to control people and tax them and have additional regulation,
Jason Hartman 30:33
you know, so that’s,
Mark Moss 30:34
yeah, no, that’s exactly right. And the problem that that we’ve our world has shifted to is that everybody has this very short term thinking, and we’ve lost this long term perspective. And so what I mean by that is we kind of manage everything very closely. So you know, the pandemic is a great, a great example. But without trying to dive into that. But back to climate change, you know, we’re making a decision, like in California’s case, for example, we make a decision to shut off all of our natural gas and coal, electricity plants, in addition, shut down what is non fossil fuel, nuclear energy, so we shut down the nuclear plants. And the goal was to push everything to renewables, wind and solar. And that sounds great, and I love it. And in a perfect world, that would be that’d be great. The problem is, there’s reality. That’s the problem. And the reality is, is that wind and solar aren’t enough. And so we end up in a situation like we are today, where we had ideology to shut off coal and natural gas, which they consider fossil fuel, we also shut down nuclear, which is not fossil fuel, but whatever, they shut that down as well. And we had this great idea that wind and solar would work, but it doesn’t. And so we end up with six hours a day of no electricity. And imagine this, Jason, for people that don’t really grasp how extreme This is. Right now, California is still one of the strictest states in the nation as far as like lockdown and stay at home orders and things like that. So this is at a time when all businesses are closed. All office towers, all office buildings, escape anywhere else,
Jason Hartman 32:04
right. And schools,
Mark Moss 32:05
school every day is shut down, schools are shut down, Moses shut down, everything is shut down. So who’s using electricity? So at a time when we’re our electricity usage is very low? Because everything shut down? We still can’t keep the lights on.
Jason Hartman 32:19
That’s amazing. Yeah. And you know, it is such a complete ripoff for parents who are having to homeschool. And can you imagine single parents having to do the home? They’re basically homeschooling essentially, I mean, yeah, that they produce some content on zoom, if you can get it when the power is on. But and there’s no tax rebate for the fact that you’re not paying for a real you’re not getting a real school experience for your kids. So that’s a complete ripoff. Yeah, it’s just unbelievable. You know, I haven’t talked about it too terribly much on the show, Mark, but I have a little bit. You know, have you followed the forest management issue and the reasons for these wildfires? I mean, that’s just I remember when I was in Arrowhead with my girlfriend at the time years ago, and it was right after that big giant Lake Arrowhead fire. And you know, the guy who was this total environmentalist guy was giving us a tour and telling us about the fires. Just right before we were there, said, you know, the reason we have the fire is because the environmentalist wouldn’t let them clear the brush below the trees because it would disturb the beetle. Okay, that was there. And so there was tons of kindling to just, you know, fuel that fire. And if they would have allowed the brush clearing and some, you know, reasonable backfire locations and so forth. It could have been prevented largely or, you know, stopped quickly. And this is just, it’s just crazy. It’s so yeah, I want this.
Mark Moss 33:41
I’m definitely no expert on the fire. So I don’t want to put myself out as I am some, you know, expert, but I have read articles from fire captains, Fire Chiefs, fire policy makers, who have been coming out publicly saying exactly what you’re saying. So many experts have been writing articles saying the exact same thing. I don’t want to pretend I am one. But yes, they are saying the same thing. But in addition, all through in Northern California and Oregon, they’ve found several and Tifa people studying fires. As a matter of fact, one guy said a fire was out on bail and 90 minutes later was busted against that another fire.
Jason Hartman 34:17
Yeah, and you know what they’re doing? They’re allowing prisoners to fight the fires which I think is fine because it does give them a path. You know, to when they get out. They can actually become a firefighter. If they fight the fire is in prison. That’s the program. But murderers rapists in get this arsonist are being allowed to fight fires and they can actually become firemen after their release. Real firemen arsonists. I mean, you got to be kidding me. That’s that’s just that’s just the nuttiest there only only Gavin nuisance could think of that. And that was that was his deal with the the inmates. So it is a crazy time
Mark Moss 34:56
but and so the so the problem is, is that if you want to know what the what the country looks Like when the democrats take over look at California, because it’s Nancy Pelosi is the third ranking member in the US and her state is California. Also Kamala Harris, who’s now you know, on the vice president campaign, she’s was the Attorney General of California, obviously, Gavin Newsom, etc. And so those policies, so the House Democrats, Nancy and Nancy Pelosi led a bill to push the same energy platform that’s happening in California. So her plan is basically the plan is to in California, and now it’s coming for the country. That’s why I said it’s coming. But then you have really under the Biden platform, you have AOC, and Bernie Sanders, who are really setting the kind of the the full more policy, and they’re pushing the green new green New Deal, which is even way more aggressive. And so we’ll see even way more electricity shut down. And the thing is, is that they understand the problem, but they think that it’s a necessary sacrifice, you need to be okay, with going without electricity for four or five hours a day, you just need to be okay with that, because that’s what it takes to save the world.
Jason Hartman 35:59
And I’ll bet you Nancy Pelosi has a built in generator in her mansion for her sub zero refrigerator with ice cream in
Mark Moss 36:08
it. And that’s a whole nother situation. Because in California, as I said, our electricity prices are already six times higher on average in the nation. So for example, I know many parts of the nation, they might pay six to eight cents per kilowatt hour. In California, we pay about 45. put that into perspective. So that’s already really hard on the lower end right on the lower income people. But what they did with some of these rolling blackouts is if you wanted to pay triple, you could leave your power on. So that’s even worse again. So not only does the lower end customer
Jason Hartman 36:38
elitist, it’s a whole elitist thing now.
Mark Moss 36:40
Yeah. unbelievers, it’s in the name of equality. But
Jason Hartman 36:43
yeah, right. Yeah, yeah, but not not a quality at all. So tell us what this means to the market. I mean, the real estate market in California was already, you know, in the higher end areas of California, certainly, that’s a cyclical market, it was already under under pressure was already softening long before COVID. And, you know, I’ve been predicting that for years, because the buyers were starting to reject the high prices. Now, you know, with low interest rates, it’s got a little bit of a reprieve. But still, those prices are very much out of whack with anything reasonable, right? So what do you what do you think’s going to happen in the real estate market there? And before you answer, you know, there are four bills in California now. And you know, they’ll probably get two of them through and two more will come later. One is repeal prop 13. Basically, I mean, you know, these things all have nuance, but generally
Mark Moss 37:37
different. But yeah,
Jason Hartman 37:38
repeal prop 13. Howard Jarvis’s 1978 tax ball, I remember that when I was a kid, and then raise the highest marginal rates, like 16.4%, I believe, instead of 13.3, where it is now, and then have a wealth tax of point 4% per year, even if you make zero money, or you lose money that year, they’re just going to take some of your wealth. And then what was the other one I saw? I can’t
Mark Moss 38:02
attend your exit tax. So if you leave the state for dough, yes, you’re liable for for that. And they also have another one where if you sell your house and move to another state, you have to pay a big chunk of that sales price as well. believable?
Jason Hartman 38:15
I don’t know if they can constitutionally get a retroactive tax through, but I wouldn’t put it past them to figure out a way, because you know, I only left California nine years ago, so I could be liable. I could get a tax bill for that last year I was there.
Mark Moss 38:26
Yeah. Well, those are great points that you bring up. And the reason why that’s important to everybody is because as you look at the real estate market in new and I’ve had these conversations, there is no such thing as the market. There’s thousands and thousands of little tiny sub markets. And so when you look at problems in California, like we’re discussing our problems, whether it may be in New York City or Michigan or whatever, you have to understand that affects other parts of the country. So while mass people might be fleeing a couple states, where are they all going and that could positively affect those areas. And so you need to understand there’s nuance there. And even inside California, there’s nuance. So for example, I live by the beach and a small little beach community. And real estate here is nuts. It’s going completely nuts. I mean, literally $3 million homes are getting multiple offers and selling in weeks. But then other areas like like you mentioned, like Silicon Valley, for example. The home markets are weakening a lot up there. But then you go a couple hours from there into the mountains like around Tahoe, and the real estate markets nuts again. And even here in Southern California. Our mountains are called Big Bear, Big Bear and Arrowhead. I was gone. But I talked to people who were trying to go up there last weekend, and it’s about a two hour drive up a windy mountain road. And it was bumper to bumper traffic going up and down. Every single hotel was sold out. So people are flocking those areas. I have a friend who has a
Jason Hartman 39:46
they were just talking they’re probably because it’s cool. You know it’s higher altitude, so it’s much cooler, there’s there’s air conditioning,
Mark Moss 39:52
well, it’s part of that but also I have a friend who’s got Vacation Rentals out in Palm Springs, and he said he turns away five to 10 people every single De. And so people are trying to do like kind of staycations. And like, get me out of the city, I’m going to go to Palm Springs, I want to get away from people and get me out of the city. I want to go to the mountains. And so those areas, even within like a Southern California or even Los Angeles County, certain areas are doing way better than others.
Jason Hartman 40:19
Yeah, no, it’s um, it’s it’s absolutely crazy. So the overall I mean, you know, some people are starting to predict like, a real estate crash in 2021. A lot of people said it would be here by now. Right. But do you think that’s going to happen? Now, of course, we both know, and everybody listening has to know that there’s at least 400 local markets in the United States 400 essays. And within those MSA, there are many more markets than there are product types by price range, what you gave example of in your community $3 million homes selling like that, you know, the rich are getting richer. We’ve all seen that this is a very uneven situation right now. But you know, just give us your general thoughts on where we’re going what to expect.
Mark Moss 41:02
Yeah, so you know, the, the thing that everyone needs to understand and when I look at the comments on my videos, and I’m sure you see the same thing is that there’s a lot of nuance, right, you have to understand, as I said, there’s no the market, there’s 400 markets, and then there’s sub markets and types and prices and whatever. So for example, the I think there’s going to be a lot of softening and what we call like the mcmansions, those might be the, you know, $500 million price homes, particularly through kind of the Midwest and the Northeast, as the baby boomers want to leave those types of homes and leave the cold the snow and go for warm climates where they can play tennis and golf around. They want to leave expensive places to go to cheap places. So I think there’s a lot of softening there because one they all want a lot of people want to leave those areas and two, we don’t have the population the demographics aren’t there to move up and take those houses. So those types are going to be bad, but then in areas that have sunshine 360 days a year are very cheap, low taxes, etc. I see starter homes you know the bread and butter, three bedroom, two bath that could still do really really well so you understand there’s nuance to the market. This will be continued on the next episode. Thank you for listening and happy investing.
Jason Hartman 42:19
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