To start the episode, Jason Hartman talks about the outlook for 2021, The Cantillon Effect, and the Federal Reserve. Later on, he continues his conversation with Investment Counselor Adam. They compare specific real estate markets to those in the Hartman Network. Jason and Adam also talk about how different Texas properties are when it comes to returns.

Announcer 0:02
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 1000s 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 0:54
Welcome to Episode 1618 1618. And we are in a world where the Federal Reserve Yes, that Corporation Corporation notice I said Corporation, not government agency that runs our monetary system. They say that the outlook for 2021 has brightened. But now this is interesting, they say, but interest rate is staying near zero. Ladies and gentlemen, kids, animals, whoever’s listening, when you have artificially low negative interest rates, interest rates near zero, that might be a good time to go long on real estate. I’m just saying. I’m just saying. Think about it. Think about it. So the Federal Reserve said on Wednesday that it will keep buying government bonds, yes, they are the world’s biggest investor until the economy makes, quote, substantial, unquote, progress. And nowadays, I don’t even think it needs to make substantial progress. In fact, it’s already made substantial progress, whatever that means. Why is that? Because remember, what I’m always saying, align your interest with the most powerful forces the human race has ever known. They want to benefit and they want all their friends to benefit from the cantillon effect. This is yet another example of the cantillon effect. Right? Because if they keep buying bonds, well, guess who also owns those same bonds that they’re buying? They’re supporting the market for the bond market artificially, and that benefits all the bigwigs. It benefits, the biggest bond trading company in the world. What’s that called? PIMCO, their office used to be right down the street from our office in Newport Beach, California. And all the big investors, all of the big companies that have done these bond issues, the government, of course, what does it do? It displaces money out of the government bond market, because the Fed is in there buying the government bonds, so we don’t have to rely on China. Why rely on foreign countries to buy your bonds when you can just have your own fed by them? I mean, this is just such a complex web of AI. It’s an insider’s game, folks. But the cantillon effect is definitely in play. And you can benefit because you have the proxy key to the can tell you in effect, and it is your income property, your income property. Okay, according to the Associated Press, who crowned Joe Biden president, without even knowing the election results, folks who can’t even make this stuff up, can you Okay, they are going to keep their key rate very low. So that pretty much says, go long on real estate. But there is more. It means stock up on these cheap mortgages. Do you know the mortgage rate just dropped? Again, I just read an article yesterday that now again, we have broken the record. We have fallen through the floor on interest rates to see the lowest mortgage rates ever. I did say ever that’s what I say. Okay, just so you know, just want to make sure that’s clear, ever. Oh, yeah, yeah, this is just amazing. I mean, did any of us ever think we would see an environment like this? It’s absolutely incredible. But the folks who have the income property, and the folks closest to the money are just getting richer and richer and richer, because they’re all becoming multi can trillionaires. Okay. The policymakers now foresee that the economy contracting at 2.4%, this year, less than 3.7% decline, it had thought that it had predicted just a couple of months ago, right. For the next year, they anticipate a rebound. Okay, and they upgraded the growth forecast. And this is pretty incredible, folks, are you ready for this? This is an amazing, amazing recovery. They upgraded the growth forecast from 4% to 4.2%. Now what they’re talking about there, of course, is the GDP. And they say by the end of 2021, the Fed expects the unemployment rate to fall below 5% from its current 6.7%. And that is lower than the 5.5% rate they had forecasted. So the Fed is getting optimistic, but at the same time that they’re optimistic, they are not raising rates. Now, just think about that amazing forecast, a growth forecast of 4.2%. That is, like a Is this the roaring 20s? Maybe it’s the roaring 20s. Maybe it’s the roaring 20s, we will see Remember, the Spanish Flu that started in Kansas, or Kansas City? I’m not sure which can’t remember, can’t remember. So after the Spanish flu pandemic was over 102 years ago, we had the roaring 20s. Now, I’m not saying we’re going to have the roaring 20s this time, because obviously things are quite different. But then nine years after the roaring 20s started, obviously, what did we have we had the beginning of the Great Depression? Well, we had a stock market crash, and then we had a great depression. But that’s it is interesting. It’s the elasticity, you remember, it’s the breadth of the difference from where we were, to where we’re going. And when people get the chance to get back into normal life. And I think they’re going to be looking at life with somewhat of an an attitude of, hey, life is fragile. Let’s live it up a little bit. I’m not saying that’s good. I’m just saying I think it’s the way people are, right, because they’re sort of they’ve sort of got that rubber band concept going on. So pretty interesting times. And by the way, I was looking at another article today report that said, there are bidding wars for more than half of all listings, in numerous markets across the US, not every market, because then you’d be talking about 400 MSA is almost and 3100 ish counties. So not necessarily every market but bidding wars on more than half of all the main markets in the country, right. So it’s absolutely unbelievable to report on this stuff nowadays. It is truly, truly an amazing, amazing market we’re in and it is propped up by a bunch of, you know, smoke and mirrors, House of Cards, whatever you want to call it. But that’s nothing new folks. That is nothing new. That’s been that way for decades, if not 100 years since the Fed was created. And it’s true of every economy in the world. It’s not just the US economy. So that’s the way it is as the famous newscaster used to end the broadcast. That’s the way it is. Okay. So that is the way it is. Let’s get to Adam, who is back with us today to talk more about all of these issues and more. So here we go. All right, another slide that I want to hear you talk about for a second.

Adam 9:48
So, so then I went and I said, you know, if we’re waiting until 2023 for inventory, what are we and we’ve discussed this a little bit the last time what is going on in the markets we’re in now. And you know, how will that impact your investing in the future. So I went to the FHFA website and looked at their home price indexes that they have, and saw how our markets are doing. They had the top 100 essays in terms of appreciation or not I found the last year. And these are some of our markets and how they’re doing and appreciation wise over the past quarter and the last year. So I want you to know, this 9%. And Atlanta is the worst number I’m going to show you today. So, Atlanta, the Atlanta market where we have some properties, not a ton anymore, but some is up 9% over the last year, and 3.3% over last quarter, the US as a whole appreciated 7.8% over the last year, and 3.1% over the last quarter. So these are markets that, you know, we obviously as I just said, We don’t invest for the appreciation. But if you were to get in today, the likelihood is you’re going to see something similar to this for at least the next 612 months, because the feds found a flat out come out and said, Hey, we’re not going to touch rates. And if rates stay this low, and the inventory stays this low, there’s only one way prices can go right now. And that’s in the upward direction. Yeah. And so Cape Coral Fort Myers, where we also have properties 9.5% appreciation in the last year 4.2% in the last quarter, where else Jacksonville, Florida 9.7% over the last year or 2.7% over the last quarter. So I mean,

Jason Hartman 11:40
when you look at appreciation stats, it’s really important to just point out to people, the power, the incredible power of leverage, you know, if you want to buy a mutual fund, or you want to buy stocks or bonds, or cryptocurrency, you’ve got to put 100% down.

Adam 12:01
Yeah, they don’t do loans for that. There’s no

Jason Hartman 12:03
leverage, okay, with with real estate, let’s just do the simple, you know, you can’t do this on investment property, but let’s just say it’s 10% down for simplicity sake, okay? Cut it in half for an investment property where you putting 20% down. And by the way, you can put 15% down sometimes on investment property, so, but let’s just go with 10 for simplicity, just for concept 10.2% turns into 102% gross return on investment 9.7% turns into 97%, annual annual gross return on investment. Understand that it’s simplified. It doesn’t include tax benefits, or positive cash flow that makes these numbers better. Okay. But what makes it worse is if you just wanted to take one year and you said okay, I’m gonna make that appreciation, sell it a year later, well, you’re gonna have closing costs, and that’s gonna eat up your return. So I just want to say on balance, you know, understand that, but again, the best thing to do is be a long term buy and hold investor. So go ahead. Yeah,

Adam 13:13
so then we also have Birmingham, which is got a 10.2% over last year 4.4% over the last quarter. That’s number 19. And we’re not even done. We’re continuing to go up Memphis as 10.4% over last year and 6.4% over the last quarter. We talked about Memphis for six weeks ago whenever I was showing that why why that city is appreciating the thought of selling my Memphis properties. Time. No way. Yeah, so you’ve got that at 10.4% and Jason, do you want to guess which market we have? That is the absolute best and appreciation? I’m gonna say Atlanta. No, we already covered Atlanta. That was nine point. Okay. 9.0 It gets better. It does get better. 10.4 No, it is our newest market.

Jason Hartman 14:00
Oh, Charlotte. Charlotte. Yeah.

Adam 14:02
Charlotte is 10.8% over last year. It is the number nine out of the top 100. metros, 10.8% over last year and 3.8% over the last quarter.

Jason Hartman 14:12
Wow, that’s just incredible.

Adam 14:14
So I say this not to say you’re guaranteed 910 11% if you go into these markets, but this is this is flat out happening right now. This is the economic situation we have the COVID crisis summit getting in the rearview mirror, the economy is picking back up, home prices are appreciating and if you’re going to get in if you’re going to invest if you’re going to increase your portfolio, if you wait for until 2023 even if these things just go up 10% over the next year, even if property is dropped 20% In the meantime, you’re not getting that much of a benefit from it. You know, maybe it goes down to 95% of what it is now whenever it drops 20% but you’re missing out on it. ton of possibility in the next two years with all of the benefits that are available, you really are. And I just wanted to address a couple things I’ve been putting on the screen. Number one, we’re talking about Charlotte, you can check out our Charlotte investing webinar, where we do teach a little bit in there. And then we go into specific properties. And brand new construction in Charlotte, North Carolina,

Jason Hartman 15:23
I love this market. I’ve made good money there myself as an investor. And also, you know, we’ve helped hundreds of clients over the years invest in that market. So that’s Jason, slash Charlotte. And then also our advanced asset protection and estate planning webinar. I’ve been showing that on the screen. That’s Jason Slash protect, so you can check those out and get a lot more information with with any of those. It’s amazing, Adam, it really is. And I think it deserves a sound effect.

Adam 15:57
Yep. Yeah, definitely. So that’s, that’s what I got for you today.

Jason Hartman 16:01
Oh, okay. That’s it. So my lecture, grab a couple questions and comments.

Adam 16:05
Yeah, sure. There’s a couple here, like, what do you think of cash County, Utah, or San Antonio market? I don’t I don’t know a ton about those markets, honestly. I mean, I know, I know, San Antonio, it’s an hour and a half hour and a half south of me. But like we’ve talked about Texas, before, you’re going to have to really dive into it. Texas requires about a point nine to 1% Rv ratio, just to make the property taxes work to

Jason Hartman 16:29
offset the higher property taxes.

Adam 16:31
Yeah. Because as a as a non home owner occupied, you know, owner, it’s going to be they’re going to be high.

Jason Hartman 16:38
When you’re an investor, they charge you a higher tax rate.

Adam 16:41
Well, so yeah, they they can your they don’t cap the amount, they can raise the value of your land, or your property. So it can get a little rough. But you know, if you can make it work, then Texas is a good place to invest. It just can get tricky as Texas appreciates, you have to make. They can lend a couple of rough years, or not rough but not as good years, if your rent doesn’t keep up with your value as much. So yeah,

Jason Hartman 17:06
sure. I want to address a comment here from CV and CV says you six unemployment is around 15% or more, according to George gammon. Well, you know, I don’t deny that the unemployment stats are understated. There’s no good reason, just like the consumer price index, the CPI, which is the measure of inflation is also understated. It’s all a big scam, folks. I mean, no one will deny that, okay, they manipulate the statistics. Yes, that’s the way the world works, unfortunately. But the right question to be thinking about CV and everybody else is compared to what? Remember, we’re only comparing the stated official unemployment rate today, and the stated official consumer price index today to what it was before when it was also manipulated. Okay. I know what you’re gonna say, if you’ve really taken a deep dive into this stuff, you’re gonna say, when it comes to inflation, at least. And by the way, I have the founder of shadow stats calm john Williams, on my podcast, and he keeps track of this stuff, you know, beyond what the government tells you. But I think he’s wrong. In some ways, too. Because one of the big arguments is, these guys will say, and, you know, George will say this, too, frankly, is that, you know, before 1980 if you just calculate inflation, for example, not unemployment here, but inflation, the way they calculated it before 1980, it wouldn’t be much higher than it is now. Well, here’s the problem. Nobody ever asked. You know, you say the inflation stats are wrong today, and I agree with you. I agree. They are manipulated. But they were also manipulated.

Adam 18:55
Okay, not new.

Jason Hartman 18:56
But the way they did it before 1980 was correct, either. Okay, you can argue with that. And when you look at like Shadow stats, and you do his inflation calculator, I’m a paid subscriber to shadow stats, okay, I paid for the membership. And that gives you access to some of his calculators, and I won’t even quote his stats, because they’re so ridiculous. They’re like, insane. I mean, Adam, if you want to take a couple of these questions, I’m gonna find a paper because I have it around here somewhere. So Adam, it’s all yours.

Adam 19:24
All right, so CV, you talking about house hacking in places like Queens, New York City, a millennial and the home prices are sky high, I can definitely understand that. You’re looking at houses in the $850,000 range. 30 year fixed rate at 2.75% is around 20 $700 monthly mortgage, and property taxes around $600 per month. So you’re looking at 30 $300 all in and you can rent it out for 2100 a month, and the tenant would be paying your equity and you’d have a lower cost of living. If the housing prices potentially fall, the tenant would pay your mortgage, well, your tenant wouldn’t be paying your mortgage at 20 $100 a month, you’d still be paying, you know, at least 12 $100 a month to live in the property. Now house hacking has its places, you know, if you just really want a property and want to get in there, and you know, you’re okay with, with that, and then 12 $100 a month, so living, you know, Queens might be worth it to you, you just need to look at what you’re losing, you know, buying that property, I don’t know what you’ll have to put down if it’s, you know, 5% 10%. And what you can do with that money, if you don’t put it there, and the benefits you can get tax wise, and for the future. So I mean, living for 12 $100 isn’t, isn’t a bad deal. But it’s just what else could you do with your capitals? The big question to ask,

Jason Hartman 20:48
Well, let me just share with you the difference on the Bureau of Labor Statistics, the BLS and the shadow stats, inflation calculation, I’m gonna hold this up to the camera in a moment, okay. But because I got it on good old fashioned paper, I printed it out it, I couldn’t believe it. So it was so amazing to me that I had to print it. What I was doing is I was doing a, a bunch of calculations for the presentation that I gave yesterday. And, you know, I was calculating how real estate has actually, from a payment perspective, a monthly payment perspective, it’s become cheaper and cheaper and cheaper over the years, when you adjust for inflation prices and interest rates and mortgage rates, I should say. And so I was looking at the shadow stats stuff, and I was going to use their numbers, I was tempted, but I decided not to because they’re so outrageous. Here’s how outrageous the numbers are. Okay, what I did, is I plugged into their inflation calculator that I’m I pay for to be a subscriber to this. Okay. $100,000. Okay. So a $100,000 mortgage, for example, in 2006, was worth how much in 2020? Because this is an example of what I call inflation induced step destruction. So look at this. According to the BLS, the inflation has affected that mortgage by $27,000 and change. According to shadow stats. You’re ready. Here you go, Adam, look at this. Now, when I hold this to the camera, I won’t be able to read it. So maybe you can read it. $347,000, I think that says,

Adam 22:28
Oh, sorry. It was 359,000, I believe is what it became $349,000.

Jason Hartman 22:36
So that’s, do you think that’s reasonable? I don’t think so as much as I’d love to believe shadow stats. And I do believe that it’s manipulated, it’s just not manipulated that much.

Adam 22:48
So essentially, if you say there is talking about dark winter and the great reset in order to usher in this global reset agenda, the markets will need to crash. How are you going to protect yourself from this Marxist agenda? I think we’ve been seeing that it’s very difficult to try to force an entire economy to crash. I mean, we shut down the the world economy for months. And you know, it’s bounced back. So it’s going to be pretty tricky. I mean, you’re saying the Marxist Professor Richard Wolff predicts we will see the worst crash of our lifetime. As we know we are entering the Marxist era, there may be some truth to his prediction. You do have some people promoting it. But the the mainstream the vast majority, the people who are making our laws, that’s, that’s not what they’re saying. That’s not what they’re doing. So I think that’s fear mongering, and a lot of a lot of ways, but i don’t i don’t think i don’t see that happening.

Jason Hartman 23:41
Yeah. So Richard Wolffe, when I interviewed him, the Marxist Professor richard wolf, I just could not when Adam, I interviewed this guy, I obviously don’t agree with him. I’m the last person who’s a Marxist. Okay. But, you know, his fans, you know, were commenting on that interview saying, I was such an idiot, right? And then my fans, were saying I was glorifying Marxism. How do you? How do you win? I tell ya, it’s just some days, you just can’t win Kenya.

Adam 24:13
All right. Well, one thing to keep in mind. And Jason, you and I were talking a little bit about it before we even started this is you have to look at the past history of the United States, and see that we find a way and it’s very hard to keep our economy, our people down. I mean, you look at, you know, what’s happened in the last year and where we are now. It’s pretty incredible. I mean, we were a high flying society, doing great. We shut everything down. I mean, we stopped the world. We stopped the country. We put people out of work. And you know what, eight months later, we’re bouncing back. Yes, there’s still some people who are hurt, who are hurting. But by and large, the rebound We’ve had from that is incredible. It’s amazing. And that’s with parts of the economy still being shut down, right? I mean, when this when these vaccines hit, and were able to, you know, reopen all of the big cities, all of the, you know, industries that are being shut down now, I mean, there’s not going to be a ton of pent up demand for people to go do things. But that demand gets unleashed. We’re, unless something drastic happens elsewhere in society, I think we’re going to be back to where we were, you know,

Jason Hartman 25:29
I don’t know if we’ll be back to where we were I, you know, I predicted the modified square root meaning, you know, people will reassess values, and we’ll move into a bit of a smaller economy will wake up to a smaller economy. But that’s not necessarily that bad. And I might be wrong, because Adam, what’s really important to remember, and I’ve got a podcast coming up on this topic, is that after the 1918, Spanish flu, that killed between 50 and 100 million people, what did we have? We have the roaring 20s. And, you know, the concept psychologically, which is really important on that is that look, when people are, you know, shut inside, when they can’t do what they want, when they’re not spending money. As soon as they get a hold of some, you know, they just want to, they want to kind of bust out and go and you know, live life. And they also feel maybe somewhat fatalistic that, hey, you know, life is short. We just had a tragic thing we went through, and, you know, I survived it. Right. You know, maybe I should live it up a little. And so there is some of that and people spend following that mentality. So, you know, after the 1918, Spanish flu, we have the roaring 20s. Okay, go and, you know, watch some movies and videos about that and see how life was during the roaring 20s. It was, it was it was a pendulum, the pendulum is always swinging. And so we’re at one part of that pendulum. Now, it’s uneven, whole economy, but certainly parts of it. Certainly some people others are doing great, some are suffering. It’s very mixed, I get it. But the pendulum is always swinging back and forth.

Adam 27:16
So CVX you’re asking if there are any places in Texas where it’s a good place to invest? We’re looking at Texas markets. Right now we’re last I heard we were looking at New Braunfels, which is a kind of a medium sized city between just a little south of Austin, which is a, you know, it’s a great place. And if we can make the numbers work, it’ll be a fantastic place to buy, honestly, I would, I’d probably go by there. But

Jason Hartman 27:42
Texas has become a little bit expensive, folks. I mean, we’ve helped hundreds, probably 1000s I don’t know, hundreds, at least of investors invest in all the big Texas markets, whether it be Dallas, Austin, San Antonio, Houston, but it’s become a little bit priced out, you know, and we got to be in those markets, where the cash flow is good. And those rent to value ratios are really good for our clients that already own Texas properties like myself, okay, that, you know, and I bought them years ago, I’m just knocking it and it’s, but there’s a difference between entering a market today and entering it back then when your cost basis is different. Yeah.

Adam 28:24
So Austin was the number three market I believe on the list. It was 11.3% appreciation year over year. So it was issues in regards to you ask CB what cities are good cities to invest in at the moment. I mean, just go to Jason Slash properties. Those markets are good. We can help you find properties there. You could go to Jason slash ask. You can send any questions our way and somebody on the team will help you out.

Jason Hartman 28:50
Yeah, and a lot of times we answer those questions on the podcast, too. So you know, definitely the creating wealth podcast is, is what you want to be listening to five days a week, Monday through Friday. Well, Adam, let’s wrap it up. Thank you so much, to Adam and thank you to all of you watching we really appreciate your fantastic comments and questions and appreciate you viewing and telling your friends about us and and be sure to click that like button before you go and helps us with the algorithm that runs the world unfortunately. But that’s the way it is. We will see you later today on the podcast. And and we do that five days a week, so be sure to check out the creating wealth podcast if you’re not already subscribing. Adam, thanks so much. Thanks, everybody. Have a great day.

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